First Mid-Illinois Bancshares, Inc. Announces Fourth Quarter and Full Year 2018 Results - First Mid Bancshares (NASDAQ:FMBH)

MATTOON, Ill., Jan. 24, 2019 (GLOBE NEWSWIRE) -- First Mid-Illinois Bancshares, Inc. FMBH (the "Company") today announced its financial results for the quarter and full year ended December 31, 2018.

Highlights

Net income of $9.9 million and $36.6 million for the fourth quarter and full year, respectively
Successfully completed the acquisition of SCB Bancorp, Inc. ("Soy Capital") on November 15^th
Ended 2018 with $3.8 billion in total assets, an increase of approximately 36% for the year
Wealth Management division ended the year with $3.9 billion in assets under management

"The fourth quarter was a solid ending to what was an outstanding year," said Joe Dively, Chairman and Chief Executive Officer. "Our 2018 accomplishments were extensive and continued to support our strategic initiatives to deliver meaningful value and results for customers and shareholders.

"The quarter included one and a half months of results related to the closing of the acquisition of Soy Capital. We delivered solid net income for the period, despite an elevated loan loss provision that was primarily tied to one credit. In addition, loan growth was muted by a few payoffs and the delay in the closing of certain new loans that are still expected to close. Overall loan growth, excluding 2018 acquired loans, was 5.5% for the year and we see solid loan growth opportunities for 2019.

"With respect to Soy Capital, I am extremely pleased with how the employees have come together to deliver expanded products and services to our customers. We have already had some success in expanding and cross-selling customer relationships between the bank, insurance and wealth management business units. The fast start validates the projected acquisition value and increases my confidence in the great things we can achieve together," Dively concluded.

Net Interest Income

Net interest income for the fourth quarter of 2018 increased by $0.9 million, or 3.0% compared to the third quarter of 2018. The increase was primarily driven by the inclusion of Soy Capital for one and a half months during the quarter, partially offset by lower accretion income. The fourth quarter included $2.1 million in total loan accretion income compared to $2.5 million in the third quarter of 2018.

In comparison to the fourth quarter of 2017, net interest income increased by $7.5 million, or 32.1%. The increase was primarily attributable to the additional revenue from our acquisition of Soy Capital and our acquisition of First BancTrust Corporation ("First Bank") on May 1, 2018. In addition, growth in the loan portfolio and higher yields were partially offset by higher funding costs.

Net Interest Margin

Net interest margin, on a tax equivalent basis, was 3.75% for the fourth quarter compared to 3.89% in the prior quarter. The combination of adding Soy Capital to the mix, which carried a lower net interest margin, and lower accretion income were the primary drivers to the decrease from the prior quarter.

In comparison to the fourth quarter last year, the net interest margin increased slightly. The average yields on investment securities and loans increased at a greater pace than the average cost of funds.

Loan Portfolio

Total loans increased by $244.4 million, or 10.2%, during the quarter. When excluding the acquired loans from Soy Capital, total loans decreased by $7.7 million. The fourth quarter was negatively impacted by approximately $26.0 million of loans where the borrowers unexpectedly delayed the scheduled closings, which have or are expected to close in the first quarter of 2019. In addition, the quarter included an increase in payoffs. Loan yields for the quarter were 4.83%. Excluding accretion income, loan yields increased by eight basis points in the quarter.

Loans increased by $705.0 million when compared to fourth quarter last year. The increase was a combination of strong organic growth over the last twelve months and the addition of loans from Soy Capital and First Bank. Excluding acquired loans, growth in loans was 5.5% for the year.

Asset Quality

Asset quality measures were generally consistent with the prior quarter when excluding the impact of purchase accounting tied to the Soy Capital acquisition. At December 31, 2018, nonperforming loans were 1.51% of total loans. The allowance for loan losses at quarter end was 0.99% of total loans, and the allowance for loan losses to non-performing loans was 65.7%. Excluding approximately $786.5 million of outstanding acquired loans, the allowance for loan losses to total loans was approximately 1.41% at year-end. The increase in non-performing loans for the quarter to $39.8 million from $27.9 million in the prior quarter was primarily tied to the addition of Soy Capital's loans. Excluding Soy Capital, non-performing loans were consistent with the prior quarter.

