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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 6/30/97 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 (Zip Code)
executive offices)
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 August 6, 1997
--------------------------------------- -----------------------------
Class A Common Stock, without par value 5,790,728
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)
June 30, 1997 December 31, 1996
--------------- -----------------
(Dollars in thousands)
ASSETS
Cash and due from banks $40,049 $33,738
Federal funds sold 10,500 0
Securities held to maturity (fair value 1997 $51,396; 1996 $61,422) 50,738 55,107
Securities available for sale (amort. cost 1997 $158,970; 1996 $177,040) 165,663 171,243
Loans (net of unearned interest) 591,103 569,500
Allowance for loan losses (6,517) (6,131)
------------ ------------
Net loans $584,586 $563,369
Premises and equipment 22,639 21,588
Other assets 18,649 19,873
------------ ------------
Total assets $892,824 $864,918
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Non-interest bearing $78,590 $ 78,077
Interest bearing 714,829 688,850
------------ ------------
Total deposits $793,419 $766,927
Short-term borrowings 6,000 14,405
Long-term debt 10,000 5,000
Other liabilities 5,291 5,169
------------ ------------
Total liabilities $814,710 $791,501
------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock $ - $ -
Common stock 6,291 6,291
Surplus 20,709 20,594
Retained earnings 50,141 47,402
Unrealized gain (loss) on securities available for sale, net 4,350 3,285
------------ ------------
Total stockholders' equity before treasury stock, unearned ESOP
shares and deferred compensation for stock grants $81,491 $ 77,572
Treasury stock, at cost (2,753) (3,489)
Unearned ESOP shares and deferred compensation for stock grants (624) (666)
------------ ------------
Total stockholders' equity $78,114 $ 73,417
------------ ------------
Total liabilities and stockholders' equity $892,824 $ 864,918
============ ============
Class A Common Shares outstanding at period end 5,790,814 5,721,712
============ ============
Class B Common Shares outstanding at period end 1,125,000 1,125,000
============ ============
FIRST BUSEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
June 30, 1997 June 30, 1996
--------------- -----------------
(Dollars in thousands)
ASSETS
Cash and due from banks $40,049 $37,530
Federal funds sold 10,500 0
Securities held to maturity (fair value 1997 $51,396; 1996 $61,422) 50,738 61,293
Securities available for sale (amort. cost 1997 $158,970; 1996 $177,040) 165,663 179,912
Trading securities at fair value 1,854
Loans (net of unearned interest) 591,103 537,873
Allowance for loan losses (6,517) (5,543)
------------ ------------
Net loans $584,586 $532,330
Premises and equipment 22,639 21,300
Other assets 18,649 21,250
------------ ------------
Total assets $892,824 $855,469
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Non-interest bearing $78,590 $76,183
Interest bearing 714,829 682,980
------------ ------------
Total deposits $793,419 $759,163
Short-term borrowings 6,000 16,916
Long-term debt 10,000 5,000
Other liabilities 5,291 5,704
------------ ------------
Total liabilities $814,710 $786,783
------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock $ - $ -
Common stock 6,291 6,291
Surplus 20,709 20,395
Retained earnings 50,141 44,858
Unrealized gain (loss) on securities available for sale, net 4,350 1,868
------------ ------------
Total stockholders' equity before treasury stock, unearned ESOP $81,491 $ 73,412
shares and deferred compensation for stock grants
Treasury stock, at cost (2,753) (4,000)
Unearned ESOP shares and deferred compensation for stock grants (624) (726)
------------ ------------
Total stockholders' equity $78,114 $68,686
------------ ------------
Total liabilities and stockholders' equity $892,824 $855,469
============ ============
Class A Common Shares outstanding at period end 5,790,814 5,669,306
============ ============
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 SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
1997 1996
---------- ----------
(Dollars in thousands,
except per share amounts)
INTEREST INCOME:
Interest and fees on loans $24,589 $ 21,774
Interest and dividends on investment securities:
Taxable interest income 5,188 6,768
Non-taxable interest income 1,002 1,036
Dividends 53 61
Interest on federal funds sold 148 392
---------- ----------
Total interest income $30,980 $ 30,031
---------- ----------
INTEREST EXPENSE:
Deposits $14,419 $14,072
Short-term borrowings 320 623
Long-term debt 247 138
---------- ----------
Total interest expense $14,986 $14,833
---------- ----------
Net interest income $15,994 $15,198
Provision for loan losses 400 250
