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 3/31/2003 Commission File No. 0-15950
FIRST BUSEY CORPORATION
(Exact name of registrant as specified in its charter)
Nevada 37-1078406
(State or other jurisdiction (I.R.S. Employer
of Incorporation or Identification No.)
organization)
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 in 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 May 1, 2003
- ------------------------------- --------------------------
Common Stock, without par value 13,653,520
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
2
FIRST BUSEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, 2003 December 31, 2002
-------------- -----------------
ASSETS (Dollars in thousands)
Cash and due from banks $ 48,233 $ 47,645
Federal funds sold 18,500 --
Securities available for sale (amortized cost 2003, $218,170; 233,498 233,830
2002, $216,801)
Loans (net of unearned interest) 1,099,735 1,101,043
Allowance for loan losses (16,048) (15,460)
------------ ------------
Net loans 1,083,687 1,085,583
Premises and equipment 26,846 27,359
Cash surrender value of life insurance 11,269 11,109
Goodwill 7,380 7,380
Other intangible assets 2,361 2,464
Other assets 22,368 20,208
------------ ------------
Total assets $ 1,454,142 $ 1,435,578
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Non-interest bearing $ 154,386 $ 151,105
Interest bearing 1,058,526 1,062,500
------------ ------------
Total deposits 1,212,912 1,213,605
Securities sold under agreements to repurchase 9,005 2,467
Long-term borrowings 77,759 71,759
Company obligated mandatorily redeemable preferred securities 25,000 25,000
Other liabilities 10,142 7,584
------------ ------------
Total liabilities 1,334,818 1,320,415
------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock -- --
Common stock 6,291 6,291
Surplus 20,977 20,862
Retained earnings 94,176 91,639
Accumulated other comprehensive income 10,267 10,276
------------ ------------
Total stockholders' equity before treasury stock, unearned ESOP 131,711 129,068
shares and deferred compensation for restricted stock awards
Treasury stock, at cost (10,546) (12,050)
Unearned ESOP shares and deferred compensation for restricted stock
awards (1,841) (1,855)
------------ ------------
Total stockholders' equity 119,324 115,163
------------ ------------
Total liabilities and stockholders' equity $ 1,454,142 $ 1,435,578
============ ============
Common Shares outstanding at period end 13,640,020 13,568,220
============ ============
See accompanying notes to unaudited consolidated financial statements.
3
FIRST BUSEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(UNAUDITED)
2003 2002
------------ ------------
INTEREST INCOME: (Dollars in thousands, except
per share amounts)
Interest and fees on loans $ 16,485 $ 16,404
Interest and dividends on investment securities:
Taxable interest income 1,595 1,786
Non-taxable interest income 517 484
Dividends 38 31
Interest on federal funds sold 33 58
------------ ------------
Total interest income $ 18,668 $ 18,763
------------ ------------
INTEREST EXPENSE:
Deposits $ 5,424 $ 6,265
Short-term borrowings 45 139
Long-term borrowings 811 655
Company obligated mandatorily redeemable preferred securities 563 563
------------ ------------
Total interest expense $ 6,843 $ 7,622
------------ ------------
Net interest income $ 11,825 $ 11,141
Provision for loan losses 600 565
------------ ------------
Net interest income after provision for loan losses $ 11,225 $ 10,576
------------ ------------
OTHER INCOME:
Trust fees $ 1,107 $ 1,250
Commissions and brokers fees, net 465 541
Service charges on deposit accounts 1,693 1,556
Other service charges and fees 450 422
Security gains, net 183 274
Gain on sales of loans 2,235 797
Increase in cash surrender value of life insurance 160 177
Other operating income 182 447
------------ ------------
Total other income $ 6,475 $ 5,464
------------ ------------
OTHER EXPENSES:
Salaries and wages $ 4,689 $ 4,298
Employee benefits 962 931
Net occupancy expense of premises 815 775
Furniture and equipment expenses 682 729
Data processing 509 368
Stationery, supplies and printing 293 233
Amortization of intangible assets 103 112
Other operating expenses 2,329 1,549
------------ ------------
Total other expenses $ 10,382 $ 8,995
------------ ------------
Income before income taxes $ 7,318 $ 7,045
Income taxes 2,476 2,355
------------ ------------
NET INCOME $ 4,842 $ 4,690
============ ============
BASIC EARNINGS PER SHARE $ 0.36 $ 0.35
============ ============
DILUTED EARNINGS PER SHARE $ 0.35 $ 0.34
============ ============
DIVIDENDS DECLARED PER SHARE OF COMMON STOCK $ 0.17 $ 0.15
============ ============
See accompanying notes to unaudited consolidated financial statements.
