SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 1O-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended 9/30/97 Commission File No. 0-15950
FIRST BUSEY CORPORATION
(Exact name of registrant as specified in its charter)
Nevada 37-1078406
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(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification No.)
201 W. Main St.
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 practicable date.
Class Outstanding at November 7, 1997
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Class A Common Stock, without par value 5,742,585
Class B Common Stock, without par value 1,125,000
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIRST BUSEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, 1997 December 31, 1996
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(Dollars in thousands)
ASSETS
Cash and due from banks $ 51,189 $ 33,738
Federal funds sold 0 0
Securities held to maturity (fair value 1997 $51,362; 1996 $55,800) 50,314 55,107
Securities available for sale (amort. cost 1997 $154,111; 1996 $166,189) 162,896 171,243
Trading securities at fair value 0
Loans (net of unearned interest) 604,538 569,500
Allowance for loan losses (6,593) (6,131)
============ ============
Net loans $ 597,945 $ 563,369
Premises and equipment 22,642 21,588
Other assets 19,227 19,873
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Total assets $ 904,213 $ 864,918
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Non-interest bearing $ 78,553 $ 78,077
Interest bearing 722,859 688,850
------------ ------------
Total deposits $ 801,412 $ 766,927
Short-term borrowings 5,750 14,405
Long-term debt 10,000 5,000
Other liabilities 6,390 5,169
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Total liabilities $ 823,552 $ 791,501
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STOCKHOLDERS' EQUITY
Preferred stock $ - $ -
Common stock 6,291 6,291
Surplus 20,714 20,594
Retained earnings 51,554 47,402
Unrealized gain (loss) on securities available for sale, net 5,711 3,285
------------ ------------
Total stockholders' equity before treasury stock, unearned ESOP
shares and deferred compensation for stock grants $84,270 $77,572
Treasury stock, at cost (3,006) (3,489)
Unearned ESOP shares and deferred compensation for stock grants (603) (666)
------------ ------------
Total stockholders' equity $80,661 $73,417
------------ ------------
Total liabilities and stockholders' equity $904,213 $864,918
============ ============
Class A Common Shares outstanding at period end 5,780,728 5,721,712
============ ============
Class B Common Shares outstanding at period end 1,125,000 1,125,000
============ ============
FIRST BUSEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, 1997 September 30, 1996
------------------ ------------------
(Dollars in thousands)
ASSETS
Cash and due from banks $51,189 $41,761
Federal funds sold 0 0
Securities held to maturity (fair value 1997 $51,362; 1996 $59,281) 50,314 58,859
Securities available for sale (amort. cost 1997 $154,111; 1996 $175,775) 162,896 179,184
Trading securities at fair value 929
Loans (net of unearned interest) 604,538 562,777
Allowance for loan losses (6,593) (5,619)
------------ ------------
Net loans $597,945 $557,158
Premises and equipment 22,642 21,636
Other assets 19,227 22,086
------------ ------------
Total assets $904,213 $881,613
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Non-interest bearing $78,553 $75,661
Interest bearing 722,859 707,341
------------ ------------
Total deposits $801,412 $783,002
Short-term borrowings 5,750 17,187
Long-term debt 10,000 5,000
Other liabilities 6,390 6,077
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Total liabilities $823,552 $811,266
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STOCKHOLDERS' EQUITY
Preferred stock $ - $ -
Common stock 6,291 6,291
Surplus 20,714 20,491
Retained earnings 51,554 46,050
Unrealized gain (loss) on securities available for sale, net 5,711 2,216
------------ ------------
Total stockholders' equity before treasury stock, unearned ESOP
shares and deferred compensation for stock grants $84,270 $75,048
Treasury stock, at cost (3,006) (3,912)
Unearned ESOP shares and deferred compensation for stock grants (603) (789)
------------ ------------
Total stockholders' equity $80,661 $70,347
------------ ------------
Total liabilities and stockholders' equity $904,213 $881,613
============ ============
Class A Common Shares outstanding at period end 5,780,728 5,680,123
============ ============
Class B Common Shares outstanding at period end 1,125,000 1,125,000
============ ============
FIRST BUSEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
1997 1996
---------- ----------
(Dollars in thousands,
except per share amounts)
INTEREST INCOME:
Interest and fees on loans $ 37,716 $ 33,726
Interest and dividends on investment securities:
Taxable interest income 7,688 9,718
Non-taxable interest income 1,505 1,578
Dividends 81 90
Interest on federal funds sold 243 408
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Total interest income $ 47,233 $ 45,520
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INTEREST EXPENSE:
Deposits $ 22,149 $ 21,313
Short-term borrowings 448 845
Long-term debt 394 208
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Total interest expense $ 22,991 $ 22,366
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Net interest income $ 24,242 $ 23,154
Provision for loan losses 600 400
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Net interest income after provision for loan losses $ 23,642 $ 22,754
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OTHER INCOME:
Trust $ 2,364 $ 1,945
Commissions and brokers' fees, net 771 605
Service charges on deposit accounts 2,211 2,175
Other service charges and fees 910 682
Security gains, net 357 90
Trading security gains, net 2 (113)
Gain on sales of pooled loans 293 197
Other operating income 617 729
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Total other income $ 7,525 $ 6,310
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OTHER EXPENSES:
Salaries and wages $ 9,085 $ 8,725
Employee benefits 1,884 1,653
