Filed by Bowne Pure Compliance
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2007
OR
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 0-32535
FIRST BANCTRUST CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
37-1406661
(IRS Employer Identification No.)
101 South Central Avenue
Paris, Illinois
(Address of principal executive offices)
61944
(Zip Code)
217-465-6381
(Registrants telephone number, including area code)
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 þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in
Rule 12b-2 of the Exchange Act.
o Large Accelerated Filer o Accelerated Filer þ Non-Accelerated Filer
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2
of the Exchange Act) Yes o No þ
Indicate the number of shares outstanding of each of the issuers classes of common stock,
as of the latest practicable date.
As of November 9, 2007, the Registrant had outstanding 2,227,900 shares of common stock.
First BancTrust Corporation
Form 10-Q Quarterly Report
First BancTrust Corporation
Condensed Consolidated Balance Sheets
(in thousands of dollars except share data)
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September 30, |
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December 31, |
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2007 |
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2006 |
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|
(unaudited) |
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|
|
Assets |
|
|
|
|
|
|
|
|
Cash and due from banks |
|
$ |
7,494 |
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|
$ |
13,216 |
|
Interest-bearing demand deposits |
|
|
4,419 |
|
|
|
15,575 |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
11,913 |
|
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|
28,791 |
|
Available-for-sale securities |
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|
48,589 |
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|
64,515 |
|
Held-to-maturity securities (fair value of $5,260 and $4,662) |
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|
5,422 |
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|
4,780 |
|
Loans held for sale, net of unrealized loss of $3 and $3 |
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|
532 |
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|
836 |
|
Loans, net of allowance for loan losses of $2,172 and $2,222 |
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209,385 |
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|
185,444 |
|
Premises and equipment |
|
|
10,590 |
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|
11,017 |
|
Federal Home Loan Bank stock |
|
|
3,749 |
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|
|
3,749 |
|
Foreclosed assets held for sale, net |
|
|
509 |
|
|
|
366 |
|
Interest receivable |
|
|
3,284 |
|
|
|
2,919 |
|
Deferred income taxes |
|
|
1,598 |
|
|
|
1,490 |
|
Loan servicing rights |
|
|
313 |
|
|
|
351 |
|
Cash surrender value of life insurance |
|
|
5,149 |
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|
|
5,008 |
|
Goodwill |
|
|
541 |
|
|
|
541 |
|
Core deposit intangibles |
|
|
691 |
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|
|
764 |
|
Other assets |
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|
593 |
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|
|
487 |
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|
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|
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|
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|
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|
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Total assets |
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$ |
302,858 |
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|
$ |
311,058 |
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Liabilities and Stockholders Equity |
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Deposits |
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Demand |
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$ |
19,443 |
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$ |
25,033 |
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Savings, NOW and money market |
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|
64,797 |
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|
57,844 |
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Time |
|
|
132,154 |
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|
159,726 |
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|
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|
|
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Total deposits |
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216,394 |
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|
242,603 |
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Short term borrowings |
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2,465 |
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Federal Home Loan Bank advances and other borrowings |
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|
48,800 |
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32,800 |
|
Junior subordinated debentures |
|
|
6,186 |
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|
6,186 |
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Pass through payments received on loans sold |
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2 |
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|
122 |
|
Advances from borrowers for taxes and insurance |
|
|
331 |
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|
148 |
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Interest payable |
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|
668 |
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|
|
929 |
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Other |
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|
1,569 |
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|
1,614 |
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|
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Total liabilities |
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276,415 |
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|
284,402 |
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|
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Commitments and Contingent Liabilities |
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Stockholders Equity |
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Preferred stock, $.01 par value; 1,000,000 shares authorized
and unissued |
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|
Common stock, $.01 par value, 5,000,000 shares authorized;
3,041,750 shares issued; 2,227,900 and 2,318,700
shares outstanding |
|
|
30 |
|
|
|
30 |
|
Additional paid-in capital |
|
|
15,060 |
|
|
|
14,834 |
|
Retained earnings |
|
|
20,170 |
|
|
|
19,693 |
|
Unearned employee stock ownership plan shares -
45,688 and 68,494 shares |
|
|
(264 |
) |
|
|
(396 |
) |
Accumulated other comprehensive loss |
|
|
(650 |
) |
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|
(679 |
) |
Treasury stock, at cost - 813,850 and 723,050 shares |
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|
(7,903 |
) |
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|
(6,826 |
) |
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|
|
|
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|
Total stockholders equity |
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|
26,443 |
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|
26,656 |
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|
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|
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|
|
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Total liabilities and stockholders equity |
|
$ |
302,858 |
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|
$ |
311,058 |
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|
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See Notes to Unaudited Condensed Consolidated Financial Statements.
- 1 -
First BancTrust Corporation
Condensed Consolidated Statements of Income
(in thousands of dollars except share data)
(unaudited)
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Nine Months Ended September 30 |
|
2007 |
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|
2006 |
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Interest and Dividend Income |
|
|
|
|
|
|
|
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Loans |
|
|
|
|
|
|
|
|
Taxable |
|
$ |
11,199 |
|
|
$ |
9,223 |
|
Tax exempt |
|
|
43 |
|
|
|
45 |
|
Securities
|
|
|
|
|
|
|
|
|
Taxable |
|
|
1,920 |
|
|
|
2,059 |
|
Tax exempt |
|
|
248 |
|
|
|
395 |
|
Dividends on Federal Home Loan Bank stock |
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|
87 |
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|
|
150 |
|
Deposits with financial institutions and other |
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|
146 |
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|
|
101 |
|
|
|
|
|
|
|
|
Total interest and dividend income |
|
|
13,643 |
|
|
|
11,973 |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Interest Expense |
|
|
|
|
|
|
|
|
Deposits |
|
|
5,895 |
|
|
|
4,448 |
|
Federal Home Loan Bank advances and other debt |
|
|
1,639 |
|
|
|
1,568 |
|
|
|
|
|
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|
Total interest expense |
|
|
7,534 |
|
|
|
6,016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Interest Income |
|
|
6,109 |
|
|
|
5,957 |
|
Provision for loan losses |
|
|
446 |
|
|
|
163 |
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
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|
Net Interest Income After Provision for Loan Losses |
|
|
5,663 |
|
|
|
5,794 |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Noninterest Income |
|
|
|
|
|
|
|
|
Customer service fees |
|
|
886 |
|
|
|
806 |
|
Other service charges and fees |
|
|
705 |
|
|
|
679 |
|
Net gains on loan sales |
|
|
199 |
|
|
|
208 |
|
Net realized gains on sales of available-for-sale securities |
|
|
70 |
|
|
|
|
|
Loan servicing fees |
|
|
314 |
|
|
|
332 |
|
Brokerage fees |
|
|
57 |
|
|
|
66 |
|
Abstract and title fees |
|
|
264 |
|
|
|
242 |
|
Increase in cash surrender value of life insurance |
|
|
167 |
|
|
|
158 |
|
Other |
|
|
155 |
|
|
|
122 |
|
|
|
|
|
|
|
|
Total noninterest income |
|
|
2,817 |
|
|
|
2,613 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest Expense |
|
|
|
|
|
|
|
|
Salaries and employee benefits |
|
|
3,704 |
|
|
|
3,887 |
|
Net occupancy expense |
|
|
629 |
|
|
|
501 |
|
Equipment expense |
|
|
793 |
|
|
|
742 |
|
Data processing fees |
|
|
508 |
|
|
|
466 |
|
Professional fees |
|
|
310 |
|
|
|
366 |
|
Foreclosed assets expense, net |
|
|
88 |
|
|
|
65 |
|
Marketing expense |
|
|
174 |
|
|
|
178 |
|
Printing and office supplies |
|
|
131 |
|
|
|
132 |
|
Amortization of loan servicing rights |
|
|
131 |
|
|
|
183 |
|
Other expenses |
|
|
859 |
|
|
|
912 |
|
|
|
|
|
|
|
|
Total noninterest expense |
|
|
7,327 |
|
|
|
7,432 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before Income Tax |
|
|
1,153 |
|
|
|
975 |
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
276 |
|
|
|
195 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
$ |
877 |
|
|
$ |
780 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per Share |
|
$ |
0.41 |
|
|
$ |
0.35 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings Per Share |
|
$ |
0.39 |
|
|
$ |
0.34 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends Per Share |
|
$ |
0.18 |
|
|
$ |
0.18 |
|
|
|
|
|
|
|
|
See Notes to Unaudited Condensed Consolidated Financial Statements.
