SEC Filing | First Busey Corporation

SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended 6/30/98 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 June 30, 1998 --------------------------------------- ---------------------------- Class A Common Stock, without par value 6,883,237

PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Page 2 of 22

FIRST BUSEY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) June 30, 1998 December 31, 1997 ------------- ----------------- (Dollars in thousands) ASSETS Cash and due from banks $45,190 $43,299 Federal funds sold 21,450 18,800 Securities available for sale (amort. cost 1998 $214,315; 1997 $206,589) 224,294 215,514 Loans (net of unearned interest) 624,886 602,937 Allowance for loan losses (7,312) (6,860) ----------- ----------- Net loans $ 617,574 $ 596,077 Premises and equipment 24,459 22,834 Other assets 19,569 19,016 ----------- ----------- Total assets $ 952,536 $ 915,540 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Deposits: Non-interest bearing $ 98,742 $ 92,090 Interest bearing 725,900 719,363 ----------- ----------- Total deposits $ 824,642 $ 811,453 Short-term borrowings 15,550 6,550 Long-term debt 20,000 10,000 Other liabilities 6,947 6,258 ----------- ----------- Total liabilities $ 867,139 $ 834,261 ----------- ----------- STOCKHOLDERS' EQUITY Preferred stock $ - $ - Common stock 6,291 6,291 Surplus 21,219 20,729 Retained earnings 56,098 53,011 Unrealized gain (loss) on securities available for sale, net 6,486 5,801 ----------- ----------- Total stockholders' equity before treasury stock, unearned ESOP shares and deferred compensation for stock grants $ 90,094 $ 85,832 Treasury stock, at cost (4,089) (3,922) Unearned ESOP shares and deferred compensation for stock grants (608) (631) ----------- Total stockholders' equity $ 85,397 $ 81,279 ----------- Total liabilities and stockholders' equity $ 952,536 $ 915,540 =========== =========== Class A Common Shares outstanding at period end 6,883,237 6,865,393 =========== =========== Page 3 of 22

FIRST BUSEY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) June 30, 1998 June 30, 1997 ------------- ------------- (Dollars in thousands) ASSETS Cash and due from banks $ 45,190 $ 40,049 Federal funds sold 21,450 10,500 Securities held to maturity (fair value 1997 $51,396 ) - 50,738 Securities available for sale (amort. cost 1998 $214,315; 224,294 165,663 1997 $158,970) Loans (net of unearned interest) 624,886 591,103 Allowance for loan losses (7,312) (6,517) ----------- ----------- Net loans $ 617,574 $ 584,586 Premises and equipment 24,459 22,639 Other assets 19,569 18,649 ----------- ----------- Total assets $ 952,536 $ 892,824 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Deposits: Non-interest bearing $ 98,742 $ 78,590 Interest bearing 725,900 714,829 ----------- ----------- Total deposits $ 824,642 $ 793,419 Short-term borrowings 15,550 6,000 Long-term debt 20,000 10,000 Other liabilities 6,947 5,291 ----------- ----------- Total liabilities $ 867,139 $ 814,710 ----------- ----------- STOCKHOLDERS' EQUITY Preferred stock $ - $ - Common stock 6,291 6,291 Surplus 21,219 20,709 Retained earnings 56,098 50,141 Unrealized gain (loss) on securities available for sale, net 6,486 4,350 ----------- ----------- Total stockholders' equity before treasury stock, unearned ESOP shares and deferred compensation for stock grants $ 90,094 $ 81,491 Treasury stock, at cost (4,089) (2,753) Unearned ESOP shares and deferred compensation for stock grants (608) (624) ----------- ----------- Total stockholders' equity $ 85,397 $ 78,114 ----------- ----------- Total liabilities and stockholders' equity $ 952,536 $ 892,824 =========== =========== Class A Common Shares outstanding at period end 6,883,237 5,790,814 =========== =========== Class B Common Shares outstanding at period end 0 1,125,000 =========== =========== Page 4 of 22

