EX-99 2 exhibit99_102915x8k.htm EXHIBIT 99 Exhibit

Exhibit 99
QUARTERLY REPORT TO STOCKHOLDERS
2015 THIRD QUARTER

First Mid Announces:
•
Completion of 12 Branch Acquisition
•
Earnings Growth Trend Continues
•
Asset Quality Remains Strong
•
New Product Rollout and Service Expansion

The third quarter of 2015 included the successful completion of the acquisition of 12 Southern Illinois banking centers from Old National Bank. We closed the acquisition on August 14th and completed the system conversion over that weekend with the branches opening as First Mid-Illinois Bank and Trust, N.A. the following Monday. We are excited to complete the acquisition and expand our service area in Southern Illinois. The initial response from customers has been good, our new employees are a great addition to the team, and we have expanded products and services now offered in those markets. As you review the quarter-end financial statements, you will see that many line items on the balance sheet, income statement, and performance ratios are impacted by the acquisition. The new branches added approximately $156 million in loans and $453 million in deposits. Strategically, the acquisition provides a stable, low-cost source of core deposits to enable future loan growth throughout our market areas. Also, we passed a milestone as our total consolidated assets now exceed $2 billion and we now operate 47 banking centers in 33 communities across Illinois.

Financial results for First Mid-Illinois Bancshares, Inc. continue to be solid with higher earnings despite the one-time acquisition costs, continued excellent asset quality ratios, and strong regulatory capital ratios. Net income for the first nine months of 2015 was $11,858,000 compared to $11,551,000 for the same period last year. Net income is higher than last year despite incurring approximately $1.1 million of acquisition costs during the first nine months of 2015. Diluted earnings per share were $1.33 for the first nine months of 2015 compared to $1.38 for the first nine months of 2014 due to an increase in common shares outstanding following the capital raise completed in June. For the third quarter of 2015, net income was $3,663,000 compared to $3,915,000 for the third quarter of 2014, and diluted earnings per share were $.36 for the third quarter of 2015 compared to $.47 for the same period last year.

Year-to-date net income increased due to improvement in several areas including greater net interest income with growth in loans over the past year and the increase in assets from the acquisition, increases in fees from electronic services, and growth in mortgage banking and brokerage revenues. Comparing net income for the third quarter of 2015 to the same period last year, this quarter was lower primarily due to the acquisition costs from the Southern Illinois branch acquisition.

Year-to-date net interest income totaled $40.0 million compared to $38.4 million for the same period last year while the third quarter of 2015 was $14.0 million compared to $13.0 million for the third quarter of 2014. Loan balances increased over the past year to $1.24 billion as of September 30, 2015 compared to $1.04 billion last September. As previously mentioned, $156 million of loans were added with the acquisition and we have also grown commercial operating loans in our legacy market area. In addition, investment balances have increased as we added securities to invest the cash received from the acquisition. The growth in loans and investments from last September increased the level of earning assets resulting in the increase in net interest income. Our deposit balances also increased from $1.30 billion on September 30, 2014 to $1.73 billion on September 30, 2015 with $453 million of the increase resulting from the acquisition. Deposits from our legacy markets declined slightly from last year as we did not replace a $5 million brokered CD and we reduced higher-cost CD balances. The additional cash from the acquisition elevated our federal funds sold and interest-bearing balances at banks to $174.4 million reducing our earning asset yields and resulting in a decline in our net interest margin. The net interest margin on a tax equivalent basis for the first nine months of 2015 was 3.40% compared to 3.52% for the same period last year while the margin for the third quarter of 2015 was 3.23% compared to 3.51% for the third quarter of last year. We continue to implement a plan to invest the cash received from the acquisition over the next several months that balances risk and return. Investments are typically higher-yielding than federal funds sold and should improve our net interest margin once completed.