Net occupancy expense of bank premises 1,630 1,452
Furniture and equipment expenses 1,294 1,231
Data processing 1,287 1,050
Stationery, supplies and printing 509 539
Foreclosed property write-downs and expenses 7 89
Amortization expense 991 991
Other operating expenses 3,525 3,627
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Total other expenses $ 20,212 $19,357
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Income before income taxes $ 10,955 $ 9,707
Income taxes 3,260 2,825
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Net income $ 7,695 $ 6,882
========== ==========
NET INCOME PER SHARE OF COMMON STOCK AND STOCK EQUIVALENTS: $ 1.10 $ 0.99
========== ==========
DIVIDENDS DECLARED PER SHARE:
Class A Common Stock $ 0.5200 $0.4933
========== ==========
Class B Common Stock $ 0.4727 $0.4485
========== ==========
FIRST BUSEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE QUARTERS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
1997 1996
---------- ----------
(Dollars in thousands,
except per share amounts)
Interest and fees on loans $13,127 $11,952
Interest and dividends on investment securities:
Taxable interest income 2,500 2,950
Non-taxable interest income 503 542
Dividends 28 29
Interest on federal funds sold 95 16
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Total interest income $16,253 $15,489
---------- ----------
INTEREST EXPENSE:
Deposits $7,730 $7,241
Short-term borrowings 128 222
Long-term debt 147 70
---------- ----------
Total interest expense $8,005 $7,533
---------- ----------
Net interest income $8,248 $7,956
Provision for loan losses 200 150
---------- ----------
Net interest income after provision for loan losses $8,048 $7,806
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OTHER INCOME:
Trust $739 $659
Commissions and brokers' fees, net 264 184
Service charges on deposit accounts 747 743
Other service charges and fees 307 241
Security gains, net 92 85
Trading security gains, net 0 19
Gain on sales of pooled loans 176 81
Other operating income 207 244
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Total other income $2,532 $2,256
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OTHER EXPENSES:
Salaries and wages $3,074 $2,966
Employee benefits 584 529
Net occupancy expense of bank premises 564 504
Furniture and equipment expenses 439 438
Data processing 465 366
Stationery, supplies and printing 164 195
Foreclosed property write-downs and expenses 7 14
Amortization expense 331 331
Other operating expenses 1,183 1,536
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Total other expenses $6,811 $6,879
---------- ----------
Income before income taxes $3,769 $3,183
Income taxes 1,129 920
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Net income $2,640 $2,263
========== ==========
NET INCOME PER SHARE OF COMMON STOCK AND STOCK EQUIVALENTS: $0.38 $0.32
========== ==========
DIVIDENDS DECLARED PER SHARE:
Class A Common Stock $0.1800 $0.1600
========== ==========
Class B Common Stock $0.1636 $0.1455
========== ==========
FIRST BUSEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
1997 1996
---------- ----------
(Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $7,695 $6,882
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 2,574 2,494
Provision for loan losses 600 400
Decrease in deferred income taxes (659) (374)
Amortization of investment security discounts (245) (947)
Gain on sales of investment securities, net (357) (90)
Proceeds from sales of pooled loans 26,774 26,763
Loans originated for sale (30,413) (27,006)
Gain on sale of pooled loans (293) (197)
Loss on sales and dispositions of premises and equipment 0 17
Change in assets and liabilities:
Increase in other assets (856) 151
Increase in accrued expenses 739 614
Increase (decrease) in interest payable 46 (190)
Increase in income taxes payable 436 336
---------- ----------
Net cash provided by operating activities $6,041 $8,853
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CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of securities classified available for sale $10,559 $10,431
Proceeds from maturities of securities classified available for sale 67,739 365,373
Proceeds from maturities of securities classified held to maturity 5,887 22,097
Purchase of securities classified available for sale (65,662) (333,113)
Purchase of securities classified held to maturity (1,050) (19,556)
Decrease in federal funds sold 0 650
Increase in loans (31,379) (81,215)
Purchases of premises and equipment (2,575) (1,254)
Proceeds from sales of premises and equipment 1 0
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Net cash (used in) investing activities ($16,480) ($36,587)
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CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in certificates of deposit $ 33,751 $13,976
Net increase in demand, money market and saving deposits 734 24,129
Cash dividends paid (3,543) (3,306)
Purchase of treasury stock (404) (461)
Proceeds from sale of treasury stock 1,257 136
Proceeds from short-term borrowings 5,000 0
Principal payments on short-term borrowings (2,500) (2,000)
Net decrease in federal funds purchased,
repurchase agreements and Federal Reserve discount borrowings (6,405) (2,337)
---------- ----------
Net cash provided by (used in) financing activities $27,890 $30,137
---------- ----------
Net increase (decrease) in cash and cash equivalents $17,451 $2,403
Cash and due from banks, beginning $33,738 39,358
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Cash and due from banks, ending $51,189 $41,761
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FIRST BUSEY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: INTERIM FINANCIAL STATEMENTS
The consolidated interim financial statements of First Busey Corporation and
Subsidiaries are unaudited, but in the opinion of management reflect all
necessary adjustments, consisting only of normal recurring accruals, for a
fair presentation of results as of the dates and for the periods covered by
the financial statements. The results for the interim periods are not
necessarily indicative of the results of operations that may be expected for
the fiscal year.
