UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2002
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NUMBER 0-32535
FIRST BANCTRUST CORPORATION
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
DELAWARE
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)
37-1406661
(IRS EMPLOYER IDENTIFICATION NO.)
206 SOUTH CENTRAL AVENUE
PARIS, ILLINOIS
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
61944
(ZIP CODE)
217-465-6381
(ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)
CHECK WHETHER THE ISSUER: (1) FILED ALL REPORTS REQUIRED TO BE FILED BY
SECTION 13 OR 15(d) OF THE EXCHANGE ACT DURING THE PAST 12 MONTHS (OR FOR SUCH
SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2)
HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
--- ---
STATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF COMMON
EQUITY AS OF THE LATEST PRACTICABLE DATE.
AS OF MAY 10, 2002 THE REGISTRANT HAD OUTSTANDING 1,409,875 SHARES OF COMMON
STOCK.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE): YES [ ] NO [X]
First BancTrust Corporation
Form 10-QSB Quarterly Report
Index Page
PART I - Financial Information
Item 1 Financial Statements
Condensed Consolidated Balance Sheets 1
(As of March 31, 2002 and December 31, 2001)
Condensed Consolidated Statements of Income 2
(For the three months ended March 31, 2002 and 2001)
Condensed Consolidated Statements of Cash Flows 3
(For the three months ended March 31, 2002 and 2001)
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 6
PART II - Other Information
Item 1 Legal Proceedings 11
Item 2 Changes in Securities 12
Item 3 Defaults Upon Senior Securities 12
Item 4 Submission of Matters to a Vote of Security
Holders 12
Item 5 Other Information 12
Item 6 Exhibits and Reports on Form 8-K 12
SIGNATURES 13
FIRST BANCTRUST CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands of dollars except share data)
MARCH 31, DECEMBER 31,
2002 2001
(unaudited)
--------------------------------------------------------------------------------------------------
ASSETS
Cash and due from banks $ 4,065 $ 7,308
Interest-bearing demand deposits 6,853 9,438
--------- ---------
Cash and cash equivalents 10,918 16,746
Available-for-sale securities 68,852 65,207
Loans held for sale 3,822 597
Loans, net of allowance for loans losses of $1,857 and $1,657 99,660 100,656
Premises and equipment 2,372 2,435
Foreclosed assets held for sale, net 827 807
Interest receivable 1,863 2,116
Deferred income taxes 125 --
Loan servicing rights 1,997 2,095
Cash surrender value of life insurance 3,521 3,479
Federal Home Loan Bank stock 1,605 1,582
Other assets 312 317
--------- ---------
Total assets $ 195,874 $ 196,037
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest bearing $ 12,741 $ 13,963
Interest bearing 128,713 127,353
--------- ---------
Total deposits 141,454 141,316
Federal Home Loan Bank advances and other debt 25,512 25,516
Pass through payments received on loans sold 136 270
Advances from borrowers for taxes and insurance 286 140
Deferred income taxes -- 127
Interest payable 159 124
Other liabilities 793 826
--------- ---------
Total liabilities 168,340 168,319
--------- ---------
COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 1,000,000 shares authorized
and unissued
Common stock, $.01 par value, 5,000,000 shares
authorized; 1,520,875 shares issued and outstanding 15 15
Additional paid-in capital 14,394 14,382
Retained earnings 15,418 15,214
Accumulated other comprehensive income (loss) (124) 247
--------- ---------
29,703 29,858
Unallocated employee stock ownership plan shares -
106,466 and 110,267 shares (1,230) (1,275)
Treasury stock, at cost - 67,600 and 62,600 shares (939) (865)
--------- ---------
Total stockholders' equity 27,534 27,718
--------- ---------
Total liabilities and stockholders' equity $ 195,874 $ 196,037
========= =========
See notes to condensed consolidated financial statements.
