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Section 1: 10-Q (10-Q)

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UNITED STATES 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 9/30/2018

 

 

 

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

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 incorporation
or organization)

 

(I.R.S. Employer Identification No.)

 

 

 

100 W. University Ave.
Champaign, Illinois

 

61820

(Address of principal executive offices)

 

(Zip code)

 

Registrant’s telephone number, including area code:  (217) 365-4544

 

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

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   No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes   No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

 

 

 

 

 

Large accelerated filer

Accelerated filer

 

 

Non-accelerated filer

Smaller reporting company

 

 

Emerging growth company

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transaction period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   No

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

 

 

 

Class

 

Outstanding at November 7, 2018

Common Stock, $.001 par value

 

48,860,557

 

 

 

 


 

Table of Contents

FIRST BUSEY CORPORATION

FORM 10-Q

September 30, 2018

 

Table of Contents

 

 

 

 

Part I 

FINANCIAL INFORMATION

 

 

 

 

Item 1. 

FINANCIAL STATEMENTS

3

 

CONSOLIDATED BALANCE SHEETS

4

 

CONSOLIDATED STATEMENTS OF INCOME

5

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

7

 

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

8

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

9

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

11

Item 2. 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

51

Item 3. 

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

70

Item 4. 

CONTROLS AND PROCEDURES

71

 

 

 

Part II 

OTHER INFORMATION

 

 

 

 

Item 1. 

LEGAL PROCEEDINGS

71

Item 1A. 

RISK FACTORS

71

Item 2. 

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

72

Item 3. 

DEFAULTS UPON SENIOR SECURITES

72

Item 4. 

MINE SAFETY DISCLOSURES

72

Item 5. 

OTHER INFORMATION

72

Item 6. 

EXHIBITS

72

 

SIGNATURES

73

 

 

2


 

Table of Contents

 

PART I - FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

3


 

Table of Contents

FIRST BUSEY CORPORATION and Subsidiaries

CONSOLIDATED BALANCE SHEETS

September 30, 2018 and December 31, 2017

(Unaudited)

 

 

 

 

 

 

 

 

    

September 30, 2018

    

December 31, 2017

 

 

(dollars in thousands)

Assets

 

 

 

 

 

 

Cash and cash equivalents (interest-bearing 2018 $52,390; 2017 $234,889)

 

$

160,652

 

$

353,272

Securities available for sale

 

 

863,381

 

 

872,682

Securities held to maturity

 

 

626,250

 

 

443,550

Securities equity investments

 

 

7,317

 

 

5,378

Loans held for sale

 

 

32,617

 

 

94,848

Portfolio loans (net of allowance for loan losses 2018 $52,743; 2017 $53,582)

 

 

5,570,998

 

 

5,465,918

Premises and equipment, net

 

 

119,162

 

 

116,913

Goodwill

 

 

267,685

 

 

269,346

Other intangible assets, net

 

 

34,278

 

 

38,727

Cash surrender value of bank owned life insurance

 

 

127,663

 

 

126,737

Deferred tax asset, net

 

 

16,431

 

 

17,296

Other assets

 

 

62,951

 

 

55,973

Total assets

 

$

7,889,385

 

$

7,860,640

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

Noninterest-bearing

 

$

1,438,054

 

$

1,597,421

Interest-bearing

 

 

4,757,515

 

 

4,528,544

Total deposits

 

$

6,195,569

 

$

6,125,965

 

 

 

 

 

 

 

Securities sold under agreements to repurchase

 

 

255,906

 

 

304,566

Short-term borrowings

 

 

200,000

 

 

220,000

Long-term debt

 

 

50,000

 

 

50,000

Senior notes, net of unamortized issuance costs

 

 

39,505

 

 

39,404

Subordinated notes, net of unamortized issuance costs

 

 

59,121

 

 

64,715

Junior subordinated debt owed to unconsolidated trusts

 

 

71,118

 

 

71,008

Other liabilities

 

 

46,026

 

 

49,979

Total liabilities

 

$

6,917,245

 

$

6,925,637

 

 

 

 

 

 

 

Commitments and contingencies (see Note 13)