4
FIRST BUSEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(UNAUDITED)
2003 2002
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES (Dollars in thousands)
Net income $ 4,842 $ 4,690
Adjustments to reconcile net income to net cash provided by
operating activities:
Stock-based compensation 14 29
Depreciation and amortization 1,010 982
Provision for loan losses 600 565
Provision for deferred income taxes (238) --
Stock Dividends (173) (68)
Amortization of investment security discounts (86) (82)
Gain on sales of investment securities, net (183) (274)
Gain on sale of pooled loans (2,235) (797)
Gain on sale and disposition of premises and equipment (2) (26)
Market valuation adjustment on OREO property 357
Change in assets and liabilities:
Increase in other assets (2,252) (2,097)
Increase in accrued expenses 719 3,176
Decrease in interest payable (201) (511)
Increase in income taxes payable 2,283 1,069
Decrease in taxes receivable -- 1,139
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES BEFORE
LOAN ORIGINATIONS AND SALES $ 4,455 $ 7,795
Loans originated for sale (107,157) (35,856)
Proceeds from sales of loans 120,781 43,189
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 18,079 $ 15,128
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of securities classified available for sale $ 7,627 $ 3,370
Proceeds from maturities of securities classified available for sale 66,882 22,622
Purchase of securities classified available for sale (73,749) (23,235)
(Increase) decrease in federal funds sold (18,500) 20,000
Increase in loans (10,358) (16,357)
Proceeds from sale of premises and equipment 138 97
Purchases of premises and equipment (530) (371)
Increase in investment in life insurance -- (343)
Increase in cash surrender value of bank owned life insurance (160) (169)
------------ ------------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES $ (28,650) $ 5,614
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in certificates of deposit $ (10,752) $ (11,194)
Net increase (decrease) in demand, money market and saving deposits 10,059 (20,814)
Cash dividends paid (2,305) (2,040)
Purchase of treasury stock (174) (1,240)
Proceeds from sale of treasury stock 1,793 642
Net increase (decrease) in securities sold under agreement to repurchase 6,538 (2,367)
Principal payments on short-term borrowings -- (1,000)
Proceeds from long-term borrowings 6,000 14,000
Principal payments on long-term borrowings -- (8,000)
------------ ------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES $ 11,159 $ (32,013)
------------ ------------
Net increase (decrease) in cash and due from banks $ 588 $ (11,271)
Cash and due from banks, beginning $ 47,645 $ 41,580
------------ ------------
Cash and due from banks, ending $ 48,233 $ 30,309
============ ============
See accompanying notes to unaudited consolidated financial statements.
5
FIRST BUSEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(UNAUDITED)
2003 2002
------------ ------------
(Dollars in thousands)
Net income $ 4,842 $ 4,690
Other comprehensive income, before tax:
Unrealized gains on securities:
Unrealized holding gains (losses) arising during period 169 (137)
Less reclassification adjustment for gains included in net income (183) (274)
------------ ------------
Other comprehensive loss before tax (14) (411)
Income tax benefit related to items of other comprehensive income (5) (163)
------------ ------------
Other comprehensive loss, net of tax $ (9) $ (248)
------------ ------------
Comprehensive income $ 4,833 $ 4,442
============ ============
See accompanying notes to unaudited consolidated financial statements.
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. First Busey 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.
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
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.
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.
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
6
estimates. The results for the interim periods are not necessarily indicative of
the results of operations that may be expected for the fiscal year.
NOTE 2: LOANS
The major classifications of loans at March 31, 2003 and December 31, 2002 were
as follows:
March 31, 2003 December 31, 2002
-------------- -----------------
(Dollars in thousands)
Commercial $ 122,133 $ 118,004
Real estate construction 138,468 129,872
Real estate - farmland 14,048 13,421
Real estate - 1-4 family residential mortgage 401,565 430,189
Real estate - multifamily mortgage 62,631 57,559
Real estate - non-farm nonresidential mortgage 285,245 274,153
Installment 56,985 55,811
Agricultural 18,660 22,034
------------ ------------
$ 1,099,735 $ 1,101,043
Less:
Allowance for loan losses (16,048) (15,460)
------------ ------------
Net loans $ 1,083,687 $ 1,085,583
============ ============
The real estate-mortgage category includes loans held for sale with carrying
values of $49,372,000 at March 31, 2003 and $60,761,000 at December 31, 2002;
these loans had fair market values of $50,280,000 and $61,685,000, respectively.
