CHAMPAIGN, Ill., July 28, 2020 (GLOBE NEWSWIRE) -- (Nasdaq: BUSE)
Message from our President & CEO
Second Quarter Financial ResultsThe net income for First Busey Corporation (“First Busey” or the “Company”) for the second quarter of 2020 was $25.8 million, or $0.47 per diluted common share, as compared to $15.4 million, or $0.28 per diluted common share, for the first quarter of 2020 and $24.1 million, or $0.43 per diluted common share, for the second quarter of 2019. Adjusted net income1 for the second quarter of 2020 was $26.2 million, or $0.48 per diluted common share, as compared to $15.5 million, or $0.28 per diluted common share, for the first quarter of 2020 and $29.5 million, or $0.53 per diluted common share, for the second quarter of 2019. Pre-provision net revenue1 for the second quarter of 2020 was $45.4 million as compared to $35.8 million for the first quarter of 2020 and $34.3 million for the second quarter of 2019. Adjusted pre-provision net revenue1 for the second quarter of 2020 was $46.4 million as compared to $38.2 million for the first quarter of 2020 and $42.8 million for the second quarter of 2019. For the second quarter of 2020, annualized return on average assets and annualized return on average tangible common equity1 were 1.00% and 12.02%, respectively. Based on adjusted net income1, annualized return on average assets was 1.02% and annualized return on average tangible common equity1 was 12.20% for the second quarter of 2020.
The Company’s performance was solid during the quarter as it continued to navigate the Coronavirus disease 2019 ("COVID-19") pandemic and record appropriate reserves. During the quarter, due to Paycheck Protection Program ("PPP") loans and other factors, the Company’s total assets exceeded $10 billion. If the Company remains over $10 billion in assets at year-end, it will begin to face limitations on interchange fees and heightened supervision and regulation in 2021. In future quarters, COVID-19 is expected to have a complex and continued adverse impact on the economy, the banking industry and First Busey, all subject to a high degree of uncertainty as it relates to both timing and severity. Primary areas of potential future impact to the Company may include further margin compression, increased provision expense, lower wealth management and customer service fees and a deterioration in asset quality.
On January 1, 2020, the Company adopted ASU 2016-13 (Topic 326), “Measurement of Credit Losses on Financial Instruments,” commonly referenced as the Current Expected Credit Loss (“CECL”) model. Upon adoption of CECL, the Company recognized a $16.8 million increase in its allowance for credit losses, substantially attributable to the remaining loan fair value marks on prior acquisitions, and a $5.5 million increase in its reserve for unfunded commitments. Under accounting rules, the reserve for unfunded commitments is carried on the balance sheet in other liabilities rather than as a component of the allowance for credit losses. These one-time increases, net of tax, were $15.9 million and recorded as an adjustment to beginning retained earnings. Ongoing impacts of the CECL methodology will be dependent upon changes in economic conditions and forecasts, originated and acquired loan portfolio composition, credit performance trends, portfolio duration, and other factors. During the second quarter of 2020, the Company recorded provision for credit losses of $12.9 million and provision for unfunded commitments of $0.6 million primarily as a result of economic factors around COVID-19. The allowance increased from $53.7 million at December 31, 2019, to $84.4 million at March 31, 2020, to $96.0 million at June 30, 2020, representing 1.33% of portfolio loans outstanding, 1.48% of portfolio loans excluding PPP loans, and 378.43% of non-performing loans at June 30, 2020.
The Company views certain non-operating items, including acquisition-related and restructuring charges, as adjustments to net income reported under U.S. generally accepted accounting principles (“GAAP”). Non-operating pretax adjustments for the second quarter of 2020 were $0.1 million of expenses related to acquisitions and $0.3 million of restructuring expenses. The Company believes that non-GAAP measures (including adjusted pre-provision net revenue, adjusted net income, adjusted earnings per share, adjusted return on average assets, adjusted net interest margin, adjusted efficiency ratio, tangible book value, tangible book value per share and return on average tangible common equity), facilitate the assessment of its financial results and peer comparability. A reconciliation of these non-GAAP measures is included in tabular form at the end of this release.
COVID-19 UpdateFirst Busey continues to operate as an essential community resource during these unprecedented times resulting from COVID-19. The Company entered this crisis from a position of strength and remains resolute in its focus on serving its customers, communities and associates while protecting its balance sheet.
1 A Non-GAAP financial measure. See “Non-GAAP Financial Information” below for reconciliation.
To alleviate some of the financial hardships qualifying customers may face as a result of COVID-19, First Busey is offering an internal Financial Relief Program. The program includes options for short-term loan payment deferrals and certain fee waivers. As of June 30, 2020, the Company had 1,122 commercial loan payment deferrals representing $1.12 billion in loans, 949 mortgage/personal loan payment deferrals representing $130.2 million in loans and an additional 638 deferrals for $80.9 million of mortgage loans in the serviced portfolio. An update on the deferral program as of July 24, 2020 is provided in the 2Q20 Quarterly Earnings Supplement presentation.
As part of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), Congress appropriated approximately $349 billion for the creation of the PPP and then authorized a second phase for another $310 billion in PPP loans. The program provided payroll assistance for the nation’s nearly 30 million small businesses—and select nonprofits—in the form of 100% government-guaranteed low-interest loans from the U.S. Small Business Administration. First Busey served as a bridge for the program, actively helping existing and new business clients sign up for this important financial resource. At June 30, 2020, First Busey had $746.4 million in PPP loans outstanding, with an amortized cost of $729.3 million, representing 4,445 new and existing customers.
Subordinated Debt IssuanceTo further enhance the Company’s strong capital and liquidity positions, First Busey completed a successful public offering of $125.0 million 5.25% Fixed-to-Floating Rate Subordinated Notes due 2030 during the quarter. This issuance of regulatory capital qualifying subordinated debt contributed to an increase in the First Busey total risk based capital ratio, which was 16.23% at June 30, 2020, compared to 13.85% at March 31, 2020, while also significantly bolstering the cash reserves held at the holding company.
Banking Center Consolidation PlanAfter careful consideration and analysis, the Company decided in July 2020 its plan to consolidate 12 branches to ensure a balance between the Company’s physical banking center network and robust digital banking services. An efficient banking center footprint and strategic service models are necessary to keep First Busey competitive, responsive and independent. The banking centers will close in October 2020. When fully realized, annualized expense savings net of expected associated revenue impacts are anticipated to be approximately $3.3 million with the impact of these cost savings beginning to be realized in the fourth quarter of 2020. One-time expenses expected in relation to the banking centers closings are anticipated to be incurred during the third and fourth quarters of 2020.
