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 9/30/2003 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 Identification Incorporation or organization) 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 by check mark whether the registrant is an accelerated filer (as defined by Rule 12b-2 of the Act) Yes [X] No [ ] Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date. Class Outstanding at October 31, 2003 - ------------------------------------------------------------------------------ Common Stock, without par value 13,662,977
PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS 2 of 29
FIRST BUSEY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 2003 AND DECEMBER 31, 2002 (UNAUDITED) September 30, 2003 December 31, 2002 ------------------ ----------------- (Dollars in thousands) ASSETS Cash and due from banks $ 44,024 $ 47,645 Federal funds sold - - Securities available for sale (amortized cost 2003, $234,241; 2002, $216,801) 251,369 233,830 Loans 1,144,846 1,101,043 Allowance for loan losses (16,731) (15,460) ------------ ----------- Net loans $ 1,128,115 $ 1,085,583 Premises and equipment 22,163 27,359 Cash surrender value of bank owned life insurance 16,593 11,109 Goodwill 7,380 7,380 Other intangible assets 2,205 2,464 Other assets 22,336 20,208 ------------ ----------- Total assets $ 1,494,185 $ 1,435,578 ============ =========== LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Deposits: Noninterest bearing $ 162,616 $ 151,105 Interest bearing 1,050,063 1,062,500 ------------ ----------- Total deposits $ 1,212,679 $ 1,213,605 Federal funds purchased and securities sold under agreements to repurchase 34,500 2,467 Long-term debt 87,759 71,759 Company obligated mandatorily redeemable preferred securities 25,000 25,000 Other liabilities 9,010 7,584 ------------ ----------- Total liabilities $ 1,368,948 $ 1,320,415 ------------ ----------- STOCKHOLDERS' EQUITY Preferred stock $ - $ - Common stock 6,291 6,291 Surplus 20,932 20,862 Retained earnings 100,237 91,639 Accumulated other comprehensive income 10,322 10,276 ------------ ----------- Total stockholders' equity before treasury stock, unearned ESOP shares and deferred compensation for stock grants $ 137,782 $ 129,068 Treasury stock, at cost (10,731) (12,050) Unearned ESOP shares and deferred compensation for stock grants (1,814) (1,855) ------------ ----------- Total stockholders' equity $ 125,237 $ 115,163 ------------ ----------- Total liabilities and stockholders' equity $ 1,494,185 $ 1,435,578 ============ =========== Common shares outstanding at period end 13,649,520 13,568,220 ============ =========== See notes to unaudited consolidated financial statements. 3 of 29
FIRST BUSEY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002 (UNAUDITED) 2003 2002 -------- -------- (Dollars in thousands, except per share amounts) INTEREST INCOME: Interest and fees on loans $ 49,225 $ 49,606 Interest and dividends on investment securities: Taxable interest income 4,567 5,406 Non-taxable interest income 1,543 1,500 Dividends 140 92 Interest on federal funds sold 114 168 -------- -------- Total interest income $ 55,589 $ 56,772 -------- -------- INTEREST EXPENSE: Deposits $ 15,192 $ 18,552 Short-term borrowings 127 340 Long-term debt 2,604 2,318 Company obligated mandatorily redeemable preferred securities 1,688 1,688 -------- -------- Total interest expense $ 19.611 $ 22,898 -------- -------- Net interest income $ 35,978 $ 33,874 Provision for loan losses 1,378 2,055 -------- -------- Net interest income after provision for loan losses $ 34,600 $ 31,819 -------- -------- OTHER INCOME: Trust $ 3,467 $ 3,682 Commissions and brokers fees, net 1,541 1,658 Service charges on deposit accounts 5,427 5,204 Other service charges and fees 1,433 1,338 Security gains, net 322 569 Gain on sales of loans 5,833 2,383 Increase in cash surrender value of life insurance 484 498 Other operating income 557 1,154 -------- -------- Total other income $ 19,064 $ 16,486 -------- -------- OTHER EXPENSES: Salaries and wages $ 14,585 $ 13,076 Employee benefits 2,818 2,693 Net occupancy expense of premises 2,326 2,279 Furniture and equipment expenses 1,899 2,239 Data processing 1,326 1,084 Stationery, supplies and printing 813 733 Amortization of intangible assets 309 495 Other operating expenses 6,313 5,369 -------- -------- Total other expenses $ 30,389 $ 27,968 -------- -------- Income before income taxes $ 23,275 $ 20,337 Income taxes 7,767 6,788 -------- -------- NET INCOME $ 15,508 $ 13,549 ======== ======== BASIC EARNINGS PER SHARE $ 1.14 $ 1.00 ======== ======== DILUTED EARNINGS PER SHARE $ 1.13 $ 0.99 ======== ======== DIVIDENDS DECLARED PER SHARE OF COMMON STOCK $ 0.51 $ 0.45 ======== ======== See notes to unaudited consolidated financial statements. 4 of 29
FIRST BUSEY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE QUARTERS ENDED SEPTEMBER 30, 2003 AND 2002 (UNAUDITED) 2003 2002 -------- -------- (Dollars in thousands, except per share amounts) INTEREST INCOME: Interest and fees on loans $ 16,386 $ 16,969 Interest and dividends on investment securities: Taxable interest income 1,418 1,747 Non-taxable interest income 512 523 Dividends 64 31 Interest on federal funds sold 37 82 -------- -------- Total interest income $ 18,417 $ 19,352 -------- -------- INTEREST EXPENSE: Deposits $ 4,592 $ 6,186 Short-term borrowings 30 75 Long-term debt 933 913 Company obligated mandatorily redeemable preferred securities 563 563 -------- -------- Total interest expense $ 6,118 $ 7,737 -------- -------- Net interest income $ 12,299 $ 11,615 Provision for loan losses 448 575 -------- -------- Net interest income after provision for loan losses $ 11,851 $ 11,040 -------- -------- OTHER INCOME: Trust $ 1,176 $ 1,071 Commissions and brokers fees, net 565 563 Service charges on deposit accounts 1,898 1,793 Other service charges and fees 478 476 Security gains, net 23 96 Gains on sales of loans 1,359 1,027 Increase in cash surrender value of life insurance 157 162 Other operating income 62 248 -------- -------- Total other income $ 5,718 $ 5,436 -------- -------- OTHER EXPENSES: Salaries and wages $ 4,949 $ 4,436 Employee benefits 934 870 Net occupancy expense of premises 797 722 Furniture and equipment expenses 589 758 Data processing 447 374 Stationary, supplies and printing 294 243 Amortization of intangible assets 103 271 Other operating expenses 1,910 1,899 -------- -------- Total other expenses $ 10,023 $ 9,573 -------- -------- Income before income taxes $ 7,546 $ 6,903 Income taxes 2,236 2,331 -------- -------- NET INCOME $ 5,310 $ 4,572 ======== ======== BASIC EARNINGS PER SHARE $ 0.39 $ 0.34 ======== ======== DILUTED EARNINGS PER SHARE $ 0.38 $ 0.33 ======== ======== DIVIDENDS DECLARED PER SHARE OF COMMON STOCK $ 0.17 $ 0.15 ======== ======== See notes to unaudited consolidated financial statements. 5 of 29
FIRST BUSEY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002 (UNAUDITED) 2003 2002 ---------- ---------- (Dollars in thousands) CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 15,508 $ 13,549 Adjustments to reconcile net income to net cash provided by operating activities: Stock-based compensation 41 86 Depreciation and amortization 2,753 3,116 Provision for loan losses 1,378 2,055 Provision for deferred income taxes 435 (512) Stock dividends (379) (224) Accretion of security discounts (241) (335) Gain on sales of investment securities, net (322) (569) Gain on sale of pooled loans (5,833) (2,383) Gain on sale and disposition of premises and equipment (421) (36) Gain on sale of OREO properties (75) (45) Market valuation adjustment on OREO properties 694 - Change in assets and liabilities: Increase in other assets (2,083) (2,118) Increase in accrued expenses 2,165 3,769 Decrease in interest payable (835) (405) (Increase) decrease in income taxes receivable (953) 1,139 (Decrease) increase in income taxes payable (392) 768 ---------- ---------- NET CASH PROVIDED BY OPERATING ACTIVITIES BEFORE LOAN ORIGINATIONS AND SALES $ 11,440 $ 17,855 ---------- ---------- Loans originated for sale (364,547) (170,300) Proceeds from sales of loans 399,718 156,607 ---------- ---------- NET CASH PROVIDED BY OPERATING ACTIVITIES $ 46,611 $ 4,162 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sales of securities classified available for sale 13,451 20,887 Proceeds from maturities of securities classified available for sale 165,362 52,212 Purchase of securities classified available for sale (195,311) (89,070) Increase in federal funds sold - (10,600) Increase in loans (73,639) (56,319) Proceeds from sale of premises and equipment 6,160 109 Purchases of premises and equipment (2,987) (1,180) Proceeds from sale of OREO properties 630 903 Increase in investment in bank owned life insurance (5,000) (343) Increase in cash surrender value of bank owned life insurance (484) (498) ---------- ---------- NET CASH USED IN INVESTING ACTIVITIES $ (91,818) $ (83,899) ---------- ---------- (continued) 6 of 29
