2
CONTENTS
Corporate Information
Letters To Shareholders
Selected Financial Data
Company Profile
Management Report
Management’s Discussion and
Analysis of Financial Condition
and Results of Operations
Page
3
Pages
4-5
Pages
6- 7
Pages
8- 9
Page 10
Pages
11-16
Independent Auditor’s Report
Page 17
Consolidated Financial Statements:
Balance Sheets
Statements of Income
Statements of Changes in
Stockholders’ Equity
Statements of Cash Flows
Notes to Consolidated
Financial Statements
First Bankers Trust Company, N.A.
Directors and Officers
Page 18
Page 19
Page 20
21-22
Pages
Pages
23-38
Page
39
CORPORATE INFORMATION
3
Corporate Description
First Bankers Trustshares, Inc. is a bank holding company for First Bankers
Trust Company, N.A. and FBIL Statutory Trust I. The company was
incorporated on August 25, 1988 and is headquartered in Quincy, Illinois.
First Bankers Trustshares’ mission, through its subsidiaries, is to provide
comprehensive financial products and services to its retail, institutional, and
corporate customers in the Tri-State area of West Central Illinois and
Northeastern Missouri.
As a community oriented financial institution, the Bank, which traces its
beginnings to 1946, operates four banking facilities located in Quincy,
Illinois, one facility in Mendon, Illinois in northern Adams County and
facilities located in Chicago, Illinois and Phoenix, Arizona that provide trust
services.
FBIL Statutory Trust I was capitalized in September 2000 for the purpose of
issuing Company Obligated Mandatorily Redeemable Preferred Securities.
For additional financial information contact:
Joe J. Leenerts, Senior Vice President/Treasurer
First Bankers Trustshares, Inc.
Telephone (217) 228-8000
Stockholder Information
Common shares authorized: 6,000,000
Common shares outstanding: 2,579,230
Stockholders of record:
*As of December 31, 2000
246*
Inquiries regarding transfer requirements, lost certificates, changes of address
and account status should be directed to the corporation’s transfer agent:
First Bankers Trust Company, N.A.
(Attn: Linda Shultz)
1201 Broadway
P.O. Box 3566
Quincy, IL 62305-3566
Corporate Address
First Bankers Trustshares, Inc.
P.O. Box 3566
Quincy, IL 62305-3566
Independent Auditors
McGladrey & Pullen, LLP
220 N. Main, Suite 900
Davenport, IA 52801
General Counsel
Hinshaw and Culbertson
222 N. LaSalle, Suite 300
Chicago, IL 60601-1081
Board of Directors
First Bankers Trustshares, Inc.
David E. Connor
Chairman of the Board
First Bankers Trustshares, Inc.
President
David E. Connor & Associates
David G. Cosby
Senior Vice President
Commerce Bank St. Louis
William D. Daniels
Chairman of the Board
First Bankers Trust Company, N.A.
Member
Harborstone Group, LLC.
Donald K. Gnuse
President & Chief Executive Officer
First Bankers Trustshares, Inc.
President & Chief Executive Officer
First Bankers Trust Company, N.A.
Steven E. Siebers
Secretary of the Board
First Bankers Trustshares, Inc.
Attorney
Scholz, Loos, Palmer, Siebers & Duesterhaus
Dennis R. Williams
Consultant
Self Employed
EXECUTIVE OFFICERS
Donald K. Gnuse
President and CEO
Steven E. Siebers
Secretary
Joe J. Leenerts
Senior Vice President/Treasurer
FIRST BANKERS TRUSTSHARES, INC. Stock Prices
Market Value
High
Low
Period End Close
12/31/00
$ 19.00
$ 13.63
$ 19.00
09/30/00
$ 13.63
$ 13.63
$ 13.63
06/30/00
$ 14.19
$ 13.63
$ 13.63
03/31/00
$ 14.19
$ 13.13
$ 14.19
12/31/99
$ 13.75
$ 13.13
$ 13.13
The following companies make a market in FBTI common stock:
Howe Barnes Investments, Inc.
135 South LaSalle Street
Chicago, IL 60603
Phone (800) 800-4693
First Union Securities, Inc.
Maine Center, 535 Maine
Quincy, IL 62301
Phone (800) 223-1037
4
LETTERS TO SHAREHOLDERS
customers – whether small or large, local or regional. We
welcome mega-mergers in our territory because as a
consequence of such an event, First Bankers usually picks up
quite a few customers, disgruntled by the changes made in
the name of greater efficiency in the merged bank.
Yet in this day of unfettered interstate banking, Internet
banking, and the pervasive expansion of “banking services”
(whatever that means) on the part of the Wal-Marts, State
Farms, and Merrill Lynches, a bank like First Bankers Trust
simply cannot succeed by steaming as before. There is
critical size which banks like First Bankers Trust must
achieve to be able to employ the latest in expensive
operational equipment, to secure and retain the increasingly
sophisticated staff pool, and to have sufficient lending
capability to serve the growing needs of our commercial
customers. These and other arrows in the quiver of the
modern bank are essential in order to continue to offer our
chosen banking customers more banking bang for the buck.
At every board meeting (and quite often between them)
your board of directors discusses the challenges and
opportunities facing the company. A stopped clock may be
right twice a day, but that is not the guiding philosophy at
First Bankers Trustshares. Change is in the air. However,
over time, the bankers’ responses to change have not always
turned out to have been especially wise. Sometimes one gets
the impression that the mad rush of the lemmings may have
been in reality a convention of bankers who were chasing a
fellow banker who was suspected of having a new idea. At
First Bankers Trustshares, we are quite aware of the
challenges of change in our environment. We propose to
manage that change (not be managed by it).
We have four constituencies: our community, our
customers, our staff, and our stockholders. Whatever course
First Bankers Trustshares takes will integrate, to the best of
our ability, the concerns of each of these. Standing still
seems to be an unlikely strategy (too easy a target for the
other sharks in the banking pool), but other opportunities are
constantly presenting themselves. First Bankers Trustshares’
track record should give our shareholders a great deal of
confidence that, as it has in the past, the bank’s plan for the
future will continue to be a winner. As Charles Kettering
said, “I am interested in the future because I am going to be
spending the rest of my life there.” How true!
Sincerely,
David E. Connor
Chairman of the Board of Directors
David E. Connor
Chairman of the Board
Dear Shareholders:
“Less is more.” –Mies van der Rohe
“The problem at _______ (name omitted to protect the
not-so-innocent) lay bare one of banking’s dominant myths —
- that bigger means better.” — The Economist (January 27,
2001 issue)
In an article discussing the mega-merger craze among the
world’s banks, The Economist, one of the world’s leading
newspapers, describes the recent merger of the Bank of
America and Nations Bank, which created the country’s
biggest bank in terms of branches, as a “beached whale.”
This catastrophe was caused, according to The Economist, by
“a combined bout of flu and cancer – the flu being a growing
portfolio of bad loans and the cancer a fundamentally flawed
vision about the role of banking in today’s environment.”
Earlier in the article, there is a description of banking in
the U.S. twenty (thirty?) years ago: “Thousands of small
local banks lending to people and small business in their
neighborhoods plus a few big money center banks that lent to
the country’s biggest corporations.” The article goes on to
state that economies of scale expected in large mergers are
frequently outdistanced by diseconomies in management and
by the need to amortize the high prices necessary to
accomplish the merger in the first place. According to The
Economist, the verdict on the crusade for bigger banks is that
from the point of view of the shareholder, (paraphrasing
Vanderohe) less (size) is often more (profitable).
I mention these comments in The Economist because the
Board of Directors of First Bankers Trustshares constantly
confront the matter of asset size, capital adequacy,
shareholder value, profit margins, and management talent and
depth. First Bankers Trustshares is by no means a mega-
bank; but it is a solid, profitable, and well-run bank, where
every effort is bent on providing first-rate service to our
LETTERS TO SHAREHOLDERS
5
TRUST ASSETS – Our trust department continues a steady
climb in clients served nationwide. Trust earnings were up
by 34% with net operating earnings exceeding those posted
by members of the peer group.
DEPOSITS – Our marketing efforts resulted in a 23%
increase in deposits for the year. This was accomplished by
taking an aggressive position for attracting deposits in order
to fund our increased lending activity.
WHERE DO WE GO FROM HERE? – Our goals and
objectives for the year 2001 have already been set in motion.
Although competition is fierce with an over-abundance of
banks, thrifts, credit unions, brokerage houses and insurance
companies all vying for the sale dollar, we still anticipate
another good year. The excess capacity in the industry will
shrink, in time, with only the strongest and those who are
able to adapt surviving. Your Company’s plan calls for it to
be a survivor. That plan includes a goal of making your stock
investment in the Company becoming one of the best long-
term investments in your portfolio. Thank you, again, for
entrusting that investment to us.
Yours sincerely,
Donald K. Gnuse/CEO
President
Donald K. Gnuse
President & Chief Executive Officer
Dear Shareholders:
The year 2000 proved to be another successful year for your
Company. I thought I would take this opportunity to share
with you some of the “historical highs” that were posted
during the year.
EARNINGS – Company earnings for the year 2000 rose
from $1.05 per share for year-end 1999 to $1.17.
CASH DIVIDENDS – For the eighth consecutive year the
Board of Directors have raised the cash dividend to
stockholders. The raise is due to the continued splendid
earning performance of the Company.
STOCKHOLDER INVESTMENT – We are very proud of
the fact that during the past six years the return on
stockholder equity has averaged 17.5%, which exceeds our
benchmark goal of 15%. Market makers posted First Bankers
Trustshares, Inc.’s common stock price at $19.00 per share at
year-end, which reflected a 45% increase in market value
when compared to the previous year-end. Shareholders that
purchased stock and held it for long-term growth have been
well rewarded for their decision.
ASSET EMPLOYMENT – The major asset employed by
our Company is loans. Our talented lending staff, even in the
face of significant competition, generated a 13% increase in
our loan volume compared to 1999 figures.
