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 9/30/2001 Commission File No. 0-15950 FIRST BUSEY CORPORATION (Exact name of registrant as specified in its charter) Nevada 37-1078406 ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer 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 practicable date. <TABLE> <CAPTION> Class Outstanding at October 31, 2001 - --------------------------------------------------------------------- <s> <c> Common Stock, without par value 13,673,452 </TABLE> 1 of 24
PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS 2 of 24
<TABLE> <CAPTION> FIRST BUSEY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 2001, AND DECEMBER 31, 2000 (UNAUDITED) September 30, 2001 December 31, 2000 ----------------------------------------- (Dollars in thousands) <s> <c> <c> ASSETS Cash and due from banks $ 52,543 $ 58,585 Federal funds sold 45,800 34,700 Securities available for sale (amort. cost 2001 $227,041; 2000 $218,790) 241,450 228,597 Loans 935,679 984,369 Allowance for loan losses (12,977) (12,268) -------------------- ------------------- Net loans 922,702 972,101 Premises and equipment 30,090 31,253 Goodwill and other intangibles 10,999 12,255 Other assets 22,372 17,553 -------------------- ------------------- Total assets $ 1,325,956 $ 1,355,044 ==================== =================== LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Deposits: Non-interest bearing $ 135,829 $ 134,669 Interest bearing 988,366 1,014,118 -------------------- ------------------- Total deposits $ 1,124,195 $ 1,148,787 Securities sold under agreements to repurchase 13,199 18,890 Short-term borrowings 5,283 32,283 Long-term debt 45,000 52,976 Company obligated mandatorily redeemable preferred securities of subsidiary trust holding solely subordinated debentures 25,000 - Other liabilities 9,220 9,783 -------------------- ------------------- Total liabilities $ 1,221,897 $ 1,262,719 -------------------- ------------------- STOCKHOLDERS' EQUITY Preferred stock $ - $ - Common stock 6,291 6,291 Surplus 21,447 22,044 Retained earnings 79,959 73,215 Accumulated other comprehensive income 8,693 5,917 -------------------- ------------------- Total stockholders' equity before treasury stock, unearned ESOP shares and deferred compensation for stock grants $ 116,390 $ 107,467 Treasury stock, at cost (10,046) (12,858) Unearned ESOP shares and deferred compensation for stock grants (2,285) (2,284) -------------------- ------------------- Total stockholders' equity $ 104,059 $ 92,325 -------------------- ------------------- Total liabilities and stockholders' equity $ 1,325,956 $ 1,355,044 ==================== =================== Common Shares outstanding at period end 13,660,296 13,451,180 ==================== =================== <FN> See accompanying notes to unaudited consolidated financial statements. </TABLE> 3 of 24
<TABLE> <CAPTION> FIRST BUSEY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 (UNAUDITED) 2001 2000 -------- -------- (Dollars in thousands, except per share amounts) <s> <c> <c> INTEREST INCOME: Interest and fees on loans $59,214 $58,525 Interest and dividends on investment securities: Taxable interest income 7,746 7,898 Non-taxable interest income 1,554 1,522 Dividends 86 95 Interest on federal funds sold 1,028 317 -------- -------- Total interest income $69,628 $68,357 -------- -------- INTEREST EXPENSE: Deposits $32,819 $30,008 Short-term borrowings 1,865 4,186 Long-term debt 1,913 2,183 Company obligated mandatorily redeemable preferred securities of subsidiary trust holding solely subordinated debentures 647 - -------- -------- Total interest expense $37,244 $36,377 -------- -------- Net interest income $32,384 $31,980 Provision for loan losses 1,145 1,675 -------- -------- Net interest income after provision for loan losses $31,239 $30,305 -------- -------- OTHER INCOME: Trust $ 3,486 $ 3,249 Commissions and brokers' fees, net 1,670 1,408 Service charges on deposit accounts 4,429 3,886 Other service charges and fees 1,214 1,570 Security gains, net 1,076 347 Net commissions from travel services 707 700 Gain on sales of pooled loans 1,634 827 Other operating income 2,378 1,359 -------- -------- Total other income $16,594 $13,346 -------- -------- OTHER EXPENSES: Salaries and wages $13,131 $11,908 Employee benefits 2,609 2,174 Net occupancy expense of premises 2,293 2,214 Furniture and equipment expenses 2,914 2,561 Data processing 587 955 Stationery, supplies and printing 790 750 Amortization of intangible assets 1,256 1,165 Other operating expenses 5,345 4,772 -------- -------- Total other expenses $28,925 $26,499 -------- -------- Income before income taxes $18,908 $17,152 Income taxes 6,922 6,080 -------- -------- NET INCOME $11,986 $11,072 ======== ======== BASIC EARNINGS PER SHARE $ 0.89 $ 0.83 ======== ======== DILUTED EARNINGS PER SHARE $ 0.88 $ 0.81 ======== ======== DIVIDENDS DECLARED PER SHARE OF COMMON STOCK $ 0.39 $ 0.36 ======== ======== <FN> See accompanying notes to unaudited consolidated financial statements. </TABLE> 4 of 24
<TABLE> <CAPTION> FIRST BUSEY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE QUARTERS ENDED SEPTEMBER 30, 2001 AND 2000 (UNAUDITED) 2001 2000 -------- -------- (Dollars in thousands, except per share amounts) <s> <c> <c> INTEREST INCOME: Interest and fees on loans $18,701 $20,914 Interest and dividends on investment securities: Taxable interest income 2,468 2,548 Non-taxable interest income 516 511 Dividends 27 31 Interest on federal funds sold 279 22 -------- -------- Total interest income $21,991 $24,026 -------- -------- INTEREST EXPENSE: Deposits $ 9,736 $10,810 Short-term borrowings 329 1,615 Long-term debt 599 686 Company obligated mandatorily redeemable preferred securities of subsidiary trust holding solely subordinated debentures 575 - -------- -------- Total interest expense $11,239 $13,111 -------- -------- Net interest income $10,752 $10,915 Provision for loan losses 250 690 -------- -------- Net interest income after provision for loan losses $10,502 $10,225 -------- -------- OTHER INCOME: Trust $ 1,080 $ 993 Commissions and brokers' fees, net 506 453 Service charges on deposit accounts 1,522 1,378 Other service charges and fees 399 425 Security gains, net 204 322 Net commissions from travel services 181 216 Gain on sales of pooled loans 668 307 Other operating income 930 244 -------- -------- Total other income $ 5,490 $ 4,338 -------- -------- OTHER EXPENSES: Salaries and wages $ 4,490 $ 4,107 Employee benefits 806 726 Net occupancy expense of premises 760 779 Furniture and equipment expenses 946 884 Data processing 196 232 Stationery, supplies and printing 249 297 Amortization of intangible assets 541 369 Other operating expenses 1,807 1,661 -------- -------- Total other expenses $ 9,795 $ 9,055 -------- -------- Income before income taxes $ 6,197 $ 5,508 Income taxes 2,336 1,975 -------- -------- NET INCOME $ 3,861 $ 3,533 ======== ======== BASIC EARNINGS PER SHARE $ 0.29 $ 0.27 ======== ======== DILUTED EARNINGS PER SHARE $ 0.28 $ 0.26 ======== ======== DIVIDENDS DECLARED PER SHARE OF COMMON STOCK $ 0.13 $ 0.12 ======== ======== <FN> See accompanying notes to unaudited consolidated financial statements. </TABLE> 5 of 24