FIRST BUSEY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002 (UNAUDITED) 2003 2002 ---------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Net (decrease) increase in certificates of deposit $ (31,263) $ 51,116 Net increase in demand, money market and saving deposits 30,337 13,663 Cash dividends paid (6,910) (6,102) Purchase of treasury stock (2,193) (3,353) Proceeds from sale of treasury stock 3,582 763 Net increase (decrease) in securities sold under agreement to repurchase 32,033 (6,133) Proceeds from short-term borrowings - 500 Principal payments on short-term borrowings - (2,500) Proceeds from issuance of long-term debt 16,000 41,000 Principal payments on long-term debt - (8,000) --------- -------- NET CASH PROVIDED BY FINANCING ACTIVITIES $ 41,586 $ 80,954 --------- -------- NET (DECREASE) INCREASE IN CASH AND DUE FROM BANKS $ (3,621) $ 1,217 Cash and due from banks, beginning 47,645 $ 41,580 --------- -------- Cash and due from banks, ending $ 44,024 $ 42,797 ========= ======== See notes to unaudited consolidated financial statements. FIRST BUSEY CORPORATION AND SUBSIDIARIES SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002 (UNAUDITED) 2003 2002 ----- ------- (Dollars in thousands) Other real estate acquired in settlement of loans $ 391 $ 5,823 FIRST BUSEY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002 (UNAUDITED) Nine Months Ended September 30, 2003 2002 -------- -------- (Dollars in thousands) Net income $ 15,508 $ 13,549 -------- -------- Other comprehensive income, before tax: Unrealized gains on securities: Unrealized holding gains arising during period $ 421 $ 3,759 Less reclassification adjustment for gains included in net income (322) (569) -------- -------- Other comprehensive income, before tax $ 99 $ 3,190 Income tax expense related to items of other comprehensive income 53 1,265 -------- -------- Other comprehensive income, net of tax $ 46 $ 1,925 -------- -------- Comprehensive income $ 15,554 $ 15,474 ======== ======== See notes to unaudited consolidated financial statements. 7 of 29
FIRST BUSEY CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED 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 consolidated financial statements have been prepared in accordance with accounting principles generally accepted within the United States of America for interim financial data and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The results for the interim periods are not necessarily indicative of the results of operations that may be expected for the fiscal year. In preparing the consolidated financial statements, the Corporation's management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses for the reporting period. Actual results could differ from those estimates. NOTE 2: LOANS The major classifications of loans as of September 30, 2003 and December 31, 2002 were as follows: September 30, 2003 December 31, 2002 ------------------ ----------------- (Dollars in thousands) Commercial $ 126,426 $ 118,004 Real estate construction 157,084 129,872 Real estate - farmland 12,301 13,421 Real estate - 1-4 family residential mortgage 401,307 430,189 Real estate - multifamily mortgage 83,293 57,559 Real estate - non-farm nonresidential mortgage 284,032 274,153 Installment 58,499 55,811 Agricultural 21,904 22,034 --------------------------------- $ 1,144,846 $ 1,101,043 Less: Allowance for loan losses 16,731 15,460 --------------------------------- Net loans $ 1,128,115 $ 1,085,583 ================================= The real estate-mortgage category includes loans held for sale with carrying values of $31,423,000 at September 30, 2003 and $60,761,000 at December 31, 2002; these loans had fair market values of $31,443,000 and $61,685,000 respectively. 8 of 29
NOTE 3: EARNINGS PER SHARE Net income per common share has been computed as follows: Three Months Ended Nine Months Ended September 30, September 30, 2003 2002 2003 2002 -------------------------------------------------------- Net income $ 5,310,000 $ 4,572,000 $15,508,000 $13,549,000 Shares: Weighted average common shares outstanding 13,555,070 13,517,312 13,559,239 13,553,927 Diluted effect of outstanding options, as determined by the application of the treasury stock method 145,314 84,333 126,824 79,515 ----------- ----------- ----------- ----------- Weighted average common shares outstanding, as adjusted for diluted earnings per share calculation 13,700,384 13,601,645 13,686,063 13,633,442 =========== =========== =========== =========== Basic earnings per share $ 0.39 $ 0.34 $ 1.14 $ 1.00 =========== =========== =========== =========== Diluted earnings per share $ 0.38 $ 0.33 $ 1.13 $ 0.99 =========== =========== =========== =========== FIRST BUSEY CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS NOTE 4: STOCK-BASED COMPENSATION First Busey Corporation applies Accounting Principles Board Opinion No. 25 in accounting for stock options and discloses the fair value of options granted as permitted by SFAS No. 123. The Corporation has recorded no compensation expense associated with stock options as all options granted under its plan had an exercise price equal to the market value of the common stock when granted. The following summarizes the pro-forma effects assuming compensation expense had been recorded based upon the estimated fair value: Three Months Ended Nine Months Ended September 30, September 30, (dollars in thousands, except per share) 2003 2002 2003 2002 ------- ------- -------- -------- Net income as reported $ 5,310 $ 4,572 $ 15,508 $ 13,549 Less compensation expense determined under fair value method for all options granted, net of related tax effects 65 76 193 162 ------- ------- -------- -------- Pro-forma net income $ 5,245 $ 4,496 $ 15,315 $ 13,387 ======= ======= ======== ======== BASIC EARNINGS PER SHARE Reported net income $ 0.39 $ 0.34 $ 1.14 $ 1.00 Less compensation expense - 0.01 0.01 0.01 ------- ------- -------- -------- Pro-forma net income $ 0.39 $ 0.33 $ 1.13 $ 0.99 ======= ======= ======== ======== DILUTED EARNINGS PER SHARE Reported net income $ 0.38 $ 0.33 $ 1.13 $ 0.99 Less compensation expense - - 0.01 0.01 ------- ------- -------- -------- Pro-forma net income $ 0.38 $ 0.33 $ 1.12 $ 0.98 ======= ======= ======== ======== The Corporation has not granted any stock options during 2003. 9 of 29
NOTE 5: OUTSTANDING COMMITMENTS The Corporation is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers in the way of commitments to extend credit. They involve, to varying degrees, elements of credit risk in excess of the amount recognized in the balance sheets. The Corporation's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual amount of those instruments. The corporation uses the same credit policies in making commitments and conditional obligations as they do for on-balance-sheet instruments. A summary of the contractual amount of the Corporation's exposure to off-balance sheet risk follows: September 30, 2003 December 31, 2002 ---------------------------------------- (Dollars in thousands) Financial instruments whose contract amounts represent credit risk: Commitments to extend credit $ 237,255 $ 222,407 Standby letters of credit 11,561 13,138 Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. These commitments are generally at variable interest rates and generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The customer's credit worthiness is evaluated on a case-by-case basis. The amount of collateral obtained, if it is deemed necessary by the Corporation upon extension of credit, is based on management's credit evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory, property and equipment and income-producing commercial properties. Standby letters of credit are conditional commitments issued by the Corporation to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements, including bond financing and similar transactions and primarily have terms of one year or less. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Corporation holds collateral, which may include accounts receivable, inventory, property and equipment, income producing properties, supporting those commitments if deemed necessary. In the event the customer does not perform in accordance with the terms of the agreement with the third party, the Corporation would be required to fund the commitment. The maximum potential amount of future payments the Corporation could be required to make is represented by the contractual amount shown in the summary above. If the commitment is funded, the Corporation would be entitled to seek recovery from the customer. As of September 30 2003, and December 31, 2002, no amounts have been recorded as liabilities for the Corporation's potential obligations under these guarantees. FORWARD LOOKING STATEMENTS This presentation includes forward looking statements that are intended to be covered by the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward looking statements include but are not limited to comments with respect to the objectives and strategies, financial condition, results of operations and business of First Busey Corporation. These forward looking statements involve numerous assumptions, inherent risks and uncertainties, both general and specific, and the risk that predictions and other forward looking statements will not be achieved. The Corporation cautions you not to place undue reliance on these forward looking statements as a number of important factors could cause actual future results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward looking statements. 10 of 29