- 2 -
First BancTrust Corporation
Condensed Consolidated Statements of Income
(in thousands of dollars except share data)
(unaudited)
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|
Three Months Ended September 30 |
|
2007 |
|
|
2006 |
|
|
|
|
|
|
|
|
|
|
Interest and Dividend Income |
|
|
|
|
|
|
|
|
Loans
|
|
|
|
|
|
|
|
|
Taxable |
|
$ |
4,016 |
|
|
$ |
3,320 |
|
Tax exempt |
|
|
14 |
|
|
|
15 |
|
Securities |
|
|
|
|
|
|
|
|
Taxable |
|
|
673 |
|
|
|
695 |
|
Tax exempt |
|
|
43 |
|
|
|
133 |
|
Dividends on Federal Home Loan Bank stock |
|
|
26 |
|
|
|
50 |
|
Deposits with financial institutions and other |
|
|
32 |
|
|
|
43 |
|
|
|
|
|
|
|
|
Total interest and dividend income |
|
|
4,804 |
|
|
|
4,256 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense |
|
|
|
|
|
|
|
|
Deposits |
|
|
1,964 |
|
|
|
1,807 |
|
Federal Home Loan Bank advances and other debt |
|
|
630 |
|
|
|
457 |
|
|
|
|
|
|
|
|
Total interest expense |
|
|
2,594 |
|
|
|
2,264 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Interest Income |
|
|
2,210 |
|
|
|
1,992 |
|
Provision for loan losses |
|
|
182 |
|
|
|
68 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Interest Income After Provision for Loan Losses |
|
|
2,028 |
|
|
|
1,924 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest Income |
|
|
|
|
|
|
|
|
Customer service fees |
|
|
311 |
|
|
|
305 |
|
Other service charges and fees |
|
|
236 |
|
|
|
225 |
|
Net gains on loan sales |
|
|
90 |
|
|
|
85 |
|
Loan servicing fees |
|
|
97 |
|
|
|
92 |
|
Brokerage fees |
|
|
21 |
|
|
|
24 |
|
Abstract and title fees |
|
|
92 |
|
|
|
82 |
|
Increase in cash surrender value of life insurance |
|
|
57 |
|
|
|
54 |
|
Other |
|
|
52 |
|
|
|
30 |
|
|
|
|
|
|
|
|
Total noninterest income |
|
|
956 |
|
|
|
897 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest Expense |
|
|
|
|
|
|
|
|
Salaries and employee benefits |
|
|
1,195 |
|
|
|
1,254 |
|
Net occupancy expense |
|
|
212 |
|
|
|
185 |
|
Equipment expense |
|
|
261 |
|
|
|
252 |
|
Data processing fees |
|
|
162 |
|
|
|
167 |
|
Professional fees |
|
|
78 |
|
|
|
82 |
|
Foreclosed assets expense, net |
|
|
6 |
|
|
|
24 |
|
Marketing expense |
|
|
56 |
|
|
|
72 |
|
Printing and office supplies |
|
|
50 |
|
|
|
44 |
|
Amortization of loan servicing rights |
|
|
44 |
|
|
|
61 |
|
Other expenses |
|
|
291 |
|
|
|
350 |
|
|
|
|
|
|
|
|
Total noninterest expense |
|
|
2,355 |
|
|
|
2,491 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before Income Tax |
|
|
629 |
|
|
|
330 |
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
187 |
|
|
|
58 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
$ |
442 |
|
|
$ |
272 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per Share |
|
$ |
0.21 |
|
|
$ |
0.12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings Per Share |
|
$ |
0.20 |
|
|
$ |
0.12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends Per Share |
|
$ |
0.06 |
|
|
$ |
0.06 |
|
|
|
|
|
|
|
|
See Notes
to Unaudited Condensed Consolidated Financial Statements.
- 3 -
First BancTrust Corporation
Condensed Consolidated Statements of Cash Flows
(in thousands of dollars)
(unaudited)
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30 |
|
2007 |
|
|
2006 |
|
|
|
|
|
|
|
|
|
|
Operating Activities |
|
|
|
|
|
|
|
|
Net income |
|
$ |
877 |
|
|
$ |
780 |
|
Items not requiring (providing) cash |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
625 |
|
|
|
449 |
|
Provision for loan losses |
|
|
446 |
|
|
|
163 |
|
Loss on foreclosed assets, net |
|
|
44 |
|
|
|
21 |
|
Loss on disposition of premises and equipment |
|
|
1 |
|
|
|
93 |
|
Amortization of premiums and discounts on securities, net |
|
|
51 |
|
|
|
37 |
|
Amortization of loan servicing rights |
|
|
131 |
|
|
|
183 |
|
Deferred income taxes |
|
|
(126 |
) |
|
|
(159 |
) |
Amortization of intangible assets |
|
|
73 |
|
|
|
50 |
|
Net realized gains on available-for-sale securities |
|
|
(70 |
) |
|
|
|
|
Net gains on loan sales |
|
|
(199 |
) |
|
|
(208 |
) |
Compensation expense related to ESOP and incentive plan |
|
|
358 |
|
|
|
416 |
|
Loans originated for sale |
|
|
(19,576 |
) |
|
|
(11,679 |
) |
Proceeds from sales of loans originated for sale |
|
|
19,988 |
|
|
|
11,539 |
|
|
|
|
|
|
|
|
|
|
Changes in |
|
|
|
|
|
|
|
|
Interest receivable |
|
|
(365 |
) |
|
|
(476 |
) |
Cash surrender value of life insurance |
|
|
(141 |
) |
|
|
(136 |
) |
Other assets |
|
|
(106 |
) |
|
|
182 |
|
Interest payable |
|
|
(261 |
) |
|
|
363 |
|
Other liabilities |
|
|
(45 |
) |
|
|
(122 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
1,705 |
|
|
|
1,496 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities |
|
|
|
|
|
|
|
|
Purchases of available-for-sale securities |
|
|
(7,649 |
) |
|
|
(5,984 |
) |
Proceeds from maturities of available-for-sale securities |
|
|
7,171 |
|
|
|
15,782 |
|
Proceeds from sales of available-for-sale securities |
|
|
16,466 |
|
|
|
|
|
Purchases of held-to-maturity securities |
|
|
(987 |
) |
|
|
|
|
Proceeds from maturities of held-to-maturity securities |
|
|
347 |
|
|
|
463 |
|
Net change in loans |
|
|
(24,810 |
) |
|
|
(26,718 |
) |
Proceeds from sales of foreclosed assets |
|
|
236 |
|
|
|
295 |
|
Purchases of premises and equipment |
|
|
(200 |
) |
|
|
(5,284 |
) |
Capitalized interest |
|
|
|
|
|
|
(101 |
) |
Redemption of Federal Home Loan Bank stock |
|
|
|
|
|
|
1,884 |
|
Proceeds from sales of premises and equipment |
|
|
1 |
|
|
|
9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(9,425 |
) |
|
|
(19,654 |
) |
|
|
|
|
|
|
|
- 4 -
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30 |
|
2007 |
|
|
2006 |
|
|
|
|
|
|
|
|
|
|
Financing Activities |
|
|
|
|
|
|
|
|
Net increase (decrease) in demand deposits, money market,
NOW and savings accounts |
|
$ |
1,363 |
|
|
$ |
(7,403 |
) |
Net increase (decrease) in certificates of deposit |
|
|
(27,572 |
) |
|
|
37,142 |
|
Net increase (decrease) in short-term borrowings |
|
|
2,465 |
|
|
|
(2,500 |
) |
Proceeds from Federal Home Bank advances |
|
|
20,500 |
|
|
|
29,500 |
|
Repayment of Federal Home Loan Bank advances |
|
|
(4,500 |
) |
|
|
(39,500 |
) |
Net change in pass through payments received on loans sold |
|
|
(120 |
) |
|
|
(45 |
) |
Net change in advances from borrowers for taxes and insurance |
|
|
183 |
|
|
|
(158 |
) |
Proceeds from stock options exercised |
|
|
5 |
|
|
|
99 |
|
Purchase of treasury stock |
|
|
(1,082 |
) |
|
|
(390 |
) |
Dividends paid |
|
|
(400 |
) |
|
|
(413 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
(9,158 |
) |
|
|
16,332 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease in Cash and Cash Equivalents |
|
|
(16,878 |
) |
|
|
(1,826 |
) |
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, Beginning of Year |
|
|
28,791 |
|
|
|
12,447 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, End of Year |
|
$ |
11,913 |
|
|
$ |
10,621 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Cash Flows Information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid (net of capitalized interest) |
|
$ |
7,795 |
|
|
$ |
5,653 |
|
|
|
|
|
|
|
|
|
|
Income taxes paid (net of refunds) |
|
$ |
255 |
|
|
$ |
460 |
|
|
|
|
|
|
|
|
|
|
Real estate and other property acquired in settlement of loans |
|
$ |
423 |
|
|
$ |
253 |
|
See Notes to Unaudited Condensed Consolidated Financial Statements.
- 5 -
First BancTrust Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited)
Note 1 Basis of Presentation
The accompanying unaudited interim condensed consolidated financial statements have been prepared
pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain disclosures
required by accounting principles generally accepted in the United States of America are not
included herein. These interim statements should be read in conjunction with the audited
consolidated financial statements and notes thereto, included in the Companys Form 10-K filed with
the Securities and Exchange Commission.