First Busey’s goal of being a strong community bank for the communities it serves begins with outstanding associates. The Company is honored to be named among the 2020 Best Places to Work in Illinois by Daily Herald Business Ledger, the 2020 Best Companies to Work For in Florida by Florida Trend magazine, the 2020 Best Place to Work in Indiana by the Indiana Chamber of Commerce, 2019 Best Banks to Work For by American Banker, the 2019 Best-In-State Banks for Illinois by Forbes and Statista, the 2019 Best Places to Work in St. Louis by the St. Louis Business Journal and the 2019 Best Places to Work in Money Management by Pensions and Investments.
First Busey takes pride in its culture and is thankful for the exceptional work over the past few months carried out by its associates. In today’s fluid, ever-evolving landscape, the Company remains steadfast in its commitment to the customers and communities it serves.
/s/ Van A. DukemanPresident & Chief Executive OfficerFirst Busey Corporation
| SELECTED FINANCIAL HIGHLIGHTS1 | ||||||||||||||||||
| (dollars in thousands, except per share data) | ||||||||||||||||||
| As of and for the Three Months Ended | As of and for the Six Months Ended | |||||||||||||||||
| June 30, | March 31, | December 31, | June 30, | June 30, | June 30, | |||||||||||||
| 2020 | 2020 | 2019 | 2019 | 2020 | 2019 | |||||||||||||
| EARNINGS & PER SHARE DATA | ||||||||||||||||||
| Pre-provision net revenue2,4 | $ | 45,394 | $ | 35,849 | $ | 37,479 | $ | 34,330 | $ | 81,243 | $ | 71,453 | ||||||
| Revenue3 | 98,462 | 96,363 | 102,969 | 102,350 | 194,825 | 196,636 | ||||||||||||
| Net income | 25,806 | 15,364 | 28,571 | 24,085 | 41,170 | 49,554 | ||||||||||||
| Diluted earnings per share | 0.47 | 0.28 | 0.52 | 0.43 | 0.75 | 0.90 | ||||||||||||
| Cash dividends paid per share | 0.22 | 0.22 | 0.21 | 0.21 | 0.44 | 0.42 | ||||||||||||
| Net income by operating segment | ||||||||||||||||||
| Banking | $ | 25,985 | $ | 14,924 | $ | 29,573 | $ | 24,441 | $ | 40,909 | $ | 51,106 | ||||||
| Remittance Processing | 528 | 860 | 958 | 1,105 | 1,388 | 2,130 | ||||||||||||
| Wealth Management | 3,082 | 3,599 | 3,465 | 2,845 | 6,681 | 5,486 | ||||||||||||
| AVERAGE BALANCES | ||||||||||||||||||
| Cash and cash equivalents | $ | 563,022 | $ | 477,242 | $ | 533,519 | $ | 328,414 | $ | 520,132 | $ | 327,525 | ||||||
| Investment securities | 1,717,790 | 1,738,564 | 1,677,962 | 1,897,486 | 1,728,177 | 1,810,237 | ||||||||||||
| Loans held for sale | 108,821 | 61,963 | 68,480 | 25,143 | 85,392 | 21,218 | ||||||||||||
| Portfolio loans | 7,216,825 | 6,658,277 | 6,657,283 | 6,528,326 | 6,937,551 | 6,329,596 | ||||||||||||
| Interest-earning assets | 9,485,200 | 8,817,544 | 8,810,505 | 8,666,136 | 9,151,372 | 8,378,862 | ||||||||||||
| Total assets | 10,374,820 | 9,688,177 | 9,713,858 | 9,522,678 | 10,031,499 | 9,198,975 | ||||||||||||
| Non-interest bearing deposits | 2,472,568 | 1,842,743 | 1,838,523 | 1,747,746 | 2,157,656 | 1,682,691 | ||||||||||||
| Interest-bearing deposits | 6,073,795 | 6,081,972 | 6,052,529 | 5,970,408 | 6,077,884 | 5,782,495 | ||||||||||||
| Total deposits | 8,546,363 | 7,924,715 | 7,891,052 | 7,718,154 | 8,235,540 | 7,465,186 | ||||||||||||
| Securities sold under agreements to repurchase | 184,208 | 182,280 | 204,076 | 193,621 | 183,244 | 199,045 | ||||||||||||
| Interest-bearing liabilities | 6,527,709 | 6,512,217 | 6,537,611 | 6,493,885 | 6,519,964 | 6,280,175 | ||||||||||||
| Total liabilities | 9,141,550 | 8,470,017 | 8,489,411 | 8,326,876 | 8,805,784 | 8,042,900 | ||||||||||||
| Stockholders' common equity | 1,233,270 | 1,218,160 | 1,224,447 | 1,195,802 | 1,225,715 | 1,153,075 | ||||||||||||
| Tangible stockholders' common equity4 | 863,571 | 845,920 | 845,179 | 818,951 | 854,746 | 788,289 | ||||||||||||
| PERFORMANCE RATIOS | ||||||||||||||||||
| Pre-provision net revenue to average assets2,4 | 1.76 | % | 1.49 | % | 1.53 | % | 1.45 | % | 1.63 | % | 1.57 | % | ||||||
| Return on average assets4 | 1.00 | % | 0.64 | % | 1.17 | % | 1.01 | % | 0.83 | % | 1.09 | % | ||||||
| Return on average common equity | 8.42 | % | 5.07 | % | 9.26 | % | 8.08 | % | 6.75 | % | 8.67 | % | ||||||
| Return on average tangible common equity4 | 12.02 | % | 7.30 | % | 13.41 | % | 11.80 | % | 9.69 | % | 12.68 | % | ||||||
| Net interest margin4,5 | 3.03 | % | 3.20 | % | 3.27 | % | 3.43 | % | 3.11 | % | 3.45 | % | ||||||
| Efficiency ratio4 | 50.97 | % | 59.69 | % | 60.54 | % | 63.62 | % | 55.28 | % | 60.92 | % | ||||||
| Non-interest revenue as a % of total revenue3 | 28.08 | % | 27.95 | % | 30.14 | % | 28.26 | % | 28.01 | % | 27.88 | % | ||||||
| NON-GAAP INFORMATION | ||||||||||||||||||
| Adjusted pre-provision net revenue2,4 | $ | 46,448 | $ | 38,211 | $ | 41,131 | $ | 42,823 | $ | 84,659 | $ | 81,425 | ||||||
| Adjusted net income4 | 26,191 | 15,479 | 31,782 | 29,498 | 41,670 | 56,112 | ||||||||||||
| Adjusted diluted earnings per share4 | 0.48 | 0.28 | 0.57 | 0.53 | 0.76 | 1.02 | ||||||||||||