---------- ----------
Net interest income after provision for loan losses $15,594 $14,948
---------- ----------
OTHER INCOME:
Trust $1,625 $1,286
Commissions and brokers fees, net 507 421
Service charges on deposit accounts 1,464 1,432
Other service charges and fees 603 441
Security gains (losses), net 265 5
Trading security gains (losses), net 2 (132)
Gain on sales of pooled loans 117 116
Other operating income 410 485
---------- ----------
Total other income $4,993 $4,054
---------- ----------
OTHER EXPENSES:
Salaries and wages $6,011 $5,759
Employee benefits 1,300 1,124
Net occupancy expense of bank premises 1,066 948
Furniture and equipment expenses 855 793
Data processing 822 684
Stationery, supplies and printing 345 344
Foreclosed property write-downs and expenses 0 75
Amortization expense 660 660
Other operating expenses 2,342 2,091
---------- ----------
Total other expenses $13,401 $12,478
---------- ----------
Income before income taxes $7,186 $6,524
Income taxes 2,131 1,905
---------- ----------
Net income $5,055 $4,619
========== ==========
NET INCOME PER SHARE OF COMMON STOCK AND STOCK EQUIVALENTS: $0.72 $0.67
========== ==========
DIVIDENDS DECLARED PER SHARE:
Class A Common Stock $0.3400 $0.3333
========== ==========
Class B Common Stock $0.3091 $0.3030
========== ==========
FIRST BUSEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE QUARTERS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
1997 1996
---------- ----------
(Dollars in thousands,
except per share amounts)
INTEREST INCOME:
share amounts)
Interest and fees on loans $12,581 $ 11,171
Interest and dividends on investment securities:
Taxable interest income 2,547 3,237
Non-taxable interest income 502 525
Dividends 25 28
Interest on federal funds sold 48 70
---------- ----------
Total interest income $15,703 $ 15,031
---------- ----------
INTEREST EXPENSE:
Deposits $7,269 $6,943
Short-term borrowings 188 262
Long-term debt 146 69
---------- ----------
Total interest expense $7,603 $7,274
---------- ----------
Net interest income $8,100 $7,757
Provision for loan losses 200 100
---------- ----------
Net interest income after provision for loan losses $7,900 $7,657
---------- ----------
OTHER INCOME:
Trust $850 $670
Commissions and brokers fees, net 220 216
Service charges on deposit accounts 744 733
Other service charges and fees 333 240
Security gains (losses), net 166 4
Trading security gains (losses), net 1 (44)
Gain on sales of pooled loans 82 68
Other operating income 141 228
---------- ----------
Total other income $2,537 $2,115
---------- ----------
OTHER EXPENSES:
Salaries and wages $3,006 $2,907
Employee benefits 627 556
Net occupancy expense of bank premises 501 480
Furniture and equipment expenses 425 399
Data processing 463 348
Stationery, supplies and printing 161 186
Foreclosed property write-downs and expenses 0 71
Amortization expense 330 330
Other operating expenses 1,146 1,048
---------- ----------
Total other expenses $6,659 $6,325
---------- ----------
Income before income taxes $3,778 $3,447
Income taxes 1,131 1,019
---------- ----------
Net income $2,647 $2,428
========== ==========
NET INCOME PER SHARE OF COMMON STOCK AND STOCK EQUIVALENTS: $0.38 $0.35
========== ==========
DIVIDENDS DECLARED PER SHARE:
Class A Common Stock $0.1700 $0.1667
========== ==========
Class B Common Stock $0.1545 $0.1515
========== ==========
FIRST BUSEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
1997 1996
---------- ----------
(Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $5,055 $4,619
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,686 1,646
Provision for loan losses 400 250
Decrease in deferred income taxes (625) (401)
Amortization of investment security discounts (195) (892)
Gain on sales of investment securities, net (265) (5)
Proceeds from sales of pooled loans 13,734 12,995
Loans originated for sale (14,139) (14,834)
Gain on sale of pooled loans (117) (116)
Loss on sales and dispositions of premises and equipment 0 9
Change in assets and liabilities:
Increase (decrease) in other assets 642 1,486
Increase (decrease) in accrued expenses (179) (23)
Increase (decrease) in interest payable (96) (164)
Increase in income taxes payable 397 574
---------- ----------
Net cash provided by operating activities $6,298 $5,144
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of securities classified available for sale $3,274 $8,049
Proceeds from maturities of securities classified available for sale 57,490 352,724
Proceeds from maturities of securities classified held to maturity 5,450 18,323
Purchase of securities classified available for sale (53,116) (320,675)
Purchase of securities classified held to maturity (1,050) (17,951)
(Increase) decrease in federal funds sold (10,500) 650
Increase in loans (21,122) (54,677)
