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 3/31/2002 Commission File No. 0-15950
FIRST BUSEY CORPORATION
(Exact name of registrant as specified in its charter)
Nevada 37-1078406
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
201 West Main Street
Urbana, Illinois 61801
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(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, 2002
------------------------------------------------------------
Common Stock, without par value 13,652,588
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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, 2002 December 31, 2001
-------------- -----------------
(Dollars in thousands)
<s> <c> <c>
ASSETS
Cash and due from banks $ 30,309 $ 41,580
Federal funds sold - 20,000
Securities available for sale (amortized cost 2002, $195,064;
2001, $197,398) 208,125 210,869
Loans (net of unearned interest) 985,959 978,106
Allowance for loan losses (13,881) (13,688)
------------ ------------
Net loans 972,078 964,418
Premises and equipment 28,511 29,081
Cash surrender value of life insurance 10,678 -
Goodwill 9,293 9,293
Other intangible assets 2,274 2,124
Other assets 15,450 23,324
------------ ------------
Total assets $ 1,276,718 $ 1,300,689
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Non-interest bearing $ 127,621 $ 138,685
Interest bearing 946,370 967,314
------------ ------------
Total deposits 1,073,991 1,105,999
Securities sold under agreements to repurchase 7,400 9,767
Short-term borrowings 1,000 2,000
Long-term borrowings 53,021 47,021
Company obligated mandatorily redeemable preferred securities 25,000 25,000
Other liabilities 8,683 5,112
------------ ------------
Total liabilities 1,169,095 1,194,899
------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock - -
Common stock 6,291 6,291
Surplus 20,947 21,170
Retained earnings 84,511 81,861
Accumulated other comprehensive income 7,880 8,128
------------ ------------
Total stockholders' equity before treasury stock, unearned ESOP
shares and deferred compensation for restricted stock awards 119,629 117,450
Treasury stock, at cost (9,811) (9,639)
Unearned ESOP shares and deferred compensation for restricted stock
awards (2,195) (2,021)
------------ ------------
Total stockholders' equity 107,623 105,790
------------ ------------
Total liabilities and stockholders' equity $ 1,276,718 $ 1,300,689
============ ============
Common Shares outstanding at period end 13,669,388 13,677,688
============ ============
<FN>
See accompanying notes to unaudited consolidated financial statements.
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FIRST BUSEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001
(UNAUDITED)
2002 2001
------- -------
(Dollars in thousands,
except per share amounts)
<s> <c> <c>
INTEREST INCOME:
Interest and fees on loans $16,404 $20,568
Interest and dividends on investment securities:
Taxable interest income 1,786 2,724
Non-taxable interest income 484 518
Dividends 31 30
Interest on federal funds sold 58 509
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Total interest income $18,763 $24,349
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INTEREST EXPENSE:
Deposits $ 6,265 $12,027
Short-term borrowings 139 833
Long-term borrowings 655 721
Company obligated mandatorily redeemable preferred securities 563 -
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Total interest expense $ 7,622 $13,581
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Net interest income $11,141 $10,768
Provision for loan losses 565 400
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Net interest income after provision for loan losses $10,576 $10,368
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OTHER INCOME:
Trust fees $ 1,250 $ 1,151
Commissions and brokers fees, net 541 597
Service charges on deposit accounts 1,556 1,379
Other service charges and fees 422 397
Security gains, net 274 651
Gain on sales of pooled loans 797 433
Net commissions from travel services - 272
Increase in cash surrender value of life insurance 177 -
Other operating income 447 512
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Total other income $ 5,464 $ 5,392
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OTHER EXPENSES:
Salaries and wages $ 4,298 $ 4,264
Employee benefits 931 968
Net occupancy expense of premises 775 802
Furniture and equipment expenses 832 971
Data processing 195 190
Stationery, supplies and printing 233 257
Amortization of intangible assets 112 358
Other operating expenses 1,619 1,518
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Total other expenses $ 8,995 $ 9,328
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Income before income taxes $ 7,045 $ 6,432
Income taxes 2,355 2,334
------- -------
Net income $ 4,690 $ 4,098
======= =======
BASIC EARNINGS PER SHARE $ 0.35 $ 0.30
======= =======
DILUTED EARNINGS PER SHARE $ 0.34 $ 0.30
======= =======
DIVIDENDS DECLARED PER SHARE OF COMMON STOCK $ 0.15 $ 0.13
======= =======
<FN>
See accompanying notes to unaudited consolidated financial statements.
