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First Mid-Illinois Bancshares, Inc. Announces Second Quarter 2018 Results

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MATTOON, Ill., July 26, 2018 (GLOBE NEWSWIRE) -- First Mid-Illinois Bancshares, Inc. (NASDAQ:FMBH) (the "Company") today announced its financial results for the quarter and year-to-date period ended June 30, 2018.

Second Quarter Highlights

  • Record quarterly net income of $10.0 million, or $0.72 diluted earnings per share
  • Strong loan growth of 1.7%, excluding acquired loans
  • Awarded Central/Southern Illinois Community Bank of the Year by U.S. Small Business Administration for 5th consecutive year     
  • Closed the First BancTrust Corporation ("First Bank") acquisition on May 1, 2018
  • Announced the pending acquisition of SCB Bancorp, Inc. ("Soy Capital") on June 12, 2018
  • Completed common stock capital raise of approximately $36 million to help finance the acquisition of Soy Capital

"We are pleased to report another strong quarter of financial results highlighted by a record net income and solid loan growth," said Joe Dively, Chairman and Chief Executive Officer.  "We significantly outpaced last year's first half growth performance, while managing our operating efficiency and making investments for the future.

"In addition to our organic growth, we continued to execute on the portion of our strategic plan for growth through acquisitions.  On May 1, 2018 we closed on the First Bank acquisition, adding approximately $475 million in assets and deepening our presence in the Champaign market while expanding into contiguous counties east of our headquarters.  Our integration efforts are on plan and I am very pleased at how well the organizations have come together.

"On June 12th, we announced the acquisition of Soy Capital and priced an underwritten registered common stock capital raise tied to the deal on the following day.  We are thankful to the participating investors and underwriters for completing the successful offering.  Soy Capital is a very strong bank which owns the largest farm management and community bank owned insurance divisions in the state of Illinois.  I'm extremely excited about what the combined company can achieve and the improved diversification with non-interest income expected to increase from 25% to 31% of total revenues.  We operate similar lines of business today and will build upon Soy's strong reputation in expanding the products and services in all of the communities we serve," Dively concluded.    

Net Interest Income

Net interest income for the second quarter of 2018 increased by $4.3 million, or 18.4% compared to the first quarter of 2018.  The increase was primarily driven by the inclusion of First Bank for two months of the quarter and loan growth.  The quarter included $1.2 million of loan accretion income compared to $0.6 million in the linked quarter.    

In comparison to the second quarter of 2017, net interest income increased by $3.5 million, or 14.6%.  The increase was primarily attributable to the addition of First Bank as well as growth in the loan portfolio that was partially offset by higher funding costs.   

Net Interest Margin

Net interest margin, on a tax equivalent basis, was 3.79% for the second quarter compared to 3.65% in the prior quarter.  The increase from the first quarter of 2018 was driven by higher yields on the loan portfolio and increased accretion income, partially offset by higher funding costs. 

In comparison to the second quarter last year, the net interest margin decreased by five basis points.  The second quarter of 2017 included $1.8 million in accretion income, which was $0.6 million more than the current quarter.       

Loan Portfolio

Total loans increased by $399.0 million compared to the first quarter, with the addition of First Bank representing $364.9 million at quarter end.  Excluding First Bank, loans grew by $34.1 million, or 1.7%.  Loan balances at the end of the quarter were $2.38 billion.  The growth in the second quarter continued the trend of strong commercial real estate growth.

Loans increased by $551.0 million when compared to second quarter last year.  Excluding First Bank, loans increased $186.2 million, or 10.2% compared to the same period last year.      

Asset Quality

For the quarter, asset quality remained strong as legacy non-performing loan balances were consistent with the first quarter.  Reported asset quality metrics for the second quarter were impacted by the purchase accounting tied to the First Bank acquisition.  At June 30, 2018, nonperforming loans were 1.0% of total loans.  Allowance for loan losses at quarter end was 0.93% of total loans, and the allowance for loan losses to non-performing loans was 89.1%.  Non-performing loans were $24.7 million.      