 

 

 

 

 

 

Stockholders’ Equity

 

 

 

 

 

 

Common stock, $.001 par value, authorized 66,666,667 shares; shares issued 2018 and    

  2017 49,185,581

 

 

49

 

 

49

Additional paid-in capital

 

 

1,079,111

 

 

1,084,889

Accumulated deficit

 

 

(87,532)

 

 

(132,122)

Accumulated other comprehensive loss

 

 

(13,024)

 

 

(2,810)

Total stockholders’ equity before treasury stock

 

$

978,604

 

$

950,006

 

 

 

 

 

 

 

Common stock shares held in treasury at cost, 2018 325,272; 2017 500,638

 

 

(6,464)

 

 

(15,003)

Total stockholders’ equity

 

$

972,140

 

$

935,003

Total liabilities and stockholders’ equity

 

$

7,889,385

 

$

7,860,640

 

 

 

 

 

 

 

Common shares outstanding at period end

 

 

48,860,309

 

 

48,684,943

See accompanying notes to unaudited Consolidated Financial Statements.

 

 

4


 

Table of Contents

FIRST BUSEY CORPORATION and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME

For the Nine Months Ended September 30, 2018 and 2017

(Unaudited)

 

 

 

 

 

 

 

 

 

    

2018

    

2017

    

 

 

(dollars in thousands, except per share amounts)

Interest income:

 

 

 

 

 

 

 

Interest and fees on loans

 

$

186,839

 

$

138,595

 

Interest and dividends on investment securities:

 

 

 

 

 

 

 

Taxable interest income

 

 

21,250

 

 

12,339

 

Non-taxable interest income

 

 

3,630

 

 

2,521

 

Total interest income

 

 

211,719

 

 

153,455

 

Interest expense:

 

 

 

 

 

 

 

Deposits

 

 

21,837

 

 

8,058

 

Federal funds purchased and securities sold under agreements to repurchase

 

 

1,139

 

 

618

 

Short-term borrowings

 

 

1,257

 

 

521

 

Long-term debt

 

 

622

 

 

421

 

Senior notes

 

 

1,199

 

 

562

 

Subordinated notes

 

 

2,379

 

 

1,098

 

Junior subordinated debt owed to unconsolidated trusts

 

 

2,383

 

 

1,857

 

Total interest expense

 

 

30,816

 

 

13,135

 

Net interest income

 

 

180,903

 

 

140,320

 

Provision for loan losses

 

 

4,024

 

 

2,494

 

Net interest income after provision for loan losses

 

 

176,879

 

 

137,826

 

Non-interest income:

 

 

 

 

 

 

 

Trust fees

 

 

20,573

 

 

17,088

 

Commissions and brokers’ fees, net

 

 

2,860

 

 

2,239

 

Remittance processing

 

 

10,588

 

 

8,581

 

Fees for customer services

 

 

21,576

 

 

18,658

 

Mortgage revenue

 

 

4,488

 

 

8,430

 

Security gains, net

 

 

160

 

 

1,143

 

Other income

 

 

6,896

 

 

4,774

 

Total non-interest income

 

 

67,141

 

 

60,913

 

Non-interest expense:

 

 

 

 

 

 

 

Salaries, wages and employee benefits

 

 

80,315

 

 

67,448

 

Net occupancy expense of premises

 

 

11,271

 

 

10,025

 

Furniture and equipment expenses

 

 

5,418

 

 

5,123

 

Data processing

 

 

12,391

 

 

11,348

 

Amortization of intangible assets

 

 

4,450

 

 

3,675

 

Other expense

 

 

30,429

 

 

23,707

 

Total non-interest expense

 

 

144,274

 

 

121,326

 

Income before income taxes

 

 

99,746

 

 

77,413

 

Income taxes

 

 

26,108

 

 

26,980

 

Net income

 

$

73,638

 

$

50,433

 

 

 

 

 

 

 

 

 

Basic earnings per common share

 

$

1.51

 

$

1.24

 

Diluted earnings per common share

 

$

1.50

 

$

1.23

 

Dividends declared per share of common stock

 

$

0.60

 

$

0.54

 

See accompanying notes to unaudited Consolidated Financial Statements.