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FIRST BUSEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001
(UNAUDITED)
2002 2001
------------ ------------
(Dollars in thousands)
<s> <c> <c>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 4,690 $ 4,098
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation 29 1
Depreciation and amortization 982 1,384
Provision for loan losses 565 400
Increase in deferred income taxes 26
Amortization of investment security discounts (82) (326)
Gain on sales of investment securities, net (274) (651)
Proceeds from sales of pooled loans 43,189 35,839
Loans originated for sale (35,856) (44,440)
Gain on sale of pooled loans (797) (433)
Gain on sale and disposition of premises and equipment (26) -
Change in assets and liabilities:
(Increase) decrease in other assets (2,609) 996
Increase in accrued expenses 3,176 129
Decrease in interest payable (511) (102)
Increase in income taxes payable 1,069 1,518
Decrease in taxes receivable 1,139 -
------------ ------------
Net cash provided by (used in) operating activities $ 14,684 $ (1,561)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of securities classified available for sale $ 3,370 $ 1,507
Proceeds from maturities of securities classified available for sale 22,622 34,218
Purchase of securities classified available for sale (23,303) (24,841)
Decrease (increase) in federal funds sold 20,000 (15,300)
(Increase) decrease in loans (16,357) 20,779
Proceeds from sale of premises and equipment 97 -
Purchases of premises and equipment (371) (310)
------------ ------------
Net cash provided by investing activities $ 6,058 $ 16,053
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net (decrease) increase in certificates of deposit (11,194) 719
Net decrease in demand, money market and saving deposits (20,814) (17,717)
Cash dividends paid (2,040) (1,748)
Purchase of treasury stock (1,240) (2,082)
Proceeds from sale of treasury stock 642 2,485
Net decrease in securities sold under agreement to repurchase (2,367) (1,266)
Proceeds from short-term borrowings - 1,200
Principal payments on short-term borrowings (1,000) (2,500)
Proceeds from long-term borrowings 14,000 -
Principal payments on long-term borrowings (8,000) (9,982)
------------ ------------
Net cash used in financing activities $ (32,013) $ (30,891)
------------ ------------
Net decrease in cash and due from banks $ (11,271) $ (16,399)
Cash and due from banks, beginning $ 41,580 $ 58,585
------------ ------------
Cash and due from banks, ending $ 30,309 $ 42,186
============ ============
<FN>
See accompanying notes to unaudited consolidated financial statements.
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FIRST BUSEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001
(UNAUDITED)
2002 2001
------- -------
(Dollars in thousands,
except per share amounts)
<s> <c> <c>
Net income $4,690 $4,098
Other comprehensive income, before tax:
Unrealized gains on securities:
Unrealized holding gains (losses) arising during period (137) 2,401
Less reclassification adjustment for gains included in net income (274) (651)
------- -------
Other comprehensive (loss) income, before tax (411) 1,750
Income tax (benefit) expense related to items of other comprehensive income (163) 694
------- -------
Other comprehensive (loss) income, net of tax $ (248) $1,056
------- -------
Comprehensive income $4,442 $5,154
======= =======
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 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 Corporation's Annual Report and Form 10-K for the year
ended December 31, 2001. 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, 2002 and December 31, 2001 were
as follows:
March 31, 2002 December 31, 2001
------------------------------------
(Dollars in thousands)
<s> <c> <c>
Commercial $123,647 $121,694
Real estate construction 88,825 83,701
Real estate - farmland 14,237 14,414
Real estate - 1-4 family residential mortgage 372,527 371,154
Real estate - multifamily mortgage 56,169 54,265
Real estate - non-farm nonresidential mortgage 257,235 253,932
Installment 55,369 57,924
Agricultural 17,950 21,022
------------------------------------
$985,959 $978,106
Less:
Allowance for loan losses (13,881) (13,688)
------------------------------------
Net loans $972,078 $964,418
====================================
The real estate-mortgage category includes loans held for sale with carrying
values of $15,348,000 at March 31, 2002 and $21,884,000 at December 31, 2001;