6
SELECTED FINANCIAL DATA
(Amount in thousands of dollars, except per share data statistics)
YEAR ENDED DECEMBER 31,
PERFORMANCE
Net income
Preferred stock cash dividends paid
Common stock cash dividends paid
Common stock cash dividend payout ratio
Return on average assets
Return on common stockholders’ equity1
PER COMMON SHARE2
Earnings, basic and diluted
Dividends (Paid)
Book value3
Stock price
High
Low
Close
Price/Earnings per share (at period end)
Market price/Book value (at period end)
Weighted average number of
shares outstanding
AT DECEMBER 31,
Assets
Investment securities
Loans
Deposits
Short-term borrowings and Federal
Home Loan Bank advances
Note payable
Company obligated mandatorily
redeemable preferred securities
Stockholders’ equity4
Stockholders’ equity to total assets
Tier 1 capital ratio (risk based)
Total capital ratio (risk based)
Leverage ratio
1998
$ 2,618 $
2000
1999
1997
1996
1995
$ 3,007 $ 2,710
$ - $ - $ 32 $
$ 361 309
11.40%
1.14%
17.23%
1,921 $ 1,797 $ 1,347
64 $ 106 $ 152
$ 204 $ 176 $ 162 $ 149
12.77%
.86%
15.22%
9.52%
1.07%
17.33%
9.77%
1.07%
18.53%
7.89%
1.21%
20.27%
12.01%
1.11%
16.43%
1.17 $ 1.05 $ 1.02 $ .74 $ .67 $ .47
$
.14 $ .12 $ .08 $ .07 $ .07 $ .06
$
$ 7.51 $ 6.49 $ 5.62 $ 4.54 $ 3.88 $ 3.28
$ 19.00 $ 13.75 $ 11.50 $ 8.50 $ 4.07 $ 3.28
$ 13.13 $ 11.50 $ 8.50 $ 4.07 $ 3.28 $ 3.13
$ 19.00 $ 13.13 $ 11.50 $ 8.50 $ 4.07 $ 3.28
16.2 12.5
7.0
1.00
2.53 2.02
11.6 6.1
1.87 1.05
11.3
2.05
2,579,230 2,579,230 2,545,358 2,533,776 2,533,776 2,533,776
$ 298,497 $ 258,503 $ 236,323 $ 222,593 $ 178,644 $ 163,514
45,672
73,314 73,730 70,384
102,186
176,455 156,439 125,867
131,518
244,362 199,477 187,721
65,273
118,829
174,778
41,853
111,225
140,104
26,828
-
38,436
2,780
27,495
3,980
28,786
4,580
20,721
4,980
15,085
5,380
-
5,000
$ 19,357 $ 16,737 $ 14,349
-
6.48%
12.31%
13.25%
8.84%
6.47%
9.43%
10.53%
6.45%
6.07%
9.70%
10.92%
6.03%
-
-
-
$ 11,993 $ 10,822 $ 9,793
5.99%
8.45%
9.64%
5.40%
6.06%
8.83%
10.09%
5.66%
5.39%
8.74%
9.94%
6.21%
1 Return on common stockholders’ equity is calculated by subtracting preferred stock dividends from net income and dividing by average common stockholders’ equity.
Common stockholders’ equity is defined as equity minus preferred stock equity and plus or minus accumulated other comprehensive income (loss).
2 Previous year per share data has been converted to reflect the two-for-one stock split effective June 30, 2000.
3 Book value per share is calculated by dividing stockholders’ equity, excluding accumulated other comprehensive income (loss), by outstanding shares.
4 Stockholders’ equity does not include accumulated comprehensive income (loss).
SELECTED FINANCIAL DATA
7
Return On Average Assets
Return On Average Common Equity
1.07%
1.07%
1.21%
1.14%
1.11%
1.40%
1.20%
1.00%
0.80%
0.60%
0.40%
0.20%
0.00%
0.86%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
18.53%
17.33%
20.27%
17.23%
16.43%
15.22%
1995
1996
1997
1998
1999
2000
1995
1996
1997
1998
1999
2000
Earnings Per Share
Price/Earnings Multiples
$1.02
$1.05
$1.17
$0.67
$0.74
$0.47
1995
1996
1997
1998
1999
2000
18.0X
16.0X
14.0X
12.0X
10.0X
8.0X
6.0X
4.0X
2.0X
0.0X
7.0X
6.1X
16.2X
11.6X
11.3X
12.5X
1995
1996
1997
1998
1999
2000
Price To Book Value
Loan/Deposit Growth
2.53X
2.05X
2.02X
1.87X
1.00X
1.05X
1995
1996
1997
1998
1999
2000
$250
$200
$150
$100
$50
$0
Loans
Deposits
$175
$188
$132
$140
$102
$111
$119
$126
$244
$199
$156
$176
1995
1996
1997
1998
1999
2000
$1.20
$1.00
$0.80
$0.60
$0.40
$0.20
$0.00
3.0X
2.5X
2.0X
1.5X
1.0X
0.5X
0.0X
COMPANY PROFILE
8
You Have To Believe
“To say that the times were conducive to the formation of a
bank, would be a wishful and gross exaggeration.”
These were the words of Delbert Loos, one of the founding
Directors of Broadway Bank and later Chairman of the Board
of First Bankers Trust Company, N.A., about the conditions
that existed in the Quincy community in early 1946. In spite
of the fear and trepidation that people felt about investing in
anything at the time, he and a number of others were able to
establish the capital necessary for the bank’s creation.
“You had to be there to fully evaluate the lack of trust in
the banking industry,” Loos states in his booklet entitled A
Bank Is Born. Yet, trust and belief in the right individuals
spawned the $200,000 in stock to open the bank’s doors.
Now, just over 50 years later, that capital stands in excess of
$20,000,000.
By comparison, in 1989, also not the best of times to be
buying bank stock, that same trust and belief in the right
individuals, brought organizers of First Bankers Trustshares,
Inc. together to form the holding company which now owns
the bank. In just over 11 years, that trust and belief has been
rewarded by increasing the worth of their original investment
by 10 times its initial amount.
You Have To Plan
Since that first meeting on January 30, 1946, when the
group of north side businessmen met to organize their steps
for opening a bank, a plan has been followed. First Bankers
Trust Company utilizes a participatory planning method,
which involves every employee, from input to action steps.
An Internal and External Situation Analysis is constructed by
the bank’s Chief Financial Officer, an input sheet, called a
SWOT form (strengths, weaknesses, opportunities, and
threats) is requested of each employee and an analysis is then
compiled by the bank’s Planning Officer.
Each department of the bank meets to develop a divisional
plan and corresponding budget figures. The bank’s Senior
Management then produces a Corporate Plan & Budget which
are presented to the Board of Directors for its approval.
The approved plan and budget are then shared with the
employees through a series of small-group, Presidential
Dinners. Employees are encouraged to ask questions and
make comments.
The Corporate Plan & Budget are monitored on a regular
basis and reviewed bi-monthly at management meetings
conducted by the Executive Vice President.
Plans for the year 2001 and beyond, in a falling rate
environment and with increased competition, remain very
aggressive.
You Have To Manage
The bank, since its inception, has remained committed to
Quincy and the Tri-State area. Now, with four offices in
Quincy, and one in Mendon, the bank employs over 100
individuals, handles in excess of 800,000 teller transactions
annually, has Trust offices in Chicago and Phoenix, handles
the information for three correspondent banks, and has
become the depository institution for several of the largest
employers in the area.
This recent increase in size and activity, coupled with
continued profitability, is a direct result of a coordinated
approach to management. This involves the empowering of
department and branch managers, which, in turn, increases
the need for constant communication and feedback. A strong
emphasis on operational synergies becomes imperative to
obtaining continued profit margins and efficiency ratios.
There is no question, in today’s economy, that margins are
being compressed, fees are being scrutinized, overhead is
rising, and competition has globalized. The successful banks
in the next decade will be those banks that embrace change,
that respond to the market needs, those that adopt
professional, proactive selling as an attitude, and that truly
manage for that success.
You Have To Listen
Effective listening is a key to the success that First Bankers
Trust Company has experienced in the past. Responding to
the needs that have been identified in that listening process is
key to that success continuing. Many of the bank’s products
are a direct result of that response: Drive-up banking;
Television banking; banking by mail; Express Telephone 24-
hour banking; Automated Teller Machines; Business on-line
banking; Internet banking; Seniors First; Secondary Market
Mortgage Lending; Bank Leasing.
Over the years the Bank has found it helpful to have focus
groups comprised of customers and non-customers.
Questionnaires are made available to all customers at all
banking locations and through statement stuffers, and a
confidential Shopping Survey is conducted on a periodic
basis to obtain comments, suggestions, and constructive
criticism from the bank’s many publics.
COMPANY PROFILE
9
You Have To Perform
All of the belief, planning, managing, and listening in the
world is worthless, however, if a company cannot perform. It
is the proper synchronization of all of these processes that
determines the level of success that a company achieves.
Plans and goals must be constructed in such a way as to be
measurable. They must be able to be monitored at given
points along their timeline. They must be flexible enough to
be modified if necessary, yet rigid enough to achieve desired
results. It is also necessary that the company’s management
be held accountable for reaching its goals.
It is the intent of the current management team to continue
to outperform its peers and to be responsive to its customers,
its community, its employees and it shareholders.
10
MANAGEMENT REPORT
To The Stockholders:
Management of First Bankers Trustshares, Inc. has
prepared and is responsible for the integrity and
consistency of the financial statements and other
related information contained in this Annual
Report. In the opinion of Management, the
financial statements, which necessarily include
amounts based on Management estimates and
judgements, have been prepared in conformity with
generally accepted accounting principles
appropriate to the circumstances.
In meeting its responsibility, First Bankers
Trustshares maintains a system of internal controls
and procedures designed to provide reasonable
assurance that assets are safeguarded, that
transactions are executed in accordance with
established policies and practices, and that
transactions are properly recorded so as to permit
preparation of financial statements that fairly
present financial position and results of operations
in conformity with generally accepted accounting
principles. Internal controls and procedures are
augmented by written policies covering standards
of personal and business conduct and an
organization structure providing for division of
responsibility and authority.
The effectiveness of, and compliance with,
established control systems are monitored through
a continuous program of internal audit and credit
examinations. In recognition of cost-benefit
relationships and inherent control limitations, some
features of the control systems are designed to
detect rather than prevent errors, irregularities and
departures from approved policies and practices.
Management believes the system of controls has
prevented or detected, on a timely basis, any
occurrences that could be material to the financial
statements and that timely corrective actions have
been initiated when appropriate.
First Bankers Trustshares engaged the firm of
McGladrey & Pullen, LLP, Independent Auditors,
to render an opinion on the consolidated financial
statements. To the best of our knowledge, the
Independent Auditors were provided with access to
all information and records necessary to render
their opinion.
The Board of Directors exercises its responsibility
for the financial statements and related information
through the Audit Committee, which is composed
entirely of outside directors. The Audit Committee
meets regularly with Management, the internal
auditing staff and the Independent Auditors to
assess the scope of the annual audit plan and to
discuss audit, internal control and financial
reporting issues, including major changes in
accounting policies and reporting practices. The
Independent Auditors also meet with the Audit
Committee, without Management being present, to
afford them the opportunity to discuss the adequacy
of compliance with established policies and
procedures and the quality of financial reporting.
Donald K. Gnuse
President and Chief Executive Officer
Joe J. Leenerts
Senior Vice President/Treasurer
and Chief Financial Officer
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
11
Management’s Discussion and Analysis
of Financial Condition and Results of Operations
Introduction
The following discussion of the financial condition and
results of operations of First Bankers Trustshares, Inc.
provides an analysis of the consolidated financial
statements included in this annual report and focuses
upon those factors which had a significant influence on
the overall 2000 performance.
The discussion should be read in conjunction with the
Company’s consolidated financial statements and notes
thereto appearing elsewhere in this Annual Report.
The Company was incorporated on August 25, 1988,
and acquired First Midwest Bank/ M.C.N.A. (the Bank)
on June 30, 1989. The Bank acquisition was accounted
for using purchase accounting. Prior to the acquisition
of the Bank, the Company did not engage in any
significant business activities.
Financial Management
The primary business of the Company is that of a
community-oriented financial institution offering a
variety of financial services to meet the needs of the
communities it serves. The Company attracts deposits
from the general public and uses such deposits, together
with borrowings and other funds, to originate one-to-
four family residential mortgage loans, consumer loans,
small business loans and agricultural loans in its
primary market area. The Company also invests in
mortgage-backed securities, investment securities
consisting primarily of U.S. government or agency
obligations, financial institution certificates of deposit,
and other liquid assets.