| Adjusted pre-provision net revenue to average assets4 | 1.80 | % | 1.59 | % | 1.68 | % | 1.80 | % | 1.70 | % | 1.78 | % | ||||||
| Adjusted return on average assets4 | 1.02 | % | 0.64 | % | 1.30 | % | 1.24 | % | 0.84 | % | 1.23 | % | ||||||
| Adjusted return on average tangible common equity4 | 12.20 | % | 7.36 | % | 14.92 | % | 14.45 | % | 9.80 | % | 14.35 | % | ||||||
| Adjusted net interest margin4,5 | 2.93 | % | 3.07 | % | 3.14 | % | 3.27 | % | 3.00 | % | 3.29 | % | ||||||
| Adjusted efficiency ratio4 | 50.48 | % | 59.54 | % | 57.02 | % | 56.55 | % | 54.96 | % | 56.49 | % | ||||||
| 1 Results are unaudited. | ||||||||||||||||||
| 2 Net interest income plus non-interest income, excluding security gains and losses, less non-interest expense. | ||||||||||||||||||
| 3 Revenue consist of net interest income plus non-interest income, excluding security gains and losses. | ||||||||||||||||||
| 4 See “Non-GAAP Financial Information” below for reconciliation. | ||||||||||||||||||
| 5 On a tax-equivalent basis, assuming a federal income tax rate of 21%. | ||||||||||||||||||
| Condensed Consolidated Balance Sheets1 | As of | |||||||||||||||
| (dollars in thousands, except per share data) | June 30, | March 31, | December 31, | September 30, | June 30, | |||||||||||
| 2020 | 2020 | 2019 | 2019 | 2019 | ||||||||||||
| Assets | ||||||||||||||||
| Cash and cash equivalents | $ | 1,050,072 | $ | 342,848 | $ | 529,288 | $ | 525,457 | $ | 420,207 | ||||||
| Investment securities | 1,701,992 | 1,770,881 | 1,654,209 | 1,721,865 | 1,869,143 | |||||||||||
| Loans held for sale | 108,140 | 89,943 | 68,699 | 70,345 | 39,607 | |||||||||||
| Commercial loans | 5,637,999 | 5,040,507 | 4,943,646 | 4,900,430 | 4,759,329 | |||||||||||
| Retail real estate and retail other loans | 1,591,021 | 1,704,992 | 1,743,603 | 1,768,985 | 1,772,797 | |||||||||||
| Portfolio loans | $ | 7,229,020 | $ | 6,745,499 | $ | 6,687,249 | $ | 6,669,415 | $ | 6,532,126 | ||||||
| Allowance | (96,046 | ) | (84,384 | ) | (53,748 | ) | (52,965 | ) | (51,375 | ) | ||||||
| Premises and equipment | 146,951 | 149,772 | 151,267 | 153,641 | 149,726 | |||||||||||
| Goodwill and other intangibles | 368,053 | 370,572 | 373,129 | 381,323 | 375,327 | |||||||||||
| Right of use asset | 8,511 | 9,074 | 9,490 | 9,979 | 10,426 | |||||||||||
| Other assets | 319,272 | 327,200 | 276,146 | 274,700 | 267,480 | |||||||||||
| Total assets | $ | 10,835,965 | $ | 9,721,405 | $ | 9,695,729 | $ | 9,753,760 | $ | 9,612,667 | ||||||
| Liabilities & Stockholders' Equity | ||||||||||||||||
| Non-interest bearing deposits | $ | 2,764,408 | $ | 1,910,673 | $ | 1,832,619 | $ | 1,779,490 | $ | 1,766,681 | ||||||
| Interest-bearing checking, savings, and money market deposits | 4,781,761 | 4,580,547 | 4,534,927 | 4,498,005 | 4,316,730 | |||||||||||
| Time deposits | 1,363,497 | 1,482,013 | 1,534,850 | 1,652,971 | 1,749,811 | |||||||||||
| Total deposits | $ | 8,909,666 | $ | 7,973,233 | $ | 7,902,396 | $ | 7,930,466 | $ | 7,833,222 | ||||||
| Securities sold under agreements to repurchase | 194,249 | 167,250 | 205,491 | 202,500 | 190,846 | |||||||||||
| Short-term borrowings | 24,648 | 21,358 | 8,551 | 29,739 | 30,761 | |||||||||||
| Long-term debt | 256,837 | 134,576 | 182,522 | 183,968 | 185,576 | |||||||||||
| Junior subordinated debt owed to unconsolidated trusts | 71,387 | 71,347 | 71,308 | 71,269 | 71,230 | |||||||||||
| Lease liability | 8,601 | 9,150 | 9,552 | 10,101 | 10,531 | |||||||||||
| Other liabilities | 134,493 | 126,906 | 95,475 | 109,736 | 86,893 | |||||||||||
| Total liabilities | $ | 9,599,881 | $ | 8,503,820 | $ | 8,475,295 | $ | 8,537,779 | $ | 8,409,059 | ||||||
| Total stockholders' equity | $ | 1,236,084 | $ | 1,217,585 | $ | 1,220,434 | $ | 1,215,981 | $ | 1,203,608 | ||||||
| Total liabilities & stockholders' equity | $ | 10,835,965 | $ | 9,721,405 | $ | 9,695,729 | $ | 9,753,760 | $ | 9,612,667 | ||||||
| Share Data | ||||||||||||||||
| Book value per common share | $ | 22.67 | $ | 22.38 | $ | 22.28 | $ | 22.03 | $ | 21.73 | ||||||
| Tangible book value per common share2 | $ | 15.92 | $ | 15.57 | $ | 15.46 | $ | 15.12 | $ | 14.95 | ||||||
| Ending number of common shares outstanding | 54,516,000 | 54,401,208 | 54,788,772 | 55,197,277 | 55,386,636 | |||||||||||
| 1 Results are unaudited except for amounts reported as of December 31, 2019. | ||||||||||||||||
| 2 See “Non-GAAP Financial Information” below for reconciliation, excludes tax effect of other intangible assets. | ||||||||||||||||
| Condensed Consolidated Statements of Income1 | |||||||||||
| (dollars in thousands, except per share data) | |||||||||||
| For the | For the | ||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||
| Interest and fees on loans | $ | 71,089 | $ | 78,031 | $ | 143,625 | $ | 149,820 | |||
| Interest on investment securities | 9,999 | 12,352 | 20,658 | 23,612 | |||||||
| Other interest income | 145 | 1,083 | 1,383 | 2,315 | |||||||
| Total interest income | $ | 81,233 | $ | 91,466 | $ | 165,666 | $ | 175,747 | |||