<TABLE> <CAPTION> FIRST BUSEY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 (UNAUDITED) 2001 2000 ---------- ---------- (Dollars in thousands) <s> <c> <c> CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 11,986 $ 11,072 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization 4,301 3,906 Provision for loan losses 1,145 1,675 Decrease in deferred income taxes (1,467) (513) Amortization of investment security discounts (660) (245) Gain on sales of investment securities, net (1,076) (347) Proceeds from sales of pooled loans 176,578 40,834 Loans originated for sale (179,117) (39,972) Gain on sale of pooled loans (1,634) (827) (Gain) loss on sales and dispositions of premises and equipment (6) 1 Change in assets and liabilities: Increase in other assets (4,991) (2,105) Increase (decrease) in accrued expenses 694 (1,564) (Decrease) increase in interest payable (1,729) 744 Decrease in income taxes receivable 172 - Increase in income taxes payable 113 2,680 ---------- ---------- Net cash provided by operating activities $ 4,309 $ 15,339 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sales of securities classified available for sale $ 4,507 $ 16,245 Proceeds from maturities of securities classified available for sale 91,962 29,268 Purchase of securities classified available for sale (102,984) (35,433) Increase in federal funds sold (11,100) (1,600) Decrease (increase) in loans 52,427 (100,745) Purchases of premises and equipment (1,879) (5,828) Proceeds from sales of premises and equipment 7 576 ---------- ---------- Net cash provided by (used in) investing activities $ 32,940 ($97,517) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES Net (decrease) increase in certificates of deposit (73,275) 45,773 Net increase in demand, money market and saving deposits 48,683 33,900 Cash dividends paid (5,242) (4,808) Purchase of treasury stock (2,535) (1,881) Proceeds from sale of treasury stock 4,745 400 Proceeds from short-term borrowings 3,500 55,925 Principal payments on short-term borrowings (30,500) (65,932) Proceeds from long-term borrowings 2,000 18,000 Principal payments on long-term borrowings (9,976) (18,898) Proceeds from issuance of trust preferred securities 25,000 - Net decrease in securities sold under agreement to repurchase and federal funds purchased (5,691) (628) ---------- ---------- Net cash (used in) provided by financing activities ($43,291) $ 61,851 ---------- ---------- Net decrease in cash and due from banks ($6,042) ($20,327) Cash and due from banks, beginning $ 58,585 69,722 ---------- ---------- Cash and due from banks, ending $ 52,543 $ 49,395 ========== ========== <FN> See accompanying notes to unaudited consolidated financial statements. </TABLE> 6 of 24
<TABLE> <CAPTION> FIRST BUSEY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 (UNAUDITED) 2001 2000 ------- ------- (Dollars in thousands, except per share amounts) <s> <c> <c> Net Income $11,986 $11,072 ------- ------- Other comprehensive income, before tax: Unrealized gains on securities: Unrealized holding gains arising during period $ 5,678 $ 2,141 Less reclassification adjustment for gains included in net income 1,076 347 ------- ------- Other comprehensive income, before tax $ 4,602 $ 1,794 Income tax expense related to items of other comprehensive income 1,826 710 ------- ------- Other comprehensive income, net of tax $ 2,776 $ 1,084 ------- ------- Comprehensive income $14,762 $12,156 ======= ======= </TABLE> 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 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, 2001 and December 31, 2000 were as follows: <TABLE> <CAPTION> September 30, 2001 December 31, 2000 ----------------------------------------- (Dollars in thousands) <s> <c> <c> Commercial $ 115,900 $ 124,052 Real estate construction 75,511 75,672 Real estate - farmland 14,664 15,411 Real estate - 1-4 family residential mortgage 365,320 404,226 Real estate - multifamily mortgage 52,657 61,954 Real estate - non-farm nonresidential mortgage 237,821 231,230 Installment 52,913 50,980 Agricultural 20,893 20,844 ----------------------------------------- $ 935,679 $ 984,369 Less: Allowance for loan losses (12,977) (12,268) ----------------------------------------- Net loans $ 922,702 $ 972,101 ========================================= </TABLE> 7 of 24
The real estate-mortgage category includes loans held for sale with carrying values of $9,665,000 at September 30, 2001 and $5,492,000 at December 31, 2000; these loans had fair market values of $9,793,000 and $5,568,000 respectively. The following table sets forth the maturities of the loan portfolio. <TABLE> <CAPTION> 1 year or less 1 year - 5 years Over 5 years Total -------------- ---------------- ------------ ------------ <s> <c> <c> <c> <c> Commerical & Agricultural 87,761 31,331 17,701 136,793 Real Estate 129,756 311,967 304,250 745,973 Installment 10,126 39,890 2,897 52,913 -------------- ---------------- ------------ ------------ Total 227,643 383,188 324,848 935,679 ============== ================ ============ ============ Fixed 86,131 254,070 81,785 421,986 Variable 141,512 129,118 243,063 513,693 -------------- ---------------- ------------ ------------ Total 227,643 383,188 324,848 935,679 ============== ================ ============ ============ </TABLE> NOTE 3: INCOME PER SHARE Net income per common share has been computed as follows: <TABLE> <CAPTION> Three Months Ended Nine Months Ended September 30, September 30, 2001 2000 2001 2000 ----------- ----------- ----------- ----------- <s> <c> <c> <c> <c> Net