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

October, 24 2019 08:00 AM First Mid Bancshares Inc.

MATTOON, Ill., Oct. 24, 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 September 30, 2019.

Highlights

Quarterly net income of $11.7 million, or $0.70 diluted earnings per share
Strong loan growth for the quarter of $77.0 million, or 3.0%
Repurchased over $1.1 million worth of outstanding shares during the quarter
Redeemed $10.3 million trust preferred debt issuance in early October
Board approves 11.1% increase to December semi-annual dividend

“The second half of the year started very strong with 3.0% loan growth in the quarter,” said Joe Dively, Chairman and Chief Executive Officer. “Early signs for the fourth quarter are continuing on a positive trend helping make up for the softer first half of the year. Despite higher than normal provision expense partially tied to loan growth, we delivered solid earnings for the third quarter. In addition, we executed on our capital management strategy with a combination of stock repurchases and debt redemption.”

“Noninterest income continues to be a differentiator for us representing over 30% of our year-to-date revenues. A prime example of that success was the recent recognition where First Mid Insurance Group was named a top performing agency by the Independent Insurance Agents and Brokers of America. In addition, our lending, wealth management and insurance teams have never worked more closely to address the needs of the combined customer base,” Dively concluded.

Net Interest Income

Net interest income for the third quarter of 2019 decreased by $0.2 million, or 0.6% compared to the second quarter of 2019. While interest income was flat, interest expenses increased on higher deposit costs. The current quarter included $2.6 million in accretion income, which was flat compared to the prior quarter.

In comparison to the third quarter of 2018, net interest income increased by $1.0 million, or 3.4%. The increase was primarily attributable to the acquisition of SCB Bancorp, Inc. (“Soy Capital”), which closed on November 15, 2018.

Net Interest Margin

Net interest margin, on a tax equivalent basis, was 3.60% for the third quarter of 2019 compared to 3.64% in the prior quarter. The decrease was primarily driven by higher funding costs from seasonal movement of demand deposit balances and higher CD costs. Loan yields declined one basis point on a reduction to floating rate loans from the Federal Reserve rate cuts in the quarter, which was almost completely offset by loan growth. Given our strong cash and capital position, the Company redeemed its most expensive trust preferred debt issuance in early October. The $10.3 million borrowing was at 3-month LIBOR plus 280 basis points and the redemption will help lower interest expense moving forward.

In comparison to the third quarter of 2018, net interest margin decreased by 29 basis points. The year-over-year decrease in the ratio was primarily due to the inclusion of Soy Capital’s lower net interest margin and higher funding costs in a more competitive and challenging interest rate environment.

Loan Portfolio

Total loans ended the quarter at $2.62 billion, representing an increase of $77.0 million, or 3.0% compared to the prior quarter. The increase was primarily in commercial real estate and commercial and industrial loans. With respect to agriculture operating loans, which represent 4.6% of outstanding loans, First Mid continues to monitor cash flows closely. Harvest is underway and initial signs reflect cash flows in line with estimates developed early in the spring for a majority of the Company’s borrowers. Generally, while yields are lower, prices and subsidies are higher. First Mid has minimal exposure to the cattle and dairy sector.

Loans increased by $223.4 million, or 9.3%, compared to the third quarter of last year through a combination of both organic and acquisition related growth.

Asset Quality

At September 30, 2019, nonperforming loans were 0.92% of total loans, allowance for loan losses was 1.02% of total loans, and the allowance for loan losses to non-performing loans was 110.5%. Non-performing loans declined from the previous quarter by $1.6 million to $24.2 million. Excluding outstanding acquired loans, the allowance for loan losses to total loans was 1.33%.

Net charge-offs were $2.3 million during the third quarter with $0.7 million of this total tied to a single credit. This was an acquired loan and the offsetting discount was accreted to income. The Company recorded provision expense of $2.7 million during the third quarter compared to $0.1 million in the second quarter of 2019 and $2.6 million in the third quarter of last year. Excluding the previously mentioned individual charge-off, the increase in provision expense was mostly driven by loan growth.