1
FIRST BANCTRUST CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands of dollars)
(unaudited)
THREE MONTHS ENDED MARCH 31 2002 2001
--------------------------------------------------------------------------------------
INTEREST INCOME
Loans
Taxable $ 2,203 $2,553
Tax exempt 11 13
Investment securities
Taxable 864 625
Tax exempt 72 59
Deposits with financial institutions 35 67
FHLB stock dividends 20 26
---------- ------
Total interest income 3,205 3,343
---------- ------
INTEREST EXPENSE
Deposits 1,160 1,516
Federal Home Loan Bank advances and other debt 289 398
---------- ------
Total interest expense 1,449 1,914
---------- ------
NET INTEREST INCOME 1,756 1,429
Provision for loan losses 199 147
---------- ------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 1,557 1,282
---------- ------
NONINTEREST INCOME
Service charges on deposit accounts 95 130
Loan servicing fees (144) 22
Other customer fees 223 176
Net gains on loan sales 164 169
Brokerage fees 2 5
Abstract and title fees 104 84
Other income 52 36
---------- ------
Total noninterest income 496 622
---------- ------
NONINTEREST EXPENSE
Salaries and employee benefits 917 815
Net occupancy expenses 45 48
Equipment expenses 155 164
Data processing fees 113 125
Advertising and promotion 40 39
Professional fees 92 88
Other expenses 221 139
---------- ------
Total noninterest expense 1,583 1,418
---------- ------
INCOME BEFORE INCOME TAX 470 486
Income tax expense 192 173
---------- ------
NET INCOME 278 313
---------- ------
OTHER COMPREHENSIVE INCOME (LOSS)
Unrealized appreciation (depreciation) on
available-for-sale securities (371) 433
---------- ------
COMPREHENSIVE INCOME (LOSS) $ (93) $ 746
========== ======
EARNINGS PER SHARE
Basic $ 0.19 $ N/A
========== ======
Weighted average shares 1,479,075 N/A
========== ======
See notes to condensed consolidated financial statements.
2
FIRST BANCTRUST CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of dollars)
(unaudited)
THREE MONTHS ENDED MARCH 31 2002 2001
-------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income $ 278 $ 313
Items not requiring (providing) cash
Depreciation and amortization 70 74
Provision for loan losses 199 147
Investment securities amortization (accretion), net 6 1
Amortization of loan servicing rights 269 90
Deferred income taxes 5 --
Net gain on sales of foreclosed assets (4) --
Net gains on loan sales (164) (169)
Loans originated for sale (10,169) (5,076)
Proceeds from sales of loans originated for resale 6,936 4,562
Federal Home Loan Bank stock dividends (23) (29)
Compensation expense related to employee stock ownership plan 56 --
Changes in
Interest receivable 253 61
Cash surrender value (42) (47)
Other assets 5 (143)
Interest payable 35 73
Other liabilities (33) 301
-------- --------
Net cash provided (used) by operating activities (2,323) 158
-------- --------
INVESTING ACTIVITIES
Purchases of available-for-sale securities (8,897) (6,983)
Proceeds from maturities of available-for-sale securities 4,534 4,726
Proceeds from sales of available-for-sale securities 85 --
Net collections in loans 591 2,440
Proceeds from sales of foreclosed assets 190 214
Purchases of premises and equipment (7) (65)
Proceeds from sale of premises and equipment -- 1
-------- --------
Net cash provided (used) by investing activities (3,504) 333
-------- --------
FINANCING ACTIVITIES
Net increase (decrease) in demand deposits, money market,
NOW and savings deposits $ (1,221) 17,840
Net increase (decrease) in certificates of deposit 1,359 (2,581)
Net decrease in short-term borrowings -- (1,500)
Proceeds from the issuance of Federal Home Loan Bank advances -- 17,500
Repayment of Federal Home Loan Bank advances and other debt (4) (10,003)
Pass through payments received on loans sold (134) (76)
Net increases in advances by borrowers for taxes and insurance 146 186
Dividends paid (73) --
Purchase of treasury stock (74) --
-------- --------
Net cash provided (used) by financing activities (1) 21,366
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (5,828) 21,857
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 16,746 9,146
-------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 10,918 $ 31,003
======== ========
SUPPLEMENTAL CASH FLOWS INFORMATION
Real estate acquired in settlement of loans $ 206 $ 484
Interest paid 1,414 1,841
Income tax paid 193 75
See notes to condensed consolidated financial statements.