Purchases of premises and equipment (2,036) (412)
Proceeds from sales of premises and equipment 1 0
---------- ----------
Net cash (used in) investing activities ($21,609) ($13,969)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in certificates of deposit $23,503 ($18,255)
Net increase in demand, money market and saving deposits 2,989 32,521
Cash dividends paid (2,316) (2,235)
Purchase of treasury stock (402) (367)
Proceeds from sale of treasury stock 1,253 41
Principal payments on short-term borrowings (2,000) (1,250)
Proceeds from long-term borrowings 5,000 0
Net increase (decrease) in federal funds purchased,
repurchase agreements and Federal Reserve discount borrowings (6,405) (3,458)
---------- ----------
Net cash provided by (used in) financing activities $21,622 $6,997
---------- ----------
Net increase (decrease) in cash and cash equivalents $6,311 ($1,828)
Cash and due from banks, beginning $33,738 39,358
---------- ----------
Cash and due from banks, ending $40,049 $37,530
========== ==========
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 June 30, 1997 and December 31, 1996 were
as follows:
June 30, 1997 December 31, 1996
------------------------------------------
(Dollars in thousands)
Commercial $64,495 $62,065
Real estate construction 27,491 26,184
Real estate - farmland 11,721 11,468
Real estate - 1-4 family residential mortgage 221,643 207,946
Real estate - multifamily mortgage 74,608 74,245
Real estate - non-farm nonresidential mortgage 136,168 131,350
Installment 40,311 39,707
Agricultural 14,667 16,537
------------------------------------------
$591,104 $569,502
Less:
Unearned interest 1 2
------------------------------------------
$591,103 $569,500
------------------------------------------
Less:
Allowance for loan losses 6,517 6,131
------------------------------------------
Net loans $584,586 $563,369
==========================================
The real estate-mortgage category includes loans held for sale with carrying
values of $1,969,000 at June 30, 1997 and $1,447,000 at December 31, 1996;
these loans had fair market values of $1,996,000 and $1,457,000, 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
June 30, June 30,
1997 1996 1997 1996
------------ ------------ ------------ ------------
Net income $2,647,000 $2,428,000 $5,055,000 $4,619,000
Shares:
Weighted average common shares outstanding 6,914,134 6,795,518 6,912,760 6,800,539
Dilutive effect of outstanding options, as determined
by the application of the treasury stock method 100,475 133,507 100,163 120,583
------------ ------------ ------------ ------------
Weighted average common shares outstanding,
as adjusted 7,014,609 6,929,025 7,012,923 6,921,122
============ ============ ============ ============
Net income per share of common stock and stock equivalents: $0.38 $0.35 $0.72 $0.67
============ ============ ============ ============
NOTE 4: SUPPLEMENTAL CASH FLOW DISCLOSURES FOR THE SIX MONTHS ENDED JUNE 30,
1997 AND 1996.
1997 1996
---------- ----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest $15,082 $14,997
========== ==========
Income taxes $1,966 $1,713
========== ==========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Other real estate acquired in settlement of loans $27 $351
========== ==========
Change in unrealized gain (loss) on securities available for sale $1,639 ($1,885)
========== ==========
(Decrease) increase in deferred income taxes attributable to the
unrealized (gain) loss on investment securities available for sale ($574) $660
========== ==========
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 June 30, 1997
(unaudited) when compared with December 31, 1996 and the results of operations
for the six months ended June 30, 1997 and 1996 (unaudited) and the results of
operations for the three months ended June 30, 1997 and 1996 (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 JUNE 30, 1997 AS COMPARED TO DECEMBER 31, 1996
Total assets increased $27,906,000, or 3.2%, to $892,824,000 at June 30, 1997
from $864,918,000 at December 31, 1996.
Securities held to maturity decreased $4,369,000, or 7.9%, to $50,738,000 at
June 30, 1997 from $55,107,000 at December 31, 1996. Securities available for
sale decreased $5,580,000, or 3.3%, to $165,663,000 at June 30, 1997 from
$171,243,000 at December 31, 1996, as security maturities were used to help
finance loan growth.
Loans increased $21,603,000 or 3.8%, to $591,103,000 at June 30, 1997 from
$569,500,000 at December 31, 1996, primarily due to increases in commercial and
mortgage loans.
Total deposits increased $26,492,000, or 3.5%, to $793,419,000 at June 30, 1997
from $766,927,000 at December 31, 1996. Non-interest bearing deposits increased
0.7% to $78,590,000 at June 30, 1997 from $78,077,000 at December 31, 1996.