income $ 3,861,000 $ 3,533,000 $11,986,000 $11,072,000 Shares: Weighted average common shares outstanding 13,495,521 13,350,088 13,455,502 13,359,036 Dilutive effect of outstanding options, as determined by the application of the treasury stock method 125,317 216,975 149,558 249,984 ----------- ----------- ----------- ----------- Weighted average common shares outstanding, as adjusted 13,620,838 13,567,063 13,605,060 13,609,020 =========== =========== =========== =========== Basic earnings per share $ 0.29 $ 0.27 $ 0.89 $ 0.83 ----------- ----------- ----------- ----------- Diluted earnings per share $ 0.28 $ 0.26 $ 0.88 $ 0.81 ----------- ----------- ----------- ----------- </TABLE> NOTE 4: TRUST PREFERRED SECURITIES On June 18, 2001, First Busey Corporation ("Corporation") issued $25 million of Trust Preferred Securities ("Securities") through First Busey Capital Trust I ("Trust"), a statutory business trust and wholly owned subsidiary of the Corporation. The Securities pay cumulative cash distributions quarterly at an annual rate of 9.00%. Proceeds from the sale of the Securities were invested by the Trust in 9.00% Junior Subordinated Deferrable Interest Debentures issued by the Corporation which represents all of the assets of the Trust. The Securities are subject to mandatory redemption, in whole or in part, upon repayment of the Junior Subordinated Debentures at the stated maturity or their earlier redemption, in each case at a redemption price equal to the aggregate liquidation preference of the Securities plus any accumulated and unpaid distributions thereon to the date of redemption. Prior redemption is permitted under certain circumstances such as changes in tax and investment company regulations. The Corporation fully and unconditionally guarantees the Securities through the combined operation of the debentures and related documents. The Corporation's obligations under the guarantee are unsecured and subordinate to all of the Corporation's senior and subordinated indebtedness. 8 of 24
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, 2001 (unaudited) when compared with December 31, 2000 and the results of operations for the nine months ended September 30, 2001 and 2000 (unaudited) and the results of operations for the three months ended September 30, 2001 and 2000 (unaudited). This discussion and analysis should be read in conjunction with the Corporation's consolidated financial statements and notes thereto appearing elsewhere in this quarterly report. FINANCIAL CONDITION AT SEPTEMBER 30, 2001 AS COMPARED TO DECEMBER 31, 2000 Total assets decreased $29,088,000, or 2.1%, to $1,325,956,000 at September 30, 2001 from $1,355,044,000 at December 31, 2000. Securities available for sale increased $12,853,000, or 5.6%, to $241,450,000 at September 30, 2001 from $228,597,000 at December 31, 2000. Loans decreased $48,690,000 or 4.9%, to $935,679,000 at September 30, 2001 from $984,369,000 at December 31, 2000, primarily due to decreases in commercial, 1-4 family residential mortgage, and multifamily mortgage loans. These decreases were partially offset by increases in non-farm nonresidential real estate and installment loans. Total deposits decreased $24,592,000, or 2.1%, to $1,124,195,000 at September 30, 2001 from $1,148,787,000 at December 31, 2000. Non-interest bearing deposits increased $1,160,000 to $135,829,000 at September 30, 2001 from $134,669,000 at December 31, 2000. Interest-bearing deposits decreased $25,752,000 to $988,366,000 at September 30, 2001 from $1,014,118,000 at December 31, 2000. Short-term borrowings decreased $27,000,000 to $5,283,000 at September 30, 2001, as compared to $32,283,000 at December 31, 2000. In June, 2001, the Corporation issued $25,000,000 in trust preferred securities. The proceeds were used to reduce short-term debt associated with the purchase of Busey Bankfsb in October, 1999. Long-term debt decreased $7,976,000 to $45,000,000 at September 30, 2001, as compared to $52,976,000 at December 31, 2000. In the first nine months of 2001, the Corporation repurchased 133,734 shares of its common stock at an aggregate cost of $2,535,000. 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. The following table sets forth the components of non-performing assets and past due loans. <TABLE> <CAPTION> September 30, 2001 December 31, 2000 -------------------- ------------------- (Dollars in thousands) <s> <c> <c> Non-accrual loans $ 930 $ 767 Loans 90 days past due, still accruing 1,543 4,667 Restructured loans - - Other real estate owned 30 230 Non-performing other assets 1 11 -------------------- ------------------- Total non-performing assets $ 2,504 $ 5,675 ==================== =================== Total non-performing assets as a percentage of total assets 0.19% 0.42% ==================== =================== Total non-performing assets as a percentage of loans plus non- performing assets 0.27% 0.57% ==================== =================== </TABLE> The ratio of non-performing assets to loans plus non-performing assets decreased to 0.27% at September 30, 2001 from 0.57% at December 31, 2000. This was due primarily to a decrease in the balance of loans 90 days past due and still accruing, partially offset by an increase in non-accrual loans. The overall reduction in non-performing assets is the result of management's efforts to implement more vigorous underwriting standards and more aggressive collection procedures to reduce the balance of non-performing loans. 9 of 24
