CHAMPAIGN – As was forewarned a month ago, First Busey Corp. reported a massive net loss for the third quarter but indicated the worst may be over.

The parent company of Busey Bank on Tuesday reported a net loss of $283.7 million, or $7.92 per share, for the quarter that ended Sept. 30.

The loss was primarily due to a $208.2 million goodwill impairment charge, reflecting a reduction in the company's market value.

Excluding that charge, the net loss was $75.5 million, which was higher than the $62.5 million to $67.5 million projection First Busey made in mid-September.

First Busey Chairman Van Dukeman said the problems were concentrated primarily in the company's Florida and Indiana markets.

The Champaign-based bank holding company recorded a $140 million provision for loan losses in the third quarter, $15 million higher than initially anticipated.

"We believe our outsized provisioning for loan losses is behind us," Dukeman stated in the earnings report. "However, we still face challenges managing our existing non-performing loan portfolio."

Dukeman said the company would continue to make provisions for loan losses, but at rates significantly lower than in the last two quarters.

The bank also announced that on Oct. 30, it will pay a dividend of 4 cents per common share, down from the 8-cents-per-share dividend it had paid the last two quarters.

First Busey recently raised $82.8 million in capital by selling 20.7 million shares of common stock in a public offering. It also expects to close on a private placement of $39.3 million in convertible preferred stock.

"In light of the new common shares outstanding and our earnings performance, we reduced the dividend by half," Dukeman said.

First Busey's stock has been trading in the $4 to $5 range for most of the last month, down from the $6.50 range, where it traded before the September announcement that the company planned to raise capital by selling new issues of common and preferred stock.

Busey Bank has 34 banking centers in central Illinois, one in Indianapolis and eight in southwest Florida.

It's the out-of-state banking operations that have been giving the company fits. Nearly 21 percent of Busey's total loans in Florida and nearly 9 percent of its Indiana loans are "non-performing" – that is, interest payments are at least 90 days overdue, and the loans are looking doubtful.

In its core Illinois market, only 1.9 percent of Busey's total loans fall in that category.

Dukeman said the bank will likely make "a significant amount of loan sales" in order to reduce its holdings of non-performing loans.

"While we expect any loan sale will be at a discount to the face value of the loan, we must weigh this discount against the costs of carrying the loan through resolution," he said.

He said non-performing loans are costly to manage because they don't produce interest income and there are legal and other costs associated with the loans.

So far this year, First Busey has had a net loss of $298.6 million, or $8.34 per share. For the same nine months in 2008, the company had net income of $23.4 million.

Its year-to-date provision for loan losses has totaled $197.5 million, compared with $22.5 million in 2008.

First Busey's quarterly profits, losses

2008

1Q: $10 million

2Q: $4.6 million

3Q: $8.8 million

4Q: -$61.4 million

2009

1Q: $5.5 million

2Q: -$20.5 million

3Q: -$283.7 million

Source: First Busey filings

KEY EVENTS

August 2008: Florida bank slams earnings; Chairman Van Dukeman predicts Florida will eventually pay off.

October 2008: Announces plans to eventually combine Florida, Illinois banks.

March 2009: Sells $100 million of preferred stock to Treasury Department; writes off all goodwill in Florida bank.

April 2009: Cuts common-stock dividends by 60 percent to raise capital.

July 2009: Management team will spend next 24-36 months determining whether Florida "makes sense."

Sept. 21, 2009: Plan to raise more than $100 million in capital, forecasts third-quarter net loss of $62.5 million to $67.5 million.