CHAMPAIGN, Ill., Oct. 22, 2019 (GLOBE NEWSWIRE) -- (Nasdaq: BUSE)
Message from our President & CEO
Positive advances in the third quarter of 2019 compared to the second quarter of 2019
- Net income and adjusted net income1 increased to $24.8 million and $30.5 million, respectively
- Earnings per share of $0.45 and adjusted earnings per share1 of $0.55 compared to $0.43 and $0.53, respectively
- Portfolio loans of $6.67 billion as compared to $6.53 billion, an annualized increase of 8.3%
- Tangible book value per common share of $15.12 as compared to $14.95
First Busey Corporation’s (“First Busey” or the “Company”) net income for the third quarter of 2019 was $24.8 million, or $0.45 per diluted common share, as compared to $24.1 million, or $0.43 per diluted common share, for the second quarter of 2019 and $26.9 million, or $0.55 per diluted common share, for the third quarter of 2018. Adjusted net income1 for the third quarter of 2019 was $30.5 million, or $0.55 per diluted common share, as compared to $29.5 million, or $0.53 per diluted common share, for the second quarter of 2019 and $27.0 million, or $0.55 per diluted common share, for the third quarter of 2018.
The Company views certain non-operating items, including acquisition-related and restructuring charges, as adjustments to net income reported under generally accepted accounting principles (“GAAP”). Non-operating pretax adjustments for the third quarter of 2019 were $7.0 million of expenses related to acquisitions and $0.7 million of expenses related to other restructuring costs. The reconciliation of non-GAAP measures (including adjusted net income, 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), which the Company believes facilitates the assessment of its financial results and peer comparability, is included in tabular form at the end of this release.
Year-to-date net income through September 30, 2019 was $74.4 million, or $1.35 per diluted common share, compared to net income of $73.6 million, or $1.50 per diluted common share, for the comparable period of 2018. Year-to-date adjusted net income1 for the first nine months of 2019 was $86.6 million, or $1.57 per diluted common share, compared to $77.5 million or $1.58 per diluted common share for the first nine months of 2018.
For the third quarter of 2019, annualized return on average assets and annualized return on average tangible common equity were 1.02% and 11.79%, respectively. Based on adjusted net income1, annualized return on average assets was 1.25% and annualized return on average tangible common equity was 14.50% for the third quarter of 2019. For the nine months ended September 30, 2019, annualized return on average assets and annualized return on average tangible common equity were 1.06% and 12.37%, respectively. Based on adjusted net income1, annualized return on average assets was 1.24% and annualized return on average tangible common equity was 14.41% for the nine months ended September 30, 2019.
On January 31, 2019, the Company completed its acquisition of The Banc Ed Corp. (“Banc Ed”), the holding company for TheBANK of Edwardsville (“TheBANK”). First Busey operated TheBANK as a separate subsidiary from the completion of the acquisition until October 4, 2019, when it was merged with and into Busey Bank. At that time, TheBANK’s banking centers became banking centers of Busey Bank. When we completed the Banc Ed acquisition, we reset the baseline for the future financial performance of First Busey in a multitude of positive ways. With TheBANK now merged and integrated, we expect to see the full contribution and synergies of TheBANK reflected in the Company’s financial performance in the quarters ahead.
1 A Non-GAAP financial measure. See “Non-GAAP Financial Information” below for reconciliation.
On October 4, 2019, in addition to TheBANK being merged into Busey Bank, the Company partnered with a new core provider. The core conversion positions the combined organization for future growth. Strategic process improvements and investments in technology platforms will allow the Company to serve customers more efficiently and effectively for years to come.
On August 31, 2019, the Company completed the previously announced merger of Busey Bank with Investors’ Security Trust Company (“IST”), a Fort Myers, Florida wealth management firm, which had $471.1 million assets under care. Through this transaction, Busey Bank and IST broaden the expertise and raise the level of service available to clients—from individuals and families to institutions and foundations—and remain committed to their founding principles of being active community stewards and providing the highest level of personal service to clients delivered by experienced, local professionals.
In addition to the successful integration of these acquisitions, we are pleased to report net organic loan growth of $137.3 million in the third quarter, with total portfolio loans increasing to $6.67 billion at September 30, 2019 from $6.53 billion at June 30, 2019. This is the result of focused initiatives and effort on the part of our associates across our markets and was accomplished while maintaining our conservative credit principles. As of September 30, 2019, the ratio of non-performing loans to total loans declined to 0.50%, while the ratio of allowance to non-performing loans increased to 160.00%.
Our goal of being a strong community bank for the communities we serve begins with outstanding associates. The Company is honored to be named among the 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 Illinois by Best Companies Group and Daily Herald Business Ledger, the 2019 Best Companies to Work For in Florida by Florida Trend magazine, the 2019 Best Place to Work in Indiana by Best Companies Group and the Indiana Chamber of Commerce and the 2019 Best Places to Work in St. Louis by Quantum Workplace and St. Louis Business Journal.
We are pleased with our third quarter 2019 operating results and feel confident that we are well positioned for growth as we move into the final quarter of 2019 and into 2020.