FIRST BUSEY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997 (UNAUDITED) 1998 1997 ---- ---- (Dollars in thousands, except per share amounts) INTEREST INCOME: Interest and fees on loans $26,550 $24,589 Interest and dividends on investment securities: Taxable interest income 5,275 5,188 Non-taxable interest income 847 1,002 Dividends 69 53 Interest on federal funds sold 596 148 -------- -------- Total interest income $33,337 $30,980 -------- -------- INTEREST EXPENSE: Deposits $15,081 $14,419 Short-term borrowings 574 320 Long-term debt 596 247 -------- -------- Total interest expense $16,251 $14,986 -------- -------- Net interest income 17,086 $15,994 Provision for loan losses 650 400 -------- -------- Net interest income after provision for loan losses $16,436 $15,594 -------- -------- OTHER INCOME: Trust $ 1,783 $ 1,625 Commissions and brokers fees, net 593 507 Service charges on deposit accounts 1,441 1,464 Other service charges and fees 953 603 Security gains (losses), net 533 265 Trading security gains (losses), net 0 2 Gain on sales of pooled loans 384 117 Other operating income 965 410 -------- -------- Total other income $ 6,652 $ 4,993 -------- -------- OTHER EXPENSES: Salaries and wages $ 6,758 $ 6,011 Employee benefits 1,309 1,300 Net occupancy expense of bank premises 1,223 1,066 Furniture and equipment expenses 1,013 855 Data processing 961 822 Stationery, supplies and printing 350 345 Foreclosed property write-downs and expenses 0 0 Amortization expense 686 660 Other operating expenses 2,522 2,342 -------- -------- Total other expenses $14,822 $13,401 -------- -------- Income before income taxes $ 8,266 $ 7,186 Income taxes 2,554 2,131 -------- -------- NET INCOME $ 5,712 $ 5,055 ======== ======== Other comprehensive income, before tax: Unrealized gains on securities: Unrealized holding gains(losses) arising during period $ 1,587 $ 1,904 Less reclassification adjustment for gains included in net income (533) (265) -------- -------- Other comprehensive income, before tax 1,054 1,639 Income tax expense related to items of other comprehensive income (369) (574) -------- -------- Other comprehensive income, net of tax $ 685 $ 1,065 COMPREHENSIVE INCOME $ 6,397 $ 6,120 BASIC EARNINGS PER SHARE $ 0.83 $ 0.73 DILUTED EARNINGS PER SHARE $ 0.81 $ 0.72 DIVIDENDS DECLARED PER SHARE: Class A Common Stock $0.3800 $0.3400 ======== ======== Class B Common Stock - $0.3091 ======== ======== Page 5 of 22

FIRST BUSEY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE QUARTERS ENDED JUNE 30, 1998 AND 1997 (UNAUDITED) 1998 1997 ---- ---- (Dollars in thousands, except per share amounts) INTEREST INCOME: Interest and fees on loans $13,231 $12,581 Interest and dividends on investment securities: Taxable interest income 2,629 2,547 Non-taxable interest income 430 502 Dividends 34 25 Interest on federal funds sold 316 48 -------- -------- Total interest income $16,640 $15,703 -------- -------- INTEREST EXPENSE: Deposits $ 7,489 $ 7,269 Short-term borrowings 290 188 Long-term debt 330 146 -------- -------- Total interest expense $ 8,109 $ 7,603 -------- -------- Net interest income $ 8,531 $ 8,100 Provision for loan losses 0 200 -------- -------- Net interest income after provision for loan losses $ 8,531 $ 7,900 -------- -------- OTHER INCOME: Trust $ 899 $ 850 Commissions and brokers fees, net 310 220 Service charges on deposit accounts 738 744 Other service charges and fees 504 333 Security gains (losses), net 233 166 Trading security gains (losses), net 1 1 Gain on sales of pooled loans 198 82 Other operating income 467 141 -------- -------- Total other income $ 3,350 $ 2,537 -------- -------- OTHER EXPENSES: Salaries and wages $ 3,372 $ 3,006 Employee benefits 644 627 Net occupancy expense of bank premises 602 501 Furniture and equipment expenses 526 425 Data processing 475 463 Stationery, supplies and printing 201 161 Amortization expense 343 330 Other operating expenses 1,351 1,146 -------- -------- Total other expenses $ 7,514 $ 6,659 -------- -------- Income before income taxes $ 4,367 $ 3,778 Income taxes 1,366 1,131 -------- -------- NET INCOME $ 3,001 $ 2,647 ======== ======== Other comprehensive income, before tax: Unrealized gains on securities: Unrealized holding gains(losses) arising during period $ 422 $ 2,966 Less reclassification adjustment for gains included in net income (233) (166) -------- -------- Other comprehensive income, before tax $ 189 $ 2,800 Income tax expense related to items of other comprehensive income (66) (980) -------- -------- Other comprehensive income, net of tax $ 123 $ 1,820 COMPREHENSIVE INCOME $ 3,124 $ 4,467 BASIC EARNINGS PER SHARE $ 0.44 $ 0.38 DILUTED EARNINGS PER SHARE $ 0.42 $ 0.38 DIVIDENDS DECLARED PER SHARE: Class A Common Stock $0.1900 $0.1700 ======== ======== Class B Common Stock - $0.1545 ======== ======== Page 6 of 22