RESULTS OF OPERATIONS NINE MONTHS ENDED SEPTEMBER 30, 2001 AS COMPARED TO SEPTEMBER 30, 2000 SUMMARY - ------- Net income for the nine months ended September 30, 2001 increased 8.3% to $11,986,000 as compared to $11,072,000 for the comparable period in 2000. Diluted earnings per share increased 8.6% to $.88 at September 30, 2001 as compared to $.81 for the same period in 2000. Operating earnings, which exclude security gains and the related tax expense, were $11,337,000, or $.83 per share for the nine months ended September 30, 2001, as compared to $10,863,000, or $.80 per share for the same period in 2000. The Corporation's return on average assets was 1.22% for the nine months ended September 30, 2001, as compared to 1.19% for the comparable period in 2000. The return on average assets from operations of 1.15% for the nine months ended September 30, 2001 was 2 basis points lower than the 1.17% level achieved in the comparable period of 2000. Net interest margin, the Corporation's net interest income expressed as a percentage of average earning assets stated on a fully taxable equivalent basis, was 3.61% for the nine months ended September 30, 2001, or 20 basis points lower than the 3.81% for the same period in 2000. The net interest margin expressed as a percentage of average total assets, also on a fully taxable equivalent basis, was 3.39% for the nine months ended September 30, 2001, or 16 basis points lower than the to 3.55% for the same period in 2000. As interest rates have declined, the yield on interest-earning assets has decreased by greater degree than the cost of interest-bearing liabilities. During the nine months ended September 30, 2001, the Corporation recognized security gains of approximately $649,000, after income taxes, representing 5.4% of net income. During the same period in 2000, security gains of $209,000, after income taxes, were recognized, representing 1.9% of net income. INTEREST INCOME - --------------- Interest income, on a tax equivalent basis, for the nine months ended September 30, 2001 increased 1.9% to $70,636,000 from $69,337,000 for the comparable period in 2000. The increase in interest income resulted primarily from an increase in average earning assets of $81,489,000 for the period ended September 30, 2001, as compared to the same period of 2000. The growth in average interest-earning assets was offset by the decline in yields earned on all categories of interest-earning assets. The average yield on interest-earning assets for the period ended September 30, 2001, decreased to 7.63% from 8.01% for the same period in 2000. INTEREST EXPENSE - ---------------- Total interest expense increased $867,000 or 2.4% for the nine months ended September 30, 2001 as compared to the prior year period. Most of the increase in interest expense is attributable to growth in the average balances of interest-bearing checking accounts, money market deposits, and time deposits. This volume growth was partially offset by a decrease in the average balance of short-term borrowings. The average rate paid on interest-bearing liabilities fell 11 basis points for the nine months ending September 30, 2001, as compared to the prior year period. This decline is primarily due to decreases in the rates paid on savings, money market deposits, and other short-term debt, which were partially offset by increases in the rates paid on time deposits and long-term debt. PROVISION FOR LOAN LOSSES - ------------------------- The provision for loan losses of $1,145,000 for the nine months ended September 30, 2001 is $530,000 less than the provision for the comparable period in 2000. The provision and the net charge-offs of $436,000 for the period resulted in the reserve representing 1.39% of total loans and 518% of non-performing loans at September 30, 2001, as compared to the reserve representing 1.25% of total loans and 216% of non-performing loans at December 31, 2000. 10 of 24
OTHER INCOME, OTHER EXPENSE AND INCOME TAXES - -------------------------------------------- Total other income, excluding security gains, increased $2,519,000 or 19.4% for the nine months ended September 30, 2001, as compared to the same period in 2000. This increase is due primarily to growth in trust, commissions and brokers' fees, service charges on deposit accounts, gains on the sale of pooled loans, and other operating income. Gains of $1,634,000 were recognized on the sale of $174,944,000 of pooled loans for the nine months ended September 30, 2001 as compared to gains of $827,000 on the sale of $40,007,000 of pooled loans in the prior year period. Management anticipates continued sales from the current mortgage loan production of the Corporation in order to maintain the asset/liability structure 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 expenses increased 9.2% or $2,426,000 for the nine months ended September 30, 2001 as compared to the same period in 2000. Salaries and wages expense increased $1,223,000 or 10.3%, and employee benefits expense increased $435,000 or 20.0% for the nine months ended September 30, 2001, as compared to the same period last year. The Corporation had 490 full time equivalent employees as of September 30, 2001 as compared to 495 as of September 30, 2000. Occupancy and furniture and equipment expenses increased 9.0% to $5,207,000 for the nine months ended September 30, 2001 from $4,775,000 in the prior year period. In October 2000, Busey Bank fsb opened a full-service branch office in Fort Myers, Florida. The majority of the increases in salaries and wages, occupancy, and furniture and equipment expenses can be attributed to the opening of this branch office. Data processing expense decreased $368,000 to $587,000 for the nine months ended September 30, 2001 from the prior year period. During June of 2000, Busey Bankfsb converted from its existing outsourced data processor to a solution provided in-house by Busey Bank. Nonrecurring costs associated with this conversion and included in 2000 data processing expenses totaled $180,000. The Corporation's net overhead expense, total non-interest expense less non-interest income, excluding security gains, divided by average assets, decreased to 1.36% for the nine months ended September 30, 2001 from 1.45% 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, 2001 was 59.1% as compared to 57.7% for the prior year period. When the gains on the sales of pooled loans are excluded, these ratios are 61.2% and 58.7%, 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, 2001 increased to $6,922,000 as compared to $6,080,000 for the comparable period in 2000. As a percent of income before taxes, the provision for income taxes increased to 36.6% for the nine months ended September 30, 2001 from 35.4% for the same period in 2000. RESULTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 2001 AS COMPARED TO SEPTEMBER 30, 2000 SUMMARY - ------- Net income for the three months ended September 30, 2001 increased 9.3% to $3,861,000 as compared to $3,533,000 for the comparable period in 2000. Diluted earnings per share increased 7.7% to $.28 at September 30, 2001 as compared to $.26 for the same period in 2000. 11 of 24
