SEC Filing | First Busey Corporation

SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 1O-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended 9/30/96 Commission File No. 0-15950 FIRST BUSEY CORPORATION (Exact name of registrant as specified in its Charter) Nevada 37-1078406 ------------------------------- -------------------- (State or other jurisdiction of I.R.S. Employer incorporation or organization) Identification No.) 201 W. Main St. Urbana, Illinois 61801 ------------------------------- -------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (217) 365-4556 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes __X__ No _____ Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the practicable date. Class Outstanding at July 31, 1996 --------------------------------------- ----------------------------- Class A Common Stock, without par value 5,684,543 Class B Common Stock, without par value 1,125,000

PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS

FIRST BUSEY CORPORATION and Subsidiaries CONSOLIDATED BALANCE SHEETS (Unaudited) September 30, 1996 December 31, 1995 ------------------ ----------------- (Dollars in thousands) ASSETS Cash and due from banks $41,761 $39,358 Federal funds sold 0 650 Securities held to maturity (fair value 1996 $59,281; 1995 $62,625) 58,859 61,501 Securities available for sale (amort. cost 1996 $175,775; 1995 $218,257) 179,184 223,016 Trading Securities at fair value 929 - Loans (net of unearned interest) 562,777 481,772 Allowance for loan losses (5,619) (5,473) ------------------ ----------------- Net loans $557,158 $476,299 Premises and equipment 21,636 21,857 Other assets 22,086 21,985 ------------------ ----------------- Total assets $881,613 $844,666 ================== ================= LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Deposits: Non-interest bearing $75,661 $72,386 Interest bearing 707,341 672,511 ------------------ ----------------- Total deposits $783,002 $744,897 Short-term borrowings 17,187 21,674 Long-term debt 5,000 5,000 Other liabilities 6,077 5,317 ------------------ ----------------- Total liabilities $811,266 $776,888 ================== ================= STOCKHOLDER'S EQUITY Preferred stock $ - $ - Common stock 6,291 6,291 Surplus 20,491 20,380 Retained earnings 46,050 42,474 Unrealized gain (loss) on securities available for sale, net 2,216 3,093 ------------------ ----------------- Total stockholders' equity before treasury stock, unearned ESOP $75,048 $72,238 shares and deferred compensation for stock grants Treasury stock, at cost (3,912) (3,659) Unearned ESOP shares and deferred compensation for stock grants (789) (801) ------------------ ----------------- Total stockholders' equity $70,347 $67,778 ------------------ ----------------- Total liabilities and stockholders' equity $881,613 $844,666 ================== ================= Class A Common Shares outstanding at period end 5,680,123 5,686,958 ================== ================= Class B Common Shares outstanding at period end 1,125,000 1,125,000 ================== =================

FIRST BUSEY CORPORATION and Subsidiaries CONSOLIDATED BALANCE SHEETS (Unaudited) September 30, 1996 September 30, 1995 ------------------ ------------------- (Dollars in thousands) ASSETS Cash and due from banks $41,761 $30,379 Federal funds sold 0 17,450 Securities held to maturity (fair value 1996 $59,281; 1995 $64,251) 58,859 63,575 Securities available for sale (amort. cost 1996 $175,775; 1995 $170,070) 179,184 173,473 Trading Securities at fair value 929 0 Loans (net of unearned interest) 562,777 467,003 Allowance for loan losses (5,619) (5,500) ------------------ ----------------- Net loans $557,158 $461,503 Premises and equipment 21,636 21,245 Other assets 22,086 18,075 ------------------ ----------------- Total assets $881,613 $785,700 ================== ================= LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Deposits: Non-interest bearing $75,661 $67,431 Interest bearing 707,341 613,657 ------------------ ----------------- Total deposits $783,002 $681,088 Short-term borrowings 17,187 29,554 Long-term debt 5,000 5,000 Other liabilities 6,077 4,844 ------------------ ----------------- Total liabilities $811,266 $720,486 ================== ================= STOCKHOLDER'S EQUITY Preferred stock $ - $ - Common stock 6,291 6,291 Surplus 20,491 20,355 Retained earnings 46,050 41,156 Unrealized gain (loss) on securities available for sale, net 2,216 2,213 ------------------ ----------------- Total stockholders' equity before treasury stock, unearned ESOP $75,048 $70,015 shares and deferred compensation for stock grants Treasury stock, at cost (3,912) (3,726) Unearned ESOP shares and deferred compensation for stock grants (789) (1,075) ------------------ ----------------- Total stockholders' equity $70,347 $65,214 ------------------ ----------------- Total liabilities and stockholders' equity $881,613 $785,700 ================== ================= Class A Common Shares outstanding at period end 5,680,123 5,679,312 ================== ================= Class B Common Shares outstanding at period end 1,125,000 1,125,000 ================== =================