NOTE 2: LOANS
The major classifications of loans at September 30, 1997 and December 31,
1996 were as follows:
September 30, 1997 December 31, 1996
------------------------------------------
(Dollars in thousands)
Commercial $ 64,935 $ 62,065
Real estate construction 33,041 26,184
Real estate - farmland 11,661 11,468
Real estate - 1-4 family residential mortgage 228,066 207,946
Real estate - multifamily mortgage 73,792 74,245
Real estate - non-farm nonresidential mortgage 136,805 131,350
Installment 39,535 39,707
Agricultural 16,703 16,537
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$ 604,538 $ 569,502
Less:
Unearned interest 0 2
------------------------------------------
$ 604,538 $ 569,500
------------------------------------------
Less:
Allowance for loan losses 6,593 6,131
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Net loans $ 597,945 $ 563,369
==========================================
The real estate-mortgage category includes loans held for sale with carrying
values of $5,379,000 at September 30, 1997 and $1,447,000 at December 31, 1996;
these loans had fair market values of $5,416,000 and $1,457,000 respectively.
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 Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
------------ ------------ ------------ ------------
Net income $ 2,640,000 $2,263,000 $ 7,695,000 $6,882,000
Shares:
Weighted average common shares outstanding 6,911,069 6,797,680 6,912,190 6,799,579
Dilutive effect of outstanding options, as determined
by the application of the treasury stock method 119,712 147,081 106,751 129,480
------------ ------------ ------------ ------------
Weighted average common shares outstanding,
as adjusted 7,030,781 6,944,760 7,018,941 6,929,059
============ ============ ============ ============
Net income per share of common stock and stock equivalents: $ 0.38 $0.32 $ 1.10 $0.99
============ ============ ============ ============
NOTE 4: SUPPLEMENTAL CASH FLOW DISCLOSURES FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1997 AND 1996.
1997 1996
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest $ 22,945 $22,556
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Income taxes $ 3,081 $2,810
========== ==========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Other real estate acquired in settlement of loans $ 135 $396
========== ==========
Change in unrealized gain (loss) on securities available for sale $ 3,731 $1,350
========== ==========
(Decrease) increase in deferred income taxes attributable to the
unrealized (gain) loss on investment securities available for sale ($ 1,305) ($473)
========== ==========
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of the financial condition
of First Busey Corporation and Subsidiaries ("Corporation") at September 30,
1997 (unaudited) when compared with December 31, 1996 and the results of
operations for the nine months ended September 30, 1997 and 1996 (unaudited) and
the results of operations for the three months ended September 30, 1997 and 1996
(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 SEPTEMBER 30, 1997 AS COMPARED TO DECEMBER 31, 1996
Total assets increased $34,295,000, or 4.5%, to $904,213,000 at September 30,
1997 from $864,918,000 at December 31, 1996.
Securities held to maturity decreased $4,793,000, or 8.7%, to $50,314,000 at
September 30, 1997 from $55,100,000 at December 31, 1996. Securities available
for sale decreased $8,347,000, or 4.9%, to $162,896,000 at September 30, 1997
from $171,243,000 at December 31, 1996, as security maturities were used to
finance loan growth.
Loans increased $35,038,000 or 6.2%, to $604,538,000 at September 30, 1997 from
$569,500,000 at December 31, 1996, primarily due to increases in commercial and
mortgage loans.
Total deposits increased $34,485,000, or 4.5%, to $801,412,000 at September 30,
1997 from $766,927,000 at December 31, 1996. Non-interest bearing deposits
increased .6% to $78,553,000 at September 30, 1997 from $78,077,000 at December
31, 1996. Interest bearing deposits increased 4.9% to $722,859,000 at September
30, 1997 from $688,850,000 at December 31, 1996. Short-term borrowings
decreased $8,655,000, or 60.0%, to $5,750,000 at September 30, 1997, as compared
to $14,405,000 at December 31, 1996. This was due primarily to a decrease in
repurchase agreements.
In the first nine months of 1997, the Corporation repurchased 27,397 shares of
its Class A stock at an aggregate cost of $404,000. 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 September 30, 1997, 2,250 of the 58,500 options which became exercisable
on January 1, 1995 (and expire December 31, 1997) have not yet been exercised
and 49,278 of the 133,441 options which became exercisable on January 1, 1997
(and expire December 31, 1999) have not yet been exercised. The Corporation's
Board of Directors has extended the Stock Repurchase Plan to June 30, 1998. It
is anticipated that the Corporation may from time to time continue to make
purchases of its common stock in order to meet future issuance requirements.