The Company’s goal is to achieve consistently high
levels of earning assets and loan/deposit ratios while
maintaining effective expense control and high
customer service levels. The term “high level” means
the ability to profitably increase earning assets. As
deposits have become fully deregulated, sustained
earnings enhancement has focused on “earning asset”
generation. The Company will focus on lending money
profitably, controlling credit quality, net interest margin,
operating expenses and on generating fee income from
services.
Consolidated Assets
(Amounts in thousands of dollars)
Assets
Cash and due from banks:
Non-interest bearing
Interest bearing
Securities
Federal funds sold
Net loans
Other assets
Total Assets
Liabilities &
Stockholders' Equity
Deposits
Short-term borrowings
Federal Home Loan
Bank advances
Note payable
Company obligated
manditorily redeemable
preferred securities
Other liabilities
Stockholders’ equity
Total Liabilities &
Stockholders' Equity
2000
Change
1999
Change
1998
1997
1996
1995
5 Year
Growth
Rate
$ 7,555 8.49 % $ 6,964 21.96 % $ 5,710 $ 4,843 $ 7,483 $ 4,899 54.22 %
16,163 1547.60
73,314 ( .56)
18,700 39.29
174,504 12.93
8,261 (7.00)
7,274 10,930 3,366 1,012 1497.13
70,384 65,273 41,853 45,672 60.52
20,600 17,000 10,200 4,700 297.87
124,007 116,983 109,283 100,616 73.43
7,564 6,459 6,615 24.88
8,348
981 (86.51)
73,730 4.75
13,425 (34.83)
154,520 24.61
8,883 6.41
$ 298,497 15.47 % $ 258,503 9.39 % $ 236,323 $ 222,593 $ 178,644 $ 163,514 82.55 %
$ 244,362 22.50 % $ 199,477 6.26 % $ 187,721 $ 174,778 $ 140,104 $ 131,518 85.80 %
17,828 (3 2.56)
13,495 25,786 15,721 8,085 120.51
26,436 95.89
9,000 (25.00)
-
(100.00)
12,000 (14.29)
2,780 (30.15)
14,000 3,000 5,000 7,000 28.57
4,980 5,380 -
3,980 4,580
5,000 100.00
2,972 17.10
19,335 26.60
- -
2,538 (3.90)
15,272 5.43
-
- -
2,641 2,271 1,901 1,608 84.83
14,486 12,178 10,938 9,923 94.85
-
-
$ 298,497
15.47 %
$ 258,503
9.39 %
$ 236,323
$ 222,593
$ 178,644
$ 163,514
82.55 %
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
12
At December 31, 2000, the Company had assets of
$298,497,000 compared to $258,503,000 at December
31, 1999. The $39,994,000 (15.47%) increase in total
assets during the year ended December 31, 2000 was
principally funded through increases of $44,885,000
(22.50%) in deposits. The increase in deposits allowed
for $8,608,000 (32.56%) and $3,000,000 (25.00%)
reduction in short term borrowings and Federal Home
Loan Bank balances, respectively. These funds were
the primary source used to fund increases in loans of
$20,016,000 (12.79%), $15,182,000 (1547.60%) in
interest bearing balances in banks and federal funds sold
of $5,275,000 (39.29%).
Demand for the Bank’s lending products, including
commercial lines of credit, residential real estate, and
direct consumer loans has traditionally been moderately
strong. Commercial (8.45%), agricultural (23.94%),
real estate (12.60%), and consumer (21.52%) lending
experienced growth during 2000. Approximately
$6,243,000 of fixed rate long-term residential real estate
loans was sold in the secondary market during 2000
while $8,790,000 in 1999. Agricultural real estate loans
totaling $164,000 were sold in the secondary market
during 2000, while $1,126,000 was sold in 1999. In
addition, under the Company’s student loan program,
approximately $467,000 in student loans was sold to
Sallie Mae during 2000 compared to $523,000 sold in
1999. Management continues to place emphasis on the
quality versus the quantity of the credits placed in the
portfolio.
In addition to lending, the Company has focused on
maintaining and enhancing high levels of fee income for
its existing services and new services. Generation of
fee income will be a goal of the Company and should
be a source of continued revenues in the future.
Results of Operations Summary
The Company’s earnings are primarily dependent on net
interest income, the difference between interest income
and interest expense. Interest income is a function of
the balances of loans, securities and other interest
earning assets outstanding during the period and the
yield earned on such assets. Interest expense is a
function of the balances of deposits and borrowings
outstanding during the same period and the rates paid
on such deposits and borrowings. The Company’s
earnings are also affected by provisions for loan losses,
service charges, trust income, other non-interest income
and expense and income taxes.
Non-interest expense consists primarily of employee
compensation and benefits, occupancy and equipment
expenses, amortization and general and administrative
expenses.
Prevailing economic conditions as well as federal
regulations concerning monetary and fiscal policies as
they pertain to financial institutions significantly affect
the Company. Deposit balances are influenced by a
number of factors including interest rates paid on
competing personal investments and the level of
personal income and savings within the institution’s
market. In addition, growth of deposit balances is
influenced by the perceptions of customers regarding
the stability of the financial services industry. Lending
activities are influenced by the demand for housing,
competition from other lending institutions, as well as
lower interest rate levels, which may stimulate loan
refinancing. The primary sources of funds for lending
activities include deposits, loan payments, borrowing
and funds provided from operations.
For the year ended December 31, 2000, the Company
reported consolidated net income of $3,007,000, a
$297,000 (10.96%) increase from 1999. Net interest
income for the periods being compared increased
$605,000 or 7.14%. Other income increased $113,000
(4.93%) while other expenses increased $477,000
(7.37%) over 1999 totals.
Analysis of Net Income
The Company’s assets are primarily comprised of
interest earning assets including commercial,
agricultural, consumer and real estate loans, as well as
federal funds sold, interest bearing deposits in banks
and securities. Average earning assets equaled
$257,904,000 for the year ended December 31, 2000. A
combination of interest bearing and non-interest bearing
deposits, long term debt, federal funds purchased,
securities sold under agreement to repurchase, other
borrowings and capital funds are employed to finance
these assets.
Net Income
$4,000
$3,000
$2,000
$1,000
$1,347
$0
$2,618
$2,710
$3,007
$1,797
$1,921
1995
1996
1997
1998
1999
2000
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
13
Consolidated Income Summary
(Amounts in thousands of dollars)
Interest income
Interest expense
Net interest income
Provision for loan losses
Net interest income after provision
for loan losses
Other income
Other expense
Income before taxes
Income tax expense
Net income
2000
Change
1999
Change
1998
1997
1996
1995
(240) 66.67
(8,204) 4.06
$ 20,135 20.75 % $ 16,675 6.44 % $ 15,666 $ 13,385 $ 12,445 $ 11,397
(11,059) 34.80
(7,884) (6,703) (6,415) (5,674)
$ 9,076 7.14 % $ 8,471 8.85 % $ 7,782 $ 6,682 $ 6,030 $ 5,723
(240) -
(144) (30) (67) (180)
$ 8,836 7.35 % $ 8,231 7.76 % $ 7,638 $ 6,652 $ 5,963 $ 5,543
2,404 4.93
1,979 1,265 967 970
(6,951) 7.37
(5,795) (5,145) (4,419) (4,709)
$ 4,289 5.95 % $ 4,048 5.91 % $ 3,822 $ 2,772 $ 2,511 $ 1,804
(1,282) (4.19)
(1,204) (851) (714) (457)
$ 3,007 10.96 % $ 2,710 3.51 % $ 2,618 $ 1,921 $ 1,797 $ 1,347
2,291 15.77
(6,474) 11.72
(1,338) 11.13
5 Year
Growth
Rate
76.67 %
94.91
58.59 %
33.33
59.41 %
147.84
47.61
137.75 %
180.53
123.24 %
For the Years Ended December 31,
(Amounts in thousands of dollars)
1999
$ 16,329
346
(8,204)
1998
$ 15,358
308
(7,884)
2000
$ 19,680
455
(11,059)
$ 9,076
$ 8,471
$ 7,782
$ 257,904
$ 226,302
$ 205,299
3.52%
3.74%
3.79%
Interest Income
Loan Fees
Interest Expense
Net Interest
Income
Average Earning
Assets
Net Interest
Margin
The yield on average earning assets for the year ended
2000 was 7.81% while the average cost of funds for the
same period was 5.06% on average interest bearing
liabilities of $218,763,000. The yield on average
earning assets for the year ended 1999 was 7.37%,
while the average cost of funds for the same period was
4.33% on average interest bearing liabilities of
$189,592,000. The increase in net interest income can
be attributed to the $2,431,000 (6.62%) increase in
average net earning assets during the period. This
increase offset the decrease in both interest spread (29
basis point) and net interest margin (22 basis points).
Provision for Loan Losses
The allowance for loan losses as a percentage of net
loans outstanding is 1.11% at December 31, 2000,
compared to 1.23% at December 31, 1999. Net loan
charge-offs totaled $208,000 for the year ended
December 31, 2000 compared to $181,000 in 1999.
The amounts recorded in the provision for loan losses
The amounts recorded in the provision for loan losses are
are determined from management’s quarterly evaluation
determined from management’s quarterly evaluation of
the quality of the loan portfolio. In this review, such
of the quality of the loan portfolio. In this review, such
factors as the volume and character of the loan portfolio,
factors as the volume and character of the loan
general economic conditions and past loan loss
portfolio, general economic conditions and past loan
experience are considered. Management believes that the
loss experience are considered. Management believes
allowance for loan losses is adequate to provide for losses
that the allowance for loan losses is adequate to provide
in the portfolio at December 31, 2000.
for losses in the portfolio at December 31, 2000.
Other Income
Other Income
Other income may be divided into two broad categories
-recurring and non-recurring. Trust fees and service
charges on deposit accounts are the major sources of
recurring other income. Investment securities gains and
other income vary annually. Other income for the
period ended December 31, 2000 was $2,404,000, an
increase of $113,000 (4.93%) from 1999. The securities
losses of $258,000 were due from the implementation
of an investment strategy that was directed to the
enhancement of earnings in future periods.
Other Expense
Other expenses for the period ended December 31, 2000
totaled $6,951,000, an increase of $477,000 (7.37%)
from 1999 year-end totals. Salaries and employee
benefits expense aggregated 52.51% and 52.58% of
total other expense for the year ended December 31,
2000 and 1999, respectively.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
14
Non-accrual, Restructured and Past Due Loans and Leases and Other Real Estate Owned
(Amounts in thousands of dollars)
At December 31,
Non-accrual loans and leases
Other real estate owned
Total non-performing assets
Loans and leases past due 90 days or more
Total non-performing assets and 90-day past due loans and leases
Interest income as originally contracted on non-accrual
and restructured loans and leases
Interest income recognized on non-accrual and
restructured loans and leases
Reduction of interest income due to non-accrual
and restructured loans and leases
Reduction in basic and diluted earnings per share due to
non-accrual and restructured loans and leases
Income Taxes
The Company files its Federal income tax return on a
consolidated basis with the Bank. See Note 16 to the
consolidated financial statements for detail of income
taxes.
Liquidity
The concept of liquidity comprises the ability of an
enterprise to maintain sufficient cash flow to meet its
needs and obligations on a timely basis. Bank liquidity
must thus be considered in terms of the nature and mix of
the institution’s sources and uses of funds.
Bank liquidity is provided from both assets and
liabilities. The asset side provides liquidity through
regular maturities of investment securities and loans.