NOTE 3: INCOME PER SHARE
Net income per common share has been computed as follows:
Three Months Ended March 31,
2003 2002
------------ ------------
Net income $ 4,842,000 $ 4,690,000
Shares:
Weighted average common shares outstanding 13,550,573 13,581,040
Dilutive effect of outstanding options as determined by the
application of the treasury stock method 113,881 75,526
------------ ------------
Weighted average common shares outstanding, as
adjusted for diluted earnings per share calculation 13,664,454 13,656,566
============ ============
Basic earnings per share $ 0.36 $ 0.35
============ ============
Diluted earnings per share $ 0.35 $ 0.34
============ ============
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.
7
The following summarizes the pro-forma effects assuming compensation expense had
been recorded based upon the estimated fair value:
Three months ended March 31
2003 2002
------------ ------------
(dollars in thousands)
Net income as reported $ 4,842 $ 4,690
Less Compensation expense determined under fair value method for
all options granted, net of related tax effects 64 35
------------ ------------
Pro-forma net income $ 4,778 4,655
============ ============
BASIC EARNINGS PER SHARE
Reported net income $ 0.36 $ 0.35
Less compensation expense 0.01 0.01
------------ ------------
Pro-forma net income $ 0.35 $ 0.34
============ ============
DILUTED EARNINGS PER SHARE
Reported net income $ 0.35 $ 0.34
Less compensation expense -- --
------------ ------------
Pro-forma net income $ 0.35 $ 0.34
============ ============
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:
March 31, 2003 December 31, 2002
-------------- -----------------
(Dollars in thousands)
Financial instruments whose contract amounts represent
credit risk:
Commitments to extend credit $ 221,643 $ 222,407
Standby letters of credit 13,510 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
8
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 an d 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 March
31, 2003, and December 31, 2002, no amounts have been recorded as liabilities
for the Corporation's potential obligations under these guarantees.
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, 2003
(unaudited) when compared with December 31, 2002 and the results of operations
for the three months ended March 31, 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 three months ending March 31, 2002, to be consistent
with the classifications adopted as of and for the three months ending March 31,
2003.
FINANCIAL CONDITION AT MARCH 31, 2003 AS COMPARED TO DECEMBER 31, 2002
Total assets increased $18,564,000, or 1.3%, to $1,454,142,000 at March 31, 2003
from $1,435,578,000 at December 31, 2002. Securities available for sale
decreased $332,000 or 0.1%, to $233,498,000 at March 31, 2003 from $233,830,000
at December 31, 2002. Loans decreased $1,308,000 or 0.1% to $1,099,735,000 at
March 31, 2003 from $1,101,043,000 at December 31, 2002, primarily due to
decreases in the balances of 1-4 family residential mortgages and agricultural
loans offset by growth in commercial, real estate construction, multifamily
mortgages, and non-farm nonresidential mortgages.
Total deposits decreased $693,000, or 0.1%, to $1,212,912,000 at March 31, 2003
from $1,213,605,000 at December 31, 2002. Non interest-bearing deposits
increased $3,281,000 or 2.2% to $154,386,000 at March 31, 2003 from $151,105,000
at December 31, 2002. Interest-bearing deposits decreased $3,974,000 or 0.4% to
$1,058,526,000 at March 31, 2003 from $1,062,500,000 at December 31, 2002.
Long-term borrowings increased $6,000,000 or 8.4% to $77,759,000 at March 31,
2003, as compared to $71,759,000 at December 31, 2002.
In the first three months of 2003, the Corporation repurchased 7,500 shares of
its common stock at an aggregate cost of $173,400. The Corporation's board of
directors approved a stock repurchase plan on March 20, 2001, for the repurchase
of 500,000 shares of common stock. Through March 31, 2003, the Corporation has
repurchased 260,956 shares of common stock under this plan.
9
The following table sets forth the components of non-performing assets and past
due loans.