The following table sets forth the components of non-performing assets and past
due loans.
September 30, 1997 December 31, 1996
------------------ ------------------
(Dollars in thousands)
Non-accrual loans $ 1,012 $0
Loans 90 days past due, still accruing 2,036 1,002
Restructured loans 0 0
Other real estate owned 346 805
Non-performing other assets 1 1
------------------ ------------------
Total non-performing assets $3,395 $1,808
================== ==================
Total non-performing assets as a percentage of total assets 0.38% 0.21%
================== ==================
Total non-performing assets as a percentage of loans plus non-performing assets 0.56% 0.32%
================== ==================
The ratio of non-performing assets to loans plus non-performing assets increased
to 0.56% at September 30, 1997 from 0.32% at December 31, 1996. This was due to
increases in the balance of non-accrual loans and the balance of loans 90 days
past due and still accruing, offset partially by a decrease in the balance of
other real estate owned. Although the non-performing ratios have increased over
the last nine months, the Corporation's ratios compare favorably with those of
its peers.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AS COMPARED TO SEPTEMBER 30, 1996
SUMMARY
Net income for the nine months ended September 30, 1997 increased 11.8% to
$7,695,000 as compared to $6,882,000 for the comparable period in 1996.
Earnings per share increased 11.1% to $1.10 at September 30, 1997 as compared to
$.99 for the same period in 1996.
Operating earnings, which exclude security gains and the related tax expense,
were $7,463,000, or $1.07 per share for the nine months ended September 30,
1997, as compared to $6,823,000, or $.98 per share for the same period in 1996.
The Corporation's return on average assets was 1.18% for the nine months ended
September 30, 1997, as compared to 1.07% for the comparable period in 1996. The
return on average assets from operations of 1.14% for the nine months ended
September 30, 1997 was 8 basis points higher than the 1.06% level achieved in
the comparable period of 1996.
Net interest margin, the Corporation's net interest income expressed as a
percentage of average earning assets stated on a fully taxable equivalent basis,
was 4.21% for the nine months ended September 30, 1997, as compared to 4.12% for
the same period in 1996. The net interest margin expressed as a percentage of
average total assets, also on a fully taxable equivalent basis, was 3.87% for
the nine months ended September 30, 1997, compared to 3.78% for the same period
in 1996. The increase in the net interest margin reflects the increase in the
net interest spread the Corporation has experienced. The Corporation has been
reinvesting investment security maturities and sales proceeds in higher yielding
loans in order to increase the net interest margin.
During the nine months ended September 30, 1997, the Corporation recognized
security gains of approximately $232,000, after income taxes, representing 3.0%
of net income. During the same period in 1996, security gains of $59,000, after
income taxes, were recognized, representing 0.9% of net income.
INTEREST INCOME
Interest income, on a tax equivalent basis, for the nine months ended September
30, 1997 increased 3.7% to $48,274,000 from $46,573,000 for the comparable
period in 1996. The increase in interest income resulted from an increase in
average earning assets of $17,955,000 for the period ended September 30, 1997,
as compared to the same period of 1996, combined with an 11 basis point increase
in the average yield on interest earning assets to 8.04% in the current period
when compared to the same period in 1996.
INTEREST EXPENSE
Total interest expense increased 2.8% for the nine months ended September 30,
1997 as compared to the prior year period. This increase resulted in large part
from a $15,439,000 increase in average time deposit balances and a 34 basis
point increase in the average rate paid on interest bearing transaction deposits
for the nine months ended September 30, 1997, as compared to the same period in
1996.
PROVISION FOR LOAN LOSSES
The provision for loan losses of $600,000 for the nine months ended September
30, 1997 is $200,000 more than the provision for the comparable period in 1996.
The provision and the net charge-offs of $254,000 for the period resulted in the
reserve representing 1.09% of total loans and 216% of non-performing loans at
September 30, 1997, as compared to the reserve representing 1.08% of total loans
and 612% of non-performing loans at December 31, 1996. The adequacy of the
reserve for loan losses is consistent with management's consideration of the
composition of the portfolio, recent credit quality experience, and prevailing
economic conditions.
Within the last three years, the Corporation has grown its installment loan
portfolio through bank -approved dealer paper, installment car loans originated
by dealers at the time of sale. It is possible that a weakening in the economic
cycle could adversely affect the quality of these loans and resultant charge-
offs may necessitate larger loan loss provisions.
OTHER INCOME, OTHER EXPENSE AND INCOME TAXES
Total other income, excluding security gains, increased 15.2% for the nine
months ended September 30, 1997 as compared to the same period in 1996. This
was a combination of increases in trust commissions and brokers' fees, other
service charges and fees, and gains on sales of pooled loans along with no
trading security losses for the nine months ended September 30, 1997 as compared
to the same period in 1996. Gains of $293,000 were recognized on the sale of
$26,481,000 of pooled loans for the nine months ended September 30, 1997 as
compared to gains of $197,000 on the sale of $26,566,000 of pooled loans in the
prior year period.