| Interest on deposits | 7,721 | 14,154 | 19,948 | 26,654 | |||||||
| Interest on securities sold under agreements to repurchase | 100 | 627 | 508 | 1,210 | |||||||
| Interest on short-term borrowings | 118 | 494 | 185 | 685 | |||||||
| Interest on long-term debt | 1,745 | 1,871 | 3,299 | 3,581 | |||||||
| Interest on junior subordinated debt owed to unconsolidated trusts | 736 | 892 | 1,480 | 1,806 | |||||||
| Total interest expense | $ | 10,420 | $ | 18,038 | $ | 25,420 | $ | 33,936 | |||
| Net interest income | $ | 70,813 | $ | 73,428 | $ | 140,246 | $ | 141,811 | |||
| Provision for credit losses | 12,891 | 2,517 | 30,107 | 4,628 | |||||||
| Net interest income after provision for credit losses | $ | 57,922 | $ | 70,911 | $ | 110,139 | $ | 137,183 | |||
| Wealth management fees | 10,193 | 9,488 | 21,748 | 18,517 | |||||||
| Fees for customer services | 7,025 | 9,696 | 15,386 | 17,793 | |||||||
| Remittance processing | 3,718 | 3,717 | 7,471 | 7,497 | |||||||
| Mortgage revenue | 2,705 | 2,851 | 4,086 | 4,796 | |||||||
| Income on bank owned life insurance | 2,282 | 2,102 | 3,339 | 3,080 | |||||||
| Security gains (losses), net | 315 | (1,026 | ) | 902 | (984 | ) | |||||
| Other | 1,726 | 1,068 | 2,549 | 3,142 | |||||||
| Total non-interest income | $ | 27,964 | $ | 27,896 | $ | 55,481 | $ | 53,841 | |||
| Salaries, wages and employee benefits | 28,555 | 34,268 | 62,558 | 66,609 | |||||||
| Data processing | 4,051 | 5,616 | 8,446 | 10,017 | |||||||
| Net occupancy expense of premises | 4,448 | 4,511 | 9,163 | 8,713 | |||||||
| Furniture and equipment expense | 2,537 | 2,352 | 4,986 | 4,447 | |||||||
| Professional fees | 1,986 | 3,192 | 3,810 | 6,379 | |||||||
| Amortization of intangible assets | 2,519 | 2,412 | 5,076 | 4,506 | |||||||
| Other | 8,972 | 15,669 | 19,543 | 24,512 | |||||||
| Total non-interest expense | $ | 53,068 | $ | 68,020 | $ | 113,582 | $ | 125,183 | |||
| Income before income taxes | $ | 32,818 | $ | 30,787 | $ | 52,038 | $ | 65,841 | |||
| Income taxes | 7,012 | 6,702 | 10,868 | 16,287 | |||||||
| Net income | $ | 25,806 | $ | 24,085 | $ | 41,170 | $ | 49,554 | |||
| Per Share Data | |||||||||||
| Basic earnings per common share | $ | 0.47 | $ | 0.43 | $ | 0.75 | $ | 0.91 | |||
| Diluted earnings per common share | $ | 0.47 | $ | 0.43 | $ | 0.75 | $ | 0.90 | |||
| Average common shares outstanding | 54,489,403 | 55,638,187 | 54,575,595 | 54,464,167 | |||||||
| Diluted average common shares outstanding | 54,705,273 | 55,941,117 | 54,807,170 | 54,764,129 | |||||||
| 1 Results are unaudited. | |||||||||||
Balance Sheet Growth
At June 30, 2020, portfolio loans were $7.23 billion, as compared to $6.75 billion as of March 31, 2020 and $6.53 billion as of June 30, 2019. The amortized cost of PPP loans of $729.3 million are included in the June 30, 2020 balance. When excluding the PPP loans, total commercial loans declined by $131.8 million during the quarter. Decreased line utilization by commercial customers accounted for approximately $78.4 million of this decline.
Average portfolio loans were $7.22 billion for the second quarter of 2020 as compared to $6.66 billion in the first quarter of 2020 and $6.53 billion in the second quarter of 2019. The average balance of PPP loans in the second quarter of 2020 were $579.5 million. Average interest-earning assets for the second quarter of 2020 increased to $9.49 billion compared to $8.82 billion for the first quarter of 2020 and $8.67 billion for the second quarter of 2019.
Total deposits were $8.91 billion at June 30, 2020, compared to $7.97 billion at March 31, 2020 and $7.83 billion at June 30, 2019. The increase in deposits for the second quarter of 2020 is attributable to retention of PPP loan funding in customer deposit accounts, other core deposit growth and seasonality in public funds. The Company remains funded primarily through core deposits with significant market share in its primary markets.
Net Interest Margin and Net Interest Income
Net interest margin for the second quarter of 2020 was 3.03%, compared to 3.20% for the first quarter of 2020 and 3.43% for the second quarter of 2019. While net interest margin declined, net interest income was $70.8 million in the second quarter of 2020 compared to $69.4 million in the first quarter of 2020. Net interest income was $73.4 million in the second quarter of 2019.
The Federal Open Market Committee (“FOMC”) lowered Federal Funds Target Rates for the first time in 11 years on July 31, 2019 and then again on September 18, 2019 and October 30, 2019, for a combined decrease of 75 basis points during 2019. In response to the potential economic risks posed by COVID-19, the FOMC took further action during the first quarter of 2020, lowering the Federal Funds Target Rate by 50 basis points on March 3, 2020, followed by an additional 100 basis point reduction on March 15, 2020. These rate cuts contributed to the decline in net interest margin, as assets, in particular commercial loans, repriced more quickly and to a greater extent than liabilities.