Investment securities with maturities of one year or less,
deposits with banks and federal funds sold are a primary
source of asset liquidity. On December 31, 2000, these
categories totaled $43,273,000 or 14.50% of assets,
compared to $23,202,000 or 8.98% the previous year.
As of December 31, 2000, securities held to maturity
included $74,000 of gross unrealized gains and $159,000
of gross unrealized
losses on securities which
management intends to hold until maturity. Such
amounts are not expected to have a material effect on
future earnings beyond the usual amortization of
premium and accretion of discount.
Closely related to the management of liquidity is the
management of rate sensitivity (management of variable
rate assets and liabilities), which focuses on maintaining
a stable net interest margin, an important factor in
earnings growth and stability. Emphasis is placed on
maintaining an evenly balanced rate sensitivity position
2000
1999
1998
1997
1996
1995
- 113
$ 242 $ 147 $ 88 $ 298 $ 275 $ 51
-
-
$ 242 $ 260 $ 88 $ 347 $ 275 $ 51
31
32
$ 731 $ 518 $ 119 $ 408 $ 573 $ 83
489 258
298
61
49
-
$ 26
$ 10
$ 9
$ 53
$ 25
$ 4
-
-
$ 26 $ 10 $ 9 $ 53 $ 25 $ 4
-
-
-
-
$ .01 $ .00 $ .00 $ .01 $ .01 $ .00
to avoid wide swings in margins and minimize risk due
to changes in interest rates.
The Company’s Asset/Liability Committee is charged
with the responsibility of prudently managing the
volumes and mixes of assets and liabilities of the
subsidiary Bank.
Management believes that it has structured its pricing
mechanisms such that the net interest margin should
maintain acceptable levels in 2001, regardless of the
changes in interest rates that may occur. The following
table shows the repricing period for interest-earning
assets and interest-bearing liabilities and the related
repricing gap (Amounts in thousands of dollars):
Interest-earning assets
Interest-bearing liabilities
Repricing gap
(repricing assets minus
repricing liabilities)
Interest-earning assets
Interest-bearing liabilities
Repricing gap
(repricing assets minus
repricing liabilities)
As of December 31, 2000
Repricing Period
After one
Year through
Five years
$ 105,149
20,416
Through
One year
$ 114,807
206,307
After
Five years
$ 65,093
7,000
$ (91,500)
$ 84,733
$ 58,093
As of December 31, 1999
Repricing Period
After one
Year through
Five years
$ 95,426
35,221
Through
One year
$ 82,236
167,425
After
Five years
$ 66,987
4,000
$ (85,189)
$ 60,205
$ 62,987
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
15
Effects of Inflation
Until recent years, the economic environment in which
the Company operates has been one of significant
increases in the prices of most goods and services and a
corresponding decline in the purchasing power of the
dollar.
Banks are affected differently than other commercial
enterprises by the effects of inflation. Some reasons for
these disparate effects are a) premises and equipment for
banks represent a relatively small proportion of total
assets; b) a bank’s asset and liability structure is
substantially monetary in nature, which can be converted
into a fixed number of dollars regardless of changes in
prices, such as loans and deposits; and c) the majority of
a bank’s income is generated through net interest income
and not from goods or services rendered.
The Company’s capital, as defined by the regulations,
was 13.25 percent of risk-weighted assets at December
31, 2000. In addition, a leverage ratio of at least 4.00
percent is to be maintained. At December 31, 2000, the
Company’s leverage ratio was 8.84 percent.
Asset Liability Management
Since changes in interest rates may have a significant
impact on operations the Company has implemented, and
currently maintains, an asset liability management
committee at the Bank to monitor and react to the
changes in interest rates and other economic conditions.
Research concerning interest rate risk is supplied by the
Company from information received from a third party
source. The committee acts upon this information by
adjusting pricing, fee income parameters, and/or
marketing emphasis.
Although inflation may impact both interest rates and
volume of loans and deposits, the major factor that
affects net interest income is how well a bank is
positioned to cope with changing interest rates.
Common Stock Information and Dividends
The Company’s common stock is held by 246
shareholders as of December 31, 2000, and is traded in a
limited over-the-counter market.
Capital
The ability to generate and maintain capital at adequate
levels is critical to the Company’s long term success. A
common measure of capitalization for financial
institutions is primary capital as a percent of total assets.
Regulations also require the Company to maintain certain
minimum capital levels in relation to consolidated
Company assets. Regulations require a ratio of capital to
risk-weighted assets of 8.00 percent.
Risked Based Capital Ratios
14.00%
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
9.64%
10.09%
9.94%
10.92%
10.53%
13.25%
1995
1996
1997
1998
1999
2000
On December 31, 2000 the market price of the
Company’s common stock was established by Howe
Barnes Investments, Inc. at $19.00 a share. Cash
dividends on common stock of $387,000 were declared
by the Board of Directors of the Company for the year
ended December 31, 2000.
Closing Share Price Data
$20.00
$18.00
$16.00
$14.00
$12.00
$10.00
$8.00
$6.00
$4.00
$2.00
$0.00
$19.00
$13.13
$11.50
$8.50
$4.07
$3.28
1995
1996
1997
1998
1999
2000
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
16
Financial Report
Upon written request of any shareholder of record on
December 31, 2000, the Company will provide, without
charge, a copy of its 2000 Annual Report including
financial statements and schedules.
The Company filed a Form 15 with the Securities and
Exchange Commission to discontinue the filing of
quarterly (10-Q) and annual (10-K) reports based on the
Company’s number of stockholders, however, the
Company does prepare similar reports to those required
under the Securities Exchange Act of 1934.
Notice of Annual Meeting of Stockholders
The annual meeting of stockholders will be May 8,
2001 at 9:00 A.M. at the Quincy Holiday Inn, 201
South 3rd Street, Quincy, Illinois.
INDEPENDENT AUDITOR’S REPORT
17
To the Board of Directors
First Bankers Trustshares, Inc.
Quincy, Illinois
We have audited the accompanying consolidated balance sheets of First Bankers Trustshares, Inc. and
subsidiaries as of December 31, 2000 and 1999, and the related consolidated statements of income, changes in
stockholders’ equity and cash flows for the years ended December 31, 2000, 1999 and 1998. These financial
statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects,
the financial position of First Bankers Trustshares, Inc. and subsidiaries as of December 31, 2000 and 1999,
and the results of their operations and their cash flows for the years ended December 31, 2000, 1999 and 1998,
in conformity with generally accepted accounting principles.
Davenport, Iowa
February 16, 2001
18
FINANCIAL SUMMARY
FIRST BANKERS TRUSTSHARES, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands of dollars, except share and per share data)
Assets
Cash and due from banks (Note 3)
Non-interest bearing
Interest bearing
Securities held to maturity (Note 4)
Securities available for sale (Note 4)
Federal funds sold
Loans held for sale
Loans (Note 5)
Less allowance for loan losses
Net loans
Premises, furniture and equipment, net (Note 6)
Accrued interest receivable
Other assets
TOTAL ASSETS
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Non-interest bearing demand
Interest bearing demand
Savings
Time (Note 7)
Total Deposits
Short-term borrowings (Note 8)
Federal Home Loan Bank advances (Note 9)
Note payable (Note 9)
Company obligated mandatorily redeemable preferred
securities of subsidiary trust holding soley
subordinated debentures (Note 10)
Accrued interest payable
Other liabilities
TOTAL LIABILITIES
Commitments and Contingencies (Note 11)
Stockholders' Equity (Note 14):
Preferred stock, Series A, nonvoting, variable rate,
cumulative, no par value, $50 stated value; authorized
50,000 shares; issued and outstanding none (Note 13)
Common stock, $1 par value, authorized 6,000,000
shares; issued and outstanding 2,579,230 shares
(Note 19)
Additional paid in capital (Note 19)
Retained earnings
Accumulated other comprehensive (loss)
TOTAL STOCKHOLDERS' EQUITY
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
December 31,
2000
1999
$ 7,555
16,163
$ 23,718
$ 11,102
62,212
18,700
417
176,455
(1,951)
$ 174,504
$ 3,701
2,027
2,116
$ 298,497
$ 6,964
981
$ 7,945
$ 12,629
61,101
13,425
74
156,439
(1,919)
$ 154,520
$ 4,132
1,758
2,919
258,503
$
$ 42,467
58,694
30,519
112,682
$ 244,362
17,828
9,000
-
$ 34,047
36,652
36,704
92,074
$ 199,477
26,436
12,000
2,780
5,000
1,952
1,020
$ 279,162
-
1,419
1,119
$ 243,231
-
-
2,580
1,290
2,251
14,526
(22)
$ 19,335
3,541
11,906
(1,465)
15,272
$
$ 298,497
$
258,503
See notes to consolidated financial statements
FINANCIAL SUMMARY
19
FIRST BANKERS TRUSTSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands of dollars, except per share data)
Interest income:
Interest and fees on loans:
Taxable
Non-taxable
Interest on securities:
Taxable
Non-taxable
Interest on federal funds sold
Interest on interest bearing deposits in banks
Total interest income
Interest expense:
Interest on deposits:
Interest bearing demand and savings
Time
Total interest on deposits
Interest on short-term borrowings
Interest on Federal Home Loan Bank advances
Interest on note payable
Interest on company obligated mandatorily redeemable
preferred securities
Total interest expense
Net interest income
Provision for loan losses (Note 5)
Net interest income after provision for loan
Losses
Other income:
Trust department
Service charges on deposit accounts
Investment securities gains (losses), net (Note 4)
Other
Total other income
Other expenses:
Salaries and employee benefits
Occupancy expense, net
Equipment expense
Computer processing
Professional services
Amortization of intangibles
Other
Total other expenses
Income before income taxes
Income taxes (Note 16)
Net income
Net income applicable to common stock
2000
Years Ended December 31,
1999
1998
$ 14,614
120
$ 11,589
130
$ 10,662
130
3,708
742
591
360
$ 20,135
3,550
774
498
134
$ 16,675
3,453
689
468
264
$ 15,666
$ 2,605
6,162
$ 8,767
1,142
826
152
172
$ 11,059
$ 9,076
$ 1,859
4,731
$ 6,590
716
649
249
-
$ 8,204
$ 8,471
$ 1,863
4,390
$ 6,253
891
408
332
-
$ 7,884
$ 7,782
$ 240
$ 240
$ 144
$ 8,836
$ 8,231
$ 7,638
$ 1,297
413
(258)
952
$ 2,404
$ 966
384
2
939
$ 2,291
$ 3,650
480
608
326
148
134
1,605
$ 6,951
$ 4,289
1,282
$ 3,007
$ 3,007
$ 3,404
487
571
309
98
134
1,471
$ 6,474
$ 4,048
1,338
$ 2,710
$ 2,710
$ 793
338
37
811
$ 1,979
$ 3,076
456
528
236
84
134
1,281
$ 5,795
$ 3,822
1,204
$ 2,618
$ 2,586
Earnings per share of common stock, basic and diluted
$ 1.17
$ 1.05
$ 1.02
See notes to consolidated financial statements
20
FINANCIAL SUMMARY
FIRST BANKERS TRUSTSHARES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Amounts in thousands of dollars, except per share data)
Years Ended December 31, 2000, 1999 and 1998
Balance, December 31, 1997
Comprehensive income:
Net income
Other comprehensive (loss),
net of tax, unrealized (losses) on
securities available for sale, net
of reclassification adjustment
(Note 2)
Comprehensive income
Preferred stock conversion to
Common stock ($11.00 conversion
price) (Note 13)
Dividends declared on preferred
stock (amount per share $3.19)
Dividends declared on common
stock (amount per share $.09)
Balance, December 31, 1998
Comprehensive income:
Net income
Other comprehensive (loss), net
of tax, unrealized (losses) on
securities available for sale, net
of reclassification adjustment
(Note 2)
Comprehensive income
Dividends declared on common
stock (amount per share $.13)
Balance, December 31, 1999
Comprehensive income:
Net income
Other comprehensive income, net