March 31, 2003 December 31, 2002
-------------- -----------------
(Dollars in thousands)
Non-accrual loans $ 990 $ 1,265
Loans 90 days past due, still accruing 4,499 963
Restructured loans -- --
Other real estate owned 5,482 5,724
Non-performing other assets 1 1
------------ ------------
Total non-performing assets $ 10,972 $ 7,953
============ ============
Total non-performing assets as a percentage of total assets 0.75% 0.55%
============ ============
Total non-performing assets as a percentage of loans plus non-performing assets 0.99% 0.72%
============ ============
Loans 90 days past due and still accruing were $4,499,000 or 0.41% of total
loans as of March 31, 2003, compared to $963,000 or 0.09% as of December 31,
2002. Of the March 31, 2003, balance $3,584,000 relates to a commercial borrower
which is expected to complete a plan of reorganization and refinance the debt
during the second quarter of 2003. All remaining loans in this category are in
the process of collection and management believes that sufficient collateral
exists to cover contractual interest and principal payments on these loans.
The balance of other real estate owned decreased to $5,482,000 as of March 31,
2003, compared to $5,724,000 on December 31, 2002. This decrease was primarily
attributable to the recording of a valuation adjustment in the amount of
$300,000 by Busey Bank in connection with the carrying value of a hotel property
in the McLean County market, which value was $4067,000 as of March 31, 2003.
Busey Bank became mortgagee in possession of this property on June 28, 2002, and
remains so pending completion of foreclosure proceedings which are expected to
be completed during the third quarter of 2003.
RESERVE FOR LOAN LOSSES
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 sytem 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 estimated 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 probable loan losses. Potential problem loans totaled
$1,680,000 as of March 31, 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.
10
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2003 AS COMPARED TO MARCH 31, 2002
SUMMARY
Net income for the three months ended March 31, 2003, increased $152,000 or 3.2%
to $4,842,000 as compared to $4,690,000 for the comparable period in 2002.
Diluted earnings per share increased $0.01 or 2.9% to $.35 for the quarter
ending March 31, 2003, as compared to $0.34 for the same period in 2002.
The Corporation's return on average assets was 1.38% for the three months ended
March 31, 2003, as compared to 1.48% achieved for the comparable period in 2002.
The Corporation's return on average stockholders' equity was 16.73% for the
three months ended March 31, 2003, as compared to 17.86% for the same period in
2002.
EARNING ASSETS, SOURCES OF FUNDS, AND NET INTEREST MARGIN
Average earning assets increased $130,558,000 or 10.9% to $1,332,042,000 for the
quarter ending March 31, 2003, as compared to $1,201,484,000 for the same period
last year. This is due primarily to growth in the average balance of loans
outstanding, U.S. Government obligations, and obligations of states and
political subdivisions.
The balance of interest-bearing liabilities averaged $1,157,815,000 for the
quarter ending March 31, 2003, an increase of $114,201,000 or 10.9% from the
average balance of $1,043,614,000 for the same period in 2002. Growth in
long-term debt and all categories of interest-bearing deposits was offset
partially by declines in the average balance of short-term borrowings.
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 3.70% for the three months ended March 31, 2003, as compared to 3.87% for
the same period in 2002. The net interest margin expressed as a percentage of
average total assets, also on a fully taxable equivalent basis, was 3.46% for
the three months ended March 31, 2003, compared to 3.61% for the same period in
2002.
Interest income, on a tax equivalent basis, for the three months ended March 31,
2003 was $18,992,000, which is $93,000 or 0.5% lower than for the same period in
2002. The average yield on total earning assets declined 66 basis points to
5.78% for the first quarter of 2003 as compared to 6.44% for the same period in
2002. Growth in the average balances of loans and investment securities was
offset by the decline in yield on all categories of interest-earning assets.
Interest expense for the three months ended March 31, 2003, was $6,843,000,
which is $779,000 or 10.2% lower than for the same period in 2002. The average
rate paid on total interest-bearing liabilities declined 56 basis points to
2.40% for the first quarter of 2003 as compared to 2.96% for the same period in
2002. Growth in the average balances of interest-bearing deposits and long-term
debt was offset by the decline in rates paid on all categories of deposits,
short-term borrowings, and long-term debt.