Interim statements are subject to possible adjustments in connection with the annual audit of the
Company for the year ended December 31, 2007. In the opinion of management of the Company, the
accompanying unaudited interim condensed consolidated financial statements reflect all adjustments
(consisting of normal recurring adjustments) necessary for a fair presentation of the consolidated
financial position and consolidated results of operations for the periods presented. The results
of operations for the three and nine months ended September 30, 2007 are not necessarily indicative
of the results to be expected for the full year. The condensed consolidated balance sheet of the
Company as of December 31, 2006 has been derived from the audited consolidated balance sheet of the
Company as of that date.
Note 2 Newly Adopted Accounting Pronouncement
The Company adopted the provisions of FASB Interpretation No. 48 (FIN 48), Accounting for
Uncertainty in Income Taxes, on January 1, 2007. The Company has recognized no increase in its
liability for unrecognized tax benefits as a result of the implementation of FIN 48. The Company
files income tax returns in the U.S. federal jurisdiction and the state of Illinois jurisdiction.
With a few exceptions, the Company is no longer subject to U.S. federal, state and local or
non-U.S. income tax examinations by tax authorities for years before 2004.
Note 3 Junior Subordinated Debentures
Capital securities of $6.0 million were issued June 15, 2005 by a statutory business trust, FBTC
Statutory Trust I (Trust). The Company owns 100% of the common equity of the trust, which is a
wholly-owned subsidiary of the Company. The $6.0 million in proceeds from the trust preferred
issuance and an additional $186,000 for the Companys investment in the common equity of the Trust,
a total of $6,186,000, was invested in the junior subordinated debentures of the Company. As
required by FIN 46R, the Company has not consolidated the investment in the Trust. The Trust was
formed with the purpose of issuing trust preferred securities and investing the proceeds from the
sale of such trust preferred securities in the debentures. The debentures held by the Trust are
the sole assets of the trust. Distributions of the trust preferred securities are payable at a
variable rate of interest, which is equal to the interest rate being earned by the trust on the
debentures, and are recorded as interest expense by the Company. The trust preferred securities
are subject to mandatory redemption, in whole or in part, upon repayment of the debentures.
- 6 -
The debentures are included as Tier I capital for regulatory capital purposes. On March 1, 2005,
the Federal Reserve Board adopted a final rule that allows the continued limited inclusion of trust
preferred securities in the calculation of Tier 1 capital for regulatory purposes. The final rule
provides a five-year transition period,
ending March 31, 2009, for application of the quantitative limits to have an impact on its
calculation of Tier 1 capital for regulatory purposes or its classification as well-capitalized.
The debentures issued are first redeemable, in whole or part, by the Company, on June 15, 2010, and
mature on June 15, 2035. The funds were used for the acquisition of the common stock of Rantoul
First Bank and for the repurchase of First BancTrust Corporation common stock. Interest is fixed
at a rate of 5.80% for a period of five years, and then converts to a floating rate after June 15,
2010. Interest payments are made quarterly. Interest expense generated by the debentures for the
nine months ended September 30, 2007 and 2006 totaled $269,000 for both periods, and totaled
$89,000 for both of the three month periods ended September 30, 2007 and 2006.
Note 4 Short term borrowings
The Company negotiated a revolving line of credit for $2.0 million with LaSalle Bank NA on March
13, 2007 for a term of one year. The interest rate, currently 7.45%, is subject to change monthly,
and is based on the LIBOR rate plus 175 basis points. Interest payments are due quarterly.
Principal payments may be made at month end with penalty. The loan is secured by all of the First
Bank & Trust, s.b. stock owned by the Company. As of September 30, 2007, the amounts drawn against
the line of credit totaled $964,000, which was also the outstanding balance at September 30, 2007.
The proceeds of the borrowing were used to repurchase First BancTrust Corporation stock. Interest
expense associated with the outstanding balance totaled $27,000 for the nine months ended September
30, 2007 and $18,000 for the three months ended September 30, 2007.
Note 5
Employee Stock Ownership Plan
The Company has an Employee Stock Ownership Plan (ESOP) for the benefit of its employees. The
ESOP purchased required shares in the open market with funds borrowed from the Company. The ESOP
expense was $264,000 and $273,000 for the nine month periods ended September 30, 2007 and 2006, and
$85,000 and $89,000 for the three month periods ended September 30, 2007 and 2006.
Shares purchased by the ESOP are held in a suspense account and are allocated to ESOP participants
based on a pro rata basis as debt service payments are made to the Company. The loan is secured by
the shares purchased with the proceeds and will be repaid by the ESOP with funds from the Companys
discretionary contributions to the ESOP and earnings on ESOP assets. Principal payments are
scheduled to occur over an eight-year period.
- 7 -
Note 6
Earnings per Share
Basic earnings per share have been computed based upon the weighted average common shares
outstanding for the three month and nine month periods ended September 30, 2007 and 2006. Diluted
earnings per share reflect the potential dilution that could occur if securities or other contracts
to issue common stock were exercised or converted into common stock or resulted in the issuance of
common stock that then shared in the earnings of the Company.
Earnings per share were computed as follows (dollar amounts in thousands except share data):
- 8 -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
Average |
|
|
Per Share |
|
|
|
Income |
|
|
Shares |
|
|
Amount |
|
For the nine months ended September 30, 2007: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per Share: |
|
|
|
|
|
|
|
|
|
|
|
|
Income available to common stockholders |
|
$ |
877 |
|
|
|
2,163,835 |
|
|
$ |
0.41 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Dilutive Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
Unearned recognition and retention plan shares |
|
|
|
|
|
|
49,766 |
|
|
|
|
|
Stock Options |
|
|
|
|
|
|
33,818 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings per Share: |
|
|
|
|
|
|
|
|
|
|
|
|
Income available to common stockholders and
assumed conversions |
|
$ |
877 |
|
|
|
2,247,419 |
|
|
$ |
0.39 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended September 30, 2006: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per Share: |
|
|
|
|
|
|
|
|
|
|
|
|
Income available to common stockholders |
|
$ |
780 |
|
|
|
2,206,721 |
|
|
$ |
0.35 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Dilutive Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
Unearned recognition and retention plan shares |
|
|
|
|
|
|
69,857 |
|
|
|
|
|
Stock Options |
|
|
|
|
|
|
40,758 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings per Share: |
|
|
|
|
|
|
|
|
|
|
|
|
Income available to common stockholders and
assumed conversions |
|
$ |
780 |
|
|
|
2,317,336 |
|
|
$ |
0.34 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended September 30, 2007: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per Share: |
|
|
|
|
|
|
|
|
|
|
|
|
Income available to common stockholders |
|
$ |
442 |
|
|
|
2,136,836 |
|
|
$ |
0.21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Dilutive Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
Unearned recognition and retention plan shares |
|
|
|
|
|
|
46,833 |
|
|
|
|
|
Stock Options |
|
|
|
|
|
|
27,336 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings per Share: |
|
|
|
|
|
|
|
|
|
|
|
|
Income available to common stockholders and
assumed conversions |
|
$ |
442 |
|
|
|
2,211,005 |
|
|
$ |
0.20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended September 30, 2006: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per Share: |
|
|
|
|
|
|
|
|
|
|
|
|
Income available to common stockholders |
|
$ |
272 |
|
|
|
2,211,224 |
|
|
$ |
0.12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Dilutive Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
Unearned recognition and retention plan shares |
|
|
|
|
|
|
63,941 |
|
|
|
|
|
Stock options |
|
|
|
|
|
|
36,638 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings per Share: |
|
|
|
|
|
|
|
|
|
|
|
|
Income available to common stockholders and
assumed conversions |
|
$ |
272 |
|
|
|
2,311,803 |
|
|
$ |
0.12 |
|
|
|
|
|
|
|
|
|
|
|
- 9 -
Note 7 Comprehensive Income
Comprehensive income for the three and nine month periods ended September 30, 2007 and 2006 is
listed below:
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30 |
|
|
|
2007 |
|
|
2006 |
|
|
|
|
|
|
|
|
|
|
Net Income |
|
$ |
877 |
|
|
$ |
780 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income (Loss) |
|
|
|
|
|
|
|
|
Unrealized appreciation (depreciation) on available-for-sale securities |
|
|
75 |
|
|
|
(118 |
) |
|
|
|
|
|
|
|
|
|
Less: Reclassification adjustment for realized gains included
in net income |
|
|
46 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29 |
|
|
|
(118 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income (Loss) |
|
$ |
906 |
|
|
$ |
662 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30 |
|
|
|
2007 |
|
|
2006 |
|
|
|
|
|
|
|
|
|
|
Net Income |
|
$ |
442 |
|
|
$ |
272 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income |
|
|
|
|
|
|
|
|
Unrealized depreciation on available-for-sale securities |
|
|
296 |
|
|
|
567 |
|
|
|
|
|
|
|
|
|
|
Less: Reclassification adjustment for realized gains included in net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
296 |
|
|
|
567 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income |
|
$ |
738 |
|
|
$ |
839 |
|
|
|
|
|
|
|
|
Note 8 Authorized Share Repurchase Program
On March 15, 2007, the Board of Directors authorized the repurchase in open market transactions of
117,710 shares, or 5% or the Companys outstanding shares prior to March 15, 2008. As of September
30, 2007, the Company had repurchased 66,000 shares under this program, leaving 51,710 shares
available to be repurchased. Previously, the Company had completed seven other repurchase programs
for stock repurchases of 762,550 shares. The Company issued 4,200 shares of treasury stock upon
the exercise of stock options in 2005, 10,000 shares of treasury stock upon the exercise of stock
options in May, 2006, and 500 shares upon the exercise of stock options in August, 2007. As of
August 9, 2007, the Company owned a cumulative total of 813,850 shares in treasury stock. The
repurchased shares are held as treasury stock and are available for general corporate purposes.