these loans had fair market values of $15,441,000 and $22,069,000 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
--------------------------------------------
<s> <c> <c> <c> <c>
Commercial and agricultural $ 90,138 $ 33,097 $ 18,362 $141,597
Real estate 141,309 327,831 319,853 788,993
Installment 11,833 40,200 3,336 55,369
-------- -------- -------- --------
$243,280 $401,128 $341,551 $985,959
======== ======== ======== ========
Fixed rate $ 90,137 $258,780 $ 91,832 $440,749
Floating rate 153,143 142,348 249,719 545,210
-------- -------- -------- --------
$243,280 $401,128 $341,551 $985,959
======== ======== ======== ========
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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,
2002 2001
----------- -----------
<s> <c> <c>
Net income $ 4,690,000 $ 4,098,000
Shares:
Weighted average common shares outstanding 13,581,040 13,442,495
Dilutive effect of outstanding options, as determined
by the application of the treasury stock method 75,526 160,490
----------- -----------
Weighted average common shares outstanding,
as adjusted for diluted earnings per share calculation 13,656,566 13,602,985
=========== ===========
Basic earnings per share $ 0.35 $ 0.30
=========== ===========
Diluted earnings per share $ 0.34 $ 0.30
=========== ===========
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, 2002
(unaudited) when compared with December 31, 2001 and the results of operations
for the three months ended March 31, 2002 and 2001 (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, 2002 AS COMPARED TO DECEMBER 31, 2001
Total assets decreased $23,971,000, or 1.8%, to $1,276,718,000 at March 31, 2002
from $1,300,689,000 at December 31, 2001. Securities available for sale
decreased $2,744,000 or 1.3%, to $208,125,000 at March 31, 2002 from
$210,869,000 at December 31, 2001. Loans increased $7,853,000 or 0.8%, to
$985,959,000 at March 31, 2002 from $978,106,000 at December 31, 2001, primarily
due to increases in commercial, real estate construction, multifamily mortgages,
non-farm nonresidential mortgages offset partially by decreases in installment
and agricultural loans.
Total deposits decreased $32,008,000, or 2.9%, to $1,073,991,000 at March 31,
2002 from $1,105,999,000 at December 31, 2001. Non interest-bearing deposits
decreased $11,064,000 or 8.0% to $127,621,000 at March 31, 2002 from
$138,685,000 at December 31, 2001. Historically, the Corporation has
experienced significant increases in noninterest-bearing deposits at year end.
As a result, changes recorded in the first fiscal quarter historically reflect
decreases as such deposit volume returns to a typical level. Interest-bearing
deposits decreased $20,944,000 or 2.2% to $946,370,000 at March 31, 2002 from
$967,314,000 at December 31, 2001. Long-term borrowings increased $6,000,000 or
12.8% to $53,021,000 at March 31, 2002, as compared to $47,021,000 at December
31, 2001.
In the first three months of 2002, the Corporation repurchased 58,800 shares of
its common stock at an aggregate cost of $1,240,000. The Corporation is
purchasing shares for the treasury as they become available in order to meet
future issuance requirements of previously granted non-qualified stock options.
As of March 31, 2002, there were 243,800 outstanding options currently
exercisable. There were an additional 124,192 stock options outstanding but not
currently exercisable.
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The following table sets forth the components of non-performing assets and past
due loans.
March 31, 2002 December 31, 2001
-------------- -----------------
(Dollars in thousands)
<s> <c> <c>
Non-accrual loans $4,886 $1,265
Loans 90 days past due, still accruing 1,267 959
Restructured loans - -
Other real estate owned 1,596 30
Non-performing other assets 1 1
------- -------
Total non-performing assets $7,750 $2,255
======= =======
Total non-performing assets as a percentage of total assets 0.61% 0.17%
======= =======
Total non-performing assets as a percentage of loans plus non-performing assets 0.78% 0.23%
======= =======
The ratio of non-performing assets to loans plus non-performing assets increased
to 0.78% at March 31, 2002 from 0.23% at December 31, 2001. The majority of
the increase in non-accrual loans is due to the addition of $4,400,000 million
in loans to one borrower. These loans are secured by a real estate property
in the process of renovation. The borrower is in the process of securing
other guarantors to refinance the loans and complete the renovation project.
