First Busey Announces 2020 Third Quarter Earnings
10/27/2020 - 05:00 PM
CHAMPAIGN, Ill., Oct. 27, 2020 (GLOBE NEWSWIRE) --
M essage from our Chairman & CEO
Positive advances in the third quarter of 2020 compared to the second quarter of 2020 and third quarter of 2019
Third quarter 2020 net income and adjusted net income 1 increased to $ 30.8 million and $ 32.8 million, respectively Third quarter 2020 diluted earnings per share of $0.5 6 and adjusted earnings per share 1 of $0. 60 compared to $0.4 7 and $0. 48 , r espectively , in the second quarter of 2020 Non-interest income of $32.3 million increased in third quarter 2020 compared to $28.0 million in second quarter 2020, non- interest income represents 32% of revenue in the third quarter of 2020 Non-interest expense of $ 56.5 millio n and non-interest expense excluding non-operating adjustments 1 of $54.0 million in third q uarter 2020 decreased compared to third quarter of 2019 of $68.1 million and $60.5 million, respectively Total assets decreased from $10.84 billion at June 30 ,2020, to $10.54 billion at September 30, 2020 Tangible book value per common share 1 of $1 6.32 at September 30, 20 20 as compared to $15. 92 at June 30, 20 20 and $15.12 at September 30, 2019, an increase of 7.9% over September 30, 2019 Wealth assets under care of $9.50 billion for the third quarter are within 2% of December 31, 2019 $9.70 billion high water mark For additional information, please refer to the 3Q20 Quarterly Earnings Supplement Third Quarter Financial Results The net income for First Busey Corporation (“First Busey” or the “Company”) for the third quarter of 2020 was $30.8 million, or $0.56 per diluted common share, as compared to $25.8 million, or $0.47 per diluted common share, for the second quarter of 2020 and $24.8 million, or $0.45 per diluted common share, for the third quarter of 2019. Adjusted net income1 for the third quarter of 2020 was $32.8 million, or $0.60 per diluted common share, as compared to $26.2 million, or $0.48 per diluted common share, for the second quarter of 2020 and $30.5 million, or $0.55 per diluted common share, for the third quarter of 2019. For the third quarter of 2020, annualized return on average assets and annualized return on average tangible common equity1 were 1.15% and 13.92%, respectively. Based on adjusted net income1 , annualized return on average assets was 1.22% and annualized return on average tangible common equity1 was 14.81% for the third quarter of 2020.
Pre-provision net revenue1 for the third quarter of 2020 was $45.9 million as compared to $45.4 million for the second quarter of 2020 and $35.9 million for the third quarter of 2019. Adjusted pre-provision net revenue1 for the third quarter of 2020 was $48.7 million as compared to $46.4 million for the second quarter of 2020 and $43.6 million for the third quarter of 2019. Pre-provision net revenue to average assets1 for the third quarter of 2020 was 1.71% as compared to 1.76% for the second quarter of 2020 and 1.48% for the third quarter of 2019. Adjusted pre-provision net revenue to average assets1 for the third quarter of 2020 was 1.81% as compared to 1.80% for the second quarter of 2020 and 1.79% for the third quarter of 2019.
The Company views certain non-operating items, including acquisition-related and other restructuring charges, as adjustments to net income reported under U.S. generally accepted accounting principles (“GAAP”). Non-operating pretax adjustments for the third quarter of 2020 included $0.3 million of expenses related to prior acquisitions and $2.2 million of other restructuring costs. 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 common equity, tangible common equity to tangible assets, 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.
1 A Non-GAAP financial measure. See “Non-GAAP Financial Information” below for reconciliation.
After careful consideration and analysis, the Company decided in July 2020 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 and responsive. These 12 banking centers closed on October 23, 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. Non-operating pretax expenses in salaries, wages and employee benefits in relation to the branch closings were $0.6 million during the third quarter of 2020, with an additional $0.1 million expected in the fourth quarter of 2020. The Company anticipates additional one-time expenses related to the banking center consolidation plan in the fourth quarter of 2020 as we finalize the fair value estimates related to the disposition of these banking centers. We currently estimate those remaining non-operating pretax expenses related to the consolidation to be in the range of $7.0 million to $7.5 million.
The operating model reorganization is consistent with the Company’s continued efforts to transition to a regional operating model that enhances sales organization alignment across our key business lines and improves efficiencies. Non-operating pretax expenses in salaries, wages and employee benefits related to the reorganization were $1.4 million during the third quarter of 2020. These efforts are currently anticipated to provide approximately $3.6 million in annual pre-tax noninterest expense savings when fully realized.
