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 ------------------------------- ------------------- (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. <TABLE> <CAPTION> Class Outstanding at May 1, 2002 ------------------------------------------------------------ <S> <C> Common Stock, without par value 13,652,588 </TABLE> 1 of 20
PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS 2 of 20
<TABLE> <CAPTION> 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. </TABLE> 3 of 20
<TABLE> <CAPTION> 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 ------- ------- Total interest income $18,763 $24,349 ------- ------- INTEREST EXPENSE: Deposits $ 6,265 $12,027 Short-term borrowings 139 833 Long-term borrowings 655 721 Company obligated mandatorily redeemable preferred securities 563 - ------- ------- Total interest expense $ 7,622 $13,581 ------- ------- Net interest income $11,141 $10,768 Provision for loan losses 565 400 ------- ------- Net interest income after provision for loan losses $10,576 $10,368 ------- ------- 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 ------- ------- Total other income $ 5,464 $ 5,392 ------- ------- 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 ------- ------- Total other expenses $ 8,995 $ 9,328 ------- ------- 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. </TABLE> 4 of 20
<TABLE> <CAPTION> 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. </TABLE> 5 of 20
<TABLE> <CAPTION> 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 ======= ======= </TABLE> 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. 6 of 20
NOTE 2: LOANS The major classifications of loans at March 31, 2002 and December 31, 2001 were as follows: <TABLE> <CAPTION> 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 ==================================== </TABLE> 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: <TABLE> <CAPTION> 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 ======== ======== ======== ======== </TABLE> 7 of 20
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: <TABLE> <CAPTION> 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 =========== =========== </TABLE> 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. 8 of 20
The following table sets forth the components of non-performing assets and past due loans. <TABLE> <CAPTION> 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% ======= ======= </TABLE> 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. 9 of 20
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. 10 of 20
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. <TABLE> <CAPTION> 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 ====== ====== </TABLE> 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 11 of 20
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. <TABLE> <CAPTION> 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 <CAPTION> 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 </TABLE> 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. 12 of 20
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. 13 of 20
The following table sets forth the static rate-sensitivity analysis of the Corporation as of March 31, 2002. <TABLE> <CAPTION> 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 ===================================================================== </TABLE> 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. 14 of 20
<TABLE> <CAPTION> 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. </TABLE> 15 of 20
<TABLE> <CAPTION> 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. </TABLE> 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: <TABLE> <CAPTION> 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%) </TABLE> 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 19 of 20
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