Operating earnings, which exclude security gains and the related tax expense, were $3,738,000, or $.27 per share for the three months ended September 30, 2001, as compared to $3,339,000, or $.25 per share for the same period in 2000. The Corporation's return on average assets was 1.17% for the three months ended September 30, 2001, as compared to 1.10% achieved for the comparable period in 2000. The return on average assets from operations of 1.14% for the three months ended September 30, 2001 is 10 basis points higher than the 1.04% level achieved in the comparable period of 2000. The net interest margin expressed as a percentage of average earning assets was 3.59% for the three months ended September 30, 2001, or 17 basis points lower than the 3.76% level achieved for the like period in 2000. The net interest margin expressed as a percentage of average total assets was 3.37% for the three months ended September 30, 2001, or 13 basis points lower than the 3.50% for the same period in 2000. During the three months ended September 30, 2001, the Corporation recognized security gains of approximately $123,000, after income taxes, representing 3.2% of net income. During the same period in 2000, security gains of approximately $194,000, after income taxes, were recognized, representing 5.5% of net income. INTEREST INCOME - --------------- Interest income on a fully taxable equivalent basis decreased $1,981,000 or 8.2% for the three months ended September 30, 2001 from the same period in 2000. The increase resulted from a higher level of interest income on greater average volumes of Federal funds sold and investment securities offset by a decline in the average balance of loans outstanding for the three months ended September 30, 2001 as compared to the same period of 2000. The yield on interest earning assets for the three months ended September 30, 2001, decreased to 7.23% from 8.15% for the same period in 2000, as all categories of interest-earning assets have been impacted by the decline in market interest rates. INTEREST EXPENSE - ---------------- Total interest expense decreased $1,837,000, or 14.0%, for the three months ended September 30, 2001 as compared to the prior year period. This decrease resulted from decreases in the average volumes of short-term borrowings offset by increases in the average balances of money market deposits and long-term debt. Most of the decrease can be attributed to the decline in the average rates paid on all categories of interest-bearing deposits and short-term borrowings offset by an increase in the average rate paid on long-term debt. OTHER INCOME, OTHER EXPENSE AND INCOME TAXES - -------------------------------------------- Total other income, excluding security transactions, increased $1,270,000 or 31.6% for the three months ended September 30, 2001 as compared to the same period in 2000. This was a combination of increased trust revenue, commissions and brokers' fees, service charges on deposit accounts, gains on sales of pooled loans, and other operating income. Gains of $668,000 were recognized on the sale of $77,519,000 of pooled loans for the three months ended September 30, 2001 as compared to gains of $307,000 on the sale of $19,734,000 of pooled loans in the prior year period. Total other expenses increased 8.2% or $740,000 for the three months ended September 30, 2001 as compared to the same period in 2000. Salaries and wages expense increased $383,000 or 9.3% and employee benefits expense increased $80,000 or 11.0% for the three months ended September 30, 2001, as compared to the same period last year. Occupancy and furniture and equipment expenses increased 2.6% to $1,706,000 for the three months ended September 30, 2001 from $1,663,000 in the prior year period. The consolidated efficiency ratio for the three months ended September 30, 2001 was 59.8% as compared to 59.4% for the prior year period. When the gains on the sales of pooled loans are excluded, these ratios are 62.4% and 60.6%, respectively. The change in the current year efficiency ratio is due to the income and expense items noted above. 12 of 24
Income taxes for the three months ended September 30, 2001 increased to $2,336,000 as compared to $1,975,000 for the comparable period in 2000. As a percent of income before taxes, the provision for income taxes increased to 37.7% for the three months ended September 30, 2001 from 35.9% for the same period in 2000. NEW ACCOUNTING PRONOUNCEMENTS - ----------------------------- In September 2000, Statement on Financial Accounting Standards No. 140 "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities" was issued to replace Statement on Financial Accounting Standards No. 125 which was issued in June 1996. Statement No. 125 addressed issues related to transfers of financial assets in which the transferor has some continuing involvement with the transferred assets or with the transferee. Statement No. 140 resolves implementation issues which arose as a result of Statement No. 125, but carries forward most of Statement No. 125's provisions. Statement No. 140 is effective for transfers occurring after March 31, 2001, and for disclosures relating to securitization transactions and collateral for fiscal years ending after December 15, 2000. Management does not believe the adoption of Statement No. 140 will have a significant impact on its financial statements. In June 2001, the Financial Accounting Standards Board issued Statement No. 141, "Business Combinations" (SFAS No. 141). SFAS No. 141 addresses financial accounting and reporting for business combinations and supersedes APB Opinion No. 16, "Business Combinations" and SFAS No. 38, "Accounting for Preacquisition Contingencies of Purchased Enterprises." SFAS No. 141 requires all business combinations in the scope of this SFAS to be accounted for using the purchase method. SFAS No. 141 is effective for business combinations initiated after June 30, 2001, and all business combinations accounted for using the purchase method for which the acquisition date is July 1, 2001, or later. In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 142, "Goodwill and Other Intangible Assets" (FAS 142). The standard addresses financial accounting and reporting for acquired goodwill and other intangible assets and supersedes APB Opinion No. 17, "Intangible Assets." It addresses how intangible assets should be accounted for at acquisition and in subsequent periods. Most