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First Mid Bancshares, Inc. Announces Second Quarter 2019 Results

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MATTOON, Ill., July 25, 2019 (GLOBE NEWSWIRE) -- First Mid Bancshares, Inc. (NASDAQ:FMBH) (the "Company") today announced its financial results for the quarter and year-to-date period ended June 30, 2019.

Highlights

  • Delivered quarterly net income of $11.0 million, or $0.66 diluted earnings per share
  • Tangible book value per share increased by 3.6% in the quarter to $22.35
  • Completed SCB Bancorp, Inc. ("Soy Capital") bank merger and system conversion on budget   

"I am pleased to report another solid quarter of financial performance," said Joe Dively, Chairman and Chief Executive Officer. "We continued our focus on improved credit quality and the results reflect another strong quarter of earnings with minimal charge-offs. While this effort has put pressure on loan growth, the long-term benefits outweigh the managed attrition." 

"With the April completion of the bank merger and systems integration tied to the Soy Capital deal, we have the full benefit of the cost savings moving forward and recorded approximately $2.4 million of acquisition related expenses in the quarter. We are off to a great start with the combined companies and the results, especially for the insurance and ag services business lines, are already reflecting our efforts on growing and expanding the noninterest income diversity the Soy Capital acquisition provided," Dively concluded.  

Net Interest Income

Net interest income for the second quarter of 2019 decreased by $0.9 million, or 2.9% compared to the first quarter of 2019.  The decrease was primarily driven by lower loan balances, less accretion income and higher funding costs. The current quarter included $2.6 million in accretion income compared to $2.9 million in the prior quarter.

In comparison to the second quarter of 2018, net interest income increased by $3.9 million, or 14.1%. The increase was primarily attributable to the addition of Soy Capital and the acquisition of First BancTrust Corporation ("First Bank"), which closed on May 1, 2018.     

Net Interest Margin

Net interest margin, on a tax equivalent basis, was 3.64% for the second quarter of 2019 compared to 3.74% in the prior quarter. The decrease was primarily driven by less accretion income and higher funding costs. The higher funding costs were partially driven by customers moving deposits from noninterest bearing accounts to interest bearing checking. Excluding accretion income, net interest margin declined by six basis points in the current quarter. 

In comparison to the second quarter of 2018, net interest margin decreased by 15 basis points. The year-over-year decrease in the ratio was primarily due to the inclusion of Soy Capital's lower net interest margin.     

Loan Portfolio

Total loans ended the quarter at $2.55 billion, representing a decrease of $50.5 million compared to the prior quarter. The decline was primarily driven by both the Company's continued focus on improved credit quality from acquired loans and from an increased competitive environment. The Company continues to maintain its strong credit and underwriting standards, electing not to match certain opportunities where the competition reflects proposed terms beyond First Mid's requirements. With respect to agriculture operating loans, we believe that nearly all the Company's borrowers were able to get their crops in the ground by late May and early June, despite wet conditions in many other areas of the Midwest. While yields on the crops are expected to be lower than last year's record harvest, a combination of the increase in corn and soybean prices and the additional USDA funding are expected to position most of our farming customers in a better cash flow position than last year. A recent USDA research report showed expectations for farmers in our area to have increases in cash income from crop farming by approximately 5% in 2019 over 2018. First Mid has minimal exposure to the cattle and dairy sector.  

Loans increased by $169.9 million, or 7.1%, compared to the second quarter of last year through a combination of both organic and acquisition related growth.      

Asset Quality

At June 30, 2019, nonperforming loans were 1.0% of total loans, allowance for loan losses was 1.04% of total loans, and the allowance for loan losses to non-performing loans was 102.3%. Non-performing loans of $25.8 million declined to the lowest level in a year, down from $26.0 million in the previous quarter. Excluding outstanding acquired loans, the allowance for loan losses to total loans was 1.38%.        

Net charge-offs were $0.4 million during the second quarter consistent with the prior quarter. The Company recorded provision expense of $0.1 million during the second quarter compared to $0.9 million in the first quarter of 2019 and $1.9 million in the second quarter of last year. The decline in provision expense was driven by a combination of improved asset quality and a decline in loan balances.       