Other factors contributing to the reported decline in net interest margin during the second quarter of 2020 include lower accretion income, the sizeable balance of lower-yielding PPP loans, the Company’s significant liquidity position, lower line utilization by commercial loan customers and the issuance of subordinated debt completed during the quarter.
Asset Quality
Loans 30-89 days past due were $5.2 million as of June 30, 2020, a decrease from $10.2 million as of March 31, 2020, and $18.0 million as of June 30, 2019. Non-performing loans totaled $25.4 million as of June 30, 2020, a decrease from $27.2 million as of March 31, 2020, and $33.1 million as of June 30, 2019. Continued disciplined credit management resulted in non-performing loans as a percentage of total loans of 0.35%, at June 30, 2020 as compared to 0.40% at March 31, 2020 and 0.51% at June 30, 2019. Non-performing loans as a percentage of total loans, excluding the amortized cost of PPP loans, was of 0.39% at June 30, 2020.
Net charge-offs totaled $1.2 million for the quarter ended June 30, 2020 compared to $3.4 million and $2.1 million for the quarters ended March 31, 2020 and June 30, 2019, respectively.
The allowance as a percentage of portfolio loans increased to 1.33% at June 30, 2020, as compared to 1.25% at March 31, 2020 and 0.79% at June 30, 2019. The allowance as a percentage of portfolio loans, excluding the amortized cost of PPP loans, was 1.48% at June 30, 2020. The allowance as a percentage of non-performing loans increased to 378.43% at June 30, 2020 compared to 310.10% at March 31, 2020 and 155.33% at June 30, 2019.
As a matter of policy and practice, the Company limits the level of concentration exposure in any particular loan segment and maintains a well-diversified loan portfolio.
| Asset Quality1 | |||||||||||||||
| (dollars in thousands) | As of and for the Three Months Ended | ||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | |||||||||||
| 2020 | 2020 | 2019 | 2019 | 2019 | |||||||||||
| Portfolio loans | $ | 7,229,020 | $ | 6,745,499 | $ | 6,687,249 | $ | 6,669,415 | $ | 6,532,126 | |||||
| Portfolio loans excluding amortized cost of PPP loans | 6,499,734 | 6,745,499 | 6,687,249 | 6,669,415 | 6,532,126 | ||||||||||
| Loans 30-89 days past due | 5,166 | 10,150 | 14,271 | 12,434 | 18,040 | ||||||||||
| Non-performing loans: | |||||||||||||||
| Non-accrual loans | 25,095 | 25,672 | 27,896 | 31,827 | 32,816 | ||||||||||
| Loans 90+ days past due | 285 | 1,540 | 1,611 | 1,276 | 258 | ||||||||||
| Total non-performing loans | $ | 25,380 | $ | 27,212 | $ | 29,507 | $ | 33,103 | $ | 33,074 | |||||
| Total non-performing loans, segregated by geography | |||||||||||||||
| Illinois/ Indiana | 16,285 | 17,761 | 20,428 | 24,296 | 24,509 | ||||||||||
| Missouri | 5,327 | 5,711 | 5,227 | 8,202 | 7,778 | ||||||||||
| Florida | 3,768 | 3,740 | 3,852 | 605 | 787 | ||||||||||
| Other non-performing assets | 3,755 | 3,553 | 3,057 | 926 | 936 | ||||||||||
| Total non-performing assets | $ | 29,135 | $ | 30,765 | $ | 32,564 | $ | 34,029 | $ | 34,010 | |||||
| Total non-performing assets to total assets | 0.27 | % | 0.32 | % | 0.34 | % | 0.35 | % | 0.35 | % | |||||
| Total non-performing assets to portfolio loans and non-performing assets | 0.40 | % | 0.46 | % | 0.49 | % | 0.51 | % | 0.52 | % | |||||
| Allowance to portfolio loans | 1.33 | % | 1.25 | % | 0.80 | % | 0.79 | % | 0.79 | % | |||||
| Allowance to portfolio loans, excluding PPP | 1.48 | % | 1.25 | % | 0.80 | % | 0.79 | % | 0.79 | % | |||||
| Allowance as a percentage of non-performing loans | 378.43 | % | 310.10 | % | 182.15 | % | 160.00 | % | 155.33 | % | |||||
| Net charge-offs | 1,229 | 3,413 | 1,584 | 1,821 | 2,057 | ||||||||||
| Provision | 12,891 | 17,216 | 2,367 | 3,411 | 2,517 | ||||||||||
| 1 Results are unaudited. | |||||||||||||||
Non-Interest Income
Total non-interest income of $28.0 million for the second quarter of 2020 increased as compared to $27.5 million in the first quarter of 2020 and $27.9 million in the second quarter of 2019. Revenues from wealth management fees and remittance processing activities represented 49.7% of the Company’s non-interest income for the quarter ended June 30, 2020, providing a balance to spread-based revenue from traditional banking activities.
Wealth management fees were $10.2 million for the second quarter of 2020, a decrease from $11.6 million for the first quarter of 2020 but an increase from $9.5 million for the second quarter of 2019. The decrease in second quarter of 2020 compared to first quarter of 2020 was primarily due to a $1.0 million seasonal decline in farm management fees, $0.7 million decline in trust and investment services fees as a result of market volatility offset by a seasonal increase in tax preparation fees of $0.4 million. Net income from the Wealth Management segment was $3.1 million for the second quarter of 2020, a decrease from $3.6 million for the first quarter of 2020 but an increase from $2.8 million in the second quarter of 2019. First Busey’s Wealth Management division ended the second quarter of 2020 with $9.02 billion in assets under care as compared to $8.93 billion at the end of the first quarter.
Fees for customer services were $7.0 million for the second quarter of 2020, a decrease from $8.4 million for the first quarter of 2020 and $9.7 million for the second quarter of 2019. The second quarter decrease was a result of deposit account fee waivers related to the Financial Relief Program and changing customer behaviors resulting from COVID-19. Personal and business overdraft fees were the most impacted, decreasing by $1.6 million in the second quarter of 2020 as compared to the first quarter of 2020.
Remittance processing revenue from the Company’s subsidiary, FirsTech, of $3.7 million for the second quarter of 2020 was down slightly from $3.8 million in the first quarter of 2020 but steady with the second quarter of 2019. The Remittance Processing operating segment generated net income of $0.5 million for the second quarter of 2020 as compared to $0.9 million in the first quarter of 2020 and $1.1 million in the second quarter of 2019. The net income decline in the second quarter was largely attributable to higher compensation expenses, including $0.3 million in one-time, non-operating severance related costs.