The Company continues to navigate the economic environment caused by the coronavirus disease 2019 (“COVID-19”) pandemic effectively and prudently. Our balance sheet strength remains robust with sound and stable asset quality, strong capital levels and substantial liquidity. Nevertheless, we remain vigilant, given that the negative impacts of COVID-19 are expected to continue in future quarters as the course of the economic recovery remains unclear and further fiscal stimulus is uncertain. These negative impacts may include further margin compression, increased provision expense, lower customer service fees and a deterioration in asset quality. As of the quarter ended September 30, 2020, the Company’s total assets exceeded $10 billion due to Paycheck Protection Program (“PPP”) loans and other factors. 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.
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 third quarter of 2020, the Company recorded provision for credit losses of $5.5 million and provision for unfunded commitments of $0.3 million primarily as a result of economic factors and uncertainty due to COVID-19. The allowance for credit losses 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, to $98.8 million at September 30, 2020, representing 1.39% of portfolio loans outstanding, 1.55% of portfolio loans excluding PPP loans, and 408.82% of non-performing loans at September 30, 2020.
CO VID-19 Update 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.
To alleviate some of the financial hardships qualifying customers faced as a result of COVID-19, First Busey offered an internal Financial Relief Program. The program included options for short-term loan payment deferrals and certain fee waivers. As of September 30, 2020, the Company had 301 commercial loans on payment deferrals representing $426.4 million in loans, 565 mortgage/personal loans on payment deferrals representing $82.4 million in loans and an additional 520 deferrals for $63.7 million of mortgage loans in the serviced portfolio. As of October 21, 2020 commercial modifications decreased to 155 commercial loans on payment deferrals representing $189.3 million in loans, or 3.7% of total commercial loans.
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 September 30, 2020, First Busey had $749.4 million in PPP loans outstanding, with an amortized cost of $736.4 million, representing 4,569 new and existing customers. The Company is actively assisting these customers in submitting applications to the SBA for loan forgiveness.
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 Banks to Work For by American Banker, 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, 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 .
In today’s fluid, ever-evolving landscape, First Busey takes pride in its culture and is thankful for the tireless work carried out by its associates. Despite significant uncertainties in the current environment, the Company remains steadfast in its commitment to the customers and communities it serves.
/s/ Van A. Dukeman Chairman, President & Chief Executive Officer First Busey Corporation
SELECTED FINANCIAL HIGHLIGHTS 1 (dollars in thousands, except per share data ) As of and for the Three Months Ended As of and for the Nine Months Ended September 30, June 30, December 31, September 30, September 30, September 30, 2020 2020 2019 2019 2020 2019 EARNINGS & PER SHARE DATA Pre-provision net revenue2, 3 $ 45,922 $ 45,394 $ 37,479 $ 35,930 $ 127,165 $ 107,383 Revenue4 102,464 98,462 102,969 104,051 297,289 300,687 Net income 30,829 25,806 28,571 24,828 71,999 74,382 Diluted earnings per share 0. 56 0.47 0.52 0.45 1.31 1.35 Cash dividends paid per share 0.22 0.22 0.21 0.21 0. 