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First Mid-Illinois Bancshares, Inc. Announces Fourth Quarter and Full Year 2018 Results

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MATTOON, Ill., Jan. 24, 2019 (GLOBE NEWSWIRE) -- First Mid-Illinois Bancshares, Inc. (NASDAQ: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 15th  
  • 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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