Net charge-offs were consistent with the prior quarter at $0.8 million. The Company recorded a provision for loan losses of $3.2 million during the fourth quarter compared to $2.6 million in the third quarter and $2.4 million in the fourth quarter of last year. The increase in the current quarter was primarily tied to an impairment recorded on a single credit in the amount of $1.2 million.

Deposits

Total deposits ended the period at $2.99 billion, representing an increase of $337.3 million in the quarter, including approximately $314.0 million from Soy Capital. The Company's average rate on cost of funds was 0.60% for the quarter compared to 0.46% in the third quarter. The fourth quarter includes the impact of Soy Capital, which had a higher cost of funds.

Deposits increased by $714.0 million when compared to the fourth quarter last year. The increase was driven by a combination of organic growth and the acquisitions of Soy Capital and First Bank completed in the year.

Noninterest Income

Noninterest income for the fourth quarter of 2018 was $11.6 million compared to $7.9 million in the third quarter. The increase in the period was primarily attributable to both organic growth and the addition of Soy Capital for one and a half months.

In comparison to the fourth quarter of 2017, noninterest income increased by $4.4 million. The increase from last year was attributable to organic growth as well as the Soy Capital and First Bank acquisitions completed in the year.

Noninterest Expenses

Noninterest expense for the fourth quarter totaled $26.3 million compared to $24.5 million in the third quarter. The increase in the period was primarily attributable to the addition of Soy Capital, partially offset by a decrease in overall acquisition and merger related costs. Acquisition related costs totaled $1.1 million in the current quarter compared to $4.0 million in the third quarter. The Company's efficiency ratio, on a tax equivalent basis, for the fourth quarter 2018 was 57.7%, which includes acquisition related costs.

In comparison to the fourth quarter of 2017, noninterest expenses increased $7.2 million. The increase was primarily attributable to the operating expenses from the Soy Capital and First Bank acquisitions in the year as well as higher acquisition related non-recurring costs.

Regulatory Capital Levels

The Company's capital levels remained comfortably above the "well capitalized" levels and ended the period as follows:

Total capital to risk-weighted assets	13.63%
Tier 1 capital to risk-weighted assets	12.77%
Common equity tier 1 capital to risk-weighted assets	11.81%
Leverage ratio	11.14%

Capital

During the fourth quarter, the company did not sell any shares under the previously announced ‘at-the-market' equity offering.

About First Mid-Illinois Bancshares, Inc.: First Mid-Illinois Bancshares, Inc. is the parent company of First Mid Bank & Trust, N.A., First Mid Insurance Group, First Mid Wealth Management, and Soy Capital Bank & Trust. First Mid Bank & Trust was first chartered in 1865 and has since grown into a $3.8 billion community-focused organization that provides financial services through a network of 67 banking centers in Illinois and Missouri and a loan production office in Indiana. More information about the Company is available on our website at www.firstmid.com. Our stock is traded in The NASDAQ Stock Market LLC under the ticker symbol "FMBH".

Non-GAAP Measures: In addition to reports presented in accordance with generally accepted accounting principles ("GAAP"), this release contains certain non-GAAP financial measures. The Company believes that such non-GAAP financial measures provide investors with information useful in understanding the Company's financial performance. Readers of this release, however, are urged to review these non-GAAP financial measures in conjunction with the GAAP results as reported. These non-GAAP financial measures are detailed as supplemental tables and include "Net Interest Margin, tax equivalent," "Tangible Book Value per Common Share," and "Common Equity Tier 1 Capital to Risk Weighted Assets". While the Company believes these non-GAAP financial measures provide investors with a broader understanding of the capital adequacy, funding profile and financial trends of the Company, this information should be considered as supplemental in nature and not as a substitute to the related financial information prepared in accordance with GAAP. These non-GAAP financial measures may also differ from the similar measures presented by other companies.

