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

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MATTOON, Ill., Oct. 25, 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 September 30, 2018.

Third Quarter Highlights

  • Record quarterly net income, when adjusted for merger related costs
  • Solid loan growth of 1.3% for the quarter, excluding First Bank & Trust, IL ("First Bank") acquired loans
  • Completed the integration and merger of First Bank into First Mid
  • Board of Directors declared its next semi-annual dividend at an approximately 6% increase       

"The third quarter was another solid period of financial results reflecting the first full quarter of reported numbers with First Bank included," said Joe Dively, Chairman and Chief Executive Officer.  "Our results represent the continued success in executing on our strategic initiatives, including driving growth both organically and through smart acquisitions."

"In August, we successfully completed the integration and merger of First Bank into First Mid.  I am pleased with how the organizations have come together with a shared focused on providing exceptional service to our customers.  The merger costs and synergies are on target with our original projections for the transaction."

"With respect to the SCB Bancorp, Inc. ("Soy Capital") acquisition, we have received the necessary regulatory and Soy Capital shareholder approvals to move forward with closing the transaction.  We have scheduled the closing for November 15th.  I am excited about bringing the two organizations together with the expansion of products and services for our customers and the diversification and financial benefits to our shareholders," Dively concluded.    

Net Interest Income

Net interest income for the third quarter of 2018 increased by $2.6 million, or 9.6% compared to the second quarter of 2018.  The increase was primarily driven by loan growth and higher yields as well as the inclusion of First Bank for one additional month in the current quarter.  The third quarter included $2.5 million in total loan accretion income, which included $1.0 million in scheduled accretion and $1.5 million in accelerated accretion.  The previous quarter included $1.2 million in total loan accretion income.    

In comparison to the third quarter of 2017, net interest income increased by $7.2 million, or 31.5%.  The increase was primarily attributable to the addition of First Bank as well as growth in the loan portfolio and higher yields that were partially offset by higher funding costs.   

Net Interest Margin

Net interest margin, on a tax equivalent basis, was 3.89% for the third quarter compared to 3.79% in the prior quarter.  The increase from the second quarter of 2018 was driven by higher yields on the loan portfolio and increased accretion income, partially offset by higher funding costs.  For the quarter, and excluding accretion income, the increase in loan yields outpaced the increase in funding costs.

In comparison to the third quarter last year, the net interest margin increased by 0.21%.  The yield on earning assets increased by 0.39%, while the overall cost of funding increased by 0.18%.         

Loan Portfolio

Total loans increased by $23.5 million, or 1.0%, during the quarter.  When excluding the acquired loans from First Bank, total loans increased by 1.3% in the quarter.  The growth in the third quarter was diversified by market and primarily in the categories of commercial real estate, commercial and industrial, and agriculture.  Excluding accretion income, loan yields increased by nine basis points in the quarter to 4.43%.    

Loans increased by $532.6 million when compared to third quarter last year.  The increase was a combination of strong organic growth over the last twelve months and the addition of loans from the First Bank acquisition.      

Asset Quality

Asset quality measures were generally consistent with the prior quarter with reported asset quality metrics impacted by the purchase accounting tied to the First Bank acquisition.  At September 30, 2018, nonperforming loans were 1.2% of total loans.  Allowance for loan losses at quarter end was 0.99% of total loans, and the allowance for loan losses to non-performing loans was 85.4%.  Non-performing loans were $27.9 million.      

Net charge-offs were $0.8 million during the third quarter compared to $0.6 million in the prior quarter.  The Company recorded a provision for loan losses of $2.5 million during the third quarter compared to $1.9 million in the second quarter and $1.5 million in the third quarter of last year.         

Deposits

Total deposits ended the period at $2.65 billion, representing a decrease of $19.5 million in the quarter.  Similar to the same period in prior years, the third quarter has historically had seasonal declines in deposits due to the nature of some of the Company's business customers.  The Company's average rate on cost of funds was 0.46% for the quarter compared to 0.38% in the second quarter.  The increase was due to one additional month of First Bank, which carried a higher funding cost, and the continued rise in interest rates. 

Deposits increased by $433.9 million when compared to the third quarter last year.  The increase was driven by a combination of organic growth and the addition of First Bank.

Noninterest Income

Noninterest income for the third quarter of 2018 was $7.9 million compared to $8.4 million in the second quarter.  Excluding the $0.8 million gain on the sale of a trust preferred security in the second quarter, noninterest income increased by $0.3 million.  The increase in the period was primarily attributable to higher service charge income and one additional month of First Bank. 

In comparison to the third quarter of 2017, noninterest income increased by $0.3 million.  The increase from last year was attributable to the addition of First Bank and higher brokerage and insurance revenues.     

Noninterest Expenses    

Noninterest expense for the third quarter totaled $24.5 million compared to $20.8 million in the second quarter.  The increase in the period was primarily attributable to the additional month of First Bank and the associated merger related costs tied to the completion of the bank merger and system conversion in the quarter.  Acquisition related costs totaled $4.0 million in the current quarter compared to $0.9 million in the second quarter.  The Company's efficiency ratio, on a tax equivalent basis, for the third quarter 2018 was 61.56%, which includes acquisition related costs.     