- 10 -
Note 9 Recent Accounting Pronouncements
In September, 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157 Fair Value
Measurements which defines value, establishes a framework for measuring fair value in generally
accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 is
effective for the Company on January 1, 2008, and is not expected to have a significant impact on
the Companys financial statements.
In February, 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and
Financial Liabilities, which permits companies to choose to measure many financial instruments and
certain other items at fair value. The objective of the new pronouncement is to improve financial
reporting by providing companies with the opportunity to mitigate volatility in reported earnings
caused by measuring assets and liabilities differently without having to apply complex hedge
accounting provisions. SFAS 159 is effective for the Company in 2008. The Company has not yet
made a determination if it will elect to apply the options available in SFAS 159.
- 11 -
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This report contains certain forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. The Company intends such forward-looking statements to be covered by the safe harbor
provisions for forward-looking statements contained in the Private Securities Litigation Reform Act
of 1995 as amended, and is including this statement for purposes of these safe harbor provisions.
Forward-looking statements, which are based on certain assumptions and describe future plans,
strategies and expectations of the Company, are generally identifiable by use of the words
believe, expect, intend, anticipate, estimate, project, or similar expressions. The
Companys ability to predict results or the actual effect of future plans or strategies is
inherently uncertain. Factors which could have a material adverse affect on the operations and
future prospects of the Company and its wholly-owned subsidiaries include, but are not limited to,
changes in: interest rates; general economic conditions; legislative/regulatory provisions;
monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and
the Federal Reserve Board; the quality of composition of the loan or investment portfolios; demand
for loan products; deposit flows; competition; demand for financial services in the Companys
market area; and accounting principles, policies, and guidelines. These risks and uncertainties
should be considered in evaluating forward-looking statements and undue reliance should not be
placed on such statements. Further information concerning the Company and its business, including
additional factors that could materially affect the Companys financial results, is included in the
Companys filings with the Securities and Exchange Commission.
The following discussion compares the financial condition of First BancTrust Corporation (Company),
First Bank & Trust, s.b. (Bank), First Charter Service Corporation, and ECS Service Corporation at
September 30, 2007 to its financial condition at December 31, 2006 and the results of operations
for the three month and nine month periods ending September 30, 2007 to the same periods in 2006.
In prior years, First Charter Service Corporation provided retail sales of uninsured investment
products to customers of First Bank & Trust. In late 2004, First Bank & Trust entered into an
agreement with First Advisors Financial Group LLC (First Advisors) whereby First Advisors
provides investment advisory and asset management services to Bank customers beginning in 2005.
First Advisors rents office space from the Bank, and pays a percentage of fees generated from
transactions with Bank customers to the Bank. As a result, First Charter Service Corporation
became inactive in 2005, and has remained inactive since that time. This discussion should be read
in conjunction with the interim financial statements and notes included herein.
- 12 -
Financial Condition
Total assets of the Company decreased by $8.2 million or 2.6%, to $302.9 million at September 30,
2007 from $311.1 million at December 31, 2006. The decrease in assets was primarily due to
decreases in cash and cash equivalents and available-for-sale securities, partially offset by an
increase in loans, net of allowance for loan losses. The decrease in assets was primarily used to
fund the reduction in deposits.
The Companys cash and cash equivalents decreased by $16.9 million from $28.8 million at December
31, 2006 to $11.9 million at September 30, 2007, a 58.6% decrease. Cash and due from banks
decreased by $5.7 million or 43.3% to $7.5 million at September 30, 2007 from $13.2 million at
December 31, 2006. Interest-bearing demand deposits decreased by $11.2 million or 71.6% to $4.4
million at September 30, 2007 compared to $15.6 million at December 31, 2006. The decrease in cash
and cash equivalents was primarily used to funds loans and to retire maturing brokered certificates
of deposit.
Available-for-sale investment securities amounted to $48.6 million at September 30, 2007 compared
to $64.5 million at December 31, 2006, a $15.9 million decrease. The 24.7% decrease primarily
resulted from $16.5 million in sales of municipal bonds, and $7.2 million in investment calls and
maturities, primarily from payments on mortgage-backed securities and withdrawals from mutual
funds. Investment purchases totaled $7.6 million, which primarily consisted of the temporary
investment of the $7.1 million in bond sale proceeds in a mutual fund. The market valuation of the
available-for-sale portfolio increased by $47,000 from December 31, 2006 to September 30, 2007.
Held-to-maturity securities increased by $642,000 from $4.8 million at December 31, 2006 to $5.4
million at September 30, 2007, due to purchases of held-to-maturity securities of $987,000,
partially offset by principal payments on mortgage-backed securities of $347,000.
Loans held for sale, net of unrealized loss, decreased by $304,000 from $836,000 at December 31,
2006 to $532,000 at September 30, 2007. Unrealized loss on loans held for sale at September 30,
2007 was $3,000 at both September 30, 2007 and December 31, 2006. Loans held for sale are carried
at the lower of cost or market. Single family residential loans for qualified borrowers are
originated and sold to Federal Home Loan Mortgage Corporation (FHLMC) and to the Illinois Housing
Development Authority (IHDA). Loans held for sale at September 30, 2007 consisted of six
single-family residential loans to be sold to FHLMC and IHDA .
The Companys net loan portfolio increased by $23.9 million to $209.4 million at September 30, 2007
from $185.4 million at December 31, 2006. Gross loans increased by $23.9 million while the
allowance for loan losses decreased by $51,000. Commercial nonresidential real estate loans
increased by $4.1 million with the majority of the loan originations generated in Champaign County.
Loans secured by 1-4 family residences increased by $8.9 million and multi-family mortgage loans
increased by $2.3 million, primarily due to an increase in first mortgages on 1-4 family homes and
multi-family units in the Savoy area market. Construction loans increased by $1.7 million primarily
as a result of construction loans originated in Champaign County. Loans secured by farmland
increased by $3.4 million from new originations primarily in Clark and Edgar counties, and
agricultural production loans increased by $1.4 million. Consumer loans increased by $1.0 million
due to new originations primarily in Clark and Edgar counties.
- 13 -
At September 30, 2007, the allowance for loan losses was $2.2 million or 1.03% of the total loan
portfolio compared to the allowance for loan losses at December 31, 2006 of $2.2 million or 1.18%
of the total loan portfolio. During the first nine months of 2007, the Company charged off $565,000
of loan losses, of which $137,000 was attributable to one commercial credit secured by printing
equipment and other business assets, $181,000 was from a loss on a multi-family apartment complex,
and $30,000 was from a loss on a retail commercial building in a rural community. Chargeoffs of
$43,000 related to losses incurred on four one-to-four family residential loans. Consumer loan
chargeoffs totaled $174,000, of which $121,000 related to vehicle loans. The chargeoffs of
$565,000 were partially offset by $69,000 in recoveries from consumer loans, primarily vehicle
loans. The net chargeoffs of $496,000 for the first nine months of 2007 increased by $175,000 when
compared to net chargeoffs of $321,000 for the first nine months of 2006. The Companys
nonperforming loans and troubled debt restructurings remained $1.8 million or 0.86% of total loans
at September 30, 2007 compared to $1.8 million or 0.98% as a percentage of total loans at December
31, 2006. The Companys loans delinquent 90 days and over at September 30, 2007 totaled $1.7
million and included $555,000 in commercial real estate loans, $637,000 in agricultural production
loans, $135,000 in farmland loans, $53,000 in commercial loans, $282,000 in 1-4 family residential
loans, and $69,000 in consumer loans. The Companys troubled debt restructurings of $548,000 at
September 30, 2007 consisted primarily of two restructured commercial loans, of which one in the
amount of $531,000 was delinquent in excess of 90 days, and is included in the delinquent totals.
Delinquent agricultural production and farmland loans included $584,000 which are 90% guaranteed by
the federal government for $526,000. Management reviews the adequacy of the allowance for loan
losses quarterly, and believes that its allowance is adequate; however, the Company cannot assure
that future chargeoffs and/or provisions will not be necessary.
The Company owns approximately $3.7 million of Federal Home Loan Bank stock at September 30, 2007.