FIRST BUSEY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997 (UNAUDITED) 1998 1997 ---- ---- (Dollars in thousands) CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 5,712 $ 5,055 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,876 1,686 Provision for loan losses 650 400 (Decrease) in deferred income taxes (743) (625) Amortization of investment security discounts (76) (195) Gain on sales of investment securities, net (533) (265) Proceeds from sales of pooled loans 38,360 13,734 Loans originated for sale (40,571) (14,139) Gain on sale of pooled loans (384) (117) (Gain) on sales and dispositions of premises and equipment (12) 0 Change in assets and liabilities: Increase in other assets 199 642 Increase (decrease) in accrued expenses 224 (179) (Decrease) in interest payable (275) (96) Increase in income taxes payable 507 397 ---------- ---------- Net cash provided by operating activities $ 4,934 $ 6,298 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sales of securities classified available for sale $ 19,365 $ 3,274 Proceeds from maturities of securities classified available for sale 60,025 57,490 Proceeds from maturities of securities classified held to maturity - 5,450 Purchase of securities classified available for sale (86,507) (53,116) Purchase of securities classified held to maturity - (1,050) (Increase) in federal funds sold (2,650) (10,500) Increase in loans (19,783) (21,122) Purchases of premises and equipment (2,782) (2,036) Proceeds from sales of premises and equipment 23 1 Cash acquired in acquisition of Busey Carter Travel, Inc. 204 - ---------- ---------- Net cash (used in) investing activities ($32,105) ($21,609) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES Net increase (decrease) in certificates of deposit ($23,743) $ 23,503 Net increase in demand, money market and saving deposits 36,932 2,989 Cash dividends paid (2,625) (2,316) Purchase of treasury stock (893) (402) Proceeds from sale of treasury stock 391 1,253 Proceeds from short-term borrowings 10,000 - Principal payments on short-term borrowings (1,000) (2,000) Proceeds from long-term borrowings 15,000 5,000 Principal payments on long-term borrowings (5,000) - Net increase (decrease) in federal funds purchased, repurchase agreements and Federal Reserve discount borrowings - (6,405) ---------- ---------- Net cash provided by (used in) financing activities $ 29,062 $ 21,622 ---------- ---------- Net increase (decrease) in cash and cash equivalents $ 1,891 $ 6,311 Cash and due from banks, beginning $ 43,299 $ 33,738 ---------- ---------- Cash and due from banks, ending $ 45,190 $ 40,049 ========== ========== Page 7 of 22

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, 1998 and December 31, 1997 were as follows: June 30, 1998 December 31, 1997 ----------------------------------- (Dollars in thousands) Commercial $75,892 $63,861 Real estate construction 37,381 31,306 Real estate - farmland 12,862 11,782 Real estate - 1-4 family residential mortgage 232,413 225,622 Real estate - multifamily mortgage 64,486 74,385 Real estate - non-farm nonresidential mortgage 148,548 139,653 Installment 36,912 38,925 Agricultural 16,392 17,403 ----------------------------------- $624,886 $602,937 ----------------------------------- Less: Allowance for loan losses 7,312 6,860 ----------------------------------- Net loans $617,574 $596,077 =================================== The real estate-mortgage category includes loans held for sale with carrying values of $7,558,000 at June 30, 1998 and $4,963,000 at December 31, 1997; these loans had fair market values of $7,634,000 and $5,016,000, respectively. Page 8 of 22

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, 1998 1997 1998 1997 ---------- ---------- ---------- ---------- Net income $3,001,000 $2,647,000 $5,712,000 $5,055,000 Shares: Weighted average common shares outstanding 6,883,289 6,914,134 6,886,907 6,912,760 Dilutive effect of outstanding options, as determined by the application of the treasury stock method 139,860 100,475 128,819 100,163 ---------- ---------- ---------- ---------- Weighted average common shares outstanding, as adjusted 7,023,149 7,014,609 7,015,726 7,012,923 ========== ========== ========== ========== Basic earnings per share $ 0.44 $ 0.38 $ 0.83 $ 0.73 ========== ========== ========== ========== Diluted earnings per share $ 0.42 $ 0.38 $ 0.81 $ 0.72 ========== ========== ========== ========== 1998 1997 -------- -------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash payments for: Interest $16,526 $15,082 ======== ======== Income taxes $ 2,047 $ 1,966 ======== ======== SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES Other real estate acquired in settlement of loans $ 231 $ 27 ======== ======== Change in unrealized gain (loss) on securities available for sale $ 1,054 $ 1,639 ======== ======== (Decrease) increase in deferred income taxes attributable to the unrealized (gain) loss on investment securities available for sale ($369) ($574) ======== ======== Acquisition of Busey Carter Travel, Inc.: Working capital including cash $ 561 $ - Premises and equipment 23 - Intangibles and other assets 241 - -------- -------- Common stock issued from treasury to acquire Busey Carter Travel, Inc. $ 825 $ 0 ======== ======== Page 9 of 22