These risks, uncertainties and other factors include the general state of the economy, both on a local and national level, the ability of the Corporation to successfully complete acquisitions, the continued growth of geographic regions served by the Corporation, and the retention of key individuals in the Corporation's management structure. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is management's discussion and analysis of the financial condition of First Busey Corporation and Subsidiaries ("Corporation") at September 30, 2003 (unaudited), as compared with December 31, 2002 and the results of operations for the nine months ended September 30, 2003 and 2002 (unaudited), and the results of operations for the three months ended September 30, 2003 and 2002 (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. Certain reclassifications have been made to the balances, with no effect on net income, as of and for the nine and three months ending September 30, 2002, to be consistent with the classifications adopted as of and for the nine and three months ending September 30, 2003. FINANCIAL CONDITION AT SEPTEMBER 30, 2003 AS COMPARED TO DECEMBER 31, 2002 Total assets increased $58,607,000 or 4.1% to $1,494,185,000 at September 30, 2003, from $1,435,578,000 at December 31, 2002. Securities available for sale increased $17,539,000 or 7.5% to $251,369,000 at September 30, 2003, from $233,830,000 at December 31, 2002. Loans increased $43,803,000 or 4.0% to $1,144,846,000 at September 30, 2003, from $1,101,043,000 at December 31, 2002, primarily due to growth in the commercial, real estate construction, multi-family mortgage, non-farm nonresidential mortgage categories. Growth in these categories was offset partially by a decline in the balance of outstanding 1-4 family residential mortgage loans. In August, 2003, First Busey sold Busey Plaza, an office building with a book value of $4,514,000 located in downtown Urbana, Illinois. The building was occupied entirely by unaffiliated tenants and was no longer used in the operations of the Corporation. Busey Bank increased its investment bank owned life insurance by $5,000,000. The balance of total deposits as of September 30, 2003, was comparable to the balance as of December 31, 2002, although there were changes in the deposit mix. Noninterest-bearing deposits increased $11,511,000 or 7.6% to $162,616,000 as of September 30, 2003, from $151,105,000 at December 31, 2002. Interest-bearing deposits declined $12,437,000 or 1.2% to $1,050,063,000 at September 30, 2003, from $1,062,500,000 as of December 31, 2002. Securities sold under agreements to repurchase increased $5,033,000 to $7,500,000 at September 30, 2003, compared to $2,467,000 at December 31, 2002. The Corporation had $27,500,000 in Federal funds purchased as of September 30, 2003, and had no Federal funds purchased as of December 31, 2002. Long-term debt increased $16,0000,000 or 22.3% to $87,759,000 as of September 30, 2003, compared to $71,759,000 as of December 31, 2002. The increase in long-term debt is due to increases in Federal Home Loan Bank (FHLB) advances outstanding. The increases in Federal funds purchased and securities sold under agreements to repurchase and long-term debt were used to fund growth in loans and securities available for sale. In the first nine months of 2003, First Busey repurchased 86,800 shares of its common stock at an aggregate cost of $2,193,000. The Corporation's board of directors approved a stock purchase plan on March 20, 2001, for the repurchase of 500,000 shares of common stock Through September 30, 2003, the Corporation had repurchased 340,256 shares of common stock under this plan. 11 of 29
ASSET QUALITY The following table sets forth the components of non-performing assets and past due loans. September 30, 2003 December 31, 2002 ------------------ ----------------- (Dollars in thousands) Non-accrual loans $ 2,607 $ 1,265 Loans 90 days past due, still accruing 2,817 963 Restructured loans - - Other real estate owned 5,460 5,724 Non-performing other assets 1 1 --------- ------- Total non-performing assets $ 10,885 $ 7,953 ========= ======= Total non-performing assets as a percentage of total assets 0.73% 0.55% ========= ======= Total non-performing assets as a percentage of loans plus non-performing assets 0.94% 0.72% ========= ======= Loans 90 days past due and still accruing were $2,817,000 or 0.25% of total loans as of September 30, 2003, compared to $963,000 or 0.09% of total loans as of December 31, 2002. The balance of other real estate owned decreased to $5,460,000 as of September 30, 2003, compared to $5,724,000 as of December 31, 2002. This decrease is attributable primarily to the recording of valuation adjustments totaling $694,000 by Busey Bank in connection with the carrying values of OREO properties. Busey Bank became mortgage in possession of a hotel property in the McLean County market on June 28, 2002, and took ownership of the property on September 13, 2003. Through the first nine months of 2003, the hotel property has reported an operating loss of $123,000 which is included as a component of other operating expenses on the Corporation's consolidated income statement. ALLOWANCE FOR LOAN LOSSES First Busey Corporation has established an allowance for loan losses which represents the corporation's estimate of the probable losses that have occurred as of the date of the consolidated financial statements. Management has established an allowance for loan losses which reduces the total loans outstanding by an estimate of uncollectible loans. Loans deemed uncollectible are charged against and reduce the allowance. Periodically, a provision for loan losses is charged to current expense. This provision acts to replenish the allowance for loan losses and to maintain the allowance at a level that management deems adequate. There is no precise method of predicting specific loan losses or amounts which ultimately may be charged off on segments of the loan portfolio. The determination that a loan may become uncollectible, in whole or in part, is a matter of judgment. Similarly, the adequacy of the allowance for loan losses can be determined only on a judgmental basis, after full review, including (a) consideration of economic conditions and their effect on particular industries and specific borrowers; (b) a review of borrowers' financial data, together with industry data, the competitive situation, the borrowers' management capabilities and other factors; (c) a continuing evaluation of the loan portfolio, including monitoring by lending officers and staff credit personnel of all loans which are identified as being of less than acceptable quality; (d) an in-depth appraisal, on a monthly basis, of all impaired (loans are considered to be impaired when based on current information and events, it is probable the Corporation will not be able to collect all amounts due); and (e) an evaluation of the underlying collateral for secured lending, including the use of independent appraisals of real estate properties securing loans. Periodic provisions for loan losses are determined by management based upon the size and the quality of the loan portfolio measured against prevailing economic conditions and historical loan loss experience and also based on specific exposures in the portfolio. Management has instituted a formal loan review system supported by an effective credit analysis and control process. The Corporation will maintain the allowance for loan losses at a level sufficient to absorb estimated uncollectible loans and, therefore, expects to make periodic additions to the allowance for loan losses. 12 of 29
The Corporation maintains its allowance for loan losses at a level management believes will be adequate to absorb estimated losses on existing loans based on an evaluation of the collectibility of loans and prior loss experience. The allowance is calculated using a risk rating system which involves judgments, estimates, and uncertainties that are susceptible to change. This risk rating system is based on continuous credit reviews of the loan portfolio and considers changes in the nature and volume of the loan portfolio, overall portfolio quality, loan concentrations, specific problem loans, current and anticipated economic conditions that may affect the borrowers' ability to pay, historical loan loss experience and other factors, which, in management's opinion, deserve current recognition in estimating loan losses. Changes in these factors or conditions could have significant impact on the Corporation's financial condition or results of operation. POTENTIAL PROBLEM LOANS Potential problem loans are those loans which are not categorized as impaired, non-accrual, past due or restructured, but where current information indicates that the borrower may not be able to comply with present loan repayment terms. Management assesses the potential for loss on such loans as it would with other problem loans and has considered the effect of any potential loss in determining its provision for loan losses. Potential problem loans totaled $913,000 at September 30, 2003 as compared to $1,053,000 as of December 31, 2002. There are no other loans identified which management believes represent or result from trends or uncertainties which management reasonably expects will materially impact future operating results, liquidity or capital resources. There are no other credits identified about which management is aware of any information which causes management to have serious doubts as to the ability of such borrower(s) to comply with the loan repayment terms. RESULTS OF OPERATIONS NINE MONTHS ENDED SEPTEMBER 30, 2003 AS COMPARED TO SEPTEMBER 30, 2002 SUMMARY Net income for the nine months ended September 30, 2003, increased $1,959,000 or 14.5% to $15,508,000 as compared to $13,549,000 for the comparable period in 2002. Year-to-date diluted earnings per share increased $0.14 or 14.1% to $1.13 for the nine months ending September 30, 2003 as compared to $0.99 for the same period in 2002. The Corporation's return on average assets was 1.43% for the nine months ended September 30, 2003, as compared to 1.38% for the comparable period in 2002. The corporation's return on average shareholders' equity was 17.20% for the nine months ended September 30, 2003, as compared to 16.67% for the same period in 2002. EARNING ASSETS, SOURCES OF FUNDS, AND NET INTEREST MARGIN Average earning assets increased $134,686,000 or 11.0% to $1,363,369,000 for the nine months ending September 30, 2003, as compared to $1,228,683,000 for the same period last year. This is due primarily to growth in the average balances of loans outstanding, U.S. Government obligations, and obligations of states and political subdivisions. Interest-bearing liabilities averaged $1,177,816,000 during the first nine months of 2003, an increase of $108,267,000 or 10.1% from the average balance of $1,069,549,000 for the same period in 2002. This growth is due to increases in the average balances of all categories of interest-bearing deposit accounts and long-term debt. Income on interest-earning assets is accrued based on the effective yield of the underlying financial instruments. A loan is considered to be impaired when, based on current information and events, it is probable the Corporation will not be able to collect all amounts due. The accrual of interest income on impaired loans is discontinued when there is reasonable doubt as to the borrower's ability to meet contractual payments of interest or principal. 13 of 29