Forward Looking Statements: This document may contain certain forward-looking statements about First Mid, such as discussions of First Mid's pricing and fee trends, credit quality and outlook, liquidity, new business results, expansion plans, anticipated expenses and planned schedules. First Mid intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1955. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations of First Mid, are identified by use of the words "believe," "expect," "intend," "anticipate," "estimate," "project," or similar expressions. Actual results could differ materially from the results indicated by these statements because the realization of those results is subject to many risks and uncertainties, including, among other things, the possibility that any of the anticipated benefits of the acquisition of Soy Capital will not be realized or will not be realized within the expected time period; the risk that integration of the operations of Soy Capital with First Mid will be materially delayed or will be more costly or difficult than expected; changes in interest rates; general economic conditions and those in the market areas of First Mid; legislative/regulatory changes; monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board; the quality or composition of First Mid's loan or investment portfolios and the valuation of those investment portfolios; demand for loan products; deposit flows; competition, demand for financial services in the market areas of First Mid; and accounting principles, policies and guidelines. Additional information concerning First Mid, including additional factors and risks that could materially affect First Mid's financial results, are included in First Mid's filings with the Securities and Exchange Commission (the "SEC"), including its Annual Reports on Form 10-K. Forward-looking statements speak only as of the date they are made. Except as required under the federal securities laws or the rules and regulations of the SEC, we do not undertake any obligation to update or review any forward-looking information, whether as a result of new information, future events or otherwise.

Investor Contact: Aaron Holt
VP, Shareholder Relations
217-258-0463
aholt@firstmid.com

- Tables Follow –


FIRST MID-ILLINOIS BANCSHARES, INC.
Condensed Consolidated Balance Sheets
(In thousands, unaudited)

	As of
	December 31,			September 30,			December 31,
	2018			2018			2017

Assets
Cash and cash equivalents	$	141,400		$	64,485		$	88,879
Investment securities		769,279			670,672			649,596
Loans (including loans held for sale)		2,644,519			2,400,160			1,939,501
Less allowance for loan losses		(26,189	)		(23,839	)		(19,977	)
Net loans		2,618,330			2,376,321			1,919,524
Premises and equipment, net		59,117			47,327			38,266
Goodwill and intangibles, net		139,097			102,014			70,829
Bank owned life insurance		65,484			51,443			41,883
Other assets		47,027			43,215			32,562
Total assets	$	3,839,734		$	3,355,477		$	2,841,539

Liabilities and Stockholders' Equity
Deposits:
Non-interest bearing	$	575,784		$	493,935		$	480,283
Interest bearing		2,412,902			2,157,462			1,794,356
Total deposits		2,988,686			2,651,397			2,274,639
Repurchase agreement with customers		192,330			98,875			155,388
Other borrowings		127,469			150,236			70,351
Junior subordinated debentures		29,000			28,958			24,000
Other liabilities		26,385			9,178			9,197
Total liabilities		3,363,870			2,938,644			2,533,575

Total stockholders' equity		475,864			416,833			307,964
Total liabilities and stockholders' equity	$	3,839,734		$	3,355,477		$	2,841,539


FIRST MID-ILLINOIS BANCSHARES, INC.
Condensed Consolidated Statements of Income
(In thousands, except per share data, unaudited)