PROVISION FOR LOAN LOSSES
The provision of loan losses of $600,000 for the three months ended March 31,
2003, was $35,000 more than the provision expense of $565,000 for the comparable
period in 2002. The provision and the net charge-offs of $12,000 for the quarter
ending March 31, 2003, resulted in the reserve representing 1.45% of total loans
and 292% of non-performing loans at March 31, 2003, as compared to the reserve
representing 1.40% of outstanding loans and 694% of non-performing loans at
December 31, 2002. Net charge-offs for the first quarter of 2003 were $12,000
compared to $372,000 for the first quarter of 2002. The net chargeoff ratio (net
charge-offs as a percentage of average loans) was 0.01% for the three months
ending March 31, 2003, a decrease from 0.04% for the same period in 2002. The
adequacy of the reserve for loan losses is consistent with management's
consideration
11
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 transactions, increased $1,102,000 or
21.2% to $6,292,000 for the three months ended March 31, 2003, from $5,190,000
for the same period in 2002. Growth in service charges and gains on the sale of
loans offset declines in trust fees, commissions and brokers' fees, and other
operating income.
Gains of $2,235,000 were recognized on the sale of $118,546,000 of loans for the
three months ended March 31, 2003, as compared to gains of $797,000 on the sale
of $42,392,000 of loans in the prior year period. 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,
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 the
loans necessary to maintain the Corporation's 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.
During the three months ended March 31, 2003, the Corporation recognized
security gains of approximately $110,000, after income taxes, representing 2.3%
of net income. During the same period in 2001, security gains of approximately
$165,000 after income taxes were recognized, representing 3.5% 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 expense increased $1,387,000 or 15.4% to $10,382,000 for the three
months ended March 31, 2003 as compared to $8,995,000 for the same period in
2002.
Salaries and wages expense increased $391,000 or 9.1% to $4,689,000 for the
three months ended March 31, 2003, as compared to $4,298,000 during the same
period last year. Most of the growth in salary expense is related to commission
and other incentive compensation programs for associates involved in
originating, processing, and selling mortgage loans held for sale. The
Corporation had 493 and 476 full-time-equivalent employees as of March 31, 2003,
and 2002, respectively. Occupancy and furniture and equipment expenses decreased
$7,000 or 0.5% to $1,497,000 for the three months ended March 31, 2003, from
$1,504,000 in the prior year period.
Other operating expenses increased $780,000 or 50.4% to $2,329,000 for the three
months ending March 31, 2003, compared to $1,549,000 for the same period in
2002. Other operating expenses for the three months ending March 31, 2003,
include $70,000 in OREO expenses associated with operating the hotel property as
mortgagee in possession as well as $357,000 in market valuation adjustments to
reflect reductions in the estimated net realizable values of this property as
well as others held in other real estate owned.
The Corporation's net overhead expense, total non-interest expense less
non-interest income, net of security gains, divided by average assets, decreased
to 1.17% for the three months ended March 31, 2003 from 1.20% 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, 2003 was
55.7% as compared to 53.3% for the prior year period.
12
Income taxes for the three months ended March 31, 2003 increased to $2,476,000
as compared to $2,355,000 for the comparable period in 2002. As a percent of
income before taxes, the provision for income taxes increased slightly to 33.8%
for the quarter ending March 31, 2003, as compared to 33.4% for the same period
in 2002.
NEW ACCOUNTING PRONOUNCEMENTS
Effective January 1, 2002, First Busey Corporation applied FASB Statement No.
142, Goodwill and Other Intangible Assets. Among its provisions is a requirement
to disclose what reported net income would have been in all periods presented
exclusive of amortization expense, net of related income tax effects, recognized
in those periods related to goodwill, intangible assets no longer being
amortized, and changes in amortization periods for intangible assets that will
continue to be amortized together with related per share amounts.
Three Months Ended
March 31, 2003 March 31, 2002
-------------- --------------
(Dollars in thousands except per
share amounts)
Reported net income $ 4,842 $ 4,690
Add goodwill amortization 82 135
------------ ------------
Adjusted net income $ 4,924 $ 4,825
============ ============
BASIC EARNINGS PER SHARE
Reported net income $ 0.36 $ 0.35
Goodwill amortization -- --
------------ ------------
Adjusted new income $ 0.36 $ 0.35
============ ============
DILUTED EARNINGS PER SHARE
Reported net income $ 0.35 $ 0.34
Goodwill amortization 0.01 0.01
------------ ------------
Adjusted net income $ 0.36 $ 0.35
============ ============
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. First Busey Trust & Investment Co. provides trust and asset management
services to individual and corporate customers throughout central Illinois.
Busey Bank Florida provides a full range of banking services to individual and
corporate customers 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.
13
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.