FIRST BUSEY CORPORATION and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME For the Nine Months Ended September 30, 1996 and 1995 (Unaudited) 1996 1995 ------------------ ----------------- (Dollars in thousands, except per share amounts) INTEREST INCOME: Interest and fees on loans $33,726 $29,164 Interest and dividends on investment securities: Taxable interest income 9,718 8,538 Non-taxable interest income 1,578 1,508 Dividends 90 99 Interest on federal funds sold 408 646 ------------------ ----------------- Total interest income $45,520 $39,955 ------------------ ----------------- INTEREST EXPENSE: Deposits $21,313 $18,036 Short-term borrowings 845 1,162 Long-term debt 208 207 ------------------ ----------------- Total interest expense $22,366 $19,405 ------------------ ----------------- Net interest income $23,154 $20,550 Provision for loan losses 400 375 ------------------ ----------------- Net interest income after provision for loan losses $22,754 $20,175 ------------------ ----------------- OTHER INCOME: Trust $1,945 $1,894 Service charges on deposit accounts 2,175 1,972 Other service charges and fees 1,287 945 Security gains (losses), net 90 169 Trading security gains (losses), net (113) 26 Gain on sales of pooled loans 197 558 Other operating income 729 892 ------------------ ----------------- Total other income $6,310 $6,456 ------------------ ----------------- OTHER EXPENSES: Salaries and wages $8,725 $7,875 Employee benefits 1,653 1,480 Net occupancy expense of bank premises 1,452 1,376 Furniture and equipment expenses 1,231 1,148 Data processing 1,050 1,076 Stationery, supplies and printing 539 516 Foreclosed property write-downs and expenses 89 110 Amortization expense 991 645 Other operating expenses 3,627 3,224 ------------------ ----------------- Total other expenses $19,357 $17,450 ------------------ ----------------- Income before income taxes $9,707 $9,181 Income taxes 2,825 2,707 ------------------ ----------------- Net income $6,882 $6,474 ================== ================= NET INCOME PER SHARE OF COMMON STOCK AND STOCK EQUIVALENTS: $0.99 $0.94 DIVIDENDS DECLARED PER SHARE: Class A Common Stock $0.4933 $0.4400 ================== ================= Class B Common Stock $0.4485 $0.4000 ================== =================

FIRST BUSEY CORPORATION and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME For the Quarters Ended September 30, 1996 and 1995 (Unaudited) 1996 1995 ------------------ ----------------- (Dollars in thousands, except per share amounts) INTEREST INCOME: Interest and fees on loans $11,952 $10,256 Interest and dividends on investment securities: Taxable interest income 2,950 2,955 Non-taxable interest income 542 522 Dividends 29 32 Interest on federal funds sold 16 285 ------------------ ----------------- Total interest income $15,489 $14,050 ------------------ ----------------- INTEREST EXPENSE: Deposits $7,241 $6,356 Short-term borrowings 222 522 Long-term debt 70 70 ------------------ ----------------- Total interest expense $7,533 $6,948 ------------------ ----------------- Net interest income $7,956 $7,102 Provision for loan losses 150 275 ------------------ ----------------- Net interest income after provision for loan losses $7,806 $6,827 ------------------ ----------------- OTHER INCOME: Trust $659 $583 Service charges on deposit accounts 743 676 Other service charges and fees 425 303 Security gains (losses), net 85 121 Trading security gains (losses), net 19 (2) Gain on sales of pooled loans 81 145 Other operating income 244 266 ------------------ ----------------- Total other income $2,256 $2,092 ------------------ ----------------- OTHER EXPENSES: Salaries and wages $2,966 $2,674 Employee benefits 529 475 Net occupancy expense of bank premises 504 536 Furniture and equipment expenses 438 408 Data processing 366 371 Stationery, supplies and printing 195 164 Foreclosed property write-downs and expenses 14 21 Amortization expense 331 215 Other operating expenses 1,536 869 ------------------ ----------------- Total other expenses $6,879 $5,733 ------------------ ----------------- Income before income taxes $3,183 $3,186 Income taxes 920 937 ------------------ ----------------- Net income $2,263 $2,249 ================== ================= NET INCOME PER SHARE OF COMMON STOCK AND STOCK EQUIVALENTS: $0.32 $0.33 DIVIDENDS DECLARED PER SHARE: Class A Common Stock $0.1600 $0.1467 ================== ================= Class B Common Stock $0.1455 $0.1333 ================== =================

FIRST BUSEY CORPORATION and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30, 1996 and 1995 (Unaudited) 1996 1995 ------------------ ----------------- (Dollars in thousands, except per share amounts) CASH FLOWS FROM OPERATING ACTIVITIES Net income $6,882 $6,474 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,494 2,078 Provision for loan losses 400 375 Increase in deferred income taxes (374) (635) Amortization of investment security discounts (947) (462) Gain on sales of investment securities, net (90) (169) Proceeds from sales of pooled loans 26,763 26,584 Loans originated for sale (27,006) (19,648) Gain on sale of pooled loans (197) (558) Loss on sales and dispositions of premises and equipment 17 0 Change in assets and liabilities: Increase (decrease) in other assets 151 (273) Increase (decrease) in accrued expenses 614 817 Increase (decrease) in interest payable (190) 501 Increase in income taxes payable 336 337 ------------------ ----------------- Net cash provided by operating activities $8,853 $15,421 ------------------ ----------------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sales of securities classified available for sale $10,431 $41,675 Proceeds from maturities of securities classified available for sale 365,373 67,662 Proceeds from maturities of securities classified held to maturity 22,097 10,571 Purchase of securities classified available for sale (333,113) (133,766) Purchase of securities classified held to maturity (19,556) (7,314) (Increase) decrease in federal funds sold 650 (17,450) Increase in loans (81,215) (23,009) Purchases of premises and equipment (1,254) (684) ------------------ ----------------- Net cash (used in) investing activities ($36,587) ($62,355) ------------------ ----------------- CASH FLOWS FROM FINANCING ACTIVITIES Net increase (decrease) in certificates of deposit $13,976 $34,317 Net increase in demand, money market and saving deposits 24,129 11,077 Cash dividends paid (3,306) (2,957) Purchase of treasury stock (461) (681) Proceeds from sale of treasury stock 136 237 Proceeds from short-term borrowings 0 5,750 Principal payments on short-term borrowings (2,000) (750) Net increase (decrease) in federal funds purchased, repurchase agreements and Federal Reserve discount borrowings (2,337) (1,006) ------------------ ----------------- Net cash provided by (used in) financing activities $30,137 $45,987 ------------------ ----------------- Net increase (decrease) in cash and cash equivalents $2,403 ($947) Cash and due from banks, beginning 39,358 31,326 ------------------ ----------------- Cash and due from banks, ending $41,761 $30,379 ================== =================