	Three Months Ended				Twelve Months Ended
	December 31,				December 31,
	2018		2017		2018		2017
Interest income:
Interest and fees on loans	$	30,553	$	21,333	$	105,772	$	82,670
Interest on investment securities		4,966		3,897		18,237		16,482
Interest on federal funds sold & other deposits		269		83		556		403
Total interest income		35,788		25,313		124,565		99,555
Interest expense:
Interest on deposits		3,422		1,155		8,571		3,995
Interest on securities sold under agreements to repurchase		134		44		330		181
Interest on other borrowings		834		392		2,517		1,379
Interest on subordinated debt		396		247		1,409		927
Total interest expense		4,786		1,838		12,827		6,482
Net interest income		31,002		23,475		111,738		93,073
Provision for loan losses		3,184		2,411		8,667		7,462
Net interest income after provision for loan		27,818		21,064		103,071		85,611
Non-interest income:
Trust revenues		2,852		1,048		5,786		3,744
Brokerage commissions		688		611		2,674		2,161
Insurance commissions		2,390		724		5,592		3,872
Service charges		1,988		1,760		7,435		6,920
Securities gains, net		0		27		901		616
Mortgage banking revenues		266		309		1,205		1,184
ATM/debit card revenue		2,044		1,667		7,487		6,495
Other		1,419		1,064		4,334		5,344
Total non-interest income		11,647		7,210		35,414		30,336
Non-interest expense:
Salaries and employee benefits		13,952		10,071		46,803		39,756
Net occupancy and equipment expense		4,225		3,218		14,533		12,596
Net other real estate owned (income) expense		260		30		282		560
FDIC insurance		319		226		1,059		905
Amortization of intangible assets		1,156		502		3,215		2,153
Stationary and supplies		238		185		963		724
Legal and professional expense		1,318		1,291		5,243		3,887
Marketing and donations		541		447		1,794		1,356
Other		4,311		3,182		16,088		12,284
Total non-interest expense		26,320		19,152		89,980		74,221
Income before income taxes		13,145		9,122		48,505		41,726
Income taxes		3,206		4,497		11,905		15,042
Net income	$	9,939	$	4,625	$	36,600	$	26,684

Per Share Information
Basic earnings per common share	$	0.62	$	0.37	$	2.53	$	2.13
Diluted earnings per common share		0.62		0.37		2.52		2.13

Weighted average shares outstanding		15,985,021		12,628,828		14,487,126		12,531,659
Diluted weighted average shares outstanding		15,998,551		12,634,560		14,500,585		12,536,534


FIRST MID-ILLINOIS BANCSHARES, INC.
Condensed Consolidated Statements of Income
(In thousands, except per share data, unaudited)

	For the Quarter Ended
	December 31,		September 30,			June 30,		March 31,		December 31,
	2018		2018			2018		2018		2017
Interest income:
Interest and fees on loans	$	30,553	$	28,850		$	25,362	$	21,007	$	21,333
Interest on investment securities		4,966		4,511			4,679		4,081		3,897
Interest on federal funds sold & other deposits		269		127			90		70		83
Total interest income		35,788		33,488			30,131		25,158		25,313
Interest expense:
Interest on deposits		3,422		2,217			1,670		1,262		1,155
Interest on securities sold under agreements to repurchase		134		72			65		59		44
Interest on other borrowings		834		707			593		383		392
Interest on subordinated debt		396		405			349		259		247
Total interest expense		4,786		3,401			2,677		1,963		1,838
Net interest income		31,002		30,087			27,454		23,195		23,475
Provision for loan losses		3,184		2,551			1,877		1,055		2,411
Net interest income after provision for loan		27,818		27,536			25,577		22,140		21,064
Non-interest income:
Trust revenues		2,852		919			938		1,077		1,048
Brokerage commissions		688		660			661		665		611
Insurance commissions		2,390		877			838		1,487		724
Service charges		1,988		2,009			1,803		1,635		1,760
Securities gains, net		0		0			881		20		27
Mortgage banking revenues		266		368			410		161		309
ATM/debit card revenue		2,044		1,979			1,860		1,604		1,667
Other		1,419		1,107			970		838		1,064
Total non-interest income		11,647		7,919			8,361		7,487		7,210
Non-interest expense:
Salaries and employee benefits		13,952		11,600			11,057		10,194		10,071
Net occupancy and equipment expense		4,225		3,530			3,505		3,273		3,218
Net other real estate owned (income) expense		260		(61	)		7		76		30
FDIC insurance		319		174			285		281		226
Amortization of intangible assets		1,156		838			716		505		502
Stationary and supplies		238		328			186		211		185
Legal and professional expense		1,318		1,071			1,717		1,137		1,291
Marketing and donations		541		468			431		354		447
Other		4,311		6,542			2,892		2,343		3,182
Total non-interest expense		26,320		24,490			20,796		18,374		19,152
Income before income taxes		13,145		10,965			13,142		11,253		9,122
Income taxes		3,206		2,731			3,105		2,863		4,497
Net income	$	9,939	$	8,234		$	10,037	$	8,390	$	4,625