March 31, 2003
-----------------------------------------------------------------------------------------------
First Busey
Busey Bank Trust & Consolidated
Busey Bank Florida Investment Co. All Other Totals Eliminations Totals
---------- ---------- -------------- ---------- ---------- ------------ ------------
Interest income $ 17,689 $ 924 $ 36 $ 597 $ 19,246 $ (578) $ 18,668
Interest expense 5,787 494 -- 1,141 7,422 $ (579) 6,843
Other income 5,043 104 986 6,400 12,533 $ (6,058) 6,475
Net income 5,089 (64) 275 5,191 10,491 $ (5,649) 4,842
Total assets 1,354,514 84,609 3,259 185,469 1,627,851 $ (173,709) 1,454,142
March 31, 2002
-----------------------------------------------------------------------------------------------
First Busey
Busey Bank Trust & Consolidated
Busey Bank Florida Investment Co. All Other Totals Eliminations Totals
---------- ---------- -------------- ---------- ---------- ------------ ------------
Interest income $ 18,033 $ 658 $ 40 $ 607 $ 19,338 $ (575) $ 18,763
Interest expense 6,711 322 -- 1,155 8,188 $ (566) 7,622
Other income 3,604 76 1,262 6,478 11,420 $ (5,956) 5,464
Net income 4,716 6 364 5,207 10,293 $ (5,603) 4,690
Total assets 1,211,335 53,751 3,500 177,640 1,446,226 $ (169,508) 1,276,718
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 March 31, 2003.
Long-term liquidity needs will be satisfied primarily through retention of
capital funds.
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 quarter of 2003 the
Corporation sold $118,546,000 and originated $107,157,000 in mortgage loans for
sale compared to originations of $35,856,000 and sales of $42,392,000 during the
first quarter of 2002. As of March 31, 2003, the Corporation held $49,372,000 in
loans held for sale. Management intends to sell these loans during the second
quarter of 2003.
14
The objective of liqudity 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 March 31, 2003, and
2002, the Corporation had outstanding loan commitments including lines of credit
of $221,643,000 and $194,397,000, 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 March
31, 2003:
Company
Obligated
Mandatorily
Short-and Redeemable
Certificates Long-term Preferred
Due Within of Deposit Borrowing Leases Securities Total
- ---------- ----------- ----------- ----------- ----------- -----------
(dollars in thousands)
1 year $ 298,188 $ 262 $ 759 $ -- $ 299,209
2 years 82,453 9,262 754 -- 92,469
3 years 51,402 14,262 706 -- 66,370
4 years 30,653 15,262 695 -- 46,610
5 years 41,160 34,237 598 -- 75,995
Thereafter 102 4,474 744 25,000 30,320
----------- ----------- ----------- ----------- -----------
Total $ 503,958 $ 77,759 $ 4,256 $ 25,000 $ 610,973
=========== =========== =========== =========== ===========
Commitments to extend credit $ 221,643
===========
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, 2003,
the Corporation earned $4,842,000 and paid dividends of $2,305,000 to
stockholders, resulting in a retention of current earnings of $2,537,000. The
Corporation's dividend payout for the three months ended March 31, 2003 was
47.6%.
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. 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 1 capital (as defined in the regulations) to risk-weighted
assets (as defined), and Tier 1 (as defined) to average assets (as defined).
Management believes, as of March 31, 2003, that the Corporation and the Banks
meet all capital adequacy requirements to which they are subject.
15
Following is a summary of First Busey Corporation's capital ratios as of March
31, 2003 and December 31, 2002:
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 March 31, 2003:
Total Capital (to Risk Weighted Assets)
Consolidated $142,600 13.45% $ 84,837 8.00% N/A N/A
Busey Bank $110,909 11.21% $ 79,141 8.00% $ 98,926 10.00%
Busey Bank Florida $111,838 21.52% $ 4,402 8.00% $ 5,503 10.00%
Tier I Capital (to Risk Weighted Assets)
Consolidated $124,133 11.71% $ 42,419 4.00% N/A N/A
Busey Bank $ 93,980 9.50% $ 39,571 4.00% $ 59,356 6.00%
Busey Bank Florida $ 11,216 20.38% $ 2,201 4.00% $ 3,302 6.00%
Tier I Capital (to Average Assets)
Consolidated $124,133 8.93% $ 56,371 4.00% N/A N/A
Busey Bank $ 93,980 7.19% $ 52,301 4.00% $ 65,376 5.00%
Busey Bank Florida $ 11,216 13.26% $ 3,385 4.00% $ 4,231 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%
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.