/s/ Van A. Dukeman
President & Chief Executive Officer
First Busey Corporation
SELECTED FINANCIAL HIGHLIGHTS1 | |||||||||||||||||||||||||||||||||
| (dollars in thousands, except per share data) | As of and for the | As of and for the | |||||||||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||||||
| September 30, | June 30, | December 31, | September 30, | September 30, | September 30, | ||||||||||||||||||||||||||||
| 2019 | 2019 | 2018 | 2018 | 2019 | 2018 | ||||||||||||||||||||||||||||
| EARNINGS & PER SHARE DATA | |||||||||||||||||||||||||||||||||
| Revenue2 | $ | 104,051 | $ | 102,350 | $ | 83,184 | $ | 82,627 | $ | 300,687 | $ | 247,884 | |||||||||||||||||||||
| Net income | 24,828 | 24,085 | 25,290 | 26,859 | 74,382 | 73,638 | |||||||||||||||||||||||||||
| Diluted earnings per share | 0.45 | 0.43 | 0.51 | 0.55 | 1.35 | 1.50 | |||||||||||||||||||||||||||
| Cash dividends paid per share | 0.21 | 0.21 | 0.20 | 0.20 | 0.63 | 0.60 | |||||||||||||||||||||||||||
| Net income by operating segment | |||||||||||||||||||||||||||||||||
| Banking | $ | 25,731 | $ | 24,441 | $ | 24,134 | $ | 26,486 | $ | 76,837 | 73,235 | ||||||||||||||||||||||
| Remittance Processing | 972 | 1,105 | 814 | 957 | 3,102 | 2,896 | |||||||||||||||||||||||||||
| Wealth Management | 2,184 | 2,845 | 2,040 | 2,280 | 7,670 | 7,332 | |||||||||||||||||||||||||||
| AVERAGE BALANCES | |||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 515,965 | $ | 328,414 | $ | 272,811 | $ | 238,000 | $ | 391,029 | $ | 227,806 | |||||||||||||||||||||
| Investment securities | 1,780,066 | 1,897,486 | 1,443,054 | 1,417,708 | 1,800,069 | 1,345,996 | |||||||||||||||||||||||||||
| Loans held for sale | 42,418 | 25,143 | 23,380 | 28,661 | 28,326 | 31,785 | |||||||||||||||||||||||||||
| Portfolio loans | 6,558,519 | 6,528,326 | 5,540,852 | 5,551,753 | 6,406,779 | 5,531,087 | |||||||||||||||||||||||||||
| Interest-earning assets | 8,781,590 | 8,666,136 | 7,174,755 | 7,132,324 | 8,514,580 | 7,031,636 | |||||||||||||||||||||||||||
| Total assets | 9,659,769 | 9,522,678 | 7,846,154 | 7,802,308 | 9,352,272 | 7,707,090 | |||||||||||||||||||||||||||
| Non-interest bearing deposits | 1,780,645 | 1,747,746 | 1,486,977 | 1,492,709 | 1,715,701 | 1,494,016 | |||||||||||||||||||||||||||
| Interest-bearing deposits | 6,086,378 | 5,970,408 | 4,852,649 | 4,784,657 | 5,884,904 | 4,658,303 | |||||||||||||||||||||||||||
| Total deposits | 7,867,023 | 7,718,154 | 6,339,626 | 6,277,366 | 7,600,605 | 6,152,319 | |||||||||||||||||||||||||||
| Securities sold under agreements to repurchase | 184,637 | 193,621 | 210,416 | 234,729 | 194,189 | 242,268 | |||||||||||||||||||||||||||
| Interest-bearing liabilities | 6,557,518 | 6,493,885 | 5,329,898 | 5,303,632 | 6,373,639 | 5,219,086 | |||||||||||||||||||||||||||
| Total liabilities | 8,446,936 | 8,326,876 | 6,866,652 | 6,840,484 | 8,179,059 | 6,760,415 | |||||||||||||||||||||||||||
| Stockholders' common equity | 1,212,833 | 1,195,802 | 979,502 | 961,824 | 1,173,213 | 946,675 | |||||||||||||||||||||||||||
| Tangible stockholders' common equity3 | 835,232 | 818,951 | 678,023 | 658,910 | 804,109 | 641,937 | |||||||||||||||||||||||||||
| PERFORMANCE RATIOS | |||||||||||||||||||||||||||||||||
| Return on average assets4 | 1.02 | % | 1.01 | % | 1.28 | % | 1.37 | % | 1.06 | % | 1.28 | ||||||||||||||||||||||
| Return on average common equity4 | 8.12 | % | 8.08 | % | 10.24 | % | 11.08 | % | 8.48 | % | 10.40 | ||||||||||||||||||||||
| Return on average tangible common equity3,4 | 11.79 | % | 11.80 | % | 14.80 | % | 16.17 | % | 12.37 | % | 15.34 | ||||||||||||||||||||||
| Net interest margin4,5 | 3.35 | % | 3.43 | % | 3.38 | % | 3.41 | % | 3.42 | % | 3.47 | ||||||||||||||||||||||
| Efficiency ratio6 | 62.73 | % | 63.62 | % | 56.57 | % | 53.47 | % | 61.55 | % | 56.02 | ||||||||||||||||||||||
| Non-interest revenue as a % of total revenues2 | 29.38 | % | 28.26 | % | 27.27 | % | 26.45 | % | 28.40 | % | 27.02 | ||||||||||||||||||||||
| NON-GAAP INFORMATION | |||||||||||||||||||||||||||||||||
| Adjusted net income6 | $ | 30,535 | $ | 29,498 | $ | 25,958 | $ | 27,006 | $ | 86,647 | $ | 77,518 | |||||||||||||||||||||
| Adjusted diluted earnings per share6 | 0.55 | 0.53 | 0.53 | 0.55 | 1.57 | 1.58 | |||||||||||||||||||||||||||
| Adjusted return on average assets4 | 1.25 | % | 1.24 | % | 1.31 | % | 1.37 | % | 1.24 | % | 1.34 | ||||||||||||||||||||||