Net charge-offs were $0.6 million during the second quarter compared to $0.3 million in the prior quarter.  The Company recorded a provision for loan losses of $1.9 million during the second quarter compared to $1.1 million in the first quarter and $1.8 million in the second quarter of last year.         

Deposits

Total deposits ended the period at $2.67 billion, representing an increase of $379.0 million in the quarter with the addition of First Bank representing $383.7 million of the quarter end balance.  Excluding First Bank, deposits declined by $4.7 million during the period.  Deposits for the period were positively impacted by the funds received pursuant to the registered common stock capital raise.  The Company's average rate on cost of funds was 0.38% for the quarter, compared to 0.32% in the first quarter and 0.24% in the second quarter of 2017.  The increase was primarily due to the addition of First Bank, which carried a higher funding cost.  The Company continues to maintain a strong core deposit base.      

Deposits increased by $381.5 million when compared to second quarter last year.  Excluding First Bank, deposits decreased by $2.2 million compared to the same period last year.

Noninterest Income

Noninterest income for the second quarter of 2018 was $8.4 million compared to $7.5 million in the first quarter and $8.0 million in the second quarter of last year.  The increase in the period was primarily attributable to the addition of First Bank.  In addition, the Company sold its one trust preferred security resulting in a $0.8 million security gain. 

In comparison to the second quarter of 2017, noninterest income increased by $0.4 million.  In addition to the current quarter including First Bank and the sale of the trust preferred security, the second quarter of last year included a $0.9 million tax refund benefit.     

Noninterest Expenses

Noninterest expense for the second quarter totaled $20.8 million compared to $18.4 million in the first quarter.  The increase in the period and year-over-year was primarily attributable to the addition of First Bank.  Acquisition related costs were $0.9 million in the current quarter compared to $0.3 million in the first quarter.   

In comparison to the second quarter of 2017, noninterest expenses increased $2.8 million.  The increase was primarily attributable to the addition of First Bank and higher acquisition related costs.  The Company's efficiency ratio, on a tax equivalent basis, for the second quarter 2018, was 56.7%, ending the period with 711 full-time equivalent employees.

Regulatory Capital Levels

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

Total capital to risk-weighted assets   14.10%
Tier 1 capital to risk-weighted assets   13.27%
Common equity tier 1 capital to risk-weighted assets   12.15%
Leverage ratio    11.03%

Capital Raise

On June 13, 2018, First Mid priced an underwritten public offering of 947,368 shares of First Mid's common stock at a price to the public of $38.00 per share for aggregate gross proceeds of approximately $36.0 million.  The offering closed on June 15, 2018.  The net proceeds to First Mid, after deducting underwriting discounts and commissions and offering expenses, were approximately $34.0 million.  The shares included the underwriters' exercise of its option to purchase from First Mid an additional 15% of shares of the Company's common stock. First Mid intends to use the proceeds from the offering for general corporate purposes, including, but not limited to, additions to working capital and to support organic growth, or possible additional future acquisitions of other financial institutions, including in connection with its previously announced acquisition of Soy Capital, if it is completed.

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

Bank Name and Logo Change
On June 26th, the Company announced a new logo and shorter name for its bank subsidiary.  The transition to the new logo and shorter name is underway and will continue over the next year.  The name was shortened to First Mid Bank & Trust from First Mid-Illinois Bank & Trust.  The name was geographically limiting, while the Company has expanded into other states.