16
The following table sets forth the static rate-sensitivity analysis of the
Corporation as of March 31, 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 $ 33 $ -- $ -- $ -- $ -- $ 33
Federal funds sold 18,500 -- -- -- -- 18,500
Investment securities 5,011 16,210 20,292 26,506 88,078 156,097
U.S. Governments
Obligations of states and
political subdivisions 3,760 640 1,825 5,707 40,223 52,155
Other securities 11,490 -- -- 206 13,551 25,247
Loans (net of unearned int.) 487,630 79,132 71,179 106,981 354,813 1,099,735
---------- ---------- ---------- ---------- ---------- ----------
Total rate-sensitive assets $ 526,424 $ 95,982 $ 93,296 $ 139,400 $ 496,665 $1,351,767
---------- ---------- ---------- ---------- ---------- ----------
Interest bearing transaction
deposits $ 38,378 $ -- $ -- $ -- $ -- $ 38,378
Savings deposits 105,764 -- -- -- -- 105,764
Money market deposits 410,426 -- -- -- -- 410,426
Time deposits 50,830 69,871 84,256 98,355 200,646 503,958
Short-term borrowings:
Federal funds purchased & 9,005 -- -- -- -- 9,005
repurchase agreements
Other -- -- -- 1,759 -- 1,759
Long-term debt -- 1,500 -- -- 74,500 76,000
Company obligated mandatorily
redeemable preferred securities -- -- -- -- 25,000 25,000
---------- ---------- ---------- ---------- ---------- ----------
Total rate-sensitive liabilities $ 614,403 $ 71,371 $ 84,256 $ 100,114 $ 300,146 $1,170,290
Rate-sensitive assets less
rate-sensitive liabilities $ (87,979) $ 24,611 $ 9,040 $ 39,286 $ 196,519 $ 181,476
---------- ---------- ---------- ---------- ---------- ----------
Cumulative Gap $ (87,979) $ (63,368) $ (54,328) $ (15,042) $ 181,477
========== ========== ========== ========== ==========
Cumulative amounts as a
percentage of total
rate-sensitive assets -6.51% -4.69% -4.02% -1.11% 13.43%
========== ========== ========== ========== ==========
Cumulative ratio 0.86 0.91 0.93 0.98 1.16
========== ========== ========== ========== ==========
The foregoing table shows a negative (liability-sensitive) rate-sensitivity gap
of $88.0 million in the 1-30 days repricing period as there were more
liabilities subject to repricing during 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
March 31, 2003 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 the rates on rate-sensitive assets. After one
year, a rate increase would benefit the Corporation because the volume of
rate-sensitive assets repricing would exceed the volume of rate-sensitive
liabilities subject to repricing.
The funds management policies of Busey Bank and Busey Bank Florida require the
banks to maintain a cumulative rate-sensitivity ratio of .75 - 1.25 in the
90-day, 180-day, and 1-year time periods. As of March 31, 2003, the banks and
the Corporation, on a consolidated basis are within those guidelines.
17
FIRST BUSEY CORPORATION AND SUBSIDIARIES
AVERAGE BALANCE SHEETS AND INTEREST RATES
QUARTERS ENDED MARCH 31, 2003 AND 2002
2003 2002
-------------------------------------- ----------------------------------
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
----------- ----------- -------- ----------- ----------- -------
ASSETS (Dollars in thousands)
Federal funds sold $ 11,627 $ 33 1.15% $ 15,101 $ 58 1.56%
Investment securities
U.S. Government obligations 161,105 1,444 3.64% 135,483 1,618 4.84%
Obligations of states and political
subdivisions(1) 50,874 795 6.34% 42,144 745 7.17%
Other securities 25,056 189 3.06% 24,146 199 3.34%
Loans (net of unearned interest)(1)(2) 1,083,380 16,531 6.19% 984,610 16,465 6.78%
----------- ----------- ----------- -----------
Total interest earning assets $ 1,332,042 $ 18,992 5.78% $ 1,201,484 $ 19,085 6.44%
=========== ===========
Cash and due from banks 37,051 32,929
Premises and equipment 27,433 28,851
Reserve for loan losses (15,591) (13,687)
Other assets 42,095 37,159
----------- -----------
Total Assets $ 1,423,030 $ 1,286,736
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing transaction deposits $ 17,794 $ 25 0.57% $ 14,783 $ 38 1.04%
Savings deposits 101,745 212 0.85% 96,761 267 1.12%
Money market deposits 425,608 916 0.87% 405,618 1,333 1.33%
Time deposits 507,093 4,271 3.42% 440,960 4,627 4.26%
Short-term borrowings:
Federal funds purchased 1,639 6 1.48% 262 1 1.55%
Repurchase agreements 5,977 39 2.65% 8,920 125 5.68%