Deposits

Total deposits at June 30, 2019 were $3.01 billion, an increase of $23.8 million since year-end, but a second quarter decline of $33.7 million consistent with seasonal trends. Customer movement of funds from noninterest bearing accounts to interest bearing checking accounts helped drive higher deposit costs. The Company's average rate on cost of funds was 0.76% for the quarter compared to 0.70% in the first quarter and 0.38% in the second quarter of 2018. 

Noninterest Income

Noninterest income for the second quarter of 2019 was $13.6 million compared to $14.6 million in the first quarter. The decrease was primarily driven by the seasonality of the insurance division, which, as expected, declined by $1.8 million. Revenues in other noninterest fee income categories increased by $0.8 million from the prior quarter. Wealth management revenues were slightly lower and assets under management held steady at $4.2 billion.      

Noninterest income increased $5.2 million compared to the second quarter of last year due to a combination of both organic and acquisition growth.

Noninterest Expenses    

Noninterest expense for the second quarter totaled $30.2 million compared to $28.3 million in the first quarter. The current quarter included $2.4 million in acquisition related costs compared to $0.2 million in the prior quarter. In addition, the current quarter included $0.4 million in expense related to a fair value impairment on mortgage servicing rights. Excluding the acquisition related costs, noninterest expenses declined by $0.5 million, which was primarily driven by the cost savings from the Soy Capital system conversion and bank merger.    

Noninterest expense was $9.4 million higher than the second quarter of 2018. The increase is primarily due to the addition of both Soy Capital and a full quarter of First Bank in the current period numbers. The Company's efficiency ratio, on a tax equivalent basis and inclusive of acquisition costs, for the second quarter 2019 was 62.3% compared to 56.7% for the same period last year.

 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 14.82%
Tier 1 capital to risk-weighted assets 13.92%
Common equity tier 1 capital to risk-weighted assets 12.93%
Leverage ratio 11.06%

Capital Markets

The Company maintains a Board approved stock repurchase program that currently has approximately $6.2 million in available repurchase capacity. During the quarter ended June 30, 2019, the Company did not repurchase any shares.

Under the previously announced ‘at-the-market' equity offering, the Company did not sell any shares during the current quarter.         

About Us: First Mid Bancshares, Inc. ("First Mid") is the parent company of First Mid Bank & Trust, N.A., First Mid Insurance Group, Inc. and First Mid Wealth Management Co. Our mission is to fulfill the financial needs of our communities with exceptional personal service, professionalism and integrity, and deliver meaningful value and results for our customers and shareholders.

First Mid is a $3.8 billion community-focused organization that provides a full-suite of financial services including banking, wealth management, brokerage, Ag services, and insurance through a sizeable network of locations throughout Illinois and eastern Missouri and a loan production office in the greater Indianapolis area. Together, our First Mid team takes great pride in their work and their ability to serve our customers well over the last 154 years. 

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, 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
 
  June 30,   December 31,   June 30,
  2019   2018   2018
                   
Assets                  
Cash and cash equivalents $   168,416   $   141,400   $   85,575  
Investment securities     833,763       769,279       688,616  
Loans (including loans held for sale)     2,546,543       2,644,519       2,376,683  
Less allowance for loan losses   (26,359   (26,189    (22,045 )
Net loans     2,520,184       2,618,330       2,354,638  
Premises and equipment, net     59,898       59,117       47,003  
Goodwill and intangibles, net     135,762       139,097       102,618  
Bank owned life insurance     66,347       65,484       51,101  
Other assets     58,471       47,027       39,922  
Total assets $   3,842,841   $   3,839,734   $   3,369,473  
                   
Liabilities and Stockholders' Equity                  
Deposits:                  
Non-interest bearing $   603,823   $   575,784   $   526,117  
Interest bearing     2,408,667       2,412,902       2,144,747  
Total deposits     3,012,490       2,988,686       2,670,864  
Repurchase agreement with customers     152,264       192,330       141,662  
Other borrowings     95,826       127,469       105,083  
Junior subordinated debentures     29,084       29,000       28,792  
Other liabilities     44,219       26,385       11,746  
Total liabilities   3,333,883     3,363,870     2,958,147  
                   