In comparison to the third quarter of 2017, noninterest expenses increased $6.6 million.  The increase was primarily attributable to the addition of First Bank and higher acquisition related costs.  

Regulatory Capital Levels and Dividend

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

Total capital to risk-weighted assets   14.62%                          
Tier 1 capital to risk-weighted assets   13.73%                                                
Common equity tier 1 capital to risk-weighted assets   12.60%                                                                                                          
Leverage ratio   11.24%                          

On October 23, 2018, the Company's Board of Directors declared its next semi-annual dividend at $0.36 per share, which represents an increase of approximately 6%.  The dividend is payable on November 14th for shareholders of record as of November 7th.

Capital

During the third 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 and First Mid Wealth Management.  First Mid Bank & Trust 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 57 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 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.

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

 
FIRST MID-ILLINOIS BANCSHARES, INC.   
Condensed Consolidated Balance Sheets   
(In thousands, unaudited) 
               
      As of
      September 30,   December 31,   September 30,
      2018   2017   2017
               
Assets              
Cash and cash equivalents     $   64,485   $   88,879   $   69,643
Investment securities       670,672     649,596     692,195
Loans (including loans held for sale)       2,400,160     1,939,501     1,867,562
Less allowance for loan losses       (23,839)     (19,977)     (18,589)
Net loans       2,376,321     1,919,524     1,848,973
Premises and equipment, net       47,327     38,266     38,638
Goodwill and intangibles, net       102,014     70,829     71,331
Bank owned life insurance       51,443     41,883     41,601
Other assets       43,215     32,562     32,075
Total assets     $   3,355,477   $   2,841,539   $   2,794,456
               
Liabilities and Stockholders' Equity              
Deposits:              
Non-interest bearing     $   493,935   $   480,283   $   430,036
Interest bearing       2,157,462     1,794,356     1,787,441
Total deposits       2,651,397     2,274,639     2,217,477
Repurchase agreement with customers       98,875     155,388     116,360
Other borrowings                             150,236     70,351     118,302
Junior subordinated debentures       28,958     24,000     23,980
Other liabilities       9,178     9,197     6,906
Total liabilities       2,938,644     2,533,575     2,483,025
               
Total stockholders' equity       416,833     307,964     311,431
Total liabilities and stockholders' equity     $   3,355,477   $   2,841,539   $   2,794,456
               
 
FIRST MID-ILLINOIS BANCSHARES, INC.
Condensed Consolidated Statements of Income
(In thousands, except per share data, unaudited)
               
  Three Months Ended   Nine Months Ended
  September 30,   September 30,
  2018   2017   2018   2017
Interest income:              
Interest and fees on loans $   28,850   $   20,385   $   75,219   $   61,337
Interest on investment securities 4,511   4,179   13,271   12,585
Interest on federal funds sold & other deposits 127   50   287   320
Total interest income   33,488     24,614     88,777     74,242
Interest expense:              
Interest on deposits 2,217   1,028   5,149   2,840
Interest on securities sold under agreements to repurchase 72   51   196   137
Interest on other borrowings 707   426   1,683   987
Interest on subordinated debt 405   236   1,013   680
Total interest expense   3,401     1,741     8,041     4,644
Net interest income   30,087     22,873     80,736     69,598
Provision for loan losses 2,551   1,489   5,483   5,051
Net interest income after provision for loan   27,536     21,384     75,253     64,547
Non-interest income:              
Trust revenues 919   925   2,934   2,696
Brokerage commissions 660   536   1,986   1,550
Insurance commissions 877   670   3,202   3,148
Service charges 2,009   1,758   5,447   5,160
Securities gains, net 0   254   901   589
Mortgage banking revenues 368   347   939   875
ATM/debit card revenue 1,979   1,595   5,443   4,828
Other 1,107   1,576   2,915   4,280
Total non-interest income   7,919     7,661     23,767     23,126
Non-interest expense:              
Salaries and employee benefits 11,600   9,648   32,851   29,685
Net occupancy and equipment expense 3,530   3,129   10,308   9,378
Net other real estate owned (income) expense (61)   385   22   530
FDIC insurance 174   210   740   679
Amortization of intangible assets 838   545   2,059   1,651
Stationary and supplies 328   168   725   539
Legal and professional expense 1,071   871   3,925   2,596
Marketing and donations 468   338   1,253   909
Other 6,542   2,618   11,777   9,102
Total non-interest expense   24,490     17,912     63,660     55,069
Income before income taxes   10,965     11,133     35,360     32,604
Income taxes 2,731   3,538   8,699   10,545
Net income $   8,234   $   7,595   $   26,661   $   22,059
               
Per Share Information              
Basic earnings per common share $   0.54   $   0.61   $   1.91   $   1.76
Diluted earnings per common share   0.54     0.61     1.90     1.76
               