Other -- -- 0.00% 1,500 13 3.51%
Long-term debt 72,959 811 4.51% 49,810 655 5.33%
Company obligated mandiatorily
redeemable preferred securities 25,000 563 9.13% 25,000 563 9.13%
----------- ----------- ----------- -----------
Total interest-bearing liabilities $ 1,157,815 $ 6,843 2.40% $ 1,043,614 $ 7,622 2.96%
=========== ===========
Net interest spread 3.38% 3.48%
==== ====
Demand deposits 138,466 127,960
Other liabilities 9,349 8,637
Stockholders' equity 117,400 106,525
----------- -----------
Total Liabilities and Stockholders' Equity $ 1,423,030 $ 1,286,736
=========== ===========
Interest income / earning assets(1) $ 1,332,042 $ 18,992 5.78% $ 1,201,484 $ 19,085 6.44%
Interest expense / earning assets $ 1,332,042 6,843 2.08% $ 1,201,484 7,622 2.57%
----------- ---- ----------- ----
Net interest margin(1) $ 12,149 3.70% $ 11,463 3.87%
=========== ==== =========== ====
(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.
18
FIRST BUSEY CORPORATION AND SUBSIDIARIES
CHANGES IN NET INTEREST INCOME
QUARTERS ENDED MARCH 31, 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 $ (12) $ (13) $ (25)
Investment securities:
U.S. Government obligations 267 (441) (174)
Obligations of states and political
subdivisions(2) 145 (95) 50
Other securities 7 (17) (10)
Loans(2) 1,577 (1,511) 66
--------- --------- ---------
Change in interest income(2) $ 1,984 $ (2,077) $ (93)
--------- --------- ---------
Increase (decrease) in interest expense:
Interest-bearing transaction deposits $ 6 $ (19) $ (13)
Savings deposits 13 (68) (55)
Money market deposits 63 (480) (417)
Time deposits 635 (991) (356)
Short-term borrowings:
Federal funds purchased 5 -- 5
Repurchase agreements (33) (53) (86)
Other (6) (7) (13)
Long-term debt 269 (113) 156
Company obligated mandatorily redeemable preferred securities -- -- --
--------- --------- ---------
Change in interest expense $ 952 $ (1,731) $ (779)
--------- --------- ---------
Increase in net interest income(2) $ 1,032 $ (346) $ 686
========= ========= =========
(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.
19
ITEM 3: QUANTITAVE 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 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 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 -175 basis points,
- -100 basis points, +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, 2003, is as
follows:
Basis Point Changes
-175 -100 +100 +200
------ ------ ------ ------
Percentage change in net interest income due to an
immediate change in interest rates over a one-year period (4.30%) (2.12%) 3.42% 6.73%
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.
20
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 22, 2003. At that meeting, the following matter was approved by
the stockholders:
Election of the following fourteen (14) directors to serve until the
next annual meeting of stockholders:
Joseph M. Ambrose P. David Kuhl
Samuel P. Banks V.B. Leister, Jr.
T.O. Dawson Douglas C. Mills
Victor F. Feldman Linda M. Mills
Kenneth M. Hendren Edwin A. Scharlau II
E. Phillips Knox David C. Thies
Barbara J. Kuhl Arthur R. Wyatt
ITEM 5: Other Information
Not Applicable
ITEM 6: Exhibits and Reports on Form 8-K
(a) Exhibits
99.1 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.
99.2 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 April 16, 2003, First Busey Corporation filed a report on Form
8-K (Item 5) dated April 17, 2003 releasing its financial results
for the three months ending March 31, 2003.
21
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: //Douglas C. Mills//
---------------------------------------------
Douglas C. Mills
Chairman of the Board and Chief Executive
Officer
By: //Barbara J. Jones//
---------------------------------------------
Barbara J. Jones
Chief Financial Officer
(Principal financial and accounting officer)
Date: May 15, 2003
22
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: March 15, 2003
23
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
I, Barbara J. Jones, 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. Jones//
---------------------------------
Barbara J. Jones
Chief Financial Officer
Date: March 15, 2003
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