66 0.63 Net income by operating segment Banking $ 31,744 $ 25,985 $ 29,573 $ 25,731 $ 72,653 $ 76,837 Remittance Processing 5 78 528 958 972 1, 966 3,102 Wealth Management 3, 166 3,082 3,465 2,184 9,847 7,670 AVERAGE BALANCES Cash and cash equivalents $ 836,097 $ 563,022 $ 533,519 $ 515,965 $ 626,222 $ 391,029 Investment securities 1, 824,327 1,717,790 1,677,962 1,780,066 1,7 60,461 1,800,069 Loans held for sale 10 4,965 108,821 68,480 42,418 91,964 28,326 Portfolio loans 7, 160,757 7,216,825 6,657,283 6,558,519 7,012,497 6,406,779 Interest-earning assets 9, 805,948 9,485,200 8,810,505 8,781,590 9, 371,157 8,514,580 Total assets 10, 680,995 10,374,820 9,713,858 9,659,769 10, 249,578 9,352,272 Non-interest bearing deposits 2, 59 2 ,130 2,472,568 1,838,523 1,780,645 2, 303,538 1,715,701 Interest-bearing deposits 6, 169,377 6,073,795 6,052,529 6,086,378 6, 108,605 5,884,904 Total deposits 8, 761,507 8,546,363 7,891,052 7,867,023 8, 412,143 7,600,605 Securities sold under agreements to repurchase 1 90,046 184,208 204,076 184,637 18 5,528 194,189 Interest-bearing liabilities 6, 694,561 6,527,709 6,537,611 6,557,518 6,5 78,587 6,373,639 Total liabilities 9, 432,547 9,141,550 8,489,411 8,446,936 9,016,230 8,179,059 Stockholders' common equity 1,2 48,448 1,233,270 1,224,447 1,212,833 1,2 33,348 1,173,213 Tangible stockholders' common Equity3 8 80,958 863,571 845,179 835,232 8 63,547 804,109 PERFORMANCE RATIOS Pre-provision net revenue to average assets2, 3 1.7 1 % 1.76 % 1.53 % 1.48 % 1.6 6 % 1.54 % Return on average assets3 1. 15 % 1.00 % 1.17 % 1.02 % 0. 94 % 1.06 % Return on average common equity 9.82 % 8.42 % 9.26 % 8.12 % 7.80 % 8.48 % Return on average tangible common equity3 1 3.92 % 12.02 % 13.41 % 11.79 % 11.14 % 12.37 % Net interest margin3 ,5 2.86 % 3.03 % 3.27 % 3.35 % 3. 02 % 3.42 % Efficiency ratio3 5 2.42 % 50.97 % 60.54 % 62.73 % 54.30 % 61.55 % Non-interest revenue as a % of total revenue4 31.92 % 28.08 % 30.14 % 29.38 % 29.36 % 28.40 % NON-GAAP INFORMATION Adjusted pre-provision net revenue2, 3 $ 4 8,701 $ 46,448 $ 41,131 $ 43,600 $ 133,360 $ 125,025 Adjusted net income3 32,803 26,191 31,782 30,535 74,473 86,647 Adjusted diluted earnings per share3 0. 60 0.48 0.57 0.55 1.36 1.57 Adjusted pre-provision net revenue to average assets3 1.8 1 % 1.80 % 1.68 % 1.79 % 1.7 4 % 1.79 % Adjusted return on average assets3 1. 22 % 1.02 % 1.30 % 1.25 % 0. 97 % 1.24 % Adjusted return on average tangible common equity3 1 4.81 % 12.20 % 14.92 % 14.50 % 11.52 % 14.41 % Adjusted net interest margin3 ,5 2. 75 % 2.93 % 3.14 % 3.22 % 2.91 % 3.27 % Adjusted efficiency ratio3 49.97 % 50.48 % 57.02 % 55.42 % 5 3.24 % 56.12 % 1 Results are unaudited.2 Net interest income plus non-interest income, excluding security gains and losses, less non-interest expense.3 See “Non-GAAP Financial Information” below for reconciliation.4 Revenue consist of net interest income plus non-interest income, excluding security gains and losses.5 On a tax-equivalent basis, assuming a federal income tax rate of 21%.
Condensed Consolidated Balance Sheets 1 As of (dollars in thousands, except per share data ) September 30, June 30, March 31, December 31, September 30, 2020 2020 2020 2019 2019 Assets Cash and cash equivalents $ 479,721 $ 1,050,072 $ 342,848 $ 529,288 $ 525,457 Investment securities 2,098,657 1,701,992 1,770,881 1,654,209 1,721,865 Loans held for sale 87,772 108,140 89,943 68,699 70,345 Commercial loans 5,6 00,705 5,637,999 5,040,507 4,943,646 4,900,430 Retail real estate and retail other loans 1,5 20,606 1,591,021 1,704,992 1,743,603 1,768,985 Portfolio loans $ 7, 121,311 $ 7,229,020 $ 6,745,499 $ 6,687,249 $ 6,669,415 Allowance (9 8,841 ) (96,046 ) (84,384 ) (53,748 ) (52,965 ) Premises and equipment 14 4,001 146,951 149,772 151,267 153,641 Goodwill and other intangibles 36 5,960 368,053 370,572 373,129 381,323 Right of use asset 7,251 8,511 9,074 9,490 9,979 Other assets 3 33,796 319,272 327,200 276,146 274,700 Total assets $ 10, 539,628 $ 10,835,965 $ 9,721,405 $ 9,695,729 $ 9,753,760 Liabilities & Stockholders' Equity Non-interest bearing deposits $ 2, 595,075 $ 2,764,408 $ 1,910,673 $ 1,832,619 $ 1,779,490 Interest-bearing checking, savings, and money market deposits 4, 819,859 4,781,761 