of tax, unrealized gains on
securities available for sale, net
of reclassification adjustment
(Note 2)
Comprehensive income
Adjustment to reflect two-for-one
common stock split (Note 19)
Dividends declared on common
stock (amount per share $.15)
Balance, December 31, 2000
Preferred
Stock
$ 500
Common
Stock
$ 1,267
Additional
Paid In
Capital
$ 3,064
Retained
Earnings
$ 7,162
Accumulated
Other
Comprehensive
Income (Loss)
$ 185
Comprehensive
Income
Total
$ 12,178
-
-
-
2,618
-
2,618
2,618
-
-
-
-
(48)
(48)
$ 2,570
(48)
(500)
23
477
-
-
-
-
-
(32)
-
-
$ -
-
$ 1,290
-
$ 3,541
(230)
$ 9,518
-
$ 137
-
(32)
(230)
$ 14,486
-
-
-
2,710
-
2,710
2,710
-
-
-
-
(1,602)
(1,602)
$ 1,108
(1,602)
-
$ -
-
$ 1,290
-
$ 3,541
(322)
$ 11,906
-
$ (1,465)
(322)
$ 15,272
-
-
-
3,007
-
3,007
3,007
-
-
-
-
1,443
1,443
$ 4,450
1,443
-
1,290
(1, 290)
-
$ -
-
$ 2,580
-
$ 2,251
(387)
$ 14,526
-
$ (22)
(387)
$ 19,335
See notes to consolidated financial statements
FINANCIAL SUMMARY
21
FIRST BANKERS TRUSTSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands of dollars)
Cash Flows From Operating Activities
Net income
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses
Amortization of goodwill
Depreciation
Amortization/accretion of premiums/discounts on
securities, net
Investment securities (gains) losses, net
Loans originated for resale
Proceeds from loans sold
Gain on sale of loans
Deferred income taxes
(Increase) decrease in accrued interest receivable
and other assets
Increase (decrease) in accrued interest payable
and other liabilities
Net cash provided by operating activities
Cash Flows From Investing Activities
Purchases of securities available for sale
Purchases of securities held to maturity
Proceeds from sales of securities available for sale
Proceeds from sales of securities held to maturity
Proceeds from maturities, calls and principal
reductions of securities available for sale
Proceeds from maturities, calls and principal
reductions of securities held to maturity
Increase in loans, net
(Increase) decrease in federal funds sold
Purchases of premises, furniture and equipment
Net cash (used in) investing activities
2000
$ 3,007
Years Ended December 31,
1999
$ 2,710
1998
$ 2,618
240
134
656
240
134
615
144
134
546
10
258
(7,217)
6,970
(96)
(25)
155
(2)
(9,672)
10,554
(115)
(38)
58
(37)
(20,350)
19,981
(180)
(188)
(460)
(203)
19
408
$ 3,885
(116)
$ 4,262
344
$ 3,089
$ (23,204)
(700)
17,972
164
$ (34,015)
(2,106)
3,633
-
$ (47,877)
(3,209)
11,043
-
6,185
24,292
31,815
2,059
(20,224)
(5,275)
(225)
$ (23,248)
2,114
(30,866)
7,175
(716)
$ (30,489)
3,017
(7,168)
(3,600)
(715)
$ (16,694)
Cash Flows From Financing Activities
Net increase in deposits
Principal payments on note payable
Cash dividends paid on preferred stock
Cash dividends paid on common stock
Increase (decrease) in short-term borrowings
Proceeds from Federal Home Loan Bank advances
Repayments of Federal Home Loan Bank advances
Proceeds from issuance of preferred securities of
subsidiary trust
Net cash provided by financing activities
Net increase (decrease) in cash and due from banks
Cash and Due From Banks:
Beginning
Ending
$ 44,885
(2,780)
-
(361)
(8,608)
2,000
(5,000)
$ 11,756
(1,200)
-
(309)
12,941
5,000
(7,000)
$ 12,943
(600)
(32)
(204)
(12,291)
11,000
-
5,000
$ 35,136
$ 15,773
-
$ 21,188
$ (5,039)
-
$ 10,816
$ (2,789)
$ 7,945
$ 23,718
$ 12,984
$ 7,945
$ 15,773
$ 12,984
(continued)
22
FINANCIAL SUMMARY
FIRST BANKERS TRUSTSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands of dollars, except share and per share data)
Supplemental disclosure of cash flow information,
Cash payments for:
Interest
Income taxes
Supplemental schedule of noncash investing and
financing activities:
Net change in accumulated other comprehensive income
(loss), unrealized gains (losses) on securities available
for sale, net
Conversion of 10,000 shares of preferred stock to
45,454 shares of common stock
Transfer of loans to other real estate owned
Years Ended December 31,
2000
$ 10,526
$ 1,509
1999
$ 8,305
$ 1,332
1998
$ 7,819
$ 1,232
$ 1,443
$ (1,602)
$ (48)
$ -
$ -
$ -
$ 113
$ 500
$ -
See notes to consolidated financial statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 23
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
First Bankers Trustshares, Inc. (the “Company”) is a bank holding company providing bank and bank related services
through its subsidiaries, First Bankers Trust Company, N.A. (Bank) and FBIL Statutory Trust I, to a market area
consisting primarily of Adams and adjacent Illinois counties, and Marion, Lewis and Shelby counties in Missouri. Trust
services are provided through trust offices located in Quincy and Chicago, Illinois and Phoenix, Arizona.
Significant Accounting Policies
The accounting and reporting policies of First Bankers Trustshares, Inc. and its subsidiaries conform to generally
accepted accounting principles and general practices within the banking industry. The following is a summary of the
more significant of these policies.
Accounting Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates. The allowance for loan losses is inherently
subjective as it requires material estimates that are susceptible to significant change. The fair value disclosure of
financial statements is an estimate that can be computed within a range.
Basis of Consolidation
The consolidated financial statements include the accounts of First Bankers Trustshares, Inc. and its wholly-owned
subsidiaries, First Bankers Trust Company, National Association (the “Bank”) and FBIL Statutory Trust I. All
significant intercompany accounts and transactions have been eliminated in consolidation.
Presentation of Cash Flows
For purposes of reporting cash flows, cash and due from banks includes cash on hand and amounts due from banks,
including cash items in process of clearing. Cash flows from loans to customers, deposits, short-term borrowings and
federal funds sold are reported net.
Trust Department Assets
Trust assets, other than cash deposits held by the Bank, are not assets of the Bank and, accordingly are not included in
these consolidated financial statements.
Securities
Securities held to maturity are those for which the Bank has the ability and intent to hold to maturity. Securities meeting
such criteria at the date of purchase and as of the balance sheet date are carried at amortized cost, adjusted for
amortization of premiums and discounts, computed by the interest method over their contracted lives.
Securities available for sale are accounted for at fair value and the unrealized holding gains or losses, net of their
deferred income tax effect, are presented as increases or decreases in accumulated other comprehensive income, as a
separate component of equity.
Realized gains and losses on sales of securities are based upon the adjusted book value of the specific securities sold and
are included in earnings.
There were no trading securities at December 31, 2000 and 1999.
Loans
Loans are stated at the principal amount outstanding, net of allowance for loan losses. Interest on loans is credited to
operations as earned, based upon the principal amount outstanding.
24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
It is the Bank’s policy to discontinue the accrual of interest income on any loan when, in the opinion of management,
there is reasonable doubt as to the timely collection of interest or principal. Interest on these loans is credited to income
only when the loan is removed from nonaccrual status. Nonaccrual loans are returned to an accrual status when, in the
opinion of management, the financial position of the borrower and other relevant factors indicate there is no longer any
reasonable doubt as to the timely payment of principal or interest.
The Bank grants agribusiness, commercial, residential, and consumer loans to customers throughout the Bank’s market
area. The Bank’s policy for requiring collateral is consistent with prudent lending practice and anticipates the potential
for economic fluctuations. Collateral varies but may include accounts receivable, inventory, property, equipment and
income-producing commercial properties. It is the Bank’s policy to file financing statements and mortgages covering
collateral pledged.
As of December 31, 2000 and 1999, the Bank had loan concentrations in agribusiness of 8.47% and 7.71%, respectively,
of outstanding loans. The Bank had no additional industry loan concentrations, which, in management’s judgment, were
considered to be significant. The Bank had no foreign loans outstanding as of December 31, 2000 and 1999.
Allowance for Loan Losses
The allowance for loan losses is established through a provision for loan losses charged to expense. Loans are charged
against the allowance for loan losses when management believes that the collectibility of the principal is unlikely. The
allowance is an amount that management believes will be adequate to absorb losses inherent in existing loans and
commitments to extend loans based on evaluations of the collectibility and prior loss experience. The evaluations take
into consideration such factors as changes in the nature and volume of the portfolio, overall portfolio quality, loan
concentrations, specific problem loans and commitments, and current and anticipated economic conditions that may
affect the borrower’s ability to pay.
Loans are considered impaired when, based on current information and events, it is probable the Bank will not be able to
collect all amounts due under the loan agreement. The portion of the allowance for loan losses applicable to impaired
loans is computed based on the present value of the estimated future cash flows of interest and principal discounted at
the loan’s effective interest rate or on the fair value of the collateral for collateral dependent loans. The entire change in
present value of expected cash flows of impaired loans is reported as bad debt expense in the same manner in which
impairment initially was recognized or as a reduction in the amount of bad debt expense that otherwise would be
reported. The Bank recognizes interest income on impaired loans on a cash basis.
Transfers of Financial Assets
Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered. Control over
transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the
transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange
the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an
agreement to repurchase them before their maturity.
Credit Related Financial Instruments
In the ordinary course of business, the Bank has entered into commitments to extend credit, including commitments
under lines of credit and standby letters of credit. Such financial instruments are recorded when they are funded.
Sale of Loans
As part of its management of assets and liabilities, the Company periodically sells residential real estate, agricultural and
student loans. Loans, which are expected to be sold in the foreseeable future, are classified as held for sale and are
recorded at the lower of aggregate cost or market value. At December 31, 2000 and 1999, loans held for sale consist of
residential and agricultural real estate loans.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 25
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Premises, Furniture and Equipment
Premises, furniture and equipment are stated at cost less accumulated depreciation. Depreciation is determined using the
straight-line method over the estimated useful lives of the assets.
Other Real Estate Owned
Other real estate owned (OREO), which is included with other assets, represents properties acquired through foreclosure,
in-substance foreclosure or other proceedings. Any write-down to fair value at the time of the transfer to OREO is
charged to the allowance for loan losses. Property is evaluated regularly to ensure that the recorded amount is supported
by the current fair value. Subsequent write-downs to fair value are charged to earnings.