Mortgage revenue of $2.7 million in the second quarter of 2020 increased compared to $1.4 million in the first quarter of 2020 but decreased compared to $2.9 million in the second quarter of 2019. The increase in the second quarter of 2020 over first quarter was a due to higher mortgage production and stronger gain on sale margins.
Operating Efficiency
The efficiency ratio was 50.97% for the quarter ended June 30, 2020 compared to 59.69% for the quarter ended March 31, 2020 and 63.62% for the quarter ended June 30, 2019. The adjusted efficiency ratio1 was 50.48% for the quarter ended June 30, 2020, 59.54% for the quarter ended March 31, 2020, and 56.55% for the quarter ended June 30, 2019. The Company remains focused on expense discipline.
Specific areas of non-interest expense are as follows:
- Salaries, wages and employee benefits were $28.6 million in the second quarter of 2020, a decrease from $34.0 million in the first quarter of 2020 and $34.3 million from the second quarter of 2019. The deferral of PPP loan origination costs of $3.8 million combined with a decrease in full-time equivalents contributed to the lower salaries, wages and benefits expense in the second quarter of 2020. Total full-time equivalents at June 30, 2020 numbered 1,480 compared to 1,507 at March 31, 2020 and 1,579 at June 30, 2019.
- Other expense in the second quarter of 2020 of $9.0 million decreased compared to $10.6 million in the first quarter of 2020 and $15.7 million in the second quarter of 2019. The deferral of PPP loan origination costs of $1.1 million reduced other expense in the second quarter of 2020. Provision for unfunded commitments of $0.6 million and $1.0 million were recorded in the second and first quarter of 2020, respectively. Non-operating acquisition expenses of $0.1 million were recorded in the second and first quarter of 2020, related to the Investors’ Security Trust Company acquisition.
Capital Strength
The Company's strong capital levels, coupled with its earnings, have allowed First Busey to provide a steady return to its stockholders through dividends. The Company will pay a cash dividend on July 31, 2020 of $0.22 per common share to stockholders of record as of July 24, 2020. The Company has consistently paid dividends to its common stockholders since the bank holding company was organized in 1980.
As of June 30, 2020, the Company continued to exceed the capital adequacy requirements necessary to be considered “well-capitalized” under applicable regulatory guidelines. The Company’s tangible common equity1 (“TCE”) was $883.9 million at June 30, 2020, compared to $863.5 million at March 31, 2020 and $845.4 million at June 30, 2019. TCE represented 8.43% of tangible assets at June 30, 2020, compared to 9.22% at March 31, 2020 and 9.13% at June 30, 2019.1
2Q20 Quarterly Earnings Supplement
For additional information on the Company’s response to COVID-19, financial condition and operating results, please refer to the 2Q20 Quarterly Earnings Supplement presentation furnished via Form 8-K on July 28, 2020, in conjunction with this earnings release.
1 A Non-GAAP financial measure. See “Non-GAAP Financial Information” below for reconciliation.
Corporate Profile
As of June 30, 2020, First Busey Corporation (Nasdaq: BUSE) was a $10.84 billion financial holding company headquartered in Champaign, Illinois.
Busey Bank, the wholly-owned bank subsidiary of First Busey Corporation, had total assets of $10.82 billion as of June 30, 2020 and is headquartered in Champaign, Illinois, with 61 banking centers serving Illinois, 13 banking centers serving Missouri, five banking centers serving southwest Florida and a banking center in Indianapolis, Indiana. Through the Busey Wealth Management division, the Company provides asset management, investment and fiduciary services to individuals, businesses and foundations. As of June 30, 2020, assets under care were approximately $9.02 billion. Busey Bank owns a retail payment processing subsidiary, FirsTech, Inc., which processes approximately 27 million transactions per year using online bill payment, lockbox processing and walk-in payments at its 4,000 agent locations in 43 states. More information about FirsTech, Inc. can be found at firstechpayments.com.
Busey Bank was named among Forbes’ 2019 Best-In-State Banks—one of five in Illinois and 173 from across the country, equivalent to 2.8% of all U.S. banks. Best-In-State Banks are awarded for exceptional customer experiences as determined by a survey sample of 25,000+ banking customers who rated banks on trust, terms and conditions, branch services, digital services and financial advice.
For more information about us, visit busey.com.
Contacts:
Jeffrey D. Jones, Chief Financial Officer 217-365-4130
Non-GAAP Financial Information
This earnings release contains certain financial information determined by methods other than GAAP. These measures include adjusted pre-provision net revenue, adjusted net income, adjusted earnings per share, adjusted return on average assets, adjusted net interest margin, adjusted efficiency ratio, tangible common equity, tangible common equity to tangible assets, tangible book value per share and return on average tangible common equity. Management uses these non-GAAP measures, together with the related GAAP measures, in analysis of the Company’s performance and in making business decisions. Management also uses these measures for peer comparisons.
A reconciliation to what management believes to be the most direct compared GAAP financial measures, specifically total net interest income in the case of pre-provision net revenue, net income in the case of adjusted net income, adjusted earnings per share and adjusted return on average assets, total net interest income in the case of adjusted net interest margin, total non-interest income and total non-interest expense in the case of adjusted efficiency ratio and total stockholders’ equity in the case of tangible common equity, tangible common equity to tangible assets, tangible book value per share and return on average tangible common equity, appears below. The Company believes the adjusted measures are useful for investors and management to understand the effects of certain non-recurring non-interest items and provide additional perspective on the Company’s performance over time as well as comparison to the Company’s peers.