During the third quarter of 2007, the Federal Home Loan Bank of Chicago received a Cease and Desist
Order from their regulator, the Federal Housing Finance Board. The draft order prohibits capital
stock repurchases and redemptions until a time to be determined by the Federal Housing Finance
Board. The Federal Home Loan Bank will continue to provide liquidity and funding through advances
and the purchases of mortgages through the MPF Program. With regard to dividends, the Federal Home
Loan Bank will continue to assess their dividend capacity each quarter and receive the necessary
approval if a dividend is made.
Premises and equipment decreased by $427,000 from $11.0 million at December 31, 2006 to $10.6
million at September 30, 2007, primarily due to depreciation expense of $625,000, partially offset
by equipment additions of $200,000. Net foreclosed assets held for sale, totaling $509,000 at
September 30, 2007 increased $143,000, or 39.1%, compared to $366,000 at December 31, 2006. As of
September 30, 2007, the Company had real estate properties totaling $440,000 consisting of four
residential properties, two commercial properties, and two vacant lots and other repossessed assets
totaling $69,000, which included printing equipment valued at $27,000 and other consumer
repossessed assets of $42,000. Foreclosed assets are carried at lower of cost or net realizable
value.
- 14 -
Interest receivable increased by $365,000 from $2.9 million at December 31, 2006 to $3.3 million at
September 30, 2007, a 12.5% increase, primarily due to loan growth. Deferred income
taxes increased by $108,000 from $1.5 million at December 31, 2006 to $1.6 million at September 30,
2007, primarily as a result of the tax effect of the change in market value of available for sale
securities. Other assets increased by $106,000 from $487,000 at December 31, 2006 to $593,000 at
September 30, 2007 primarily as a result of an increase in prepaid insurance.
The Companys total deposits totaled $216.4 million at September 30, 2007 compared to $242.6
million at December 31, 2006, a decrease of $26.2 million. The 10.8% decrease in total deposits was
due to a $5.6 million decrease in non-interest bearing deposits, and by a $27.6 million decrease in
certificates of deposit, partially offset by an increase in savings, NOW and money market accounts
of $7.0 million. The decrease of $5.6 million in demand deposits was primarily due to a shift in
deposits from demand to NOW accounts, as checking products targeting seniors were reformatted. The
increase in savings, NOW and money market accounts of $7.0 million was comprised of an increase of
an increase of $1.7 million in NOW accounts which was primarily due to the reformatted senior
checking product, an increase of $5.0 million in savings accounts primarily due to a promotion
highlighting the Pay Yourself Savings account to attract lower cost deposits, and by an increase
in money market accounts of $283,000. Time deposits decreased by $27.6 million from $159.7 million
at December 31, 2006 to $132.1 million at September 30, 2007, primarily due to the reduction in
brokered certificates of deposit. Brokered certificates of deposit totaling $22.9 million maturing
in the first three months of 2007 were not renewed. The reductions in certificates were primarily
funded by the reduction of cash and cash equivalents, and by the increase in Federal Home Loan Bank
advances.
Short term borrowings increased by $965,000 due to the Company securing a line of credit from
LaSalle Bank National Association. The revolving line of credit was approved for $2.0 million, and
is secured by the First Bank & Trust, s.b. stock owned by the Company. The short-term borrowings
were used to purchase treasury stock. Short-term borrowings at September 30, 2007 also included
federal funds purchased of $1.5 million from a correspondent bank. Federal Home Loan Bank advances
increased by $16.0 million from $32.8 million at December 31, 2006 to $48.8 million at September
30, 2007. Two new convertible advances of $5.0 million each were obtained in March and April, 2007
with lock out rates of 4.13% and 4.29% for one year. After the lock out term of one year has
passed, the Federal Home Loan Bank has the option to convert each advance to a quarterly adjustable
advance, with the option of prepayment available if that should occur. A 30 day fixed term daily
floating rate advance was negotiated in June, 2007 for $3.0 million which matured in July 2007.
When this advance matured in July, 2007, it was replaced with a $5.0 million convertible advance
with a lock out rate of 4.75% for a period of six months. Existing advances include $25.5 million
have passed the initial lock-out period and are subject to possible conversion quarterly. Fixed
rate, fixed term advances at September 30, 2007 total $7.3 million, and the line of credit at
September 30, 2007 had a $1.0 million balance. The total average rate of all advances was 4.28% as
of September 30, 2007. The increase in borrowings was used primarily to reduce brokered
certificates of deposit and to fund loan growth.
- 15 -
Junior subordinated debentures remained constant at $6.2 million at September 30, 2007 compared to
December 31, 2006. Capital securities of $6.0 million were issued June 15, 2005 by a statutory
business trust, FBTC Statutory Trust I. The Company owns 100% of the common equity of the trust,
which is a wholly-owned subsidiary of the Company. The $6.0 million in
proceeds from the trust preferred issuance and an additional $186,000 for the Companys investment
in the common equity of the Trust, a total of $6,186,000, was invested in the junior subordinated
debentures of the Company. As required by FIN 46R, the Company has not consolidated the investment
in the Trust. The trust was formed with the purpose of issuing trust preferred securities and
investing the proceeds from the sale of such trust preferred securities in the debentures. The
debentures held by the trust are the sole assets of the trust. Distributions of the trust
preferred securities are payable at a variable rate of interest, which is equal to the interest
rate being earned by the trust on the debentures, and are recorded as interest expense by the
Company. The trust preferred securities are subject to mandatory redemption, in whole or in part,
upon repayment of the debentures.
The debentures are included as Tier I capital for regulatory capital purposes. The debentures
issued are first redeemable, in whole or part, by the Company, on June 15, 2010, and mature on June
15, 2035. Interest payments are made quarterly. Interest expense related to the debentures was
$269,000 for both the nine month periods ended September 30, 2007 and 2006, and $90,000 for both
the three months periods ended September 30, 2007 and 2006.
Advances from borrowers for taxes and insurance increased by $183,000 from $148,000 at December 31,
2006 to $331,000 at September 30, 2007. The $183,000 increase is a normal trend, as escrows
typically accumulate funds in the first half of the year for the payment of real estate taxes later
in the year. Payments for 2006 real estate taxes in Edgar and Clark Counties are not due until
during the fourth quarter of 2007 due to late billing resulting from quadrennial assessment in
those counties. Interest payable decreased by $261,000, or 28.1% from $929,000 at December 31, 2006
to $668,000 at September 30, 2007 primarily a result of the reduction in balances of certificates
of deposits.
Stockholders equity at September 30, 2007 was $26.4 million compared to $26.7 million at December
31, 2006, a decrease of $213,000. Retained earnings increased by the amount of net income or
$877,000, partially offset by $400,000 in dividends declared and paid. As shares from the employee
stock ownership plan vested to participants from December 31, 2006 to September 30, 2007,
stockholders equity increased by $264,000, and as shares from the incentive plan were earned by
participants for the same period, stockholders equity increased by $94,000. Accumulated
comprehensive loss decreased by $29,000 due to an increase in the fair value of securities
available for sale, net of related tax effect. Treasury stock increased by $1.1 million due to the
repurchase of 91,300 shares of stock, which was partially offset by the transfer of 500 shares for
stock options exercised in August 2007.
Results of Operations
Comparison of Nine Month Periods Ended September 30, 2007 and 2006
Net income for the nine months ended September 30, 2007 increased by $97,000 or 12.4% from $780,000
for the nine months ended September 30, 2006 to $877,000 for the nine months ended September 30,
2007. The increase in net income is primarily due to increases in net interest
income and noninterest income and by a reduction in noninterest expense, partially offset by
increases in the provision for loan losses and income tax expense.
- 16 -
Net interest income increased $152,000 or 2.6% from $6.0 million for the nine months ended
September 30, 2006 to $6.1 million for the nine months ended September 30, 2007. The primary
reasons for the increase in net interest income was an increase in total interest and dividend
income of $1.7 million, partially offset by an increase in interest expense of $1.5 million. The
Companys net interest margin was 3.04% and 3.15% during the nine months ended September 30, 2007
and 2006, respectively. The net interest margin decreased as a result of a decrease in interest
spread. Interest spread decreased by 10 basis points from 2.86% for the nine months ended
September 30, 2006 to 2.76% for the nine months ended September 30, 2007. The average rate paid on
interest bearing liabilities increased by 56 basis points, while the average rate earned on
interest bearing assets increased by 45 basis points. The average balances of interest bearing
assets for the nine month period ending September 30, 2007 increased by $16.1 million to $267.9
million compared to $251.8 million in average earning assets for the nine month period ending
September 30, 2006. Interest bearing liabilities increased by $18.4 million from $230.9 million
for the nine month period ended September 30, 2006 to $249.3 million for the nine month period
ended September 30, 2007. The increase in interest bearing assets was primarily due to loan
growth, while the increase in interest bearing liabilities was due to the acquisition of $13.0
million in Rantoul deposits in December, 2006 from another local financial institution.