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, 1998 (unaudited) when compared with December 31, 1997 and the results of operations for the six months ended June 30, 1998 and 1997 (unaudited) and the results of operations for the three months ended June 30, 1998 and 1997 (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, 1998 AS COMPARED TO DECEMBER 31, 1997 Total assets increased $36,996,000, or 4.0%, to $952,536,000 at June 30, 1998 from $915,540,000 at December 31, 1997. Securities available for sale increased $8,780,000, or 4.1%, to $224,294,000 at June 30, 1998 from $215,514,000 at December 31, 1997. Loans increased $21,949,000, or 3.6%, to $624,886,000 at June 30, 1998 from $602,937,000 at December 31, 1997, primarily due to increases in commercial and mortgage loans. Total deposits increased $13,189,000, or 1.6%, to $824,642,000 at June 30, 1998 from $811,453,000 at December 31, 1997. Non-interest bearing deposits increased 7.2% to $98,742,000 at June 30, 1998 from $92,090,000 at December 31, 1997. Interest-bearing deposits increased 0.9% to $725,900,000 at June 30, 1998 from $719,363,000 at December 31, 1997. Short-term borrowings increased $9,000,000 to $15,550,000 at June 30, 1998, as compared to $6,550,000 at December 31, 1997. Proceeds from the increase in short-term borrowings were used to capitalize Busey Business Bank, the holding company's new bank subsidiary located in Indianapolis, Indiana. In the first six months of 1998, the Corporation repurchased 31,656 shares of its Class A common stock at an aggregate cost of $893,000. 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, 1998, 41,403 of the 133,441 options which became exercisable on January 1, 1997 (and expire December 31, 1999), have not yet been exercised, and 14,700 of the 31,950 options which became exercisable on January 1, 1998 (and expire December 31, 1999), have not yet been exercised. The following table sets forth the components of non-performing assets and past due loans. June 30, 1998 December 31, 1997 ------------- ----------------- (Dollars in thousands) Non-accrual loans $165 $628 Loans 90 days past due, still accruing 1,778 1,033 Restructured loans - - Other real estate owned 381 516 Non-performing other assets 2 5 -------------- ---------------- Total non-performing assets $2,326 $2,182 ============== ================ Total non-performing assets as a percentage of total assets 0.24% 0.24% ============== ================ Total non-performing assets as a percentage of loans plus non-performing assets 0.37% 0.36% ============== ================ The ratio of non-performing assets to loans plus non-performing assets increased to 0.37% at June 30, 1998 from 0.36% at December 31, 1997. This was due to an increase in the balance of loans 90 days past due and still accruing, offset partially by a decrease in the balances of non-accrual loans and other real estate owned Page 10 of 22

RESULTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1998 AS COMPARED TO JUNE 30, 1997 SUMMARY - ------- Net income for the six months ended June 30, 1998 increased 13.0% to $5,712,000 as compared to $5,055,000 for the comparable period in 1997. Diluted earnings per share increased 12.5% to $.81 at June 30, 1998 as compared to $.72 for the same period in 1997. Operating earnings, which exclude security gains and the related tax expense, were $5,365,000, or $.76 per share for the six months ended June 30, 1998, as compared to $4,883,000, or $.70 per share for the same period in 1997. The Corporation's return on average assets was 1.25% for the six months ended June 30, 1998, as compared to 1.18% for the comparable period in 1997. The return on average assets from operations of 1.18% for the six months ended June 30, 1998 was 4 basis points higher than the 1.14% level achieved in the comparable period of 1997. 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 4.18% for the six months ended June 30, 1998, as compared to 4.24% for the same period in 1997. The net interest margin expressed as a percentage of average total assets, also on a fully taxable equivalent basis, was 3.87% for the six months ended June 30, 1998, compared to 3.88% for the same period in 1997. The decrease in the net interest margin is due primarily to the 13 basis point increase in the average rate paid on interest-bearing liabilities. During the six months ended June 30, 1998, the Corporation recognized security gains of approximately $347,000, after income taxes, representing 6.1% of net income. During the same period in 1997, security gains of $172,000, after income taxes, were recognized, representing 3.4% of net income. INTEREST INCOME - --------------- Interest income, on a tax equivalent basis, for the six months ended June 30, 1998 increased 7.1% to $33,933,000 from $31,676,000 for the comparable period in 1997. The increase in interest income resulted from an increase in average earning assets of $59,162,000 for the period ended June 30, 1998, as compared to the same period of 1997. The average yield on interest-earning assets decreased from 8.04% for the six months ended June 30, 1997 to 8.02% for the same period in 1998. This is due primarily to declines in the yields on investment securities partially offset by increases in the yields on loans and federal funds sold. INTEREST EXPENSE - ---------------- Total interest expense increased 8.4% for the six months ended June 30, 1998 as compared to the prior year period. This increase resulted primarily from the growth of $36,508,000 in average interest-bearing liabilities to $749,840,000 for the six months ending June 30, 1998, compared to $713,332,000 for the same period in 1997. PROVISION FOR LOAN LOSSES - ------------------------- The provision for loan losses of $650,000 for the six months ended June 30, 1998 is $250,000 more than the provision for the comparable period in 1997. The provision and the net charge-offs for the period resulted in the reserve representing 1.17% of total loans and 376% of non-performing loans at June 30, 1998, as compared to the reserve representing 1.14% of total loans and 413% of non-performing loans at December 31, 1997. 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. Page 11 of 22