5


 

Table of Contents

FIRST BUSEY CORPORATION and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME

For the Three Months Ended September 30, 2018 and 2017

(Unaudited)

 

 

 

 

 

 

 

 

    

2018

    

2017

 

 

(dollars in thousands, except per share amounts)

Interest income:

 

 

 

 

 

 

Interest and fees on loans

 

$

63,589

 

$

56,762

Interest and dividends on investment securities:

 

 

 

 

 

 

Taxable interest income

 

 

8,006

 

 

4,689

Non-taxable interest income

 

 

1,166

 

 

1,068

Total interest income

 

 

72,761

 

 

62,519

Interest expense:

 

 

 

 

 

 

Deposits

 

 

8,946

 

 

3,851

Federal funds purchased and securities sold under agreements to repurchase

 

 

426

 

 

291

Short-term borrowings

 

 

324

 

 

447

Long-term debt

 

 

245

 

 

141

Senior notes

 

 

400

 

 

400

Subordinated notes

 

 

792

 

 

799

Junior subordinated debt owed to unconsolidated trusts

 

 

854

 

 

649

Total interest expense

 

 

11,987

 

 

6,578

Net interest income

 

 

60,774

 

 

55,941

Provision for loan losses

 

 

758

 

 

1,494

Net interest income after provision for loan losses

 

 

60,016

 

 

54,447

Non-interest income:

 

 

 

 

 

 

Trust fees

 

 

6,324

 

 

5,071

Commissions and brokers’ fees, net

 

 

881

 

 

766

Remittance processing

 

 

3,630

 

 

2,877

Fees for customer services

 

 

7,340

 

 

6,577

Mortgage revenue

 

 

1,272

 

 

3,526

Security gains, net

 

 

 —

 

 

290

Other income

 

 

2,406

 

 

1,730

Total non-interest income

 

 

21,853

 

 

20,837

Non-interest expense:

 

 

 

 

 

 

Salaries, wages and employee benefits

 

 

26,024

 

 

25,497

Net occupancy expense of premises

 

 

3,761

 

 

3,714

Furniture and equipment expenses

 

 

1,715

 

 

1,785

Data processing

 

 

4,016

 

 

5,113

Amortization of intangible assets

 

 

1,445

 

 

1,286

Other expense

 

 

8,968

 

 

9,544

Total non-interest expense

 

 

45,929

 

 

46,939

Income before income taxes

 

 

35,940

 

 

28,345

Income taxes

 

 

9,081

 

 

9,561

Net income

 

$

26,859

 

$

18,784

 

 

 

 

 

 

 

Basic earnings per common share

 

$

0.55

 

$

0.41

Diluted earnings per common share

 

$

0.55

 

$

0.41

Dividends declared per share of common stock

 

$

0.20

 

$

0.18

See accompanying notes to unaudited Consolidated Financial Statements.

 

 

6


 

Table of Contents

FIRST BUSEY CORPORATION and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Three and Nine Months Ended September 30, 2018 and 2017

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30, 

 

September 30, 

 

 

    

2018

    

2017

    

2018

    

2017

 

 

 

(dollars in thousands)

 

Net income

 

$

26,859

 

$

18,784

 

$

73,638

 

$

50,433

 

Other comprehensive (loss) income, before tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized net (losses) gains on securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized net holding (losses) gains arising during period

 

 

(3,020)

 

 

563

 

 

(13,280)

 

 

1,864

 

Reclassification adjustment for gains included in net income

 

 

 —

 

 

(290)

 

 

(160)

 

 

(1,143)

 

Other comprehensive (loss) income, before tax

 

 

(3,020)

 

 

273

 

 

(13,440)

 

 

721

 

Income tax (benefit) expense related to items of other comprehensive income

 

 

(861)

 

 

119

 

 

(3,831)

 

 

298

 

Other comprehensive (loss) income, net of tax

 

 

(2,159)

 

 

154

 

 

(9,609)

 

 

423

 

Comprehensive income

 

$

24,700

 

$

18,938

 

$

64,029

 

$

50,856

 

See accompanying notes to unaudited Consolidated Financial Statements.