3
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-QSB. Accordingly, certain disclosures required by generally accepted
accounting principles are not included herein. These interim statements should
be read in conjunction with the audited consolidated financial statements and
notes thereto, dated February 1, 2002, included in the Company's Form 10-KSB
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, 2002. 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 months ended March 31, 2002
and 2001 are not necessarily indicative of the results to be expected for the
full year.
Note 2 - Conversion to Stock Form of Ownership
On October 16, 2000 the Board of Directors of First Bank & Trust, sb (the
"Bank") adopted a Plan of Conversion to convert from an Illinois mutual savings
bank to an Illinois stock savings bank with the concurrent formation of a
holding company. First BancTrust Corporation (the "Company") was incorporated in
November 2000. A subscription offering of the shares of common stock, $0.01 par
value per share ("Common Stock"), of the Company was offered initially to
eligible deposit account holders of First Bank & Trust, sb. The Bank's
conversion from an Illinois mutual savings bank to an Illinois stock savings
bank was completed on April 18, 2001 (the "Conversion").
In connection with the conversion, the Company issued 1,520,875 shares of common
stock to the public for gross proceeds of $15.2 million, $14.4 million net of
conversion costs. The Bank issued all of its outstanding capital stock to the
Company in exchange for one-half of the net proceeds of the offering, which
amounted to $7.2 million. The Company accounted for the purchase in a manner
similar to a pooling of interests, whereby assets and liabilities of the Bank
maintain their historical cost basis in the consolidated company.
Note 3 - Employee Stock Ownership Plan
In connection with the conversion, the Bank established an Employee Stock
Ownership Plan ("ESOP") for the benefit of its employees. In the initial stock
offering, deposit account owners purchased all available shares. The ESOP
purchased required shares in the open market
4
subsequent to the conversion date for $1.4 million with funds borrowed from the
Company. The ESOP expense was $56,000 for the three-month period ended March 31,
2002.
Shares purchased by the ESOP with the loan proceeds 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
Company's discretionary contributions to the ESOP and earnings on ESOP assets.
Principal payments are scheduled to occur over an eight-year period.
Note 4 - Earnings per Share
Amounts reported as earnings per common share reflect earnings available to
common stockholders for the year divided by the weighted average number of
common shares outstanding during the period. Earnings per share is calculated
beginning with the date of the conversion and, therefore, no earnings per share
is reported for the three-month period ended March 31, 2001.
Note 5 - Authorized Share Repurchase Program
On October 3, 2001 the Company announced that the Board of Directors authorized
the open-market stock repurchases of up to 5%, or 76,044 shares of the Company's
outstanding stock over the one-year period ending September 27, 2002. On April
18, 2002 the Company announced that the Board of Directors has authorized the
additional open-market stock repurchases of up to 5%, or 67,407 shares of the
Company's outstanding stock over the next one-year period ending March 14, 2003,
as in the opinion of management, market conditions warrant. As of May 10, 2002,
the Company had repurchased 111,000 shares.
Note 6 - Subsequent Event
On February 7, 2002 the Company's Board of Directors adopted the 2002 Stock
Option Plan. A total of 152,087 shares of Common Stock has been reserved for
future issuance pursuant to the Option Plan. The number of reserved shares is
equal to 10% of the Common Stock sold in connection with the Conversion.