Our year-to-date provision for loan losses increased to $889,000 compared to $495,000 for the first nine months of 2014 while the provision for the third quarter of 2015 was $481,000 compared to $44,000 for the third quarter of 2014. Provision expense increased due to the growth in the loan portfolio and higher net charge-offs thus far in 2015. For the first nine months of 2015, net charge-offs were $343,000 compared to $39,000 for the same period last year. While net charge-offs were higher than last year, they remain low from a historical standpoint and low for a $1.24 billion loan portfolio. Also, overall asset quality remains very strong as our total non-performing loans and other real estate owned to total assets were .18% as of September 30, 2015


and compares well to peer banks. The trend over the past year has continued to improve as total non-performing loans and other real estate owned were $3.8 million at September 30, 2015 compared to $5.2 million at September 30, 2014. We also have a strong coverage ratio of the allowance for loan losses to the level of non-performing loans of 405% as of September 30, 2015.

Non-interest income for the first nine months of 2015 was $14.3 million as compared to $13.9 million for the first nine months of 2014 while non-interest income was $5.0 million for the third quarter of 2015 compared to $4.4 million for the third quarter last year. Year-to-date ATM and debit card fees are $291,000 higher than last year with the addition of the Southern Illinois locations and an increase in electronic transactions. Year-to-date mortgage banking revenues increased by $108,000 with greater home purchase and refinance activity. Brokerage revenues and insurance commissions have also increased. The additional revenues have offset the decline in gains on the sale of securities as market conditions and balance sheet liquidity positioning have limited sale opportunities in 2015.
Operating expenses for the first nine months of 2015 were $34.9 million compared to $33.3 million for the same period last year. Operating expenses for the third quarter of 2015 were $12.9 million compared to $11.1 million for the third quarter of last year. The operating expenses of the new branch locations are included from August 14th through September 30th. In addition, year-to-date acquisition costs of approximately $1.1 million and third quarter acquisition costs of approximately $835,000 are included in the operating expense totals.

As mentioned, our four regulatory capital ratios remained strong as of September 30, 2015 and in excess of the regulatory minimums to be considered well-capitalized. We completed the private placement of $29.3 million in common stock in June and recorded the acquisition-related accounting entries in the third quarter. The combination resulted in our capital ratios at September 30, 2015 being similar to year-end 2014 and positions the Company well for the future. Our tangible book value per share was $15.32 at September 30, 2015 compared to $15.63 at year-end and $13.96 last September.

Through strategic hires and new technology deployment, we have expanded services and coverage across our markets. We launched mobile deposit services that allow customers to make deposits via their smart phone this quarter. With the hire of Mike Neill as Carbondale Community President, we are able to offer trust services across the newly-acquired markets. Mike will be working closely with Bill Schlinkert who recently joined First Mid’s Trust and Wealth Management team and leads our Trust department. Investments in professional hires and technology will enable First Mid to continue delivering value for both customers and shareholders.

In conclusion, this has been an exciting quarter as we completed the acquisition. The dedication of our team has been tremendous and I am confident our new Southern Illinois region will be a significant contributor to our future performance and success.

Thank you for your continued support of First Mid-Illinois Bancshares, Inc. and please contact me if you should have any questions.


Sincerely,

Joseph R. Dively
Chairman and Chief Executive Officer
217-258-9520
jdively@firstmid.com

October 29, 2015


Third Quarter 2015 Financial Results
 
 
 
FIRST MID-ILLINOIS BANCSHARES, INC.
 
 
 
 
 
CONDENSED CONSOLIDATED BALANCE SHEETS
 
 
 
 
(In thousands)
(unaudited)

 


 
(unaudited)

 
September 30,

 
December 31,

 
September 30,

 
2015

 
2014
 
2014
Assets
 
 
 
 
 
Cash and cash equivalents
$
215,463

 
$
51,730

 
$
57,572

Investment securities
552,591

 
431,506

 
429,226

Loans (including loans held for sale)
1,236,749

 
1,062,406

 
1,041,008

Less allowance for loan losses
(14,228
)
 
(13,682
)
 
(13,705
)
Net loans
1,222,521

 
1,048,724

 
1,027,303

Premises and equipment, net
31,582

 
27,352

 
27,757

Goodwill and intangibles, net
47,362

 
27,597

 
27,753

Other assets
22,509

 
20,194

 
23,737

Total assets
$
2,092,028

 
$
1,607,103

 
$
1,593,348

 
 
 
 
 
 
Liabilities and Stockholders’ Equity
 
 
 
 
 
Deposits:
 
 
 
 
 