OTHER INCOME, OTHER EXPENSE AND INCOME TAXES - -------------------------------------------- Total other income, excluding security gains, increased 29.4% for the six months ended June 30, 1998 as compared to the same period in 1997. This was a combination of increases in trust revenue, commissions and brokers fees, and gains on the sales of pooled loans for the six months ended June 30, 1998 as compared to the same period in 1997. As of June 30, 1998, the asset management divisions of the Corporation had $1,077,000,000 in assets under care, an increase of 21.4% from $887,293,000 at June 30, 1998. Gains of $384,000 were recognized on the sale of $37,976,000 of pooled loans for the six months ended June 30, 1998 as compared to gains of $117,000 on the sale of $13,617,000 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 10.6% or $1,421,000 for the six months ended June 30, 1998 as compared to the same period in 1997. Salaries and wages expense increased $747,000 or 12.4% and employee benefits expense increased $9,000 for the six months ended June 30, 1998, as compared to the same period last year. The Corporation had 425 full time equivalent employees as of June 30, 1998 as compared to 393 as of June 30, 1997. Occupancy and furniture and equipment expenses increased 16.4% to $2,236,000 for the six months ended June 30, 1998 from $1,921,000 in the prior year period. Data processing expense increased $139,000 or 16.9% to $961,000 for the six months ended June 30, 1998 from the prior year period. The Corporation's net overhead expense, total non-interest expense less non-interest income divided by average assets, decreased to 1.91% for the six months ended June 30, 1998 from 2.02% 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, 1998 was 62.3%, an improvement from 62.6% for the same period in 1997. When the gains on the sales of pooled loans are excluded these ratios are 63.3% and 62.9% for the six month periods ending June 30, 1998 and June 30, 1997 respectively. Income taxes for the six months ended June 30, 1998 increased to $2,554,000 as compared to $2,131,000 for the comparable period in 1997. As a percent of income before taxes, the provision for income taxes increased to 30.9% for the six months ended June 30, 1998 from 29.7% for the same period in 1997. Page 12 of 22

RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 1998 AS COMPARED TO JUNE 30, 1997 SUMMARY - ------- Net income for the three months ended June 30, 1998 increased 13.4% to $3,001,000 as compared to $2,647,000 for the comparable period in 1997. Diluted earnings per share increased 10.5% to $.42 at June 30, 1998 as compared to $.38 for the same period in 1997. Operating earnings, which exclude security gains and the related tax expense, were $2,849,000, or $.40 per share for the three months ended June 30, 1998, as compared to $2,540,000, or $.37 per share for the same period in 1997. The Corporation's return on average assets was 1.31% for the three months ended June 30, 1998, as compared to 1.22% achieved for the comparable period in 1997. The return on average assets from operations for the three months ended June 30, 1998 of 1.24% was seven basis points more than the 1.17% level achieved in the comparable period of 1997. The net interest margin expressed as a percentage of average earning assets was 4.14% for the three months ended June 30, 1998, a decrease of 12 basis points from the level achieved for the like period in 1997. The net interest margin expressed as a percentage of average total assets was 3.84% for the three months ended June 30, 1998, compared to 3.90% for the same period in 1997. During the three months ended June 30, 1998, the Corporation recognized security gains of approximately $152,000, after income taxes, representing 5.0% of net income. During the same period in 1997, security gains of approximately $107,000, after income taxes, were recognized, representing 4.1% of net income. INTEREST INCOME - --------------- Interest income on a fully taxable equivalent basis increased $888,000, or 5.5% for the three months ended June 30, 1998 from the same period in 1997. 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 yields and average balances of obligations of states and political subdivisions outstanding, for the three months ended June 30, 1998 as compared to the same period of 1997. The yield on interest earning assets decreased 15 basis points for the three months ended June 30, 1998 as compared to the same period in 1997. INTEREST EXPENSE - ---------------- Total interest expense increased 6.7% for the three months ended June 30, 1998 as compared to the prior year period. This increase resulted in large part from an increase in average other short-term borrowings and average long-term debt balances for the three months ended June 30, 1998, as compared to the same period in 1997. OTHER INCOME, OTHER EXPENSE AND INCOME TAXES - -------------------------------------------- Total other income, excluding security transactions, increased 31.5% for the three months ended June 30, 1998 as compared to the same period in 1997. This was a combination of increased trust revenue, commissions and brokers fees, other service charges and fees, gains on sales of pooled loans, and other operating income. Gains of $198,000 were recognized on the sale of $22,331,000 of pooled loans for the three months ended June 30, 1998 as compared to gains of $82,000 on the sale of $8,472,000 of pooled loans in the prior year period. Total other expense increased 12.8% or $855,000 for the three months ended June 30, 1998 as compared to the same period in 1997. Page 13 of 22