The Board of Directors on February 7, 2002 also adopted the 2002 Recognition and
Retention Plan and Trust Agreement ("Recognition Plan"), subject to shareholder
approval. The Company will contribute sufficient funds to the trust established
pursuant to the Recognition Plan ("Trust") so that the Trust can purchase a
number of shares of Common Stock equal to 4% of the Common Stock sold in the
Conversion, or 60,835 shares.
On April 22, 2002, at the Annual Meeting of Stockholders of the Company, both
the Option Plan and the Recognition Plan were approved by the shareholders.
5
ITEM 2. MANAGEMENT'S 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
Company's 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 Company's 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 statement. Further information concerning the Company and
its business, including additional factors that could materially affect the
Company's financial results, is included in the Company's 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, ECS Service Corporation, and the Bank's wholly owned subsidiary,
Community Finance Center, Inc. at March 31, 2002 to its financial condition at
December 31, 2001 and the results of operations for the three-month period
ending March 31, 2002 to the same period in 2001. In February 2002, the Company
filed a declaration to become a financial holding company which became effective
March 16, 2002. Ownership of First Charter Service Corporation and ECS Service
Corporation has been transferred from the Bank to the Company. This discussion
should be read in conjunction with the interim financial statements and notes
included herein.
FINANCIAL CONDITION
Total assets of the Company decreased by $163,000 or 0.08%, to $195.9 million at
March 31, 2002 from $196.0 million at December 31, 2001. Cash and cash
equivalents decreased by $5.8 million and loans net of allowance for loan losses
decreased by $1.0 million, offset by an increase of $3.6 million in investment
securities available for sale and a $3.2 million increase in loans held for
sale.
6
The Company's cash and due from banks decreased by $3.2 million or 44.38% to
$4.1 million at March 31, 2002 from $7.3 million at December 31, 2001.
Interest-bearing demand deposits decreased $2.6 million or 27.39% to $6.9
million at March 31, 2002 compared to $9.4 million at December 31, 2001. The
decrease in cash and cash equivalents was primarily used to fund investment
purchases and loans. Investment securities available for sale amounted to $68.9
million at March 31, 2002 compared to $65.2 million at December 31, 2001, a $3.7
million or 5.67% increase. The increase resulted from $8.9 million in investment
purchases, primarily in mortgage-backed securities and Federal Home Loan Bank
("FHLB") agency bonds, offset by calls and maturities of $4.5 million, sales of
$85,000 and a net decrease in market value of $600,000.
Loans held for sale increased by $3.2 million from $597,000 at December 31, 2001
to $3.8 million at March 31, 2002. This increase is primarily due to refinancing
activity at lower fixed interest rates on loans to be sold in the secondary
market. Loans held for sale at March 31, 2002 included $959,000 in single-family
residential loans and $2.9 million in agricultural loans.
The Company's net loan portfolio decreased by $1.0 million to $99.7 million at
March 31, 2002 from $100.7 million at December 31, 2001. Gross loans decreased
by $800,000 while the allowance for loan losses increased by $200,000. Loans
secured by 1-4 family residences decreased by $900,000, as borrowers refinanced
existing loans to fixed-rate loans to take advantage of the lower interest
rates. These loans were then sold into the secondary market. Construction loans
declined by $700,000 as they were converted to permanent financing. Farmland
loans increased by $300,000, commercial real estate loans increased by $200,000,
consumer loans increased by $200,000, and agricultural loans increased by
$100,000.
At March 31, 2002 the allowance for loan losses was $1.9 million or 1.83% of the
total loan portfolio compared to $1.7 million, or 1.62% at December 31, 2001.
The increase in the allowance for loan losses is due to a higher reserve for
consumer loans based on the Company's analysis of the consumer loan portfolio.