Deposits

Total deposits at September 30, 2019 were $2.99 billion, a decrease of $23.6 million in the quarter. Repurchase agreements with customers increased by $22.3 million in the third quarter. Despite the Company reducing rates in certain products based on the Federal Reserve rate cuts, it has been successful in maintaining deposit relationships. The Company’s average rate on cost of funds was 0.79% for the quarter compared to 0.76% in the second quarter and 0.46% in the third quarter of 2018.

Noninterest Income

Noninterest income for the third quarter of 2019 was $12.9 million compared to $13.6 million in the second quarter. The decrease was primarily driven by the seasonality of the insurance division and the wealth management real estate brokerage sales. Revenues in other noninterest fee income categories increased mostly due to mortgage banking.

Noninterest income increased $5.0 million compared to the third quarter of last year due to a combination of both organic and acquisition growth.

Noninterest Expenses

Noninterest expense for the third quarter totaled $25.9 million compared to $30.2 million in the second quarter. The second quarter included $2.4 million in acquisition related costs and $0.4 million in expense related to a fair value impairment on mortgage servicing rights. Excluding these items, noninterest expenses decreased $1.5 million in the period, primarily tied to the full quarter of cost saves for the Soy Capital acquisition, lower noninterest income, and a small bank assessment credit from the FDIC.

Noninterest expense was $1.4 million higher than the third quarter of 2018. The increase is primarily due to the addition of Soy Capital, partially offset by lower acquisition costs. The Company’s efficiency ratio, on a tax equivalent basis, for the third quarter 2019 was 54.7% compared to 61.6% for the same period last year.

Regulatory Capital Levels and Dividend

The Company’s capital levels remained comfortably above the “well capitalized” levels and ended the period as follows:

Total capital to risk-weighted assets
Tier 1 capital to risk-weighted assets
Common equity tier 1 capital to risk-weighted assets
Leverage ratio

15.30%
14.39%
13.39%
11.38%

The Company’s Board of Directors approved its next semi-annual dividend in the amount of $0.40, representing an increase of 11.1%. The dividend is payable on December 13, 2019 for shareholders of record on November 29, 2019.

Capital Markets

On August 16, 2019, the Company adopted a repurchase plan under Rule 10b5-1 and Rule 10b-18 of the Securities Exchange Act of 1934, as amended. During the quarter, the Company repurchased $1.1 million, or 35,427 shares. The Company has approximately $5.1 million in remaining capacity under the plan.

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 BANCSHARES, INC.
Condensed Consolidated Balance Sheets
(In thousands, unaudited)



As of






September 30,

December 31,

September 30,



2019

2018

2018








Assets







Cash and cash equivalents

$
108,229

$
141,400

$
64,485
Investment securities


811,573

769,279

670,672
Loans (including loans held for sale)

2,623,558

2,644,519

2,400,160
Less allowance for loan losses

(26,741)

(26,189)

(23,839)
Net loans


2,596,817

2,618,330

2,376,321
Premises and equipment, net

59,724

59,117

47,327
Goodwill and intangibles, net

134,461

139,097

102,014
Bank owned life insurance

66,786

65,484

51,443
Other assets


60,139

47,027

43,215
Total assets


$
3,837,729

$
3,839,734

$
3,355,477








Liabilities and Stockholders' Equity






Deposits:







Non-interest bearing


$
596,518

$
575,784

$
493,935
Interest bearing


2,392,407

2,412,902

2,157,462
Total deposits


2,988,925

2,988,686

2,651,397
Repurchase agreement with customers

174,530

192,330

98,875
Other borrowings


80,862

127,469

150,236
Junior subordinated debentures

29,126

29,000

28,958
Other liabilities


42,327

26,385

9,178
Total liabilities


3,315,770

3,363,870

2,938,644








Total stockholders' equity

521,959

475,864

416,833
Total liabilities and stockholders' equity

$
3,837,729

$
3,839,734

$
3,355,477

FIRST MID BANCSHARES, INC.
Condensed Consolidated Statements of Income
(In thousands, except per share data, unaudited)