Salaries and wages expense increased $366,000 or 12.2% and employee benefits expense increased $17,000 or 2.7% for the three months ended June 30, 1998, as compared to the same period last year. Occupancy and furniture and equipment expenses increased 21.8% to $1,128,000 for the three months ended June 30, 1998 from $926,000 in the prior year period. Data processing expense increased $12,000 or 2.6% to $475,000 for the three months ended June 30, 1998 from the prior year period. The consolidated efficiency ratio for the three months ended June 30, 1998 was 62.9% as compared to 61.5% for the prior year period. When the gains on the sales of pooled loans are excluded, this ratio is 64.0% for the three months ended June 30, 1998 compared to 62.0% for the same period in 1997. 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, 1998 increased to $1,366,000 as compared to $1,131,000 for the comparable period in 1997. As a percent of income before taxes, the provision for income taxes increased to 31.3% for the three months ended June 30, 1998 from 29.9% for the same period in 1997. 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 and the Federal Home Loan Bank of Chicago. The Corporation has an operating line with American National Bank and Trust Company of Chicago in the amount of $10,000,000 with $5,000,000 available as of June 30, 1998. The Corporation's dependence on large liabilities (defined as time deposits over $100,000 and short-term borrowings) decreased to 11.0% at June 30, 1998 from 12.4% at December 31, 1997. 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 $17,059,000 decrease in time deposits over $100,000 and a $9,000,000 increase in short-term debt which resulted in a lower 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, 1998, the Corporation earned $5,712,000 and paid dividends of $2,625,000 to stockholders, resulting in a retention of current earnings of $3,087,000. The Corporation's dividend payout for the six months ended June 30, 1998 was 46.0%. The Corporation's risk-based capital ratio was 13.49% and the leverage ratio was 7.86% as of June 30, 1998, as compared to 13.01% and 7.61% respectively as of December 31, 1997. The Corporation and its bank subsidiaries were well above all minimum required capital ratios as of June 30, 1998. Page 14 of 22

MARKET RISK - ----------- Market risk is the risk of change in asset values due to movements in underlying market rates and prices. Interest rate risk is the risk to earnings and capital arising from movements in interest rates. Interest rate risk is the most significant market risk affecting the Corporation as other types of market risk, such as foreign currency exchange rate risk and commodity price risk, do not arise in the normal course of the Corporation's business activities. The Corporation's banking subsidiary, Busey Bank, has an asset-liability committee which meets monthly to review current market conditions and attempts to structure the bank's balance sheet to ensure stable net interest income despite potential changes in interest rates with all other variables constant. The asset-liability committee uses gap analysis to identify mismatches in the dollar value of assets and liabilities subject to repricing within specific time periods. The Funds Management Policy established by the asset-liability committee and approved by the Corporation's board of directors establishes guidelines for maintaining the ratio of cumulative rate-sensitive assets to rate-sensitive liabilities within prescribed ranges at certain intervals. A summary of the Corporation's gap analysis is summarized on page 25. The committee does not rely solely on gap analysis to manage interest-rate risk as interest rate changes do not impact all categories of assets and liabilities equally or simultaneously. The asset-liability committee supplements gap analysis with balance sheet and income simulation analysis to determine the potential impact on net interest income of changes in market interest rates. In these simulation models the balance sheet is projected out over a one-year period and net interest income is calculated under current market rates, and then assuming permanent instantaneous shifts in the yield curve of +/- 100 basis point and +/- 200 basis points. These interest-rate scenarios indicate the interest rate risk of the Corporation over a one-year time horizon due to changes in interest rates, as of June 30, 1998, is as follows: Basis Point Changes ----------------------------------------- -200 -100 +100 +200 ----------------------------------------- Percentage change in net interest income due to an immediate change in interest over a one-year period (6.10%) (2.98%) (.14%) (.36%) YEAR 2000 COMPLIANCE - -------------------- The Corporation has developed an all encompassing plan to address Year 2000 related issues. A major aspect of the plan is the migration from an outsourced data processing solution to an in-house solution. This migration is underway with a planned completion date for all major applications of the middle of October, 1998. There will be a cost of approximately $3,800,000 for equipment and software which will be partially offset by the elimination of many of the outsourcing costs. Some of these costs will be capitalized as they relate to equipment purchased for the in-house data processing solution. Testing of desktop hardware and software systems has begun. Those systems that are not compliant are being upgraded or eliminated. To date 100% of the desktop hardware has been reviewed and certified compliant. Approximately 50% of the desktop software has been reviewed and certified compliant. The Corporation held a customer education seminar discussing the Year 2000 on June 15, 1998. In conjunction with the seminar, an educational brochure was developed and is being made available to customers. The Corporation is planning to conduct at least one additional seminar later in 1998. Contingency plans continue to be developed for critical business applications in order to mitigate potential problems and/or delays associated with implementation of new solutions or delivery of products and services from vendors. 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. Page 15 of 22

