FIRST BUSEY CORP /NV/ - 10-K Annual Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2000

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-15950

FIRST BUSEY CORPORATION
(Exact name of registrant as specified in its Charter)

Nevada 37-1078406
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)

201 West Main Street
Urbana, Illinois 61801
------------------------------- -------------------
(Address of principal (Zip Code)
executive offices)

(217) 365-4513
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, without par value

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 Regulation S-K is not contained herein, and will not be contained to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

As of March 2, 2001, the aggregate market value of the Common Stock held by
non-affiliates was $144,451,394. The market value of the Common Stock is based
on the closing price for such stock as reported on the Nasdaq National Market on
that date. Affiliates include all directors, executive officers and beneficial
holders owning 5% or more of the shares.

Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date.

Class Outstanding at March 2, 2001
----- ----------------------------

Common Stock, without par value 13,565,034

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement dated March 16, 2001 for First
Busey Corporation's Annual Meeting of Stockholders to be held April 16, 2001,
(the "2001 Proxy Statement") are incorporated by reference into Part III.

(This page intentionally left blank)

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FIRST BUSEY CORPORATION
Form 10-K Annual Report

Table of Contents

PART 1

Item 1 Business 4
Item 2 Properties 12
Item 3 Legal Proceedings 13
Item 4 Submission of Matters to a Vote of Security Holders 13

PART II

Item 5 Market for Registrant's Common Equity and Related Stockholder Matters 14
Item 6 Selected Financial Data 15
Item 7 Management's Discussion and Analysis of Financial Condition and Results of
Operations 16
Item 7A Quantitative and Qualitative Disclosures About Market Risk . 30
Item 8 Financial Statements and Supplementary Data 31
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure 31

PART III

Item 10 Directors and Executive Officers of the Registrant 31
Item 11 Executive Compensation 31
Item 12 Security Ownership of Certain Beneficial Owners and Management 31
Item 13 Certain Relationships and Related Transactions . 31

PART IV

Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K 32

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PART I

ITEM 1. BUSINESS

INTRODUCTION
First Busey Corporation ("First Busey"), a Nevada corporation, is a
financial holding company located in Urbana, Illinois. As of December 31, 2000,
First Busey had ten wholly owned, directly and indirectly, subsidiaries: one
community bank, one savings and loan, a thrift holding company, a non-bank
holding company, a trust company, a securities broker-dealer, an ATM company, an
insurance company, a real estate company, and a travel agency. First Busey is
engaged primarily in commercial, retail and correspondent banking and provides
trust services, insurance services, and travel services. Based on assets of
$1.36 billion as of December 31, 2000, First Busey, with deposits of $1.15
billion and stockholders' equity of $92 million, is one of the largest financial
institutions headquartered in east central Illinois. First Busey's largest
subsidiary, Busey Bank, with continuous operations since 1868, is one of the
oldest banks chartered in Illinois.

First Busey's strategic plan is to provide a full range of financial
services including commercial, retail and correspondent banking services through
its banking subsidiaries, with emphasis on commercial and retail services. The
strategic plan also emphasizes the operation of its banking centers
autonomously, allowing them to tailor their service and products to the
particular markets they serve while consolidating back-room operations. First
Busey intends to continue its expansion and growth in the three counties it
currently serves in Illinois, Champaign, McLean and Ford County, its banking
center in Indianapolis, Indiana, and its Loan Production Offices in Ft. Myers
and Naples, Florida. In addition to the Florida loan production offices, Busey
opened a 24,000 square foot full-service facility in Fort Myers, Florida in
October, 2000, as a branch of Busey Bank fsb. First Busey engages in
exploratory discussions regarding potential acquisitions from time to time;
however, First Busey does not currently have any commitments to acquire or merge
with any financial institution.

First Busey Corporation's operations are conducted primarily through its
lead bank, Busey Bank (twenty-two locations), Busey Bank fsb (four locations),
the trust company and the securities broker-dealer subsidiary. First Busey
provides its subsidiaries with both financial and managerial support. Each
subsidiary operates under the direction of its own Board of Directors.

BUSEY BANK
Busey Bank was established on January 13, 1868 and is a state-chartered
bank. As of December 31, 2000, Busey Bank had total assets of $1.05 billion,
representing 77% of First Busey's assets, and had total revenues of $86 million,
representing 77% of First Busey's revenues. Busey Bank provides a full range of
banking services including commercial and retail banking products. The services
available to its commercial and retail customers include a broad selection of
depository and lending activities. In the commercial lending area, Busey Bank
is designated a Small Business Administration Preferred Lender authorized to
fund government guaranteed loans on an expedited basis and is also an approved
lender under the Federal National Mortgage Association Program, permitting
expedited origination of single- and multi-family mortgage loans. Busey Bank's
other commercial lending activities consist primarily of secured loans to
borrowers in many different industries. Busey Bank's retail services include
consumer lending, numerous types of deposit accounts and certain specialized
programs such as the Fortune Five-O Program for the mature market.

Management's philosophy continues to be to develop programs tailored to
specific market segments of its customer base with particular emphasis on retail
services. The Busey organization emphasizes establishing strong relationships
with its customers. Busey Bank has adopted a strategy to increase other income
by emphasizing fee-based services, including transaction accounts, full service
brokerage, mortgage origination and other loan services generating fees.

Guidelines for Busey Bank for various collateral advance ratios are set
forth in the Loan Review Grading System under "Collateral Position." Loan

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Officers are required to use the grading system in determining an acceptable
collateral position on any given credit request. Collateral coverage
percentages for various types of credit are set forth in the following table:

Collateral Type Coverage Ratio
--------------------- ---------------

Commercial Loans: Real Estate 125%
Accounts Receivable 125%
Inventory & Equipment 200%

Consumer Real Estate Loans: Real Estate 125%

Installment Loans: Cash or Equivalent 110%
Vehicle 140%
Mobile Homes 150%
Other Collateral 160%

All commercial loans must be supported by a completed and signed financial
statement, which should include a minimum of a balance sheet and income
statement. Loan Officers are encouraged to require borrowers to provide annual
statements prepared by a CPA firm. Where possible, an audit should be obtained,
however, a review or compilation is acceptable. The Credit Analysis Department
tracks delinquent financial statements and provides weekly reports to the
Commercial Loan Department. In addition, the Senior Loan Committee receives a
monthly report detailing delinquent financial statements for customers with
large loan balances. A borrower's financial position including cash flow is
monitored at least annually through an annual review process.

BUSEY BANK FSB
First Busey Corporation acquired First Federal Savings & Loan Association
of Bloomington on October 29, 1999, when it acquired the outstanding shares of
First Federal's parent Eagle BancGroup, Inc. This transaction was accounted for
as a purchase and resulted in intangible assets totaling $8,903,000. Of this,
$2,114,000 was allocated to core deposit intangible which will be amortized over
7 years at the rate of approximately $302,000 per year. The remaining
$6,789,000 was recorded as goodwill and will be amortized over 20 years at the
rate of approximately $340,000 per year. First Federal was established in 1919
and is a federally chartered capital stock savings association regulated by the
Office of Thrift Supervision (OTS). In June, 2000, First Federal changed its
name to Busey Bank fsb. As of December 31, 2000, Busey Bank fsb had total
assets of $298 million, representing 22% of First Busey's assets. Busey Bank
fsb offers a wide range of retail deposit products and invests those deposits in
one-to-four family residential mortgage loans, commercial real estate loans,
commercial business loans and automobile and other consumer loans.

In February, 2001, the Board of Directors of Busey Bank fsb and the Board
of Directors of Busey Bank agreed to merge Busey Bank fsb into Busey Bank. The
merger is scheduled to be completed in the second quarter of 2001.

FIRST BUSEY TRUST AND INVESTMENT COMPANY
First Busey Trust and Investment Company began operation on January 1, 1987
as a successor to the combined trust departments of Busey Bank and Champaign
County Bank & Trust Co., which began trust operations in 1967 and 1947,
respectively. First Busey Trust operates as the asset management subsidiary of
the organization and is exclusively dedicated to providing a full range of trust
and investment management services. In addition to trust and investment
management services, First Busey Trust offers such ancillary services as farm
management, estate and retirement planning, tax preparation, custody services,
and philanthropic advisory services.

First Busey plans to continue to expand its trust activities by increasing
assets under control, currently more than $1 billion, and by developing new
financial services. For the year ending December 31, 2000, First Busey Trust &
Investment Company generated net income of $1.5 million representing 10.4% of
First Busey's earnings.

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OTHER SUBSIDIARIES
First Busey Resources, Inc., owns and manages Busey Plaza, a 90,000 square
foot building which is fully leased to unaffiliated tenants.

First Busey Corporation formed Busey Business Bank on January 12, 1998.
This was a de novo bank established in Indianapolis, Indiana. Upon the
establishment of this chartered bank, Busey Bank closed its Loan Production
Office in Indianapolis. In October of 1998, Busey Business Bank was merged into
Busey Bank and continues to operate as a full-service banking center.

Busey Bank established a full service securities broker-dealer subsidiary,
First Busey Securities, Inc., on April 1, 1991.Through the offering of full
service brokerage, along with various insurance and annuity products, new
sources of fee income are available to First Busey Corporation.

In October of 1997, Busey Bank established an insurance subsidiary, Busey
Insurance Services, Inc., to further enhance the services available to its
customers. This subsidiary focuses primarily on meeting the long-term care and
life insurance needs of customers in the Champaign and McLean County markets.
During 1997, Busey Bank established a subsidiary, BAT, Inc, which owns and
operates automated teller machines. In January of 1998, Busey Bank acquired
Busey Carter Travel, a travel agency serving primarily Champaign County. This
acquisition was also completed to enhance the services available to the
customers of Busey Bank. In January 1999, this subsidiary changed its name to
Busey Travel, Inc.

COMPETITION
First Busey faces intense competition in all phases of its banking business
from other banks and financial institutions. First Busey's subsidiary banks
compete for deposits with a large number of depository institutions including
commercial banks, savings and loan associations, credit unions, money market
funds and other financial institutions and financial intermediaries serving
Champaign County, McLean County, Ford County, Illinois, Hamilton County,
Indiana, and Lee County, Florida. Principal competitive factors with respect to
deposits include interest rates paid on deposits, customer service, convenience
and location.