The Company's recoveries of $40,000 completely offset the charge-offs for the
three-months ended March 31, 2002 compared to $387,000 in net charge-offs for
the three-months ended March 31, 2001. The Company's nonperforming loans and
troubled debt restructurings as a percentage of total loans decreased from 2.17%
or $2.2 million at December 31, 2001 compared to 1.63% or $1.7 million at March
31, 2002. The Company's nonperforming loans and troubled debt restructurings of
$1.7 million at March 31, 2002 consists primarily of restructured commercial and
agricultural loans and nonperforming loans primarily secured by 1-4 family
residences and commercial real estate. 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.
Foreclosed assets have remained stable with $827,000 at March 31, 2002, compared
to $807,000 at December 31, 2001. As of March 31, 2002 the Company had thirteen
real estate properties totaling $662,000 consisting of eight single-family
dwellings, three commercial buildings, one multi-family dwelling and one
farmland property, and other repossessed assets of $165,000. Foreclosed assets
are carried at lower of cost or net realizable value.
Interest receivable declined by $253,000 or 11.96% from $2.1 million to $1.9
million primarily due to annual payments received on agricultural loans. Loan
servicing rights declined by $98,000
7
from $2.1 million at December 31, 2001 to $2.0 million at March 31, 2002, as
$171,000 created in new servicing assets was offset by $269,000 in amortization
of existing servicing assets.
The Company's total deposits amounted to $141.5 million at March 31, 2002
compared to $141.3 million at December 31, 2001, an increase of $138,000. The
slight increase in total deposits was due to a $1.4 million increase in interest
bearing deposits, partially offset by a $1.2 million decrease in non-interest
bearing deposits. The increase in interest bearing deposits was a result of an
increase of $2.7 million in interest-bearing checking accounts, primarily
Investor checking, and $1.0 million increase in savings accounts, partially
offset by $2.3 million reduction in certificates of deposit.
Pass through payments received on loans sold declined by $134,000 from $270,000
at December 31, 2001 to $136,000 at March 31, 2002. Advances by borrowers for
taxes and insurance increased by $146,000 from $140,000 at December 31, 2001 to
$286,000 at March 31, 2002. Adjustments to deferred income taxes for the tax
effect of the change in market value of investment securities available for sale
resulted in a deferred tax asset of $125,000 at March 31, 2002 compared to a
liability of $127,000 at December 31, 2001.
Stockholders' equity at March 31, 2002 was $27.5 million compared to $27.7
million at December 31, 2001, a decrease of $184,000. Accumulated comprehensive
income decreased by the decline in the fair value of securities available for
sale, net of tax, or $371,000. Retained earnings increased by the amount of net
income or $278,000, partially offset by $73,000 in dividends declared and paid.
Treasury stock increased from $865,000 at December 31, 2001 to $939,000 at March
31, 2002 due to purchases of $75,000.
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTH PERIODS ENDED MARCH 31, 2002 AND 2001
Net income for the three months ended March 31, 2002 decreased by $35,000 or
11.18% from $313,000 for the three months ended March 31, 2001 to $278,000 for
the three months ended March 31, 2002. The decrease in net income is primarily
due to a decrease in noninterest income and increases in noninterest expense and
provision for loan losses, partially offset by an increase in net interest
income.
Net interest income increased $327,000 or 22.9% from $1.43 million for the three
months ended March 31, 2001 to $1.76 million for the three months ended March
31, 2002. The primary reason for the increase in net interest income was a
decrease in interest expense of $465,000 partially offset by a decrease of
$138,000 in interest income. The Company's net interest margin was 4.01% and
3.54% during the three months ended March 31, 2002 and 2001, respectively. The
net interest margin increased as a result of an increase in the ratio of earning
assets to earning liabilities and a decrease in interest rates on
interest-bearing liabilities. The decrease in interest rates on interest-bearing
liabilities was due to an increase in demand deposit accounts which had lower
rates and a decrease in certificate of deposit rates. The increase in the ratio
of earning assets to earning liabilities was primarily due to the proceeds from
the stock conversion in 2001. The Company did not invest the proceeds in higher
rate investments until April, 2001.