Interest bearing deposits increased 3.8% to $714,829,000 at June 30, 1997 from
$688,850,000 at December 31, 1996. Short-term borrowings decreased $8,405,000,
or 58.3%, to $6,000,000 at June 30, 1997, as compared to $14,405,000 at December
31, 1996. This was due primarily to a decrease in federal funds purchased.
In the first six months of 1997, the Corporation repurchased 17,311 shares of
its Class A stock at an aggregate cost of $402,000. 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 June 30, 1997, 2,250 of the 58,500 options which became exercisable on
January 1, 1995 (and expire December 31, 1997) have not yet been exercised and
49,278 of the 133,441 options which became exercisable on January 1, 1997 (and
expire December 31, 1999) have not yet been exercised. The Corporation's Board
of Directors has extended the Stock Repurchase Plan to June 30, 1998. 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.
June 30, 1997 December 31, 1996
----------------- ------------------
(Dollars in thousands)
Non-accrual loans $0 $0
Loans 90 days past due, still accruing 1,781 1,002
Restructured loans 0 0
Other real estate owned 441 805
Non-performing other assets 1 1
----------------- ------------------
Total non-performing assets $2,223 $1,808
================= ==================
Total non-performing assets as a percentage of total assets 0.25% 0.21%
================= ==================
Total non-performing assets as a percentage of loans plus non-performing assets 0.38% 0.32%
================= ==================
The ratio of non-performing assets to loans plus non-performing assets increased
to 0.38% at June 30, 1997 from 0.32% at December 31, 1996. This was due to an
increase in the balance of non-accrual loans, offset partially by a decrease in
the balance of other real estate owned. The balance of loans outstanding
increased during the period at a rate slower than the rate of growth in non-
performing assets, thereby causing an increase in the percentage of non-
performing assets.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997 AS COMPARED TO JUNE 30, 1996
SUMMARY
Net income for the six months ended June 30, 1997 increased 9.4% to $5,055,000
as compared to $4,619,000 for the comparable period in 1996. Earnings per share
increased 7.5% to $.72 at June 30, 1997 as compared to $.67 for the same period
in 1996.
Operating earnings, which exclude security gains and the related tax expense,
were $4,883,000, or $.70 per share for the six months ended June 30, 1997, as
compared to $4,616,000, or $.67 per share for the same period in 1996.
The Corporation's return on average assets was 1.18% for the six months ended
June 30, 1997, as compared to 1.09% for the comparable period in 1996. The
return on average assets from operations of 1.14% for the six months ended June
30, 1997 was 5 basis points higher than the 1.09% level achieved in the
comparable period of 1996.
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 4.24% for the six months ended June 30, 1997, as compared to 4.07% for the
same period in 1996. The net interest margin expressed as a percentage of
average total assets, also on a fully taxable equivalent basis, was 3.88% for
the six months ended June 30, 1997, compared to 3.74% for the same period in
1996. The increase in the net interest margin reflects the increase in
interest income the Corporation experienced due to an increase in average
earning assets and a larger net interest spread.
During the six months ended June 30, 1997, the Corporation recognized security
gains of approximately $172,000, after income taxes, representing 3.4% of net
income. During the same period in 1996, security gains of $3,000, after income
taxes, were recognized, representing 0.1% of net income.
INTEREST INCOME
Interest income, on a tax equivalent basis, for the six months ended June 30,
1997 increased 3.1% to $31,676,000 from $30,727,000 for the comparable period
in 1996. The increase in interest income resulted from an increase in average
earning assets of $9,660,000 for the period ended June 30, 1997, as compared to
the same period of 1996, along with a 7 basis point increase in the average
yield on interest earning assets to 8.04% in the current period when compared to
the same period in 1996. The increase in yield resulted from the reinvestment
of security proceeds into loans, while yields for all interest-earning assets
declined in the current period, when compared to the same period in 1996.
INTEREST EXPENSE
Total interest expense increased 1.0% for the six months ended June 30, 1997 as
compared to the prior year period. This increase resulted in large part from a
29 basis point increase in the average rate paid on transaction deposits and a 7
basis point increase in the average rate paid on time deposit balances for the
six months ended June 30, 1997, as compared to the same period in 1996.
PROVISION FOR LOAN LOSSES
The provision for loan losses of $400,000 for the six months ended June 30, 1997
is $150,000 more than the provision for the comparable period in 1996. The
provision and the net charge-offs of $14,000 for the period resulted in the
reserve representing 1.10% of total loans and 366% of non-performing loans at
June 30, 1997, as compared to the reserve representing 1.08% of total loans and
612% of non-performing loans at December 31, 1996. 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.