FIRST BUSEY CORPORATION and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1: INTERIM FINANCIAL STATEMENTS The consolidated interim financial statements of First Busey Corporation and Subsidiaries are unaudited, but in the opinion of management reflect all necessary adjustments, consisting only of normal recurring accruals, for a fair presentation of results as of the dates and for the periods covered by the financial statements. The results for the interim periods are not necessarily indicative of the results of operations that may be expected for the fiscal year. NOTE 2: LOANS The major classifications of loans at September 30, 1996 and December 31, 1995 were as follows: September 30, 1996 December 31, 1995 ------------------------------------------ (Dollars in thousands) Commercial $60,976 $55,687 Real estate construction 28,517 25,566 Real estate - farmland 12,229 11,162 Real estate - 1-4 family residential mortgage 204,421 179,047 Real estate - multifamily mortgage 76,530 57,364 Real estate - non-farm nonresidential mortgage 122,976 98,006 Installment 41,056 42,353 Agricultural 16,075 12,594 ------------------------------------------ $562,780 $481,779 Less: Unearned interest 3 7 ------------------------------------------ $562,777 $481,772 ------------------------------------------ Less: Allowance for loan losses 5,619 5,473 ------------------------------------------ Net loans $557,158 $476,299 ========================================== The real estate-mortgage category includes loans held for sale with carrying values of $2,243,000 at September 30, 1996 and $1,803,000 at December 31, 1995; these loans had fair market values of $2,259,000 and $1,840,000, respectively.

FIRST BUSEY CORPORATION and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 3: INCOME PER SHARE Net income per common share has been computed as follows: Three Months Ended Six Months Ended September 30, September 30, 1996 1995 1996 1995 ---------- ---------- ---------- ---------- Net income $2,263,000 $2,249,000 $6,882,000 $6,474,000 Shares: Weighted average common shares outstanding 6,797,680 6,806,487 6,799,579 6,819,248 Dilutive effect of outstanding options, as determined by the application of the treasury stock method 147,081 97,385 129,480 94,581 ---------- ---------- ---------- ---------- Weighted average common shares outstanding, as adjusted 6,944,760 6,903,872 6,929,059 6,913,829 ========== ========== ========== ========== Net income per share of common stock and stock equivalents: $0.32 $0.33 $0.99 $0.94 ========== ========== ========== ========== NOTE 4: SUPPLEMENTAL CASH FLOW DISCLOSURES FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995. 1996 1995 ---------- ---------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash payments for: Interest $22,556 $18,904 ========== ========== Income taxes $2,810 $2,927 ========== ========== SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES Other real estate acquired in settlement of loans $396 $569 ========== ========== Change in unrealized gain (loss) on securities available for sale $1,350 $4,680 ========== ========== (Decrease) increase in deferred income taxes attributable to the unrealized (gain) loss on investment securities available for sale ($473) ($1,625) ========== ==========