Management believes that sufficient collateral value securing this loan exists
to cover contractual interest and principal payments on these loans. The
balance of other real estate loans increased from $30,000 as of December 31,
2001, to $1,596,000 on March 31, 2002. Management is actively working to
liquidate these properties and expects minimal losses on these sales.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2002 AS COMPARED TO MARCH 31, 2001
SUMMARY
- -------
Net income for the three months ended March 31, 2002 increased 14.4% to
$4,690,000 as compared to $4,098,000 for the comparable period in 2001. Diluted
earnings per share increased 13.3% to $.34 at March 31, 2002 as compared to $.30
for the same period in 2001.
Operating earnings, which exclude security gains and the related tax expense,
were $4,525,000, or $.33 per share for the three months ended March 31, 2002, as
compared to $3,705,000, or $.27 per share for the same period in 2001.
The Corporation's return on average assets was 1.48% for the three months ended
March 31, 2002, as compared to 1.25% achieved for the comparable period in 2001.
The return on average assets from operations declined to 1.43% for the three
months ended March 31, 2002, as compared to the 1.13% achieved in the comparable
period of 2001.
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 3.87% for the three months ended March 31, 2002, as compared to 3.60% for
the same period in 2001. The net interest margin expressed as a percentage of
average total assets, also on a fully taxable equivalent basis, was 3.61% for
the three months ended March 31, 2002, compared to 3.38% for the same period in
2001.
During the three months ended March 31, 2002, the Corporation recognized
security gains of approximately $165,000, after income taxes, representing 3.5%
of net income. During the same period in 2001, security gains of approximately
$393,000 after income taxes were recognized, representing 9.6% 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.
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EARNING ASSETS, SOURCES OF FUNDS, AND NET INTEREST MARGIN
- ---------------------------------------------------------
Average earning assets were $49,637,000 lower during the quarter ending March
31, 2002, as compared to the same period last year. This is due to primarily to
declines in the average balances of Federal funds sold, U.S. Government
obligations, and other securities offset by growth in the average balance of
loans. Interest rates continued to decline during 2001, and the Corporation
responded by lowering rates on its loan and deposit product offerings. The
Corporation experienced significant runoff in its higher cost deposits,
particularly in the time deposit category. The Corporation managed this decline
in average time deposit balances through security maturities combined with
growth in lower costing savings and money market deposits.
The average balance of short-term borrowings for the first quarter of 2002 was
$39,112,000 lower than the average balance for the same period last year. First
Busey Corporation issued $25,000,000 in cumulative trust preferred securities in
June, 2001. The Corporation used the proceeds of the offering to reduce
short-term debt associated with its 1999 acquisition of First Federal Savings &
Loan Association of Bloomington.
Interest income, on a tax equivalent basis, for the three months ended March 31,
2002 was $19,085,000, which is $5,601,000 or 22.7% lower than for the same
period in 2001. The average yield on total earning assets declined 156 basis
points to 6.44% for the first quarter of 2002 as compared to 8.00% for the same
period in 2001. Interest expense for the three months ended March 31, 2002, was
$7,622,000, which is $5,959,000 or 43.9% lower than for the same period in 2001.
The average rate paid on total interest-bearing liabilities declined 198 basis
points to 2.96% for the first quarter of 2002 as compared to 4.94% for the same
period in 2001.
The year-to-date interest margin expressed as a percentage of interest-earning
assets increased 27 basis to 3.87% for the first quarter of 2002 when compared
to the same period last year. The increase in net interest margin is due
primarily to change in mix of funding liabilities combined with the increase in
the average balance of loans.
PROVISION FOR LOAN LOSSES
- -------------------------
The provision of loan losses of $565,000 for the three months ended March 31,
2001, was $165,000 more than the provision expense of $400,000 for the
comparable period in 2001. As a percentage of total outstanding loans the loan
loss provision increased slightly to 1.41% as of March 31, 2002, compared to
1.40% as of December 31, 2001. Net chargeoffs for the first quarter of 2002
were $372,000 compared to $91,000 for the first quarter of 2001. Management
considers the reserve for loan losses to be adequate based on review and
analysis 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 9.5% to
$5,190,000 from $4,741,000 for the three months ended March 31, 2002, as
compared to the same period in 2001. This was a combination of increased trust
revenue, service charges on deposit accounts, gains on sales of pooled loans,
and increase in the cash value of life insurance offset by decreases in
commissions and brokers' fees, and net commissions from travel services. In
December, 2001, the Corporation sold the customer list of its travel agency
subsidiary. As a result of this sale, net commissions from travel services
dropped to $0 for the first quarter of 2002 from $272,000 for the first quarter
last year.