First Busey's subsidiary banks compete for loans with other banks
headquartered in Illinois and Indiana, with loan production offices of large
money center banks headquartered in other states, as well as with savings and
loan associations, credit unions, finance companies, mortgage bankers, leasing
companies and other institutions. Competitive factors with respect to loans
include interest rates charged, customer service and responsiveness in tailoring
financial products to the needs of customers. First Busey's subsidiary banks
compete for loans primarily by designing their products for and directing their
marketing efforts to businesses in the markets they serve which are locally
owned, well-capitalized and well-managed.

Many of the entities that compete with First Busey's subsidiary banks are
substantially larger in size than First Busey and First Busey's subsidiary
banks, and many non-bank financial intermediaries are not subject to the
regulatory restrictions applicable to First Busey's bank subsidiaries. First
Busey and its subsidiary banks have experienced an increase in the level of
competition as well as the number of competitors in recent years. See
"Supervision and Regulation."

EMPLOYEES
First Busey and its subsidiaries employed 484 employees (full-time equivalent)
on December 31, 2000.Management considers its relationship with its employees to
be good

SUPERVISION AND REGULATION

GENERAL
Financial institutions and their holding companies are extensively
regulated under federal and state laws. As a result, the business, financial
condition and prospects of First Busey and its subsidiary banks can be

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materially affected not only by management decisions and general economic
conditions, but also by applicable statutes and regulations and other regulatory
pronouncements and policies promulgated by regulatory agencies with jurisdiction
over First Busey and its subsidiary banks, such as the Federal Reserve Board
("FRB"), Federal Deposit Insurance Corporation ("FDIC") and the State of
Illinois Office of Banks and Real Estate, and the effect of such statutes,
regulations and other pronouncements and policies can be significant, cannot be
predicted with a high degree of certainty and can change over time.
Furthermore, such statutes, regulations and other pronouncements and policies
are intended to protect the depositors and the FDIC's deposit insurance funds,
not to protect stockholders.

Bank holding companies and banks are subject to enforcement actions by
their regulators for regulatory violations. In addition to compliance with
statutory and regulatory limitations and requirements concerning financial and
operating matters, regulated financial institutions such as First Busey and its
subsidiary banks must file periodic and other reports and information with their
regulators and are subject to examination by each of their regulators.

The statutory requirements applicable to and regulatory supervision of
financial holding companies and banks have increased significantly and have
undergone substantial change in recent years. To a great extent, these changes
are embodied in the Financial Institutions Reform, Recovery and Enforcement Act
("FIRREA"), enacted in August 1989, the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA"), enacted in December 1991, and the
regulations promulgated under FIRREA and FDICIA.

The following discussion and other references to and descriptions of the
regulation of financial institutions contained herein constitute brief summaries
thereof. This discussion is not intended to constitute and does not purport to
be a complete statement of all legal restrictions and requirements applicable to
First Busey and its subsidiary bank and all such descriptions are qualified in
their entirety by reference to applicable statutes, regulations and other
regulatory pronouncements.

INTERSTATE BANKING AND BRANCHING LEGISLATION
On September 29, 1994, the Riegle-Neal Interstate Banking and Efficiency
Act of 1994 (the "Interstate Banking Act") was enacted. Under the Interstate
Banking Act, adequately capitalized and adequately managed bank holding
companies will be allowed to acquire banks across state lines subject to certain
limitations. In addition, under the Interstate Banking Act, since June 1, 1997,
banks have been permitted, under some circumstances, to merge with one another
across state lines and thereby create a main bank with branches in separate
states. After establishing branches in a state through an interstate merger
transaction, a bank may establish and acquire additional branches at any
location in the state where any bank involved in the interstate merger could
have established or acquired branches under applicable federal and state law.

Under the Interstate Banking Act, states could adopt legislation permitting
interstate mergers before June 1, 1997. Alternatively, states could adopt
legislation before June 1, 1997, subject to certain conditions, opting out of
interstate branching. Illinois adopted legislation, effective September 29,
1995, permitting interstate mergers beginning on June 1, 1997. It is
anticipated that this interstate merger and branching ability will increase
competition and further consolidate the financial institutions industry.

REGULATION OF BANK HOLDING COMPANIES AND THEIR NON-BANK SUBSIDIARIES
First Busey is a registered financial holding company within the meaning of
the Bank Holding Company Act of 1956, as amended ("BHCA"). As such, First Busey
is subject to regulation, supervision and examination by the FRB. First Busey
is also subject to the limitations and requirements of the Illinois Bank Holding
Company Act ("IBHCA"). These limitations and requirements, however, are no more
restrictive in most instances than those imposed by the BHCA and the FRB. The
business and affairs of First Busey are regulated in a variety of ways,
including limitations on acquiring control of other banks and bank holding
companies, limitations on activities and investments, limitations on interstate
acquisitions, regulatory capital requirements and limitations on payment of
dividends. In addition, it is the FRB's policy that a bank holding company is
expected to act as a source of financial strength to banks that it owns or
controls and, as a result, the FRB could require First Busey to commit resources

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to support its subsidiary bank in circumstances in which First Busey might not
do so absent the FRB's policy.

First Busey Trust & Investment Co. is subject to regulation and examination
by the State of Illinois Office of Banks and Real Estate and the FRB. The
federal and state laws generally applicable to a trust company subsidiary of a
financial holding company regulate, among other things, the scope of its
business, investments and other activities. Busey Insurance Services, Inc. is
regulated by the Illinois Department of Insurance. First Busey Securities, Inc.
is regulated by the National Association of Securities Dealers ("NASD").

ACQUISITION OF BANKS AND BANK HOLDING COMPANIES
The BHCA generally prohibits a bank holding company from (1) acquiring,
directly or indirectly, more than 5% of the outstanding shares of any class of
voting securities of a bank or bank holding company, (2) acquiring control of a
bank or another bank holding company, (3) acquiring all or substantially all the
assets of a bank, or (4) merging or consolidating with another bank holding
company without first obtaining FRB approval. In considering an application
with respect to any such transaction, the FRB is required to consider a variety
of factors, including the potential anti-competitive effects of the transaction,
the financial condition and future prospects of the combining and resulting
institutions, the managerial resources of the resulting institution, the
convenience and needs of the communities the combined organization would serve,
the record of performance of each combining organization under the Community
Reinvestment Act and the Equal Credit Opportunity Act, and the prospective
availability to the FRB of information appropriate to determine ongoing
regulatory compliance with applicable banking laws.

In addition, both the federal Change in Bank Control Act and the Illinois
Banking Act ("IBA") impose limitations on the ability of one or more individuals
or other entities to acquire control of First Busey or its subsidiary banks.

The BHCA generally imposes certain limitations on extensions of credit and
other transactions by and between banks that are members of the Federal Reserve
System and other banks and non-bank companies in the same holding company.
Under the BHCA and the FRB's regulations, a bank holding company and its
subsidiaries are prohibited from engaging in certain tie-in arrangements in
connection with any extension of credit, lease or sale of property or furnishing
of services.

The BHCA prohibits a bank holding company from acquiring control of a bank
whose principal office is located outside of the state in which its principal
place of business is located unless specifically authorized by applicable state
law. The IBHCA permits Illinois bank holding companies to acquire control of
banks in any state and permits bank holding companies whose principal place of
business is in another state to acquire control of Illinois banks or bank
holding companies if that state affords reciprocal rights to Illinois bank
holding companies and certain other requirements are met.

The restrictions described above represent limitations on expansion by
First Busey and its subsidiary banks, the acquisition of control of First Busey
by another company and the disposition by First Busey of all or a portion of the
stock of its subsidiary banks or by its subsidiary banks of all or a substantial
portion of its assets.

PERMITTED NON-BANKING ACTIVITIES

On November 12, 1999, President Clinton signed into law the Gramm-Leach-
Bliley Act (the "GLB Act"), which allows financial holding companies to engage
in a wider range of non-banking activities. A bank holding company which elects
to become a financial holding company under this act would be allowed to engage
in any activity the Federal Reserve Board, in consultation with the Secretary of
the Treasury, determines by regulation or order to be financial in nature,
incidental to any such financial activity or complementary to any such financial
activity and does not present a substantial risk to the safety or soundness of
depository institutions or the financial system in general. The Act does not
allow banks or their affiliates to engage in commercial activities that are not

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financial in nature. A bank holding company may elect to be treated as a
financial holding company only if all depository institution subsidiaries of the
holding company are well-capitalized, well-managed, and have at least a
satisfactory rating under the Community Reinvestment Act. First Busey
Corporation became a financial holding company on May 11, 2000.

ALLOWANCE FOR LOAN LOSS
First Busey Corporation maintains an allowance for loan losses to absorb
losses inherent in the loan portfolio. The allowance is based on management's
estimated range of those losses. Actual loan losses may vary significantly from
this estimate. The methodology and assumptions used in calculating the
allowance are continually reviewed as to their appropriateness given recent loss
experience and other factors that influence the estimation process.

First Busey Corporation's loan loss allowance is categorized into five
groups of loans: real estate mortgages, personal loans, commercial loans,
sensitive assets, and dealer paper. The real estate mortgages are further
stratified into single-family mortgage loans and commercial mortgages which
include multifamily loans. The commercial loans are stratified into the three
geographic regions in which the banks generate loans: central Illinois,
Florida, and Indianapolis. Loans which are past due 30-89 days and those past
due more than 90 days are segregated out from each loan category and then the
remaining balances are stratified based on credit underwriting grade. Balances
for each subgrouping of loans are multiplied by individual risk factors to
determine the minimum reserve allocation for each sub-category. The risk
factors are based on historical losses, credit quality of the portfolio, and
current economic conditions and are updated quarterly. The total of the
calculated minimum reserve allocations is compared to the reserve balance at the
end of each quarter. The reserve balance is then adjusted to meet the
calculated minimum reserve. If the reserve balance is greater than the
calculated minimum reserve, no addition to the loan loss provision is made
during the period.

The Corporation evaluates sensitive assets individually. Sensitive assets
are defined as nonaccrual loans, loans on the Bank's watch loan report, and
other loans identified as having more than reasonable potential for loss. The
remaining loan categories listed above are evaluated as groups.

In determining the risk factors used to calculate the minimum reserve
allocation for each loan category, the Corporation considers guidelines issued
by federal and state regulatory agencies, historical loss experience for each
category, current economic conditions, the level of nonaccrual loans, and
current delinquency reports for each loan class.