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is management's discussion and analysis of the financial condition of First Busey Corporation and Subsidiaries ("Corporation") at September 30, 1996 (unaudited) when compared with December 31, 1995 and the results of operations for the nine months ended September 30, 1996 and 1995 (unaudited) and the results of operations for the three months ended September 30, 1996 and 1995 (unaudited). This discussion and analysis should be read in conjunction with the Corporation's consolidated financial statements and notes thereto appearing elsewhere in this quarterly report. FINANCIAL CONDITION AT SEPTEMBER 30, 1996 AS COMPARED TO DECEMBER 31, 1995 Total assets increased $36,947,000, or 4.4%, to $881,613,000 at September 30, 1996 from $844,666,000 at December 31, 1995. Securities held to maturity decreased $2,642,000, or 4.3%, to $58,859,000 at September 30, 1996 from $61,501,000 at December 31, 1995. Securities available for sale decreased $53,832,000, or 23.1%, to $179,184,000 at September 30, 1996 from $233,016,000 at December 31, 1995, as security maturities were used to finance loan growth. Loans increased $81,005,000 or 16.8%, to $562,777,000 at September 30, 1996 from $481,772,000 at December 31, 1995, primarily due to increases in commercial and mortgage loans. Total deposits increased $38,105,000, or 5.1%, to $783,002,000 at September 30, 1996 from $744,897,000 at December 31, 1995. Non-interest bearing deposits increased 4.5% to $75,661,000 at September 30, 1996 from $72,386,000 at December 31, 1995. Interest bearing deposits increased 5.2% to $707,341,000 at September 30, 1996 from $672,511,000 at December 31, 1995. Short-term borrowings decreased $4,487,000, or 20.7%, to $17,187,000 at September 30, 1996, as compared to $21,674,000 at December 31, 1995. This was due primarily to a decrease in repurchase agreements. In the first nine months of 1996, the Corporation repurchased 24,510 shares of its Class A stock at an aggregate cost of $462,000. The Corporation is purchasing shares for the treasury as they become available in order to meet future issuance requirements of previously granted non-qualified stock options. As of September 30, 1996, 11,250 of the 96,750 options which became exercisable on January 1, 1993 (and expire December 31, 1996) have not yet been exercised and 40,500 of the 58,500 options which became exercisable on January 1, 1995 (and expire December 31, 1997) have not yet been exercised. The Corporation's Board of Directors has extended the Stock Repurchase Plan to June 30, 1997. It is anticipated that the Corporation may from time to time continue to make purchases of its common stock in order to meet future issuance requirements. The following table sets forth the components of non-performing assets and past due loans. September 30, 1996 December 31,1995 ------------------ ---------------- (Dollars in thousands) Non-accrual loans $0 $532 Loans 90 days past due, still accruing 1,460 897 Restructured loans 0 0 Other real estate owned 865 1,380 Non-performing other assets 54 1 -------------- ---------------- Total non-performing assets $2,379 $2,810 ============== ================ Total non-performing assets as a percentage of total assets 0.27% 0.33% ============== ================ Total non-performing assets as a percentage of loans plus non-performing assets 0.42% 0.58% ============== ================ The ratio of non-performing assets to loans plus non-performing assets decreased to 0.42% at September 30, 1996 from 0.58% at December 31, 1995. This was due to decreases in the balance of non-accrual loans and other real estate owned, offset partially by an increase in the balance of loans 90 days past due and still accruing. The balance of loans outstanding increased during the period, while the balance of non-performing assets decreased thereby causing a further decrease in the percentage of non-performing assets.

RESULTS OF OPERATIONS NINE MONTHS ENDED SEPTEMBER 30, 1996 AS COMPARED TO SEPTEMBER 30, 1995 SUMMARY Net income for the nine months ended September 30, 1996 increased 6.3% to $6,882,000 as compared to $6,474,000 for the comparable period in 1995. Earnings per share increased 5.3% to $.99 at September 30, 1996 as compared to $.94 for the same period in 1995. Operating earnings, which exclude security gains and the related tax expense, were $6,823,000, or $.98 per share for the nine months ended September 30, 1996, as compared to $6,364,000, or $.92 per share for the same period in 1995. The Corporation's return on average assets was 1.07% for the nine months ended September 30, 1996, as compared to 1.15% for the comparable period in 1995. The return on average assets from operations of 1.06% for the nine months ended September 30, 1996 was 7 basis points lower that the 1.13% level achieved in the comparable period of 1995. Net interest margin, the Corporation's net interest income expressed as a percentage of average earning assets stated on a fully taxable equivalent basis, was 4.12% for the nine months ended September 30, 1996, as compared to 4.20% for the same period in 1995. The net interest margin expressed as a percentage of average total assets, also on a fully taxable equivalent basis, was 3.78% for the nine months ended September 30, 1996, compared to 3.84% for the same period in 1995. The decrease in the net interest margin reflects the increase in interest expense the Corporation experienced due to the $78 million in deposit liabilities assumed in December 1995. The Corporation has been reinvesting investment security maturities and sales proceeds in higher yielding loans in order to increase the net interest margin. During the nine months ended September 30, 1996, the Corporation recognized security gains of approximately $59,000, after income taxes, representing 0.9% of net income. During the same period in 1995, security gains of $110,000, after income taxes, were recognized, representing 1.7% of net income. INTEREST INCOME Interest income, on a tax equivalent basis, for the nine months ended September 30, 1996 increased 13.7% to $46,573,000 from $40,974,000 for the comparable period in 1995. The increase in interest income resulted from an increase in average earning assets of $97,672,000 for the period ended September 30, 1996, as compared to the same period of 1995, offset in part by a 4 basis point decrease in the average yield on interest earning assets to 7.93% in the current period when compared to the same period in 1995. INTEREST EXPENSE Total interest expense increased 15.3% for the nine months ended September 30, 1996 as compared to the prior year period. This increase resulted in large part from a $57,923,000 increase in average time deposit balances and a $25,378,000 increase in average savings deposit balances for the nine months ended September 30, 1996, as compared to the same period in 1995.

