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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 3/31/2001 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 the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practicable date.
Class Outstanding at May 1, 2001
------------------------------------------------------------------------
Common Stock, without par value 13,522,062
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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FIRST BUSEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, 2001 December 31, 2000
-------------- -----------------
(Dollars in thousands)
ASSETS
Cash and due from banks $ 42,186 $ 58,585
Federal funds sold 50,000 34,700
Securities available for sale (amortized cost 2001, $208,971; 220,528 228,597
2000, $218,790)
Loans (net of unearned interest) 972,533 984,369
Allowance for loan losses (12,577) (12,268)
------------ ------------
Net loans $ 959,956 $ 972,101
Premises and equipment 30,537 31,253
Goodwill and other intangibles 11,897 12,255
Other assets 16,297 17,553
------------ ------------
Total assets $ 1,331,401 $ 1,355,044
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Non-interest bearing 117,230 134,669
Interest bearing 1,014,559 1,014,118
------------ ------------
Total deposits $ 1,131,789 $ 1,148,787
Securities sold under agreements to repurchase 17,624 18,890
Short-term borrowings 30,983 32,283
Long-term debt 42,994 52,976
Other liabilities 11,876 9,783
------------ ------------
Total liabilities $ 1,235,266 $ 1,262,719
------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock $ - $ -
Common stock 6,291 6,291
Surplus 21,861 22,044
Retained earnings 75,565 73,215
Accumulated other comprehensive income 6,973 5,917
------------ ------------
Total stockholders' equity before treasury stock, unearned ESOP $ 110,690 $ 107,467
shares and deferred compensation for stock grants
Treasury stock, at cost (12,267) (12,858)
Unearned ESOP shares and deferred compensation for stock grants (2,288) (2,284)
------------ ------------
Total stockholders' equity $ 96,135 $ 92,325
------------ ------------
Total liabilities and stockholders' equity $ 1,331,401 $ 1,355,044
============ ============
Common Shares outstanding at period end 13,535,432 13,451,180
============ ============
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FIRST BUSEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(UNAUDITED)
2001 2000
-------- --------
INTEREST INCOME: (Dollars in thousands, except per share amounts)
Interest and fees on loans $ 20,568 $ 18,239
Interest and dividends on investment securities:
Taxable interest income 2,724 2,772
Non-taxable interest income 518 504
Dividends 30 30
Interest on federal funds sold 509 199
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Total interest income $ 24,349 $ 21,744
-------- --------
INTEREST EXPENSE:
Deposits $ 12,027 $ 9,460
Short-term borrowings 833 1,223
Long-term debt 721 782
-------- --------
Total interest expense $ 13,581 $ 11,465
-------- --------
Net interest income $ 10,768 $ 10,279
Provision for loan losses 400 390
-------- --------
Net interest income after provision for loan losses $ 10,368 $ 9,889
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OTHER INCOME:
Trust $ 1,151 $ 1,095
Commissions and brokers fees, net 597 408
Service charges on deposit accounts 1,379 1,181
Other service charges and fees 397 630
Security gains (losses), net 651 (7)
Gain on sales of pooled loans 433 446
Net commissions from travel services 272 253
Other operating income 512 386
-------- --------
Total other income $ 5,392 $ 4,392
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OTHER EXPENSES:
Salaries and wages $ 4,264 $ 3,890
Employee benefits 968 727
Net occupancy expense of premises 802 725
Furniture and equipment expenses 971 817
Data processing 190 293
Stationery, supplies and printing 257 209
Amortization of intangible assets 358 383
Other operating expenses 1,518 1,671
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Total other expenses $ 9,328 $ 8,715
-------- --------
Income before income taxes $ 6,432 $ 5,566
Income taxes 2,334 1,959
-------- --------
Net income $ 4,098 $ 3,607
======== ========
BASIC EARNINGS PER SHARE $ 0.30 $ 0.27
======== ========
DILUTED EARNINGS PER SHARE $ 0.30 $ 0.26
======== ========
DIVIDENDS DECLARED PER SHARE OF COMMON STOCK $ 0.13 $ 0.12
======== ========
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FIRST BUSEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(UNAUDITED)
2001 2000
-------- --------
(Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 4,098 $ 3,607
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 1,385 1,276
Provision for loan losses 400 390
Increase in deferred income taxes 26 6
Amortization of investment security discounts (326) (110)