The following table sets forth the static rate-sensitivity analysis of the Corporation as of June 30, 1998. 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 $ 21,450 $ 0 $ 0 $ 0 $ 0 $ 21,450 Investment securities U.S. Governments 8,169 8,903 17,262 65,325 69,202 168,861 Obligations of states and political subdivisions 0 0 4,531 361 27,999 32,891 Other securities 3,494 100 150 1,481 17,317 22,542 Loans (net of unearned int.) 194,992 37,064 39,747 89,353 263,720 624,886 ----------------------------------------------------------------------- Total rate-sensitive assets $ 228,105 $ 46,067 $ 61,690 $ 156,520 $378,248 $870,630 ----------------------------------------------------------------------- Interest bearing transaction deposits $ 161,493 $ 0 $ 0 $ 0 $ 0 $161,493 Savings deposits 80,595 0 0 0 0 80,595 Money market deposits 134,493 0 0 0 0 134,493 Time deposits 38,361 57,444 59,354 98,540 95,620 349,319 Short-term borrowings: Federal funds purchased & repurchase agreements 0 0 0 0 0 0 Other 0 0 10,000 5,550 0 15,550 Long-term debt 0 0 0 0 20,000 20,000 ----------------------------------------------------------------------- Total rate-sensitive liabilities $ 414,942 $ 57,444 $ 69,354 $ 104,090 $115,620 $761,450 ----------------------------------------------------------------------- Rate-sensitive assets less rate-sensitive liabilities ($186,837) ($11,377) ($7,664) $ 52,430 $262,628 $109,180 ----------------------------------------------------------------------- Cumulative gap ($186,837) ($195,214) ($205,878) ($153,448) $109,180 $ - ======================================================================= Cumulative gap as a percentage of total rate-sensitive assets -21.46% -22.77% -23.65% -17.62% 12.54% ======================================================================= Cumulative ratio (cumulative RSA/RSL) 0.55X 0.58X 0.62X 0.76X 1.14X 1.14X ======================================================================= The foregoing table shows a negative (liability sensitive) rate-sensitivity gap of $186.8 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, 1998, 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. Page 16 of 22

FIRST BUSEY CORPORATION AND SUBSIDIARIES AVERAGE BALANCE SHEETS AND INTEREST RATES SIX MONTHS ENDED JUNE 30, 1998 AND 1997 1998 1997 ---------------------------------------------------------- Average Income/ Yield/ Average Income/ Yield/ Balance Expense Rate Balance Expense Rate ---------------------------------------------------------- (Dollars in thousands) ASSETS Federal funds sold $21,815 $ 596 5.51% $ 5,561 $ 148 5.36% Investment securities U.S. Government obligations 168,886 4,850 5.79% 163,457 4,734 5.84% Obligations of states and political subdivisions (1) 32,474 1,303 8.09% 36,989 1,543 8.41% Other securities 22,311 493 4.46% 20,605 507 4.96% Loans (net of unearned interest) (1) (2) 608,270 26,691 8.85% 567,982 24,744 8.79% ------------------ ------------------ Total interest earning assets $853,756 $33,933 8.02% $794,594 $31,676 8.04% ======= ======= Cash and due from banks 31,977 38,241 Premises and equipment 24,004 22,236 Reserve for possible loan losses (7,224) (6,337) Other assets 17,854 18,072 --------- --------- Total Assets $920,367 $866,806 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Interest-bearing transaction deposits $ 11,323 $ 111 1.97% $145,648 $ 1,373 1.90% Savings deposits 80,484 1,318 3.30% 82,113 1,327 3.26% Money market deposits 267,784 3,937 2.96% 119,682 2,219 3.74% Time deposits 353,387 9,715 5.54% 347,663 9,500 5.51% Short-term borrowings: Federal funds purchased and repurchase agreements 275 8 5.60% 2,921 85 5.87% Other 14,764 566 7.74% 6,714 235 7.05% Long-term debt 21,823 596 5.50% 8,591 247 5.80% ------------------ ------------------ Total interest bearing liabilities $749,840 $16,251 4.37% $713,332 $14,986 4.24% ======= ======= Net interest spread 3.65% 3.80% ===== ===== Demand deposits 79,534 72,466 Other liabilities 7,838 5,689 Stockholders' equity 83,155 75,319 --------- --------- Total Liabilities and Stockholders' Equity $920,367 $866,806 ========= ========= Interest income / earning assets (1) $853,756 $33,933 8.02% $794,594 $31,676 8.04% Interest expense / earning assets $853,756 16,251 3.84% 794,594 14,986 3.80% ----------------- ----------------- Net interest margin (1) $17,682 4.18% $16,690 4.24% ================= ================= (1) On a tax-equivalent basis, assuming a federal income tax rate of 35% for 1998 and 1997. (2) Non-accrual loans have been included in average loans, net of unearned interest. Page 17 of 22

FIRST BUSEY CORPORATION AND SUBSIDIARIES CHANGES IN NET INTEREST INCOME SIX MONTHS ENDED JUNE 30, 1998 AND 1997 Change due to (1) Average Average Total Volume Yield/Rate Change ------------------------------------- (Dollars in thousands) Increase (decrease) in interest income: Federal funds sold $ 444 $ 4 $ 448 Investment securities: U.S. Government obligations 156 (40) 116 Obligations of states and political subdivisions (2) (183) (57) (240) Other securities 61 (75) (14) Loans (2) 1,767 180 1,947 ------------------------------------- Change in interest income (2) $ 2,245 $ 12 $ 2,257 ------------------------------------- Increase (decrease) in interest expense: Interest bearing transaction deposits ($1,316) $ 54 ($1,262) Savings deposits (27) 18 (9) Money market deposits 2,063 (345) 1,718 Time deposits 157 58 215 Short-term borrowings: Federal funds purchased and repurchase agreements (74) (3) (77) Other 307 24 331 Long-term debt 361 (12) 349 ------------------------------------- Change in interest expense $ 1,471 ($206) $ 1,265 ------------------------------------- Increase in net interest income (2) $ 774 $ 218 $ 992 ===================================== (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 1998 and 1997. Page 18 of 22