These non-GAAP disclosures have inherent limitations and are not audited. They should not be considered in isolation or as a substitute for the results reported in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Tax effected numbers included in these non-GAAP disclosures are based on estimated statutory rates or effective rates as appropriate.
| Reconciliation of Non-GAAP Financial Measures – Adjusted Pre-Provision Net Revenue | ||||||||||||||||
| (dollars in thousands) | ||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30,2020 | March 31,2020 | June 30, 2019 | June 30, 2020 | June 30, 2019 | ||||||||||||
| Net interest income | $ | 70,813 | $ | 69,433 | $ | 73,428 | $ | 140,246 | $ | 141,811 | ||||||
| Non-interest income | 27,964 | 27,517 | 27,896 | 55,481 | 53,841 | |||||||||||
| Less securities gains and losses, net | (315 | ) | (587 | ) | 1,026 | (902 | ) | 984 | ||||||||
| Non-interest expense | (53,068 | ) | (60,514 | ) | (68,020 | ) | (113,582 | ) | (125,183 | ) | ||||||
| Pre-provision net revenue | $ | 45,394 | $ | 35,849 | $ | 34,330 | $ | 81,243 | $ | 71,453 | ||||||
| Acquisition and other restructuring expenses | 487 | 145 | 7,293 | 632 | 8,772 | |||||||||||
| Provision for unfunded commitments | 567 | 1,017 | - | 1,584 | - | |||||||||||
| New Market Tax Credit amortization | - | 1,200 | 1,200 | 1,200 | 1,200 | |||||||||||
| Adjusted pre-provision net revenue | $ | 46,448 | $ | 38,211 | $ | 42,823 | $ | 84,659 | $ | 81,425 | ||||||
| Average total assets | $ | 10,374,820 | $ | 9,688,177 | $ | 9,522,678 | $ | 10,031,499 | $ | 9,198,975 | ||||||
| Reported: Pre-provision net revenue to average assets1 | 1.76 | % | 1.49 | % | 1.45 | % | 1.63 | % | 1.57 | % | ||||||
| Adjusted: Pre-provision net revenue to average assets1 | 1.80 | % | 1.59 | % | 1.80 | % | 1.70 | % | 1.78 | % | ||||||
| 1 Annualized measure. | ||||||||||||||||
| Reconciliation of Non-GAAP Financial Measures – Adjusted Net Income, Adjusted Earnings Per Share and Adjusted Return on Average Assets | ||||||||||||||||
| (dollars in thousands) | ||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, 2020 | March 31,2020 | June 30, 2019 | June 30, 2020 | June 30, 2019 | ||||||||||||
| Net income | $ | 25,806 | $ | 15,364 | $ | 24,085 | $ | 41,170 | $ | 49,554 | ||||||
| Acquisition expenses | ||||||||||||||||
| Salaries, wages and employee benefits | - | - | 43 | - | 43 | |||||||||||
| Data processing | - | - | 327 | - | 334 | |||||||||||
| Lease or fixed asset impairment | - | - | 415 | - | 415 | |||||||||||
| Other (includes professional and legal) | 141 | 145 | 3,293 | 286 | 4,498 | |||||||||||
| Other restructuring costs | ||||||||||||||||
| Salaries, wages and employee benefits | 346 | - | 275 | 346 | 275 | |||||||||||
| Data processing | - | - | 292 | - | 392 | |||||||||||
| Other (includes professional and legal) | - | - | 826 | - | 993 | |||||||||||
| MSR valuation impairment | - | - | 1,822 | - | 1,822 | |||||||||||
| Related tax benefit | (102 | ) | (30 | ) | (1,880 | ) | (132 | ) | (2,214 | ) | ||||||
| Adjusted net income | $ | 26,191 | $ | 15,479 | $ | 29,498 | $ | 41,670 | $ | 56,112 | ||||||
| Diluted average common shares outstanding | 54,705,273 | 54,913,329 | 55,941,117 | 54,807,170 | 54,764,129 | |||||||||||
| Reported: Diluted earnings per share | $ | 0.47 | $ | 0.28 | $ | 0.43 | $ | 0.75 | $ | 0.90 | ||||||
| Adjusted: Diluted earnings per share | $ | 0.48 | $ | 0.28 | $ | 0.53 | $ | 0.76 | $ | 1.02 | ||||||
| Average total assets | $ | 10,374,820 | $ | 9,688,177 | $ | 9,522,678 | $ | 10,031,499 | $ | 9,198,975 | ||||||
| Reported: Return on average assets1 | 1.00 | % | 0.64 | % | 1.01 | % | 0.83 | % | 1.09 | % | ||||||
| Adjusted: Return on average assets 1 | 1.02 | % | 0.64 | % | 1.24 | % | 0.84 | % | 1.23 | % | ||||||
| 1 Annualized measure. | ||||||||||||||||
| Reconciliation of Non-GAAP Financial Measures – Adjusted Net Interest Margin | ||||||||||||||||
| (dollars in thousands) | ||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, 2020 | March 31, 2020 | June 30, 2019 | June 30, 2020 | June 30, 2019 | ||||||||||||
| Reported: Net interest income | $ | 70,813 | $ | 69,433 | $ | 73,428 | $ | 140,246 | $ | 141,811 | ||||||
| Tax-equivalent adjustment | 717 | 730 | 777 | 1,447 | 1,454 | |||||||||||
| Purchase accounting accretion related to business combinations | (2,477 | ) | (2,827 | ) | (3,471 | ) | (5,304 | ) | (6,465 | ) | ||||||
| Adjusted: Net interest income | $ | 69,053 | $ | 67,336 | $ | 70,734 | $ | 136,389 | $ | 136,800 | ||||||
| Average interest-earning assets | $ | 9,485,200 | $ | 8,817,544 | $ | 8,666,136 | $ | 9,151,372 | $ | 8,378,862 | ||||||
| Reported: Net interest margin1 | 3.03 | % | 3.20 | % | 3.43 | % | 3.11 | % | 3.45 | % | ||||||
| Adjusted: Net Interest margin1 | 2.93 | % | 3.07 | % | 3.27 | % | 3.00 | % | 3.29 | % | ||||||
| 1 Annualized measure. | ||||||||||||||||
| Reconciliation of Non-GAAP Financial Measures – Adjusted Efficiency Ratio | ||||||||||||||||
| (dollars in thousands) | ||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, 2020 | March 31, 2020 | June 30, 2019 | June 30, 2020 | June 30, 2019 | ||||||||||||
| Reported: Net Interest income | $ | 70,813 | $ | 69,433 | $ | 73,428 | $ | 140,246 | $ | 141,811 | ||||||
| Tax-equivalent adjustment | 717 | 730 | 777 | 1,447 | 1,454 | |||||||||||
| Tax-equivalent interest income | $ | 71,530 | $ | 70,163 | $ | 74,205 | $ | 141,693 | $ | 143,265 | ||||||
| Reported: Non-interest income | 27,964 | 27,517 | 27,896 | 55,481 | 53,841 | |||||||||||
| Less securities gains and losses, net | (315 | ) | (587 | ) | 1,026 | (902 | ) | 984 | ||||||||
| Adjusted: Non-interest income | $ | 27,649 | $ | 26,930 | $ | 28,922 | $ | 54,579 | $ | 54,825 | ||||||
| Reported: Non-interest expense | 53,068 | 60,514 | 68,020 | 113,582 | 125,183 | |||||||||||
| Amortization of intangible assets | (2,519 | ) | (2,557 | ) | (2,412 | ) | (5,076 | ) | (4,506 | ) | ||||||