Net interest income, on a fully taxable equivalent basis, increased $2,091,000 or 6.0% to $36,933,000 for the nine months ended September 30, 2003, compared to $34,842,000 for the same period in 2002. 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 3.62% for the nine months ended September 30, 2003, as compared to 3.79% for the same period in 2002. Net interest margin expressed as a percentage of average total assets, also on a fully taxable equivalent basis, was 3.40% for the nine months ended September 30, 2003, compared to 3.54% for the same period in 2002. Interest income, on a tax equivalent basis, for the nine months ended September 30, 2003, was $56,544,000, which is $1,196,000 or 2.1% lower than the $57,740,000 earned during the same nine-month period in 2002. The average yield on interest-earning assets declined 73 basis points to 5.55% for the nine-month period ending September 30, 2003, compared to 6.28% for the same period in 2002. Declines in the yields on all categories of interest-earning assets offset the growth in the average balances of all categories of interest-earning assets. Interest expense for the nine-month period ended September 30, 2003, was $19,611,000, which is $3,287,000 or 14.4% lower than the $22,898,000 paid during the same period in 2002. The average rate paid on interest-bearing liabilities declined 63 basis points to 2.23% for the nine months ending September 30, 2003, as compared to 2.86% for the same period in 2002. Declines in the average rates paid on all categories of interest-bearing liabilities more than offset the growth in the average balances of all deposit categories, short-term borrowings, and long-term debt. PROVISION FOR LOAN LOSSES The Corporation's provision for loan losses of $1,378,000 during the nine months ended September 30, 2003, is $677,000 less than the $2,055,000 recorded during the comparable period in 2002. The provision and net charge-offs of $107,000 for the nine-month period ending September 30, 2003, resulted in the allowance representing 1.46% of total loans and 308% of non-performing loans as of September 30, 2003, as compared to the allowance representing 1.40% of outstanding loans and 694% of non-performing loans as of December 31, 2002. Net charge-offs for the first nine months of 2003 were $107,000 compared to $1,476,000 for the comparable period in 2002. The net chargeoff ratio (net charge-offs as a percentage of average loans) was 0.01% for the nine-month period ending September 30, 2003, reflecting a decrease from 0.20% for the same period in 2002. The adequacy of the allowance for loan losses is consistent with management's consideration of the composition of the portfolio, non-performing asset levels, recent credit quality experience, historic charge-off trends, and prevailing economic conditions among other factors. OTHER INCOME, OTHER EXPENSE, AND INCOME TAXES Total other income, excluding security gains, increased $2,825,000 or 17.7% to $$18,742,000 for the nine months ended September 30, 2003, compared to $15,917,000 for the same period in 2002. Growth in service charges and gains on the sale of loans were partially offset by declines in trust fees, commissions and brokers' fees, and other operating income. Income recognized on service charges, trust fees, commissions, and loan gains is recognized based on contractual terms and are accrued based on estimates, or are recognized as transactions occur or services are provided. Income from the servicing of sold loans is recognized based on estimated asset valuations and transactions volumes. While these estimates and assumptions may be considered complex, First Busey has implemented controls and processes to ensure the accuracy of these accruals. During the first nine months of 2003 the Corporation recognized $5,833,000 on the sale of $393,885,000 compared to $2,383,000 on the sale of $154,224,000 of loans during the prior year period. The increase in gains on the sale of loans and the principal balances sold can be attributed to the interest-rate environment experienced during the nine months ending September 30, 2003, as customers refinanced existing home mortgages at lower interest rates. Management anticipates continued sales from the current mortgage loan production of the Corporation if mortgage loan originations allow and the sales of loans necessary to maintain the Corporation's 14 of 29
desired asset/liability structure. 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. In this low interest rate environment customers have prepaid loans in the corporation's sold loan portfolio more rapidly than anticipated when the loans were sold. This has resulted in more rapid amortization of the Corporation's mortgage servicing asset. During the second quarter of 2003, the Corporation recorded a valuation allowance of $215,000 to the carrying value of its mortgage servicing assets. Mortgage servicing asset amortization of $1,392,000 and the valuation allowance of $215,000 have been recorded as charges against the servicing income on sold mortgage loans and are included in other operating income. During the nine months ending September 30, 2003, the Corporation recognized security gains of approximately $194,000 after income taxes, representing 1.3% of net income. During the same period in 2002, security gains of approximately $343,000 after income taxes were recognized, representing 2.5% of net income. The Corporation owns a position in a qualified equity security with substantial appreciated value. First Busey's Board of Directors has authorized an orderly liquidation of this asset over a six-year period. Total other expenses increased $2,421,000 or 8.7% to $30,389,000 for the nine months ending September 30, 2003, compared to $27,968,000 for the comparable period in 2002. Salaries and wage expense increased $1,509,000 or 11.5% to $14,585,000 for the nine months ended September 30, 2003, as compared to $13,076,000 during the same period last year. Growth in the salary expense is due primarily to increases in commissions and other incentive compensation for associates involved in originating, processing, and selling mortgage loans held for sale. Growth in the Florida market also contributed to the increase in salary and wage expense as Busey Bank Florida opened a branch in Cape Coral, Florida, during the fourth quarter of 2002 and added a second branch in Cape Coral during the third quarter of 2003. The Corporation had 495 and 470 full-time equivalent employees as of September 30, 2003, and September 30, 2002, respectively. Occupancy and furniture and equipment expenses decreased $293,000 or 6.5% to $4,225,000 for the nine-month period ending September 30, 2003, compared to $4,518,000 during the comparable period in 2002. Data processing expenses increased $242,000 due to costs associated with the upgrade of Busey Bank's image capture system. These expenses were incurred during the first quarter of 2003. Other operating expenses increased $838,000 or 12.7% to $7,435,000 for the nine month period ending September 30, 2003, compared to $6,597,000 for the comparable period in 2002. Of this increase, $694,000 is associated with the recording of valuation adjustments by Busey Bank on the carrying value of properties held in its other real estate owned inventory. Income taxes for the nine months ended September 30, 2003, increased to $7,767,000 as compared to $6,788,000 for the comparable period in 2002. As a percentage of income before taxes, the provision for income taxes was 33.4% for the nine months ended September 30, 2003, as well as for the comparable period in 2002. RESULTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 2003, AS COMPARED TO SEPTEMBER 30, 2002 SUMMARY Net income for three months ended September 30, 2003, increased $738,000 or 16.1% to $5,310,000 as compared to $4,572,000 for the three months ending September 30, 2002. Diluted earnings per share increased $0.05 or 15.2% to $0.38 for the three months ending September 30, 2003 as compared to $0.33 for the comparable period in 2002. The Corporation's return on average assets was 1.42% for the three month period ending September 30, 2003, compared to 1.34% for the comparable period in 2002. The return on average shareholders' equity increased to 17.07% for the three month period ending September 30, 2003, compared to 16.33% for the comparable period in 2002. 15 of 29