Gains of $797,000 were recognized on the sale of $42,392,000 of loans for the
three months ended March 31, 2002, as compared to gains of $433,000 on the sale
of $35,406,000 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,
2002 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.
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Total other expense decreased 3.6% or $333,000 to $8,995,000 for the three
months ended March 31, 2002 as compared to $9,328,000 for the same period in
2001.
Salaries and wages expense increased $34,000 or 0.8% and employee benefits
expense increased $37,000 or 3.8% for the three months ended March 31, 2002, as
compared to the same period last year. The Corporation had 476 and 499
full-time-equivalent employees as of March 31, 2002, and 2001, respectively.
Occupancy and furniture and equipment expenses decreased 9.4% to $1,607,000 for
the three months ended March 31, 2002 from $1,773,000 in the prior year period.
Expenses associated with the travel agency, including personnel and occupancy
and furniture expenses, dropped consistent with the sale of its customer list,
resulting in a decline in quarterly net income of approximately $42,000, after
tax.
The Corporation's net overhead expense, total non-interest expense less
non-interest income divided by average assets, decreased to 1.11% for the three
months ended March 31, 2002 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, 2002 was
53.3% as compared to 56.6% for the prior year period.
Income taxes for the three months ended March 31, 2002 increased to $2,355,000
as compared to $2,334,000 for the comparable period in 2001. 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 decreased to 33.4% for the three
months ended March 31, 2002 from 35.3% for the same period in 2001.
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, 2002 March 31, 2001
-------------- --------------
(Dollars in thousands except
per share amounts)
<s> <c> <c>
Reported net income $4,690 $4,098
Add goodwill amortization - 233
------ ------
Adjusted net income $4,690 $4,331
====== ======
BASIC EARNINGS PER SHARE
Reported net income $ 0.35 $ 0.30
Goodwill amortization - 0.02
------ ------
Adjusted new income $ 0.35 $ 0.32
====== ======
DILUTED EARNINGS PER SHARE
Reported net income $ 0.34 $ 0.30
Goodwill amortization - 0.02
------ ------
Adjusted net income $ 0.34 $ 0.32
====== ======
In June, 2001, Statement of Financial Accounting Standards No. 143, "Accounting
for Asset Retirement Obligations," was issued to address financial reporting and
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. This Statement applies to all entities and
to legal obligations associated with the retirement of long-lived assets that
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result from the acquisition, construction, development or normal operations of a
long-lived asset, except for certain obligations of lessees. Statement No. 143
is effective for financial statements issued for fiscal years beginning after
June 15, 2002. The Corporation does not believe the adoption of the Standard
will have a material impact on the consolidated financial statements.
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.
In November, 2001, Busey Bank fsb transferred its charter to Florida and changed
its name to Busey Bank Florida. Simultaneously, Busey Bank fsb transferred
banking assets in McLean County, Illinois to Busey Bank. As of March 31, 2002,
Busey Bank Florida had one banking location 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.
March 31, 2002
------------------------------------------------------------------------------------------------
First Busey
Busey Bank Trust & Consolidated
Busey Bank Florida Investment Co. All Other Totals Eliminations Totals
----------- ----------- --------------- ---------- ---------- -------------- -------------
<s> <c> <c> <c> <c> <c> <c> <c>
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
March 31, 2001
------------------------------------------------------------------------------------------------
First Busey
Busey Bank Trust & Consolidated
Busey Bank Florida Investment Co. All Other Totals Eliminations Totals
----------- ----------- --------------- ---------- ---------- -------------- -------------
<s> <c> <c> <c> <c> <c> <c> <c>
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
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.