| Adjusted return on average tangible common equity3,4 | 14.50 | % | 14.45 | % | 15.19 | % | 16.26 | % | 14.41 | % | 16.15 | ||||||||||||||||||||||
| Adjusted net interest margin4,5 | 3.22 | % | 3.27 | % | 3.27 | % | 3.29 | % | 3.27 | % | 3.31 | ||||||||||||||||||||||
| Adjusted efficiency ratio6 | 55.42 | % | 56.55 | % | 55.49 | % | 53.26 | % | 56.12 | % | 54.16 | ||||||||||||||||||||||
| 1 Results are unaudited. | |||||||||||||||||||||||||||||||||
| 2 Revenues consist of net interest income plus non-interest income, excluding security gains and losses. | |||||||||||||||||||||||||||||||||
| 3 Average tangible stockholders’ common equity is defined as average common equity less average goodwill and intangibles. See “Non-GAAP Financial Information” below for reconciliation. | |||||||||||||||||||||||||||||||||
| 4 Annualized, see “Non-GAAP Financial Information” below for reconciliation. | |||||||||||||||||||||||||||||||||
| 5 On a tax-equivalent basis, assuming a federal income tax rate of 21%. | |||||||||||||||||||||||||||||||||
| 6 See “Non-GAAP Financial Information” below for reconciliation. | |||||||||||||||||||||||||||||||||
Condensed Consolidated Balance Sheets1 | As of | ||||||||||||||||||||||||||||||||
| (dollars in thousands, except per share data) | September 30, | June 30, | March 31, | December 31, | September 30, | ||||||||||||||||||||||||||||
| 2019 | 2019 | 2019 | 2018 | 2018 | |||||||||||||||||||||||||||||
| Assets | |||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 525,457 | $ | 420,207 | $ | 330,407 | $ | 239,973 | $ | 160,652 | |||||||||||||||||||||||
| Investment securities | 1,721,865 | 1,869,143 | 1,940,519 | 1,312,514 | 1,496,948 | ||||||||||||||||||||||||||||
| Loans held for sale | 70,345 | 39,607 | 20,291 | 25,895 | 32,617 | ||||||||||||||||||||||||||||
| Commercial loans | 4,900,430 | 4,759,329 | 4,744,136 | 4,060,126 | 4,141,816 | ||||||||||||||||||||||||||||
| Retail real estate and retail other loans | 1,768,985 | 1,772,797 | 1,770,945 | 1,508,302 | 1,481,925 | ||||||||||||||||||||||||||||
| Portfolio loans | $ | 6,669,415 | $ | 6,532,126 | $ | 6,515,081 | $ | 5,568,428 | $ | 5,623,741 | |||||||||||||||||||||||
| Allowance for loan losses | (52,965 | ) | (51,375 | ) | (50,915 | ) | (50,648 | ) | (52,743 | ) | |||||||||||||||||||||||
| Premises and equipment | 153,641 | 149,726 | 147,958 | 117,672 | 119,162 | ||||||||||||||||||||||||||||
| Goodwill and other intangibles | 381,323 | 375,327 | 377,739 | 300,558 | 301,963 | ||||||||||||||||||||||||||||
| Right of use asset | 9,979 | 10,426 | 10,898 | - | - | ||||||||||||||||||||||||||||
| Other assets | 274,700 | 267,480 | 245,356 | 187,965 | 207,045 | ||||||||||||||||||||||||||||
| Total assets | $ | 9,753,760 | $ | 9,612,667 | $ | 9,537,334 | $ | 7,702,357 | $ | 7,889,385 | |||||||||||||||||||||||
| Liabilities & Stockholders' Equity | |||||||||||||||||||||||||||||||||
| Non-interest bearing deposits | $ | 1,779,490 | $ | 1,766,681 | $ | 1,791,339 | $ | 1,464,700 | $ | 1,438,054 | |||||||||||||||||||||||
| Interest-bearing checking, savings, and money market deposits | 4,498,005 | 4,316,730 | 4,214,809 | 3,287,618 | 3,205,232 | ||||||||||||||||||||||||||||
| Time deposits | 1,652,971 | 1,749,811 | 1,757,078 | 1,497,003 | 1,552,283 | ||||||||||||||||||||||||||||
| Total deposits | $ | 7,930,466 | $ | 7,833,222 | $ | 7,763,226 | $ | 6,249,321 | $ | 6,195,569 | |||||||||||||||||||||||
| Securities sold under agreements to repurchase | 202,500 | 190,846 | 217,077 | 185,796 | 255,906 | ||||||||||||||||||||||||||||
| Short-term borrowings | 29,739 | 30,761 | 30,739 | - | 200,000 | ||||||||||||||||||||||||||||
| Long-term debt | 183,968 | 185,576 | 188,221 | 148,686 | 148,626 | ||||||||||||||||||||||||||||
| Junior subordinated debt owed to unconsolidated trusts | 71,269 | 71,230 | 71,192 | 71,155 | 71,118 | ||||||||||||||||||||||||||||
| Lease liability | 10,101 | 10,531 | 10,982 | - | - | ||||||||||||||||||||||||||||
| Other liabilities | 109,736 | 86,893 | 69,756 | 52,435 | 46,026 | ||||||||||||||||||||||||||||
| Total liabilities | $ | 8,537,779 | $ | 8,409,059 | $ | 8,351,193 | $ | 6,707,393 | $ | 6,917,245 | |||||||||||||||||||||||
| Total stockholders' equity | $ | 1,215,981 | $ | 1,203,608 | $ | 1,186,141 | $ | 994,964 | $ | 972,140 | |||||||||||||||||||||||
| Total liabilities & stockholders' equity | $ | 9,753,760 | $ | 9,612,667 | $ | 9,537,334 | $ | 7,702,357 | $ | 7,889,385 | |||||||||||||||||||||||