Three Months Ended


Nine Months Ended



September 30,


September 30,



2019

2018


2019

2018
Interest income:










Interest and fees on loans


$
31,976

$
28,850


$
95,619

$
75,219
Interest on investment securities

5,297

4,511


15,942

13,271
Interest on federal funds sold & other deposits

305

127


1,639

287
Total interest income


37,578

33,488


113,200

88,777
Interest expense:










Interest on deposits


5,174

2,217


14,492

5,149
Interest on securities sold under agreements to repurchase
196

72


671

196
Interest on other borrowings


691

707


2,111

1,683
Interest on subordinated debt


392

405


1,236

1,013
Total interest expense


6,453

3,401


18,510

8,041
Net interest income


31,125

30,087


94,690

80,736
Provision for loan losses


2,658

2,551


3,696

5,483
Net interest income after provision for loan

28,467

27,536


90,994

75,253
Non-interest income:










Wealth management revenues


3,311

1,579


10,543

4,920
Insurance commissions


3,242

877


12,557

3,202
Service charges


2,091

2,009


5,852

5,447
Securities gains, net


51

0


323

901
Mortgage banking revenues


582

368


1,167

939
ATM/debit card revenue


2,173

1,979


6,391

5,443
Other


1,467

1,107


4,311

2,915
Total non-interest income


12,917

7,919


41,144

23,767
Non-interest expense:










Salaries and employee benefits

14,497

11,600


46,636

32,851
Net occupancy and equipment expense

4,377

3,530


13,375

10,308
Net other real estate owned (income) expense

172

(61)


413

22
FDIC insurance


(87)

174


389

740
Amortization of intangible assets

1,373

838


4,552

2,059
Stationary and supplies


284

328


835

725
Legal and professional expense

1,215

1,071


3,713

3,925
Marketing and donations


523

468


1,458

1,253
Other


3,540

6,542


13,020

11,777
Total non-interest expense


25,894

24,490


84,391

63,660
Income before income taxes


15,490

10,965


47,747

35,360
Income taxes


3,820

2,731


11,780

8,699
Net income


$
11,670

$
8,234


$
35,967

$
26,661











Per Share Information










Basic earnings per common share

$
0.70

$
0.54


$
2.16

$
1.91
Diluted earnings per common share

0.70

0.54


2.15

1.90
Dividends per common share


-

-


$
0.36

$
0.34











Weighted average shares outstanding

16,684,395

15,290,539


16,677,932

13,982,389
Diluted weighted average shares outstanding

16,719,175

15,306,218


16,712,712

13,999,159

FIRST MID BANCSHARES, INC.
Condensed Consolidated Statements of Income
(In thousands, except per share data, unaudited)




















For the Quarter Ended





September 30

June 30,

March 31,

December 31,

September 30,






2019

2019

2019

2018

2018
Interest income:














Interest and fees on loans





$
31,976

$
31,539

$
32,104

$
30,553

$
28,850
Interest on investment securities




5,297

5,436

5,209

4,966

4,511
Interest on federal funds sold & other deposits




305

596

738

269

127
Total interest income





37,578

37,571

38,051

35,788

33,488
Interest expense:














Interest on deposits





5,174

4,940

4,378

3,422

2,217
Interest on securities sold under agreements to repurchase



196

215

260

134

72
Interest on other borrowings





691

697

723

834

707
Interest on subordinated debt





392

406

438

396

405
Total interest expense





6,453

6,258

5,799

4,786

3,401
Net interest income





31,125

31,313

32,252

31,002

30,087
Provision for loan losses





2,658

91

947

3,184

2,551
Net interest income after provision for loan




28,467

31,222

31,305

27,818

27,536
Non-interest income:














Wealth management revenues





3,311

3,587

3,645

3,540

1,579
Insurance commissions





3,242

3,760

5,555

2,390

877
Service charges





2,091

1,959

1,802

1,988

2,009
Securities gains, net





51

218

54

0

0
Mortgage banking revenues





582

346

239

266

368
ATM/debit card revenue





2,173

2,202

2,016

2,044

1,979
Other





1,467

1,516

1,328

1,419

1,107
Total non-interest income





12,917

13,588

14,639

11,647

7,919
Non-interest expense:














Salaries and employee benefits




14,497

15,565

16,574

13,952

11,600
Net occupancy and equipment expense




4,377

4,543

4,455

4,225

3,530
Net other real estate owned (income) expense




172

188

53

260

(61)
FDIC insurance





(87)

197

279

319

174
Amortization of intangible assets




1,373

1,823

1,356

1,156

838
Stationary and supplies





284

264

287

238

328
Legal and professional expense




1,215

1,304

1,194

1,318

1,071
Marketing and donations





523

481

454

541

468
Other





3,540

5,822

3,658

4,311

6,542
Total non-interest expense





25,894

30,187

28,310

26,320

24,490
Income before income taxes





15,490

14,623

17,634

13,145

10,965
Income taxes





3,820

3,642

4,318

3,206

2,731
Net income





$
11,670

$
10,981

$
13,316

$
9,939

$
8,234

FIRST MID BANCSHARES, INC.
Consolidated Financial Highlights and Ratios
(Dollars in thousands, except per share data)
(Unaudited)



As of and for the Quarter Ended



September 30,

June 30,

March 31,

December 31,

September 30,



2019

2019

2019

2018

2018












Loan Portfolio











Construction and land development

$
68,821

$
57,069

$
49,179

$
50,619

$
91,355
Farm loans


229,715

229,924

236,864

231,700

191,724
1-4 Family residential properties

347,370

355,143

362,617

373,518

367,343
Multifamily residential properties

154,859

167,709

175,903

184,051

100,368
Commercial real estate

954,992

888,711

905,679

906,850

814,574
Loans secured by real estate

1,755,757

1,698,556

1,730,242

1,746,738

1,565,364
Agricultural loans


121,650

118,216

118,026

135,877

120,770
Commercial and industrial loans

543,937

530,405

550,853

557,011

540,387
Consumer loans


83,171

84,907

86,540

91,516

57,248
All other loans


119,043

114,459

111,333

113,377

116,391
Total loans


2,623,558

2,546,543

2,596,994

2,644,519

2,400,160












Deposit Portfolio











Non-interest bearing demand deposits

$
596,518

$
603,823

$
628,944

$
575,784

$
493,935
Interest bearing demand deposits

899,763

844,931

828,144

903,426

749,396
Savings deposits


431,497

438,769

444,619

432,319

397,910
Money Market


435,517

473,160

483,867

485,388

481,799
Time deposits


625,630

651,807

660,639

591,769

528,357
Total deposits


2,988,925

3,012,490

3,046,213

2,988,686

2,651,397












Asset Quality











Non-performing loans


$
24,203

$
25,773

$
25,988

$
29,749

$
27,925
Non-performing assets

28,645

29,380

29,857

32,344

30,065
Net charge-offs


2,276

436

432

834

757
Allowance for loan losses to non-performing loans

110.49%

102.27%

102.76%

88.03%

85.37%
Allowance for loan losses to total loans outstanding

1.02%

1.04%

1.03%

0.99%

0.99%
Nonperforming loans to total loans

0.92%

1.01%

1.00%

1.13%

1.16%
Nonperforming assets to total assets

0.75%

0.77%

0.77%

0.84%

0.90%












Common Share Data











Common shares outstanding

16,663,095

16,694,316

16,677,128

16,644,635

15,294,925
Book value per common share

$
31.32

$
30.49

$
29.81

$
28.57

$
27.25
Tangible book value per common share

23.25

22.35

21.57

20.22

20.58
Market price of stock


34.62

34.92

33.32

31.92

40.33












Key Performance Ratios and Metrics










End of period earning assets

$
3,444,775

$
3,447,695

$
3,539,175

$
3,491,606

$
3,081,929
Average earning assets

3,444,088

3,470,776

3,516,032

3,307,437

3,090,835
Average rate on average earning assets (tax equivalent)
4.39%

4.40%

4.44%

4.35%

4.35%
Average rate on cost of funds

0.79%

0.76%

0.70%

0.60%

0.46%
Net interest margin (tax equivalent)

