First Mid Bancshares, Inc. Announces Third Quarter 2019 Results

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:

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 HoltVP, Shareholder Relations217-258-0463 [email protected]

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