First Mid Bancshares, Inc. Announces Fourth Quarter and Full Year 2020 Results

MATTOON, Ill., Jan. 28, 2021 (GLOBE NEWSWIRE) — First Mid Bancshares, Inc. (NASDAQ: FMBH) (the “Company”) today announced its financial results for the quarter and full year period ended December 31, 2020.
HighlightsRecord quarterly net income of $13.6 million, or $0.81 diluted EPSReceived regulatory approval on pending acquisition of LINCO Bancshares, Inc. (“LINCO”)Assisted customers on the forgiveness of $93.4 million in Paycheck Protection Program (“PPP”) loansAnnounced branch optimization plan with completion now anticipated by mid-year 2021Wealth Management assets under management increased 7% for the year to $4.5 billionAnnouncing change to quarterly dividend from semi-annual dividend beginning in 2021“2020 was an incredible year with a combination of significant challenges and tremendous opportunities,” said Joe Dively, Chairman and Chief Executive Officer. “The First Mid team stepped up for our customers and shareholders, and I am proud of all that we accomplished. We ended the year with a record quarter of financial results, including working with our customers in the PPP forgiveness process, while completing a very successful subordinated debt offering and receiving regulatory approval for the pending acquisition of LINCO Bancshares, Inc.”“We are excited about the new year with the second round of PPP underway, the branch optimization plan to be completed by mid-year, and the expected close of the LINCO acquisition in February. The deepened presence in the St. Louis metro market and geographic diversity into mid-Missouri and Texas increases our growth prospects, strengthens our balance sheet, and is estimated to provide over 20% earnings accretion. The customers and employees are excited about the expanded product set and are ready to move forward with a combined company that we believe will be better and stronger,” Dively concluded.Net Interest IncomeNet interest income for the fourth quarter of 2020 increased by $0.9 million, or 2.8% compared to the third quarter of 2020. Interest income increased by $1.3 million and interest expense increased $0.4 million from the previous quarter. The increase in interest income was partially driven by fee income from the PPP loans. The PPP fee income was $3.2 million in the fourth quarter compared to $1.0 million in the third quarter of 2020.   At year end, the Company had $3.5 million of unrealized fee income on the first round of PPP loans remaining.   Total accretion income was $0.3 million, which was a decline of $0.1 million from the previous quarter. Interest expense was impacted by an additional $0.9 million of interest on the $96 million of subordinated debt that was raised in connection with the pending LINCO acquisition and for general corporate purposes. Excluding this, interest expense declined by $0.5 million in the quarter.In comparison to the fourth quarter of 2019, net interest income increased $2.5 million, or 7.9%. The increase was primarily the result of higher interest income on loans and lower interest expense outpacing the decline in investment income. Interest expense decreased by $1.4 million compared to the fourth quarter of last year, despite the additional $0.9 million of interest expense on the new subordinated debt.           Net Interest MarginNet interest margin, on a tax equivalent basis, was 3.17% for the fourth quarter of 2020, which was flat compared to the prior quarter. Both earning asset yields and cost of funds increased by two basis points.   Earning asset yields were impacted by PPP fee income and cost of funds were impacted by the new subordinated debt interest expense. Excluding the subordinated debt interest, the net interest margin would have been 8 basis points higher.In comparison to the fourth quarter of 2019, the net interest margin decreased 40 basis points with accretion income representing $1.5 million, or 17 basis points of the decline. Earning asset yields were down 66 basis points and average cost of funds declined by 26 basis points compared to the same period.  Loan PortfolioTotal loans ended the quarter at $3.14 billion, representing a decrease of $97.8 million compared to the prior quarter. The decline included $93.4 million of forgiven PPP loans. At year end, the Company had $168.3 million of PPP loans remaining on the balance sheet. For the year, and excluding PPP and acquired loans, loan balances increased $91.8 million, or 3.4%.  The Company continues to see its loan deferrals trending lower. As of January 19, 2021, outstanding deferrals totaled $49.4 million, or 1.6% of the loan portfolio. Hotels represent the largest deferral category at 84% of the total outstanding deferrals. Most remaining deferrals are paying interest with only principal deferred.Asset QualityThe Company’s asset quality measures continue to reflect a strong credit culture.   