CAPITAL REQUIREMENTS
Regulatory capital requirements applicable to all regulated financial
institutions, including bank holding companies and banks, have increased
significantly in recent years and further increases are possible in future
periods. The FRB has adopted risk-based capital standards for bank holding
companies. The articulated objectives of Congress and the FRB in establishing a
risk-based method of measuring capital adequacy are (i) to make regulatory
capital requirements applicable to bank holding companies more sensitive to
differences in risk profiles among bank holding companies, (ii) to factor off-
balance sheet liabilities into the assessment of capital adequacy, (iii) to
reduce disincentives for bank holding companies to hold liquid, low risk assets
and (iv) to achieve greater consistency in the evaluation of capital adequacy of
major banking organizations throughout the world by conforming to the framework
developed jointly by supervisory authorities from countries that are parties to
the so-called "Basle Accord" adopted by such supervisory authorities in July,
1988.

The FRB requires bank holding companies to maintain a minimum ratio of
risk-weighted capital to total risk-adjusted assets. Banking organizations,
however, generally are expected to operate well above the minimum risk-based
ratios. Risk-adjusted assets include a "credit equivalent amount" of
off-balance sheet items, determined in accordance with conversion formulae set
forth in the FRB's regulations. Each asset and off-balance sheet item, after
certain adjustments, is assigned to one of four risk-weighting categories, 0%,
20%, 50% or 100%, and the risk-adjusted values are then added together to
determine risk-weighted assets.

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A bank holding company must meet two risk-based capital standards, a "core"
or "Tier 1" capital requirement and a total capital requirement. The current
regulations require that a bank holding company maintain Tier 1 capital equal to
4% of risk-adjusted assets and total capital equal to 8% of risk-adjusted
assets. Tier 1 capital must represent at least 50% of total capital and may
consist of those items defined in applicable regulations as core capital
elements. Core capital elements include common stockholders' equity; qualifying
noncumulative, nonredeemable perpetual preferred stock; qualifying (i.e., up to
25% of total Tier 1 capital) cumulative, nonredeemable perpetual preferred
stock; and minority interests in the equity accounts of consolidated
subsidiaries. Core capital excludes goodwill and other intangible assets
required to be deducted in accordance with applicable regulations.

Total capital represents the sum of Tier 1 capital plus "Tier 2" capital,
less certain deductions. Tier 2 or "supplementary" capital consists of
allowances for loan and lease losses; perpetual preferred stock (to the extent
not included in Tier 1 capital); hybrid capital instruments; perpetual debt;
mandatory convertible debt securities; term subordinated debt; and intermediate
term preferred stock, in each case subject to applicable regulatory limitations.
The maximum amount of Tier 2 capital that may be included in an organization's
qualifying total capital cannot exceed 100% of Tier 1 capital. In determining
total capital, a bank holding company must deduct from the sum of Tier 1 and
Tier 2 capital its investments in unconsolidated subsidiaries; reciprocal
holdings of certain securities of banking organizations; and other deductions
required by regulation or determined on a case-by-case basis by the appropriate
supervisory authority.

Another capital measure, the Tier 1 leverage ratio, is defined as Tier 1
capital divided by average total assets (net of allowance for losses and
goodwill). The minimum leverage ratio is 3% for banking organizations that do
not anticipate significant growth and that have well-diversified risk (including
no undue interest rate risk), excellent asset quality, high liquidity and good
earnings. Other banking organizations are expected to have ratios of at least
4% to 5%, depending upon their particular condition and growth plans. Higher
capital ratios could be required if warranted by the particular circumstances or
risk profile of a given banking organization. The FRB has not advised First
Busey of any specific minimum Tier 1leverage ratio applicable to it.

As of December 31, 2000, First Busey's Tier 1 and total risk-based capital
ratios were 7.77% and 9.43%, respectively, and its Tier 1 leverage ratio was
5.71%.

The failure of a bank holding company to meet its risk-weighted capital
ratios may result in supervisory action, as well as inability to obtain approval
of any regulatory applications and, potentially, increased frequency of
examination. The nature and intensity of the supervisory action will depend
upon the level of noncompliance. Under the IBHCA, no bank holding company may
acquire control of a bank if, at the time it applies for approval or at the time
the transaction is consummated, its ratio of total capital to total assets, as
determined in accordance with then applicable FRB regulations, is or will be
less than 7%.

Risk-based capital ratios focus principally on broad categories of credit
risk and do not incorporate factors that can affect the Company's financial
condition, such as overall interest rate risk exposure, liquidity, funding and
market risks, the quality and level of earnings, investment or loan portfolio
concentrations, the quality of loans and investments, the effectiveness of loan
and investment policies and management's ability to monitor and control
financial and operating risks. For this reason, the overall financial health of
First Busey and its subsidiary banks and the assessment of First Busey and its
subsidiary banks by various regulatory agencies may differ from conclusions that
might be drawn solely from the level of First Busey or its subsidiary banks'
risk-based capital ratios.

During 1994, the federal banking regulators announced a joint decision not
to modify risk-based capital and leverage requirements for regulatory capital to
reflect the impact of unrealized gains and losses for securities classified as
"available for sale." This decision was made in response to the Financial
Accounting Standards Board's issuance of Statement No. 115 "Accounting for
Certain Investments in Debt and Equity Securities."

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Regulation of Banks

Busey Bank is a banking corporation organized under the IBA. As such, it
is subject to regulation, supervision and examination by the State of Illinois
Office of Banks and Real Estate. The deposit accounts of the bank subsidiary
are insured up to applicable limits by the FDIC's Bank Insurance Fund (the
"BIF"). Thus, Busey Bank is also subject to regulation, supervision and
examination by the FDIC. In certain instances, the statutes administered by and
regulations promulgated by certain of these agencies are more stringent than
those of other agencies with jurisdiction. In these instances, Busey Bank must
comply with the more stringent restrictions, prohibitions or requirements.

Busey Bank fsb is a federally chartered capital stock savings association
regulated by the Office of Thrift Supervision (OTS). Its deposits are insured
up to applicable limits by the FDIC's Savings Association Insurance Fund (the
"SAIF"). This regulatory framework sets parameters for Busey Bank fsb's
activities and operations and grants the OTS extensive discretion with regard to
its supervisory and enforcement powers and examination policies. Busey Bank fsb
files periodic reports with the OTS concerning its activities and financial
condition, must obtain OTS approval prior to entering into certain transactions
or initiating new activities, and is subject to periodic examination by the OTS
to evaluate the institution's compliance with various regulatory requirements.

The business and affairs of Busey Bank and Busey Bank fsb are regulated in
a variety of ways. Regulations apply to, among other things, insurance of
deposit accounts, capital ratios, payment of dividends, liquidity requirements,
the nature and amount of the investments that the bank subsidiary may make,
transactions with affiliates, community and consumer lending laws, internal
policies and controls, reporting by and examination of the bank subsidiaries and
changes in control of the bank subsidiaries.

DIVIDENDS

The FRB has issued a policy statement on the payment of cash dividends by
bank holding companies. In the policy statement, the FRB expressed its view that
a bank holding company experiencing weak earnings should not pay cash dividends
which exceed its net income or which could only be funded in ways that would
weaken its financial health, such as by borrowing. The FRB also may impose
limitations on the payment of dividends as a condition to its approval of
certain applications, including applications for approval of mergers and
acquisitions. First Busey uses funds derived primarily from the payment of
dividends by its largest banking subsidiary for, among other purposes, the
payment of dividends to First Busey's stockholders. Under provisions of the
IBA, dividends may not be declared by banking subsidiaries except out of the
bank's net profit (as defined), and unless the bank has transferred to surplus
at least one-tenth of its net profits since the date of the declaration of the
last preceding dividend, until the amount of its surplus is at least equal to
its capital. Presently, the surplus of Busey Bank exceeds its capital.

All dividends paid by First Busey's banking subsidiaries are restricted by
capital adequacy requirements imposed by federal regulators regarding the
maintenance of the risk-weighted asset ratios and the leverage ratio (as defined
by regulatory agencies). At December 31, 2000, Busey Bank had $28,492,000 and
Busey Bank fsb had $1,340,000 available for the payment of dividends to First
Busey. Sound banking practices require the maintenance of adequate levels of
capital. State and federal regulatory authorities have adopted standards for
the maintenance of capital by banks and savings associations and adherence to
such standards further limits the ability of banks to pay dividends.

First Busey Trust & Investment Co., as an Illinois corporation, is
permitted to make distributions to its stockholder as authorized by its Board of
Directors, except that as long as it continues in a fiduciary business, it may
not withdraw for purposes of payment of dividends or otherwise any portion of
its capital account except with the approval of the State of Illinois Office of
Banks and Real Estate.

11

MONETARY POLICY AND ECONOMIC CONDITION
The earnings of commercial banks and bank holding companies are affected
not only by general economic conditions but also by the policies of various
governmental regulatory authorities. In particular, the FRB influences
conditions in the money and capital markets, which affect interest rates and the
growth in bank credit and deposits. FRB monetary policies have had a
significant effect on the operating results of commercial banks in the past and
this is expected to continue in the future. The general effect, if any, of such
policies upon the future business and earnings of First Busey and its subsidiary
banks cannot be predicted.

ITEM 2. PROPERTIES

As of March 1, 2001, First Busey and its subsidiaries conduct business in
twenty-four locations. First Busey and Busey Bank have their headquarters at
the Busey Bank Building, a 40,000 square foot building owned by Busey Bank. In
addition to the Busey Bank Building, First Busey and/or its subsidiaries own the
land and building for fifteen locations, own the building and lease the land for
two locations and lease seven locations. The Busey Plaza Building, the Naples
loan production office, one of the branch offices in Bloomington, one of the
branch offices in Urbana, and branch offices in Indianapolis, Thomasboro, and
Lexington are the only facilities not fully occupied by First Busey or its
subsidiaries. The Busey Plaza Building, a five-story 90,000 square foot office
building, is leased to unaffiliated tenants.