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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 $9,000,000
available as of March 31, 2002. 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 7.9% at March 31, 2002 from
8.6% at December 31, 2001. This is the ratio of total large liabilities to
total liabilities. This change was due to a $7,241,000 decrease in time
deposits over $100,000 combined with a $3,367,000 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,
2002, the Corporation earned $4,690,000 and paid dividends of $2,040,000 to
stockholders, resulting in a retention of current earnings of $2,650,000. The
Corporation's dividend payout for the three months ended March 31, 2002 was
43.5%. The Corporation's total risk-based capital ratio was 14.05% and the
leverage ratio was 9.04% as of March 31 2002, as compared to 13.63% and 8.78%
respectively as of December 31, 2001. The Corporation and its bank subsidiary
were well above all minimum required capital ratios as of March 31, 2002.
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.
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The following table sets forth the static rate-sensitivity analysis of the
Corporation as of March 31, 2002.
Rate Sensitive Within
---------------------------------------------------------------------
1-30 31-90 91-180 181 Days - Over
Days Days Days 1 Year 1 Year Total
---------------------------------------------------------------------
(Dollars in thousands)
<s> <c> <c> <c> <c> <c> <c>
Interest-bearing deposits $ 64 $ - $ - $ - $ - $ 64
Investment securities
U.S. Governments 10,020 8,065 19,165 27,137 78,568 142,955
Obligations of states and
political subdivisions - 183 97 3,561 37,038 40,879
Other securities 10,078 301 1,032 205 12,675 24,291
Loans (net of unearned int.) 364,868 63,470 62,198 103,365 392,058 985,959
---------------------------------------------------------------------
Total rate-sensitive assets $ 385,030 $ 72,019 $ 82,492 $ 134,268 $520,339 $1,194,148
---------------------------------------------------------------------
Interest bearing transaction
deposits $ 27,912 $ - $ - $ - $ - $ 27,912
Savings deposits 99,461 - - - - 99,461
Money market deposits 380,807 - - - - 380,807
Time deposits 51,956 65,183 83,768 115,282 122,001 438,190
Short-term borrowings:
Federal funds purchased &
repurchase agreements 1,050 1,600 1,850 2,000 900 7,400
Other - - 1,000 - - 1,000
Long-term debt 8,000 12,000 2,021 5,000 26,000 53,021
Company obligated mandatorily
redeemable preferred securities - - - - 25,000 25,000
---------------------------------------------------------------------
Total rate-sensitive liabilities $ 569,186 $ 78,783 $ 88,639 $ 122,282 $173,901 $1,032,791
Rate-sensitive assets less
rate-sensitive liabilities $(184,156) $ (6,764) $ (6,147) $ 11,986 $346,438 $ 161,357
---------------------------------------------------------------------
Cumulative Gap $(184,156) $(190,920) $(197,067) $(185,081) $161,357
=====================================================================
Cumulative amounts as a
percentage of total
rate-sensitive assets -15.42% -15.99% -16.50% -15.50% 13.51%
=====================================================================
Cumulative ratio 0.68 0.71 0.73 0.78 1.16
=====================================================================
The foregoing table shows a negative (liability sensitive) rate-sensitivity gap
of $184.2 million in the 1-30 days time period. On a cummulative basis, the gap
remains liability sensitive through 1 year as rate-sensitive liabilities that
reprice in those time periods are greater in volume than rate-sensitive assets
that are subject to repricing in the same respective time periods. The
composition of the gap structure at March 31, 2002 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, 2002 AND 2001
2002 2001
------------------------------- ------------------------------
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
------------------------------- ------------------------------
(Dollars in thousands)
<s> <c> <c> <c> <c> <c> <c>
ASSETS
Federal funds sold $ 15,101 $ 58 1.56% $ 37,173 $ 509 5.55%
Investment securities
U.S. Government obligations 135,483 1,618 4.84% 162,189 2,338 5.85%
Obligations of states and political
subdivisions (1) 42,144 745 7.17% 43,451 797 7.44%
Other securities 24,146 199 3.34% 35,674 416 4.73%
Loans (net of unearned interest) (1) (2) 984,610 16,465 6.78% 972,634 20,626 8.60%