EARNING ASSETS, SOURCES OF FUNDS, AND NET INTEREST MARGIN Average earning assets increased $129,996,000 or 10.3% to $1,397,700,000 for the three months ending September 30, 2003, as compared to $1,267,704,000 for same period last year. This is due primarily to growth in the average balances of U.S. Government obligations and outstanding loans. Interest-bearing liabilities averaged $1,200,448,000 during the three months ending September 30, 2003, an increase of $93,888,000 or 8.5% from the average balance of $1,106,560,000 for the same period in 2002. This growth is due to increases in the average balances of long-term debt and all categories of interest-bearing deposit accounts. Busey Bank Florida's interest-bearing deposits averaged $76,061,000 for the three months ending September 30, 2003, as compared to $45,783,000 for the comparable period in 2002. Net interest income, on a fully taxable equivalent basis, increased $664,000 or 5.6% to $12,611,000 for the three months ended September 30, 2003, compared to $11,947,000 for the same period in 2002. 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 3.58% for the three months ending September 30, 2003, as compared to 3.74% for the comparable period in 2002. The net interest margin expressed as a percentage of average total assets, also on a fully taxable equivalent basis, was 3.36% for the three months ended September 30, 2003, compared to 3.49% for comparable period in 2002. Interest income, on a tax equivalent basis, for the three-month period ending September 30, 2003, was $18,729,000, which is $955,000 or 4.9% lower than the $19,684,000 earned during the same period in 2002. The average yield on interest-earning assets declined 84 basis points to 5.32% for the three-month period ended September 30, 2003, compared to 6.16% for the same period in 2002. Declines in the yields on all categories of interest-earning assets with the exception of other securities offset the growth in the average balances of investment securities and loans. Interest expense for the three months ending September 30, 2003, was $6,118,000, which is $1,619,000 or 20.9% lower than for the same period in 2002. The average rate paid on interest-bearing liabilities declined 75 basis points to 2.02% for the three months ended September 30, 2003, as compared to 2.77% for the same period in 2002. Declines in the average rate paid on all categories of interest-bearing liabilities offset growth in the average balances of all categories of interest-bearing liabilities. OTHER INCOME, OTHER EXPENSE, AND INCOME TAXES Total other income, excluding security transactions, increased $355,000 or 6.6% to $5,695,000 for the three months ended September 30, 2003, compared to $5,340,000 for the same period in 2002. Growth in trust fees, service charges and gains on the sale of loans were partially offset by declines in other operating income. Gains of $1,359,000 were recognized on the sale of $156,556,000 of mortgage loans during the three months ending September 30, 2003, compared to gains of $1,027,000 on the sale of $54,658,000 in mortgage loans during the prior year period. During the three-month period ending September 30, 2003, the Corporation recognized security gains of approximately $14,000, after income taxes, representing 0.3% of net income. During the comparable period in 2002, security gains of approximately $58,000, after income taxes, were recognized, representing 1.3% of net income. Total other expenses increased $450,000 or 4.7% to $10,023,000 for the three months ending September 30, 2003, compared to $9,573,000 for the comparable period in 2002. Salaries and wage expense increased $513,000 or 11.6% to $4,949,000 for the three months ended September 30, 2003, as compared to $4,436,000 during the same period last year. Again, the growth in salary and wage expense is due to increases in compensation programs for associates involved in originating, processing, and selling mortgage loans held for sale combined with the addition of the branch offices in Cape Coral, Florida. Occupancy 16 of 29
and furniture and equipment expenses decreased $94,000 or 6.4% to $1,386,000 for the three-month period ending September 30, 2003, compared to $1,480,000 during the comparable period in 2002. Income taxes for the three-month period ending September 30, 2003, decreased to $2,236,000 as compared to $2,331,000 for the comparable period in 2002. As a percentage of income before taxes, the provision for income taxes decreased to 29.6% for the three months ended September 30, 2003 from 33.8% for the comparable period in 2002 due to a change in the estimated refunds due from Federal and state taxing authorities on the corporations 2002 tax calculation. NEW ACCOUNTING PRONOUNCEMENTS Financial Accounting Standards Board Interpretation (FIN) No. 46 "Consolidation of Variable Interest Entities, an interpretation of Accounting Research Bulletin No. 51." FIN 46 establishes accounting guidance for consolidation of variable interest entities (VIE) that function to support the activities of the primary beneficiary. The primary beneficiary of a VIE entity is the entity that absorbs a majority of the VIE's expected losses, receives a majority of the VIE's expected residual returns, or both, as a result of ownership, controlling interest, contractual relationship or other business relationship with a VIE. Prior to the implementation of FIN 46, VIEs were generally consolidated by an enterprise when the enterprise had a controlling financial interest through ownership of a majority of voting interest in the entity. The provisions of FIN 46 were effective immediately for all arrangements entered into after January 31, 2003. If a VIE existed prior to February 1, 2003, FIN 46 was effective at the beginning of the first interim period beginning after June 15, 2003. However, on October 8, 2003, the Financial Accounting Standards Board (FASB) deferred the implementation date of FIN 46 until the first period ending after December 15, 2003. The Corporation expects to adopt FIN 46 in connection with its consolidated financial statements for the year ended December 31, 2003. In its current form, FIN 46 may require the Corporation to de-consolidate its investment in First Busey Capital Trust I in future financial statements. The potential de-consolidation of subsidiary trusts of bank holding companies formed in connection with the issuance of trust preferred securities, like First Busey Capital Trust I, appears to be an unintended consequence of FIN 46. It is currently unknown if, or when, the FASB will address this issue. In July, 2003, the Board of Governors of the Federal Reserve System issued a supervisory letter instructing bank holding companies to continue to include the trust preferred securities in their Tier I capital for regulatory capital purposes until notice is given to the contrary. The Federal Reserve intends to review the regulatory implications of any accounting treatment changes and, if necessary or warranted, provide further appropriate guidance. There can be no assurance that the Federal Reserve will continue to permit institutions to include trust preferred securities in Tier I capital for regulatory capital purposes. As of September 30, 2003, assuming the Corporation was not permitted to include the $25 million in trust preferred securities issued by First Busey Capital Trust I in its Tier 1 capital, the Corporation would still exceed the regulatory required minimums for capital adequacy purposes. If the trust preferred securities were no longer permitted to be included in Tier 1 capital, the Corporation would also be permitted to redeem the capital securities, which bear interest at 9.00%, without penalty. The interpretations of FIN 46 and its application to various transaction types and structures are evolving. Management continuously monitors emerging issues related to FIN 46, some of which could potentially impact the Corporation's financial statements. In April, 2003, Statement on Financial Accounting Standards No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities, was issued. This statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities. This Statement is effective for contracts entered into or modified after June 30, 2003, except as stated below and for hedging relationships designated after June 30, 2003. In addition, except as stated below, all provisions of this Statement should be applied prospectively. The provisions of this Statement that relate to Statement 133 Implementation issues that have been effective for fiscal quarters that began prior to June 15, 2003, should continue to be applied in accordance with their respective effective dates. In addition, paragraphs 7(a) and 23(a), which related to forward purchases or sales of 17 of 29
when-issued securities or other securities that do not yet exist, should be applied to both existing contracts and new contracts entered into after June 30, 2003. The Corporation does not anticipate this statement will have a significant impact upon the operations of First Busey or its subsidiaries. In May, 2003, Statement on Financial Accounting Standards No. 150 Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity was issued. This Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). Many of those instruments were previously classified as equity. This Statement requires an issuer to classify the following instruments as liabilities (or assets in some circumstances): - A financial instrument issued in the form of shares that is mandatorily redeemable - that embodies an unconditional obligation requiring the issuer to redeem it by transferring its assets at a specified or determinable date (or dates) or upon an event that is certain to occur - A financial instrument, other than an outstanding share, that, at inception, embodies an obligation to repurchase the issuer's equity shares, or is indexed to such an obligation, and that requires or may require the issuer to settle the obligation by transferring assets (for example, a forward purchase contract or written put option on the issuer's equity shares that is to be physically settled or net cash settled) - A financial instrument that embodies an unconditional obligation, or a financial instrument other than an outstanding share that embodies a conditional obligation, that the issuer must or may settle by issuing a variable number of its equity shares, if, at inception, the monetary value f the obligation is based solely or predominantly on any of the following: - A fixed monetary amount known at inception, for example, a payable settleable with a variable number of the issuer's equity shares. - Variations in something other than the fair