12

ITEM 3. LEGAL PROCEEDINGS

There are no material pending legal proceedings, other than routine
litigation incidental to the business, to which First Busey or its subsidiaries
are a part of or which any of their property is the subject.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

EXECUTIVE OFFICERS OF THE REGISTRANT

Name Office (year first elected as an officer) Age
- -------------------- ------------------------------------------------ ---

Douglas C. Mills Chairman of the Board, President and Chief 60
Executive Officer of First Busey (1971)

Edwin A. Scharlau II Chairman of the Board of First Busey Trust & 56
Investment Co. and First Busey Securities, Inc.
(1967)

P. David Kuhl President and Chief Executive 51
Officer of Busey Bank (1979)

Barbara J. Kuhl President and Chief Operating 50
Officer of First Busey (1974)

All executive officers except for Barbara J. Kuhl also currently serve on
First Busey's Board of Directors.

13

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Effective October 1, 1998, First Busey Common Stock began trading on the
Nasdaq National Market under the symbol BUSE. Prior to that the stock was
traded and quoted in the National Quotation Bureau's "Pink Sheets" (1988-1997)
and on the OTC Bulletin Board (1997-1998). Although a limited trading market
for shares of First Busey Common Stock has developed recently, there can be no
assurance that it will continue.

The following table presents for the periods indicated the high and low
closing price for First Busey common stock as provided by the Corporation's
market maker Stephens, Inc. and reported on the Nasdaq National Market.

2000 1999
------------------- -------------------
Market Prices of Common Stock High Low High Low
- ----------------------------- -------- -------- -------- --------

First Quarter $23.0000 $18.5000 $19.5000 $18.0000
Second Quarter $21.4375 $16.3750 $26.7500 $18.5000
Third Quarter $22.5000 $16.7500 $26.5000 $19.5000
Fourth Quarter $20.4375 $16.7500 $24.3750 $21.0000

During 2000 and 1999, First Busey, declared cash dividends per share of common
stock as follows:

2000 COMMON STOCK
---- ------------

January $ .1200
April $ .1200
July $ .1200
October $ .1200

1999
----

January $ .1100
April $ .1100
July $ .1100
October $ .1100

A three-for-two stock split on both Class A and Class B Common Stock
occurred on May 7, 1996. All issued and outstanding shares of Class B Common
Stock were converted to Class A Common Stock on December 31, 1997. A three-for-
two stock split on both Class A and Class B Common Stock occurred on May 7,
1996. In April, 1998, shareholders approved Restated Articles of Incorporation
which authorized just one class of stock to be referred to only as "Common
Stock," thus eliminating the "Class A" designation. A two-for-one stock split
on Common Stock occurred on August 3, 1998.

For a discussion of restrictions on dividends, please see the discussion of
dividend restrictions under Item 1, Business, Dividends on page 11.

As of March 2, 2001 there were approximately 932 holders of First Busey
Common Stock.

14

ITEM 6. SELECTED FINANCIAL DATA

SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following selected financial data for each of the five years in the
period ended December 31, 2000, have been derived from First Busey's annual
consolidated financial statements audited by McGladrey & Pullen, LLP,
independent certified public accountants, whose report on the financial position
as of December 31, 2000 and December 31, 1999, and the results of operations for
each of the three years in the period ended December 31, 2000, appears elsewhere
in this report. This financial data should be read in conjunction with the
financial statements and the related notes thereto appearing in this report.

2000 1999 1998 1997 1996
---- ---- ---- ---- ----
(dollars in thousands, except per share data)

BALANCE SHEET ITEMS
- -------------------------------
Securities $ 228,597 $ 225,046 $217,991 $215,514 $226,350
Loans, net of unearned interest 984,369 886,684 662,281 602,937 569,500
Allowance for loan losses 12,268 10,403 7,101 6,860 6,131
Total assets 1,355,044 1,247,123 951,531 915,540 864,918
Total deposits 1,148,787 1,027,981 826,704 811,453 766,927
Long-term debt 52,976 55,849 25,000 10,000 5,000
Stockholders' equity 92,325 82,284 87,103 81,279 73,417

RESULTS OF OPERATIONS
- -------------------------------
Interest income $ 93,242 $ 72,311 $ 67,048 $ 63,831 $ 61,197
Interest expense 50,476 34,920 32,975 31,119 30,033
Net interest income 42,766 37,391 34,073 32,712 31,164
Provision for loan losses 2,515 2,570 700 1,075 1,100
Net income $ 14,053 $ 12,548 11,398 $ 10,371 $ 9,306

2000 1999 1998 1997 1996
---- ---- ---- ---- ----
(dollars in thousands, except per share data)

PER SHARE DATA(1)
- -------------------------------
Diluted earnings $ 1.03 $ .90 $ .81 $ .74 $ .67
Cash dividends (Class A) .48 .44 .39 .35 .33
Book value 6.86 6.08 6.36 5.92 5.36
Closing price $19.9375 $22.625 18.25 13.75 11.125

OTHER INFORMATION
- -------------------------------
Return on average assets 1.12% 1.22% 1.22% 1.18% 1.08%
Return on average equity 16.56% 14.68% 14.02% 13.42% 13.40%
Net interest margin(2) 3.75% 4.03% 4.10% 4.20% 4.13%
Stockholders' equity to assets 6.81% 6.60% 9.15% 8.88% 8.49%

(1) Per share amounts have been restated to give retroactive effect to the
two-for-one stock split which occurred August 3, 1998, and the
three-for-two stock split which occurred May 7, 1996.
(2) Calculated as a percent of average earning assets.

15

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following is management's discussion and analysis of the financial
condition and results of operations of First Busey Corporation and Subsidiaries
(the "Corporation") for the years ended December 31, 2000, 1999, and 1998. It
should be read in conjunction with "Business," "Selected Financial Data," the
consolidated financial statements and the related notes to the consolidated
financial statements and other data included in this Annual Report. All per
share amounts have been restated to give retroactive effect to the two-for-one
stock split which occurred August 3, 1998.

GENERAL

The Corporation's consolidated income is generated primarily by the
financial services activities of its subsidiaries. Since January 1, 1982, the
Corporation has acquired eleven banks and sold two; acquired six savings and
loan branches and two bank branches; acquired a bank branch in an FDIC assisted
acquisition of a failed bank; acquired a thrift holding company and federal
savings and loan; formed a trust company subsidiary; formed an insurance agency
subsidiary; formed a non-bank ATM subsidiary and acquired a travel agency. All
of the banks acquired during those years were accounted for using the purchase
method of accounting, except for Bank of Urbana which was accounted for using
the pooling of interests method. All subsidiary banks owned by the Corporation
as of November 1991 were merged with Busey Bank. Under the purchase method of
accounting, the earnings of the acquired subsidiaries are included in the
Corporation's earnings only for the periods subsequent to acquisition. The
following table illustrates the amounts of net income contributed by each
subsidiary (on a pre-consolidation basis) since January 1, 1998, less purchase
accounting adjustments (net income for Busey Bank in following table excludes
income from Bank subsidiaries and includes deduction of $395,000 for
amortization expense recorded on parent company statements).

Subsidiary Acquired 2000 1999 1998
- -----------------------------------------------------------------------------------------------------
(dollars in thousands)

Busey Bank(1) 3/20/80 $13,094 82.6% 11,256 83.5% $10,630 86.5%
Busey Bank fsb(2) 10/29/99 937 5.9% 392 2.9% -- --
First Busey Trust & Investment Co.(3) -- 1,459 9.2% 1,304 9.6% 1,175 9.6%
First Busey Securities, Inc.(4) -- 357 2.3% 352 2.6% 301 2.4%
First Busey Resources, Inc.(5) -- 154 1.0% 159 1.2% 205 1.7%
Busey Insurance Services, Inc.(6) -- (38) -0.2% 6 0.0% (14) -0.1%
BAT, Inc.(7) -- 20 0.1% 14 0.1% (3) -0.0%
Busey Travel, Inc.(8) 1/1/98 (153) -1.0% 9 0.1% (10) -0.1%
FFS Investments(9) 10/29/99 19 0.1% (7) 0.0% -- --
-------------------------------------------------------------
Total $15,849 100.0% 13,485 100.0% $12,284 100.0%
=============================================================

(1) City Bank of Champaign and Champaign County Bank & Trust were merged into
Busey Bank as of January 1, 1987. First National Bank of Thomasboro was
merged into Busey Bank as of January 1,1988. State Bank of St. Joseph was
merged into Busey Bank as of November 3, 1989. The Bank of Urbana,
Citizens Bank of Tolono, and the assets of Community Bank of Mahomet
subject to its liabilities were merged into Busey Bank as of
November 16, 1991. Busey Bank of McLean County was merged into Busey
Bank as of January 1, 1996. Busey Business Bank was formed on
January 12, 1998, and merged into Busey Bank as of October 30, 1998.
(2) Acquired as a subsidiary of Eagle BancGroup, Inc. as of October 29, 1999.
(3) Formed as a subsidiary of the Corporation as of January 1, 1987 as a
successor to the combined trust departments of Busey Bank and Champaign
County Bank & Trust.
(4) Formed as a subsidiary of Busey Bank as of April 1, 1991.
(5) Reactivated as a subsidiary of First Busey Corporation as of
January 1, 1997. Real estate and certain other assets previously carried
on the parent company's balance sheet were transferred to subsidiary as
of that date.
(6) Formed as a subsidiary of Busey Bank as of October 1, 1997.
(7) Reactivated as a subsidiary of Busey Bank as of July 1, 1997.
(8) Acquired as a subsidiary of Busey Bank as of January 1, 1998.
(9) Acquired as a subsidiary of First Federal Savings and Loan Association of
Bloomington as of October 29, 1999.

Busey Bank, Busey Bank fsb and First Busey Trust & Investment Co. are the
three subsidiaries which contributed more than 10% of the Corporation's
consolidated net income. Busey Bank provides a full range of banking services
to individual and corporate customers through its branch network in central
Illinois, through its branch in Indianapolis, Indiana, and through its loan

16

production office in Fort Myers, Florida. Busey Bank fsb provides a full range
of banking services to individual and corporate customers through its branches
in McLean County in Illinois and its branch in Fort Myers, Florida. First Busey
Trust & Investment provides trust and asset management services to individual
and corporate customers throughout central Illinois.

