FMBH - First Mid Bancshares Inc. Announces Second Quarter 2019 Results

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: 

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 –