significantly, goodwill and intangible assets that have indefinite useful lives will not be amortized but rather will be tested at least annually for impairment. Intangible assets that have finite useful lives will continue to be amortized over their useful lives. The standard also provides specific guidance for testing goodwill for impairment and requires additional disclosures about goodwill and intangible assets. FAS 142 is effective for fiscal years beginning after December 15, 2001. The standard is required to be applied to the beginning of an entity's fiscal year and to be applied to all goodwill and other intangible assets recognized in its financial statements at that date. Impairment losses for goodwill and other intangible assets with indefinite lives that arise due to the initial application of this Standard are to be reported as resulting from a change in accounting principle. The Company does not believe the adoption of the Standard will have a material impact on the consolidated financial statements. In June 2001, Statement on 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 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. In August 2001, Statement on Financial Accounting Standards No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets" was issued to supersede Statement No. 121 "Accounting for the Impairment and for Long-Lived Assets to Be Disposed Of", and the accounting and reporting provisions of APB Opinion No. 30 "Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions." Statement No. 144 is effective for financial statements issued for fiscal years beginning after December 15, 2001, and interim periods within those fiscal years, with early application encouraged. 13 of 24
REPORTABLE SEGMENTS AND RELATED INFORMATION - ------------------------------------------- First Busey Corporation has three reportable segments, Busey Bank, Busey Bankfsb, 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 central 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 Bankfsb provides a full range of banking services to individual and corporate customers in McLean County. 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 in the annual report. The Corporation accounts for intersegment revenue and transfers at current market value. <TABLE> <CAPTION> September 30, 2001 --------------------------------------------------------------------------------------------------- First Busey Trust & Consolidated Busey Bank Busey Bankfsb Investment Co. All Other Totals Eliminations Totals --------------------------------------------------------------------------------------------------- <s> <c> <c> <c> <c> <c> <c> <c> Interest income $ 52,921 $ 16,482 $ 137 $ 144 $ 69,684 $ (56) $ 69,628 Interest expense 25,990 9,516 - 1,715 37,221 23 37,244 Other income 9,230 1,856 3,522 16,801 31,409 (14,815) 16,594 Net income 10,678 1,593 1,076 12,168 25,515 (13,529) 11,986 Total assets 1,033,876 283,461 3,891 142,482 1,463,710 (137,754) 1,325,956 <CAPTION> September 30, 2000 --------------------------------------------------------------------------------------------------- First Busey Trust & Consolidated Busey Bank Busey Bankfsb Investment Co. All Other Totals Eliminations Totals --------------------------------------------------------------------------------------------------- <s> <c> <c> <c> <c> <c> <c> <c> Interest income $ 56,366 $ 11,805 $ 133 $ 104 $ 68,408 $ (51) $ 68,357 Interest expense 28,144 6,251 - 1,920 36,315 62 36,377 Other income 7,492 680 3,281 16,132 27,585 (14,239) 13,346 Net income 10,355 1,051 1,096 11,509 24,011 (12,939) 11,072 Total assets 1,036,795 273,328 3,554 133,069 1,446,746 (123,744) 1,323,002 </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. 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 and the Federal Home Loan Bank of Chicago. The Corporation has an operating line with American National Bank and Trust Company of Chicago in the amount of $10,000,000 with $7,000,000 available as of September 30, 2001. 14 of 24
The Corporation's dependence on large liabilities (defined as time deposits over $100,000 and short-term borrowings) decreased to 9.9% at September 30, 2001 from 17.3% at December 31, 2000. This is the ratio of total large liabilities to total liabilities, and is low in comparison to the Corporation's peers. This decrease was due to a $64,564,000 decrease in time deposits over $100,000 combined with a $32,691,000 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 nine months ended September 30, 2001, the Corporation earned $11,986,000 and paid dividends of $5,242,000 to stockholders, resulting in a retention of current earnings of $6,744,000. The Corporation's dividend payout for the nine months ended September 30, 2001 was 43.7%. The Corporation's total risk-based capital ratio was 13.89% and the Tier 1 leverage ratio was 6.59% as of September 30, 2001, as compared to 9.43% and 5.71% respectively as of December 31, 2000. The Corporation and its bank subsidiary were above all minimum required capital ratios as of September 30, 2001. <TABLE> <CAPTION> To Be Well Capitalized Under For Capital Prompt Corrective Actual Adequacy Purposes Action Provisions ------------------------------------------------------------ Amount Ratio Amount Ratio Amount Ratio ------------------------------------------------------------ (Dollars in Thousands) <s> <c> <c> <c> <c> <c> <c> Total Capital (to Risk Weighted Assets) $120,072 13.28% $72,323 8.00% $90,403 10.00% Tier I Capital (to Risk Weighted Assets) $ 79,875 8.84% $36,162 4.00% $54,242 6.00% Tier I Capital (to Average Assets) $ 79,875 6.19% $51,630 4.00% $64,537 5.00% </TABLE> 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. 15 of 24