FIRST MID-ILLINOIS BANCSHARES, INC.
Consolidated Financial Highlights and Ratios
(Dollars in thousands, except per share data)
(Unaudited)
	As of and for the Quarter Ended
	December 31,			September 30,			June 30,			March 31,			December 31,
	2018			2018			2018			2018			2017

Loan Portfolio
Construction and land development	$	50,618		$	91,355		$	88,481		$	109,076		$	107,594
Farm loans		231,700			191,724			184,887			122,564			127,183
1-4 Family residential properties		373,518			367,343			378,573			289,899			293,667
Multifamily residential properties		184,051			100,368			105,948			60,881			61,798
Commercial real estate		906,850			814,574			803,362			699,142			681,757
Loans secured by real estate		1,746,737			1,565,364			1,561,251			1,281,562			1,271,999
Agricultural loans		135,877			120,770			113,533			74,336			86,631
Commercial and industrial loans		557,011			540,387			502,211			458,697			444,263
Consumer loans		91,517			57,248			59,090			28,784			29,749
All other loans		113,377			116,391			140,598			134,318			106,859
Total loans		2,644,519			2,400,160			2,376,683			1,977,697			1,939,501

Deposit Portfolio
Non-interest bearing demand deposits	$	575,784		$	493,935		$	526,117		$	478,303		$	480,283
Interest bearing demand deposits		903,426			749,396			781,360			707,759			700,376
Savings deposits		432,319			397,910			405,287			374,594			359,065
Money Market		485,388			481,799			434,559			389,020			390,880
Time deposits		591,769			528,357			523,541			342,215			344,035
Total deposits		2,988,686			2,651,397			2,670,864			2,291,891			2,274,639

Asset Quality
Non-performing loans	$	39,839		$	27,924		$	24,729		$	17,869		$	17,513
Non-performing assets		42,434			30,065			27,237			19,849			20,347
Net charge-offs		834			757			603			261			1,022
Allowance for loan losses to non-performing loans		65.74	%		85.37	%		89.15	%		116.24	%		114.07	%
Allowance for loan losses to total loans outstanding		0.99	%		0.99	%		0.93	%		1.05	%		1.03	%
Nonperforming loans to total loans		1.51	%		1.16	%		1.04	%		0.90	%		0.90	%
Nonperforming assets to total assets		1.11	%		0.90	%		0.81	%		0.70	%		0.72	%

Common Share Data
Common shares outstanding		16,644,635			15,294,925			15,285,146			12,677,846			12,660,748
Book value per common share	$	28.57		$	27.25		$	26.91		$	24.50		$	24.32
Tangible book value per common share	$	20.22		$	20.58		$	20.20		$	18.95		$	18.73
Market price of stock	$	31.92		$	40.33		$	39.30		$	36.45		$	38.54

Key Performance Ratios and Metrics
End of period earning assets	$	3,491,606		$	3,081,929		$	3,103,956		$	2,634,223		$	2,602,578
Average earning assets		3,307,437			3,090,835			2,949,144			2,625,684			2,581,277
Average rate on average earning assets (tax equivalent)		4.35	%		4.35	%		4.16	%		3.95	%		4.01	%
Average rate on cost of funds		0.60	%		0.46	%		0.38	%		0.32	%		0.29	%
Net interest margin (tax equivalent)		3.75	%		3.89	%		3.79	%		3.65	%		3.72	%
Return on average assets		1.10	%		0.98	%		1.27	%		1.18	%		0.66	%
Return on average common equity		8.99	%		7.92	%		11.23	%		10.86	%		5.95	%
Efficiency ratio (tax equivalent) ¹		57.66	%		61.56	%		56.65	%		57.16	%		59.08	%
Full-time equivalent employees		818			686			711			591			592


¹ Represents non-interest expense divided by the sum of fully tax equivalent net interest income and non-interest income. Non-interest expense adjustments exclude foreclosed property expense
and amortization of intangibles. Non-interest income includes tax equivalent adjustments and non-interest income excludes gains and losses on the sale of investment securities.