-------------------- --------------------
Total interest earning assets $1,201,484 $19,085 6.44% $1,251,121 $24,686 8.00%
======= =======
Cash and due from banks 32,929 33,011
Premises and equipment 28,851 30,999
Reserve for possible loan losses (13,687) (12,395)
Other assets 37,159 28,182
----------- -----------
Total Assets $1,286,736 $1,330,918
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing transaction deposits $ 14,783 $ 38 1.04% $ 38,244 $ 274 2.91%
Savings deposits 96,761 267 1.12% 87,946 648 2.99%
Money market deposits 405,618 1,333 1.33% 335,444 2,829 3.42%
Time deposits 440,960 4,627 4.26% 553,332 8,276 6.07%
Short-term borrowings:
Federal funds purchased and 9,182 126 5.57% 18,211 260 5.79%
repurchase agreements
Other 1,500 13 3.51% 31,583 573 7.36%
Long-term debt 49,810 655 5.33% 50,538 721 5.79%
Company obligated mandiatorily
redeemable preferred securities 25,000 563 9.13% - - -
-------------------- --------------------
Total interest-bearing liabilities $1,043,614 $ 7,622 2.96% $1,115,298 $13,581 4.94%
======= =======
Net interest spread 3.48% 3.06%
===== =====
Demand deposits 127,960 111,374
Other liabilities 8,637 10,138
Stockholders' equity 106,525 94,108
Total Liabilities and Stockholders' Equity $1,286,736 $1,330,918
=========== ===========
Interest income / earning assets (1) $1,201,484 $19,085 6.44% $1,251,121 $24,686 8.00%
Interest expense / earning assets $1,201,484 7,622 2.57% $1,251,121 13,581 4.40%
----------------- -----------------
Net interest margin (1) $11,463 3.87% $11,105 3.60%
================= =================
<FN>
(1) On a tax-equivalent basis, assuming a federal income tax rate of 35% for 2002 and 2001.
(2) Non-accrual loans have been included in average loans, net of unearned interest.
15 of 20
FIRST BUSEY CORPORATION AND SUBSIDIARIES
CHANGES IN NET INTEREST INCOME
QUARTERS ENDED MARCH 31, 2002 AND 2001
Change due to (1)
Average Average Total
Volume Yield/Rate Change
----------------------------------
(Dollars in thousands)
<s> <c> <c> <c>
Increase (decrease) in interest income:
Federal funds sold $ (265) $ (186) $ (451)
Investment securities:
U.S. Government obligations (374) (346) (720)
Obligations of states and political
subdivisions (2) (24) (28) (52)
Other securities (152) (65) (217)
Loans (2) 245 (4,406) (4,161)
----------------------------------
Change in interest income (2) $ (570) $(5,031) $(5,601)
----------------------------------
Increase (decrease) in interest expense:
Interest-bearing transaction deposits $ (115) $ (121) $ (236)
Savings deposits 59 (440) (381)
Money market deposits 500 (1,996) (1,496)
Time deposits (1,477) (2,172) (3,649)
Short-term borrowings:
Federal funds purchased and repurchase
agreements (124) (10) (134)
Other (362) (198) (560)
Long-term debt (10) (56) (66)
Company obligated mandatorily redeemable preferred securities 563 - 563
----------------------------------
Change in interest expense $ (966) $(4,993) $(5,959)
----------------------------------
Increase in net interest income (2) $ 396 $ (38) $ 358
==================================
<FN>
(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 2002 and 2001.
16 of 20
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, 2002, is as
follows:
Basis Point Changes
-175 -100 +100 +200
---------------------------------------
<s> <c> <c> <c> <c>
Percentage change in net interest income due to an
immediate change in interest rates over a one-year period 2.28% 2.74% (0.22%) (0.56%)
17 of 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 15, 2002. 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, 2002.
For: 10,887,165 (79.66%)
Against: 40,966 (0.30%)
Abstain: 38,977 (0.29%)
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 8K
There were no reports on Form 8-K filed during the three
months ending March 31, 2002.
18 of 20
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: //Barbara J. Jones//
--------------------
Barbara J. Jones
Chief Financial Officer
(Principal financial and accounting officer)
Date: May 14, 2002
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EXHIBIT 21.1. LIST OF SUBSIDIARIES:
DIRECT:
-------
Busey Bank
Busey Bank Florida
Busey Investment Group, Inc.
First Busey Resources, Inc.
First Busey Capital Trust I
INDIRECT:
---------
First Busey Trust & Investment Co.
First Busey Securities, Inc.
Busey Insurance Services, Inc.
B.A.T., Inc.
Busey Travel, Inc.
20 of 20