PROVISION FOR LOAN LOSSES The provision for loan losses of $400,000 for the nine months ended September 30, 1996 is $25,000 more than the provision for the comparable period in 1995. The provision and the net charge-offs of $254,000 for the period resulted in the reserve representing 1.00% of total loans and 385% of non-performing loans at September 30, 1996, as compared to the reserve representing 1.14% of total loans and 383% of non-performing loans at December 31, 1995. The adequacy of the reserve for loan losses is consistent with management's consideration of the composition of the portfolio, recent credit quality experience, and prevailing economic conditions. Within the last three years, the Corporation has grown its installment loan portfolio through bank -approved dealer paper, installment car loans originated by dealers at the time of sale. It is possible that a weakening in the economic cycle could adversely affect the quality of these loans and resultant charge-offs may necessitate larger loan loss provisions. OTHER INCOME, OTHER EXPENSE AND INCOME TAXES Total other income, excluding security gains, decreased 1.1% for the nine months ended September 30, 1996 as compared to the same period in 1995. This was a combination of decreases in gains on sales of pooled loans and trading security losses, offset partially by increased service charges on deposit accounts and other service charges and fees, for the nine months ended September 30, 1996 as compared to the same period in 1995. Gains of $197,000 were recognized on the sale of $26,566,000 of pooled loans for the nine months ended September 30, 1996 as compared to gains of $558,000 on the sale of $26,026,000 of pooled loans in the prior year period. Management anticipates continued sales from the current mortgage loan production of the Corporation if mortgage loan originations are high relative to historic norms and the sales of the loans are necessary to maintain the asset/liability structure that the Corporation is trying to effect. The Corporation may realize gains and/or losses on these sales dependent upon interest rate movements and upon how receptive the debt markets are to mortgage backed securities. Total other expense increased 10.9% or $1,907,000 for the nine months ended September 30, 1996 as compared to the same period in 1995. Salaries and wages expense increased $850,000 or 10.8% and employee benefits expense increased $173,000 or 11.7% for the nine months ended September 30, 1996, as compared to the same period last year as a result of new staffing at the banking centers added in December 1995. The Corporation had 384 full time equivalent employees as of September 30, 1996 as compared to 361 as of September 30, 1995. Occupancy and furniture and equipment expenses increased 6.3% to $2,683,000 for the nine months ended September 30, 1996 from $2,524,000 in the prior year period. Data processing expense decreased $26,000 or 2.4% to $1,050,000 for the nine months ended September 30, 1996 from the prior year period. Foreclosed property write-downs and expenses decreased $21,000 to $89,000 for the nine months ended September 30, 1996 from the prior year period. Other operating expenses increased $403,000 or 12.5% to $3,627,000 for the nine months ended September 30, 1996 due to a $441,000 one time assessment for the Savings Association Insurance Fund on deposits the Corporation had previously assumed from savings and loans. The Corporation's net overhead expense, total non-interest expense less non-interest income divided by average assets, increased to 2.05% for the nine months ended September 30, 1996 from 1.99% in the prior year period as a result of the income and expense items described above. The Corporation's efficiency ratio is defined as operating expenses divided by net revenue. (More specifically it is defined as non interest expense expressed as a percentage of the sum of tax equivalent net interest income and non interest income, excluding security gains). The consolidated efficiency ratio for the nine months ended September 30, 1996 was 63.6% as compared to 62.7% for the prior year period. When the gains on the sales of pooled loans are excluded, these ratios are identically 64.0%. The change in the current year efficiency ratio is due to the income and expense items noted above.

Income taxes for the nine months ended September 30, 1996 increased to $2,825,000 as compared to $2,707,000 for the comparable period in 1995. As a percent of income before taxes, the provision for income taxes decreased to 29.1% for the nine months ended September 30, 1996 from 29.5% for the same period in 1995. RESULTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 1996 AS COMPARED TO SEPTEMBER 30, 1995 SUMMARY Net income for the three months ended September 30, 1996 increased 0.6% to $2,263,000 as compared to $2,249,000 for the comparable period in 1995. Earnings per share decreased 3.0% to $.32 at September 30, 1996 as compared to $.33 for the same period in 1995. Operating earnings, which exclude security gains and the related tax expense, were $2,207,000, or $.31 per share for the three months ended September 30, 1996, as compared to $2,171,000, or $.31 per share for the same period in 1995. The Corporation's return on average assets was 1.05% for the three months ended September 30, 1996, as compared to 1.14% achieved for the comparable period in 1995. The return on average assets from operations of 1.03% for the three months ended September 30, 1996 was less than the 1.10% level achieved in the comparable period of 1995. The net interest margin expressed as a percentage of average earning assets was 4.21% for the three months ended September 30, 1996, 8 basis points higher than the level achieved for the like period in 1995. The net interest margin expressed as a percentage of average total assets was 3.87% for the three months ended September 30, 1996, as compared to 3.79% for the same period in 1995. During the three months ended September 30, 1996, the Corporation recognized security gains of approximately $56,000, after income taxes, representing 2.5% of net income. During the same period in 1995, security gains of approximately $78,000, after income taxes, were recognized, representing 3.5% of net income. INTEREST INCOME Interest income on a fully taxable equivalent basis increased $1,443,000, or 10.0% for the three months ended September 30, 1996 from the same period in 1995. The increase resulted from a higher level of interest income on greater average volumes of loans outstanding for the three months ended September 30, 1996 as compared to the same period of 1995. The yield on interest earning assets increased 6 basis points for the three months ended September 30, 1996 as compared to the same period in 1995. INTEREST EXPENSE Total interest expense increased 8.4% for the three months ended September 30, 1996 as compared to the prior year period. This increase resulted in large part from a $51,534,000 increase in average time deposit balances and from a $25,780,000 increase in average savings deposit balances for the three months ended September 30, 1996, as compared to the same period in 1995.