Management anticipates continued sales from the current mortgage loan production
of the Corporation if mortgage loan originations are high relative to historic
norms and the sales of the loans are necessary to maintain the asset/liability
structure that the Corporation is trying to effect. The Corporation may realize
gains and/or losses on these sales dependent upon interest rate movements and
upon how receptive the debt markets are to mortgage backed securities.
Total other expense increased 4.4% or $855,000 for the nine months ended
September 30, 1997 as compared to the same period in 1996.
Salaries and wages expense increased $360,000 or 4.1% and employee benefits
expense increased $231,000 or 14.0% for the nine months ended September 30,
1997, as compared to the same period last year. The Corporation had 386 full
time equivalent employees as of September 30, 1997 as compared to 384 as of
September 30, 1996. Occupancy and furniture and equipment expenses increased
9.0% to $2,924,000 for the nine months ended September 30, 1997 from $2,683,000
in the prior year period. Data processing expense increased $237,000 or 22.6%
to $1,287,000 for the nine months ended September 30, 1997 from the prior year
period. Foreclosed property write-downs and expenses decreased $82,000 to
$7,000 for the nine months ended September 30, 1997 from the prior year period.
Other operating expenses decreased $102,000 or 2.8% to $3,525,000 for the nine
months ended September 30, 1997.
The Corporation's net overhead expense, total non-interest expense less non-
interest income divided by average assets, decreased to 2.00% for the nine
months ended September 30, 1997 from 2.03% in the prior year period as a result
of the income and expense items described above.
The Corporation's efficiency ratio is defined as operating expenses divided by
net revenue. (More specifically it is defined as non interest expense
expressed as a percentage of the sum of tax equivalent net interest income and
non interest income, excluding security gains). The consolidated efficiency
ratio for the nine months ended September 30, 1997 was 62.3% as compared to
63.6% for the prior year period. When the gains on the sales of pooled loans
are excluded, these ratios are 62.9% and 64.0%, respectively. The change in
the current year efficiency ratio is due to the income and expense items
noted above.
Income taxes for the nine months ended September 30, 1997 increased to
$3,260,000 as compared to $2,825,000 for the comparable period in 1996. As a
percent of income before taxes, the provision for income taxes increased to
29.8% for the nine months ended September 30, 1997 from 29.1% for the same
period in 1996.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1997 AS COMPARED TO SEPTEMBER 30, 1996
SUMMARY
Net income for the three months ended September 30, 1997 increased 16.7% to
$2,640,000 as compared to $2,263,000 for the comparable period in 1996.
Earnings per share increased 18.8% to $.38 at September 30, 1997 as compared to
$.32 for the same period in 1996.
Operating earnings, which exclude security gains and the related tax expense,
were $2,580,000, or $.37 per share for the three months ended September 30,
1997, as compared to $2,207,000, or $.31 per share for the same period in 1996.
The Corporation's return on average assets was 1.18% for the three months ended
September 30, 1997, as compared to 1.05% achieved for the comparable period in
1996. The return on average assets from operations of 1.15% for the three
months ended September 30, 1997 exceeded the 1.03% level achieved in the
comparable period of 1996.
The net interest margin expressed as a percentage of average earning assets was
4.16% for the three months ended September 30, 1997, 5 basis points lower than
the level achieved for the like period in 1996. The net interest margin
expressed as a percentage of average total assets was 3.84% for the three months
ended September 30, 1997, as compared to 3.87% for the same period in 1996.
During the three months ended September 30, 1997, the Corporation recognized
security gains of approximately $60,000, after income taxes, representing 2.3%
of net income. During the same period in 1996, security gains of approximately
$56,000, after income taxes, were recognized, representing 2.5% of net income.
INTEREST INCOME
Interest income on a fully taxable equivalent basis increased $752,000, or 4.7%
for the three months ended September 30, 1997 from the same period in 1996. The
increase resulted from a higher level of interest income on greater average
volumes of loans outstanding for the three months ended September 30, 1997 as
compared to the same period of 1996, partially offset by a lower level of
interest income on lower average balances of investment securities. The yield
on interest earning assets increased 1 basis point for the three months ended
September 30, 1997 as compared to the same period in 1996.
INTEREST EXPENSE
Total interest expense increased 6.3% for the three months ended September 30,
1997 as compared to the prior year period. This increase resulted in large part
from a $28,475,000 increase in average time deposit balances and from a 45 basis
point increase in the average rate paid on interest-bearing transaction deposit
balances for the three months ended September 30, 1997, as compared to the same
period in 1996.
OTHER INCOME, OTHER EXPENSE AND INCOME TAXES
Total other income, excluding security transactions, increased 12.4% for the
three months ended September 30, 1997 as compared to the same period in 1996.
This was a combination of increased trust revenue, commissions and brokers' fees
and other service charges and fees. Gains of $176,000 were recognized on the
sale of $12,865,000 of pooled loans for the three months ended September 30,
1997 as compared to gains of $81,000 on the sale of $13,687,000 of pooled loans
in the prior year period.
