Most area stocks enjoy '09 rebound; First Busey falls

Last year was a wild year for the market, with many stocks rebounding from the pounding they took in the general market free fall of late 2008 and early 2009.

Of 57 companies with a notable presence in East Central Illinois, 41 ended the year with a stock price higher than at the end of 2008. Sixteen companies found their shares trading for less.

For the companies whose stock appreciated, the gains were often significant. The Dow Jones industrial average was up nearly 23 percent for the year, and the Standard & Poor's 500 index rose 26 percent.

Nearly half the 57 companies with East Central Illinois ties had run-ups exceeding those percentages. Shrewd – or lucky – holders of stock in Bon-Ton Stores, for example, saw their investment appreciate eightfold over the year. That company, based in York, Pa., operates department stores including Bergner's.

Nexstar Broadcasting Group stockholders found their shares were worth nearly seven times as much at year's end as at the beginning. That company, based in Irving, Texas, operates TV stations including WCIA in Champaign.

But the performance turned in by bank stocks was disastrous. Many ended the year lower – in some cases, much lower – than a year ago.

First Busey led the list of losers, with its stock down nearly 79 percent for the year. Shares that sold for $18.24 at the end of 2008 sold for $3.89 by the end of 2009.

Centrue Financial's stock was down nearly 58 percent, and First Midwest Bancorp's stock dropped 46 percent. Regions Financial and Old National Bancorp each lost nearly a third of their stock price over the course of the year.

Here's a look at one of the year's top winners and one of the year's top losers:

How did First Busey go to worst of the worst?

Besides suffering the biggest share-price decline of the 57 area companies, First Busey was ranked fourth on the list of the nation's "10 worst small-cap stocks" based on share-price performance in 2009. Small-cap companies are those with a market capitalization of $100 million to $1 billion.

During 2009, the Champaign-based holding company of Busey Bank announced two large charges against goodwill, posted two massive quarterly losses and slashed its dividend by 60 percent.

It merged its Florida-based banking subsidiary with its Illinois-based banking subsidiary. It accepted Troubled Asset Relief Program money from the federal government and issued new stock to build up capital. And it tried to blot up red ink from Florida.

First Busey's share price, in the $20 range in the spring of 2008, dropped from $18 to $6 during seven weeks in early 2009. It settled in the $4.50 range in September, dipped close to $3 in mid-November and is now dancing around $4.

In November, First Busey President and CEO Van Dukeman said he expects no more "outsized provisions for loan losses."

But the consensus of analysts is that First Busey will report a loss of 6 cents a share for the fourth quarter of 2009, resulting in a full-year loss of $3.98 a share.

Analysts expect earnings to remain weak in 2010. They project a loss of a penny a share in the first quarter, followed by earnings per share of 2 cents, 4 cents and 4 cents in the remaining three quarters.

First Busey's troubles were primarily related to its Florida portfolio, Daniel Arnold, an analyst with Sandler O'Neill, said last week.

The bank operates in the Sarasota and Fort Myers areas – parts of Florida that have some of the nation's highest foreclosure rates, he said.

Busey overextended itself, creating a capital issue for itself, Arnold said. The company took "some very substantial write-downs" on its Florida portfolio and was forced to raise money at levels "dilutive" to shareholders.

"I think going forward, they've taken most of the pain," Arnold said. "I think the capital levels should be sufficient and they can return to profitability."

First Busey's officers did "a hard-core evaluation of their entire loan book," he said.

"I think you have a situation where they tried to recognize their problems up front and take some upfront costs on the losses," he said. "Going forward, they can limit the size of provisions (for loan losses) they can take."

But he predicted "it will continue to be a difficult banking environment through 2010 for them and the industry."

Arnold said he believes banks will continue to see growth in nonperforming assets and loan losses this year – but at a slower rate. He said many banks won't see any growth in their balance sheets this year.

"Most balance sheets will probably contract in the fourth quarter and early 2010," he said.

There's a lack of creditworthy borrowers right now – probably not enough to make up for all the borrowers whose loans are reaching maturity, he said.

Arnold said First Busey's portfolio in Illinois and Indiana is performing better than those of many of its peers. The big risk facing the company is if the Illinois and Indiana portfolios start to deteriorate, he said.

But much of First Busey's franchise in Illinois and Indiana is tied to education and health care, Arnold said.

"Those are probably the two industries you'd want to be tied to in a recession," he said.

Why did Nexstar shoot up so much in price?

Nexstar Broadcasting Group, whose 34 TV stations include WCIA in Champaign and WCFN in Springfield, started the year with stock selling for 51 cents a share. By year's end, the shares were trading for $4.05 – quite a comeback.

Or as Edward Atorino, media analyst and managing director for The Benchmark Company, put it, Nexstar moved from "maybe-survivor" to "survivor" last year.

The company had been put on bankruptcy watch early in the year, he said. Business was terrible at the outset, but Nexstar managed to stretch out its debt covenant and business improved by year's end.

"Nexstar was in more danger than most other companies because of the amount of debt they had, but they managed to work their way through," Atorino said. "They restructured their debt – it cost them money to restructure – but it paid off. Business is getting better."

Automobile advertising came back strongly in the fourth quarter of 2009, and "2010 is getting better very fast," he said.

Broadcasters can expect to enjoy a bump from political advertising in 2010 and will get revenues from cable companies for retransmission rights, he added.

Nexstar "deserves some credit for doing what it had to do to stay above water," Atorino said. "It managed to have staying power. It survived the worst environment in the history of broadcasting."

According to Yahoo Finance, analysts project an 11-cent-per-share loss for Nexstar in the fourth quarter, resulting in a 59-cent-per-share loss for full-year 2009. Next year, only a 1-cent-per-share loss is projected.

Last year, Nexstar's share price remained below $1 until August when the price shot up to the $2 range, then to the $3 range. It fell back in October, but resumed its climb through November and December.

Atorino said broadcasting is a business "that hardly ever didn't grow."

He predicted broadcasting will be around a long time, with broadcasters expected to get revenues from phone companies as TV becomes available over mobile phones.

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