 

 

7


 

Table of Contents

FIRST BUSEY CORPORATION and Subsidiaries

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Nine Months Ended September 30, 2018 and 2017

(Unaudited)

(dollars in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

Accumulated

 

 

 

 

 

 

 

 

Common

 

Paid-in

 

Accumulated

 

Other

 

Treasury

 

 

 

 

    

Stock

    

Capital

    

(Deficit)

    

Income (loss)

    

Stock

    

Total

Balance, December 31, 2016

 

$

39

 

$

781,716

 

$

(163,689)

 

$

36

 

$

(23,788)

 

$

594,314

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 —

 

 

 —

 

 

50,433

 

 

 —

 

 

 —

 

 

50,433

Other comprehensive loss

 

 

 —

 

 

 —

 

 

 —

 

 

423

 

 

 —

 

 

423

Issuance of treasury stock for employee stock purchase plan

 

 

 —

 

 

(452)

 

 

 —

 

 

 —

 

 

841

 

 

389

Net issuance of treasury stock for restricted stock unit vesting and related tax benefit

 

 

 —

 

 

(5,221)

 

 

 —

 

 

 —

 

 

4,862

 

 

(359)

Net issuance of stock options exercised net of shares redeemed

 

 

 —

 

 

(923)

 

 

 —

 

 

 —

 

 

1,088

 

 

165

Stock issued for acquisition of First Community, net of stock issuance costs

 

 

 7

 

 

211,575

 

 

 —

 

 

 —

 

 

 —

 

 

211,582

Cash dividends common stock at $0.54 per share

 

 

 —

 

 

 —

 

 

(21,944)

 

 

 —

 

 

 —

 

 

(21,944)

Stock dividend equivalents restricted stock units at $0.54 per share

 

 

 —

 

 

342

 

 

(342)

 

 

 —

 

 

 —

 

 

 —

Stock dividend accrued on restricted stock awards assumed with the Pulaski Financial

  Corp. (“Pulaski”) acquisition at $0.54 per share

 

 

 —

 

 

 —

 

 

(10)

 

 

 —

 

 

 —

 

 

(10)

Return of 28,648 equity trust shares

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(860)

 

 

(860)

Stock based employee compensation

 

 

 —

 

 

1,935

 

 

 —

 

 

 —

 

 

 —

 

 

1,935

Balance, September 30, 2017

 

$

46

 

$

988,972

 

$

(135,552)

 

$

459

 

$

(17,857)

 

$

836,068

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2017

 

$

49

 

$

1,084,889

 

$

(132,122)

 

$

(2,810)

 

$

(15,003)

 

$

935,003

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 —

 

 

 —

 

 

73,638

 

 

 —

 

 

 —

 

 

73,638

Other comprehensive loss

 

 

 —

 

 

 —

 

 

 —

 

 

(9,609)

 

 

 —

 

 

(9,609)

Tax Cuts and Jobs Act (“TCJA”) of 2017 reclassification

 

 

 —

 

 

 —

 

 

605

 

 

(605)

 

 

 —

 

 

 —

Issuance of treasury stock for employee stock purchase plan

 

 

 —

 

 

(295)

 

 

 —

 

 

 —

 

 

724

 

 

429

Net issuance of treasury stock for restricted stock unit vesting and related tax benefit

 

 

 —

 

 

(6,059)

 

 

 —

 

 

 —

 

 

4,924

 

 

(1,135)

Net issuance of stock options exercised net of shares redeemed

 

 

 —

 

 

(2,505)

 

 

 —

 

 

 —

 

 

2,891

 

 

386

Cash dividends common stock at $0.60 per share

 

 

 —

 

 

 —

 

 

(29,238)

 

 

 —

 

 

 —

 

 

(29,238)

Stock dividend equivalents restricted stock units at $0.60 per share

 

 

 —

 

 

415

 

 

(415)

 

 

 —

 

 

 —

 

 

 —

Stock-based compensation

 

 

 —

 

 

2,666

 

 

 —

 

 

 —

 

 

 —

 

 

2,666

Balance, September 30, 2018

 

$

49

 

$

1,079,111

 

$

(87,532)

 

$

(13,024)

 

$

(6,464)

 

$

972,140

See accompanying notes to unaudited Consolidated Financial Statements.