Intangibles
Goodwill represents the unamortized cost of the investment in the Bank in excess of the fair value of net assets acquired
and is being amortized over 15 years. Goodwill totals $467,000 and $601,000 at December 31, 2000 and 1999,
respectively.
Earnings Per Share of Common Stock
Basic earnings per share of common stock is computed by dividing net income, after deducting preferred stock
dividends, by the weighted average number of shares outstanding during each reporting period. Diluted earnings per
share of common stock assumes the conversion, exercise or issuance of all potential common stock (common stock
equivalents) unless the effect is to reduce the loss or increase the income per common share from continuing operations.
The Company had no common stock equivalents as of and for the years ending December 31, 2000, 1999, and 1998.
Income Taxes
Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary
differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities
and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is
more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in the tax laws and rates on the date of enactment.
26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. COMPREHENSIVE INCOME
Comprehensive income is defined as the change in equity during a period from transactions and other events from non-
owner sources. Comprehensive income is the total of net income and other comprehensive income, which for the
Company is comprised entirely of unrealized gains and losses on securities available for sale.
Other comprehensive income (loss) is comprised as follows (Amounts in thousands of dollars):
Year ended December 31, 2000
Unrealized gains (losses) on securities available for sale:
Unrealized holding gains arising during the year
Less reclassification adjustment for (losses)
included in net income
Other comprehensive income
Year ended December 31, 1999
Unrealized gains (losses) on securities available for sale:
Unrealized holding (losses) arising during the year
Less reclassification adjustment for gains
included in net income
Other comprehensive (loss)
Year ended December 31, 1998
Unrealized gains (losses) on securities available for sale:
Unrealized holding (losses) arising during the year
Less reclassification adjustment for gains
included in net income
Other comprehensive (loss)
Before tax
Tax expense
(benefit)
Net of tax
$ 2,070
$ 787
$ 1,283
(258)
$ 2,328
(98)
$ 885
(160)
$ 1,443
$ (2,581)
$ (980)
$ (1,601)
2
$ (2,583)
1
$ (981)
1
$ (1,602)
$ (42)
$ (16)
$ (26)
37
$ (79)
15
$ (31)
22
$ (48)
3. RESTRICTIONS ON CASH AND DUE FROM BANKS
The Bank is required to maintain a reserve balance with the Federal Reserve Bank of St. Louis. The total of the reserve
balance was approximately $2,387,000 and $2,529,000 at December 31, 2000 and 1999, respectively.
4. SECURITIES
The amortized cost and fair values of securities held to maturity as of December 31, 2000 and 1999 are as follows
(Amounts in thousands of dollars):
U.S. Government agencies and corporations
State and political subdivisions
Amortized
Cost
$ 287
10,815
$ 11,102
2000
Gross
Unrealized
Gains
$ 2
72
$ 74
Gross
Unrealized
(Losses)
$ -
(159)
$ (159)
Fair
Value
$ 289
10,728
$ 11,017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 27
4. SECURITIES (Continued)
U.S. Government agencies and corporations
State and political subdivisions
Amortized
Cost
$ 1,278
11,351
$ 12,629
1999
Gross
Unrealized
Gains
$ 5
57
$ 62
Gross
Unrealized
(Losses)
$ (20)
(531)
$ (551)
Fair
Value
$ 1,263
10,877
$ 12 ,140
The amortized cost and fair values of securities available for sale as of December 31, 2000 and 1999 are as follows
(Amounts in thousands of dollars):
)
U.S. Government agencies and corporations
State and political subdivisions
Corporate securities
Collateralized mortgage obligations
U.S. Treasury securities
U.S. Government agencies and corporations
State and political subdivisions
Corporate securities
Collateralized mortgage obligations
Amortized
Cost
$ 54,718
5,822
1,417
290
$ 62,247
Amortized
Cost
$ 6,004
51,057
4,973
1,050
380
$ 63,464
2000
1999
Gross
Unrealized
Gains
$ 393
93
-
-
$ 486
Gross
Unrealized
Gains
$ 12
48
8
-
-
$ 68
Gross
Unrealized
(Losses)
$ (458)
(59)
-
(4)
$ (521)
Gross
Unrealized
(Losses)
$ (6)
(2,211)
(205)
-
(9)
$ (2,431)
Fair
Value
$ 54,653
5,856
1,417
286
$ 62,212
Fair
Value
$ 6,010
48,894
4,776
1,050
371
$ 61,101
The amortized cost and fair value of securities as of December 31, 2000 by contractual maturity, are shown below.
Expected maturities may differ from contractual maturities because the corporate securities and mortgages underlying
the collateralized mortgage obligations may be called or prepaid without penalties. Therefore, these securities are not
included in the maturity categories in the following summaries (Amounts in thousands of dollars):
Securities held to maturity:
Due in one year or less
Due after one year through five years
Due after five years through ten years
Due after ten years
Amortized
Cost
$ 1,426
3,613
2,307
3,756
$ 11,102
Fair
Value
$ 1,434
3,661
2,296
3,626
$ 11,017
28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. SECURITIES (Continued)
Securities available for sale:
Due in one year or less
Due after one year through five years
Due after five years through ten years
Due after ten years
Corporate securities
Collateralized mortgage obligations
Proceeds from sales:
Securities available for sale
Securities held to maturity
Gross gains
Gross losses
Amortized
Cost
$ 6,991
13,384
12,738
27,427
$ 60,540
1,417
290
$ 62,247
2000
$ 17,972
164
$ 9
$ 267
Fair
Value
$ 6,984
13,706
12,691
27,128
$ 60,509
1,417
286
$ 62,212
1999
$ 3,633
-
$ 10
$ 8
1998
$ 11,043
-
37
-
The sales of securities held to maturity during the year ended December 31, 2000 were made in accordance with the
provisions of Financial Accounting Standards No. 115. The sales qualified as in-substance maturities, as defined in the
standard.
As of December 31, 2000 and 1999 securities with a carrying value of approximately $60,256,000 and $56,816,000
respectively, were pledged to collateralize deposits and securities sold under agreements to repurchase and for other
purposes as required or permitted by law.
5. LOANS
The composition of net loans outstanding as of December 31, 2000 and 1999 are as follows (Amounts in thousands of
dollars):
Commercial
Agricultural
Tax exempt
Real estate, mortgage
Consumer
Other
Less: Allowance for loan
losses
Net loans
2000
$ 80,027
14,950
1,685
45,589
33,928
276
$ 176,455
1999
$ 73,789
12,062
1,852
40,486
27,919
331
$ 156,439
(1,951)
$ 174,504
(1,919)
$ 154,520
Loans on which the accrual of interest has been discontinued totaled $242,000 and $147,000 as of December 31, 2000
and 1999, respectively. The foregone interest had the effect of reducing interest income by $26,000 or $.01 on earnings
per share of common stock for the year ended December 31, 2000. The foregone interest for the years ended December
31, 1999 and 1998 had the effect of reducing interest income by $10,000 and $9,000, respectively. There was no impact
on earnings per share of common stock for 1999 or 1998.
Impaired loans were not material at December 31, 2000 and 1999.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 29
5. LOANS (Continued)
Activity in the allowance for loan losses during the years ended December 31, 2000, 1999 and 1998 is summarized
below (Amounts in thousands of dollars):
Balance, beginning of year
Provision for loan losses
Loan charge-offs
Recoveries of loans charged off
Balance, end of year
2000
$ 1,919
240
(274)
66
$ 1,951
1999
$ 1,860
240
(207)
26
$ 1,919
1998
$ 1,846
144
(160)
30
$ 1,860
In the ordinary course of business, the Bank has loans with directors, principal officers, their immediate families and
affiliated companies in which they are principal stockholders (hereafter referred to as related parties). The Bank believes
that all such loans were made on substantially the same terms, including interest rates and collateral, as those prevailing
at the time for comparable loans with other persons and that such loans do not present more than a normal risk of
collectibility or present other unfavorable features. An analysis of the changes in the aggregate amount of these loans
during 2000 and 1999 is as follows (Amounts in thousands of dollars):
Balance, beginning of year
Advances
Repayments
Balance, end of year
2000
$ 2,047
11,915
(11,304)
$ 2,658
1999
$ 2,004
2,673
(2,630)
$ 2,047
6. PREMISES, FURNITURE AND EQUIPMENT
The cost, accumulated depreciation and net book value of premises, furniture and equipment as of December 31, 2000
and 1999 is summarized as follows (Amounts in thousands of dollars):
Land
Building and improvements
Furniture and equipment
Less accumulated depreciation
7. TIME DEPOSITS
2000
$ 625
3,505
4,726
$ 8,856
(5,155)
$ 3,701
1999
$ 625
3,451
4,555
$ 8,631
(4,499)
$ 4,132
The aggregate amount of time deposits, each with a minimum denomination of $100,000, was approximately
$32,866,000 and $24,103,000 at December 31, 2000 and 1999, respectively.
At December 31, 2000, the scheduled maturities of time deposits are as follows (Amounts in thousands of dollars):
2001
2002
2003
2004
2005
$ 97,226
12,546
1,346
627
937
$ 112,682
30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. SHORT TERM BORROWINGS
The following is a summary of short-term borrowings outstanding as of December 31, 2000 and 1999 (Amounts in
thousands of dollars):
Securities sold under agreement to repurchase
U.S. Treasury tax and loan note account
Total short-term borrowings
2000
$ 16,123
1,705
$ 17,828
1999
$ 25,036
1,400
$ 26,436
Securities sold under agreements to repurchase are short-term borrowings that generally mature within 180 days from
the dates of issuance. The U.S. Treasury tax and loan note generally matures within 30 days.
Other information concerning securities sold under agreements to repurchase is summarized as follows (Amounts in
thousands of dollars):
Average balance during the year
Average interest rate during the year
Maximum month end balance during the year
Securities underlying the agreements at year end:
Carrying value
Fair value
2000
$ 21,532
5.05%
$ 26,529
1999
$ 16,840
4.07%
$ 25,036
$ 32,754
$ 32,689
$ 35,236
$ 34,948
Average balances above are based upon daily average balances and rates. The securities underlying the agreements at
year-end were under the Company’s control.
9. FEDERAL HOME LOAN BANK ADVANCES AND NOTE PAYABLE
Federal Home Loan Bank (FHLB) advances are summarized as follows at December 31, 2000:
Maturity in year ending December 31:
2001
2004
2008
Weighted
Average
Interest Rate
6.41%
5.69
4.89
Balance Due
(Amount in
thousands)
$ 4,000
3,000
2,000
$ 9,000
Advances totaling $5,000,000 maturing in 2004 and 2008 have call features that could be implemented beginning in
2001 through 2003. First mortgage loans of approximately $15,000,000 as of December 31, 2000 are pledged as
collateral on FHLB advances.
FHLB advances at December 31, 1999 totaled $12,000,000. These advances had maturity dates between 2000 and 2008
and carried fixed interest rates of 4.25% to 6.02%. First mortgage loans of approximately $20,000,000 as of December
31, 1999 were pledged as collateral on these advances.