OTHER INCOME, OTHER EXPENSE AND INCOME TAXES Total other income, excluding security transactions, increased 10.1% for the three months ended September 30, 1996 as compared to the same period in 1995. This was a combination of increased trust revenue, service charges on deposit accounts, and other service charges and fees. Gains of $81,000 were recognized on the sale of $13,687,000 of pooled loans for the three months ended September 30, 1996 as compared to gains of $145,000 on the sale of $11,941,000 of pooled loans in the prior year period. Total other expense increased 20.0% or $1,146,000 for the three months ended September 30, 1996 as compared to the same period in 1995. Salaries and wages expense increased $292,000 or 10.9% and employee benefits expense increased $54,000 or 11.4% for the three months ended September 30, 1996, as compared to the same period last year as a result of new staffing at the banking centers added in December 1995. Occupancy and furniture and equipment expenses decreased 0.2% to $942,000 for the three months ended September 30, 1996 from $944,000 in the prior year period. Data processing expense decreased $5,000 or 1.3% to $366,000 for the three months ended September 30, 1996 from the prior year period. Foreclosed property write-downs and expenses decreased $7,000 to $14,000 for the three months ended September 30, 1996 from the prior year period. Other operating expenses increased $667,000 to $1,536,000 for the three months ended September 30, 1996 from the prior year period. Of this increase, $441,000 was due to a one time assessment for the Savings Association Insurance Fund for deposits the Corporation had previously assumed from savings and loans. The consolidated efficiency ratio for the three months ended September 30, 1996 was 65.6% as compared to 60.8% for the prior year period. When the gains on the sales of pooled loans are excluded, these ratios are 66.1% and 61.8%, respectively. The change in the current year efficiency ratio is due to the income and expense items noted above. Income taxes for the three months ended September 30, 1996 decreased to $920,000 as compared to $937,000 for the comparable period in 1995. As a percent of income before taxes, the provision for income taxes decreased to 28.9% for the three months ended September 30, 1996 from 29.4% for the same period in 1995.

LIQUIDITY Liquidity is the availability of funds to meet all present and future financial obligations arising in the daily operations of the business at a minimal cost. These financial obligations consist of needs for funds to meet extensions of credit, deposit withdrawals and debt servicing. The sources of short-term liquidity utilized by the Corporation consist of non-reinvested asset maturities, deposits and capital funds. Long-term liquidity needs will be satisfied primarily through retention of capital funds. The Corporation does not deal in or use brokered deposits as a source of liquidity. The Corporation purchases federal funds as a service to its respondent banks, but generally does not rely upon these purchases for liquidity needs. Additional liquidity is provided by bank lines of credit, repurchase agreements and the ability to borrow from the Federal Reserve Bank. The Corporation has an operating line with American National Bank and Trust Company of Chicago in the amount of $10,000,000 with $3,500,000 available as of September 30, 1996. The Corporation's dependence on large liabilities (defined as time deposits over $100,000 and short-term borrowings) increased to 12.2% at September 30, 1996 from 9.6% at December 31, 1995. This is the ratio of total large liabilities to total liabilities, and is low in comparison to the Corporation's peers. This increase was due largely to a $34,587,000 increase in time deposits over $100,000 and a $12,014,000 decrease in repurchase agreements which resulted in a higher ratio of large liabilities to total liabilities. CAPITAL RESOURCES Other than from the issuance of common stock, the Corporation's primary source of capital is retained net income. During the nine months ended September 30, 1996, the Corporation earned $6,882,000 and paid dividends of $3,306,000 to stockholders, resulting in a retention of current earnings of $3,576,000. The Corporation's dividend payout for the nine months ended September 30, 1996 was 48.0%. The Corporation's risk-based capital ratio was 12.02% and the leverage ratio was 6.98% as of September 30, 1996, as compared to 12.36% and 6.92% respectively as of December 31, 1995. The Corporation and its bank subsidiary were well above all minimum required capital ratios as of September 30, 1996. RATE SENSITIVE ASSETS AND LIABILITIES Interest rate sensitivity is a measure of the volatility of the net interest margin as a consequence of changes in market rates. The rate-sensitivity chart shows the interval of time in which given volumes of rate-sensitive, earning assets and rate-sensitive, interest bearing liabilities would be responsive to changes in market interest rates based on their contractual maturities or terms for repricing. It is however, only a static, single-day depiction of the Corporation's rate sensitivity structure, which can be adjusted in response to changes in forecasted interest rates.