| Share Data | |||||||||||||||||||||||||||||||||
| Book value per common share | $ | 22.03 | $ | 21.73 | $ | 21.32 | $ | 20.36 | $ | 19.90 | |||||||||||||||||||||||
| Tangible book value per common share2 | $ | 15.12 | $ | 14.95 | $ | 14.53 | $ | 14.21 | $ | 13.72 | |||||||||||||||||||||||
| Ending number of common shares outstanding | 55,197,277 | 55,386,636 | 55,624,627 | 48,874,836 | 48,860,309 | ||||||||||||||||||||||||||||
| 1 Results are unaudited except for amounts reported as of December 31, 2018. | |||||||||||||||||||||||||||||||||
| 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 September 30, | Nine Months Ended September 30, | |||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||
| Interest and fees on loans | $ | 78,083 | $ | 63,589 | $ | 227,903 | $ | 186,839 | ||
| Interest on investment securities | 11,427 | 8,523 | 35,039 | 23,300 | ||||||
| Other interest income | 2,181 | 649 | 4,496 | 1,580 | ||||||
| Total interest income | $ | 91,691 | $ | 72,761 | $ | 267,438 | $ | 211,719 | ||
| Interest on deposits | 14,753 | 8,946 | 41,407 | 21,837 | ||||||
| Interest on securities sold under agreements to repurchase | 579 | 426 | 1,789 | 1,131 | ||||||
| Interest on short-term borrowings | 200 | 324 | 885 | 1,265 | ||||||
| Interest on long-term debt | 1,831 | 1,437 | 5,412 | 4,200 | ||||||
| Interest on junior subordinated debt owed to unconsolidated trusts | 852 | 854 | 2,658 | 2,383 | ||||||
| Total interest expense | $ | 18,215 | $ | 11,987 | $ | 52,151 | $ | 30,816 | ||
| Net interest income | $ | 73,476 | $ | 60,774 | $ | 215,287 | $ | 180,903 | ||
| Provision for loan losses | 3,411 | 758 | 8,039 | 4,024 | ||||||
| Net interest income after provision for loan losses | $ | 70,065 | $ | 60,016 | $ | 207,248 | $ | 176,879 | ||
| Trust fees | 7,689 | 6,324 | 24,122 | 20,573 | ||||||
| Commissions and brokers' fees, net | 1,132 | 881 | 3,216 | 2,860 | ||||||
| Fees for customer services | 9,842 | 7,340 | 27,635 | 21,576 | ||||||
| Remittance processing | 3,780 | 3,630 | 11,277 | 10,588 | ||||||
| Mortgage revenue | 3,331 | 1,272 | 8,127 | 4,488 | ||||||
| Security gains (losses), net | 361 | - | (623 | ) | 160 | |||||
| Other | 4,801 | 2,406 | 11,023 | 6,896 | ||||||
| Total non-interest income | $ | 30,936 | $ | 21,853 | $ | 84,777 | $ | 67,141 | ||
| Salaries, wages and employee benefits | 38,747 | 26,024 | 105,356 | 80,315 | ||||||
| Net occupancy expense of premises | 4,652 | 3,761 | 13,365 | 11,271 | ||||||
| Furniture and equipment expense | 2,489 | 1,715 | 6,936 | 5,418 | ||||||
| Data processing | 5,032 | 4,016 | 15,049 | 12,391 | ||||||
| Amortization of intangible assets | 2,360 | 1,445 | 6,866 | 4,450 | ||||||
| Other | 14,841 | 8,968 | 45,732 | 30,429 | ||||||
| Total non-interest expense | $ | 68,121 | $ | 45,929 | $ | 193,304 | $ | 144,274 | ||
| Income before income taxes | $ | 32,880 | $ | 35,940 | $ | 98,721 | $ | 99,746 | ||
| Income taxes | 8,052 | 9,081 | 24,339 | 26,108 | ||||||
| Net income | $ | 24,828 | $ | 26,859 | $ | 74,382 | $ | 73,638 | ||
| Per Share Data | ||||||||||
| Basic earnings per common share | $ | 0.45 | $ | 0.55 | $ | 1.36 | $ | 1.51 | ||
| Diluted earnings per common share | $ | 0.45 | $ | 0.55 | $ | 1.35 | $ | 1.50 | ||
| Average common shares outstanding | 55,410,109 | 48,891,496 | 54,782,946 | 48,827,861 | ||||||
| Diluted average common shares outstanding | 55,646,104 | 49,246,542 | 55,057,518 | 49,216,307 | ||||||
| 1 Results are unaudited. | ||||||||||
Balance Sheet Growth
At September 30, 2019, portfolio loans were $6.67 billion, as compared to $6.53 billion as of June 30, 2019 and $5.62 billion as of September 30, 2018. The increase as of September 30, 2019 from June 30, 2019 related to organic loan growth at both Busey Bank and TheBANK. Average portfolio loans increased to $6.56 billion for the third quarter of 2019 compared to $6.53 billion in the second quarter of 2019 and increased 18.1% compared to $5.55 billion for the third quarter of 2018.
Average interest-earning assets for the third quarter of 2019 increased to $8.78 billion compared to $8.67 billion for the second quarter of 2019 and $7.13 billion for the third quarter of 2018. Average interest-earning assets for the first nine months of 2019 increased 21.1% to $8.51 billion from $7.03 billion in the same period of 2018.