About First Mid-Illinois Bancshares, Inc.: First Mid-Illinois Bancshares, Inc. is the parent company of First Mid Bank & Trust, N.A., First Bank & Trust, IL, First Mid Insurance Group and First Mid Wealth Management.  First Mid Bank was first chartered in 1865 and has since grown into a $3.4 billion community-focused organization that provides financial services through a network of 59 banking centers in 42 Illinois and Missouri communities, 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 and Soy Capital, such as discussions of First Mid's and Soy Capital's pricing and fee trends, credit quality and outlook, liquidity, new business results, expansion plans, anticipated expenses and planned schedules. First Mid and Soy Capital intend 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 and Soy Capital, 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 proposed transactions between First Mid and 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; the inability to complete the proposed transactions due to the failure to obtain the required stockholder approval; the failure to satisfy other conditions to completion of the proposed transactions, including receipt of required regulatory and other approvals; the failure of the proposed transactions to close for any other reason; the effect of the announcement of the transaction on customer relationships and operating results; the possibility that the transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events; changes in interest rates; general economic conditions and those in the market areas of First Mid and Soy Capital; 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 and Soy Capital'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 Soy Capital; 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.

Important Information about the Merger and Additional Information
First Mid will file a registration statement on Form S-4 with the SEC in connection with the proposed transaction. The registration statement will include a proxy statement of SCB that also constitutes a prospectus of First Mid, which will be sent to the stockholders of SCB. Investors in SCB are urged to read the proxy statement/prospectus, which will contain important information, including detailed risk factors, when it becomes available. The proxy statement/prospectus and other documents which will be filed by First Mid with the SEC will be available free of charge at the SEC's website, www.sec.gov, or by directing a request when such a filing is made to First Mid-Illinois Bancshares, P.O. Box 499, Mattoon, IL 61938, Attention: Investor Relations; or to SCB Bancorp, Inc., 455 North Main Street, Decatur, Illinois 62523, Attention: Investor Relations. A final proxy statement/prospectus will be mailed to the stockholders of SCB.

This communication shall not constitute an offer to sell or the solicitation of an offer to buy securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.

Participants in the Solicitation
First Mid and SCB, and certain of their respective directors, executive officers and other members of management and employees, are participants in the solicitation of proxies in connection with the proposed transactions. Information about the directors and executive officers of First Mid is set forth in the proxy statement for its 2018 annual meeting of stockholders, which was filed with the SEC on March 16, 2018. Investors may obtain additional information regarding the interests of such participants in the proposed transactions by reading the proxy statement/prospectus for such proposed transactions when it becomes available.

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
 
  June 30,   December 31,   June 30,
  2018   2017   2017
           
Assets          
Cash and cash equivalents $ 85,575     $ 88,879     $ 73,889  
Investment securities   688,616       649,596       758,106  
Loans (including loans held for sale)   2,376,683       1,939,501       1,825,634  
Less allowance for loan losses   (22,045 )     (19,977 )     (18,209 )
Net loans   2,354,638       1,919,524       1,807,425  
Premises and equipment, net   47,003       38,266       39,076  
Goodwill and intangibles, net   102,618       70,829       69,517  
Bank owned life insurance   51,101       41,883       41,881  
Other assets   39,922       32,562       35,410  
Total assets $ 3,369,473     $ 2,841,539     $ 2,825,304  
           
Liabilities and Stockholders' Equity          
Deposits:          
Non-interest bearing $ 526,117     $ 480,283     $ 425,344  
Interest bearing   2,144,747       1,794,356       1,864,062  
Total deposits   2,670,864       2,274,639       2,289,406  
Repurchase agreement with customers   141,662       155,388       142,411  
Other borrowings   105,083       70,351       57,254  
Junior subordinated debentures   28,792       24,000       23,959  
Other liabilities   11,746       9,197       11,383  
Total liabilities   2,958,147       2,533,575       2,524,413  
           
Total stockholders' equity   411,326       307,964       300,891  
Total liabilities and stockholders' equity $ 3,369,473     $ 2,841,539     $ 2,825,304  
           


 
FIRST MID-ILLINOIS BANCSHARES, INC.
Condensed Consolidated Statements of Income
(In thousands, except per share data, unaudited)
               