Non-interest bearing
$
331,206

 
$
222,116

 
$
218,214

Interest bearing
1,400,654

 
1,049,961

 
1,080,626

Total deposits
1,731,860

 
1,272,077

 
1,298,840

Repurchase agreements with customers
108,499

 
121,869

 
88,066

Other borrowings
20,000

 
20,000

 
15,000

Junior subordinated debentures
20,620

 
20,620

 
20,620

Other liabilities
7,240

 
7,621

 
9,131

  Total liabilities
1,888,219

 
1,442,187

 
1,431,657

  Total stockholders’ equity
203,809

 
164,916

 
161,691

Total liabilities and stockholders’ equity
$
2,092,028

 
$
1,607,103

 
$
1,593,348

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands)(unaudited)
 
 
 
 
Nine months ended
 
September 30,
 
2015
 
2014
Balance at beginning of period
$
164,916

 
$
149,381

Net income
11,858

 
11,551

Dividends on preferred stock and common stock
(3,680
)
 
(4,835
)
Issuance of preferred and common stock
28,806

 
1,260

Purchase of treasury stock
(1,041
)
 
(1,650
)
Deferred compensation and other adjustments
214

 
55

Changes in accumulated other comprehensive income
2,736

 
5,929

Balance at end of period
$
203,809

 
$
161,691



Third Quarter 2015 Financial Results
 
 
 
FIRST MID-ILLINOIS BANCSHARES, INC.
 
 
 
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 
 
 
(In thousands, except per share data)(unaudited)
 
 
 
 
 
 
 
 
Three months ended
 
Nine months ended
 
September 30,
 
September 30,
 
2015
 
2014
 
2015
 
2014
Interest income:
 
 
 
 
 
 
 
Interest and fees on loans
$
12,198

 
$
11,391

 
$
34,974

 
$
33,242

Interest on investment securities
2,682

 
2,392

 
7,473

 
7,460

Interest on federal funds sold & other deposits
63

 
24

 
107

 
67

Total interest income
14,943

 
13,807

 
42,554

 
40,769

Interest expense:
 
 
 
 

 
 
Interest on deposits
645

 
586

 
1,690

 
1,778

Interest on repurchase agreements with customers
14

 
11

 
43

 
33

Interest on other borrowings
156

 
78

 
479

 
212

Interest on subordinated debt
132

 
130

 
390

 
385

Total interest expense
947

 
805

 
2,602

 
2,408

Net interest income
13,996

 
13,002

 
39,952

 
38,361

Provision for loan losses
481

 
44

 
889

 
495

Net interest income after provision for loan losses
13,515

 
12,958

 
39,063

 
37,866

Non-interest income:
 
 
 
 
 
 
 
Trust revenues
795

 
813

 
2,575

 
2,594

Brokerage commissions
329

 
265

 
913

 
748

Insurance commissions
459

 
448

 
1,568

 
1,447

Service charges
1,536

 
1,412

 
4,003

 
3,909

Securities gains, net
1

 
(20
)
 
231

 
714

Mortgage banking revenues
172

 
185

 
549

 
441

ATM / debit card revenue
1,200

 
958

 
3,224

 
2,933

Other
517

 
341

 
1,282

 
1,087

Total non-interest income
5,009

 
4,402

 
14,345

 
13,873

Non-interest expense:
 
 
 
 
 
 
 
Salaries and employee benefits
6,522

 
6,216

 
18,875

 
18,323

Net occupancy and equipment expense
2,424

 
2,056

 
6,329

 
6,319

Amortization of intangible assets
155

 
162

 
466

 
487

Legal and professional expense
660

 
514

 
1,842

 
1,753

Other
3,121

 
2,142

 
7,404

 
6,382

Total non-interest expense
12,882

 
11,090

 
34,916

 
33,264

Income before income taxes
5,642

 
6,270

 
18,492

 
18,475

Income taxes
1,979

 
2,355

 
6,634

 
6,924

Net income
$
3,663

 
$
3,915

 
$
11,858

 
$
11,551

 
 
 
 
 
 
 
 
Per Share Information
 
 
 
 
 
 
 
Basic earnings per common share
$
0.35

 
$
0.48

 
$
1.35

 
$
1.40

Diluted earnings per common share
$
0.36

 
$
0.47

 
$
1.33

 
$
1.38

Dividends per common share
$
—

 
$
—

 
$
0.29

 
$
0.26




Third Quarter 2015 Financial Results
 
 
 
FIRST MID-ILLINOIS BANCSHARES, INC.
 