In recent 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, increased 16.8% for the six months
ended June 30, 1997 as compared to the same period in 1996. This was a
combination of increases in trust revenue, commissions and brokers fees, and
other service charges and fees, for the six months ended June 30, 1997 as
compared to the same period in 1996. As of June 30, 1997, the asset management
divisions of the Corporation had $887,293,000 in assets under care, an increase
of 27.2% from $697,342,000 at June 30, 1997. Gains of $117,000 were recognized
on the sale of $13,617,000 of pooled loans for the six months ended June 30,
1997 as compared to gains of $116,000 on the sale of $12,879,000 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 allow 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 7.4% or $923,000 for the six months ended June 30,
1997 as compared to the same period in 1996.
Salaries and wages expense increased $252,000 or 4.4% and employee benefits
expense increased $176,000 or 15.7% for the six months ended June 30, 1997, as
compared to the same period last year. The Corporation had 393 full time
equivalent employees as of June 30, 1997 as compared to 387 as of June 30, 1996.
Occupancy and furniture and equipment expenses increased 10.3% to $1,921,000 for
the six months ended June 30, 1997 from $1,741,000 in the prior year period.
Data processing expense increased $138,000 or 20.2% to $822,000 for the six
months ended June 30, 1997 from the prior year period. There were no
foreclosed property write-downs and expenses in the current period, while there
was $75,000 of expense for the six months ended June 30, 1996.
The Corporation's net overhead expense, total non-interest expense less non-
interest income divided by average assets, increased to 2.02% for the six months
ended June 30, 1997 from 1.95% 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 six months ended
June 30, 1997 was 62.6%, identical to the ratio achieved for the prior year
period. When the gains on the sales of pooled loans are excluded, these ratios
are each 62.9%. The static nature of the current year efficiency ratio is due
to the income and expense items noted above.
Income taxes for the six months ended June 30, 1997 increased to $2,131,000 as
compared to $1,905,000 for the comparable period in 1996. As a percent of
income before taxes, the provision for income taxes increased to 29.7% for the
six months ended June 30, 1997 from 29.2% for the same period in 1996.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997 AS COMPARED TO JUNE 30, 1996
SUMMARY
Net income for the three months ended June 30, 1997 increased 9.0% to $2,647,000
as compared to $2,428,000 for the comparable period in 1996. Earnings per share
increased 8.6% to $.38 at June 30, 1997 as compared to $.35 for the same period
in 1996.
Operating earnings, which exclude security gains and the related tax expense,
were $2,540,000, or $.37 per share for the three months ended June 30, 1997, as
compared to $2,426,000, or $.35 per share for the same period in 1995.
The Corporation's return on average assets was 1.22% for the three months ended
June 30, 1997, as compared to 1.15% achieved for the comparable period in 1996.
The return on average assets from operations of 1.17% for the three months ended
June 30, 1997 was more than the 1.14% level achieved in the comparable period of
1996.
The net interest margin expressed as a percentage of average earning assets was
4.26% for the three months ended June 30, 1997, an increase of 9 basis points
from the level achieved for the like period in 1996. The net interest margin
expressed as a percentage of average total assets was 3.90% for the three months
ended June 30, 1997, compared to 3.83% for the same period in 1996.
During the three months ended June 30, 1997, the Corporation recognized security
gains of approximately $108,000, after income taxes, representing 4.1% of net
income. During the same period in 1996, security gains of approximately $2,000,
after income taxes, were recognized, representing an insignificant portion of
net income.
INTEREST INCOME
Interest income on a fully taxable equivalent basis increased $668,000, or 4.3%
for the three months ended June 30, 1997 from the same period in 1996. The
increase resulted from a higher level of interest income on greater average
volumes of loans, offset in part by lower levels of interest income on lower
average balances of U.S. government obligations outstanding, for the three
months ended June 30, 1997 as compared to the same period of 1996. The yield on
interest earning assets increased 17 basis points for the three months ended
June 30, 1997 as compared to the same period in 1996.
INTEREST EXPENSE
Total interest expense increased 4.5% for the three months ended June 30, 1997
as compared to the prior year period. This increase resulted in large part from
a $10,428,000 increase in average time deposit balances and 41 basis point and
15 basis point increases in average rates on transaction deposits and time
deposits, respectively, for the three months ended June 30, 1997, as compared
to the same period in 1996.