Total deposits were $7.93 billion at September 30, 2019, an increase from $7.83 billion at June 30, 2019 and $6.20 billion at September 30, 2018. 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 third quarter of 2019 was 3.35%, compared to 3.43% for the second quarter of 2019 and 3.41% for the third quarter of 2018. Adjusted net interest margin1 for the third quarter of 2019 was 3.22%, compared to 3.27% for the second quarter of 2019 and 3.29% in the third quarter of 2018. Net interest margin for the first nine months of 2019 was 3.42% compared to 3.47% for the first nine months of 2018. Adjusted net interest margin1 for the first nine months of 2019 was 3.27%, a decrease from 3.31% for the same period of 2018.
Higher aggregate yields from loan production partially offset increases in funding costs in 2019 as compared to 2018. Funding costs in 2019 increased from 2018, primarily due to resetting of time deposit rates to reflect market rates and additional borrowings in conjunction with the Banc Ed acquisition. The Federal Open Market Committee lowered Federal Funds Target rates for the first time in 11 years on July 31, 2019 and then again on September 18, 2019, for a combined decrease of 50 basis points. This contributed to the decline in net interest margin for the quarter ended September 30, 2019 as compared to the quarter ended June 30, 2019, as assets, in particular commercial loans, repriced more quickly and to a greater extent than liabilities.
Net interest income was $73.5 million in the third quarter of 2019 compared to $73.4 million in the second quarter of 2019 and $60.8 million in the third quarter of 2018. Net interest income was $215.3 million for the first nine months of 2019 compared to $180.9 million for the same period of 2018. Net purchase accounting accretion and amortization included in interest income and interest expense was $3.0 million for the third quarter of 2019, a decrease from $3.5 million for the second quarter of 2019 and an increase from $2.3 million for the third quarter of 2018. Net purchase accounting accretion and amortization included in interest income and interest expense for the first nine months of 2019 was $9.4 million compared to $8.7 million for the same period of 2018. As of September 30, 2019, the Company has $22.5 million of purchase discount to be accreted over the remaining life of our acquired loans.
Asset Quality
Non-performing loans totaled $33.1 million as of September 30, 2019 and June 30, 2019 as compared to $40.8 million as of September 30, 2018. Continued disciplined credit management resulted in non-performing loans as a percentage of total loans of 0.50% at September 30, 2019 as compared to 0.51% at June 30, 2019 and 0.72% at September 30, 2018.
The Company recorded net charge-offs of $1.8 million for the third quarter of 2019. The allowance for loan loss as a percentage of portfolio loans was 0.79% at September 30, 2019 and June 30, 2019 as compared to 0.94% at September 30, 2018. The decline in the allowance coverage ratio in 2019 is primarily attributed to the Banc Ed acquisition. Acquired loans are initially recorded at their acquisition date fair value so a separate allowance is not initially recognized. An allowance is recorded subsequent to acquisition to the extent the reserve requirement exceeds the recorded fair value adjustment.
1 A Non-GAAP financial measure. See “Non-GAAP Financial Information” below for reconciliation.
The Company recorded provision for loan losses of $3.4 million in the third quarter of 2019, compared to $2.5 million in the second quarter of 2019 and $0.8 million in the third quarter of 2018. The Company recorded provision for loan losses of $8.0 million in the first nine months of 2019 and $4.0 million in the first nine months of 2018.
| Asset Quality1 | |||||||||||||||
| (dollars in thousands) | As of and for the Three Months Ended | ||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||||
| 2019 | 2019 | 2019 | 2018 | 2018 | |||||||||||
| Portfolio loans | $ | 6,669,415 | $ | 6,532,126 | $ | 6,515,081 | $ | 5,568,428 | $ | 5,623,741 | |||||
| Loans 30-89 days past due | 12,434 | 18,040 | 10,780 | 7,121 | 8,189 | ||||||||||
| Non-performing loans: | |||||||||||||||
| Non-accrual loans | 31,827 | 32,816 | 36,230 | 34,997 | 40,395 | ||||||||||
| Loans 90+ days past due | 1,276 | 258 | 356 | 1,601 | 364 | ||||||||||
| Total non-performing loans | 33,103 | 33,074 | 36,586 | 36,598 | 40,759 | ||||||||||
| Total non-performing loans, segregated by geography | |||||||||||||||
| Illinois/ Indiana | 24,296 | 24,509 | 28,847 | 28,319 | 33,699 | ||||||||||
| Missouri | 8,202 | 7,778 | 6,593 | 7,242 | 6,222 | ||||||||||
| Florida | 605 | 787 | 1,146 | 1,037 | 838 | ||||||||||
| Other non-performing assets | 926 | 936 | 921 | 376 | 1,093 | ||||||||||
| Total non-performing assets | 34,029 | 34,010 | 37,507 | 36,974 | 41,852 | ||||||||||
| Total non-performing assets to portfolio loans and non- performing assets | 0.51 | % | 0.52 | % | 0.58 | % | 0.66 | % | 0.74 | % | |||||
| Allowance for loan losses to portfolio loans | 0.79 | % | 0.79 | % | 0.78 | % | 0.91 | % | 0.94 | % | |||||
| Allowance as a percentage of non-performing loans | 160.00 | % | 155.33 | % | 139.17 | % | 138.39 | % | 129.40 | % | |||||
| Net charge-offs | 1,821 | 2,057 | 1,844 | 2,500 | 1,320 | ||||||||||
| Provision for loan losses | 3,411 | 2,517 | 2,111 | 405 | 758 | ||||||||||
| 1 Results are unaudited. | |||||||||||||||
Non-Interest Income
Total non-interest income of $30.9 million for the third quarter of 2019 increased as compared to $27.9 million in the second quarter of 2019 and $21.9 million in the third quarter of 2018.