Loss (gain) on sales of investment securities, net (651) 7
Proceeds from sales of pooled loans 35,839 11,333
Loans originated for sale (44,440) (8,037)
Gain on sale of pooled loans (433) (446)
Gain on sale and disposition of premises and equipment - (168)
Change in assets and liabilities:
Decrease (increase) in other assets 996 (15)
Increase (decrease) in accrued expenses 129 (1,399)
Decrease in interest payable (102) (419)
Increase in income taxes payable 1,518 1,953
-------- --------
Net cash (used in) provided by operating activities ($ 1,561) $ 7,978
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of securities classified available for sale $ 1,507 $ 1,049
Proceeds from maturities of securities classified available for sale 34,218 17,595
Purchase of securities classified available for sale (24,841) (22,639)
Increase in federal funds sold (15,300) (4,800)
Decrease (increase) in loans 20,779 (15,506)
Proceeds from sale of premises and equipment - 407
Purchases of premises and equipment (310) (1,682)
-------- --------
Net cash provided by (used in) investing activities $ 16,053 ($25,576)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in certificates of deposit 719 ($29,202)
Net (decrease) increase in demand, money market and saving deposits (17,717) 10,647
Cash dividends paid (1,748) (1,619)
Purchase of treasury stock (2,082) (1,409)
Proceeds from sale of treasury stock 2,485 -
Net decrease in securities sold under agreement to repurchase (1,266) (561)
Proceeds from short-term notes payable 1,200 16,926
Principal payments on short-term borrowings (2,500) (14,283)
Proceeds from long-term borrowings - 10,000
Principal payments on long-term borrowings (9,982) (12,941)
-------- --------
Net cash provided by used in financing activities ($30,891) ($22,442)
-------- --------
Net increase (decrease) in cash and due from banks ($16,399) ($40,040)
Cash and due from banks, beginning $ 58,585 $ 69,722
-------- --------
Cash and due from banks, ending $ 42,186 $ 29,682
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FIRST BUSEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
2001 2000
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(Dollars in thousands, except per share amounts)
Net income $ 4,098 $ 3,607
Other comprehensive income, before tax:
Unrealized gains on securities:
Unrealized holding gains (losses) arising during period 2,401 ($1,566)
Less reclassification adjustment for (gains) losses included in net income (651) 7
------- -------
Other comprehensive income, before tax 1,750 (1,559)
Income tax expense related to items of other comprehensive income 694 620
------- -------
Other comprehensive income, net of tax $ 1,056 ($ 939)
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Comprehensive income $ 5,154 $ 2,668
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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.
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. First Busey 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.
These risks, uncertainties and other factors include the general state of the
economy, both on a local and national level, the ability of First Busey to
successfully complete acquisitions, the continued growth of geographic regions
served by the Corporation, and the retention of individuals who currently are
very important in the management structure of First Busey Corporation.
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 interim financial statements should be read in
conjunction with the Company's Annual Report and Form 10-K for the year ended
December 31, 2000. The results for the interim periods are not necessarily
indicative of the results of operations that may be expected for the fiscal
year.
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NOTE 2: LOANS
The major classifications of loans at March 31, 2001 and December 31, 2000 were
as follows:
March 31, 2001 December 31, 2000
--------------------------------------
(Dollars in thousands)
Commercial $117,031 $124,052
Real estate construction 81,117 75,672
Real estate - farmland 15,323 15,411
Real estate - 1-4 family residential mortgage 401,528 403,676
Real estate - multifamily mortgage 57,994 61,954
Real estate - non-farm nonresidential mortgage 232,184 231,230
Installment 48,987 50,767
Agricultural 17,654 20,844
----------------------------
$971,818 $983,606
Plus:
Deferred loan fees 715 763
----------------------------
$972,533 $984,369
Less:
Allowance for loan losses 12,577 12,268
----------------------------
Net loans $959,956 $972,101
============================
The real estate-mortgage category includes loans held for sale with carrying
values of $14,526,000 at March 31, 2001 and $5,492,000 at December 31, 2000;
these loans had fair market values of $14,652,000 and $5,568,000 respectively.