OTHER INCOME, OTHER EXPENSE AND INCOME TAXES
Total other income, excluding security transactions, increased 12.3% for the
three months ended June 30, 1997 as compared to the same period in 1996. This
was a combination of increased trust revenue, and other service charges and
fees. Gains of $82,000 were recognized on the sale of $8,472,000 of pooled
loans for the three months ended June 30, 1997 as compared to gains of $68,000
on the sale of $8,419,000 of pooled loans in the prior year period.
Total other expense increased 5.3% or $334,000 for the three months ended June
30, 1997 as compared to the same period in 1996
Salaries and wages expense increased $99,000 or 3.4% and employee benefits
expense increased $71,000 or 12.8% for the three months ended June 30, 1997, as
compared to the same period last year. Occupancy and furniture and equipment
expenses increased 5.4% to $926,000 for the three months ended June 30, 1997
from $879,000 in the prior year period. Data processing expense increased
$115,000 or 33.0% to $463,000 for the three months ended June 30, 1997 from the
prior year period. Foreclosed property write-downs and expenses decreased to
nothing in the current period from $71,000 for the three months ended June 30,
1997.
The consolidated efficiency ratio for the three months ended June 30, 1997 was
61.5% as compared to 61.9% for the prior year period. When the gains on the
sales of pooled loans are excluded, this ratio is 62.3% for each period. 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 June 30, 1997 increased to $1,131,000 as
compared to $1,019,000 for the comparable period in 1996. As a percent of
income before taxes, the provision for income taxes increased to 29.9% for the
three months ended June 30, 1997 from 29.6% for the same period in 1996.
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 $4,500,000 available as of June 30, 1997.
The Corporation's dependence on large liabilities (defined as time deposits over
$100,000 and short-term borrowings) increased to 11.9% at June 30, 1996 from
10.1% at December 31, 1996. This is the ratio of total large liabilities to
total liabilities, and is low in comparison to the Corporation's peers. This
change was due largely to a $25,197,000 increase in time deposits over $100,000
and a $6,400,000 decrease in federal funds purchased 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 six months ended June 30, 1997,
the Corporation earned $5,055,000 and paid dividends of $2,316,000 to
stockholders, resulting in a retention of current earnings of $2,739,000. The
Corporation's dividend payout for the six months ended June 30, 1997 was 45.8%.
The Corporation's risk-based capital ratio was 12.90% and the leverage ratio was
7.65% as of June 30, 1997, as compared to 12.48% and 7.14% respectively as of
December 31, 1996. The Corporation and its bank subsidiary were well above all
minimum required capital ratios as of June 30, 1997.
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 June 30, 1997.
Rate Sensitive Within
---------------------------------------------------------------------------------
1-30 31-90 91-180 181 Days- Over
Days Days Days 1 Year 1 Year Total
---------------------------------------------------------------------------------
(Dollars in thousands)
Federal funds sold $10,500 $0 $0 $0 $0 $10,500
Investment securities
U.S. Governments 7,126 14,082 30,243 36,457 70,254 158,162
Obligations of states and
political subdivisions 354 0 5,847 895 29,687 36,783
Other securities 2,167 58 584 519 18,128 21,456
Loans (net of unearned int.) 182,006 27,271 29,628 71,651 280,547 591,103
---------------------------------------------------------------------------------
Total rate-sensitive assets $202,153 $41,411 $66,302 $109,522 $398,616 $818,004
---------------------------------------------------------------------------------
Interest bearing transaction
deposits $142,600 $0 $0 $0 $0 $142,600
Savings deposits 78,175 0 0 0 0 78,175
Money market deposits 123,689 0 0 0 0 123,689
Time deposits 41,126 58,250 69,677 86,857 114,455 370,365
Short-term borrowings:
Federal funds purchased &
repurchase agreements 0 0 0 0 0 0
Other 6,000 0 0 0 0 6,000
Long-term debt 0 0 0 0 10,000 10,000
---------------------------------------------------------------------------------
Total rate-sensitive
liabilities $391,590 $58,250 $69,677 $86,857 $124,455 $730,829
---------------------------------------------------------------------------------
Rate-sensitive assets less
rate-sensitive liabilities ($189,437) ($16,839) ($3,375) $22,665 $274,161 $87,175
---------------------------------------------------------------------------------
Cumulative gap ($189,437) ($206,276) ($209,651) ($186,986) $87,175
=================================================================================
Cumulative gap as a
percentage of total
rate-sensitive assets -23.16% -25.22% -25.63% -22.86% 10.66%
=================================================================================
Cumulative ratio (cumulative RSA/RSL) 0.52X 0.54X 0.60X 0.69X 1.12X 1.12X
=================================================================================
The foregoing table shows a negative (liability sensitive) rate-sensitivity gap
of $189.4 million in the 1-30 day repricing category. The gap beyond 30 days,
through 180 days, becomes slightly more liability sensitive as rate-sensitive
assets that reprice in those time periods are slightly less in volume than rate-
sensitive liabilities that are subject to repricing in the same respective time
periods. The gap beyond 180 days becomes less liability sensitive as rate-
sensitive assets that reprice after 180 days become greater in volume than rate-
sensitive liabilities that are subject to repricing in the same respective time
periods. The composition of the gap structure at June 30, 1997, will benefit the
Corporation more if interest rates fall during the next 180 days by allowing the
net interest margin to grow as liability rates would reprice more quickly than
rates on interest rate-sensitive assets. After 180 days, a rate increase would
benefit the Corporation because the volume of rate-sensitive assets repricing
would exceed the volume of rate-sensitive liabilities that would be repricing.