Total interest and dividend income increased by $1.6 million or 13.9% from $12.0 million for the
nine months ended September 30, 2006 to $13.6 million for the nine months ended September 30, 2007.
The increase of $1.7 million was primarily due to increases in loan interest income and interest
income from deposits with financial institutions, partially offset by reductions in interest and
dividend income from securities and dividends on Federal Home Loan Bank stock. The increase of
$2.0 million in loan interest income was primarily due to a $27.7 million increase in the average
loan balance and by an increase in the average loan rate of 33 basis points. Interest and dividend
income from securities decreased by $286,000 primarily due to a decrease of $10.8 million in the
average balance of investments, partially offset by an increase of 21 basis points in the average
rate. Interest income from deposits with financial institutions increased by $45,000 primarily due
to an increase of $1.3 million in the average balance, partially offset by a decrease in average
rate of 12 basis points. Dividends on Federal Home Loan Bank stock decreased by $63,000 from the
nine months ended September 30, 2006 to the nine months ended September 30, 2007 due to a decrease
in the average balance of $2.1 million, and by a decrease in the average rate of 30 basis points.
Interest expense increased by $1.5 million or 25.2% from $6.0 million for the nine months ended
September 30, 2006 to $7.5 million for the nine months ended September 30, 2007. This increase was
primarily due to an increase of $1.4 million in interest on deposits, and a $71,000 increase in
interest on Federal Home Loan Bank advances and other debt. The $1.4 million increase in interest
expense on deposits was primarily due to an increase in the average rate paid on deposits of 69
basis points, and by an increase in the average balance of interest bearing deposits of $16.8
million. The $71,000 increase in interest on Federal Home Loan Bank
advances and other debt was due to an increase in the average balance of $1.6 million, and an
increase in average interest rate of 5 basis points.
- 17 -
For the nine months ended September 30, 2007 and 2006, the provision for losses on loans was
$446,000 and $163,000, respectively. The increase of $283,000 in the provision for loan loss was
primarily due to loan growth. The provision for the nine months ended September 30, 2007 was based
on the Companys analysis of the allowance for loan losses. Management meets on a quarterly basis
to review the adequacy of the allowance for loan losses by classifying loans in compliance with
regulatory classifications. Classified loans are individually reviewed to arrive at specific
reserve levels for those loans. Once the specific portion for each loan is calculated, management
calculates a historical portion for each category based on a combination of loss history, current
economic conditions, and trends in the portfolio. While the Company cannot assure that future
chargeoffs and/or provisions will not be necessary, the Companys management believes that, as of
September 30, 2007, its allowance for loan losses was adequate.
Noninterest income increased $204,000 or 7.8% from $2.6 million for the nine months ended September
30, 2006 to $2.8 million for the nine months ended September 30, 2007. The increase was primarily
a result of increases in customer service fees, net realized gains on sales of available-for-sale
securities, other service charges and fees, and abstract and title fees, partially offset by
decreases in loan servicing fees. Customer service fees increased by $80,000 from $806,000 for the
nine months ended September 30, 2006 to $886,000 for the nine months ended September 30, 2007,
primarily due to increased NSF and overdraft fees. Other service charges and fees increased by
$26,000 from $679,000 for the nine months ended September 30, 2006 compared to $705,000 for the
nine months ended September 30, 2007 primarily due to increases in loan related fees and debit card
fees. Net realized gains on sales of available for sale securities was $70,000 for the nine months
ended September 30, 2007 resulting from the sale of $7.2 million of municipal bonds. Loan
servicing fees decreased by $18,000 from $332,000 for the nine months ended September 30, 2006 to
$314,000 for the nine months ended September 30, 2007, primarily due to a $4.3 million decrease in
the average balance of loans serviced for others. Abstract and title fees increased by $22,000 from
$242,000 for the nine months ended September 30, 2006 to $264,000 for the nine months ended
September 30, 2007 primarily due to an increase in commissions earned on title insurance sales.
Other income increased by $33,000 from $122,000 for the nine months ended September 30, 2006 to
$155,000 for the nine months ended September 30, 2007 primarily due to an increase in ATM fees.
Total noninterest expenses were $7.3 million for the nine months ended September 30, 2007 compared
to $7.4 million for the nine months ended September 30, 2006. The primary reasons for the $105,000
decrease were decreases in salaries and employee benefits expense, professional fees, and
amortization of loan servicing rights, partially offset by increases in net occupancy expense,
equipment expense, data processing expense, and foreclosed assets expense, net.
Salaries and employee benefits decreased by $183,000 from $3.9 million for the nine months ended
September 30, 2006 to $3.7 million for the nine months ended September 30, 2007, as a result of a
decrease in salaries expense, health insurance expense, unemployment taxes and incentive plan
expense.
- 18 -
Net occupancy expense increased by $128,000 from $501,000 for the nine months ended September 30,
2006 compared to $629,000 for the nine months ended September 30, 2007. This increase can be
attributed to additional occupancy expenses associated with the addition of the Martinsville and
Rantoul West locations, as well as the expansion of the Paris facility. Deregulation in electrical
rates in the State of Illinois in 2007 also caused substantial increases in rates charged for
electricity consumption. Equipment expense increased by $51,000 primarily as a result of
increases in depreciation expense and increased software license fees. Data processing fees
increased by $42,000 primarily due to increases in fees charged by third party service providers
and increased utilization of services for the core data processing system and for the ATM network
system processing.
Professional fees decreased by $56,000 from $366,000 for the nine months ended September 30, 2006
to $310,000 for the nine months ended September 30, 2007, primarily due to a decrease in consulting
fees, primarily from the elimination of an investor relations consulting firm. Foreclosed assets
expense, net increased by $23,000 from $65,000 for the nine months ended September 30, 2006 to
$88,000 for the nine months ended September 30, 2007, primarily as a result of expenses associated
with commercial property foreclosures. Amortization of loan servicing rights decreased by $52,000
from $183,000 for the nine months ended September 30, 2006 to $131,000 for the nine months ended
September 30, 2007, as a result of the reduction in loan servicing assets.
Income tax expense was $276,000 for the nine months ended September 30, 2007 as compared to
$195,000 for the nine months ended September 30, 2006. The increase of $81,000 in income tax
expense was primarily due to an increase in income before income taxes of $178,000 from $975,000
for the nine months ended September 30, 2006 compared to $1.2 million for the nine months ended
September 30, 2007. The effective tax rate for the nine months ended September 30, 2007 was 23.9%
compared to 20.0% for the nine months ended September 30, 2006.
The Company adopted the provisions of FASB Interpretation No. 48 (FIN 48), Accounting for
Uncertainty in Income Taxes, on January 1, 2007. The Company has recognized no increase in its
liability for unrecognized tax benefits as a result of the implementation of FIN 48. The Company
files income tax returns in the U.S. federal jurisdiction and the State of Illinois jurisdiction.
With a few exceptions, the Company is no longer subject to U.S. federal, state and local on
non-U.S. income tax examinations by tax authorities for years before 2004.
Comparison of Three Month Periods Ended September 30, 2007 and 2006
Net income for the three months ended September 30, 2007 increased by $170,000 or 62.5% from
$272,000 for the three months ended September 30, 2006 to $442,000 for the three months ended
September 30, 2007. The increase in net income was primarily due to increases in net interest
income and noninterest income and a reduction in noninterest expense, partially offset by increases
in the provision for loan losses and income tax expense.
- 19 -
Net interest income increased $218,000 or 10.9% from $2.3 million for the three months ended
September 30, 2006 to $2.6 million for the three months ended September 30, 2007. The primary
reasons for the increase in net interest income was an increase in total interest and dividend
income of $548,000, partially offset by an increase in interest expense of $330,000. The Companys
net interest margin was 3.28% and 3.08% during the three months ended September 30, 2007 and 2006,
respectively. The net interest margin increased as a result of an increase in interest spread.
Interest spread increased by 25 basis points from 2.78% for the three months ended September 30,
2006 to 3.03% for the three months ended September 30, 2007. The average rate earned on interest
bearing assets increased by 56 basis points while the average rate paid on interest bearing
liabilities increased by 30 basis points. The average balances of interest bearing assets for the
three month period ending September 30, 2007 increased by $10.7 million to $269.3 million compared
to $258.6 million in average earning assets for the three month period ending September 30, 2006.
Interest bearing liabilities increased by $14.5 million from $238.4 million for the three month
period ended September 30, 2006 to $252.9 million for the three month period ended September 30,
2007. The increase in interest bearing assets was primarily due to loan growth, while the increase
in interest bearing liabilities was due to the acquisition of $13.0 million in Rantoul deposits in
December, 2006 from another local financial institution.