The following table sets forth the maturities of the loan portfolio:
Over 1 Year
1 Year Through Over
Or Less 5 Years 5 Years Total
---------------------------------------------------------------
Commercial and agricultural $ 55,916 $ 32,713 $ 46,056 $134,685
Real estate 150,441 279,236 358,469 788,146
Installment 8,876 37,306 2,805 48,987
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$215,233 $349,255 $407,330 $971,818
======== ======== ======== ========
Fixed rate $109,369 $242,219 $ 87,777 $439,365
Floating rate 105,864 107,036 319,553 532,453
-------- -------- -------- --------
$215,233 $349,255 $407,330 $971,818
======== ======== ======== ========
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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
March 31,
2001 2000
----------- -----------
Net income $ 4,098,000 $ 3,607,000
Shares:
Weighted average common shares outstanding 13,442,495 13,368,992
Dilutive effect of outstanding options, as determined
by the application of the treasury stock method 160,490 273,647
----------- -----------
Weighted average common shares outstanding,
as adjusted for diluted earnings per share calculation 13,602,985 13,642,639
=========== ===========
Basic earnings per share $ 0.30 $ 0.27
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Diluted earnings per share $ 0.30 $ 0.26
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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 March 31, 2001
(unaudited) when compared with December 31, 2000 and the results of operations
for the three months ended March 31, 2001 and 2000 (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 MARCH 31, 2001 AS COMPARED TO DECEMBER 31, 2000
Total assets decreased $23,643,000, or 1.7%, to $1,331,401,000 at March 31, 2001
from $1,355,044,000 at December 31, 2000.
Securities available for sale decreased $8,069,000 or 3.5%, to $220,528,000 at
March 31, 2001 from $228,597,000 at December 31, 2000.
Loans decreased $11,836,000 or 1.2%, to $972,533,000 at March 31, 2001 from
$984,369,000 at December 31, 2000, primarily due to decreases in commercial, 1-4
family residential mortgages, multifamily mortgages, installment, and
agricultural loans. These decreases were partially offset by increases in real
estate construction loans. Commercial loans experienced the largest decline in
balances. This decline was due primarily to balance reductions by five
borrowers.
Total deposits decreased $16,998,000, or 1.5%, to $1,131,789,000 at March 31,
2001 from $1,148,787,000 at December 31, 2000. Non interest-bearing deposits
decreased $17,439,000 or 12.9% to $117,230,000 at March 31, 2001 from
$134,669,000 at December 31, 2000. Interest-bearing deposits increased $441,000
or 0.04% to $1,014,559,000 at March 31, 2001 from $1,014,118,000 at December 31,
2000. Long-term borrowings decreased $9,982,000 or 23.2% to $42,994,000 at March
31, 2001, as compared to $52,976,000 at December 31, 2000.
In the first three months of 2001, the Corporation repurchased 110,998 shares of
its common stock at an aggregate cost of $2,082,000. 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.
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The following table sets forth the components of non-performing assets and past
due loans.
March 31, 2001 December 31,2000
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(Dollars in thousands)
Non-accrual loans $ 1,451 $ 767
Loans 90 days past due, still accruing 4,609 4,667
Restructured loans - -
Other real estate owned 185 230
Non-performing other assets 12 11
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Total non-performing assets $ 6,257 $ 5,675
============== ================
Total non-performing assets as a percentage of total assets 0.47% 0.42%
============== ================
Total non-performing assets as a percentage of loans plus non-performing assets 0.64% 0.57%
============== ================
The ratio of non-performing assets to loans plus non-performing assets increased
to 0.64% at March 31, 2001 from 0.57% at December 31, 2000. This was due to
increases in the balance of nonaccrual loans offset partially by a decrease in
loans 90 days past due, still accruing. The balance in non-accrual loans as of
March 31, 2001, includes $1,032,000 in loans secured by single-family mortgage
loans which were acquired when the Corporation acquired Busey Bank fsb in
October, 1999. These loans are well collateralized in various states of
collection including foreclosure. Management expects losses on these assets to
be minimal as the loans are well-collateralized and payment plans are being
established to make up for deficiencies. The March 31, 2001, balance in loans 90
days past due, still accruing, includes a loan in the amount of $2,134,000 to
one borrower which is secured by real estate. The borrower has entered into a
contract to sell the property and repayment is expected following the closing of
the sale. Management has also implemented more rigorous underwriting standards
and more aggressive collection procedures to prevent additional growth in
non-performing loans.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2001 AS COMPARED TO MARCH 31, 2000
SUMMARY
Net income for the three months ended March 31, 2001 increased 13.6% to
$4,098,000 as compared to $3,607,000 for the comparable period in 2000. Diluted
earnings per share increased 15.4% to $.30 at March 31, 2001 as compared to $.26
for the same period in 2000.