 
 
 
 
SELECTED FINANCIAL HIGHLIGHTS
As of
 
(Unaudited)

 


 
(Unaudited)

 
September 30,

 
December 31,

 
September 30,

 
2015

 
2014
 
2014
SHARE AND PER COMMON SHARE DATA
 
 
 
 
 
Book value per common share
$20.95
 
$19.55
 
$18.69
Tangible book value per common share
$15.32
 
$15.63
 
$13.96
Common shares outstanding
8,421,472

 
7,033,318

 
5,866,421

Market price of stock
$22.00
 
$18.55
 
$21.63
 
 
 
 
 
 
REGULATORY CAPITAL RATIOS
 
 
 
 
 
Leverage ratio
10.21
%
 
10.52
%
 
10.45
%
Total capital to risk-weighted assets
14.88
%
 
15.60
%
 
15.75
%
Tier 1 capital to risk-weighted assets
13.84
%
 
14.42
%
 
14.54
%
Common equity tier 1 capital to risk weighted assets
10.36
%
 
10.32
%
 
8.19
%
Preferred stockholders' equity
$27,400,000
 
$27,400,000
 
$52,030,000
Common stockholders' equity
$176,409,000
 
$137,516,000
 
$109,661,000
 
 
 
 
 
 
ASSET QUALITY
 
 
 
 
 
Allowance for loan losses to non-performing loans
405
%
 
301
%
 
284
%
Allowance for loan losses to total loans outstanding
1.15
%
 
1.29
%
 
1.32
%
Total YTD net charge-offs (recoveries) (1)
$343,000
 
$196,000
 
$39,000
Total non-performing loans and other real estate owned
$3,831,000
 
$4,803,000
 
$5,171,000
 
 
 
 
 
 

 
Three months ended (unaudited)
 
Nine months ended (unaudited)
 
September 30,

 
June 30,

 
September 30,

 
September 30,

 
September 30,

 
2015

 
2015
 
2014

 
2015

 
2014

PERFORMANCE RATIOS (1)
 
 
 
 
 
 
 
 
 
Return on average assets (2)
0.78
%
 
1.02
%
 
0.98
%
 
0.92
%
 
0.97
%
Return on average common equity (2)
7.17
%
 
9.79
%
 
10.89
%
 
8.86
%
 
10.76
%
Net interest margin (3)
3.23
%
 
3.57
%
 
3.51
%
 
3.40
%
 
3.52
%
 
 
 
 
 
 
 
 
 
 
(1) Financial information is provided as of the date listed except Performance Ratios and Total Net charge-offs which are as of the period ending on the date listed
(2) Annualized net income for period
(3) On a tax equivalent basis (TE), assuming a federal income tax rate of 35%




Corporate Profile

First Mid-Illinois Bancshares, Inc. is the parent company of First Mid-Illinois Bank & Trust, N.A. ("First Mid Bank"), Mid-Illinois Data Services, Inc., and First Mid Insurance Group. 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 customers and shareholders.

First Mid Bank was first chartered in 1865 and has since grown into a more than $2.1 billion community-focused organization that provides financial services through a network of 47 banking centers in 33 communities. Our talented team is comprised of over 500 men and women who take great pride in First Mid Bank and the Company, their work and their ability to serve our customers.

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."





















Note Concerning Forward-looking Statements
This presentation may contain certain forward-looking statements, such as discussions of the Company's pricing and fee trends, credit quality and outlook, liquidity, new business results, expansion plans, anticipated expenses and planned schedules. The Company 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 the Company, 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 those described in Item 1A - "Risk Factors" and other sections of the Company's Annual Report on Form 10-K, the Company's Quarterly Report for the second quarter of 2015 and the Company's other filings with the SEC. Furthermore, 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.



First Mid-Illinois Bancshares, Inc.
1421 Charleston Avenue
Mattoon, Illinois 61938
217-234-7454
www.firstmid.com