RESULTS OF OPERATIONS-THREE YEARS ENDED DECEMBER 31, 2000

SUMMARY
The Corporation reported net income of $14,053,000 in 2000, up 12.0% from
$12,548,000 in 1999, which had increased 10.1% from $11,398,000 in 1998.
Diluted earnings per share in 2000 increased 14.4% to $1.03 from $.90 in 1999,
which was a 11.1% increase from $.81 in 1998. The main factors contributing to
the increase in net income in 2000 were increases in net interest income,
service charges on deposit accounts, and trust fees. Operating earnings, which
exclude security gains and the related tax expense, were $13,608,000 or $1.00
per share for 2000; $11,924,000, or $.86 per share for 1999; and $10,590,000, or
$.75 per share for 1998.

Security gains after the related tax expense were $445,000 or 3.2% of net
income in 2000; $624,000 or 5.0% of net income in 1999; and $808,000 or 7.1% of
net income in 1998. First Busey Corporation owns a position in a qualified
equity security with substantial appreciated value. During 1998 First Busey's
Board authorized an orderly liquidation of this asset over a five-year period.

The Corporation's return on average assets was 1.12%, 1.22% and 1.22% for
2000, 1999, and 1998, respectively, and return on average equity was 16.56%,
14.68%, and 14.02% for 2000, 1999, and 1998, respectively. On an operating
earnings basis, return on average assets was 1.08%, 1.16%, and 1.14% for 2000,
1999, and 1998, respectively, and return on average equity was 16.03%, 13.95%
and 13.02% for 2000, 1999, and 1998, respectively.

NET INTEREST INCOME
Net interest income on a tax equivalent basis for 2000 increased 14.0% to
$44,083,000 from $38,668,000 for 1999, which reflected a 9.7% increase from
$35,262,000 in 1998. Net interest income increased in 2000 and 1999 due to
continued growth in average loan balances outstanding.

Average interest-earning assets increased to $1,174,249,000 in 2000 from
$959,860,000 and $860,350,000 in 1999 and 1998, respectively. The growth in
interest-earning assets during 2000 was funded by growth in core deposits and
debt.

The net interest margin was 3.75% in 2000, 4.03% in 1999, and 4.10% in
1998. Interest rate trends continued to have significant impact on the
Corporation's yields and costs during the period from 1998 through 2000.
Interest rates increased during 2000 and led to increases in both the yield
earned on interest-earning assets and rates paid on interest-bearing
liabilities. Although net interest income increased by $5,415,000, the net
interest margin declined to 3.75% for the year ended December 31, 2000, as
compared to 4.03% for the year ended December 31, 1999. Interest income rose by
$20,971,000 resulting in a 38 basis point increase in the yield on interest-
earning assets of 8.05% primarily due to growth in the average balances of loans
outstanding. Interest expense increased by $15,556,000 resulting in a 64 basis
point increase in the average rate paid on interest-bearing liabilities of 4.77%
due to growth in the average balances of all categories of interest-bearing
deposits and debt combined with higher rates paid, particularly on money market
and time deposits.

The decrease in the net interest margin for 1999 was due to the 26 basis
point decline in the average rate earned on interest-earning assets which was
only partially offset by the 22 basis point decrease in the average rate paid on
interest-bearing liabilities. The decline in the average rate earned on
interest-earning assets was partially offset by the $99,510,000 increase in
total interest-earning assets.

PROVISION FOR LOAN LOSSES
The provision for loan losses, which is a current charge against income,
represents an amount which management believes is sufficient to maintain an

17

adequate allowance for future loan losses. In assessing the adequacy of the
allowance for loan losses, management considers the size and quality of the loan
portfolio measured against prevailing economic conditions, regulatory
guidelines, and historical loan loss experience, credit quality of the
portfolio, prevailing economic conditions, and regulatory guidelines. When a
determination is made by management to charge off a loan balance, such write-off
is charged against the allowance for loan losses.

The provision for loan losses decreased slightly to $2,515,000 in 2000 from
$2,570,000 in 1999 which had increased from $700,000 in 1998. The increases in
2000 and 1999 are due primarily to growth in average loan balances, which
increased by $205,748,000 or 28% in 2000 and $110,016,000 or 17.7% in 1999.
During 2000 the Corporation experienced higher net chargeoffs than in prior
years. Net charge-offs increased to $650,000 in 2000 from $369,000 in 1999 which
had decreased from $459,000 in 1998.
Since 1998 the Corporation has also seen growth in total non-performing loans.
Non-performing loans grew $34.2% to $2,117,000 in 1999, but more than doubled
during 2000 to $5,434,000 at December 31, 2000. Depressed prices for
agricultural products combined with increases in interest rates over the past
two years have also resulted in higher risk within the agricultural loan
portfolio.

Sensitive assets include nonaccrual loans, loans on First Busey
Corporation's watch loan report, and other loans identified as having more than
reasonable potential for loss. The watch loan list is comprised of loans which
have been restructured or involve customers in industries which have been
adversely affected by market conditions. The majority of these loans are being
repaid in conformance with their contracts.

OTHER INCOME
Other income increased 12.9% in 2000 to $18,288,000 from $16,192,000 in
1999, which reflected a 19.7% increase from $13,530,000 in 1998. The increases
in 2000 and 1999 are due primarily to increases in service charges on deposit
accounts, trust fee income, and commissions and brokers' fees. As a percentage
of total income, other income was 16.4%, 18.3%, and 16.8% in 2000, 1999, and
1998, respectively. Gains on the sale of securities, as a component of other
income, totaled $737,000 (4.0%) in 2000, $1,035,000 (6.4%) in 1999, and
$1,243,000 (9.2%) in 1998. Other income also includes gains on sales of loans,
as a component of other income, of $1,112,000 (6.1%), $895,000 (5.5%), and
$988,000 (7.3%) in 2000, 1999, and 1998, respectively.

Additional components of other income were fee income and trust fees.
Service charges and other fee income increased 23.0% to $9,317,000 in 2000 from
$7,572,000 in 1999, which was a 25.5% increase from $6,034,000 in 1998. The
growth in fee income in 2000 and 1999 is due to increases in service charges on
deposit accounts and fees for customer services. Trust fees increased 8.7% in
2000; revenues were $4,364,000 in 2000, $4,013,000 in 1999, and $3,445,000 in
1998. Increases in trust department revenues in each year were primarily due to
increases in assets under care to $1,003,157,000 at December 31, 2000, from
$971,554,000 at December 31, 1999, which is an increase from $783,226,000 from
December 31, 1998. Remaining other income increased 3.0% to $2,758,000 in 2000
from $2,677,000 in 1999 which was a 47.1% increase from $1,820,000 in 1998.

OTHER EXPENSES
Other expenses increased 12.7% in 2000 to $37,249,000 from $33,063,000 in
1999, which reflected an increase from $30,400,000 in 1998. As a percentage of
total income, other expenses were 33.4%, 37.4%, and 37.7% in 2000, 1999, and
1998, respectively. Employee related expenses, including salaries and wages and
employee benefits, increased 8.6% in 2000 to $19,080,000, as compared to
$17,565,000 in 1999, which was a 9.1% increase from $16,095,000 in 1998. As a
percent of average assets, employee related expenses were 1.51%, 1.70%, and
1.73% in 2000, 1999, and 1998, respectively. The Corporation had 484, 494, and
433 full-time equivalent employees at December 31, 2000, 1999, and 1998,
respectively. Net occupancy expense of bank premises and furniture and
equipment expenses increased 12.0% in 2000 to $6,729,000 as compared to
$6,010,000 in 1999 and $4,867,000 in 1998. The increases were primarily due to
expenses associated with the addition of the Busey Bank fsb branches and
remodeling of existing facilities.

18

Remaining other expenses increased $1,952,000 or 20.6% to $11,440,000 in
2000 from $9,488,000 in 1999, which was a 0.5% increase from $9,438,000 in 1998.
The increase in 2000 is due primarily to the increase in amortization and
impairment expense associated with the acquisition of Busey Bank fsb.

INCOME TAXES
Income tax expense in 2000 was $7,237,000 as compared to $5,402,000 in 1999
and $5,105,000 in 1998. The provision for income taxes as a percent of income
before income taxes was 34.0%, 30.1%, and 30.9%, for 2000, 1999, and 1998,
respectively.

BALANCE SHEET-DECEMBER 31, 2000 AND DECEMBER 31, 1999

Total assets on December 31, 2000 were $1,355,044,000, an increase of 8.7%
from $1,247,123,000 on December 31, 1999.Total loans, net of unearned interest,
increased 11.0% to $984,369,000 on December 31, 2000, as compared to
$886,684,000 on December 31, 1999. Total deposits increased 11.8% to
$1,148,787,000 on December 31, 2000 as compared to $1,027,981,000 on December
31, 1999. Non-interest bearing deposits increased $31,668,000 or 30.7% during
2000. Interest-bearing deposits increased $89,138,000 or 9.6% during 2000.

Total stockholders' equity increased 12.2% to $92,325,000 on December 31,
2000, as compared to $82,284,000 on December 31, 1999. Growth in equity is due
primarily to $7,643,000 earnings retained in the Corporation combined with a net
increase of $3,843,000 in unrealized gains on available for sale securities.
This growth was partially offset by an increase of $2,085,000 in treasury stock.
Treasury shares will be reissued in future years as participants exercise
outstanding options under the Corporation's stock option plan which is discussed
in Note 13 to the Corporation's consolidated financial statements.

EARNING ASSETS
The average interest-earning assets of the Corporation were 93.2%, 93.0%,
and 92.4%, of average total assets for the years ended December 31, 2000, 1999,
and 1998, respectively.

INVESTMENT SECURITIES
The Corporation has classified all investment securities as securities
available for sale. These securities are held with the option of their disposal
in the foreseeable future to meet investment objectives or for other operational
needs. Securities available for sale are carried at fair value. As of December
31, 2000, the fair value of these securities was $228,597,000 and the amortized
cost was $218,790,000. There were $10,236,000 of gross unrealized gains and
$429,000 of gross unrealized losses for a net unrealized gain of $9,807,000.
The after-tax effect ($5,917,000) of this unrealized gain has been included in
stockholders' equity. The increase in market value for the debt securities in
this classification was a result of declining interest rates. The fair value
increase in the equity securities was primarily due to a $2,305,000 increase in
the value of 117,000 shares of Student Loan Marketing Association (SLM) common
stock owned by the Corporation.