The following table sets forth the static rate-sensitivity analysis of the Corporation as of September 30, 2001. <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 $ 7,495 $ - $ - $ - $ - $ 7,495 Federal Funds Sold 45,800 - - - - 45,800 Investment securities U.S. Governments 8,536 37,486 21,121 27,654 77,296 172,093 Obligations of states and political subdivisions - 3,409 2,012 62 39,206 44,689 Other securities 8,982 1,504 278 2,431 11,473 24,668 Loans (net of unearned int.) 312,073 78,142 75,319 116,377 353,768 935,679 -------------------------------------------------------------------------- Total rate-sensitive assets $ 382,886 $ 120,541 $ 98,730 $ 146,524 $481,743 $1,230,424 -------------------------------------------------------------------------- Interest bearing transaction deposits $ 48,075 $ - $ - $ - $ - $ 48,075 Savings deposits 90,510 - - - - 90,510 Money market deposits 377,188 - - - - 377,188 Time deposits 53,339 75,030 109,282 122,759 112,183 472,593 Short-term borrowings: Federal funds purchased & repurchase agreements 1,699 1,000 1,500 3,000 6,000 13,199 Other - - 5,283 - - 5,283 Long-term debt 8,000 12,000 8,000 - 17,000 45,000 Company obligated mandatorily redeemable preferred securities of subsidiary trust holding solely subordinated debentures - - - - 25,000 25,000 -------------------------------------------------------------------------- Total rate-sensitive liabilities $ 578,811 $ 88,030 $ 124,065 $ 125,759 $160,183 $1,076,848 -------------------------------------------------------------------------- Rate-sensitive assets less rate-sensitive liabilities ($195,925) $ 32,511 ($25,335) $ 20,765 $321,560 $ 153,576 -------------------------------------------------------------------------- Cumulative gap ($195,925) ($163,414) ($188,749) ($167,984) $153,576 ============================================================== Cumulative gap as a percentage of total rate-sensitive assets -15.92% -13.28% -15.34% -13.65% 12.48% ========================================================================== Cumulative ratio (cumulative RSA/RSL) 0.66 0.75 0.76 0.82 1.14 ========================================================================== </TABLE> The foregoing table shows a negative (liability sensitive) rate-sensitivity gap of $195.9 million in the 1-30 day repricing category. On a cumulative basis, the gap becomes slightly less liability sensitive in the period from 31 to 90 days as rate-sensitive assets that reprice are greater in volume than rate- sensitive liabilities that are subject to repricing in the same respective time period. In the period from 91 days to180 days, the gap again becomes liability-sensitive, and then switches back to an asset-sensitive position beyond 180 days. If rates on all rate-sensitive assets and liabilities moved by the same amount in response to a given change in market interest rates, then the composition of the gap structure at September 30, 2001, would 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. 16 of 24
<TABLE> <CAPTION> FIRST BUSEY CORPORATION AND SUBSIDIARIES AVERAGE BALANCE SHEETS AND INTEREST RATES NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 2001 2000 -------------------------------------------------------------- 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 $ 30,286 $ 1,028 4.54% $ 7,343 $ 317 5.77% Investment securities U.S. Government obligations 159,103 6,709 5.64% 164,802 7,151 5.80% Obligations of states and political subdivisions(1) 43,843 2,391 7.29% 40,680 2,342 7.70% Other securities 37,706 1,124 3.99% 21,762 842 5.17% Loans (net of unearned interest)(1) (2) 967,198 59,384 8.21% 922,060 58,685 8.51% --------------------- --------------------- Total interest- earning assets $1,238,136 $ 70,636 7.63% $1,156,647 $ 69,337 8.01% ======== ======== Cash and due from banks 31,438 33,559 Premises and equipment 30,550 30,172 Reserve for possible loan losses (12,664) (10,836) Other assets 28,575 32,811 ----------- ----------- Total Assets $1,316,035 $1,242,353 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Interest bearing transaction deposits $ 36,881 651 2.36% $ 26,860 $ 568 2.83% Savings deposits 89,975 1,736 2.58% 93,942 2,136 3.04% Money market deposits 347,173 7,820 3.01% 317,156 8,008 3.38% Time deposits 525,074 22,612 5.76% 470,303 19,296 5.49% Short-term borrowings: Federal funds purchased and Repurchase agreements 16,940 797 6.29% 32,339 1,510 6.24% Other 21,173 1,068 6.74% 48,253 2,676 7.41% Long-term debt 46,158 1,913 5.54% 53,304 2,183 5.48% Company obligated mandatorily redeemable preferred securities of subsidiary trust holding solely subordinated debentures 9,480 647 9.12% - - - --------------------- --------------------- Total interest bearing liabilities $1,092,854 $ 37,244 4.56% $1,042,157 36,377 4.67% ======== ======== Net interest spread 3.07% 3.34% ======= ======= Demand deposits 115,956 107,541 Other liabilities 10,046 9,357 Stockholders' equity 97,179 83,298 ----------- ----------- Total Liabilities and Stockholders' Equity $1,316,035 $1,242,353 =========== =========== Interest income / earning assets(1) $1,238,136 70,636 7.63% $1,156,647 69,337 8.01% Interest expense / earning assets $1,238,136 37,244 4.02% $1,156,647 36,377 4.20% ----------------- ----------------- Net interest margin(1) $ 33,392 3.61% $ 32,960 3.81% ================= ================= <FN> (1) On a tax-equivalent basis, assuming a federal income tax rate of 35% for 2001 and 2000. (2) Non-accrual loans have been included in average loans, net of unearned interest. </TABLE> 17 of 24
<TABLE> <CAPTION> FIRST BUSEY CORPORATION AND SUBSIDIARIES CHANGES IN NET INTEREST INCOME NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 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 $ 763 ($52) $ 711 Investment securities: U.S. Government obligations (243) (199) (442) Obligations of states and political subdivisions(2) 152 (103) 49 Other securities 411 (129) 282 Loans(2) 2,814 (2,115) 699 -------------------------------- Change in interest income(2) $ 3,897 ($2,598) $ 1,299 -------------------------------- Increase (decrease) in interest expense: Interest-bearing transaction deposits $ 148 ($65) $ 83 Savings deposits (87) (313) (400) Money market deposits 720 (908) (188) Time deposits 2,326 990 3,316 Short-term borrowings: Federal funds purchased and repurchase Agreements (725) 12 (713) Other (1,385) (223) (1,608) Long-term debt (296) 26 (270) Company obligated mandatorily redeemable preferred securities of subsidiary trust holding solely subordinated debentures 647 - 647 -------------------------------- Change in interest expense $ 1,348 ($481) $ 867 -------------------------------- Increase in net interest income(2) $ 2,549 ($2,117) $ 432 ================================ <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 2001 and 2000. </TABLE> 18 of 24