Total other expense decreased 1.0% or $68,000 for the three months ended
September 30, 1997 as compared to the same period in 1996.
Salaries and wages expense increased $108,000 or 3.6% and employee benefits
expense increased $55,000 or 10.4% for the three months ended September 30,
1997, as compared to the same period last year. Occupancy and furniture and
equipment expenses increased 6.5% to $1,003,000 for the three months ended
September 30, 1997 from $942,000 in the prior year period. Data processing
expense increased $99,000 or 27.0% to $465,000 for the three months ended
September 30, 1997 from the prior year period. Foreclosed property write-downs
and expenses decreased $7,000 to $14,000 for the three months ended September
30, 1997 from the prior year period. Other operating expenses decreased
$353,000 to $1,183,000 for the three months ended September 30, 1997 from the
prior year period. Of this decrease, $441,000 was due to a one time assessment
in 1996 by the Savings Association Insurance Fund for deposits the Corporation
had previously assumed from savings and loans.
The consolidated efficiency ratio for the three months ended September 30, 1997
was 61.7% as compared to 65.6% for the prior year period. When the gains on the
sales of pooled loans are excluded, these ratios are 62.7% and 61.8%,
respectively. The change in the current year efficiency ratio is due to the
income and expense items noted above.
Income taxes for the three months ended September 30, 1997 increased to
$1,129,000 as compared to $920,000 for the comparable period in 1996. As a
percent of income before taxes, the provision for income taxes increased to
30.0% for the three months ended September 30, 1997 from 28.9% for the same
period in 1996.
LIQUIDITY
Liquidity is the availability of funds to meet all present and future financial
obligations arising in the daily operations of the business at a minimal cost.
These financial obligations consist of needs for funds to meet extensions of
credit, deposit withdrawals and debt servicing.
The sources of short-term liquidity utilized by the Corporation consist of non-
reinvested asset maturities, deposits and capital funds. Long-term liquidity
needs will be satisfied primarily through retention of capital funds. The
Corporation does not deal in or use brokered deposits as a source of liquidity.
The Corporation generally does not rely upon the purchases of federal funds for
liquidity needs. Additional liquidity is provided by bank lines of credit,
repurchase agreements and the ability to borrow from the Federal Reserve Bank.
The Corporation has an operating line with American National Bank and Trust
Company of Chicago in the amount of $10,000,000 with $5,000,000 available as of
September 30, 1997.
The Corporation's dependence on large liabilities (defined as time deposits over
$100,000 and short-term borrowings) increased to 13.0% at September 30, 1997
from 10.1% at December 31, 1996. This is the ratio of total large liabilities
to total liabilities, and is low in comparison to the Corporation's peers. This
increase was due largely to a $35,616,000 increase in time deposits over
$100,000 and an $8,655,000 decrease in short-term debt which resulted in a
higher ratio of large liabilities to total liabilities.
CAPITAL RESOURCES
Other than from the issuance of common stock, the Corporation's primary source
of capital is retained net income. During the nine months ended September 30,
1997, the Corporation earned $7,695,000 and paid dividends of $3,543,000 to
stockholders, resulting in a retention of current earnings of $4,152,000. The
Corporation's dividend payout for the nine months ended September 30, 1997 was
46.0%. The Corporation's risk-based capital ratio was 12.90% and the leverage
ratio was 7.65% as of September 30, 1997, as compared to 12.48% and 7.14%
respectively as of December 31, 1996. The Corporation and its bank subsidiary
were well above all minimum required capital ratios as of September 30, 1997.
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, earn- ing
assets and rate-sensitive, interest bearing liabilities would be responsive to
changes in market interest rates based on their contractual maturities or terms
for repricing. It is, however, only a static single-day depiction of the
Corporation's rate sensitivity structure, which can be adjusted in response to
changes in forecasted interest rates.
The following table sets forth the static rate-sensitivity analysis of the
Corporation as of September 30, 1997.