FIRST MID-ILLINOIS BANCSHARES, INC.
Net Interest Margin

	For the Quarter Ended December 2018
	QTD Average					Average
	Balance			Interest		Rate
INTEREST EARNING ASSETS
Interest bearing deposits		54,768			234	1.70	%
Federal funds sold		663			3	1.80	%
Certificates of deposits investments		5208			32	2.44	%
Investment Securities:
Taxable (total less Municipals)		541,393			3,574	2.64	%
Tax-exempt (Municipals)		182,812			1,762	3.86	%
Loans (Net of Unearned Income)		2,522,593			30,727	4.83	%

Total Interest Earning Assets		3,307,437			36,332	4.35	%

NONEARNING ASSETS
Cash and Due From Banks		52,519
Premises and Equipment		53,041
Other Nonearning Assets		213,637
Allowance for Loan Losses		(24,731	)

Total Assets	$	3,601,903

INTEREST BEARING LIABILITIES
Demand Deposits		1,307,643			1,256	0.38	%
Savings Deposits		415,224			150	0.14	%
Time Deposits		574,446			2,016	1.39	%
Repurchase Agreements		131,469			134	0.40	%
FHLB Advances		121,954			762	2.48	%
Federal Funds Purchased		563			4	2.82	%
Subordinated Debt		28,972			396	5.42	%
Other Debt		10,108			68	2.67	%

Total Interest Bearing Deposits		2,590,379			4,786	0.73	%

NONINTEREST BEARING LIABILITIES
Demand Deposits		548,710		Average cost of funds		0.60	%
Other Liabilities		20,448
Stockholders' Equity		442,366

Total Liabilities & Equity	$	3,601,903

Net Interest Earnings / Spread				$	31,546	3.62	%

Impact of Non-Interest Bearing Funds						0.13	%

Net Interest Earnings as a % of Interest
Earnings Assets						3.75	%


FIRST MID-ILLINOIS BANCSHARES, INC.
Reconciliation of Non-GAAP Financial Measures
(In thousands, unaudited)

	As of and for the Quarter Ended
	December 31,			September 30,			June 30,			March 31,			December 31,
	2018			2018			2018			2018			2017

Net interest income as reported	$	31,002		$	30,087		$	27,454		$	23,195		$	23,475
Net interest income, (tax equivalent)		31,546			30,604			27,951			23,660			24,332
Average earning assets		3,307,437			3,090,835			2,949,144			2,625,685			2,581,277
Net interest margin (tax equivalent) ¹		3.75	%		3.89	%		3.79	%		3.65	%		3.72	%


Common stockholder's equity	$	475,864		$	416,833		$	411,326		$	310,587		$	307,964
Goodwill and intangibles, net		139,097			102,014			102,618			70,324			70,829
Common shares outstanding		16,645			15,295			15,285			12,678			12,661
Tangible Book Value per common share	$	20.22		$	20.58		$	20.20		$	18.95		$	18.73


Common equity tier 1 capital	$	357,952		$	335,552		$	325,572		$	254,487		$	246,798
Risk weighted assets		3,030,259			2,662,706			2,678,691			2,289,235			2,290,253
Common equity tier 1 capital to risk weighted assets ²		11.81	%		12.60	%		12.15	%		11.12	%		10.78	%


¹ Annualized and calculated on a tax equivalent basis where interest earned on tax-exempt securities and loans is adjusted to an amount comparable to interest subject
to normal income taxes assuming a federal tax rate of 21% during 2018 and 35% during 2017 and includes the impact of non-interest bearing funds.

² Defined as total common equity adjusted for gains/(losses) less goodwill and intangibles divided by risk weighted assets as of period end.

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