The Company paid off its note payable due March 31, 2001 in September 2000. At December 31, 1999 $2,780,000 was
outstanding on the note payable.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31
10. COMPANY OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF
SUBSIDIARY TRUST HOLDING SOLELY SUBORDINATED DEBENTURES
The Company issued 5,000 shares of Company Obligated Mandatorily Redeemable (COMR) Preferred Securities of
FBIL Statutory Trust I Holding Solely Subordinated Debentures. Distributions are paid semi-annually. Cumulative cash
distributions are calculated at a 10.60% annual rate. The Company may, at one or more times, defer interest payments
on the capital securities for up to 10 consecutive semi-annual periods, but not beyond September 7, 2030. At the end of
the deferral period, all accumulated and unpaid distributions will be paid. The capital securities will be redeemed on
September 7, 2030; however, the Company has the option to shorten the maturity date to a date not earlier than
September 7, 2010. The redemption price begins at 105.300% to par and is reduced by 53 basis points each year until
September 7, 2020 when the capital securities can be redeemed at par. Any accrued and unpaid distributions to the date
of the redemption must also be paid.
Holders of the capital securities have no voting rights, are unsecured and rank junior in priority of payment to all of the
Company’s indebtedness and senior to the Company’s capital stock.
The debentures are included on the balance sheet at December 31, 2000 as liabilities. For regulatory purposes, the entire
amount of the capital securities is allowed in the calculation of Tier I capital.
11. COMMITMENTS AND CONTINGENCIES
Financial instruments with off-balance sheet risk:
The Bank, in the normal course of business, is a party to financial instruments with off-balance sheet risk to meet the
financing needs of its customers. These financial instruments include unused lines of credit and standby letters of credit.
Those instruments involve, to varying degrees, elements of credit and market risk in excess of the amount recognized in
the consolidated balance sheets.
The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for
unused lines of credit and standby letters of credit is represented by the contractual amounts of those instruments. The
Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet
instruments.
A summary of the Bank’s commitments at December 31, 2000 and 1999 is as follows (Amounts in thousands of dollars):
Unused lines of credit
Standby letters of credit
2000
$ 24,194
667
1999
$ 20,141
475
Unused lines of credit are agreements to lend to a customer as long as there is no violation of any condition established
in the contract. The agreements generally have fixed expiration dates or other termination clauses and may require
payment of a fee. Since many of the agreements are expected to expire without being drawn upon, the total commitment
amounts do not necessarily represent future cash requirements. The Bank evaluates each customers’ credit worthiness
on a case-by-case basis. The amount of collateral obtained if deemed necessary by the Bank upon extension of credit is
based upon management’s credit evaluation of the counter-party. Collateral varies but may include accounts receivable,
inventory, property, equipment, and income-producing commercial properties.
Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to
a third party. Those guarantees are primarily issued to support public and private borrowing arrangements. The credit
risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.
Collateral varies as specified above and is required in instances in which the Bank deems necessary.
32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. COMMITMENTS AND CONTINGENCIES (Continued)
Concentration of credit risk:
Aside from cash on hand and in-vault, the majority of the Company’s cash is maintained at Firstar, Commerce Bank,
N.A., and the Federal Home Loan Bank of Chicago. The total amount of cash on deposit and federal funds sold
exceeded federal insurance limits by approximately $12,560,000, $6,959,000, and $12,812,000, respectively as of
December 31, 2000. In the opinion of management, no material risk of loss exists due to the financial condition of the
institutions.
12. BENEFITS
The Bank has a retirement plan, which covers substantially all full time employees (working over 20 hours per week)
after completion of one year of service and attaining the age of 21. The Bank contributes an amount adequate to fund
the Target Benefit as determined by various plan assumptions. The Target Benefit is 17.5% of total compensation and is
based on the employee’s highest consecutive five years of compensation while a participant.
The Bank also has a 401K plan, which is a tax qualified savings plan, to encourage its employees to save for retirement
purposes or other contingencies. Substantially all full time (working over 20 hours per week) employees of the Bank are
eligible to participate in the Plan on the later of January 1st or July 1st after completion of one year of service and
attaining the age of 18. The employee may elect to contribute up to 15% of their compensation before taxes. Based
upon profits, as determined by the Bank, a contribution may be made by the Bank. Employees are 100% vested in the
Bank’s contribution to the plan after five years of service. Employee contributions and vested Bank contributions may
be withdrawn only on termination of employment, retirement, or death.
Under the Employee Incentive Compensation Plan, the Bank is authorized at its discretion, pursuant to the provisions of
the plan, to establish on an annual basis, a bonus fund, which will be distributed to certain employees, based on their
performance. The Employee Incentive Compensation Plan does not become effective unless the Bank exceeds
established income levels.
Contributions to the target benefit plan for the years ended December 31, 2000, 1999 and 1998 totaled $106,000,
$112,000 and $68,000 respectively. There were no contributions to the 401(k) plan for the years ended December 31,
2000, 1999 and 1998. Incentive compensation was $179,000, $115,000 and $310,000 for the years ended December 31,
2000, 1999 and 1998, respectively.
13. PREFERRED STOCK
Fifty thousands shares of Series A preferred stock with a stated value of $50.00 per share are authorized. Preferred
Stock was authorized in June 1989. The Company issued thirty-eight thousand shares of Series A Preferred Stock in
June 1989 for a total consideration of $1,900,000. The stock pays quarterly cumulative dividends at a per annum rate of
8.50% on the last day of March, June, September, and December. The holders of the Preferred Stock do not have any
conversion rights. All shares of Preferred Stock, which have been issued, are senior to common stock as to dividends
and liquidation. The holders of the Preferred Stock will only be allowed to vote to: (a) approve the creation or issuance
of any class of securities ranking, as to the payment of dividends or as to the distribution upon liquidation, prior to, or
upon a parity with the Preferred Stock; (b) amend any provisions of the Company’s Restated Certificate of Incorporation
which would affect the designations, preferences, qualifications, limitations or restrictions and special or relative rights
of the Preferred Stock; and (c) approve any reduction in the Company’s stated capital below levels existing on the date
on which the Company sells the Preferred Stock. They will also be allowed to vote on all matters as required by
Delaware law.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 33
13. PREFERRED STOCK (Continued)
The Company can redeem the Preferred Stock at any time. The redemption amount (and the liquidation preference) will
be the face value of the shares plus all accrued and unpaid dividends. The Company redeemed for cash twenty-eight
thousand shares of Series A Preferred Stock totaling $1,400,000.00 as of December 31, 1997. On September 30, 1998
the Company redeemed the remaining $500,000 (10,000 shares) in exchange for 44,544 shares of common stock (market
value of $11.00) and six dollars in cash.
14. DIVIDENDS AND REGULATORY CAPITAL
The Company’s stockholders are entitled to receive such dividends as are declared by the Board of Directors. The
ability of the Company to pay dividends in the future is dependent upon its receipt of dividends from the Bank. The
Bank’s ability to pay dividends is regulated by banking statutes. The timing and amount of dividends will depend on
earnings, capital requirements and financial condition of the Company and the Bank as well as general economic
conditions and other relevant factors affecting the Company and the Bank.
Under the provisions of the National Bank Act the Bank may not, without prior approval of the Comptroller of the
Currency, declare dividends in excess of the total of the current and past two year’s earnings less any dividends already
paid from those earnings.
The Company and Bank are subject to various regulatory capital requirements administered by the federal banking
agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional
discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial
statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company
and Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and
certain off-balance-sheet items as calculated under regulatory accounting practices. The Company’s and Bank’s capital
amounts and classification are also subject to qualitative judgments by the regulators and components, risk weightings,
and other factors.
Quantitative measures established by regulation to ensure capital adequacy require the Company and Bank to maintain
minimum amounts and ratios (set forth in the table below) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined). Management believes,
as of December 31, 2000, that the Company and Bank meet all capital adequacy requirements to which they are subject.
The most recent notification from the Office of the Comptroller of the Currency categorized the Bank as well capitalized
under the regulatory framework for prompt corrective action. To be categorized as adequately or well capitalized the
Bank must maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in the table.
There are no conditions or events since that notification that management believes have changed the Bank’s category.
34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. DIVIDENDS AND REGULATORY CAPITAL (Continued)
The Company’s and Bank’s actual capital amounts and ratios are also presented in the table. (Amounts in thousands of
dollars):
)
Actual
For Capital
Adequacy Purposes
To Be Well
Capitalized Under
Prompt Corrective
Action Provisions
As of December 31, 2000
Amount
Ratio
Amount
Ratio
Amount
Ratio
Total Capital
(to Risk Weighted Assets)
Company
Bank
Tier I Capital
(to Risk Weighted Assets)
Company
Bank
Tier I Capital
(to Average Assets)
Company
Bank
$25,712
$22,045
13.25%
11.44%
>$15,522
>$15,423
>8.00%
>8.00%
>$19,402
>$19,279
>10.00%
>10.00%
$23,889
$20,222
12.31%
10.49%
>$7,761
>$7,711
>4.00%
>4.00%
>$11,641
>$11,567
>6.00%
>6.00%
$23,889
$20,222
8.84%
7.54%
>$10,813
>$10,726
>4.00%
>4.00%
>$13,516
>$13,407
>5.00%
>5.00%
As of December 31, 1999
Amount
Ratio
Amount
Ratio
Amount
Ratio
Total Capital
(to Risk Weighted Assets)
Company
Bank
Tier I Capital
(to Risk Weighted Assets)
Company
Bank
Tier I Capital
(to Average Assets)
Company
Bank
$18,001
$19,787
10.53%
11.61%
>$13,682
>$13,634
>8.00%
>8.00%
>$17,103
>$17,043
>10.00%
>10.00%
$16,136
$17,922
9.43%
10.52%
>$6,841
>$6,817
>4.00%
>4.00%
>$10,262
>$10,226
>6.00%
>6.00%
$16,136
$17,922
6.76%
7.57%
>$9,546
>$9,466
>4.00%
>4.00%
>$11,932
>$11,832
>5.00%
>5.00%
15. PARENT COMPANY ONLY FINANCIAL STATEMENTS
PARENT COMPANY ONLY BALANCE SHEETS
(Amounts in thousands of dollars)
Assets
Cash
Investment in First Bankers Trust Company
Investment in FBIL Statutory Trust I
Other assets
Total assets
Liabilities and stockholders' equity
Liabilities:
Company obligated mandatorily redeemable preferred
securities of subsidiary trust
Note payable
Other
Total liabilities
Total stockholders' equity
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
December 31,
2000
$ 3,462
21,103
155
99
$ 24,819
1999
$ 886
17,464
-
125
$ 18,475
$ 5,155
-
329
$ 5,484
$ 19,335
$ -
2,780
423
$ 3,203
$ 15,272
$ 24,819
$ 18,475
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 35
15. PARENT COMPANY ONLY FINANCIAL STATEMENTS (Continued)
PARENT COMPANY ONLY STATEMENTS OF INCOME
(Amounts in thousands of dollars)
Income:
Dividends received from First Bankers Trust Company
Interest
Total income
Expenses:
Interest
Salary and benefits
Other
Total expenses
Income before income tax benefits and equity in
undistributed earnings of subsidiaries
Income tax (benefit)
Income before equity in undistributed earnings
of subsidiaries
Equity in undistributed earnings of First Bankers Trust
Company
Net income
Years Ended December 31,
1999
2000
$ 1,050
91
$ 1,141
$ 324
22
114
$ 460
$ 1,400
38
$ 1,438
$ 249
22
97
$ 368
1998
$ 1,400
44
$ 1,444
$ 332
22
106
$ 460
$ 681
(130)
$ 1,070
(135)
$ 984
(161)
$ 811
$ 1,205
$ 1,145
2,196
$ 3,007
1,505
$ 2,710
1,473
$ 2,618
PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS
(Amounts in thousands of dollars)
Cash flows from operating activities
Net income
Adjustments:
Equity in undistributed earnings of subsidiary
Changes in assets and liabilities
(Increase) decrease in other assets
Increase (decrease) in other liabilities
Net cash provided by operating activities
Cash flows from investing activities
Capital infusion, FBIL Statutory Trust I
2000
Years Ended December 31,
1999
1998
$ 3,007
$ 2,710
$ 2,618
(2,196)
(1,505)
(1,473)
26
(120)
$ 717
(75)
65
$ 1,195
(51)
26
$ 1,120
$ (155)
$ -
$ -
Cash flows from financing activities
Principal payments on note payable
Cash dividends paid on preferred stock
Cash dividends paid on common stock
Proceeds from issuance of preferred securities of
subsidiary trust
Net cash provided by (used in) financing activities
Net increase (decrease) in cash
Cash beginning
Cash ending
$ (2,780)
-
(361)
$ (1,200)
-
(309)
5,155
$ 2,014
$ 2,576
886
$ 3,462
-
$ (1,509)
$ 314
1,200
$ 886
$ (600)
(32)
(204)
-
$ (836)
$ 284
916
$ 1,200
36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. INCOME TAX MATTERS
The components of income tax expense are as follows for the years ended December 31, 2000, 1999 and 1998
(Amounts in thousands of dollars):
)
(
Current
Deferred
2000
$ 1,307
(25)
$ 1,282
Years Ended December 31,
1999
1998
$ 1,376
(38)
$ 1,338
$ 1,392
(188)
$ 1,204
A reconciliation between income tax expense in the statements of income and the amount computed by applying the
statutory federal income tax rate to income before income taxes is as follows (Amounts in thousands of dollars):
Federal income tax at statutory rate
Changes from statutory rate
resulting from:
State tax, net of federal benefit
Amortization of goodwill
Tax exempt interest income, net
Over (under) accrual of provision
and other, net
Income tax expense
2000
Amount
% of
Pretax
Income
1999
Amount
% of
Pretax
Income
1998
Amount
$ 1,458
34.0 % $ 1,376
34.0 % $ 1,299
% of
Pretax
Income
34.0 %
71
45
(249)
1.7
1.0
(5.8)
139
45
(261)
3.4
1.1
(6.4)
86
45
(228)
2.2
1.2
(6.0)
(43)
$ 1,282
39
(1.0)
29.9 % $ 1,338
1.0
2
33.1 % $ 1,204
.1
31.5 %
Net deferred tax assets consist of the following components as of December 31, 2000 and 1999 (Amounts in thousands
of dollars):
Deferred tax assets:
Allowance for loan losses
Unrealized losses on securities available for sale, net
Accrued expense
Deferred tax liabilities:
Premises, furniture and equipment
Stock dividends
Net deferred tax assets
2000
$ 699
13
130
$ 842
$ (309)
(26)
$ (335)
$ 507
1999
$ 657
898
123
$ 1,678
$ (309)
(2)
$ (311)
$ 1,367
Net deferred tax assets are included in other assets on the accompanying consolidated balance sheets.