Operating earnings, which exclude security gains (losses) and the related tax
expense (benefit), were $3,705,000, or $.27 per share for the three months ended
March 31, 2001, as compared to $3,612,000, or $.26 per share for the same period
in 2000.
The Corporation's return on average assets was 1.25% for the three months ended
March 31, 2001, as compared to 1.18% achieved for the comparable period in 2000.
The return on average assets from operations declined to 1.13% for the three
months ended March 31, 2001, as compared to the 1.19% achieved in the comparable
period of 2000.
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 3.60% for the three months ended March 31, 2001, as compared to 3.74% for
the same period in 2000. The net interest margin expressed as a percentage of
average total assets, also on a fully taxable equivalent basis, was 3.38% for
the three months ended March 31, 2001, compared to 3.48% for the same period in
2000.
During the three months ended March 31, 2001, the Corporation recognized
security gains of approximately $393,000, after income taxes, representing 9.6%
of net income. During the same period in 2000, security losses of approximately
$5,000 after income taxes were recognized, representing 0.14% of net income. The
Corporation owns a position in a qualified equity security with substantial
appreciated value. First Busey's Board
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of Directors has authorized an orderly liquidation of this asset over a six-year
period.
INTEREST INCOME
Interest income, on a tax equivalent basis, for the three months ended March 31,
2001 increased 11.9% to $24,686,000 from $22,068,000 for the comparable period
in 2000. The increase in interest income resulted primarily from increases in
the average balances of Federal funds sold, other securities, and loans combined
with an increase in the average yield earned on loans. The average yield on
interest-earning assets increased 21 basis points for the three months ended
March 31, 2001, as compared to the same period in 2000, due primarily to the
increase in the yield on loan balances.
INTEREST EXPENSE
Total interest expense for the three months ended March 31, 2001, increased
18.5% to $13,581,000 from $11,465,000 for the comparable period. The increase
resulted primarily from increases in the average balances of interest-bearing
transaction accounts, money market deposits, and time deposits, combined with
higher rates on interest-bearing transaction deposits, money market deposits,
and time deposits for the three months ended March 31, 2001, as compared to the
same period in 2000.
PROVISION FOR LOAN LOSSES
The provision for loan losses of $400,000 for the three months ended March 31,
2001, was $10,000 more than the provision for the comparable period in 2000. The
provision and the low level of net charge-offs for the period resulted in the
reserve representing 1.29% of total loans on March 31, 2001, slightly higher
than the 1.25% level at December 31, 2000. Management considers the reserve for
loan losses to be adequate based on 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 transactions, increased 7.8% to
$4,741,000 from $4,399,000 for the three months ended March 31, 2001, as
compared to the same period in 2000. This was a combination of increased trust
revenue, commissions and brokers' fees, service charges on deposit accounts,
offset by a decrease in other service charges and fees. In April, 2000, the
Corporation sold its merchant transaction processing operation. Fee income on
this operation was included in other service charges and fees through the date
of sale and is responsible for most of the decrease in this line item for the
three months ended March 31, 2001, as compared to the same period in 2000.
Gains of $433,000 were recognized on the sale of $35,406,000 of loans for the
three months ended March 31, 2001, as compared to gains of $446,000 on the sale
of $10,887,000 of loans in the prior year period. The gains recognized in the
three months ending March 31, 2000 include a one-time gain of $350,000 on the
sale of the Corporation's credit card loan portfolio, which had balances of
$4,116,000. The increases in gains on the sale of loans and the principal
balances sold can be attributed to the interest-rate environment experienced
during the three months ended March 31, 2001 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 the loans are necessary to maintain the
asset/liability structure that the Corporation is trying to effect. The
Corporation may realize gains and/or losses on these sales dependent upon
interest rate movements and upon how receptive the debt markets are to mortgage
backed securities.
Total other expense increased 7.0% or $613,000 to $9,328,000 for the three
months ended March 31, 2001 as compared to $8,715,000 for the same period in
2000.
Salaries and wages expense increased $374,000 or 9.6% and employee benefits
expense increased $241,000 or 33.1% for the three months ended March 31, 2001,
as compared to the same period last year. The Corporation had 499 and 495
full-time-equivalent employees as of March 31, 2001, and 2000, respectively.