value of the issuer's equity shares, for example, a financial instrument indexed to the S&P and settleable with a variable number of the issuer's equity shares. - Variations inversely related to changes in the fair value of the issuer's equity shares, for example, a written put option that could be net share settled. The requirements of this Statement apply to issuer's classification and measurement of freestanding financial instruments, including that that comprise more than one option or forward contract. This Statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. It is to be implemented by reporting the cumulative effect of a change in an accounting principle for financial instruments created before the issuance date of the Statement and still existing at the beginning of the interim period of adoption. Restatement is not permitted. First Busey Corporation does not anticipate this Statement will have a significant impact upon the operations of the Corporation or its subsidiaries. REPORTABLE SEGMENTS AND RELATED INFORMATION First Busey Corporation has three reportable segments, Busey Bank, Busey Bank Florida and First Busey Trust & Investment Co. Busey Bank provides a full range of banking services to individual and corporate customers through its branch network in Champaign, McLean and Ford Counties in Illinois, through its branch in Indianapolis, Indiana, and through its loan production office in Fort Myers, Florida. Busey Bank Florida provides a full range of banking services to individual and corporate customers in Fort Myers, Florida. First 18 of 29
Busey Trust & Investment Company provides trust and asset management services to individual and corporate customers throughout central Illinois. The Corporation's three reportable segments are strategic business units that are separately managed as they offer different products and services and have different marketing strategies. The segment financial information provided below has been derived from the internal profitability reporting system used by management to monitor and manage the financial performance of the Corporation. The accounting policies of the three segments are the same as those described in the summary of significant accounting policies in the annual report. The Corporation accounts for intersegment revenue and transfers at current market value. September 30, 2003 --------------------------------------------------------------------------------------------------------- First Busey Busey Bank Trust & Consolidated Busey Bank Florida Investment Co. All Other Totals Eliminations Totals --------------------------------------------------------------------------------------------------------- (Dollars in thousands) Interest income $ 52,166 $ 3,235 $ 105 $ 1,803 $ 57,309 $ (1,720) $ 55,589 Interest expense 16,374 1,541 - 3,417 21,332 (1,721) 19,611 Other income 14,163 430 3,191 20,399 38,183 (19,119) 19,064 Net income 15,348 169 970 16,992 33,479 (17,971) 15,508 Total assets 1,376,114 107,657 3,293 192,419 1,679,483 (185,298) 1,494,185 September 30, 2002 ---------------------------------------------------------------------------------------------------- First Busey Busey Bank Trust & Consolidated Busey Bank Florida Investment Co. All Other Totals Eliminations Totals ---------------------------------------------------------------------------------------------------- (Dollars in thousands) Interest income $ 54,438 $ 2,136 $ 117 $ 1,810 $ 58,501 $ (1,729) $ 56,772 Interest expense 20,057 1,106 - 3,437 24,600 (1,702) 22,898 Other income 11,403 247 3,553 19,208 34,411 (17,925) 16,486 Net income 13,932 18 1,078 15,222 30,250 (16,701) 13,549 Total assets 1,321,563 64,446 3,878 180,098 1,569,985 (167,897) 1,402,088 LIQUIDITY Liquidity management is the process by which the Corporation ensures that adequate liquid funds are available to meet the present and future cash flow obligations arising in the daily operations of the business. These financial obligations consist of needs for funds to meet commitments to borrowers for extensions of credit, funding capital expenditures, withdrawals by customers, maintaining deposit reserve requirements, servicing debt, paying dividends to shareholders, and paying operating expenses. The Corporation's most liquid assets are cash and due from banks, interest-bearing bank deposits, and Federal funds sold. The balances of these assets are dependent on the Corporation's operating, investing, lending and financing activities during any given period. The Corporation's primary sources of funds, consists of deposits, investment maturities and sales, loan principal repayment, deposits, and capital funds. 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. The Corporation has not dealt in or used brokered deposits as a source of liquidity. The Corporation has an operating line with Bank One in the amount of $10,000,000, all of which was available as of September 30, 2003. Long-term liquidity needs will be satisfied primarily through retention of capital funds. 19 of 29
An additional source of liquidity that can be managed for short-term and long-term needs is the Corporation's ability to securitize or package loans (primarily mortgage loans) for sale. During the first nine months of 2003 the Corporation originated $364,547,000 and sold $393,885,000 in mortgage loans for sale compared to originations of $170,300,000 and sales of $154,224,000 during the first nine months of 2002. As of September 30, 2003, the Corporation held $31,423,000 in loans held for sale. Management intends to sell these loans during the fourth quarter of 2003. The objective of liquidity management by the Corporation is to ensure that funds will be available to meet demand in a timely and efficient manner. Based upon the level of investment securities that reprice within 30 days and 90 days, management currently believes that adequate liquidity exists to meet all projected cash flow obligations. The Corporation achieves a satisfactory degree of liquidity through actively managing both assets and liabilities. Asset management guides the proportion of liquid assets to total assets, while liability management monitors future funding requirements and prices liabilities accordingly. The Corporation's banking subsidiaries routinely enter into commitments to extend credit in the normal course of their business. As of September 30, 2003, and 2002, the Corporation had outstanding loan commitments including lines of credit of $237,255,000 and $236,290,000, respectively. The balance of commitments to extend credit represents future cash requirement and some of these commitments may expire without being drawn upon. The Corporation anticipates it will have sufficient funds available to meet its current loan commitments, including loan applications received and in process prior to the issuance of firm commitments. The Corporation has entered into certain contractual obligations and other commitments. Such obligations generally relate to funding of operations through deposits, debt issuance, and property and equipment leases. The following table summarizes significant contractual obligations and other commitments as of September 30, 2003: Company Obligated Mandatorily Short- and Redeemable Certificates Long-term Preferred Due Within of Deposit Borrowing Leases Securities Total - ----------------------------------------------------------------------------------------------------------------- (Dollars in thousands) 1 year $ 283,357 $ 262 $ 776 $ - $284,395 2 years 84,066 16,262 723 - 101,051 3 years 43,438 14,262 704 - 58,404 4 years 50,994 15,262 663 - 66,919 5 years 21,545 37,237 522 - 59,304 Thereafter 46 4,474 495 25,000 30,015 ----------------------------------------------------------------------------------- Total $ 483,446 $ 87,759 $3,883 $25,000 $600,088 =================================================================================== Commitments to extend credit $237,255 ======== CAPITAL RESOURCES Other than from the issuance of common stock, the Corporation's primary source of capital is retained net income. During the nine months ended September 30, 2003 the Corporation earned $15,508,000 and paid dividends of $6,910,000 to stockholders, resulting in a retention of current earnings of $8,598,000. The Corporation's dividend payout for the nine months ended September 30, 2003 was 44.6%. The Corporation and the Banks are subject to regulatory capital requirements administered by federal and state banking agencies. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Corporation and the Banks must meet specific capital guidelines that involve the quantitative measure of their assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. 20 of 29
Quantitative measures established by regulation to ensure capital adequacy require the Corporation and the Banks to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined), and Tier 1 capital (as defined) to average assets (as defined). Management believes, as of September 30, 2003, that the Corporation and the Banks meet all capital adequacy requirements to which they are subject. To Be Well Capitalized Under For Capital Prompt Corrective Actual Adequacy Purposes Action Provisions --------------------------------------------------------------------------- Amount Ratio Amount Ratio Amount Ratio --------------------------------------------------------------------------- (Dollars in thousands) AS OF SEPTEMBER 30, 2003: Total Capital (to Risk Weighted Assets) Consolidated $ 149,177 13.81% $ 86,425 8.00% N/A N/A Busey Bank $ 115,532 11.65% $ 79,365 8.00% $ 99,206 10.00% Busey Bank Florida $ 12,093 16.04% $ 6,033 8.00% $ 7,541 10.00% Tier I Capital (to Risk Weighted Assets) Consolidated $ 130,097 12.04% $ 43,213 4.00% N/A N/A Busey Bank $ 98,403 9.92% $ 39,683 4.00% $ 59,524 6.00% Busey Bank Florida $ 11,395 15.11% $ 3,017 4.00% $ 4,525 6.00% Tier I Capital (to Average Assets) Consolidated $ 130,097 8.90% $ 58,473 4.00% N/A N/A Busey Bank $ 98,403 7.26% $ 54,219 4.00% $ 67,774 5.00% Busey Bank Florida $ 11,395 11.98% $ 3,804 4.00% $ 4,755 5.00% AS OF DECEMBER 31, 2002: Total Capital (to Risk Weighted Assets) Consolidated $ 137,796 13.31% $ 82,830 8.00% N/A N/A Busey Bank $ 108,321 11.13% $ 77,846 8.00% $ 97,307 10.00% Busey Bank Florida $ 11,802 25.47% $ 3,708 8.00% $ 4,634 10.00% Tier I Capital (to Risk Weighted Assets) Consolidated $ 119,897 11.58% $ 41,415 4.00% N/A N/A Busey Bank $ 91,826 9.44% $ 38,923 4.00% $ 58,385 6.00% Busey Bank Florida $ 11,280 24.34% $ 1,854 4.00% $ 2,781 6.00% Tier I Capital (to Average Assets) Consolidated $ 119,897 8.66% $ 55,389 4.00% N/A N/A Busey Bank $ 91,826 7.03% $ 52,244 4.00% $ 65,305 5.00% Busey Bank Florida $ 11,280 16.50% $ 2,736 4.00% $ 3,420 5.00% 21 of 29