Revenues from trust fees, commissions and brokers’ fees, and remittance processing activities represented 40.7% of the Company’s non-interest income for the quarter ended September 30, 2019, providing a balance to spread-based revenue from traditional banking activities. Trust fees and commissions and brokers’ fees were $8.8 million for the third quarter of 2019, a seasonal decrease from $9.5 million for the second quarter 2019 and increased from $7.2 million for the third quarter of 2018. Trust fees and commissions and brokers’ fees increased to $27.3 million for the first nine months of 2019 compared to $23.4 million for the first nine months of 2018.
Net income from the wealth management segment was $2.2 million for the third quarter of 2019 compared to $2.8 million in the second quarter of 2019 and $2.3 million in the third quarter of 2018. Net income from the wealth management segment for the nine months ended September 30, 2019 was $7.7 million compared to $7.3 million for the same period of 2018, an 4.6% increase. First Busey’s wealth management division ended the third quarter of 2019 with $9.41 billion in assets under care.
Remittance processing revenue from the Company’s subsidiary, FirsTech, of $3.8 million for the third quarter of 2019 increased slightly compared to $3.7 million in the second quarter of 2019 and $3.6 million for the third quarter of 2018. Remittance processing revenue for the nine months ended September 30, 2019 was $11.3 million, an increase of 6.5%, compared to $10.6 million during the same period of 2018. The FirsTech operating segment generated net income of $1.0 million for the third quarter of 2019 and $3.1 million for the first nine months of 2019. FirsTech has seen a relative slowdown in new business onboarding as compared to recent quarters that showed significant growth, which is consistent with the business’ typical sales cycle.
The mortgage line of business generated $3.3 million of revenue in the third quarter of 2019, an increase compared to $2.9 million of revenue in the second quarter of 2019 and $1.3 million of revenue in the third quarter of 2018. Mortgage revenue for the first nine months of 2019 was $8.1 million, an increase over the comparable period of 2018 of $4.5 million, following a long period of restructuring and additional revenue from TheBANK. A decline in prevailing market rates for mortgages also contributed to increased production in recent periods.
Operating Efficiency
The efficiency ratio was 62.73% for the quarter ended September 30, 2019 compared to 63.62% for the quarter ended June 30, 2019 and 53.47% for the quarter ended September 30, 2018. The adjusted efficiency ratio1 was 55.42% for the quarter ended September 30, 2019, 56.55% for the quarter ended June 30, 2019, and 53.26% for the quarter ended September 30, 2018. The efficiency ratio for the first nine months of 2019 was 61.55% compared to 56.02% for the first nine months of 2018. The adjusted efficiency ratio1 was 56.12% for the first nine months of 2019 compared to 54.16% for the first nine months of 2018. Total non-interest expenses have been influenced by acquisition expenses and other restructuring costs. For the third quarter of 2019, adjusted non-interest expenses, including amortization, were $60.5 million compared to reported non-interest expense of $68.1 million. The Company remains focused on expense discipline.
Specific areas of non-interest expense are as follows:
- Salaries, wages and employee benefits were $38.7 million in the third quarter of 2019, an increase from $34.3 million in the second quarter of 2019 and $26.0 million from the third quarter of 2018. In the first nine months of 2019, salaries, wages and employee benefits increased to $105.4 million compared to $80.3 million for the same period of 2018. For the three and nine months ended September 30, 2019, salaries, wages and employee benefits included $3.9 million and $4.2 million, respectively, of non-operating expenses. Total full time equivalents (“FTE”) at September 30, 2019 was 1,595 compared to 1,579 at June 30, 2019 and 1,298 at September 30, 2018. Included in the September 30, 2019 FTE are 293 FTEs of TheBANK.
- Data processing expense in the third quarter of 2019 of $5.0 million decreased compared to $5.6 million in the second quarter of 2019 and increased compared to $4.0 million in the third quarter of 2018. In the first nine months of 2019, data processing expense increased to $15.0 million compared to $12.4 million for the same period of 2018. For the three and nine months ended September 30, 2019, data processing included $0.3 million and $1.0 million, respectively, of non-operating expenses, related to payment of conversion expenses. Data processing for 2019 also includes data processing related to TheBANK.
- Other expense in the third quarter of 2019 of $14.8 million decreased compared to $18.9 million in the second quarter of 2019 and increased compared to $9.0 million in the third quarter of 2018. In the first nine months of 2019, other expense increased to $45.7 million compared to $30.4 million for the same period of 2018. For the three and nine months ended September 30, 2019, other expenses included $3.6 million and $11.3 million, respectively, of non-operating expenses which primarily includes professional and legal expenses and check card conversion expenses.
Capital Strength
The Company's strong capital levels, coupled with its earnings, has allowed First Busey to provide a steady return to its stockholders through dividends. The Company will pay a cash dividend on October 25, 2019 of $0.21 per common share to stockholders of record as of October 18, 2019. The Company has consistently paid dividends to its common stockholders since the bank holding company was organized in 1980.
As of September 30, 2019, the Company continued to exceed the capital adequacy requirements necessary to be considered “well-capitalized” under applicable regulatory guidelines. The Company’s tangible stockholders’ common equity1 (“TCE”) increased to $851.1 million at September 30, 2019, compared to $845.4 million at June 30, 2019 and $679.1 million at September 30, 2018. TCE represented 9.06% of tangible assets at September 30, 2019, compared to 9.13% at June 30, 2019 and 8.94% at September 30, 2018.1
During the third quarter of 2019, the Company purchased 194,062 shares of its common stock at an average price of $25.19 per share for a total of $4.9 million under the Company’s stock repurchase plan. At September 30, 2019, the Company held 713,456 shares in treasury and had 805,938 shares available to be purchased under the plan. The Company grants share-based compensation awards to its employees and members of its board of directors as provided for under the Company’s 2010 Equity Incentive Plan. The Company may source stock option exercises and grants of restricted stock units and deferred stock units from its inventory of treasury stock as an alternative to using newly issued shares. Repurchases were executed in contemplation of maintaining levels of treasury stock appropriate to satisfy compensation awards, in addition to favorable pricing of our shares during the third quarter of 2019.