 

 

8


 

Table of Contents

FIRST BUSEY CORPORATION and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended September 30, 2018 and 2017

(Unaudited)

 

 

 

 

 

 

 

2018

    

2017

 

(dollars in thousands)

Cash Flows from Operating Activities

 

 

 

 

 

Net income

$

73,638

 

$

50,433

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Stock-based and non-cash compensation

 

2,666

 

 

1,935

Depreciation

 

7,158

 

 

6,084

Amortization of intangible assets

 

4,450

 

 

3,675

Premises and equipment impairment

 

817

 

 

 —

Provision for loan losses

 

4,024

 

 

2,494

Provision for deferred income taxes

 

4,696

 

 

(3,480)

Amortization of security premiums and discounts, net

 

6,545

 

 

4,172

Accretion of premiums and discounts on time deposits and trust preferred securities, net

 

(82)

 

 

(232)

Accretion of premiums and discounts on portfolio loans, net

 

(8,615)

 

 

(6,329)

Security gains, net

 

(160)

 

 

(1,143)

Change in equity securities, net

 

(2,699)

 

 

 —

Gain on sales of mortgage loans, net of origination costs

 

(7,805)

 

 

(36,911)

Mortgage loans originated for sale

 

(336,169)

 

 

(1,166,083)

Proceeds from sales of mortgage loans

 

406,205

 

 

1,314,779

Net losses (gains) on disposition of premises and equipment

 

186

 

 

(57)

Increase in cash surrender value of bank owned life insurance

 

(926)

 

 

(1,604)

Change in assets and liabilities:

 

 

 

 

 

(Increase) decrease in other assets

 

(3,627)

 

 

14,049

Decrease in other liabilities

 

(7,215)

 

 

(5,513)

Increase in interest payable

 

1,849

 

 

1,650

Decrease in income taxes receivable

 

2,200

 

 

1,435

Net cash provided by operating activities

$

147,136

 

$

179,354

 

 

 

 

 

 

Cash Flows from Investing Activities

 

 

 

 

 

Proceeds from sales of securities classified available for sale

 

 —

 

 

134,515

Proceeds from sales of securities classified equity

 

920

 

 

 —

Proceeds from maturities of securities classified available for sale

 

115,522

 

 

154,435

Proceeds from sales of securities classified held to maturity

 

31,815

 

 

 —

Proceeds from maturities of securities classified held to maturity

 

 —

 

 

6,358

Purchases of securities classified available for sale

 

(122,954)

 

 

(128,425)

Purchases of securities classified held to maturity

 

(217,767)

 

 

(185,201)

Net increase in loans

 

(104,195)

 

 

(98,040)

Proceeds from disposition of premises and equipment

 

26

 

 

622

Proceeds from sale of other real estate owned ("OREO") properties

 

4,275

 

 

4,069

Purchases of premises and equipment

 

(10,436)

 

 

(11,336)

Proceeds (purchases) from the redemption of Federal Home Loan Bank ("FHLB") stock, net

 

(2,611)

 

 

4,322

Net cash received in acquisitions

 

 —

 

 

29,947

Net cash used in investing activities

$

(305,405)

 

$

(88,734)

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FIRST BUSEY CORPORATION and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

For the Nine Months Ended September 30, 2018 and 2017

(Unaudited)

 

 

 

 

 

 

 

 

    

2018

    

2017

 

 

(dollars in thousands)

Cash Flows from Financing Activities

 

 

 

 

 

 

Net increase (decrease) in certificates of deposit

 

$

216,313

 

$

(92,596)

Net increase in demand deposits, money market and savings accounts

 

 

(146,517)

 

 

(42,414)

Net increase (decrease)  in federal funds purchased and securities sold under agreements to

  repurchase

 

 

(48,660)

 

 

4,443

    Proceeds from short-term borrowings, net

 

 

 —

 

 