FIRST BUSEY CORPORATION AND SUBSIDIARIES AVERAGE BALANCE SHEETS AND INTEREST RATES QUARTERS ENDED JUNE 30, 1998 AND 1997 1998 1997 ---------------------------------------------------------- Average Income/ Yield/ Average Income/ Yield/ Balance Expense Rate Balance Expense Rate ---------------------------------------------------------- (Dollars in thousands) ASSETS Federal funds sold $23,012 $ 316 5.51% $ 3,466 $ 48 5.49% Investment securities U.S. Government obligations 166,919 2,414 5.80% 159,621 2,318 5.83% Obligations of states and political subdivisions (1) 33,052 662 8.03% 37,081 774 8.36% Other securities 22,720 247 4.36% 20,811 254 4.90% Loans (net of unearned interest) (1) (2) 609,555 13,300 8.75% 575,126 12,657 8.83% ------------------ ------------------ Total interest earning assets $855,258 $16,939 7.94% $796,105 $16,051 8.09% ======= ======= Cash and due from banks 30,912 37,988 Premises and equipment 24,698 22,529 Reserve for possible loan losses (7,434) (6,425) Other assets 18,801 18,340 --------- --------- Total Assets $922,235 $868,537 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Interest bearing transaction deposits $ 11,677 $ 59 2.01% $148,418 $ 757 2.05% Savings deposits 80,471 657 3.27% 79,947 650 3.26% Money market deposits 273,605 2,039 2.99% 117,928 1,104 3.75% Time deposits 343,750 4,734 5.52% 346,409 4,759 5.51% Short-term borrowings: Federal funds purchased and repurchase agreements 143 2 5.22% 5,502 79 5.75% Other 15,925 289 7.27% 6,125 108 7.08% Long-term debt 24,670 329 5.35% 10,000 146 5.85% ------------------ ------------------ Total interest bearing liabilities $750,241 $ 8,109 4.34% $714,329 $ 7,603 4.27% ======= ======= Net interest spread 3.60% 3.82% ===== ===== Demand deposits 80,144 72,374 Other liabilities 7,871 5,667 Stockholders' equity 83,979 76,167 --------- --------- Total Liabilities and Stockholders' Equity $922,235 $868,537 ========= ========= Interest income / earning assets (1) $855,258 $16,939 7.94% $796,105 $16,051 8.09% Interest expense / earning assets $855,258 8,109 3.80% 796,105 7,603 3.83% ----------------- ----------------- Net interest margin (1) $ 8,830 4.14% $ 8,448 4.26% ================= ================= (1) On a tax-equivalent basis, assuming a federal income tax rate of 35% for 1998 and 1997. (2) Non-accrual loans have been included in average loans, net of unearned interest. Page 19 of 22

FIRST BUSEY CORPORATION AND SUBSIDIARIES CHANGES IN NET INTEREST INCOME QUARTERS ENDED JUNE 30, 1998 AND 1997 Change due to (1) Average Average Total Volume Yield/Rate Change --------------------------------- (Dollars in thousands) Increase (decrease) in interest income: Federal funds sold $ 268 $ 0 $ 268 Investment securities: U.S. Government obligations 105 (9) 96 Obligations of states and political subdivisions (2) (81) (31) (112) Other securities 36 (43) (7) Loans (2) 750 (107) 643 --------------------------------- Change in interest income (2) $1,078 (190) $ 888 --------------------------------- Increase (decrease) in interest expense: Interest bearing transaction deposits ($686) ($12) ($698) Savings deposits 4 3 7 Money market deposits 1,106 (171) 935 Time deposits (37) 12 (25) Short-term borrowings: Federal funds purchased and repurchase agreements (70) (7) (77) Other 178 3 181 Long-term debt 194 (11) 183 --------------------------------- Change in interest expense $ 689 ($183) $ 506 --------------------------------- Increase in net interest income (2) $ 389 ($7) $ 382 ================================= (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 1998 and 1997. Page 20 of 22

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, 1998. Page 21 of 22

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 14, 1998 Page 22 of 22

9 1,000 3-MOS DEC-31-1998 JUN-30-1998 45,190 0 21,450 0 224,294 0 0 624,886 7,312 952,536 824,642 15,550 6,947 20,000 0 0 6,291 79,106 952,536 13,231 3,093 316 16,640 7,489 8,109 8,531 0 233 7,514 4,367 3,001 0 0 3,001 0.44 0.42 7.94 165 1,778 0 529 7,474 178 16 7,312 0 0 0