| Non-operating adjustments: | ||||||||||||||||
| Salaries, wages and employee benefits | (346 | ) | - | (318 | ) | (346 | ) | (318 | ) | |||||||
| Data processing | - | - | (619 | ) | - | (726 | ) | |||||||||
| Other | (141 | ) | (145 | ) | (6,356 | ) | (286 | ) | (7,728 | ) | ||||||
| Adjusted: Non-interest expense | $ | 50,062 | $ | 57,812 | $ | 58,315 | $ | 107,874 | $ | 111,905 | ||||||
| Reported: Efficiency ratio | 50.97 | % | 59.69 | % | 63.62 | % | 55.28 | % | 60.92 | % | ||||||
| Adjusted: Efficiency ratio | 50.48 | % | 59.54 | % | 56.55 | % | 54.96 | % | 56.49 | % | ||||||
| Reconciliation of Non-GAAP Financial Measures – Tangible Common Equity, Tangible Common Equity to Tangible Assets, Tangible Book Value per Share and Return on Average Tangible Common Equity | |||||||||
| (dollars in thousands) | |||||||||
| As of and for the Three Months Ended | |||||||||
| June 30, 2020 | March 31, 2020 | June 30, 2019 | |||||||
| Total assets | $ | 10,835,965 | $ | 9,721,405 | $ | 9,612,667 | |||
| Goodwill and other intangible assets, net | (368,053 | ) | (370,572 | ) | (375,327 | ) | |||
| Tax effect of other intangible assets, net | 15,825 | 16,530 | 17,075 | ||||||
| Tangible assets | $ | 10,483,737 | $ | 9,367,363 | $ | 9,254,415 | |||
| Total stockholders’ equity | 1,236,084 | 1,217,585 | 1,203,608 | ||||||
| Goodwill and other intangible assets, net | (368,053 | ) | (370,572 | ) | (375,327 | ) | |||
| Tax effect of other intangible assets, net | 15,825 | 16,530 | 17,075 | ||||||
| Tangible common equity | $ | 883,856 | $ | 863,543 | $ | 845,356 | |||
| Ending number of common shares outstanding | 54,516,000 | 54,401,208 | 55,386,636 | ||||||
| Tangible common equity to tangible assets1 | 8.43 | % | 9.22 | % | 9.13 | % | |||
| Tangible book value per share | $ | 15.92 | $ | 15.57 | $ | 14.95 | |||
| Average common equity | $ | 1,233,270 | $ | 1,218,160 | $ | 1,195,802 | |||
| Average goodwill and intangibles, net | (369,699 | ) | (372,240 | ) | (376,851 | ) | |||
| Average tangible common equity | $ | 863,571 | $ | 845,920 | $ | 818,951 | |||
| Reported: Return on average tangible common equity2 | 12.02 | % | 7.30 | % | 11.80 | % | |||
| Adjusted: Return on average tangible common equity2,3 | 12.20 | % | 7.36 | % | 14.45 | % | |||
| Six Months Ended | |||||||||
| June 30, 2020 | June 30, 2019 | ||||||||
| Average stockholders' common equity | $ | 1,225,715 | $ | 1,153,075 | |||||
| Average goodwill and intangibles, net | (370,969 | ) | (364,786 | ) | |||||
| Average tangible stockholders' common equity | $ | 854,746 | $ | 788,289 | |||||
| Reported: Return on average tangible common equity2 | 9.69 | % | 12.68 | % | |||||
| Adjusted: Return on average tangible common equity2,3 | 9.80 | % | 14.35 | % | |||||
| 1 Tax-effected measure, 28% estimated deferred tax rate. | |||||||||
| 2 Annualized measure. | |||||||||
| 3 Calculated using adjusted net income. | |||||||||
Special Note Concerning Forward-Looking Statements
Statements made in this document, other than those concerning historical financial information, may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations, plans, objectives, future performance and business of the Company. Forward-looking statements, which may be based upon beliefs, expectations and assumptions of the Company’s management and on information currently available to management, are generally identifiable by the use of words such as “believe,” “expect,” “anticipate,” “plan,” “intend,” “estimate,” “may,” “will,” “would,” “could,” “should” or other similar expressions. Additionally, all statements in this document, including forward-looking statements, speak only as of the date they are made, and the Company undertakes no obligation to update any statement in light of new information or future events. A number of factors, many of which are beyond the Company’s ability to control or predict, could cause actual results to differ materially from those in the Company’s forward-looking statements. These factors include, among others, the following: (i) the strength of the local, state, national and international economy (including the impact of the 2020 presidential election and the impact of tariffs, a U.S. withdrawal from or significant negotiation of trade agreements, trade wars and other changes in trade regulations); (ii) the economic impact of any future terrorist threats or attacks, widespread disease or pandemics (including the COVID-19 pandemic in the United States), or other adverse external events that could cause economic deterioration or instability in credit markets; (iii) changes in state and federal laws, regulations and governmental policies concerning the Company’s general business; (iv) changes in accounting policies and practices, including CECL, that changed how the Company estimates credit losses; (v) changes in interest rates and prepayment rates of the Company’s assets (including the impact of The London Inter-bank Offered Rate phase-out); (vi) increased competition in the financial services sector and the inability to attract new customers; (vii) changes in technology and the ability to develop and maintain secure and reliable electronic systems; (viii) the loss of key executives or associates; (ix) changes in consumer spending; (x) unexpected results of current and/or future acquisitions, which may include failure to realize the anticipated benefits of the acquisition and the possibility that the transaction costs may be greater than anticipated; (xi) unexpected outcomes of existing or new litigation involving the Company; and (xii) the economic impact of exceptional weather occurrences such as tornadoes, hurricanes, floods, and blizzards. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Additional information concerning the Company and its business, including additional factors that could materially affect its financial results, is included in the Company’s filings with the Securities and Exchange Commission.