Occupancy and
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furniture and equipment expenses increased 15.0% to $1,773,000 for
the three months ended March 31, 2001 from $1,542,000 in the prior year period.
In October, 2000, Busey Bank fsb opened a full-service branch office in Fort
Myers, Florida. The majority of the increases in occupancy and furniture and
equipment expense can be attributed to the opening of this branch office. Data
processing expense decreased $103,000 to $190,000 for the three months ended
March 31, 2001 from the prior year period. Other operating expenses decreased
$153,000 or 9.2% for the three months ended March 31, 2001 from the prior year
period.
The Corporation's net overhead expense, total non-interest expense less
non-interest income divided by average assets, increased to 1.64% for the three
months ended March 31, 2001 from 1.42% in the prior year.
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 and amortization expense). The
consolidated efficiency ratio for the three months ended March 31, 2001 was
56.6% as compared to 55.5% for the prior year period.
Income taxes for the three months ended March 31, 2001 increased to $2,334,000
as compared to $1,959,000 for the comparable period in 2000. The increase is due
primarily to the higher level of pre-tax income. As a percent of income before
taxes, the provision for income taxes increased to 36.3% for the three months
ended March 31, 2001 from 35.2% for the same period in 2000.
REPORTABLE SEGMENTS AND RELATED INFORMATION
First Busey Corporation has three reportable segments, Busey Bank, Busey Bank
fsb, 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 and Ford Counties in Illinois, through its branch in
Indianapolis, Indiana, and through its loan production office in Fort Myers,
Florida. First Busey Trust & Investment Co. provides trust and asset management
services to individual and corporate customers throughout central Illinois.
Busey Bank fsb provides a full range of banking services to individual and
corporate customers in Bloomington, Illinois, and the surrounding communities,
and in Fort Myers, Florida.
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. The Corporation accounts for intersegment revenue and
transfers at current market value.
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March 31, 2001
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First Busey
Busey Bank Trust & Consolidated
Busey Bank fsb Investment Co. All Other Totals Eliminations Totals
----------------------------------------------------------------------------------------------------------
Interest income $ 18,570 $ 5,707 $ 45 $ 33 $ 24,355 $ (6) $ 24,349
Interest expense 9,575 3,435 - 551 13,561 20 13,581
Other income 3,133 536 1,164 5,798 10,631 (5,239) 5,392
Net income 3,638 497 349 4,275 8,759 (4,661) 4,098
Total assets 1,025,551 303,083 3,697 135,907 1,468,238 (136,837) 1,331,401
March 31, 2000
----------------------------------------------------------------------------------------------------------
First Busey
Busey Bank Trust & Consolidated
Busey Bank fsb Investment Co. All Other Totals Eliminations Totals
----------------------------------------------------------------------------------------------------------
Interest income $ 18,626 $ 3,046 $ 41 $ 33 $ 21,746 $ (2) $ 21,744
Interest expense 9,150 1,638 - 627 11,415 50 11,465
Other income 2,489 171 1,101 5,237 8,998 (4,606) 4,392
Net income 3,501 265 361 3,764 7,891 (4,284) 3,607
Total assets 1,041,904 173,455 3,399 128,302 1,347,060 (119,573) 1,227,487
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. 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 does not deal in or use brokered deposits as a source of
liquidity. The Corporation has an operating line with American National Bank and
Trust Company of Chicago in the amount of $10,000,000 with $3,700,000 available
as of March 31, 2001. Long-term liquidity needs will be satisfied primarily
through retention of capital funds.
The Corporation's reliance on large liabilities (defined as time deposits over
$100,000 and short-term borrowings) decreased to 16.5% at March 31, 2001 from
17.3% at December 31, 2000. This is the ratio of total large liabilities to
total liabilities. This change was due to a $11,809,000 decrease in time
deposits over $100,000 partially and a $2,566,000 decrease in short-term debt.
CAPITAL RESOURCES
Other than from the issuance of common stock, the Corporation's primary source
of capital is retained net income. During the three months ended March 31, 2001,
the Corporation earned $4,098,000 and paid dividends of $1,748,000 to
stockholders, resulting in a retention of current earnings of $2,350,000. The
Corporation's dividend payout for the three months ended March 31, 2001 was
42.7%. The Corporation's total risk-based capital ratio was 10.37% and the
leverage ratio was 5.89% as of March 31 2001, as compared to 9.43% and 5.71%
respectively as of December 31, 2000. The Corporation and its bank subsidiary
were well above all minimum required capital ratios as of March 31, 2001.