1 A Non-GAAP financial measure. See “Non-GAAP Financial Information” below for reconciliation.
Corporate Profile
As of September 30, 2019, First Busey Corporation (Nasdaq: BUSE) was a $9.75 billion financial holding company headquartered in Champaign, Illinois. First Busey’s wealth management division ended the third quarter of 2019 with $9.41 billion in assets under care.
As of September 30, 2019, Busey Bank, a wholly-owned bank subsidiary, with total assets of $7.80 billion is headquartered in Champaign, Illinois and has 44 banking centers serving Illinois, 13 banking centers in the St. Louis, Missouri metropolitan area, 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 September 30, 2019, assets under care were approximately $7.96 billion. Busey Bank owns a retail payment processing subsidiary, FirsTech, Inc., which processes approximately 28 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.
As of September 30, 2019, TheBANK, a wholly-owned bank subsidiary, with total assets of $1.94 billion is headquartered in Edwardsville, Illinois and has 17 banking centers. Through TheBANK Wealth Management division, the Company provides asset management, investment and fiduciary services to individuals, businesses and foundations. As of September 30, 2019, assets under care were approximately $1.45 billion. Subsequent to the end of the quarter, on October 4, 2019, the merger of TheBANK into Busey Bank was completed.
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 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 net income, adjusted return on average assets, adjusted net interest margin, adjusted efficiency ratio, tangible common equity, tangible common equity to tangible assets and adjusted 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 directly comparable GAAP financial measures, for example, – net income in the case of adjusted net income and adjusted return on average assets, total net interest income, total non-interest income and total non-interest expense in the case of adjusted efficiency ratio, total stockholders’ equity in the case of the tangible book value per share – 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.
| Reconciliation of Non-GAAP Financial Measures – Adjusted Net Income and Return on Average Assets | ||||||||||||||||
| (dollars in thousands) | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, 2019 | June 30, 2019 | September 30, 2018 | September 30, 2019 | September 30, 2018 | ||||||||||||
| Net income | $ | 24,828 | $ | 24,085 | $ | 26,859 | $ | 74,382 | $ | 73,638 | ||||||
| Acquisition expenses | ||||||||||||||||
| Salaries, wages and employee benefits | 3,673 | 43 | - | 3,716 | 1,233 | |||||||||||
| Data processing | 172 | 327 | - | 506 | 406 | |||||||||||
| Lease impairment | - | 415 | - | 415 | - | |||||||||||
| Other (includes professional and legal) | 3,100 | 3,293 | 167 | 7,598 | 2,224 | |||||||||||
| Other restructuring costs | ||||||||||||||||
| Salaries, wages and employee benefits | 182 | 275 | - | 457 | 417 | |||||||||||
| Fixed asset impairment | - | - | - | - | 817 | |||||||||||
| Data processing | 84 | 292 | - | 476 | - | |||||||||||
| Other (includes professional and legal) | 459 | 826 | - | 1,452 | - | |||||||||||
| MSR Valuation | - | 1,822 | - | 1,822 | - | |||||||||||
| Related tax benefit | (1,963 | ) | (1,880 | ) | (20 | ) | (4,177 | ) | (1,217 | ) | ||||||
| Adjusted net income | $ | 30,535 | $ | 29,498 | $ | 27,006 | $ | 86,647 | $ | 77,518 | ||||||
| Average total assets | $ | 9,659,769 | $ | 9,522,678 | $ | 7,802,308 | $ | 9,352,272 | $ | 7,707,090 | ||||||
| Reported: Return on average assets1 | 1.02 | % | 1.01 | % | 1.37 | % | 1.06 | % | 1.28 | % | ||||||
| Adjusted: Return on average assets 1 | 1.25 | % | 1.24 | % | 1.37 | % | 1.24 | % | 1.34 | % | ||||||
| 1 Annualized measure. | ||||||||||||||||
| Reconciliation of Non-GAAP Financial Measures – Adjusted Net Interest Margin | ||||||||||||||||
| (dollars in thousands) | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, 2019 | June 30, 2019 | September 30, 2018 | September 30, 2019 | September 30, 2018 | ||||||||||||
| Reported: Net interest income | $ | 73,476 | $ | 73,428 | $ | 60,774 | $ | 215,287 | $ | 180,903 | ||||||
| Tax-equivalent adjustment | 778 | 777 | 574 | 2,232 | 1,713 | |||||||||||
| Purchase accounting accretion | (2,974 | ) | (3,471 | ) | (2,273 | ) | (9,439 | ) | (8,698 | ) | ||||||
| Adjusted: Net interest income | $ | 71,280 | $ | 70,734 | $ | 59,075 | $ | 208,080 | $ | 173,918 | ||||||
| Average interest-earning assets | $ | 8,781,590 | $ | 8,666,136 | $ | 7,132,324 | $ | 8,514,580 | $ | 7,031,636 | ||||||
| Reported: Net interest margin1 | 3.35 | % | 3.43 | % | 3.41 | % | 3.42 | % | 3.47 | % | ||||||
| Adjusted: Net Interest margin1 | 3.22 | % | 3.27 | % | 3.29 | % | 3.27 | % | 3.31 | % | ||||||
| 1 Annualized measure. | ||||||||||||||||
| Reconciliation of Non-GAAP Financial Measures – Adjusted Efficiency Ratio | ||||||||||||||||