Total interest and dividend income increased by $548,000 or 12.9% from $4.3 million for the three
months ended September 30, 2006 to $4.8 million for the three months ended September 30, 2007. The
increase of $548,000 was primarily due to an increase in loan interest income partially offset by a
reduction of interest and dividend income from securities, and dividends from Federal Home Loan
Bank stock. The increase of $695,000 in loan interest income was primarily due to a $25.9 million
increase in the average loan balance and by an increase in the average loan rate of 44 basis
points. Interest and dividend income from securities decreased by $112,000 primarily due to a
decrease of $14.1 million in the average balance of investments, partially offset by an increase of
48 basis points in the average rate. Interest income from deposits with financial institutions
decreased by $11,000 primarily due to a decrease of $126,000 in the average balance of deposits
with financial institutions and by a 22 basis point reduction in the average rate. Dividends on
Federal Home Loan Bank stock decreased by $24,000 from the three months ended September 30, 2006 to
the three months ended September 30, 2007 due to a decrease in the average balance of $975,000 and
by a decrease of 146 basis points in the average rate.
Interest expense increased by $330,000 or 14.6% from $2.3 million for the three months ended
September 30, 2006 to $2.6 million for the three months ended September 30, 2007. This increase
was primarily due to an increase of $157,000 in interest on deposits, and by a $173,000 increase in
interest on Federal Home Loan Bank advances and other debt. The $157,000 increase in interest
expense on deposits was primarily due to an increase in the average rate paid on deposits of 36
basis points, partially offset by a decrease in the average balance of interest bearing deposits of
$2.6 million. The $173,000 increase in interest on Federal Home Loan Bank advances and other debt
was due to an increase in the average balance of $17.1 million, partially offset by a decrease in
average interest rate of 24 basis points.
- 20 -
For the three months ended September 30, 2007 and 2006, the provision for losses on loans was
$182,000 and $68,000, respectively. The provision for the three months ended September 30, 2007
was based on the Companys analysis of the allowance for loan losses. Management meets
on a quarterly basis to review the adequacy of the allowance for loan losses by classifying loans
in compliance with regulatory classifications. Classified loans are individually reviewed to
arrive at specific reserve levels for those loans. Once the specific portion for each loan is
calculated, management calculates a historical portion for each category based on a combination of
loss history, current economic conditions, and trends in the portfolio. While the Company cannot
assure that future chargeoffs and/or provisions will not be necessary, the Companys management
believes that, as of September 30, 2007, its allowance for loan losses was adequate.
Noninterest income increased $59,000 or 6.6% from $897,000 for the three months ended September 30,
2006 to $956,000 for the three months ended September 30, 2007. The increase was primarily a
result of increases in other service charges and fees, abstract and title fees, and other income.
Other service charges and fees increased by $11,000 from $225,000 for the three months ended
September 30, 2006 compared to $236,000 for the three months ended September 30, 2007 primarily due
to an increase in interchange fees earned on an increased volume of debit card transactions.
Abstract and title fees increased by $10,000 from $82,000 for the three months ended September 30,
2006 to $92,000 for the three months ended September 30, 2007 primarily due to an increase in
commissions earned from sales of title insurance. Other income increased by $22,000 primarily due
to an increase in ATM fees, and trust department fees.
Total noninterest expenses declined by $136,000 from $2.5 million for the three months ended
September 30, 2006 to $2.4 million for the three months ended September 30, 2007. The primary
reasons for the $136,000 decrease were decreases in salaries and employee benefits expense,
foreclosed assets expense, net, marketing expense, amortization of loan servicing rights, and other
expenses, partially offset by an increase in net occupancy expense. Salaries and employee benefits
decreased by $59,000 from $1.3 million for the three months ended September 30, 2006 to $1.2
million for the three months ended September 30, 2007, as a result of a decrease in salaries
expense, health insurance expense and incentive plan expense.
Net occupancy expense increased by $27,000 from $185,000 for the three months ended September 30,
2006 compared to $212,000 for the three months ended September 30, 2007. This increase can be
attributed to additional occupancy expenses associated with the addition of Rantoul West location,
as well as the expansion of the Paris facility. Deregulation in electrical rates in the State of
Illinois in 2007 also caused substantial increases in rates charged for electricity consumption.
Foreclosed assets expense decreased by $18,000 from $24,000 for the three months ended September
30, 2006 to $6,000 for the three months ended September 30, 2007, primarily due to an extension fee
relating to the sale of a multi-family residential real estate property acquired through
foreclosure and to the recognition of income in the current period from deferred gains. Marketing
expense decreased by $16,000 from $72,000 for the three months ended September 30, 2006 to $56,000
for the three months ended September 30, 2007 primarily due to marketing promotion in 2006
associated with the opening of the new facility in Paris. Amortization of loan servicing rights
decreased by $17,000 from $61,000 for the three months ended September 30, 2006 to $44,000 for the
three months ended September 30, 2007 due to a reduction in loan servicing assets. Other expenses
decreased by $59,000 from $350,000 for the three months ended September 30, 2006 to $291,000 for
the three months ended September 30, 2007 primarily
due to the loss on premises and equipment recognized in 2006 related to the expansion of the main
facility.
- 21 -
Income tax expense was $187,000 for the three months ended September 30, 2007 as compared to
$58,000 for the three months ended September 30, 2006. The increase of $129,000 in income tax
expense was primarily due to an increase in income before income taxes of $299,000 from $330,000
for the three months ended September 30, 2006 compared to $629,000 for the three months ended
September 30, 2007. The effective tax rate for the three months ended September 30, 2007 was 29.7%
compared to 17.6% for the three months ended September 30, 2006.
Critical Accounting Policies
The preparation of financial statements in conformity with accounting standards generally accepted
in the United States of America requires management to make estimates and assumptions that affect
the reported amounts of assets, liabilities, revenues and expenses and the related disclosure of
contingent assets and liabilities. Actual results could differ from those estimates under
different assumptions and conditions. Management believes that its critical accounting policies
and significant estimates include determining the allowance for loan losses, the valuation of loan
servicing rights, and the valuation of foreclosed real estate.
Allowance for loan losses
The allowance for loan losses is a significant estimate that can and does change based on
managements assumptions about specific borrowers and current general economic and business
conditions, among other factors. Management reviews the adequacy of the allowance for loan losses
on at least a quarterly basis. The evaluation by management includes consideration of past loss
experience, changes in the composition of the loan portfolio, the current condition and amount of
loans outstanding, identified problem loans and the probability of collecting all amounts due.
The determination of the adequacy of the allowance for loan losses is based on estimates that are
particularly susceptible to significant changes in the economic environment and market conditions.
A worsening or protracted economic decline would increase the likelihood of additional losses due
to credit and market risk and could create the need for additional loss reserves.
Loan Servicing Rights
The Company recognizes the rights to service loans as separate assets on the consolidated balance
sheet. The total cost of loans when sold is allocated between loans and loan servicing rights
based on the relative fair values of each. Loan servicing rights are subsequently carried at the
lower of the initial carrying value, adjusted for amortization, or fair value. Loan servicing
rights are evaluated for impairment based on the fair value of those rights. Factors included in
the calculation of fair value of the loan servicing rights include estimating the present value of
future net cash flows, market loan prepayment speeds for similar loans, discount rates, servicing
costs, and other economic factors. Servicing rights are amortized over the estimated period of net
servicing revenue. It is likely that these economic factors will change over the life of the loan
servicing rights, resulting in different valuations of the loan servicing rights. The differing
valuations will affect the carrying value of the loan servicing rights on the consolidated balance
sheet, as well as the income recorded from loan servicing in the income statement. As of September
30, 2007 and December 31, 2006, loan servicing rights had carrying values of $313,000 and $351,000,
respectively.
- 22 -
Foreclosed Assets Held for Sale
Foreclosed assets held for sale are carried at the lower of cost or fair value less estimated
selling costs. Management estimates the fair value of the properties based on current appraisal
information. Fair value estimates are particularly susceptible to significant changes in the
economic environment, market conditions, and the real estate market. A worsening or protracted
economic decline would increase the likelihood of a decline in property values and could create the
need to write down the properties through current operations.
Liquidity
At September 30, 2007, the Company had outstanding commitments to originate $23.5 million in loans,
and $14.7 million available to be drawn upon for open-end lines of credit. For more information on
the outstanding commitments, see the discussion below the caption Off-Balance Sheet Arrangements
and Contractual Commitments. As of September 30, 2007, the total amount of certificates scheduled
to mature in the following 12 months was $101.1 million. The Company believes that it has adequate
resources to fund all of its commitments. The Companys most liquid assets are cash and cash
equivalents. The level of cash and cash equivalents is dependent on the Companys operating,
financing, lending and investing activities during any given period. The level of cash and cash
equivalents at September 30, 2007 was $11.9 million. The Companys future short-term requirements
for cash are not expected to significantly change. In the event that the Company should require
funds beyond its capability to generate them internally, additional sources of funds are available
such as Federal Home Loan Bank advances.
Off-Balance Sheet Arrangements and Contractual Commitments
At September 30, 2007, the Company had outstanding commitments to originate loans of $23.5 million.