Total stockholders' equity   508,958     475,864     411,326  
Total liabilities and stockholders' equity $ 3,842,841   $ 3,839,734   $ 3,369,473  
           


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,
  2019   2018     2019   2018
Interest income:                
Interest and fees on loans $   31,539   $   25,362     $   63,643   $   46,369
Interest on investment securities 5,436   4,679     10,645   8,760
Interest on federal funds sold & other deposits 596   90     1,334   160
Total interest income   37,571     30,131       75,622     55,289
Interest expense:                
Interest on deposits 4,940   1,670     9,318   2,932
Interest on securities sold under agreements to repurchase 215   65     475   124
Interest on other borrowings 697   593     1,420   976
Interest on subordinated debt 406   349     844   608
Total interest expense   6,258     2,677       12,057     4,640
Net interest income   31,313     27,454       63,565     50,649
Provision for loan losses 91   1,877     1,038   2,932
Net interest income after provision for loan   31,222     25,577       62,527     47,717
Non-interest income:                
Wealth management revenues 3,587   1,599     7,232   3,341
Insurance commissions 3,760   838     9,315   2,325
Service charges 1,959   1,803     3,761   3,438
Securities gains, net 218   881     272   901
Mortgage banking revenues 346   410     585   571
ATM/debit card revenue 2,202   1,860     4,218   3,464
Other 1,516   970     2,844   1,808
Total non-interest income   13,588     8,361       28,227     15,848
Non-interest expense:                
Salaries and employee benefits 15,565   11,057     32,139   21,251
Net occupancy and equipment expense 4,543   3,505     8,998   6,778
Net other real estate owned (income) expense 188   7     241   83
FDIC insurance 197   285     476   566
Amortization of intangible assets 1,823   716     3,179   1,221
Stationary and supplies 264   186     551   397
Legal and professional expense 1,304   1,717     2,498   2,854
Marketing and donations 481   431     935   785
Other 5,822   2,892     9,480   5,235
Total non-interest expense   30,187     20,796       58,497     39,170
Income before income taxes   14,623     13,142       32,257     24,395
Income taxes 3,642   3,105     7,960   5,968
Net income $   10,981   $   10,037     $   24,297   $   18,427
                 
Per Share Information                
Basic earnings per common share $   0.66   $   0.72     $   1.46   $   1.38
Diluted earnings per common share   0.66     0.72       1.45     1.38
Dividends per common share $ 0.36   $ 0.34     $ 0.36   $ 0.34
                 
Weighted average shares outstanding 16,683,194   13,956,674     16,674,646   13,317,395
Diluted weighted average shares outstanding 16,717,974   13,974,048     16,709,426   13,334,698


FIRST MID-ILLINOIS BANCSHARES, INC.
Condensed Consolidated Statements of Income
(In thousands, except per share data, unaudited)
   