| (dollars in thousands) | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, 2019 | June 30, 2019 | September 30, 2018 | September 30, 2019 | September 30, 2018 | ||||||||||||
| Reported: Net Interest income | $ | 73,476 | $ | 73,428 | $ | 60,774 | $ | 215,287 | $ | 180,903 | ||||||
| Tax- equivalent adjustment | 778 | 777 | 574 | 2,232 | 1,713 | |||||||||||
| Tax equivalent interest income | $ | 74,254 | $ | 74,205 | $ | 61,348 | $ | 217,519 | $ | 182,616 | ||||||
| Reported: Non-interest income | 30,936 | 27,896 | 21,853 | 84,777 | 67,141 | |||||||||||
| Less security gains (losses), net | 361 | (1,026 | ) | - | (623 | ) | 160 | |||||||||
| Adjusted: Non-interest income | $ | 30,575 | $ | 28,922 | $ | 21,853 | $ | 85,400 | $ | 66,981 | ||||||
| Reported: Non-interest expense | 68,121 | 68,020 | 45,929 | 193,304 | 144,274 | |||||||||||
| Amortization of intangible assets | (2,360 | ) | (2,412 | ) | (1,445 | ) | (6,866 | ) | (4,450 | ) | ||||||
| Non-operating adjustments: | ||||||||||||||||
| Salaries, wages and employee benefits | (3,855 | ) | (318 | ) | - | (4,173 | ) | (1,650 | ) | |||||||
| Data processing | (256 | ) | (619 | ) | - | (982 | ) | (406 | ) | |||||||
| Other | (3,559 | ) | (6,356 | ) | (167 | ) | (11,287 | ) | (2,596 | ) | ||||||
| Adjusted: Non-interest expense | $ | 58,091 | $ | 58,315 | $ | 44,317 | $ | 169,996 | $ | 135,172 | ||||||
| Reported: Efficiency ratio | 62.73 | % | 63.62 | % | 53.47 | % | 61.55 | % | 56.02 | % | ||||||
| Adjusted: Efficiency ratio | 55.42 | % | 56.55 | % | 53.26 | % | 56.12 | % | 54.16 | % | ||||||
| Reconciliation of Non-GAAP Financial Measures – Tangible common equity to tangible assets, Tangible book value per share, Return on average tangible common equity | ||||||||||
| (dollars in thousands) | ||||||||||
| As of and for the Three Months Ended | ||||||||||
| September 30, 2019 | June 30, 2019 | September 30, 2018 | ||||||||
| Total assets | $ | 9,753,760 | $ | 9,612,667 | $ | 7,889,385 | ||||
| Goodwill and other intangible assets, net | (381,323 | ) | (375,327 | ) | (301,963 | ) | ||||
| Tax effect of other intangible assets, net | 16,415 | 17,075 | 8,912 | |||||||
| Tangible assets | $ | 9,388,852 | $ | 9,254,415 | $ | 7,596,334 | ||||
| Total stockholders’ equity | 1,215,981 | 1,203,608 | 972,140 | |||||||
| Goodwill and other intangible assets, net | (381,323 | ) | (375,327 | ) | (301,963 | ) | ||||
| Tax effect of other intangible assets, net | 16,415 | 17,075 | 8,912 | |||||||
| Tangible common equity | $ | 851,073 | $ | 845,356 | $ | 679,089 | ||||
| Ending number of common shares outstanding | 55,197,277 | 55,386,636 | 48,860,309 | |||||||
| Tangible common equity to tangible assets1 | 9.06 | % | 9.13 | % | 8.94 | % | ||||
| Tangible book value per share | $ | 15.12 | $ | 14.95 | $ | 13.72 | ||||
| Average common equity | $ | 1,212,833 | $ | 1,195,802 | $ | 961,824 | ||||
| Average goodwill and intangibles, net | (377,601 | ) | (376,851 | ) | (302,914 | ) | ||||
| Average tangible common equity | $ | 835,232 | $ | 818,951 | $ | 658,910 | ||||
| Reported: Return on average tangible common equity2 | 11.79 | % | 11.80 | % | 16.17 | % | ||||
| Adjusted: Return on average tangible common equity2,3 | 14.50 | % | 14.45 | % | 16.26 | % | ||||
| Nine Months Ended | ||||||||||
| September 30, 2019 | September 30, 2018 | |||||||||
| Average stockholders' common equity | $ | 1,173,213 | $ | 946,675 | ||||||
| Average goodwill and intangibles, net | (369,104 | ) | (304,738 | ) | ||||||
| Average tangible stockholders' common equity | $ | 804,109 | $ | 641,937 | ||||||
| Reported: Return on average tangible common equity2 | 12.37 | % | 15.34 | % | ||||||
| Adjusted: Return on average tangible common equity2,3 | 14.41 | % | 16.15 | % | ||||||
| 1 Tax-effected measure. | ||||||||||
| 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 we undertake no obligation to update any statement in light of new information or future events. A number of factors, many of which are beyond our ability to control or predict, could cause actual results to differ materially from those in our 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 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; (iii) changes in state and federal laws, regulations and governmental policies concerning the Company’s general business; (iv) changes in interest rates and prepayment rates of the Company’s assets; (v) increased competition in the financial services sector and the inability to attract new customers; (vi) changes in technology and the ability to develop and maintain secure and reliable electronic systems; (vii) the loss of key executives or employees; (viii) changes in consumer spending; (ix) 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; (x) unexpected outcomes of existing or new litigation involving the Company; (xi) changes in accounting policies and practices; 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.