19

The composition of securities available for sale is as follows:

Years ended December 31,
-----------------------------------------------------
2000 1999 1998 1997 1996
-----------------------------------------------------
(dollars in thousands)

U.S. Treasuries and Agencies $162,886 $164,565 $159,261 $161,762 $159,044
Equity securities 15,479 13,079 12,550 11,994 9,065
States and political subdivisions 43,197 41,554 37,398 32,351 1,253
Other 7,035 5,848 8,782 9,407 1,881
-----------------------------------------------------
Fair value of securities available for sale $228,597 $225,046 $217,991 $215,514 $171,243
=====================================================
Amortized cost $218,790 $221,601 $207,531 $206,589 $166,189
=====================================================
Fair value as a percentage of amortized cost 104.48% 101.55% 105.04% 104.32% 103.04%
=====================================================

The maturities, fair values and weighted average yields of securities
available for sale as of December 31, 2000 are:

Due in Due after 1 year Due after 5 years Due after
1 year or less through 5 years through 10 years 10 years
-----------------------------------------------------------------------------------
Fair Weighted Fair Weighted Fair Weighted Fair Weighted
Value Average Value Average Value Average Value Average
Investment Securities(1) Yield Yield Yield Yield
-----------------------------------------------------------------------------------
(dollars in thousands)

U.S. Treasuries and Agencies $ 94,352 5.73% $68,329 6.00% $ 205 6.45% $ - -%
States and political subdivisions(2) 3,992 8.48% 16,750 7.84% 19,669 7.09% 2,786 6.98%
Other 2,092 6.34% 3,417 6.28% 840 6.77% 686 10.35%
-----------------------------------------------------------------------------------
Total $100,436 5.85% $88,496 6.36% $20,714 7.07% $3,472 7.65%
===================================================================================

(1) Excludes equity securities and mortgage backed securities.
(2) On a tax-equivalent basis, assuming a federal income tax rate of 35% (the
effective federal income tax rate as of December 31, 2000)

The securities held to maturity portfolio consisted of debt securities
which provided the Corporation with a relatively stable source of income.
Additionally, the investment portfolio provides a balance to interest rate and
credit risk in other categories of the balance sheet while providing a vehicle
for the investment of available funds and supplying securities to pledge as
required collateral for certain deposits. All remaining securities were
transferred to the available for sale portfolio as of December 31, 1997.

The composition of securities held to maturity was as follows:

Years ended December 31,
------------------------------------------------
2000 1999 1998 1997 1996
------------------------------------------------
(dollars in thousands)

U.S. Treasuries and Agencies - - - - $ 8,635
States and political subdivisions - - - - 36,607
Other - - - - 9,865
------------------------------------------------
Amortized cost of securities held to maturity - - - - $55,107
================================================
Fair value of securities held to maturity - - - - $55,800
================================================
Fair value as a percentage of book value - - - - 101.26%
================================================

The Corporation also uses its investment portfolio to manage its tax
position. Depending upon projected levels of taxable income for the
Corporation, periodic changes are made in the mix of tax-exempt and taxable
securities to achieve maximum yields on a tax-equivalent basis. U.S. government
and agency securities as a percentage of total securities decreased to 71.3% at
December 31, 2000 from 73.1% at December 31, 1999 while obligations of state and
political subdivisions (tax-exempt obligations) as a percentage of total
securities increased to 18.9% at December 31, 2000, from 18.5% at December 31,
1999.

20

LOAN PORTFOLIO
Loans, including loans held for sale, before allowance for loan losses,
increased 11.0% to $984,369,000 in 2000 from $886,684,000 in 1999. Non-farm
non-residential real estate mortgage loans increased $18,074,000, or 8.5%, to
$231,230,000 in 2000 from $213,156,000 in 1999. This increase reflects
management's emphasis on commercial loans secured by mortgages. Also, 1 to 4
family residential real estate mortgage loans (not held for sale) increased
$54,995,000, or 16.0%, to $398,734,000 in 2000 from $343,739,000 in 1999. It is
intended that residential mortgage loan origination will generate income and
develop retail and other banking relationships. The Corporation has no loans to
customers engaged in oil and gas exploration or to foreign companies or
governments. Commitments under standby letters of credit, unused lines of
credit and other conditionally approved credit lines, totaled approximately
$185,376,000 as of December 31, 2000.

The loan portfolio includes a concentration of loans for commercial real
estate amounting to approximately $293,184,000 and $276,961,000 as of December
31, 2000 and 1999, respectively. Generally, these loans are collateralized by
assets of the borrowers. The loans are expected to be repaid from cash flows or
from proceeds from the sale of selected assets of the borrowers. Credit losses
arising from lending transactions for commercial real estate entities are
comparable with the Corporation's credit loss experience on its loan portfolio
as a whole.

The composition of loans is as follows:

Years ended December 31,
--------------------------------------------------
2000 1999 1998 1997 1996
--------------------------------------------------
(dollars in thousands)

Commercial and financial $124,052 $119,800 $ 80,958 $ 63,861 $ 62,065
Agricultural 20,844 20,126 19,072 17,403 16,537
Real estate-farmland 15,411 15,841 14,184 11,782 11,468
Real estate-construction 75,672 52,479 44,713 31,306 26,184
Real estate-mortgage 697,410 622,075 467,435 439,660 413,541
Installment loans to individuals 50,980 56,470 35,919 38,925 39,707
--------------------------------------------------
$984,369 $886,791 $662,281 $602,937 $569,502
Unearned interest - (107) - - (2)
--------------------------------------------------
Loans $984,369 $886,684 $662,281 $602,937 $569,500
==================================================

The following table sets forth remaining maturities of selected loans
(excluding certain real estate-farmland, real estate-mortgage loans and
installment loans to individuals) at December 31, 2000.

1 Year or Less 1 to 5 Years Over 5 Years Total
----------------------------------------------------------
(dollars in thousands)

Commercial, financial and agricultural $ 90,761 $ 33,151 $ 20,984 $ 144,896
Real estate-construction 53,955 20,268 1,449 75,672
----------------------------------------------------------
Total $ 144,716 $ 53,419 $ 22,433 $ 220,568
==========================================================
Interest rate sensitivity of selected loans
Fixed rate $ 45,988 $ 19,549 $ 7,191 $ 72,728
Adjustable rate 98,729 33,870 15,241 147,840
----------------------------------------------------------
Total $ 144,717 $ 53,419 $ 22,432 $ 220,568
==========================================================

ALLOWANCE FOR LOAN LOSSES
Management has established an allowance for loan losses which reduces the
total loans outstanding by an estimate of uncollectible loans. Loans deemed
uncollectible are charged against and reduce the allowance. Periodically, a
provision for loan losses is charged to current expense. This provision acts to
replenish the allowance for loan losses and to maintain the allowance at a level
that management deems adequate.

21

There is no precise method of predicting specific loan losses or amounts
which ultimately may be charged off on segments of the loan portfolio. The
determination that a loan may become uncollectible, in whole or in part, is a
matter of judgment. Similarly, the adequacy of the allowance for loan losses
can be determined only on a judgmental basis, after full review, including (a)
consideration of economic conditions and their effect on particular industries
and specific borrowers; (b) a review of borrowers' financial data, together with
industry data, the competitive situation, the borrowers' management capabilities
and other factors; (c) a continuing evaluation of the loan portfolio, including
monitoring by lending officers and staff credit personnel of all loans which are
identified as being of less than acceptable quality; (d) an in-depth appraisal,
on a monthly basis, of all loans judged to present a possibility of loss (if, as
a result of such monthly appraisals, the loan is judged to be not fully
collectible, the carrying value of the loan is reduced to that portion
considered collectible); and (e) an evaluation of the underlying collateral for
secured lending, including the use of independent appraisals of real estate
properties securing loans.

Periodic provisions for loan losses are determined by management based upon
the size and the quality of the loan portfolio measured against prevailing
economic conditions and historical loan loss experience and also based on
specific exposures in the portfolio. Management has instituted a formal loan
review system supported by an effective credit analysis and control process.
The Corporation will maintain the allowance for loan losses at a level
sufficient to absorb estimated uncollectible loans and, therefore, expects to
make periodic additions to the allowance for loan losses.

The following table shows activity affecting the allowance for loan losses:

Years ended December 31
-----------------------------------------------------
2000 1999 1998 1997 1996
-----------------------------------------------------
(dollars in thousands)

Average loans outstanding during period $937,239 $731,491 $621,475 $584,327 $525,311
=====================================================
Allowance for loan losses:
Balance at beginning of period $ 10,403 $ 7,101 $ 6,860 $ 6,131 $ 5,473
-----------------------------------------------------

Loans charged-off:
Commercial, financial and agricultural $ 70 $ 40 $ 62 $ 192 $ 227
Real estate-construction - - - - 19
Real estate-mortgage 290 145 282 50 32
Installment loans to individuals 414 366 260 317 404
-----------------------------------------------------
Total charge-offs $ 774 $ 551 $ 604 $ 559 $ 682
-----------------------------------------------------
Recoveries:
Commercial, financial and agricultural $ 22 $ 16 $ 12 $ 13 $ 43
Real estate-construction - - - - 50
Real estate-mortgage 4 67 49 110 -
Installment loans to individuals 98 99 84 90 147
-----------------------------------------------------
Total recoveries $ 124 $ 182 $ 145 $ 213 $ 240
-----------------------------------------------------
Net loans charged-off $ 650 $ 369 $ 459 $ 346 $ 442
-----------------------------------------------------
Provision for loan losses $ 2,515 $ 2,570 $ 700 $ 1,075 $ 1,100
-----------------------------------------------------
Net additions due to acquisition - $ 1,101 - - -
-----------------------------------------------------
Balance at end of period $ 12,268 $ 10,403 $ 7,101 $ 6,860 $ 6,131
=====================================================
Ratios:
Net charge-offs to average loans 0.07% 0.05% 0.07% 0.06% 0.08%
=====================================================
Allowance for loan losses to total loans
at period end 1.25% 1.17% 1.07% 1.14% 1.08%
=====================================================

22

The following table sets forth the allowance for loan losses by loan
categories as of December 31 for each of the years indicated:

-----------------------------------------------------------------------------------
2000 1999 1998 1997 1996
-----------------------------------------------------------------------------------
% of % of % of % of % of
Total Total Total Total Total
Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans
-----------------------------------------------------------------------------------
(dollars in thousands)

Commercial, financial, agri-
cultural and real estate-farmland $ 1,854 16.3% $ 3,391 17.6% $ 1,757 17.2% $ 1,059 15.4% $ 766 15.8%
Real estate-construction - 7.7% - 5.9% - 6.8% - 5.2% - 4.6%
Real estate-mortgage 9,051 70.8% 5,708 70.1% 4,380 70.6% 4,456 72.9% 3,505 72.6%
Installment loans to individuals 708 5.2% 1,293 6.4% 964 5.4% 1,045 6.5% 1,189 7.0%
Unallocated 655 N/A 11 N/A - N/A 300 N/A 671 N/A
-----------------------------------------------------------------------------------
Total $12,268 100% $10,403 100% $ 7,101 100% $ 6,860 100% $ 6,131 100%
===================================================================================

This table indicates growth in the allowance for loan losses for real
estate mortgages and in the unallocated portion. Growth in the allowance for
loan losses for real estate mortgages is due to growth in the outstanding
balances of real estate mortgage loans as well as an increase in the past due
balances of these loans. The increase in the unallocated portion of the
allowance for loan losses is due to the factor applied for current economic
conditions as well as growth in loans to customers in the Indianapolis and
Florida markets where average loan balances are larger than the average loan
size within the overall portfolio.

