FMBH - First Mid-Illinois Bancshares Inc. Announces Third Quarter 2018 Results

MATTOON, Ill., Oct. 25, 2018 (GLOBE NEWSWIRE) -- First Mid-Illinois Bancshares, Inc. (NASDAQ: FMBH) (the “Company”) today announced its financial results for the quarter and year-to-date period ended September 30, 2018.

Third Quarter Highlights

• Record quarterly net income, when adjusted for merger related costs
• Solid loan growth of 1.3% for the quarter, excluding First Bank & Trust, IL (“First Bank”) acquired loans
• Completed the integration and merger of First Bank into First Mid
• Board of Directors declared its next semi-annual dividend at an approximately 6% increase       

“The third quarter was another solid period of financial results reflecting the first full quarter of reported numbers with First Bank included,” said Joe Dively, Chairman and Chief Executive Officer.  “Our results represent the continued success in executing on our strategic initiatives, including driving growth both organically and through smart acquisitions.”

“In August, we successfully completed the integration and merger of First Bank into First Mid.  I am pleased with how the organizations have come together with a shared focused on providing exceptional service to our customers.  The merger costs and synergies are on target with our original projections for the transaction.”

“With respect to the SCB Bancorp, Inc. (“Soy Capital”) acquisition, we have received the necessary regulatory and Soy Capital shareholder approvals to move forward with closing the transaction.  We have scheduled the closing for November 15^th.  I am excited about bringing the two organizations together with the expansion of products and services for our customers and the diversification and financial benefits to our shareholders,” Dively concluded.    

Net Interest Income

Net interest income for the third quarter of 2018 increased by $2.6 million, or 9.6% compared to the second quarter of 2018.  The increase was primarily driven by loan growth and higher yields as well as the inclusion of First Bank for one additional month in the current quarter.  The third quarter included $2.5 million in total loan accretion income, which included $1.0 million in scheduled accretion and $1.5 million in accelerated accretion.  The previous quarter included $1.2 million in total loan accretion income.    

In comparison to the third quarter of 2017, net interest income increased by $7.2 million, or 31.5%.  The increase was primarily attributable to the addition of First Bank as well as growth in the loan portfolio and higher yields that were partially offset by higher funding costs.   

Net Interest Margin

Net interest margin, on a tax equivalent basis, was 3.89% for the third quarter compared to 3.79% in the prior quarter.  The increase from the second quarter of 2018 was driven by higher yields on the loan portfolio and increased accretion income, partially offset by higher funding costs.  For the quarter, and excluding accretion income, the increase in loan yields outpaced the increase in funding costs.

In comparison to the third quarter last year, the net interest margin increased by 0.21%.  The yield on earning assets increased by 0.39%, while the overall cost of funding increased by 0.18%.         

Loan Portfolio

Total loans increased by $23.5 million, or 1.0%, during the quarter.  When excluding the acquired loans from First Bank, total loans increased by 1.3% in the quarter.  The growth in the third quarter was diversified by market and primarily in the categories of commercial real estate, commercial and industrial, and agriculture.  Excluding accretion income, loan yields increased by nine basis points in the quarter to 4.43%.    

Loans increased by $532.6 million when compared to third quarter last year.  The increase was a combination of strong organic growth over the last twelve months and the addition of loans from the First Bank acquisition.      

Asset Quality

Asset quality measures were generally consistent with the prior quarter with reported asset quality metrics impacted by the purchase accounting tied to the First Bank acquisition.  At September 30, 2018, nonperforming loans were 1.2% of total loans.  Allowance for loan losses at quarter end was 0.99% of total loans, and the allowance for loan losses to non-performing loans was 85.4%.  Non-performing loans were $27.9 million.      

Net charge-offs were $0.8 million during the third quarter compared to $0.6 million in the prior quarter.  The Company recorded a provision for loan losses of $2.5 million during the third quarter compared to $1.9 million in the second quarter and $1.5 million in the third quarter of last year.         

Deposits

Total deposits ended the period at $2.65 billion, representing a decrease of $19.5 million in the quarter.  Similar to the same period in prior years, the third quarter has historically had seasonal declines in deposits due to the nature of some of the Company’s business customers.  The Company’s average rate on cost of funds was 0.46% for the quarter compared to 0.38% in the second quarter.  The increase was due to one additional month of First Bank, which carried a higher funding cost, and the continued rise in interest rates. 

Deposits increased by $433.9 million when compared to the third quarter last year.  The increase was driven by a combination of organic growth and the addition of First Bank.

Noninterest Income

Noninterest income for the third quarter of 2018 was $7.9 million compared to $8.4 million in the second quarter.  Excluding the $0.8 million gain on the sale of a trust preferred security in the second quarter, noninterest income increased by $0.3 million.  The increase in the period was primarily attributable to higher service charge income and one additional month of First Bank. 

In comparison to the third quarter of 2017, noninterest income increased by $0.3 million.  The increase from last year was attributable to the addition of First Bank and higher brokerage and insurance revenues.     

Noninterest Expenses    

Noninterest expense for the third quarter totaled $24.5 million compared to $20.8 million in the second quarter.  The increase in the period was primarily attributable to the additional month of First Bank and the associated merger related costs tied to the completion of the bank merger and system conversion in the quarter.  Acquisition related costs totaled $4.0 million in the current quarter compared to $0.9 million in the second quarter.  The Company’s efficiency ratio, on a tax equivalent basis, for the third quarter 2018 was 61.56%, which includes acquisition related costs.     

In comparison to the third quarter of 2017, noninterest expenses increased $6.6 million.  The increase was primarily attributable to the addition of First Bank and higher acquisition related costs.  

Regulatory Capital Levels and Dividend

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

On October 23, 2018, the Company’s Board of Directors declared its next semi-annual dividend at $0.36 per share, which represents an increase of approximately 6%.  The dividend is payable on November 14^th for shareholders of record as of November 7^th.

Capital

During the third 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 and First Mid Wealth Management.  First Mid Bank & Trust was first chartered in 1865 and has since grown into a $3.4 billion community-focused organization that provides financial services through a network of 57 banking centers in 42 Illinois and Missouri communities 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 and Soy Capital, such as discussions of First Mid’s and Soy Capital’s pricing and fee trends, credit quality and outlook, liquidity, new business results, expansion plans, anticipated expenses and planned schedules. First Mid and Soy Capital intend 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 and Soy Capital, 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 proposed transactions between First Mid and 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; the failure to satisfy other conditions to completion of the proposed transactions, including receipt of required regulatory and other approvals; the failure of the proposed transactions to close for any other reason; the effect of the announcement of the transaction on customer relationships and operating results; the possibility that the transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events; changes in interest rates; general economic conditions and those in the market areas of First Mid and Soy Capital; 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 and Soy Capital’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 Soy Capital; 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