As of December 31, 2020, the allowance for credit losses, excluding $168.3 million of PPP loans, was 1.41% of total loans, the ratio of non-performing loans to total loans was 0.90%, and the allowance for credit losses to non-performing loans was 149.0%.   Non-performing loans increased $5.7 million to $28.1 million at quarter end.   Non-performing assets to total assets was 0.65% at quarter end. Net charge-offs were $0.6 million during the fourth quarter compared to $0.3 million in the prior quarter. During the quarter, the Company completed a review of all its internally identified COVID watch list loans, including those remaining on or coming off deferrals. The review, along with other changes to classifications unrelated to COVID, resulted in an increase to special mention loans by $31.9 million to $137.8 million and an increase to substandard loans by $4.4 million to $59.5 million. The increases were primarily in the hotel and restaurant sectors. The Company does not currently expect material losses from those specific downgrades that occurred in the quarter. The Company’s total past dues improved to 0.44% at year-end 2020 versus 0.55% at the end of the third quarter.Provision expense was recorded in the amount of $0.6 million in the fourth quarter, in line with net charge-offs. The reserve was flat compared to the prior quarter on a slightly lower loan balance, excluding PPP. The economic outlook has significantly improved for the Agriculture sector, while the COVID driven restrictions continue to provide macro-economic uncertainty in certain sectors.DepositsTotal deposits ended the quarter at $3.69 billion, which represented an increase of $72.9 million from the prior quarter.   Noninterest bearing deposits increased $99.3 million, while interest bearing deposits declined by $26.4 million. The Company’s average rate on cost of funds was 0.41% for the quarter compared to 0.39% in the prior quarter and 0.67% in the fourth quarter of 2019. Excluding the interest on the subordinated debt raised during the quarter in connection with the pending LINCO acquisition, the average cost of funds would have been 0.33%.            Noninterest IncomeNoninterest income for the fourth quarter of 2020 was $15.5 million compared to $13.6 million in the third quarter.   The increase compared to the prior quarter was due to the strong performance in the farm management and real estate areas of the wealth management division and higher insurance and mortgage banking revenues. The strength of First Mid’s noninterest income continues to be a strategic differentiator providing significant diversification for the Company.     In comparison to the fourth quarter of 2019, noninterest income increased $0.7 million, or 4.5%. The year-over-year increase was driven by wealth management, insurance, debit card fees and mortgage banking income, partially offset by lower service charges, less securities gains and a decline in the other non-interest income category.        Noninterest Expenses     Noninterest expense for the fourth quarter totaled $30.3 million compared to $26.9 million in the third quarter. The current quarter included $0.4 million, or approximately $0.02 EPS, of acquisition related costs. Consistent with the prior year, incentive compensation increased with the seasonal growth for the farm real estate sales within the wealth management business as well as the strong overall financial performance for the quarter.In comparison to the fourth quarter of 2019, noninterest expenses increased $2.7 million. The increase was primarily due to acquisition costs and higher incentive costs from increased revenues and net income.The Company’s efficiency ratio, on a tax equivalent basis and inclusive of acquisition costs, for the fourth quarter 2020 was 59.0% compared to 54.9% in the prior quarter and 57.2% for the same period last year.Regulatory Capital Levels and DividendThe Company’s capital levels remained strong and comfortably above the “well capitalized” levels. Capital levels ended the period as follows:The Company’s Board of Directors has determined it is in the best interest of shareholders to change from its historical semi-annual dividend to a quarterly dividend beginning in 2021. Therefore, the Board of Directors approved a quarterly dividend in the amount of $0.205 payable on March 1, 2021 for shareholders of record on February 19, 2021. The dividend amount is exactly half of the most recent semi-annual dividend that was paid in December.
About First Mid: 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. First Mid is a $4.7 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 155 years. More information about the Company is available on our website at www.firstmid.com.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.Investor Contact:
Aaron Holt
VP, Shareholder Relations
217-258-0463
aholt@firstmid.comMatt Smith
Chief Financial Officer
217-258-1528
msmith@firstmid.com– Tables Follow –