Rate Sensitive Within
---------------------------------------------------------------------------------
1-30 31-90 91-180 181 Days- Over
Days Days Days 1 Year 1 Year Total
---------------------------------------------------------------------------------
(Dollars in thousands)
Federal Funds Sold
Investment securities
U.S. Governments 5,225 24,082 37,252 15,549 71,619 153,727
Obligations of states and
political subdivisions 1,170 4,927 991 8 29,686 36,782
Other securities 2,376 556 184 419 19,166 22,701
Loans (net of unearned int.) 180,384 25,312 48,471 77,469 272,902 604,538
---------------------------------------------------------------------------------
Total rate-sensitive assets 189,155 54,877 86,898 93,445 393,373 817,748
---------------------------------------------------------------------------------
Interest bearing transaction
deposits 128,101 0 0 0 0 128,101
Savings deposits 78,542 0 0 0 0 78,542
Money market deposits 135,603 0 0 0 0 135,603
Time deposits 33,140 62,122 76,992 93,270 115,089 380,613
Short-term borrowings:
Federal funds purchased &
repurchase agreements 0 0 0 0 0 0
Other 0 0 5,750 0 0 5,750
Long-term debt 0 0 0 5,000 5,000 10,000
---------------------------------------------------------------------------------
Total rate-sensitive
liabilities 375,386 62,122 82,742 98,270 120,089 738,609
---------------------------------------------------------------------------------
Rate-sensitive assets less
rate-sensitive liabilities (186,231) (7,245) 4,145 (4,825) 273,284 79,139
---------------------------------------------------------------------------------
Cumulative gap (186,231) (193,476) (189,320) (194,145) 79,139
=================================================================================
Cumulative gap as a
percentage of total
rate-sensitive assets -22.77% -23.66% -23.15% -23.74% 9.68%
=================================================================================
Cumulative ratio (cumulative RSA/RSL) .50 .56 .64 .69 1.11
=================================================================================
The foregoing table shows a negative (liability sensitive) rate-sensitivity gap
of $186,231 million in the 1-30 day repricing category. The gap beyond 30 days,
through 90 days, becomes slightly more liability sensitive as rate-sensitive
assets that reprice in those time periods are slightly less in volume than rate-
sensitive liabilities that are subject to repricing in the same respective time
periods. The gap beyond 90 days through 180 days becomes slightly less
liability sensitive as rate-sensitive assets that reprice after 90 days are more
in volume than rate- sensitive liabilities that are subject to repricing in the
same respective time periods. The composition of the gap structure at September
30, 1997, will benefit the Corporation more if interest rates fall during the
next 30 days by allowing the net interest margin to grow as liability rates
would reprice more quickly than rates on interest rate-sensitive assets. After
30 days through one year, a rate change would have little effect on the
Corporation because the volume of rate-sensitive assets repricing would be
similar to the volume of rate-sensitive liabilities that would be repricing.
FIRST BUSEY CORPORATION AND SUBSIDIARIES
AVERAGE BALANCE SHEETS AND INTEREST RATES
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
1997 1996
-----------------------------------------------------------------------
Average Income/ Yield Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
-----------------------------------------------------------------------
(Dollars in thousands)
ASSETS
Federal funds sold $5,962 $243 5.43% $10,066 $408 5.41%
Investment securities
U.S. Government obligations 161,073 7,008 5.82% 199,893 8,821 5.89%
Obligations of states and political
subdivisions (1) 36,911 2,316 8.39% 38,597 2,428 8.40%
Other securities 21,077 761 4.83% 23,213 987 5.68%
Loans (net of unearned interest) (1) (2) 577,814 37,946 8.78% 513,113 33,929 8.83%
--------------------- ---------------------
Total interest earning assets $802,837 $48,274 8.04% $ 784,882 $46,573 7.93%
======= =======
Cash and due from banks 37,400 34,777
Premises and equipment 22,404 21,510
Reserve for possible loan losses (6,421) (5,592)
Other assets 18,023 20,239
-------- --------
Total Assets $874,243 $855,816
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing transaction deposits $144,669 $2,128 1.97% $130,456 $1,588 1.63%
Savings deposits 80,677 1,976 3.27% 80,190 1,889 3.15%
Money market deposits 120,514 3,338 3.70% 136,420 3,884 3.80%
Time deposits 355,573 14,707 5.53% 342,134 13,952 5.45%
Short-term borrowings:
Federal funds purchased and repurchase
agreements 2,218 102 6.14% 10,329 404 5.22%
Other 6,500 346 7.11% 8,120 441 7.26%
Long-term debt 9,066 394 5.82% 5,000 208 5.55%
--------------------- ---------------------
Total interest bearing liabilities $719,217 $22,991 4.27% $712,649 $22,366 4.19%
======= =======
------- -------
Net interest spread 3.77% 3.73%
======= =======
Demand deposits 72,733 68,920
Other liabilities 5,734 5,687
Stockholders' equity 76,559 68,560
-------- --------
-------- --------
Total Liabilities and Stockholders' Equity $874,243 $855,816
======== ========
Interest income / earning assets (1) $802,837 $48,274 8.04% $784,882 $45,573 7.93%
Interest expense / earning assets $802,837 $22,991 3.83% 784,882 22,366 3.81%
--------------------- ---------------------
Net interest margin (1) $25,283 4.21% $24,207 4.12%
===================== =====================
<FN>
(1) On a tax-equivalent basis, assuming a federal income tax rate of 35%
for 1997 and 1996.
(2) Non-accrual loans have been included in average loans, net of unearned
interest.