<TABLE> <CAPTION> FIRST BUSEY CORPORATION AND SUBSIDIARIES AVERAGE BALANCE SHEETS AND INTEREST RATES QUARTERS ENDED SEPTEMBER 30, 2001 AND 2000 2001 2000 -------------------------------------------------------------- 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 $ 31,924 $ 279 3.47% $ 1,324 $ 22 6.59% Investment securities U.S. Government obligations 159,408 2,166 5.39% 154,154 2,265 5.83% Obligations of states and political subdivisions(1) 44,042 794 7.15% 41,017 786 7.60% Other securities 38,707 330 3.38% 20,044 314 6.22% Loans (net of unearned interest)(1) (2) 951,151 18,756 7.82% 966,364 20,919 8.59% --------------------- --------------------- Total interest earning assets $1,225,232 $ 22,325 7.23% $1,182,903 $ 24,306 8.15% ======== ======== Cash and due from banks 32,049 37,883 Premises and equipment 30,166 30,743 Reserve for possible loan losses (12,898) (11,194) Other assets 29,258 33,109 ----------- ----------- Total Assets $1,303,807 $1,273,444 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Interest bearing transaction deposits $ 35,514 $ 174 1.94% $ 34,096 $ 251 2.91% Savings deposits 91,723 511 2.21% 90,230 700 3.08% Money market deposits 363,075 2,473 2.70% 311,938 2,812 3.58% Time deposits 490,524 6,578 5.32% 488,676 7,049 5.72% Short-term borrowings: Federal funds purchased and 15,878 227 5.67% 41,945 675 6.38% repurchase agreements Other 6,033 102 6.71% 47,015 927 7.82% Long-term debt 43,456 599 5.47% 53,220 662 4.94% Company obligated mandatorily redeemable preferred securities of subsidiary trust holding solely subordinated debentures 25,000 575 9.13% - - - --------------------- --------------------- Total interest bearing liabilities $1,071,203 $ 11,239 4.16% $1,067,120 $ 13,076 4.86% ======== ======== Net interest spread 3.07% 3.29% ======= ======= Demand deposits 121,866 110,355 Other liabilities 9,849 10,038 Stockholders' equity 100,889 85,931 ----------- ----------- Total Liabilities and Stockholders' Equity $1,303,807 $1,273,444 =========== =========== Interest income / earning assets(1) $1,225,232 $ 22,325 7.23% $1,182,903 $ 24,306 8.15% Interest expense / earning assets $1,225,232 $ 11,239 3.64% $1,182,903 $ 13,076 4.39% ----------------- ----------------- Net interest margin(1) $ 11,086 3.59% $ 11,230 3.76% ================= ================= <FN> (1) On a tax-equivalent basis, assuming a federal income tax rate of 35% for 2001 and 2000. (2) Non-accrual loans have been included in average loans, net of unearned interest. </TABLE> 19 of 24
<TABLE> <CAPTION> FIRST BUSEY CORPORATION AND SUBSIDIARIES CHANGES IN NET INTEREST INCOME QUARTERS ENDED SEPTEMBER 30, 2001 AND 2000 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 $ 262 ($5) $ 257 Investment securities: U.S. Government obligations 82 (181) (99) Obligations of states and political subdivisions(2) 41 (33) 8 Other securities 203 (187) 16 Loans(2) (325) (1,838) (2,163) --------------------------------- Change in interest income(2) $ 263 ($2,244) ($1,981) --------------------------------- Increase (decrease) in interest expense: Interest-bearing transaction deposits $ 11 ($88) ($77) Savings deposits 12 (201) (189) Money market deposits 416 (755) (339) Time deposits 27 (498) (471) Short-term borrowings: Federal funds purchased and repurchase agreements (380) (68) (448) Other (709) (116) (825) Long-term debt (154) 91 (63) Company obligated mandatorily redeemable preferred securities of subsidiary trust holding solely subordinated debentures 575 - 575 --------------------------------- Change in interest expense ($202) ($1,635) ($1,837) --------------------------------- Decrease in net interest income (2) $ 465 ($609) ($144) ================================= <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 2001 and 2000. </TABLE> 20 of 24
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 the 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. The 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 the 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 the Corporation. 21 of 24
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK MARKET RISK - ----------- Market risk is the risk of change in asset values due to movements in underlying market rates and prices. Interest rate risk is the risk to earnings and capital arising from movements in interest rates. Interest rate risk is the most significant market risk affecting the Corporation as other types of market risk, such as foreign currency exchange rate risk and commodity price risk, do not arise in the normal course of the Corporation's business activities. The Corporation's has an asset-liability committee which meets monthly to review current market conditions and attempts to structure the Bank's and Thrift's balance sheets to ensure stable net interest income despite potential changes in interest rates with all other variables constant. The asset-liability committee uses 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 committee 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 on page 16. The committee does 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 committee supplements 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 out over a one-year period and net interest income is calculated under current market rates, and then assuming permanent instantaneous shifts in the yield curve of +/- 100 basis point 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 September 30, 2001, is as follows: <TABLE> <CAPTION> Basis Point Changes ---------------------------------- -200 -100 +100 +200 ---------------------------------- <s> <c> <c> <c> <c> Percentage change in net interest income due to an immediate (3.50%) 0.36% 0.22% 0.42% change in interest rates over a one-year period </TABLE> 22 of 24
PART II - OTHER INFORMATION ITEM 1: Legal Proceedings Not applicable ITEM 2: Changes in Securities and Use of Proceeds Not applicable ITEM 3: Defaults Upon Senior Securities Not Applicable ITEM 4: Submission of Matters to a Vote of Security Holders Not Applicable ITEM 5: Other Information Not Applicable ITEM 6: Exhibits and Reports on Form 8-K There were no reports on Form 8-K filed during the three months ending September 30, 2001. 23 of 24
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused the report to be signed on its behalf by the undersigned thereunto duly authorized. FIRST BUSEY CORPORATION (REGISTRANT) By: //Douglas C. Mills// ----------------------- Douglas C. Mills Chairman of the Board By: //Barbara J. Jones// ----------------------- Barbara J. Jones Chief Financial Officer Date: November 14, 2001 24 of 24