53,150

Repayment of long-term advances

 

 

(5,500)

 

 

(39,800)

Net proceeds from issuance of senior debt

 

 

 —

 

 

39,326

Net proceeds from issuance of subordinated debt

 

 

 —

 

 

58,986

Cash dividends paid

 

 

(29,238)

 

 

(21,971)

Proceeds from FHLB long term advances, net

 

 

(20,000)

 

 

 —

Value of shares surrendered upon vesting to satisfy tax withholding obligations of stock-based compensation

 

 

(1,136)

 

 

(1,975)

Proceeds from stock options exercised

 

 

387

 

 

165

Common stock issuance costs

 

 

 —

 

 

(259)

Net cash (used in) financing activities

 

 

(34,351)

 

 

(42,945)

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

 

(192,620)

 

 

47,675

Cash and cash equivalents, beginning of period

 

 

353,272

 

 

166,706

 

 

 

 

 

 

 

Cash and cash equivalents, ending of period

 

$

160,652

 

$

214,381

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Payments for:

 

 

 

 

 

 

Interest

 

$

26,665

 

$

11,485

Income taxes

 

 

20,127

 

 

19,369

 

 

 

 

 

 

 

Non-cash Investing and Financing Activities:

 

 

 

 

 

 

Other real estate acquired in settlement of loans

 

 

3,706

 

 

477

See accompanying notes to unaudited Consolidated Financial Statements.

 

 

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FIRST BUSEY CORPORATION and Subsidiaries

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 1:  Accounting Policies

 

Basis of Financial Statement Presentation

 

When preparing these unaudited Consolidated Financial Statements of First Busey Corporation and its subsidiaries (“First Busey,” “Company,” “we,” or “our”), a Nevada corporation, we have assumed that you have read the audited Consolidated Financial Statements included in our 2017 Form 10-K.  These interim unaudited Consolidated Financial Statements serve to update our 2017 Form 10-K and may not include all information and notes necessary to constitute a complete set of Financial Statements. 

 

We prepared these unaudited Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”). We have eliminated intercompany accounts and transactions. We have also reclassified certain prior year amounts to conform to the current period presentation.  These reclassifications did not have a material impact on our consolidated financial condition or results of operations.

 

In our opinion, the unaudited Consolidated Financial Statements reflect all normal, recurring adjustments needed to present fairly our results for the interim periods. The results of operations for interim periods are not necessarily indicative of the results that may be expected for the full year or any other interim period.

 

We have also considered the impact of subsequent events on these unaudited Consolidated Financial Statements.  On October 12, 2018 a return of capital and associated surplus to the Company from Busey Bank was executed as discussed in “Note 14: Capital” with no impact to capital for the unaudited Consolidated Financial Statements. In addition, on November 1, 2018, Busey Trust Company was merged with and into Busey Bank, with no impact to the unaudited Consolidated Financial Statements. Other than these events, there were no significant subsequent events for the quarter ended September 30, 2018 through the issuance date of these unaudited Consolidated Financial Statements that warranted adjustment to or disclosure in the unaudited Consolidated Financial Statements.

 

Use of Estimates

 

In preparing the accompanying unaudited Consolidated Financial Statements, the Company’s management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the Financial Statements and the reported amounts of revenues and expenses for the reporting period.  Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the fair value of available for sale investment securities, the fair value of assets acquired and liabilities assumed in business combinations and the determination of the allowance for loan losses.

 

Recently Issued Accounting Standards

 

Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606).”  ASU 2014-09 outlines a single model for companies to use in accounting for revenue arising from contracts with customers and supersedes most prior revenue recognition guidance, including industry-specific guidance. ASU 2014-09 requires that companies recognize revenue based on the value of transferred goods or services as they occur in the contract and establishes additional disclosures.  The Company’s revenue is comprised of net interest income, which is explicitly excluded from the scope of ASU 2014-09, and non-interest income. The Company has evaluated its non-interest income and the nature of its contracts with customers and determined that further disaggregation of revenue beyond what is presented in the accompanying unaudited Consolidated Financial Statements was not necessary.  The Company satisfies its performance obligations on its contracts with customers as services are rendered so there is limited judgment involved in applying Topic 606 that affects the determination of the timing and amount of revenue from contracts with customers. 