NON-PERFORMING LOANS
It is management's policy to place commercial and mortgage loans on non-
accrual status when interest or principal is 90 days or more past due. Such
loans may continue on accrual status only if they are both well-secured and in
the process of collection.

The following table sets forth information concerning non-performing loans at
December 31 for each of the years indicated:

Years ended December 31,
-------------------------------------------
2000 1999 1998 1997 1996
-------------------------------------------
(dollars in thousands)

Non-accrual loans $ 767 $1,220 $ 526 $ 628 $ -
Loans 90 days past due and still accruing 4,667 897 1,052 1,033 1,002
Restructured loans - - - - -
-------------------------------------------
Total non-performing loans $5,434 $2,117 $1,578 $1,661 $1,002
-------------------------------------------
Repossessed assets $ 230 $ 459 $ 320 $ 516 $ 805
Other assets acquired in satisfaction of debts
previously contracted 11 5 14 5 1
-------------------------------------------
Total non-performing other assets $ 241 $ 464 $ 334 $ 521 $ 806
-------------------------------------------
Total non-performing loans and non-
performing other assets $5,675 $2,581 $1,912 $2,182 $1,808
===========================================
Non-performing loans to loans, before
allowance for loan losses 0.55% 0.24% 0.24% 0.28% 0.18%
===========================================
Non-performing loans and non-performing
other assets to loans, before allowance for loan
losses 0.58% 0.29% 0.29% 0.36% 0.32%
===========================================

On January 1, 1995, the Corporation adopted Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment of a
Loan," as amended by Statement No. 118, which requires loans to be considered
impaired when, based on current information and events, it is probable the
Corporation will not be able to collect all amounts due. The accrual of
interest income on impaired loans is discontinued when there is reasonable doubt
as to the borrower's ability to meet contractual payments of interest or
principal. Interest income on these loans is recognized to the extent interest
payments are received and the principal is considered fully collectible. For

23

the years ended December 31, 2000 and 1999, no interest was recognized from
impaired loans, and $4,000 was recognized for the year ended December 31, 1998.

The gross interest income that would have been recorded in the years ended
December 31, 2000 and 1999 if the non-accrual and restructured loans had been
current in accordance with their original terms was $41,000 and $31,000,
respectively. The amount of interest collected on those loans that was included
in interest income was $2,000 for the year ended December 31, 2000, and $0 for
the year ended December 31, 1999.

POTENTIAL PROBLEM LOANS
Potential problem loans are those loans which are not categorized as
impaired, non-accrual, past due or restructured, but where current information
indicates that the borrower may not be able to comply with present loan
repayment terms. Management assesses the potential for loss on such loans as it
would with other problem loans and has considered the effect of any potential
loss in determining its provision for possible loan losses. Potential problem
loans totaled $2,705,000 at December 31, 2000. There are no other loans
identified which management believes represent or result from trends or
uncertainties which management reasonably expects will materially impact future
operating results, liquidity or capital resources. There are no other credits
identified about which management is aware of any information which causes
management to have serious doubts as to the ability of such borrower(s) to
comply with the loan repayment terms.

OTHER INTEREST-BEARING ASSETS
There are no other interest-bearing assets which are categorized as
impaired.

DEPOSITS
As indicated in the following table, average interest bearing deposits as a
percentage of average total deposits have increased to 89.6% for the year ended
December 31, 2000 from 89.5% for the year ended December 31, 1999.

December 31,
------------------------------------------------------------------------------------------
2000 1999 1998
------------------------------------------------------------------------------------------
(dollars in thousands)
Average % Total Average Average % Total Average Average % Total Average
Balance Rate Balance Rate Balance Rate
------------------------------------------------------------------------------------------

Non-interest bearing
demand deposits $ 107,882 10.4% - % $ 91,484 10.5% -% $ 80,986 10.1% -%
Interest bearing demand
deposits 28,976 2.8% 2.86% 13,951 1.6% 2.01% 19,271 2.4% 1.96%
Savings/Money Market 411,262 39.6% 3.37% 390,781 44.9% 2.98% 351,695 43.9% 3.14%
Time deposits 489,779 47.2% 5.63% 373,563 43.0% 5.13% 349,956 43.6% 5.49%
------------------------------------------------------------------------------------------
Total $1,037,899 100.0% 4.07% $869,779 100.0% 3.99% $801,908 100.0% 4.25%
==========================================================================================

Certificates of deposit of $100,000 and over and other time deposits of $100,000
and over at December 31, 2000, had the following maturities (dollars in
thousands):

Under 3 months $ 43,914
3 to 6 months 37,589
6 to 12 months 65,680
Over 12 months 20,174
--------
Total $167,357
========

24

SHORT-TERM BORROWINGS
The following table sets forth the distribution of short-term borrowings
and weighted average interest rates thereon at the end of each of the last three
years. Federal funds purchased and securities sold under agreements to
repurchase generally represent overnight borrowing transactions. Other short-
term borrowings consist of various demand notes and notes with maturities of
less than one year.

Federal funds
purchased and
securities sold Other short-
under agreements to term
repurchase borrowings
-------------------------------------
(dollars in thousands)

2000
Balance, December 31, 2000 $18,890 $32,283
Weighted average interest rate at end of period 5.68% 8.29%
Maximum outstanding at any month end $24,064 82,120
Average daily balance $29,504 44,961
Weighted average interest rate during period(1) 5.94% 7.76%

1999
Balance, December 31, 1999 $23,580 $48,327
Weighted average interest rate at end of period 5.68% 7.04%
Maximum outstanding at any month end $42,931 $49,727
Average daily balance $16,068 $15,510
Weighted average interest rate during period(1) 5.53% 5.96%

1998
Balance, December 31, 1998 $ - $ 5,900
Weighted average interest rate at end of period - 7.25%
Maximum outstanding at any month end $ 7,900 $16,550
Average daily balance $ 1,686 $12,981
Weighted average interest rate during period(1) 5.29% 7.78%

(1) The weighted average interest rate is computed by dividing total interest
for the year by the average daily balance outstanding.

LIQUIDITY
Liquidity is the availability of funds to meet all present and future cash
flow obligations arising in the daily operations of the business at a minimal
cost. These financial obligations consist of needs for funds to meet extensions
of credit, deposit withdrawals and debt servicing.

The sources of short-term liquidity utilized by the Corporation consist of
asset maturities, sales, deposits and capital funds. Additional liquidity is
provided by bank lines of credit, repurchase agreements and the ability to
borrow from the Federal Reserve Bank and Federal Home Loan Bank. The Corporation
does not deal in or use brokered deposits as a source of liquidity. Long-term
liquidity needs will be satisfied primarily through retention of capital funds.
An additional source of liquidity that can be managed for short-term and long-
term needs is the Corporation's ability to securitize or package loans
(primarily mortgage loans) for sale.

The objective of liquidity management by the Corporation is to ensure that
funds will be available to meet demand in a timely and efficient manner. Based
upon the level of investment securities that reprice within 30 days and 90 days,
management believes that adequate liquidity exists to meet all projected cash
flow obligations.

25

The Corporation achieves a satisfactory degree of liquidity through
actively managing both assets and liabilities. Asset management guides the
proportion of liquid assets to total assets, while liability management monitors
future funding requirements and prices liabilities accordingly. Average liquid
assets are shown in the table below:

LIQUID ASSETS

Years Ended December 31,
------------------------------
Average Balances 2000 1999 1998
------------------------------
(dollars in thousands)

Federal funds sold $10,310 $10,723 $16,463
==============================
Percentage of average total assets 0.82% 1.04% 1.77%
==============================

RATE SENSITIVE ASSETS AND LIABILITIES
Interest rate sensitivity is a measure of the volatility of the net
interest margin as a consequence of changes in market rates. The rate-
sensitivity chart shows the interval of time in which given volumes of rate-
sensitive earning assets and rate-sensitive interest bearing liabilities would
be responsive to changes in market interest rates based on their contractual
maturities or terms for repricing. It is however, only a static, single-day
depiction of the Corporation's rate sensitivity structure, which can be adjusted
in response to changes in forecasted interest rates.

