URBANA – Nearly one-quarter of First Busey Corp.'s loans are to borrowers in southwest Florida, the Urbana-based bank holding company disclosed in its quarterly report to the Securities & Exchange Commission last week.
Altogether, the company has $756.2 million in loans in southwest Florida, or 23.9 percent of its total loan portfolio of $3.12 billion, according to the report filed last Friday.
Although the company's Florida banking subsidiary is much smaller than its Illinois banking subsidiary, the percentage of loans in Florida is much greater because both banks make loans in the Florida market.
The Florida subsidiary, Busey Bank, N.A., had $378.9 million in loans, all of them in Florida, as of June 30.
Meanwhile, the Illinois subsidiary, Champaign-based Busey Bank, had almost as many loans in Florida – $377.3 million, courtesy of its loan production office in southwest Florida.
In the quarterly report, First Busey said southwest Florida has been affected by the economic downturn "as severely as any location in the United States," with commercial and residential real estate values deteriorating by double-digit percentages the past two years.
Some say the worst of the downturn in southwest Florida has occurred, the company stated.
"However, this does not mean southwest Florida has turned a corner or that our problems are over in this market," it added.
First Busey said it believes southwest Florida will be strong again, but it will take a number of years.
"Southwest Florida remains in our plans for the future," the company said.
First Busey CEO Van Dukeman is scheduled to discuss the state of the banking industry at a company-sponsored forum Friday in Urbana.
For the six months that ended June 30, 2008, First Busey reported net income of $14.6 million, down from $15.6 million for the same period in 2007.
That drop could largely be attributed to its Florida bank, which showed a net loss of $3.05 million during those six months. For the same period a year ago, the Florida bank had net income of $642,000.
Most of the loss came in the three months that ended June 30. During that time, the Florida bank posted a $2 million loss, and the holding company reported net income of $4.6 million, down from $7.86 million for the same three months in 2007.
As of June 30, First Busey had charged off $16 million of nonaccrual loans that seemed unlikely to be paid off by borrowers.
Of those, $5.48 million were charged off by the Florida bank, and $10.52 million were charged off by the Illinois bank. Of those associated with the Illinois bank, $5 million were loans in the Florida market and $5.52 million were in the Indiana and Illinois markets.
After those loans were charged off, the company still had $53.2 million in nonaccrual loans as of June 30. Of those, $14.1 million were made by the Florida bank, while $39 million were made by the Illinois bank. Three months earlier, the Illinois bank had only $13.7 million in nonaccrual loans.
The Illinois bank's provision for loan losses jumped from $700,000 in the first quarter of 2008 to $8.5 million in the second quarter of 2008. Meanwhile, the Florida bank's provision for loan losses rose from $1.5 million to $3.8 million.
"Much of the increased provision pertained to both banks' loans in the southwest Florida market," the company said.
"First Busey may need to provide for additional loan losses in the future as management continues to identify potential problem loans and gain further information concerning existing problem loans, particularly in the southwest Florida market," the report said.
"Potential problem loans were at $85.2 million as of June 30, 2008, compared to $62.6 million at March 31, 2008, and $26.3 million at Dec. 31, 2007," the company said, adding that the increase was primarily related to the southwest Florida market.