The commitments extended over varying periods of time with the majority being disbursed within a
one-year period. Loan commitments at fixed rates of interest amounted to $18.1 million, with the
remainder at floating rates. In addition, the Company had outstanding unused lines of credit to
borrowers aggregating $9.8 million for commercial lines of credit, and $4.9 million for consumer
lines of credit. Outstanding commitments for letters of credit at September 30, 2007 totaled
$560,000. Since these commitments have fixed expiration dates, and some will expire without being
drawn upon, the total commitment level may not necessarily represent future cash requirements.
- 23 -
The following table presents additional information about our unfunded commitments as of September
30, 2007, which by their terms have contractual maturity dates subsequent to September 30, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Next 12 |
|
|
13-36 |
|
|
37-60 |
|
|
More than |
|
|
|
|
|
|
Months |
|
|
Months |
|
|
Months |
|
|
60 Months |
|
|
Totals |
|
|
|
|
|
|
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unfunded commitments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Letters of credit |
|
$ |
514 |
|
|
$ |
46 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
560 |
|
Lines of credit |
|
|
9,779 |
|
|
|
878 |
|
|
|
363 |
|
|
|
3,659 |
|
|
|
14,679 |
|
Overdraft protection |
|
|
1,259 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,259 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals |
|
$ |
11,552 |
|
|
$ |
924 |
|
|
$ |
363 |
|
|
$ |
3,659 |
|
|
$ |
16,498 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Resources
The Bank is subject to capital-to-asset requirements in accordance with Federal bank regulations.
The following table summarizes the Banks regulatory capital requirements, versus actual capital as
of September 30, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Required for |
|
|
To be Well |
|
September 30, 2007 |
|
Actual |
|
|
Adequate Capital |
|
|
Capitalized |
|
|
|
Amount |
|
|
% |
|
|
Amount |
|
|
% |
|
|
Amount |
|
|
% |
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands) |
|
|
|
Total capital (to
risk-weighted
assets) |
|
$ |
33,479 |
|
|
|
16.30 |
|
|
$ |
16,340 |
|
|
|
8.0 |
|
|
$ |
20,538 |
|
|
|
10.0 |
|
Tier 1 capital (to
risk-weighted
assets) |
|
|
31,307 |
|
|
|
15.24 |
|
|
|
8,215 |
|
|
|
4.0 |
|
|
|
12,323 |
|
|
|
6.0 |
|
Tier 1 capital (to
average assets) |
|
|
31,307 |
|
|
|
10.52 |
|
|
|
11,899 |
|
|
|
4.0 |
|
|
|
14,874 |
|
|
|
5.0 |
|
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Sources of market risk include interest rate risk, foreign currency exchange risk, commodity price
risk and equity price risk. The Company is only subject to interest rate risk. The Company
purchased no financial instruments for trading purposes during the three months ended September 30,
2007 and 2006.
The principal objectives of the Companys interest rate risk management function are: (i) to
evaluate the interest rate risk included in certain balance sheet accounts; (ii) to determine the
level of risk appropriate given the Companys business focus, operating environment, capital and
liquidity requirements, and performance objectives; (iii) to establish asset concentration
guidelines; and (iv) to manage the risk consistent with Board-approved guidelines. Through such
management, the Company seeks to reduce the vulnerability of its operations to changes in interest
rates and to manage the ratio of interest rate sensitive assets to interest rate sensitive
liabilities within specified maturity terms or repricing dates. The
Companys Board of Directors has established an Asset/Liability
Committee consisting of directors and senior management officers, which is responsible for reviewing the Companys asset/liability policies and monitoring
interest rate risk as such risk relates to its operating strategies. The committee usually meets
on a quarterly basis, and at other times as dictated by market conditions, and reports to the Board
of Directors. The committee is responsible for reviewing Company activities and strategies, and the
effect of those strategies on the Companys net interest margin, the market value of the portfolio
and the effect that changes in interest rates will have on the Companys portfolio and exposure
limits.
- 24 -
The Companys key interest rate risk management tactics consist primarily of: (i) emphasizing the
attraction and retention of core deposits, which tend to be a more stable source of funding; (ii)
emphasizing the origination of adjustable rate mortgage loan products and short-term commercial and
consumer loans for the in-house portfolio, although this is dependent largely on the market for
such loans; (iii) selling longer-term fixed-rate one-to-four family mortgage loans in the secondary
market; and (iv) investing primarily in U.S. government agency instruments and mortgage-backed
securities.
The Companys interest rate and market risk profile has not materially changed from the year ended
December 31, 2006. Please refer to the Companys Form 10-K for the year ended December 31, 2006
for further discussion of the Companys market and interest risk.
ITEM 4. CONTROLS AND PROCEDURES
The Company carried out an evaluation as of September 30, 2007, under the supervision and with the
participation of the Companys management, including the Companys Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the design and operation of the Companys
disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and
Chief Financial Officer concluded that the Companys disclosure controls and procedures are
effective. There were no significant changes in the Companys internal controls or in other
factors that could significantly affect these controls during the quarter ended September 30, 2007.
Disclosure controls and procedures are the controls and other procedures of the Company that are
designed to ensure that the information required to be disclosed by the Company in its reports
filed or submitted under the Securities Exchange Act of 1934, as amended (Exchange Act) is
recorded, processed, summarized and reported, within the time periods specified in the Securities
and Exchange Commissions rules and forms. Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that information required to be disclosed by
the Company in its reports filed under the Exchange Act is accumulated and communicated to the
Companys management, including the principal executive officer and principal financial officer, as
appropriate to allow timely decisions regarding required disclosure.
- 25 -
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company and subsidiary are subject to claims and lawsuits which arise primarily in the ordinary
course of business, such as claims to enforce liens and claims involving the making and servicing
of real property loans and other issues. It is the opinion of management that the disposition or
ultimate determination of such possible claims or lawsuits will not have a material adverse effect
on the consolidated financial position of the Company.
ITEM 1A. RISK FACTORS
There have been no material changes from the risk factors set forth in Part I, Item 1A Risk
Factors of the Companys Form 10-K for the year ended December 31, 2006. Please refer to that
section of the Companys Form 10-K for disclosures regarding risks and uncertainties related to the
Companys business.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(c) The following table provides information about purchases of the Companys common stock by the
Company during the quarter ended September 30, 2007.
ISSUER PURCHASES OF EQUITY SECURITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(d) Maximum |
|
|
|
|
|
|
|
|
|
|
|
(c) Total Number |
|
|
Number of |
|
|
|
|
|
|
|
|
|
|
|
of Shares |
|
|
Shares that May |
|
|
|
|
|
|
|
|
|
|
|
Purchased as |
|
|
Yet Be |
|
|
|
(a) Total Number |
|
|
(b) Average |
|
|
Part of Publicly |
|
|
Purchased Under |
|
|
|
of Shares |
|
|
Price Paid |
|
|
Announced Plans |
|
|
the Plans |
|
Period |
|
Purchased |
|
|
per Share |
|
|
or Programs |
|
|
or Programs |
|
7/1/2007
to 7/31/2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51,710 |
|
8/1/2007
to 8/31/2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51,710 |
|
9/1/2007
to 9/30/2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51,710 |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51,710 |
|
|
|
|
(1) |
|
The board of directors approved the repurchase by the Company of 117,710 shares over the one year period ending March 15, 2008. |
- 26 -
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS
(a) Exhibits
|
|
|
31.1
|
|
Certification of Terry J. Howard required by Rule 13a-14(a). |
|
|
|
31.2
|
|
Certification of Ellen M. Litteral required by Rule 13a-14(a). |
|
|
|
32.1
|
|
Certification of Terry J. Howard, Chief Executive Officer pursuant to
Rule 13a-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002
(18 U.S.C. 1350). |
|
|
|
32.2
|
|
Certification of Ellen M. Litteral, Chief Financial Officer pursuant to
Rule 13a-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002
(18 U.S.C. 1350). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
|
|
|
|
|
|
|
FIRST BANCTRUST CORPORATION |
|
|
|
|
|
|
|
Date: November 13, 2007
|
|
/s/ Terry J. Howard |
|
|
|
|
|
|
|
|
|
Terry J. Howard |
|
|
|
|
President and Chief Executive Officer |
|
|
|
|
|
|
|
Date: November 13, 2007
|
|
/s/ Ellen M. Litteral |
|
|
|
|
|
|
|
|
|
Ellen M. Litteral |
|
|
|
|
Treasurer and Chief Financial Officer |
|
|
- 27 -
EXHIBIT INDEX
|
|
|
Exhibit No. |
|
Description |
|
31.1
|
|
Certification of Terry J. Howard required by Rule 13a-14(a). |
|
31.2
|
|
Certification of Ellen M. Litteral required by Rule 13a-14(a). |
|
32.1
|
|
Certification of Terry J. Howard, Chief Executive Officer pursuant to
Rule 13a-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002
(18 U.S.C. 1350). |
|
32.2
|
|
Certification of Ellen M. Litteral, Chief Financial Officer pursuant to
Rule 13a-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002
(18 U.S.C. 1350). |
- 28 -