The following table sets forth the static rate-sensitivity analysis of the Corporation as of September 30, 1996. Rate Sensitive Within ---------------------------------------------------------------------- 1-30 31-90 91-180 181 Days- Over Days Days Days 1 Year 1 Year Total ---------------------------------------------------------------------- (Dollars in thousands) Investment securities U.S. Governments $5,530 $42,765 $34,264 $18,167 $80,318 $181,044 Obligations of states and political subdivisions 1,000 2,619 1,055 361 34,961 39,996 Other securities 3,515 1,025 125 0 13,267 17,932 Loans (net of unearned int.) 153,635 27,494 44,894 69,857 266,897 562,777 ---------------------------------------------------------------------- Total rate-sensitive assets $163,680 $73,903 $80,338 $88,385 $395,443 $801,749 ---------------------------------------------------------------------- Interest bearing transactions deposits $125,874 $0 $0 $0 $0 $125,874 Savings deposits 82,205 0 0 0 0 82,205 Money market deposits 139,528 0 0 0 0 139,528 Time deposits 41,536 61,327 77,397 85,647 93,827 359,734 Short-term borrowings: Federal funds purchased & repurchase agreements 10,087 0 0 0 0 10,087 Other 0 0 7,100 0 0 7,100 Long-term debt 0 0 0 0 5,000 5,000 ---------------------------------------------------------------------- Total rate-sensitive liabilities $399,230 $61,327 $84,497 $85,647 $98,827 $729,528 ---------------------------------------------------------------------- Rate-sensitive assets less rate-sensitive liabilities ($235,550) $12,576 ($4,159) $2,738 $296,616 $72,221 ---------------------------------------------------------------------- ---------------------------------------------------------------------- Cumulative Gap ($235,550) ($222,974) ($227,133) ($224,395) $72,221 --- ====================================================================== Cumulative amounts as percentage of total rate-sensitive assets -29.38% -27.81% -28.33% -27.99% 9.01% --- ====================================================================== Cumulative ratio (cumulative RSA/RSL) 0.41X 0.52X 0.58X 0.64X 1.10X 1.10X ====================================================================== The foregoing table shows a negative (liability sensitive) rate-sensitivity gap of $235.6 million in the 1-30 day repricing category. The gap beyond 30 days, through 90 days, becomes slightly less liability sensitive as rate-sensitive assets that reprice in those time periods are slightly more in volume than rate-sensitive liabilities that are subject to repricing in the same respective time periods. The gap beyond 90 days through 180 days becomes slightly more liability sensitive as rate-sensitive assets that reprice after 90 days are less in volume than rate- sensitive liabilities that are subject to repricing in the same respective time periods. The composition of the gap structure at September 30, 1996, will benefit the Corporation more if interest rates fall during the next 30 days by allowing the net interest margin to grow as liability rates would reprice more quickly than rates on interest rate-sensitive assets. After 30 days through one year, a rate change would have little effect on the Corporation because the volume of rate-sensitive assets repricing would be similar to the volume of rate-sensitive liabilities that would be repricing.

FIRST BUSEY CORPORATION and Subsidiaries AVERAGE BALANCE SHEETS AND INTEREST RATES NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 1996 1995 --------------------------------------------------------------- Average Income/ Yield/ Average Income/ Yield/ Balance Expense Rate Balance Expense Rate --------------------------------------------------------------- (Dollars in thousands) ASSETS Federal funds sold $10,066 $408 5.41% $14,659 $646 5.89% Investment securities U.S. Government obligations 199,893 8,821 5.89% 167,798 7,633 6.08% Obligations of states and political subdivisions (1) 38,597 2,428 8.40% 36,189 2,321 8.57% Other securities 23,213 987 5.68% 21,167 1,004 6.34% Loans (net of unearned interest) (1) (2) 513,113 33,929 8.83% 447,397 29,370 8.78% ------------------ ------------------ Total interest earning assets $784,882 $46,573 7.93% $687,210 $40,974 7.97% ======= ======= Cash and due from banks 34,777 30,963 Premises and equipment 21,510 21,421 Reserve for possible loan losses (5,592) (5,392) Other assets 20,239 17,655 -------- -------- Total Assets $855,816 $751,857 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Interest bearing transaction deposits $130,456 $1,588 1.63% $123,109 $1,704 1.85% Savings deposits 80,190 1,889 3.15% 54,812 1,158 2.82% Money market deposits 136,420 3,884 3.80% 133,730 3,674 3.67% Time deposits 342,134 13,952 5.45% 284,211 11,500 5.41% Short-term borrowings: Federal funds purchased and repurchase agreements 10,329 404 5.22% 13,530 637 6.30% Other 8,120 441 7.26% 8,078 525 8.69% Long-term debt 5,000 208 5.55% 5,000 207 5.54% ------------------ ------------------ Total interest bearing liabilities $712,649 $22,366 4.19% $622,470 $19,405 4.17% ======= ======= Net interest spread 3.73% 3.80% ======= ======= Demand deposits 68,920 62,685 Other liabilities 5,687 4,454 Stockholders' equity 68,560 62,248 -------- -------- Total Liabilities and Stockholders' Equity $855,816 $751,857 ======== ======== Interest income / earning assets (1) $784,882 $46,573 7.93% $687,210 $40,974 7.97% Interest expense / earning assets 784,882 22,366 3.81% 687,210 19,405 3.77% ----------------- ----------------- Net interest margin (1) $24,207 4.12% $21,569 4.20% ================= ================= (1) On a tax-equivalent basis, assuming a federal income tax rate of 35% for 1996 and 1995. (2) Non-accrual loans have been included in average loans, net of unearned interest.

FIRST BUSEY CORPORATION and Subsidiaries CHANGES IN NET INTEREST INCOME NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 Change due to (1) Average Average Total Volume Yield/Rate Change ----------------------------------- (Dollars in thousands) Increase (decrease) in interest income: Federal funds sold ($189) ($49) ($238) Investment securities: U.S. Government obligations 1,413 (225) 1,188 Obligations of states and political subdivisions (2) 151 (44) 107 Other securities 224 (241) (17) Loans (2) 4,368 191 4,559 ----------------------------------- Change in interest income (2) $5,967 ($368) $5,599 ----------------------------------- Increase (decrease) in interest expense: Interest bearing transaction deposits $114 ($230) ($116) Savings deposits 586 145 731 Money market deposits 76 134 210 Time deposits 2,371 81 2,452 Short-term borrowings: Federal funds purchased and repurchase agreements (135) (98) (233) Other 3 (87) (84) Long-term debt 0 1 1 ----------------------------------- Change in interest expense $3,015 ($54) $2,961 ----------------------------------- Increase in net interest income (2) $2,952 ($314) $2,638 =================================== (1) Changes due to both rate and volume have been allocated proportionally. (2) On a tax-equivalent basis, assuming a federal income tax rate of 35% for 1996 and 1995.