The net change in deferred income taxes is reflected in the financial statements as follows (Amounts in thousands of
dollars):
Provision for income taxes
Statement of changes in stockholders’ equity, accumulated
other comprehensive (loss), unrealized (losses) on
securities available for sale, net
2000
$ (25)
Years Ended December 31,
1999
$ (38)
1998
$ (188)
885
$ 860
(981)
$ (1,019)
(31)
$ (219)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 37
17. CURRENT ACCOUNTING DEVELOPMENTS
The Financial Accounting Standards Board (FASB) has issued Statement No. 133 “Accounting for Derivative
Instruments and Hedging Activities” which is effective for all fiscal quarters of fiscal years beginning after June 15,
2001. This Statement establishes accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts and for hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value.
The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the
resulting designation. Management believes that adoption of this statement will not have an effect on the consolidated
financial statements.
The FASB has issued Statement No. 140 “Accounting for Transfers ad Servicing of Financial Assets and
Extinguishments of Liabilities”. This Statement replaces FASB Statement No. 125 in its entirety. It revises the
standards for accounting for securitizations and other transfers of financial assets and collateral and requires certain
disclosures, but carries over most of Statement 125’s provisions without reconsideration. The Statement is effective for
transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001.
Management believes that adoption of this Statement will not have an effect on the consolidated financial statements.
18. FAIR VALUE OF FINANCIAL INSTRUMENTS
FASB Statement No. 107 “Disclosures about Fair Value of Financial Instruments” requires disclosure of fair value
information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to
estimate that value. In cases where quoted market prices are not available, fair values are based on estimates using
present value or other valuation techniques. Those techniques are significantly affected by the assumptions used,
including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be
substantiated by comparison to independent markets, and in many cases, could not be realized in immediate settlement
of the instrument. Statement No. 107 excludes certain financial instruments and all non-financial instruments from its
disclosure requirements. Accordingly, the aggregate fair value amounts presented are not intended to represent the
underlying value of the Company.
The following methods and assumptions were used by the Company in estimating the fair value of its financial
instruments:
Cash and due from banks and federal funds sold: The carrying amounts reported in the balance sheets for cash and due
from banks and federal funds sold equal their fair values.
Securities: Fair values for securities are based on quoted market prices, where available. If quoted market prices are not
available, fair values are based on quoted market prices of comparable instruments.
Loans held for sale: The fair value of loans held for sale is based on quoted market prices of similar loans sold in the
secondary market.
Loans: For variable rate loans fair values are equal to carrying values. The fair values for all other types of loans are
estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to
borrowers with similar credit quality.
Accrued interest receivable and payable: The fair value of accrued interest receivable and payable is equal to its
carrying value.
Deposits: The fair values for demand and savings deposits equal their carrying amounts, which represent the amount
payable on demand. Fair values for time deposits are estimated using a discounted cash flow calculation that applies
interest rates currently being offered on time deposits to a schedule of aggregated expected monthly maturities on time
deposits.
38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
Short-term borrowings: The fair value of short-term borrowings is considered to equal carrying value due to the
borrowings short-term nature.
Federal Home Loan Bank advances and Company obligated mandatorily redeemable preferred securities: The fair value
of Federal Home Loan Bank advances and Company obligated mandatorily redeemable preferred securities is estimated
using discounted cash flow analyses, using interest rates currently being offered for similar borrowings.
Note payable: For the variable rate note payable, the carrying amount is a reasonable estimate of fair value.
Commitments to extend credit: The fair value of these commitments is not material.
The carrying values and estimated fair values of the Company’s financial instruments as of December 31, 2000 and 1999
are as follows (Amounts in thousands of dollars):
Financial assets:
Cash and due from banks
Securities held to maturity
Securities available for sale
Federal funds sold
Loans held for sale
Loans
Accrued interest receivable
Financial liabilities:
Non-interest-bearing demand deposits
Interest-bearing demand deposits
Savings deposits
Time deposits
Short-term borrowings
Federal Home Loan Bank advances
Note payable
Company obligated mandatorily redeemable
preferred securities of subsidiary trust
holding soley subordinated debentures
Accrued interest payable
19. COMMON STOCK SPLIT
Carrying
Value
$ 23,718
11,102
62,212
18,700
417
176,455
2,027
$ 42,467
58,694
30,519
112,682
17,828
9,000
-
2000
1999
Fair
Value
Carrying
Value
Fair
Value
$ 23,718
11,017
62,212
18,700
417
176,116
2,027
$ 42,467
58,694
30,519
112,724
17,828
9,032
-
$ 7,945
12,629
61,101
13,425
74
156,439
1,758
$ 34,047
36,652
36,704
92,074
26,436
12,000
2,780
$ 7,945
12,140
61,101
13,425
74
156,070
1,758
$ 34,047
36,652
36,704
91,938
26,436
11,842
2,780
5,000
1,952
5,000
1,952
-
1,419
-
1,419
On June 30, 2000 the Company issued an additional 1,289,615 shares of common stock to effect a two-for-one common
stock split. Share and per share data as of and for the years ended December 31, 2000, 1999, and 1998 has been
retroactively adjusted for this split as if it occurred on December 31, 1997.
FIRST BANKERS TRUST COMPANY, N.A. DIRECTORS & OFFICERS 39
BOARD OF DIRECTORS FIRST BANKERS TRUST COMPANY, N.A.
William D.Daniels, Chairman
Member
Harborstone Group, LLC.
Carl Adams, Jr.
President
Illinois Ayers Oil Company
Donald K. Gnuse, President & CEO
President & Chief Executive Officer
First Bankers Trust Company, N.A.
Fred E. Cory, D.D.S.
Dentist
Private Practice
Phyllis Hofmeister
Secretary
Hofmeister Farms
Merle Tieken
President
Gem City Electric
Dennis R. Williams
Consultant
Self-Employed
Mark E. Freiburg
Owner
Freiburg Insurance Agency
Arthur E. Greenbank
Executive Vice President &
Chief Operating Officer
First Bankers Trust Company, N.A.
OFFICERS
Steven E. Siebers, Secretary
Attorney
Scholz, Loos, Palmer, Siebers,
& Duesterhaus
Donald K. Gnuse
President
Chief Executive Officer
Arthur E. Greenbank
Executive Vice President
Chief Operating Officer
Joe J. Leenerts
Senior Vice President
Chief Financial Officer
Norman E. Rosson
Senior Vice President
Trust Officer
Lansing M. Tomlinson
Senior Vice President
Business Development
Naomi E. Austin
Branch Manager
Mendon
Karen L. Bell
Branch Manager
24th & Kochs Lane
Sherry A. Bryson
Assistant Vice President
Retail Banking
Peggy J. Junk
Vice President
Mortgage Lending
Patricia A. Brink
Cashier
Lois J. Knapp
Branch Manager
24th & State
Jeffery A. Conn
Consumer Lending Officer
Julie E. Kenning
Trust Operations Officer
Marvin E. Rabe
Vice President
Business Lending
Douglas R. Reed
Vice President
Business Lending
Timothy W. Corrigan
Assistant Director
Information Services
Jane A. Fischer
Director
Marketing
Steven R. Griggs
Vice President
Consumer Lending
Marcia L. Hardin
Consumer Loan Officer
Brian A. Ippensen
Trust Officer
Daniel L. Kroeger
Mortgage Lending Officer
Linda D. Reinold
Item Processing Manager
Tommy W. Lay
Vice President
Loan Department Manager
Jeanette L. Schinderling
Branch Manager
34th & Broadway
David J. McCaughey
Assistant Vice President
Mortgage Lending
Gretchen A. McGee
Vice President/Manager
Retail Banking
Kathleen D. McNay
Director
Human Resources
James R. Obert
Assistant Vice President
Business Lending
Linda J. Shultz
Trust Officer
Debrorah A. Staff
Trust Officer
Brent R. Voth
Director
Information Systems
Carmen A. Walch
Trust Officer
First Bankers Trustshares, Inc.
P.O. Box 3566
Quincy, Illinois 62305-3566
Phone: 217-228-8000
Internet: http://www.firstbankers.com
E-Mail: fbti@firstbankers.com
An Equal Opportunity Employer