Business Context and Reporting Period
Company: First Busey Corporation (Nevada)
Filing Type: Form 10-Q (Unaudited)
Reporting Period: Three months ended March 31, 2001
Business Overview: First Busey Corporation operates through three reportable segments: Busey Bank, Busey Bank fsb, and First Busey Trust & Investment Co. The company provides full-range banking services, trust, and asset management primarily in Illinois, Indiana, and Florida.
Key Financial Metrics
| Metric | Q1 2001 | Q1 2000 |
|---|---|---|
| Net Income | $4,098,000 | $3,607,000 |
| Diluted EPS | $0.30 | $0.26 |
| Total Assets | $1,331,401,000 | $1,227,487,000 (Year-end 2000: $1,355,044,000) |
| Total Loans (Net) | $959,956,000 | $972,101,000 (Year-end 2000) |
| Total Deposits | $1,131,789,000 | $1,148,787,000 (Year-end 2000) |
| Net Interest Margin | 3.60% | 3.74% |
| Return on Average Assets | 1.25% | 1.18% |
| Efficiency Ratio | 56.6% | 55.5% |
| Operating Cash Flow | ($1,561,000) | $7,978,000 |
| Investing Cash Flow | $16,053,000 | ($25,576,000) |
| Financing Cash Flow | ($30,891,000) | ($22,442,000) |
Material Changes vs. Prior Period
- Profitability: Net income increased 13.6% year-over-year to $4.098 million. Diluted EPS rose 15.4% to $0.30. Operating earnings (excluding security gains) were $3.705 million ($0.27/share).
- Balance Sheet: Total assets decreased 1.7% from December 31, 2000, primarily due to a $11.8 million decline in loans and an $8.1 million decrease in securities available for sale. Total deposits declined 1.5%, driven by a 12.9% drop in non-interest-bearing deposits.
- Interest Income/Expense: Interest income increased 11.9% due to higher average balances and yields. Interest expense rose 18.5% due to higher rates on interest-bearing deposits and increased balances.
- Non-Performing Assets (NPA): Total NPAs increased to $6.257 million (0.47% of total assets) from $5.675 million at year-end 2000. This was driven by an increase in non-accrual loans to $1.451 million.
- Capital: The total risk-based capital ratio improved to 10.37% from 9.43% at year-end 2000. The leverage ratio increased to 5.89% from 5.71%.
Guidance, Outlook, and Risks
- Security Gains: Net income included approximately $393,000 in after-tax security gains (9.6% of net income). Management is liquidating a qualified equity security with substantial appreciated value over a six-year period.
- Loan Sales: Gains of $433,000 were recognized on the sale of $35.4 million in loans, attributed to refinancing activity in a lower interest-rate environment. Management anticipates continued sales to maintain asset/liability structure.
- Interest Rate Sensitivity: The company has a negative (liability-sensitive) gap of $121.1 million in the 1-30 day repricing category. Management notes this structure benefits the company if interest rates fall in the near term, as liability rates reprice faster than asset rates.
- Operational Changes: Increased occupancy and equipment expenses are attributed to the opening of a new branch in Fort Myers, Florida, in October 2000.
- Risks: Forward-looking statements highlight risks related to the general economy, acquisition success, geographic growth, and key personnel retention. Market risk is primarily driven by interest rate fluctuations.
Investor Verification Checklist
- Verify the sustainability of net income growth given the 9.6% contribution from non-recurring security gains.
- Monitor the trend in non-accrual loans, which increased significantly to $1.451 million, including $1.032 million in single-family mortgages acquired in a 1999 acquisition.
- Assess the impact of the 12.9% decline in non-interest-bearing deposits on future funding costs and net interest margin.
- Review the execution of the six-year liquidation plan for the appreciated equity security and its impact on future earnings volatility.
- Confirm the performance of the new Fort Myers, Florida branch, which contributed to increased operating expenses.