  Three Months Ended   Six Months Ended
  June 30,   June 30,
  2018   2017   2018   2017
Interest income:              
Interest and fees on loans $ 25,362   $ 21,025   $ 46,369   $ 40,952
Interest on investment securities   4,679     4,366     8,760     8,406
Interest on federal funds sold & other deposits   90     55     160     270
Total interest income   30,131     25,446     55,289     49,628
Interest expense:              
Interest on deposits   1,670     933     2,932     1,812
Interest on securities sold under agreements to repurchase   65     46     124     86
Interest on other borrowings   593     287     976     561
Interest on subordinated debt   349     227     608     444
Total interest expense   2,677     1,493     4,640     2,903
Net interest income     27,454       23,953       50,649       46,725
Provision for loan losses   1,877     1,840     2,932     3,562
Net interest income after provision for loan   25,577     22,113     47,717     43,163
Non-interest income:              
Trust revenues   938     841     2,015     1,771
Brokerage commissions   661     509     1,326     1,014
Insurance commissions   838     853     2,325     2,478
Service charges   1,803     1,690     3,438     3,402
Securities gains, net   881     335     901     335
Mortgage banking revenues   410     335     571     528
ATM/debit card revenue   1,860     1,665     3,464     3,233
Other   970     1,741     1,808     2,704
Total non-interest income   8,361     7,969     15,848     15,465
Non-interest expense:              
Salaries and employee benefits   11,057     10,102     21,251     20,037
Net occupancy and equipment expense   3,505     3,116     6,778     6,249
Net other real estate owned (income) expense   7     127     83     145
FDIC insurance   285     290     566     469
Amortization of intangible assets   716     559     1,221     1,106
Stationary and supplies   186     186     397     371
Legal and professional expense   1,717     894     2,854     1,725
Marketing and donations   431     277     785     571
Other   2,892     2,404     5,235     6,484
Total non-interest expense   20,796     17,955     39,170     37,157
Income before income taxes   13,142     12,127     24,395     21,471
Income taxes   3,105     3,927     5,968     7,007
Net income $   10,037   $   8,200   $   18,427   $   14,464
               
Per Share Information              
Basic earnings per common share $ 0.72   $ 0.66   $ 1.38   $ 1.16
Diluted earnings per common share   0.72     0.66     1.38     1.16
               
Weighted average shares outstanding   13,956,674     12,491,757     13,317,395     12,483,788
Diluted weighted average shares outstanding   13,974,048     12,499,931     13,334,698     12,491,962
               


 
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
    June 30,   March 31,   December 31,   September 30,   June 30
    2018   2018   2017   2017   2017
                     
Loan Portfolio                    
Construction and land development   $ 88,481     $ 109,076     $ 107,594     $ 77,179     $ 68,681  
Farm loans     184,887       122,564       127,183       126,096       123,420  
1-4 Family residential properties     378,573       289,899       293,667       301,897       310,522  
Multifamily residential properties     105,948       60,881       61,798       72,323       72,492  
Commercial real estate     803,362       699,142       681,757       647,184       632,492  
Loans secured by real estate     1,561,251       1,281,562       1,271,999       1,224,679       1,207,607  
Agricultural loans     113,533       74,336       86,631       81,383       79,759  
Commercial and industrial loans     502,211       458,697       444,263       443,473       421,280  
Consumer loans     59,090       28,784       29,749       30,074       32,814  
All other loans     140,598       134,318       106,859       87,953       84,174  
Total loans     2,376,683       1,977,697       1,939,501       1,867,562       1,825,634  
                     
Deposit Portfolio                    
Non-interest bearing demand deposits   $ 526,117     $ 478,303     $ 480,283     $ 430,036     $ 425,344  
Interest bearing demand deposits     781,360       707,759       700,376       678,302       714,918  
Savings deposits     405,287       374,594       359,065       364,277       368,220  
Money Market     434,559       389,020       390,880       423,486       450,685  
Time deposits     523,541       342,215       344,035       321,376       330,239  
Total deposits     2,670,864       2,291,891       2,274,639       2,217,477       2,289,406  
                     