3.60%

3.64%

3.74%

3.75%

3.89%
Return on average assets

1.22%

1.15%

1.38%

1.10%

0.98%
Return on average common equity

9.04%

8.80%

11.02%

8.99%

7.92%
Efficiency ratio (tax equivalent) ¹

54.69%

62.31%

56.77%

57.66%

61.56%
Full-time equivalent employees

830

826

832

818

686
























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. Net-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 BANCSHARES, INC.
Net Interest Margin
(In thousands, unaudited)



For the Quarter Ended September 2019



QTD Average



Average



Balance

Interest

Rate

INTEREST EARNING ASSETS






Interest bearing deposits
$
33,991

$
268

3.13%

Federal funds sold
921

4

1.72%

Certificates of deposits investments
5,685

33

2.30%

Investment Securities:






Taxable (total less municipals)
638,628

3,958

2.48%

Tax-exempt (Municipals)
186,962

1,695

3.63%

Loans (net of unearned income)
2,577,901

32,154

4.95%









Total interest earning assets
3,444,088

38,112

4.39%









NONEARNING ASSETS






Cash and due from banks
92,106





Premises and equipment
59,951





Other nonearning assets
248,392





Allowance for loan losses
(26,726)













Total assets

$
3,817,811













INTEREST BEARING LIABILITIES






Demand deposits
$
1,291,555

$
1,803

0.55%

Savings deposits
436,002

156

0.14%

Time deposits

646,346

3,215

1.97%

Total interest bearing deposits
2,373,903

5,174

0.86%

Repurchase agreements
150,026

196

0.52%

FHLB advances
105,784

683

2.56%

Federal funds purchased
1,247

8

2.55%

Subordinated debt
29,098

392

5.34%

Other borrowings
0

0

0.00%

Total borrowings
286,155

1,279

1.77%

Total interest bearing liabilities
2,660,058

6,453

0.96%









NONINTEREST BEARING LIABILITIES






Demand deposits
597,524

Average cost of funds
0.79%

Other liabilities
44,126





Stockholders' equity
516,103













Total liabilities & stockholders' equity
$
3,817,811













Net Interest Earnings / Spread


$
31,659

3.43%









Impact of Non-Interest Bearing Funds




0.17%









Tax effected yield on interest earning assets




3.60%

FIRST MID BANCSHARES, INC.
Reconciliation of Non-GAAP Financial Measures
(In thousands, unaudited)



















As of and for the Quarter Ended





September 30,

June 30,

March 31,

December 31,

September 30,





2019

2019

2019

2018

2018














Net interest income as reported


$
31,125

$
31,313

$
32,252

$
31,002

$
30,087
Net interest income, (tax equivalent)


31,659

31,850

32,800

31,546

30,604
Average earning assets



3,444,088

3,470,776

3,516,032

3,307,437

3,090,835
Net interest margin (tax equivalent) ¹


3.60%

3.64%

3.74%

3.75%

3.89%




























Common stockholder's equity


$
521,959

$
508,958

$
497,152

$
475,864

$
416,833
Goodwill and intangibles, net


134,461

135,762

137,461

139,097

102,014
Common shares outstanding



16,663

16,695

16,677

16,645

15,295
Tangible Book Value per common share


$
23.25

$
22.35

$
21.57

$
20.22

$
20.58




























Common equity tier 1 capital


$
391,429

$
379,581

$
372,731

$
357,690

$
335,552
Risk weighted assets



2,923,245

2,935,236

2,964,638

3,030,259

2,662,706
Common equity tier 1 capital to risk weighted assets ²

13.39%

12.93%

12.57%

11.80%

12.60%




























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% 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.

Company Name:	First Mid Bancshares Inc.
Stock Symbol:	FMBH
Market:	NASDAQ
Website:	firstmid.com

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