The following table sets forth the static rate-sensitivity analysis of the
Corporation as of December 31, 2000:

Rate Sensitive Within
----------------------------------------------------------------------------------
1-30 Days 31-90 Days 91-180 Days 181 Days-1 Yr Over 1 Yr Total
----------------------------------------------------------------------------------
(dollars in thousands)

Interest-bearing deposits $ 4,471 $ - $ - $ - $ - $ 4,471
Federal funds sold 34,700 - - - - 34,700
Investment securities
U.S. Treasuries and Agencies 10,984 19,851 15,947 41,584 74,520 162,886
States and political subdivisions 60 35 283 3,471 39,348 43,197
Other securities 8,055 1,427 - 99 12,933 22,514
Loans (net of unearned interest) 282,892 92,828 110,536 110,437 387,676 984,369
----------------------------------------------------------------------------------
Total rate-sensitive assets $ 341,162 $ 114,141 $ 126,766 $ 155,591 $ 514,477 $1,252,137
----------------------------------------------------------------------------------

Interest bearing transaction deposits 51,301 - - - - 51,301
Savings deposits 87,517 - - - - 87,517
Money market deposits 329,432 - - - - 329,432
Time deposits 57,541 71,476 132,337 165,149 119,365 545,868
Short-term borrowings 34,445 2,963 3,582 3,976 6,207 51,173
Long-term debt - 21,978 4,999 3,000 22,999 52,976
----------------------------------------------------------------------------------
Total rate-sensitive liabilities $ 560,236 $ 96,417 $ 140,918 $ 172,125 $ 148,571 $1,118,267
----------------------------------------------------------------------------------
Rate-sensitive assets less rate-sensitive
liabilities ($219,074) $ 17,724 ($14,152) ($16,534) $ 365,906 $ 133,870
----------------------------------------------------------------------------------
Cumulative Gap ($219,074) ($201,350) ($215,502) ($232,036) $ 133,870
======================================================================
Cumulative amounts as a percentage
of total rate-sensitive assets -17.50% -16.08% -17.21% -18.53% 10.69%
======================================================================
Cumulative Ratio 0.61x 0.69x 0.73x 0.76x 1.12x
======================================================================

The foregoing table shows a negative (liability sensitive) cumulative
unadjusted gap of approximately $219 million in the 1-30 day repricing category.
The gap report indicates that the cumulative gap is negative through one year.
Beyond one year, the gap becomes asset sensitive as there are more rate
sensitive assets than rate-sensitive liabilities repricing after one year. The
composition of the gap structure at December 31, 2000 will benefit the
Corporation more if interest rates fall during the next year by allowing the net
interest margin to grow as liability rates would reprice more quickly than rates
on rate-sensitive assets.

26

CAPITAL RESOURCES
Other than from the issuance of common stock, the Corporation's primary
source of capital is net income retained by the Corporation. During the year
ended December 31, 2000, the Corporation earned $14,053,000 and paid dividends
of $6,410,000 to stockholders, resulting in a retention of current earnings of
$7,643,000.

The Federal Reserve Board uses capital adequacy guidelines in its
examination and regulation of bank holding companies and their subsidiary banks.
Risk-based capital ratios are established by allocating assets and certain off-
balance sheet commitments into four risk-weighted categories. These balances
are then multiplied by the factor appropriate for that risk-weighted category.
The guidelines require bank holding companies and their subsidiary banks to
maintain a total capital to total risk-weighted asset ratio of not less than
8.00%, of which at least one half must be Tier 1 capital, and a Tier 1 leverage
ratio of not less than 4.00%. As of December 31, 2000, the Corporation had a
total capital to total risk-weighted asset ratio of 9.43%, a Tier 1 capital to
risk-weighted asset ratio of 7.77% and a Tier 1 leverage ratio of 5.71%; the
Corporation's bank subsidiary, Busey Bank, had ratios of 11.90%, 10.16%, and
7.36%, respectively; the Corporation's savings and loan subsidiary, Busey Bank
fsb, had ratios of 9.69%, 8.53%, and 6.49%, respectively. As these ratios show,
the Corporation and its bank subsidiaries significantly exceed the regulatory
capital guidelines.

REGULATORY CONSIDERATIONS
It is management's belief that there are no current recommendations by the
regulatory authorities which if implemented, would have a material effect on the
Corporation's liquidity, capital resources, or operations.

NEW ACCOUNTING PRONOUNCEMENTS
Accounting for Derivative Instruments and Hedging Activities. Statement of
-------------------------------------------------------------
Financial Accounting Standard No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (FAS 133) 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. This Statement applies to all
entities. FAS 133 is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. Earlier application is encouraged. The
Statement is not to be applied retroactively to financial statements of prior
periods. In June 1999, Statement of Financial Accounting Standard No. 137 was
issued to extend the effective date by one year to all fiscal quarters of fiscal
years beginning after June 15, 2000. In June 2000, Statement of Financial
Accounting Standard No. 138 was issued to amend certain accounting and reporting
standards of FAS 133. The Company does not believe the adoption of FAS 133, as
amended by FAS 137 and 138, will have a material impact on the consolidated
financial statements.

Accounting for Transfers and Servicing of Financial Assets and
--------------------------------------------------------------
Extinguishments of Liabilities. In September 2000, Statement on Financial
- ------------------------------
Accounting Standards No. 140 (FAS 140), "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities," was issued to replace
Statement on Financial Accounting Standards No. 125 (FAS 125), which was issued
in June 1996. FAS 125 addressed issues related to transfers of financial assets
in which the transferor has some continuing involvement with the transferred
assets or with the transferee. FAS 140 resolves implementation issues which
arose as a result of FAS 125, but carries forward most of FAS 125's provisions.
FAS 140 is effective for transfers occurring after March 31, 2001 and for
disclosures relating to securitization transactions and collateral for fiscal
years ending after December 15, 2000. Management does not believe the adoption
of FAS 140 will have a significant impact on its financial statements.

27

EFFECTS OF INFLATION
The effect of inflation on a financial institution differs significantly
from the effect on an industrial company. While a financial institution's
operating expenses, particularly salary and employee benefits, are affected by
general inflation, the asset and liability structure of a financial institution
consists largely of monetary items. Monetary items, such as cash, loans and
deposits, are those assets and liabilities which are or will be converted into a
fixed number of dollars regardless of changes in prices. As a result, changes
in interest rates have a more significant impact on a financial institution's
performance than does general inflation. For additional information regarding
interest rates and changes in net interest income see "Selected Statistical
Information."

SELECTED STATISTICAL INFORMATION
The following tables contain information concerning the consolidated
financial condition and operations of the Corporation for the periods, or as of
the dates, shown. All average information is provided on a daily average basis.

28

The following table shows the consolidated average balance sheets,
detailing the major categories of assets and liabilities, the interest income
earned on interest-earning assets, the interest expense paid for interest-
bearing liabilities, and the related interest rates:

Consolidated Average Balance Sheets and Interest Rates

Years Ended December 31,
--------------------------------------------------------------------------------------------
2000 1999 1998
--------------------------------------------------------------------------------------------
Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate Balance Expense Rate
--------------------------------------------------------------------------------------------
(dollars in thousands)

Assets
Federal funds sold $ 10,310 $ 627 6.08% $ 10,723 $ 479 4.47% $ 16,463 $ 891 5.41%
Investment securities:
U.S. Treasuries and Agencies 162,526 9,434 5.80% 153,576 8,637 5.62% 169,680 9,776 5.76%
States and political
subdivisions1 40,833 3,129 7.66% 40,006 3,000 7.50% 33,683 2,665 7.91%
Other securities 23,341 1,223 5.24% 24,064 1,187 4.93% 19,049 980 5.14%
Loans (net of unearned
discount)(1), (2) 937,239 80,146 8.55% 731,491 60,285 8.24% 621,475 53,925 8.68%
--------------------------------------------------------------------------------------------
Total interest-earning assets(1) $1,174,249 $ 94,559 8.05% $ 959,860 $ 73,588 7.67% $860,350 $ 68,237 7.93%
============================================================================================
Cash and due from banks 33,768 30,726 32,175
Premises and equipment 30,399 25,437 24,243
Allowance for loan losses (11,077) (7,777) (7,253)
Other assets 32,777 23,532 21,648
----------- ----------- ---------
Total assets $1,260,116 $1,031,778 $931,163
=========== =========== =========

Liabilities and Stockholders' Equity
Interest bearing transaction deposits $ 28,976 $ 830 2.86% $ 13,951 $ 280 2.01% $ 19,271 $ 377 1.96%
Savings deposits 91,750 2,794 3.05% 85,720 2,554 2.98% 80,648 2,635 3.27%
Money market deposits 319,512 11,073 3.47% 305,061 9,105 2.98% 271,047 8,419 3.11%
Time deposits 489,779 27,589 5.63% 373,563 19,146 5.13% 349,956 19,211 5.49%
Short-term borrowings:
Federal funds purchased and
repurchase agreements 29,504 1,752 5.94% 16,068 888 5.53% 1,686 89 5.29%
Other 44,961 3,491 7.76% 15,510 924 5.96% 12,981 1,010 7.78%
Long-term debt 53,240 2,947 5.54% 36,505 2,023 5.54% 22,548 1,234 5.47%
--------------------------------------------------------------------------------------------
Total interest-bearing liabilities $1,057,722 $ 50,476 4.77% $ 846,378 $ 34,920 4.13% $758,137 $ 32,975 4.35%
============================================================================================
Net interest spread 3.28% 3.54% 3.58%
======= ======= =======
Demand deposits 107,882 91,484 80,986
Other liabilities 9,628 8,425 10,724
Stockholders' equity 84,884 85,491 81,316
----------- ----------- ---------
Total liabilities and
stockholders' equity $1,260,116 $1,031,778 $931,163
=========== =========== =========

Interest income/earning assets(1) $1,174,249 $ 94,559 8.05% $ 959,860 $ 73,588 7.67% $860,350 $ 68,237 7.93%
Interest expense/earning assets $1,174,249 $ 50,476 4.30% $ 959,860 $ 34,920 3.64% $860,350 $ 32,975 3.83%
--------------------------------------------------------------------------------------------
Net interest margin(1) $ 44,083 3.75% $ 38,668 4.03% $ 35,262 4.10%
================= ================= =================

(1) On a tax equivalent basis, assuming a federal income tax rate of 35%
(2) Non-accrual loans have been included in average loans, net of unearned discount

29

Changes In Net Interest Income

Years Ended December 31, 2000, 1999, and 1998
-------------------------------------------------------------------------
Year 2000 vs 1999 Change due to(1) Year 1999 vs 1998 Change due to(1)
-------------------------------------------------------------------------
Average Average Total Average Average Total
Volume Yield/Rate Change Volume Yield/Rate Change
-------------------------------------------------------------------------
(dollars in thousands)

Increase (decrease) in interest income:
Federal funds sold ($18) $ 166 $ 148 $ (275) $ (137) $ (412)
Investment securities:
U.S. Treasuries and Agencies 514 283 797 (910) (229) (1,139)
States and political subdivisions(2) 63 66 129 480 (145) 335
Other securities (34) 70 36 212 (5) 207
Loans(2) 17,519 2,342 19,861 9,173 (2,813) 6,360