Press Release

First Mid Bancshares, Inc. Announces Second Quarter 2019 Results

Company Release - 7/25/2019 8:30 AM ET

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 assets14.82%
Tier 1 capital to risk-weighted assets13.92%
Common equity tier 1 capital to risk-weighted assets12.93%
Leverage ratio11.06%

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
[email protected]

– 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 securities5,436 4,679  10,645 8,760
Interest on federal funds sold & other deposits596 90  1,334 160
Total interest income  37,571   30,131    75,622   55,289
Interest expense:        
Interest on deposits4,940 1,670  9,318 2,932
Interest on securities sold under agreements to repurchase215 65  475 124
Interest on other borrowings697 593  1,420 976
Interest on subordinated debt406 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 losses91 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 revenues3,587 1,599  7,232 3,341
Insurance commissions3,760 838  9,315 2,325
Service charges1,959 1,803  3,761 3,438
Securities gains, net218 881  272 901
Mortgage banking revenues346 410  585 571
ATM/debit card revenue2,202 1,860  4,218 3,464
Other1,516 970  2,844 1,808
Total non-interest income  13,588   8,361    28,227   15,848
Non-interest expense:        
Salaries and employee benefits15,565 11,057  32,139 21,251
Net occupancy and equipment expense4,543 3,505  8,998 6,778
Net other real estate owned (income) expense188 7  241 83
FDIC insurance197 285  476 566
Amortization of intangible assets1,823 716  3,179 1,221
Stationary and supplies264 186  551 397
Legal and professional expense1,304 1,717  2,498 2,854
Marketing and donations481 431  935 785
Other5,822 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 taxes3,642 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 outstanding16,683,194 13,956,674  16,674,646 13,317,395
Diluted weighted average shares outstanding16,717,974 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 securities5,436 5,209 4,966 4,511  4,679
Interest on federal funds sold & other deposits596 738 269 127  90
Total interest income  37,571   38,051   35,788   33,488    30,131
Interest expense:          
Interest on deposits4,940 4,378 3,422 2,217  1,670
Interest on securities sold under agreements to repurchase215 260 134 72  65
Interest on other borrowings697 723 834 707  593
Interest on subordinated debt406 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 losses91 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 revenues3,587 3,645 3,540 1,579  1,599
Insurance commissions3,760 5,555 2,390 877  838
Service charges1,959 1,802 1,988 2,009  1,803
Securities gains, net218 54 0 0  881
Mortgage banking revenues346 239 266 368  410
ATM/debit card revenue2,202 2,016 2,044 1,979  1,860
Other1,516 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 benefits15,565 16,574 13,952 11,600  11,057
Net occupancy and equipment expense4,543 4,455 4,225 3,530  3,505
Net other real estate owned (income) expense188 53 260 (61 7
FDIC insurance197 279 319 174  285
Amortization of intangible assets1,823 1,356 1,156 838  716
Stationary and supplies264 287 238 328  186
Legal and professional expense1,304 1,194 1,318 1,071  1,717
Marketing and donations481 454 541 468  431
Other5,822 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 taxes3,642 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 loans102.27% 102.76% 88.03% 85.37% 89.15%
Allowance for loan losses to total loans outstanding1.04%  1.03%  0.99%  0.99%  0.93%
Nonperforming loans to total loans1.01%  1.00%  1.13%  1.16%  1.04%
Nonperforming assets to total assets0.77%  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 funds0.76%  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 assets1.15%  1.38%  1.10%  0.98%  1.27%
Return on average common equity8.80%  11.02%  8.99%  7.92%  11.23%
Efficiency ratio (tax equivalent) 162.31%  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 deposits81,986 555 2.72%
Federal funds sold708 4 2.27%
Certificates of deposits investments6,736 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 assets3,470,776 38,108 4.40%
      
NONEARNING ASSETS     
Cash and due from banks74,459    
Premises and equipment59,407    
Other nonearning assets248,349    
Allowance for loan losses(27,165)    
      
Total assets$3,825,826    
      
INTEREST BEARING LIABILITIES     
Demand deposits1,284,511 1,645 0.51%
Savings deposits442,772 155 0.14%
Time deposits658,723 3,140 1.91%
Total interest bearing deposits2,386,006 4,940 0.83%
Repurchase agreements153,872 215 0.56%
FHLB advances108,044 696 2.58%
Federal funds purchased115 1 3.49%
Subordinated debt29,056 406 5.60%
Other borrowings550 0 0.00%
Total borrowings291,637 1,318 1.81%
Total interest bearing liabilities2,677,643 6,258 0.94%
      
NONINTEREST BEARING LIABILITIES     
Demand deposits606,170 Average cost of funds0.76%
Other liabilities43,136    
Stockholders' equity498,877    
      
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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Source: First Mid Bancshares, Inc.
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