  For the Quarter Ended
  June 30,   March 31,   December 31,   September 30,     June 30,
  2019   2019   2018   2018     2018
Interest income:                    
Interest and fees on loans $   31,539   $   32,104   $   30,553   $   28,850     $   25,362
Interest on investment securities 5,436   5,209   4,966   4,511     4,679
Interest on federal funds sold & other deposits 596   738   269   127     90
Total interest income   37,571     38,051     35,788     33,488       30,131
Interest expense:                    
Interest on deposits 4,940   4,378   3,422   2,217     1,670
Interest on securities sold under agreements to repurchase 215   260   134   72     65
Interest on other borrowings 697   723   834   707     593
Interest on subordinated debt 406   438   396   405     349
Total interest expense   6,258     5,799     4,786     3,401       2,677
Net interest income   31,313     32,252     31,002     30,087       27,454
Provision for loan losses 91   947   3,184   2,551     1,877
Net interest income after provision for loan   31,222     31,305     27,818     27,536       25,577
Non-interest income:                    
Wealth management revenues 3,587   3,645   3,540   1,579     1,599
Insurance commissions 3,760   5,555   2,390   877     838
Service charges 1,959   1,802   1,988   2,009     1,803
Securities gains, net 218   54   0   0     881
Mortgage banking revenues 346   239   266   368     410
ATM/debit card revenue 2,202   2,016   2,044   1,979     1,860
Other 1,516   1,328   1,419   1,107     970
Total non-interest income   13,588     14,639     11,647     7,919       8,361
Non-interest expense:                    
Salaries and employee benefits 15,565   16,574   13,952   11,600     11,057
Net occupancy and equipment expense 4,543   4,455   4,225   3,530     3,505
Net other real estate owned (income) expense 188   53   260   (61   7
FDIC insurance 197   279   319   174     285
Amortization of intangible assets 1,823   1,356   1,156   838     716
Stationary and supplies 264   287   238   328     186
Legal and professional expense 1,304   1,194   1,318   1,071     1,717
Marketing and donations 481   454   541   468     431
Other 5,822   3,658   4,311   6,542     2,892
Total non-interest expense   30,187     28,310     26,320     24,490       20,796
Income before income taxes   14,623     17,634     13,145     10,965       13,142
Income taxes 3,642   4,318   3,206   2,731     3,105
Net income $   10,981   $   13,316   $   9,939   $   8,234     $   10,037


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,  
  2019     2019     2018     2018     2018  
                             
Loan Portfolio                             
Construction and land development $   57,069     $   49,179     $   50,619     $   91,355     $   88,481  
Farm loans   229,924       236,864       231,700       191,724       184,887  
1-4 Family residential properties   355,143       362,617       373,518       367,343       378,573  
Multifamily residential properties   167,709       175,903       184,051       100,368       105,948  
Commercial real estate   888,711       905,679       906,850       814,574       803,362  
  Loans secured by real estate   1,698,556       1,730,242       1,746,738       1,565,364       1,561,251  
Agricultural loans   118,216       118,026       135,877       120,770       113,533  
Commercial and industrial loans   530,405       550,853       557,011       540,387       502,211  
Consumer loans   84,907       86,540       91,516       57,248       59,090  
All other loans   114,459       111,333       113,377       116,391       140,598  
Total loans   2,546,543       2,596,994       2,644,519       2,400,160       2,376,683  
                             
Deposit Portfolio                             
Non-interest bearing demand deposits $   603,823     $   628,944     $   575,784     $   493,935     $   526,117  
Interest bearing demand deposits   844,931       828,144       903,426       749,396       781,360  
Savings deposits   438,769       444,619       432,319       397,910       405,287  
Money Market   473,160       483,867       485,388       481,799       434,559  
Time deposits   651,807       660,639       591,769       528,357       523,541  
Total deposits   3,012,490       3,046,213       2,988,686       2,651,397       2,670,864  
                             
Asset Quality                            
Non-performing loans $   25,773     $   25,988     $   29,749     $   27,924     $   24,729  
Non-performing assets   29,380       29,857       32,344       30,065       27,237  
Net charge-offs   436       432       834       757       603  
Allowance for loan losses to non-performing loans 102.27 %   102.76 %   88.03 %   85.37 %   89.15 %
Allowance for loan losses to total loans outstanding 1.04 %   1.03 %   0.99 %   0.99 %   0.93 %
Nonperforming loans to total loans 1.01 %   1.00 %   1.13 %   1.16 %   1.04 %
Nonperforming assets to total assets 0.77 %   0.77 %   0.84 %   0.90 %   0.81 %
                             
Common Share Data                            
Common shares outstanding   16,694,316       16,677,128       16,644,635       15,294,925       15,285,146  
Book value per common share $   30.49     $   29.81     $   28.57     $   27.25     $   26.91  
Tangible book value per common share $   22.35     $   21.57     $   20.22     $   20.58     $   20.20  
Market price of stock $   34.92     $   33.32     $   31.92     $   40.33     $   39.30  
                             