FIRST BUSEY CORPORATION AND SUBSIDIARIES
AVERAGE BALANCE SHEETS AND INTEREST RATES
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
1997 1996
-----------------------------------------------------------------------
Average Income/ Yield Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
-----------------------------------------------------------------------
(Dollars in thousands)
ASSETS
Federal funds sold $5,561 $148 5.36% $14,548 $392 5.42%
Investment securities
U.S. Government obligations 163,457 4,734 5.84% 210,816 6,146 5.86%
Obligations of states and political
subdivisions (1) 36,989 1,543 8.41% 37,977 1,594 8.44%
Other securities 20,605 507 4.96% 24,079 683 5.70%
Loans (net of unearned interest) (1) (2) 567,982 24,744 8.79% 497,514 21,912 8.86%
--------------------- ---------------------
Total interest earning assets $794,594 $31,676 8.04% $784,934 $30,727 7.87%
======= =======
Cash and due from banks 38,241 34,832
Premises and equipment 22,236 21,465
Reserve for possible loan losses (6,337) (5,582)
Other assets 18,072 20,045
-------- --------
Total Assets $866,806 $855,694
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing transaction deposits $145,648 $1,373 1.90% $131,916 $1,059 1.61%
Savings deposits 82,113 1,327 3.26% 79,040 1,225 3.12%
Money market deposits 119,682 2,219 3.74% 134,735 2,538 3.79%
Time deposits 347,663 9,500 5.51% 341,868 9,250 5.44%
Short-term borrowings:
Federal funds purchased and repurchase
agreements 2,921 85 5.87% 12,347 318 5.17%
Other 6,714 235 7.05% 8,557 305 7.17%
Long-term debt 8,591 247 5.80% 5,000 138 5.55%
--------------------- ---------------------
Total interest bearing liabilities $713,332 $14,986 4.24% $713,463 $14,833 4.18%
======= =======
Net interest spread 3.80% 3.69%
======= =======
Demand deposits 72,466 68,535
Other liabilities 5,689 5,554
Stockholders' equity 75,319 68,142
-------- --------
Total Liabilities and Stockholders' Equity $866,806 $855,694
======== ========
Interest income / earning assets (1) $794,594 $31,676 8.04% $784,934 $30,727 7.87%
Interest expense / earning assets 794,594 14,986 3.80% 784,934 14,833 3.80%
--------------------- ---------------------
Net interest margin (1) $16,690 4.24% $15,894 4.07%
===================== =====================
(1) On a tax-equivalent basis, assuming a federal income tax rate of 35%
for 1997 and 1996.
(2) Non-accrual loans have been included in average loans, net of unearned
interest.
FIRST BUSEY CORPORATION AND SUBSIDIARIES
CHANGES IN NET INTEREST INCOME
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
Change due to (1)
Average Average Total
Volume Yield/Rate Change
-----------------------------------
(Dollars in thousands)
Increase (decrease) in interest income:
Federal funds sold ($239) ($5) ($244)
Investment securities:
U.S. Government obligations (1,389) (23) (1,412)
Obligations of states and political
subdivisions (2) (44) (7) (51)
Other securities (92) (84) (176)
Loans (2) 3,134 (302) 2,832
-----------------------------------
Change in interest income (2) $1,370 ($421) $949
-----------------------------------
Increase (decrease) in interest expense:
Interest bearing transaction deposits $116 $198 $314
Savings deposits 46 56 102
Money market deposits (284) (35) (319)
Time deposits 141 109 250
Short-term borrowings:
Federal funds purchased and repurchase
agreements (282) 49 (233)
Other (65) (5) (70)
Long-term debt 103 6 109
-----------------------------------
Change in interest expense ($225) $378 $153
-----------------------------------
Increase in net interest income (2) $1,595 ($799) $796
===================================
(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
1997 and 1996.