8
For the three months ended March 31, 2002 and 2001 the provision for losses on
loans was $199,000 and $147,000, respectively. The provision for the three
months ended March 31, 2002 was based on the Company's 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 Company's management believes that, as of
March 31, 2002, its allowance for loan losses was adequate.
Noninterest income decreased $126,000 or 20.26% from $622,000 for the three
months ended March 31, 2001 to $496,000 for the three months ended March 31,
2002. The decrease was primarily a result of a reduction in loan servicing fees
of $166,000 partially offset by increased other customer fees of $47,000. Loan
servicing fees declined from $22,000 for the three months ended March 31, 2001
to a negative $144,000 for the three months ended March 31, 2002. This decline
was primarily due to the accelerated amortization of servicing assets resulting
from increased principal reductions on the related loans. Approximately $2.9
million in agriculture loans were refinanced at lower interest rates, and are
included in loans held for sale until they are resold into the secondary market.
When the loans are sold, servicing assets relating to these loans will be
included in the gain on the sale of loans as required by generally accepted
accounting principles. Other customer fees increased $47,000 from $176,000 for
the three months ended March 31, 2001 to $223,000 for the three months ended
March 31, 2002. The increase was primarily attributable to loan fees on
residential loans sold into the secondary market, loan fees on consumer loan
originations, and commissions earned on credit life and disability insurance
products offered with consumer loans.
Total noninterest expenses were $1.6 million for the three months ended March
31, 2002 as compared to $1.4 million for the three months ended March 31, 2001.
The primary reason for the increase was an increase in salaries and employee
benefits of $102,000 and an increase in other expenses of $82,000. Salaries and
employee benefits increased by $102,000 from $815,000 for the three months ended
March 31, 2001 to $917,000 for the three months ended March 31, 2002 due to
normal pay increases, the addition of three full-time employees and one
part-time employee, and employee stock ownership plan expense of $56,000. Other
expenses increased by $82,000 from $139,000 for the three months ended March 31,
2001 to $221,000 for the three months ended March 31, 2002. The increase in
other expense is primarily due to holding company expenses including corporate
franchise taxes and filing fees, costs of printing and mailing annual reports
and proxies and other shareholder services.
Income tax expense was $192,000 for the three months ended March 31, 2002 as
compared to $173,000 for the three months ended March 31, 2001. The effective
tax rates were 40.8% and 35.6%, respectively, for the three months ended March
31, 2002 and 2001. The increase in the effective tax rate from 2001 to 2002 was
due to a decrease in permanent tax differences in 2002.
9
LIQUIDITY
At March 31, 2002, the Company had outstanding commitments to originate $2.1
million in loans. In addition, open-end line of credit loans had $7.0 million
available to be drawn upon. As of March 31, 2002, the total amount of
certificates scheduled to mature in the following 12 months was $48.2 million.
The Company believes that it has adequate resources to fund all of its
commitments and that it can adjust the rate on certificates of deposit to retain
deposits in changed interest environments. If the Company requires funds beyond
its internal funding capabilities, advances from the Federal Home Loan Bank of
Chicago are available as an additional source of funds.