RATE SENSITIVE ASSETS AND LIABILITIES Interest rate sensitivity is a measure of the volatility of the net interest margin as a consequence of changes in market rates. The rate-sensitivity chart shows the interval of time in which given volumes of rate-sensitive, earning assets and rate-sensitive, interest bearing liabilities would be responsive to changes in market interest rates based on their contractual maturities or terms for repricing. It is, however, only a static, single-day depiction of the Corporation's rate sensitivity structure, which can be adjusted in response to changes in forecasted interest rates. The following table sets forth the static rate-sensitivity analysis of the Corporation as of September 30, 2003. Rate Sensitive Within ----------------------------------------------------------------------------------- 1-30 31-90 91-180 181 Days - Over Days Days Days 1 Year 1 Year Total ----------------------------------------------------------------------------------- (Dollars in thousands) Interest-bearing deposits $ 21 $ - $ - $ - $ - $ 21 Investment securities: U.S. Governments 12,002 11,038 20,100 38,280 91,395 172,815 Obligations of states and political subdivisions 2,338 2,849 2,123 1,414 42,975 51,699 Other securities 12,006 100 - 762 13,987 26,855 Loans (net of unearned int.) 476,511 58,369 76,424 121,989 411,553 1,144,846 ----------------------------------------------------------------------------------- Total rate-sensitive assets $ 502,878 $ 72,356 $ 98,647 $ 162,445 $ 559,910 $1,396,236 ----------------------------------------------------------------------------------- Interest bearing transaction Deposits $ 44,292 $ - $ - $ - $ - $ 44,292 Savings deposits 106,126 - - - - 106,126 Money market deposits 416,199 - - - - 416,199 Time deposits 44,785 53,043 80,825 108,192 196,601 483,446 Federal funds purchased 27,000 - - - - 27,000 Securities sold under agreements to repurchase 7,500 - - - - 7,500 Long-term debt - - 1,759 - 86,000 87,759 Company obligated mandatorily - - redeemable preferred securities - - - - 25,000 25,000 ----------------------------------------------------------------------------------- Total rate-sensitive liabilities $ 645,902 $ 53,043 $ 82,584 $ 108,192 $ 307,601 $1,197,322 ----------------------------------------------------------------------------------- Rate-sensitive assets less rate-sensitive liabilities $ (143,024) $ 19,313 $ 16,063 $ 54,253 $ 252,309 $ 198,914 ----------------------------------------------------------------------------------- Cumulative Gap $ (143,024) $ (123,711) $ (107,648) $ (53,395) $ 198,914 =================================================================================== Cumulative amounts as a percentage of total rate-sensitive assets -10.24% -8.86% -7.71% -3.82% 14.25% =================================================================================== Cumulative ratio 0.78 0.82 0.86 0.94 1.17 =================================================================================== The foregoing table shows a negative (liability sensitive) rate-sensitivity gap of $143 million in the 1-30 day as there were more liabilities subject to repricing in that time period than there were assets subject to repricing within that same time period. The volume of assets subject to repricing exceeds the volume of liabilities subject to repricing for all time periods beyond 30 days. On a cumulative basis, however, the gap remains liability-sensitive through one year. The composition of the gap structure at September 30, 2003, will benefit the Corporation more if interest rates decrease during the next year by allowing the net interest margin to grow as liability rates would reprice more quickly than rates on rate-sensitive assets. After 1 year, a rate increase would benefit the Corporation because the volume of rate-sensitive assets subject to repricing would exceed the volume of rate-sensitive liabilities subject to repricing. 22 of 29
FIRST BUSEY CORPORATION AND SUBSIDIARIES AVERAGE BALANCE SHEETS AND INTEREST RATES NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002 2003 2002 -------------------------------------- -------------------------------- Average Income/ Yield/ Average Income/ Yield/ Balance Expense Rate Balance Expense Rate -------------------------------------- -------------------------------- (Dollars in thousands) ASSETS Federal funds sold $ 14,194 $ 114 1.07% $ 13,779 $ 168 1.63% Investment securities U.S. Government obligations 166,149 4,050 3.26% 146,984 4,881 4.44% Obligations of states and political subdivisions (1) 51,934 2,374 6.11% 44,625 2,307 6.91% Other securities 26,455 657 3.32% 24,242 618 3.41% Loans (net of unearned interest) (1) (2) 1,104,637 49,349 5.97% 999,053 49,766 6.66% ------------------------- ----------------------- Total interest earning assets $ 1,363,369 $ 56,544 5.55% $1,228,683 $ 57,740 6.28% ======== ======== Cash and due from banks 37,373 33,845 Premises and equipment 25,666 28,495 Allowance for loan losses (16,069) (13,839) Other assets 43,719 39,425 ------------- ---------- Total Assets $ 1,454,058 $1,316,609 ============= ========== LIABILITIES AND STOCKHOLDERS' EQUITY Interest-bearing transaction deposits $ 17,956 $ 70 0.52% $ 13,893 $ 107 1.03% Savings deposits 105,308 578 0.73% 96,691 824 1.14% Money market deposits 440,993 2,616 0.79% 401,966 3,836 1.28% Time deposits 499,267 11,928 3.19% 459,957 13,785 4.01% Short-term borrowings: Federal funds purchased 3,349 36 1.44% 2,292 34 1.98% Repurchase agreements 7,495 91 1.62% 6,722 291 5.79% Other - - - 600 15 3.34% Long-term debt 78,448 2,604 4.44% 62,428 2,318 4.96% Company obligated mandatorily redeemable preferred securities 25,000 1,688 9.03% 25,000 1,688 9.03% ------------------------- ----------------------- Total interest-bearing liabilities $ 1,177,816 $ 19,611 2.23% $1,069,549 $ 22,898 2.86% ======== ======== Net interest spread 3.32% 3.42% ==== ==== Demand deposits 146,336 128,469 Other liabilities 9,362 9,909 Stockholders' equity 120,544 108,682 ------------- ---------- Total Liabilities and Stockholders' Equity $ 1,454,058 1,316,609 ============= ========== Interest income / earning assets (1) $ 1,363,369 $ 56,544 5.55% $1,228,683 $ 57,740 6.28% Interest expense / earning assets $ 1,363,369 $ 19,611 1.93% $1,228,683 $ 22,898 2.49% -------------------- ---------------- Net interest margin (1) $ 36,933 3.62% $ 34,842 3.79% ==================== ================ (1) On a tax-equivalent basis, assuming a federal income tax rate of 35% for 2003 and 2002. (2) Non-accrual loans have been included in average loans, net of unearned interest. 23 of 29
FIRST BUSEY CORPORATION AND SUBSIDIARIES CHANGES IN NET INTEREST INCOME NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002 Change due to(1) Average Average Total Volume Yield/Rate Change ----------------------------------------- (Dollars in thousands) Increase (decrease) in interest income: Federal funds sold $ 5 $ (59) $ (54) Investment securities: U.S. Government obligations 799 (1,630) (831) Obligations of states and political subdivisions (2) 228 (161) 67 Other securities 54 (15) 39 Loans (2) 4,985 (5,402) (417) ----------------------------------------- Change in interest income (2) $ 6,071 $ (7,267) $ (1,196) ----------------------------------------- Increase (decrease) in interest expense: Interest-bearing transaction deposits $ 53 $ (90) $ (37) Savings deposits 82 (328) (246) Money market deposits 344 (1,564) (1,220) Time deposits 1,352 (3,209) (1,857) Short-term borrowings: Federal funds purchased 5 (3) 2 Repurchase agreements 38 (238) (200) Other (15) - (15) Long-term debt 487 (201) 286 Company obligated mandatorily redeemable preferred securities - - - ----------------------------------------- Change in interest expense $ 2,346 $ (5,633) $ (3,287) ----------------------------------------- Increase in net interest income (2) $ 3,725 $ (1,634) $ 2,091 ========================================= (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 2003 and 2002. 24 of 29