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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 March 31, 2001.
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 $ 3,459 $ - $ - $ - $ - $ 3,459
Federal funds sold 50,000 - - - - 50,000
Investment securities
U.S. Governments 18,096 19,981 17,051 35,763 62,301 153,192
Obligations of states and
political subdivisions 225 57 101 5,547 38,158 44,088
Other securities 8,814 1,505 - 50 12,879 23,248
Loans (net of unearned int.) 327,670 106,740 85,054 106,983 346,086 972,533
-----------------------------------------------------------------------------------
Total rate-sensitive assets $408,264 $128,283 $102,206 $148,343 $459,424 $1,246,520
-----------------------------------------------------------------------------------
Interest bearing transaction
deposits $51,287 $ - $ - $ - $ - $51,287
Savings deposits 90,424 - - - - 90,424
Money market deposits 325,701 - - - - 325,701
Time deposits 50,813 95,360 145,323 145,897 109,754 547,147
Short-term borrowings:
Federal funds purchased &
repurchase agreements 6,110 2,207 2,382 2,460 4,465 17,624
Other - - - 30,983 - 30,983
Long-term debt 4,994 12,000 - 11,000 15,000 42,994
-----------------------------------------------------------------------------------
Total rate-sensitive
liabilities $529,329 $109,567 $147,705 $190,340 $129,219 $1,106,160
-----------------------------------------------------------------------------------
Rate-sensitive assets less
rate-sensitive liabilities ($ 121,065) $ 18,716 ($ 45,499) ($ 41,997) $330,215 $140,360
-----------------------------------------------------------------------------------
Cumulative Gap ($ 121,065) ($102,349) ($ 147,848) ($ 189,845) $140,360
===================================================================================
Cumulative amounts as a
percentage of total
rate-sensitive assets -9.71% -8.21% -11.86% -15.23% 11.26%
===================================================================================
Cumulative ratio 0.77 0.84 0.81 0.81 1.13
===================================================================================
The foregoing table shows a negative (liability sensitive) rate-sensitivity gap
of $121.1 million in the 1-30 day repricing category. On a cummulative basis,
the gap remains liability sensitive as rate-sensitive assets that reprice in
those time periods are 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 March 31, 2001 will benefit the Corporation more if
interest rates fall during the next year by allowing the net interest margin to
grow as liability rates would reprice more quickly than rates on interest
rate-sensitive assets. After 1 year, 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.
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FIRST BUSEY CORPORATION AND SUBSIDIARIES
AVERAGE BALANCE SHEETS AND INTEREST RATES
QUARTERS ENDED MARCH 31, 2001 AND 2000
2001 2000
-------------------------------------- ------------------------------------
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
-------------------------------------- ------------------------------------
ASSETS (Dollars in thousands)
Federal funds sold $ 37,173 $ 509 5.55% $ 14,509 $ 199 5.52%
Investment securities
U.S. Government obligations 162,189 2,338 5.85% 177,376 2,559 5.80%
Obligations of states and political
subdivisions (1) 43,451 797 7.44% 40,517 775 7.69%
Other securities 35,674 416 4.73% 21,360 242 4.56%
Loans (net of unearned interest) (1) (2) 972,634 20,626 8.60% 885,669 18,293 8.31%
------------------------ ----------------------
Total interest earning assets $ 1,251,121 $ 24,686 8.00% $1,139,431 $ 22,068 7.79%
=========== ============
Cash and due from banks 33,011 33,650
Premises and equipment 30,999 29,147
Reserve for possible loan losses (12,395) (10,510)
Other assets 28,182 33,197
------------- -------------
Total Assets $ 1,330,918 $ 1,224,915
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing transaction deposits $ 38,244 274 2.91% $ 24,490 $ 137 2.25%
Savings deposits 87,946 648 2.99% 97,502 732 3.02%
Money market deposits 335,444 2,829 3.42% 325,832 2,591 3.20%
Time deposits 553,332 8,276 6.07% 460,732 6,000 5.24%
Short-term borrowings:
Federal funds purchased
and 18,211 260 5.79% 25,021 356 5.72%
repurchase agreements
Other 31,583 573 7.36% 47,849 867 7.29%
Long-term debt 50,538 721 5.79% 53,744 782 5.85%
------------------------- ----------------------
Total interest-bearing liabilities $ 1,115,298 $ 13,581 4.94% $1,035,170 $ 11,465 4.45%
============ ===========
Net interest spread 3.06% 3.34%
========== ============
Demand deposits 111,374 99,901
Other liabilities 10,138 8,565
Stockholders' equity 94,108 81,279
------------- -------------
Total Liabilities and Stockholders' Equity $ 1,330,918 $ 1,224,915
============= =============
Interest income / earning assets (1) $ 1,251,121 $ 24,686 8.00% $1,139,431 $ 22,068 7.79%
Interest expense / earning assets $ 1,251,121 13,581 4.40% $1,139,431 $ 11,465 4.05%
---------------------- -------------------------
Net interest margin (1) $ 11,105 3.60% $ 10,603 3.74%
====================== =========================
(1) On a tax-equivalent basis, assuming a federal income tax rate of 35% for
2001 and 2000. (2) Non-accrual loans have been included in average loans,
net of unearned interest.