Asset Quality                    
Non-performing loans   $ 24,729     $ 17,869     $ 17,513     $ 19,788     $ 17,125  
Non-performing assets     27,237       19,849       20,347       22,051       21,559  
Net charge-offs     603       261       1,022       1,109       1,477  
Allowance for loan losses to non-performing loans     89.15 %     116.24 %     114.07 %     93.94 %     106.33 %
Allowance for loan losses to total loans outstanding     0.93 %     1.05 %     1.03 %     1.00 %     1.00 %
Nonperforming loans to total loans     1.04 %     0.90 %     0.90 %     1.06 %     0.94 %
Nonperforming assets to total assets     0.81 %     0.70 %     0.72 %     0.79 %     0.76 %
                     
Common Share Data                    
Common shares outstanding     15,285,146       12,677,846       12,660,748       12,618,026       12,505,873  
Book value per common share   $ 26.91     $ 24.50     $ 24.32     $ 24.68     $ 24.06  
Tangible book value per common share   $ 20.20     $ 18.95     $ 18.73     $ 19.03     $ 18.50  
Market price of stock   $ 39.30     $ 36.45     $ 38.54     $ 38.40     $ 34.10  
                     
Key Performance Ratios and Metrics                    
End of period earning assets   $ 3,103,956     $ 2,634,223     $ 2,602,578     $ 2,566,809     $ 2,604,505  
Average earning assets     2,949,144       2,625,684       2,581,277       2,605,652       2,615,792  
Average rate on average earning assets (tax equivalent)     4.16 %     3.95 %     4.01 %     3.96 %     4.08 %
Average rate on cost of funds     0.38 %     0.32 %     0.29 %     0.28 %     0.24 %
Net interest margin (tax equivalent)     3.79 %     3.65 %     3.72 %     3.68 %     3.84 %
Return on average assets     1.27 %     1.18 %     0.66 %     1.08 %     1.16 %
Return on average common equity     11.23 %     10.86 %     5.95 %     9.95 %     11.11 %
Efficiency ratio (tax equivalent) 1     56.65 %     57.16 %     59.08 %     54.54 %     53.17 %
Full-time equivalent employees     711       591       592       584       590  
                     
                     
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.
Reconciliation of Non-GAAP Financial Measures
(In thousands, unaudited)
 
    As of and for the Quarter Ended
    June 30,   March 31,   December 31,   September 30,   June 30
    2018   2018   2017   2017   2017
                     
Net interest income as reported   $ 27,454     $ 23,195     $ 23,475     $ 22,873     $ 23,953  
Net interest income, (tax equivalent)     27,952       23,660       24,332       23,729       24,844  
Average earning assets     2,949,144       2,625,685       2,581,277       2,605,652       2,615,792  
Net interest margin (tax equivalent) 1     3.79 %     3.65 %     3.72 %     3.68 %     3.84 %
                     
                     
Common stockholder's equity   $ 411,326     $ 310,587     $ 307,964     $ 311,431     $ 300,891  
Goodwill and intangibles, net     102,618       70,324       70,829       71,331       69,517  
Common shares outstanding     15,285       12,678       12,661       12,618       12,506  
Tangible Book Value per common share   $ 20.20     $ 18.95     $ 18.73     $ 19.03     $ 18.50  
                     
                     
Common equity tier 1 capital   $ 325,572     $ 254,487     $ 246,798     $ 247,104     $ 237,764  
Risk weighted assets     2,678,691       2,289,235       2,290,253       2,184,812       2,185,041  
Common equity tier 1 capital to risk weighted assets  2     12.15 %     11.12 %     10.78 %     11.31 %     10.88 %
                     
                     
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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