</FN>
FIRST BUSEY CORPORATION AND SUBSIDIARIES
CHANGES IN NET INTEREST INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
Change due to (1)
Average Average Total
Volume Yield/Rate Change
-----------------------------------
(Dollars in thousands)
Increase (decrease) in interest income:
Federal funds sold ($168) $2 ($166)
Investment securities:
U.S. Government obligations (1,691) (122) (1,813)
Obligations of states and political
subdivisions (2) (105) (7) (112)
Other securities (86) (140) (226)
Loans (2) 4,247 (229) 4,018
-----------------------------------
Change in interest income (2) $2,197 ($496) $1,701
-----------------------------------
Increase (decrease) in interest expense:
Interest bearing transaction deposits $185 $355 $540
Savings deposits 12 75 87
Money market deposits (443) (104) (547)
Time deposits 554 201 755
Short-term borrowings:
Federal funds purchased and repurchase
agreements (389) 87 (302)
Other (86) (9) (95)
Long-term debt 176 11 187
-----------------------------------
Change in interest expense $9 $616 $625
-----------------------------------
Increase in net interest income (2) $2,188 ($1,112) $1,076
===================================
<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
1997 and 1996.
</FN>
FIRST BUSEY CORPORATION AND SUBSIDIARIES
AVERAGE BALANCE SHEETS AND INTEREST RATES
QUARTERS ENDED SEPTEMBER 30, 1997 AND 1996
1997 1996
-----------------------------------------------------------------------
Average Income/ Yield Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
-----------------------------------------------------------------------
(Dollars in thousands)
ASSETS
Federal funds sold $6,751 $ 95 5.58% $1,207 $ 16 5.25%
Investment securities
U.S. Government obligations 156,386 2,274 5.77% 178,293 2,675 5.97%
Obligations of states and political
subdivisions (1) 36,760 773 8.34% 39,844 834 8.33%
Other securities 21,991 254 4.59% 21,467 304 5.64%
Loans (net of unearned interest) (1) (2) 597,156 13,202 8.77% 543,975 12,017 8.79%
--------------------- ---------------------
Total interest earning assets $819,044 $16,598 8.04% $784,786 $15,846 8.03%
======= =======
Cash and due from banks 35,744 33,522
Premises and equipment 22,739 21,591
Reserve for possible loan losses (6,585) (5,611)
Other assets 17,967 20,581
-------- --------
Total Assets $888,909 $854,869
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing transaction deposits $142,741 $ 755 2.10% $127,569 $ 529 1.65%
Savings deposits 77,851 649 3.31% 82,465 664 3.21%
Money market deposits 122,152 1,119 3.63% 139,686 1,346 3.83%
Time deposits 371,135 5,207 5.57% 342,660 4,702 5.46%
Short-term borrowings:
Federal funds purchased and repurchase
agreements 837 17 8.00% 6,342 86 5.41%
Other 6,000 111 7.36% 7,312 136 7.41%
Long-term debt 10,000 147 5.85% 5,000 70 5.55%
--------------------- ---------------------
Total interest bearing liabilities $730,716 $8,005 4.35% $711,034 $7,533 4.22%
======= =======
Net interest spread 3.69% 3.82%
======= =======
Demand deposits 73,239 68,521
Other liabilities 5,836 5,991
Stockholders' equity 79,118 69,323
-------- --------
Total Liabilities and Stockholders' Equity $888,909 $854,869
======== ========
Interest income / earning assets (1) $819,044 16,598 8.04% $784,786 $15,846 8.03%
Interest expense / earning assets 819,044 8,005 3.88% 784,786 7,533 3.82%
--------------------- ---------------------
Net interest margin (1) 8,593 4.16% $8,313 4.21%
===================== =====================
<FN>
(1) On a tax-equivalent basis, assuming a federal income tax rate of 35% for
1997 and 1996.
(2) Non-accrual loans have been included in average loans, net of unearned
interest.
</FN>
FIRST BUSEY CORPORATION AND SUBSIDIARIES
CHANGES IN NET INTEREST INCOME
QUARTERS ENDED SEPTEMBER 30, 1997 AND 1996
Change due to (1)
Average Average Total
Volume Yield/Rate Change
-----------------------------------
(Dollars in thousands)
Increase (decrease) in interest income:
Federal funds sold $78 $1 $79
Investment securities:
U.S. Government obligations (321) (80) (401)
Obligations of states and political
subdivisions (2) (65) 4 (61)
Other securities 8 (58) (50)
Loans (2) 1175 10 1,185
-----------------------------------
Change in interest income (2) $875 ($123) $752
-----------------------------------
Increase (decrease) in interest expense:
Interest bearing transaction deposits $68 $158 $226
Savings deposits (40) 25 (15)
Money market deposits (163) (64) (227)
Time deposits 398 107 505
Short-term borrowings:
Federal funds purchased and repurchase
agreements (157) 88 (69)
Other (24) (1) (25)
Long-term debt 73 4 77
-----------------------------------
Change in interest expense $155 $317 $472
-----------------------------------
Increase in net interest income (2) $720 ($440) $280
===================================
<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
1997 and 1996.
</FN>
PART II - OTHER INFORMATION
ITEM 6: Exhibits and Reports on Form 8-K
(a) There were no reports on Form 8-K filed during the three
months ending September 30, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused the report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST BUSEY CORPORATION
(REGISTRANT)
By: //Scott L. Hendrie//
---------------------------
Scott L. Hendrie
Senior Vice President and
Chief Financial Officer
(Principal financial and
accounting officer)
Date: November 13, 1997