Key Performance Ratios and Metrics                            
End of period earning assets $   3,632,712     $   3,539,175     $   3,491,606     $   3,081,929     $   3,103,956  
Average earning assets   3,470,776       3,516,032       3,307,437       3,090,835       2,949,144  
Average rate on average earning assets (tax equivalent) 4.40 %   4.44 %   4.35 %   4.35 %   4.16 %
Average rate on cost of funds 0.76 %   0.70 %   0.60 %   0.46 %   0.38 %
Net interest margin (tax equivalent) 3.64 %   3.74 %   3.75 %   3.89 %   3.79 %
Return on average assets 1.15 %   1.38 %   1.10 %   0.98 %   1.27 %
Return on average common equity 8.80 %   11.02 %   8.99 %   7.92 %   11.23 %
Efficiency ratio (tax equivalent) 1 62.31 %   56.77 %   57.66 %   61.56 %   56.65 %
Full-time equivalent employees   826       832       818       686       711  
                             
                             
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. 
Note:  Asset Quality metrics as of December 31, 2018 were adjusted to match the disclosures in the 10K, which exclude TDR's from the Soy Capital acquisition. 


FIRST MID-ILLINOIS BANCSHARES, INC.
Net Interest Margin
           
  For the Quarter Ended June 2019
  QTD Average       Average
  Balance   Interest   Rate
INTEREST EARNING ASSETS          
Interest bearing deposits 81,986   555   2.72%
Federal funds sold 708   4   2.27%
Certificates of deposits investments 6,736   37   2.20%
Investment Securities:          
Taxable (total less municipals) 632,548   4,094   2.59%
Tax-exempt (Municipals) 184,838   1,699   3.68%
Loans (net of unearned income) 2,563,960   31,719   4.96%
           
Total interest earning assets 3,470,776   38,108   4.40%
           
NONEARNING ASSETS          
Cash and due from banks 74,459        
Premises and equipment 59,407        
Other nonearning assets 248,349        
Allowance for loan losses (27,165)        
           
Total assets $3,825,826        
           
INTEREST BEARING LIABILITIES          
Demand deposits 1,284,511   1,645   0.51%
Savings deposits 442,772   155   0.14%
Time deposits 658,723   3,140   1.91%
Total interest bearing deposits 2,386,006   4,940   0.83%
Repurchase agreements 153,872   215   0.56%
FHLB advances 108,044   696   2.58%
Federal funds purchased 115   1   3.49%
Subordinated debt 29,056   406   5.60%
Other borrowings 550   0   0.00%
Total borrowings 291,637   1,318   1.81%
Total interest bearing liabilities 2,677,643   6,258   0.94%
           
NONINTEREST BEARING LIABILITIES          
Demand deposits 606,170   Average cost of funds 0.76%
Other liabilities 43,136        
Stockholders' equity 498,877        
           
Total liabilities & stockholders' equity $3,825,826        
           
Net Interest Earnings / Spread     $31,850   3.46%
           
Impact of Non-Interest Bearing Funds         0.18%
           
Tax effected yield on interest earning assets       3.64%


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,
  2019     2019     2018     2018     2018
                           
Net interest income as reported $   31,313     $   32,252     $   31,002     $   30,087     $   27,454  
Net interest income, (tax equivalent)   31,850       32,800       31,546       30,604       27,951  
Average earning assets   3,470,776       3,516,032       3,307,437       3,090,835       2,949,144  
Net interest margin (tax equivalent) 1   3.64 %     3.74 %     3.75 %     3.89 %     3.79% %
                           
                           
Common stockholder's equity $   508,958     $   497,152     $   475,864     $   416,833     $   411,326  
Goodwill and intangibles, net   135,762       137,461       139,097       102,014       102,618  
Common shares outstanding   16,695       16,677       16,645       15,295       15,285  
Tangible Book Value per common share $   22.35     $   21.57     $   20.22     $   20.58     $   20.20  
                           
                           
Common equity tier 1 capital  $   379,581     $   372,731     $   357,690     $   335,552     $   325,572  
Risk weighted assets   2,935,236       2,964,638       3,030,259       2,662,706       2,678,691  
Common equity tier 1 capital to risk weighted assets  2   12.93 %     12.57 %     11.80 %     12.60 %     12.15 %
                           
                           
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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