CAPITAL RESOURCES
The Bank is subject to capital-to-asset requirements in accordance with Federal
bank regulations. The following table summarizes the Bank's regulatory capital
requirements, versus actual capital as of March 31, 2002:
----------------------------------------------------------------------------------------------------------------------
MARCH 31, 2002 REQUIRED FOR ADEQUATE TO BE WELL CAPITALIZED
ACTUAL CAPITAL
-------------------------- ------------------------- --------------------------
Amount % Amount % Amount %
------------ ------------- ------------ ------------ ------------- ------------
(Dollars in thousands)
----------------------------------------------------------------------------------------------------------------------
Total capital (to risk-weighted $22,682 20.64 $8,794 8.0 $10,992 10.0
assets)
----------------------------------------------------------------------------------------------------------------------
Tier 1 capital (to risk-weighted 21,303 19.38 4,397 4.0 6,595 6.0
assets)
----------------------------------------------------------------------------------------------------------------------
Tier 1 capital (to average assets) 21,303 10.87 7,840 4.0 9,800 5.0
----------------------------------------------------------------------------------------------------------------------
The Company's consolidated capital-to-asset requirements and actual capital as
of March 31, 2002 are summarized in the following table:
----------------------------------------------------------------------------------------------------------------------
MARCH 31, 2002 ACTUAL REQUIRED FOR ADEQUATE TO BE WELL CAPITALIZED
CAPITAL
-------------------------- ------------------------- --------------------------
Amount % Amount % Amount %
------------ ------------- ------------ ------------ ------------- ------------
(Dollars in thousands)
----------------------------------------------------------------------------------------------------------------------
Total capital (to risk-weighted $28,699 25.89 $8,868 8.0 --- N/A
assets)
----------------------------------------------------------------------------------------------------------------------
Tier 1 capital (to risk-weighted 27,308 24.63 4,434 4.0 --- N/A
assets)
----------------------------------------------------------------------------------------------------------------------
Tier 1 capital (to average assets) 27,308 14.03 7,786 4.0 --- N/A
----------------------------------------------------------------------------------------------------------------------
10
CURRENT ACCOUNTING ISSUES
In June 2001, Statement of Financial Accounting Standards ("SFAS") No. 141,
"Business Combinations" was issued establishing accounting and reporting
standards requiring all business combinations initiated after June 30, 2001 to
be accounted for using the purchase method. SFAS No. 141 is effective for the
Company for the fiscal quarter beginning July 1, 2001. The impact of this
statement is dependent on future acquisition activity.
Also in June 2001, SFAS No. 142 "Goodwill and Other Intangible Assets" was
issued effective for the first period of all fiscal years beginning after March
15, 2001. SFAS No. 142 addresses how acquired intangible assets should be
accounted for in financial statements upon their acquisition, and also how
goodwill and other intangible assets should be accounted for after they have
been initially recognized in the financial statements. In general, non-goodwill
intangible assets are to be amortized in accordance with their useful lives. In
addition, amortization of goodwill has been eliminated, with capitalized
goodwill now being subjected to at least an annual assessment for impairment. A
two-step process is to be used to determine, first whether an impairment exists,
and then whether an adjustment is required. The Company has no goodwill or
intangible assets; therefore, the adoption of this standard has had no impact on
the Company.
In July 2001, SFAS No. 143, "Accounting for Asset Retirement Obligations" was
issued. SFAS No. 143 establishes standards for accounting and reporting of
obligations associated with the retirement of tangible long-lived assets and
associated asset retirement costs. SFAS No. 143 is effective beginning June 15,
2002. The adoption of this standard is not expected to have an impact on the
Company.
In October 2001, SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets" was issued. Under SFAS No. 144, long-lived assets to be sold
within one year must be separately identified and carried at the lower of
carrying value or fair value less costs to sell.
Long-lived assets expected to be held longer than one year are subject to
depreciation and must be written down to fair value upon impairment. Long-lived
assets no longer expected to be sold within one year, such as some foreclosed
real estate, must be written down to the lower of current fair value or fair
value at the date of foreclosure adjusted to reflect depreciation since
acquisition. SFAS No. 144 had to be implemented by January 1, 2002. The adoption
of this statement had no impact on the Company.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company and subsidiary are also 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
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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 2. CHANGES IN SECURITIES
None
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 AND REPORTS ON FORM 8-K.
(a) None
(b) No Form 8-K reports were filed during the quarter.
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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: May 10, 2002 /s/ Terry J. Howard
-------------------------------------
Terry J. Howard
President and Chief Executive Officer
Date: May 10, 2002 /s/ Ellen M. Litteral
-------------------------------------
Ellen M. Litteral
Treasurer
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