FIRST BUSEY CORPORATION AND SUBSIDIARIES
AVERAGE BALANCE SHEETS AND INTEREST RATES
QUARTERS ENDED JUNE 30, 1997 AND 1996
1997 1996
-----------------------------------------------------------------------
Average Income/ Yield Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
-----------------------------------------------------------------------
(Dollars in thousands)
ASSETS
Federal funds sold $3,466 $48 5.49% $5,421 $71 5.22%
Investment securities
U.S. Government obligations 159,621 2,318 5.83% 199,395 2,919 5.89%
Obligations of states and political
subdivisions (1) 37,081 774 8.36% 38,778 808 8.38%
Other securities 20,811 254 4.90% 24,066 346 5.79%
Loans (net of unearned interest) (1) (2) 575,126 12,657 8.83% 513,897 11,239 8.80%
--------------------- ---------------------
Total interest earning assets $796,105 $16,051 8.09% $781,557 $15,383 7.92%
======= =======
Cash and due from banks 37,988 35,010
Premises and equipment 22,529 21,313
Reserve for possible loan losses (6,425) (5,658)
Other assets 18,340 20,403
-------- --------
Total Assets $868,537 $852,625
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing transaction deposits $148,418 $757 2.05% $131,937 $539 1.64%
Savings deposits 79,947 650 3.26% 81,161 624 3.09%
Money market deposits 117,928 1,104 3.75% 137,953 1,300 3.79%
Time deposits 346,409 4,759 5.51% 335,981 4,480 5.36%
Short-term borrowings:
Federal funds purchased and repurchase
agreements 5,502 79 5.75% 8,925 117 5.27%
Other 6,125 108 7.08% 8,162 145 7.14%
Long-term debt 10,000 146 5.85% 5,000 69 5.55%
--------------------- ---------------------
Total interest bearing liabilities $714,329 $7,603 4.27% $709,119 $7,274 4.13%
======= =======
Net interest spread 3.82% 3.79%
======= =======
Demand deposits 72,374 69,853
Other liabilities 5,667 5,585
Stockholders' equity 76,167 68,068
-------- --------
Total Liabilities and Stockholders' Equity $868,537 $852,625
======== ========
Interest income / earning assets (1) $796,105 $16,051 8.09% $781,557 $15,383 7.92%
Interest expense / earning assets 796,105 7,603 3.83% 781,557 7,274 3.75%
--------------------- ---------------------
Net interest margin (1) $8,448 4.26% $8,109 4.17%
===================== =====================
(1) On a tax-equivalent basis, assuming a federal income tax rate of 35% for
1997 and 1996.
(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 JUNE 30, 1997 AND 1996
Change due to (1)
Average Average Total
Volume Yield/Rate Change
-----------------------------------
(Dollars in thousands)
Increase (decrease) in interest income:
Federal funds sold ($27) 4 ($23)
Investment securities:
U.S. Government obligations (570) (31) (601)
Obligations of states and political
subdivisions (2) (32) (2) (34)
Other securities (43) (49) (92)
Loans (2) 1,376 42 1,418
-----------------------------------
Change in interest income (2) $704 ($36) $668
-----------------------------------
Increase (decrease) in interest expense:
Interest bearing transaction deposits $73 $145 $218
Savings deposits (9) 35 26
Money market deposits (184) (12) (196)
Time deposits 148 131 279
Short-term borrowings:
Federal funds purchased and repurchase
agreements (50) 12 (38)
Other (36) (1) (37)
Long-term debt 73 4 77
-----------------------------------
Change in interest expense $15 $314 $329
-----------------------------------
Increase in net interest income (2) $689 ($350) $339
===================================
(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
1997 and 1996.
PART II - OTHER INFORMATION
ITEM 6: Exhibits and Reports on Form 8-K
(a) There were no reports on Form 8-K filed during the three
months ending June 30, 1997.
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: August 8, 1997
9 1,000 DEC-31-1997 JUN-30-1997 3-MOS 40,049 0 0 0 165,663 50,738 51,396 591,103 6,517 892,824 793,419 6,000 5,291 10,000 0 0 6,291 71,823 892,824 12,581 3,074 48 15,703 7,269 7,603 8,100 200 166 6,659 3,778 2,647 0 0 2,647 0.38 0.38 8.09 0 1,781 0 418 6,329 124 112 6,517 0 0 0