Weighted average shares outstanding 15,290,539   12,528,674   13,982,339   12,498,913
Diluted weighted average shares outstanding 15,306,218   12,535,809   13,999,159   12,506,576
               


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
      September 30,   June 30,   March 31,   December 31,   September 30,
      2018   2018   2018   2017   2017
                       
Loan Portfolio                       
Construction and land development     $   91,355   $   88,481   $   109,076   $   107,594   $   77,179
Farm loans       191,724     184,887     122,564     127,183     126,096
1-4 Family residential properties       367,343     378,573     289,899     293,667     301,897
Multifamily residential properties       100,368     105,948     60,881     61,798     72,323
Commercial real estate                           814,574     803,362     699,142     681,757     647,184
Loans secured by real estate         1,565,364     1,561,251     1,281,562     1,271,999     1,224,679
Agricultural loans       120,770     113,533     74,336     86,631     81,383
Commercial and industrial loans       540,387     502,211     458,697     444,263     443,473
Consumer loans       57,248     59,090     28,784     29,749     30,074
All other loans       116,391     140,598     134,318     106,859     87,953
Total loans       2,400,160     2,376,683     1,977,697     1,939,501     1,867,562
                       
Deposit Portfolio                                     
Non-interest bearing demand deposits     $   493,935   $   526,117   $   478,303   $   480,283   $   430,036
Interest bearing demand deposits       749,396     781,360     707,759     700,376     678,302
Savings deposits       397,910     405,287     374,594     359,065     364,277
Money Market       481,799     434,559     389,020     390,880     423,486
Time deposits       528,357     523,541     342,215     344,035     321,376
Total deposits       2,651,397     2,670,864     2,291,891     2,274,639     2,217,477
                       
Asset Quality                              
Non-performing loans     $   27,924   $   24,729   $   17,869   $   17,513   $   19,788
Non-performing assets       30,065     27,237     19,849     20,347     22,051
Net charge-offs       757     603     261     1,022     1,109
Allowance for loan losses to non-performing loans     85.37%   89.15%   116.24%   114.07%   93.94%
Allowance for loan losses to total loans outstanding     0.99%   0.93%   1.05%   1.03%   1.00%
Nonperforming loans to total loans     1.16%   1.04%   0.90%   0.90%   1.06%
Nonperforming assets to total assets     0.90%   0.81%   0.70%   0.72%   0.79%
                       
Common Share Data                      
Common shares outstanding       15,294,925     15,285,146     12,677,846     12,660,748     12,618,026
Book value per common share     $   27.25   $   26.91   $   24.50   $   24.32   $   24.68
Tangible book value per common share     $   20.58   $   20.20   $   18.95   $   18.73   $   19.03
Market price of stock     $   40.33   $   39.30   $   36.45   $   38.54   $   38.40
                       
Key Performance Ratios and Metrics                      
End of period earning assets     $   3,081,929   $   3,103,956   $   2,634,223   $   2,602,578   $   2,566,809
Average earning assets       3,090,835     2,949,144     2,625,684     2,581,277     2,605,652
Average loans       2,375,303     2,244,639     1,956,156     1,885,144     1,840,570
Average deposits       2,652,292     2,522,584     2,247,447     2,240,829     2,248,387
Average rate on average earning assets (tax equivalent)     4.35%   4.16%   3.95%   4.01%   3.96%
Average rate on cost of funds     0.46%   0.38%   0.32%   0.29%   0.28%
Net interest margin (tax equivalent)     3.89%   3.79%   3.65%   3.72%   3.68%
Return on average assets     0.98%   1.27%   1.18%   0.66%   1.08%
Return on average common equity     7.92%   11.23%   10.86%   5.95%   9.95%
Efficiency ratio (tax equivalent) 1     61.56%   56.65%   57.16%   59.08%   54.54%
Full-time equivalent employees       686     711     591     592     584
                       
                       
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
    September 30,   June 30,   March 31,    December 31,   September 30,
    2018   2018   2018   2017   2017
                     
Net interest income as reported   $   30,087   $   27,454   $   23,195   $   23,475   $   22,873
Net interest income, (tax equivalent)     30,604     27,951     23,660     24,332     23,729
Average earning assets                 3,090,835     2,949,144     2,625,685     2,581,277     2,605,652
Net interest margin (tax equivalent) 1   3.89%   3.79%   3.65%   3.72%   3.68%
                     
                     
Common stockholder's equity   $   416,833   $   411,326   $   310,587   $   307,964   $   311,431
Goodwill and intangibles, net     102,014     102,618     70,324     70,829     71,331
Common shares outstanding     15,295     15,285     12,678     12,661     12,618
Tangible Book Value per common share   $   20.58   $   20.20   $   18.95   $   18.73   $   19.03
                     
                     
Common equity tier 1 capital    $   335,552   $   325,572   $   254,487   $   246,798   $   247,104
Risk weighted assets     2,662,706     2,678,691     2,289,235     2,290,253     2,184,812
Common equity tier 1 capital to risk weighted assets 2   12.60%   12.15%   11.12%   10.78%   11.31%
                     
                     
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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