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FIRST BUSEY CORPORATION AND SUBSIDIARIES
CHANGES IN NET INTEREST INCOME
QUARTERS ENDED MARCH 31, 2001 AND 2000
Change due to (1)
Average Average Total
Volume Yield/Rate Change
----------------------------------------
(Dollars in thousands)
Increase (decrease) in interest income:
Federal funds sold $ 309 $ 1 $ 310
Investment securities:
U.S. Government obligations (235) 14 (221)
Obligations of states and political
subdivisions (2) 49 (27) 22
Other securities 164 10 174
Loans (2) 1,712 621 2,333
-------------------------------------
Change in interest income (2) $ 1,999 $ 619 $ 2,618
-------------------------------------
Increase (decrease) in interest expense:
Interest-bearing transaction deposits $ 91 $ 46 $ 137
Savings deposits (76) (8) (84)
Money market deposits 71 167 238
Time deposits 1,271 1,005 2,276
Short-term borrowings:
Federal funds purchased and repurchase
agreements (100) 4 (96)
Other (302) 8 (294)
Long-term debt (51) (10) (61)
-------------------------------------
Change in interest expense $ 904 $ 1,212 $ 2,116
-------------------------------------
Increase in net interest income (2) $ 1,095 ($ 593) $ 502
=====================================
(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
2001 and 2000.
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ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
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 fsb 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 committees use 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
committees 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 in the Rate Sensitive Assets and
Liabilities section of this report.
The committees do 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 committees supplement 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 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
points 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 March 31, 2001, is as follows:
Basis Point Changes
-200 -100 +100 +200
----------------------------------------------
Percentage change in net interest income due to an
immediate change in interest rates over a one-year period (4.91%) (2.39%) (0.66%) (2.79%)
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PART II - OTHER INFORMATION
ITEM 1: Legal Proceedings
None
ITEM 2: Changes in Securities
Not applicable
ITEM 3: Defaults Upon Senior Securities
Not applicable
ITEM 4:
The annual meeting of stockholders of First Busey Corporation was held on
April 16, 2001. At that meeting, the following matters were approved by the
stockholders:
1. Election of the following fourteen (14) directors to serve until the
next annual meeting of stockholders:
Joseph M. Ambrose Samuel P. Banks
T. O. Dawson Victor F. Feldman
Kenneth M. Hendren E. Phillips Knox
Barbara J. Kuhl V. B. Leister, Jr.
P. David Kuhl Linda M. Mills
Douglas C. Mills David C. Thies
Edwin A. Scharlau II Arthur R. Wyatt
2. Ratification of the appointment of McGladrey & Pullen, LLP as
independent auditors for the fiscal year ending December 31, 2001.
For: 10,583,692 (78.02%) Against: 3,523 (0.03%)
Abstain: 20,272 (0.15%)
ITEM 5: Other Information
Not Applicable
ITEM 6: Exhibits and Reports on Form 8-K
(a.) EXHIBIT 21.1
See Exhibit Index
(b.) REPORTS ON FORM 8-K
On April 17, 2001, the Corporation filed a report on Form
8-K dated April 16, 2001, relating to Vision 2010, First
Busey Corporation's strategic plan, which was presented at
the Corporation's annual shareholder meeting held April 16,
2001.
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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: /s/ Barbara J. Jones
--------------------------------------------
Barbara J. Jones
Chief Financial Officer
(Principal financial and accounting officer)
Date: May 15, 2001
18