FIRST BUSEY CORPORATION and Subsidiaries AVERAGE BALANCE SHEETS AND INTEREST RATES QUARTERS ENDED SEPTEMBER 30, 1996 AND 1995 1996 1995 --------------------------------------------------------------- Average Income/ Yield/ Average Income/ Yield/ Balance Expense Rate Balance Expense Rate --------------------------------------------------------------- (Dollars in thousands) ASSETS Federal funds sold $1,207 $16 5.25% $19,709 $285 5.73% Investment securities U.S. Government obligations 178,293 2,675 5.97% 177,022 2,666 5.98% Obligations of states and political subdivisions (1) 39,844 834 8.33% 37,957 803 8.39% Other securities 21,467 304 5.64% 20,939 321 6.08% Loans (net of unearned interest) (1) (2) 543,975 12,017 8.79% 460,987 10,328 8.89% ------------------ ------------------ Total interest earning assets $784,786 $15,846 8.03% $716,614 $14,403 7.97% ======= ======= Cash and due from banks 33,522 30,145 Premises and equipment 21,591 21,184 Reserve for possible loan losses (5,611) (5,327) Other assets 20,581 17,499 -------- -------- Total Assets $854,869 $780,115 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Interest bearing transaction deposits $127,569 $529 1.65% $122,255 $546 1.77% Savings deposits 82,465 664 3.21% 56,685 417 2.92% Money market deposits 139,686 1,346 3.83% 142,388 1,323 3.68% Time deposits 342,660 4,702 5.46% 291,126 4,071 5.55% Short-term borrowings: Federal funds purchased and repurchase agreements 6,342 86 5.41% 19,095 301 6.26% Other 7,312 136 7.41% 9,895 220 8.85% Long-term debt 5,000 70 5.55% 5,000 70 5.54% ------------------ ------------------ Total interest bearing liabilities $711,034 $7,533 4.22% $646,444 $6,948 4.26% ======= ======= Net interest spread 3.82% 3.71% ======= ======= Demand deposits 68,521 64,349 Other liabilities 5,991 5,041 Stockholders' equity 69,323 64,281 -------- -------- Total Liabilities and Stockholders' Equity $854,869 $780,115 ======== ======== Interest income / earning assets (1) $784,786 $15,846 8.03% $716,614 $14,403 7.97% Interest expense / earning assets 784,786 7,533 3.82% 716,614 6,948 3.84% ----------------- ----------------- Net interest margin (1) $8,313 4.21% $7,455 4.13% ================= ================= (1) On a tax-equivalent basis, assuming a federal income tax rate of 35% for 1996 and 1995. (2) Non-accrual loans have been included in average loans, net of unearned interest.

FIRST BUSEY CORPORATION and Subsidiaries CHANGES IN NET INTEREST INCOME QUARTERS ENDED SEPTEMBER 30, 1996 AND 1995 Change due to (1) Average Average Total Volume Yield/Rate Change ----------------------------------- (Dollars in thousands) Increase (decrease) in interest income: Federal funds sold ($247) ($22) ($269) Investment securities: U.S. Government obligations 16 (7) 9 Obligations of states and political subdivisions (2) 39 (8) 31 Other securities 8 (25) (17) Loans (2) 1,807 (118) 1,689 ----------------------------------- Change in interest income (2) $1,623 ($180) $1,443 ----------------------------------- Increase (decrease) in interest expense: Interest bearing transaction deposits $26 ($43) ($17) Savings deposits 204 43 247 Money market deposits (26) 49 23 Time deposits 702 (71) 631 Short-term borrowings: Federal funds purchased and repurchase agreements (178) (37) (215) Other (52) (32) (84) Long-term debt 0 0 0 ----------------------------------- Change in interest expense $676 ($91) $585 ----------------------------------- Increase in net interest income (2) $947 ($89) $858 =================================== (1) Changes due to both rate and volume have been allocated proportionally. (2) On a tax-equivalent basis, assuming a federal income tax rate of 35% for 1996 and 1995.

ITEM 6: Exhibits and Reports on Form 8-K (a) There were no reports on Form 8-K filed during the three months ending September 30, 1996.

SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused the report to be signed on its behalf by the undersigned thereunto duly authorized. FIRST BUSEY CORPORATION (Registrant) By: //Scott L. Hendrie// --------------------------- Scott L. Hendrie Senior Vice President and Chief Financial Officer (Principal financial and accounting officer) Date: November 13, 1996

9 1,000 3-MOS DEC-31-1996 SEP-30-1996 41,761 0 0 929 179,184 58,859 59,281 562,777 5,619 881,613 783,002 17,187 6,077 5,000 0 0 6,291 64,056 881,613 11,952 3,521 16 15,489 7,241 7,533 7,956 150 85 6,879 3,183 2,263 0 0 2,263 0.32 0.32 8.03 0 1,460 0 1,319 5,543 106 32 5,619 0 0 0