 

 

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Descriptions of the Company’s primary revenue generating activities that are within Topic 606, and are presented in the accompanying unaudited Consolidated Statements of Income as components of non-interest income, include trust fees, commission and brokers’ fees, net, remittance processing, and fees for customer services.  Trust fees and commission and brokers’ fees, net, represents monthly fees due from wealth management customers as consideration for managing the customers' assets. Wealth management and trust services include custody of assets, investment management, fees for trust services and other fiduciary activities.  Also included are fees received from a third party broker-dealer as part of a revenue sharing agreement for fees earned from customers that the Company refers to the third party.  Revenue is recognized when the performance obligation is completed, which is generally monthly.  Remittance processing represents transaction-based fees for pay processing solutions such as online bill payments, lockbox and walk-in payments. Revenue is recognized when the performance obligation is completed, which is generally monthly.  Fees for customer services represents general service fees for monthly account maintenance and activity or transaction-based fees and consists of transaction-based revenue, time-based revenue, or item-based revenue. Revenue is recognized when the performance obligation is completed which is generally monthly for account maintenance services or when a transaction has been completed. Payment for such performance obligations are generally received at the time the performance obligations are satisfied. The adoption of this guidance on January 1, 2018 did not change the method in which non-interest income is recognized therefore a cumulative effect adjustment to retained earnings was not necessary.

 

ASU 2016-01, "Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities." ASU 2016-01 requires: equity investments, with certain exceptions, to be measured at fair value with changes in fair value recognized in net income; to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; separate presentation of financial assets and financial liabilities by measurement category and form of financial assets; eliminating the requirement to disclose the method and significant assumptions used to estimate the fair value for financial instruments measured at amortized cost on the Balance Sheet; and requires an entity to present separately in other comprehensive income (loss) the portion of the total change in fair value of a liability resulting from the change in the instrument-specific credit risk when the fair value option has been elected for the liability. ASU 2016-01 was effective on January 1, 2018 and the adoption of this guidance resulted in separate classification of equity securities previously included in available for sale securities on the Consolidated Financial Statements. There was no cumulative effect adjustment recorded with the adoption of this guidance.

 

ASU 2018-02, "Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income." ASU 2018-02 allows companies to make a one-time reclassification from accumulated other comprehensive income (loss) to retained earnings for the effects of remeasuring deferred tax liabilities and assets originally recorded in other comprehensive income as a result of the change in the federal tax rate by the TCJA. The Company adopted this guidance in the first quarter of 2018 with no impact on total stockholders' equity or net income.

 

ASU 2016-02, "Leases (Topic 842)." ASU 2016-02 intends to increase transparency and comparability among organizations by recognizing all lease transactions (with terms in excess of 12 months) on the Consolidated Balance Sheet as a lease liability and a right-of-use asset. The guidance also requires qualitative and quantitative disclosures of the amount, timing and uncertainty of cash flows arising from leases. This guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within those fiscal years. In July 2018, ASU 2018-11, "Leases (Topic 842): Targeted Improvements" was issued to allow companies to choose to recognize the cumulative effect of applying the new standard to leased assets and liabilities as an adjustment to the opening balance of retained earnings rather than recasting prior year results upon adoption of the standard. The Company is in the process of calculating the transition impact of the guidance on its Consolidated Financial Statements and related disclosures. Where the Company is a lessee, the Company expects an increase in assets and liabilities to record the right of use asset and the lease liability.

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ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." ASU 2016-13 implements a change from the current impaired loss model to an expected credit loss model over the life of an instrument, including loans and securities held to maturity. The expected credit loss model is expected to result in earlier recognition of losses. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019 including interim periods with those years. The Company has developed and is executing a project plan to implement this guidance. As part of that project plan, the Company will evaluate the impact this guidance will have on its Consolidated Financial Statements and related disclosures.

 

ASU 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment." ASU 2017-04 is intended to simplify goodwill impairment testing by eliminating the second step of the analysis which required an entity to determine the fair value of its assets a