FIRST BUSEY CORPORATION AND SUBSIDIARIES AVERAGE BALANCE SHEETS AND INTEREST RATES QUARTERS ENDED SEPTEMBER 30, 2003 AND 2002 2003 2002 ------------------------------------ -------------------------------------- Average Income/ Yield/ Average Income/ Yield/ Balance Expense Rate Balance Expense Rate ------------------------------------ -------------------------------------- (Dollars in thousands) ASSETS Federal funds sold $ 15,653 $ 37 0.94% $ 19,485 $ 82 1.67% Investment securities U.S. Government obligations 170,708 1,229 2.86% 153,933 1,587 4.09% Obligations of states and political subdivisions (1) 52,219 788 5.99% 47,970 804 6.65% Other securities 28,321 253 3.54% 24,016 192 3.17% Loans (net of unearned interest) (1) (2) 1,130,799 16,422 5.76% 1,022,300 17,019 6.60% ----------------------- ------------------------- Total interest earning assets $ 1,397,700 $ 18,729 5.32% $ 1,267,704 $ 19,684 6.16% ======== ======== Cash and due from banks 36,998 34,374 Premises and equipment 24,150 28,120 Allowance for loan losses (16,439) (13,888) Other assets 46,350 42,099 ----------- ------------ Total Assets $ 1,488,759 $ 1,358,409 =========== ============ LIABILITIES AND STOCKHOLDERS' EQUITY Interest-bearing transaction deposits $ 17,855 $ 19 0.42% $ 14,753 $ 42 1.13% Savings deposits 107,243 149 0.55% 95,753 274 1.14% Money market deposits 466,244 788 0.67% 402,576 1,214 1.20% Time deposits 488,651 3,636 2.95% 487,164 4,656 3.79% Short-term borrowings: Federal funds purchased 3,093 10 1.28% 478 3 2.49% Repurchase agreements 7,864 20 1.01% 4,739 72 6.03% Other - - - - - 0.00% Long-term debt 84,498 933 4.38% 76,097 913 4.76% Company obligated mandatorily redeemable preferred securities 25,000 563 8.93% 25,000 563 8.93% ----------------------- ------------------------- Total interest-bearing liabilities $ 1,200,448 $ 6,118 2.02% $ 1,106,560 $ 7,737 2.77% ======== ======== Net interest spread 3.30% 3.39% ==== ==== Demand deposits 156,258 130,288 Other liabilities 8,668 10,490 Stockholders' equity 123,385 111,071 ----------- ------------ Total Liabilities and Stockholders' Equity $ 1,488,759 $ 1,358,409 =========== ============ Interest income / earning assets (1) $ 1,397,700 $ 18,729 5.32% $ 1,267,704 $ 19,684 6.16% Interest expense / earning assets $ 1,397,700 $ 6,118 1.74% $ 1,267,704 $ 7,737 2.42% -------------------- -------------------- Net interest margin (1) $ 12,611 3.58% $ 11,947 3.74% ==================== ==================== (1) On a tax-equivalent basis, assuming a federal income tax rate of 35% for 2003 and 2002. (2) Non-accrual loans have been included in average loans, net of unearned interest. 25 of 29
FIRST BUSEY CORPORATION AND SUBSIDIARIES CHANGES IN NET INTEREST INCOME QUARTERS ENDED SEPTEMBER 30, 2003 AND 2002 Change due to(1) Average Average Total Volume Yield/Rate Change -------------------------------------- (Dollars in thousands) Increase (decrease) in interest income: Federal funds sold $ (14) $ (31) $ (45) Investment securities: U.S. Government obligations 202 (560) (358) Obligations of states and political subdivisions (2) 127 (143) (16) Other securities 37 24 61 Loans (2) 2,944 (3,541) (597) -------------------------------------- Change in interest income (2) $ 3,296 $ (4,251) $ (955) -------------------------------------- Increase (decrease) in interest expense: Interest-bearing transaction deposits $ 12 $ (35) $ (23) Savings deposits 38 (163) (125) Money market deposits 170 (596) (426) Time deposits 14 (1,034) (1,020) Short-term borrowings: Federal funds purchased 9 (2) 7 Repurchase agreements 30 (82) (52) Other - - - Long-term debt 72 (52) 20 Company obligated mandatorily redeemable preferred securities - - - -------------------------------------- Change in interest expense $ 345 $ (1,964) $ (1,619) -------------------------------------- Increase in net interest income (2) $ 2,951 $ (2,287) $ 664 ====================================== (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 2003 and 2002. 26 of 29
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT 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 subsidiary banks, Busey Bank and Busey Bank Florida have asset-liability committees which meet at least quarterly to review current market conditions and attempt to structure the banks' balance sheets 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 22. 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, + 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 September 30, 2003, is as follows: Basis Point Changes ------------------------------- -100 +100 +200 ------------------------------- Percentage change in net interest income due to an immediate change in interest over a one-year period (4.72%) 2.27% 5.01% These results do not differ materially from those reported as of December 31, 2002. ITEM 4: CONTROLS AND PROCEDURES Within the 90-day period prior to the filing of this report, an evaluation was carried out under the supervision and with the participation of the Corporation's management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Corporation's disclosure controls and procedures (as defined in Rule 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934). Based on their evaluation, the Corporation's Chief Executive Officer and Chief Financial Officer have concluded that the Corporation's disclosure controls and procedures are effective to ensure that information required to be disclosed by the Corporation in reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms. In addition, since their evaluation, there have been no significant changes to the Corporation's internal controls or in other factors that could significantly affect these controls, including any corrective actions with regard to significant deficiencies and material weaknesses. 27 of 29
PART II - OTHER INFORMATION ITEM 1: Legal Proceedings Not Applicable ITEM 2: Changes in Securities and Use of Proceeds Not Applicable ITEM 3: Defaults Upon Senior Securities Not Applicable ITEM 4: Submission of Matters to a Vote of Security Holders Not Applicable ITEM 5: Other Information Not Applicable ITEM 6: Exhibits and Reports on Form 8-K (a.) Exhibits 31.1 Certification of Principal Executive Officer 31.2 Certification of Principal Financial Officer 32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, from the Corporation's Chief Executive Officer. 32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, from the Corporation's Chief Financial Officer. (b.) Reports on Form 8-K On October 21, 2003, First Busey Corporation filed a report on Form 8-K (Item 12) dated October 20, 2003, releasing its financial results for the three months ending September 30, 2003. 28 of 29
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FIRST BUSEY CORPORATION (REGISTRANT) By: //Douglas C. Mills// -------------------------------- Douglas C. Mills Chairman of the Board and Chief Executive Officer By: //Barbara J. Harrington// --------------------------------- Barbara J. Harrington Chief Financial Officer (Principal financial and accounting officer) Date: November 14, 2003 29 of 29
EXHIBIT 31.1 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER I, Douglas C. Mills, Chairman of the Board and Chief Executive Officer of First Busey Corporation, certify that: 1) I have reviewed this quarterly report on Form 10-Q of First Busey Corporation; 2) Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3) Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4) The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5) The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6) The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. //Douglas C. Mills// ----------------------- Douglas C. Mills Chairman of the Board and Chief Executive Officer Date: November 14, 2003
EXHIBIT 31.2 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER I, Barbara J. Harrington, Chief Financial Officer of First Busey Corporation, certify that: 1) I have reviewed this quarterly report on Form 10-Q of First Busey Corporation; 2) Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3) Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4) The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: d) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; e) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and f) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5) The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): c) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and d) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6) The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. // Barbara J. Harrington// ---------------------------- Barbara J. Harrington Chief Financial Officer Date: November 14, 2003
EXHIBIT 32.1 The following certification is provided by the undersigned Chief Executive Officer of First Busey Corporation on the basis of such officer's knowledge and belief for the sole purpose of complying with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. CERTIFICATION I hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the accompanying Report of First Busey Corporation on Form 10-Q for the quarter ended September 30, 2003, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Report fairly presents, in all material respects, the financial condition and results of operations of First Busey Corporation as of and for the periods covered by the Report. //Douglas C. Mills// ------------------------ Douglas C. Mills Chairman of the Board and Chief Executive Officer Date: November 14, 2003 A signed original of this written statement required by Section 906 has been provided to First Busey Corporation and will be retained by First Busey Corporation and furnished to the Securities and Exchange Commission or its staff upon request.
EXHIBIT 32.2 The following certification is provided by the undersigned Chief Financial Officer of First Busey Corporation on the basis of such officer's knowledge and belief for the sole purpose of complying with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. CERTIFICATION I hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the accompanying Report of First Busey Corporation on Form 10-Q for the quarter ended September 30, 2003, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Report fairly presents, in all material respects, the financial condition and results of operations of First Busey Corporation as of and for the periods covered by the Report. //Barbara J. Harrington// ------------------------------ Barbara J. Harrington Chief Financial Officer Date: November 14, 2003 A signed original of this written statement required by Section 906 has been provided to First Busey Corporation and will be retained by First Busey Corporation and furnished to the Securities and Exchange Commission or its staff upon request.