4,580,547 4,534,927 4,498,005 Time deposits 1, 227,767 1,363,497 1,482,013 1,534,850 1,652,971 Total deposits $ 8, 642,701 $ 8,909,666 $ 7,973,233 $ 7,902,396 $ 7,930,466 Securities sold under agreements to repurchase 201,641 194,249 167,250 205,491 202,500 Short-term borrowings 4,651 24,648 21,358 8,551 29,739 Long-term debt 2 26,801 256,837 134,576 182,522 183,968 Junior subordinated debt owed to unconsolidated trusts 71 ,427 71,387 71,347 71,308 71,269 Lease liability 7,342 8,601 9,150 9,552 10,101 Other liabilities 1 29,360 134,493 126,906 95,475 109,736 Total liabilities $ 9, 283,923 $ 9,599,881 $ 8,503,820 $ 8,475,295 $ 8,537,779 Total stockholders' equity $ 1,2 55,705 $ 1,236,084 $ 1,217,585 $ 1,220,434 $ 1,215,981 Total liabilities & stockholders' equity $ 10, 539,628 $ 10,835,965 $ 9,721,405 $ 9,695,729 $ 9,753,760 Share Data Book value per common share $ 2 3.03 $ 22.67 $ 22.38 $ 22.28 $ 22.03 Tangible book value per common share2 $ 1 6.32 $ 15.92 $ 15.57 $ 15.46 $ 15.12 Ending number of common shares outstanding 54,5 22,231 54,516,000 54,401,208 54,788,772 55,197,277 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 Income 1 (dollars in thousands, except per share data) For the For the Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Interest and fees on loans $ 69,809 $ 78,083 $ 213,434 $ 227,903 Interest on investment securities 9, 607 11,427 30,265 35,039 Other interest income 213 2,181 1, 596 4,496 Total interest income $ 79,629 $ 91,691 $ 245,295 $ 267,438 Interest on deposits 6,105 14,753 26,053 41,407 Interest on securities sold under agreements to repurchase 88 579 5 96 1,789 Interest on short-term borrowings 30 200 215 885 Interest on long-term debt 2,913 1,831 6,212 5,412 Interest on junior subordinated debt owed to unconsolidated trusts 7 40 852 2,220 2,658 Total interest expense $ 9,876 $ 18,215 $ 35,296 $ 52,151 Net interest income $ 69,753 $ 73,476 $ 209,999 $ 215,287 Provision for credit losses 5,549 3,411 3 5,656 8,039 Net interest income after provision for credit losses $ 64,204 $ 70,065 $ 1 74,343 $ 207,248 Wealth management fees 10, 548 8,821 32,296 27,338 Fees for customer services 8,014 9,842 23,400 27,635 Remittance processing 3, 995 3,780 11,466 11,277 Mortgage revenue 5,793 3,331 9,879 8,127 Income on bank owned life insurance 1,022 1,573 4,361 4,653 Security gains (losses), net (426 ) 361 476 (623 ) Other 3,339 3,228 5,888 6,370 Total non-interest income $ 32,285 $ 30,936 $ 87,766 $ 84,777 Salaries, wages and employee benefits 32,839 38,747 95,397 105,356 Data processing 3,937 5,032 12,383 15,049 Net occupancy expense of premises 4, 256 4,652 13,419 13,365 Furniture and equipment expense 2, 325 2,489 7,311 6,936 Professional fees 1, 698 2,622 5,508 9,001 Amortization of intangible assets 2, 49 3 2,360 7,56 9 6,866 Other 8, 99 4 12,219 28,53 7 36,731 Total non-interest expense $ 5 6,542 $ 68,121 $ 1 70,124 $ 193,304 Income before income taxes $ 3 9,947 $ 32,880 $ 91,985 $ 98,721 Income taxes 9,118 8,052 1 9,986 24,339 Net income $ 30,829 $ 24,828 $ 71,999 $ 74,382 Per Share Data Basic earnings per common share $ 0. 56 $ 0.45 $ 1.32 $ 1.36 Diluted earnings per common share $ 0. 56 $ 0.45 $ 1.31 $ 1.35 Average common shares outstanding 5 4, 585,998 55,410,109 54, 5 79,088 54,782,946 Diluted average common shares outstanding 5 4,7 37,920 55,646,104 54, 796,354 55,057,518 1 Results are unaudited.
Balance Sheet Growth
Total assets were $10.54 billion at September 30, 2020, down from $10.84 billion at June 30, 2020, and up from $9.75 billion at September 30, 2019. At September 30, 2020, portfolio loans were $7.12 billion, as compared to $7.23 billion as of June 30, 2020 and $6.67 billion as of September 30, 2019. The amortized cost of PPP loans of $736.4 million are included in the September 30, 2020 balance. When excluding the PPP loans, total commercial loans declined by $44.4 million and retail real estate and retail other loans declined by $70.4 million during the quarter. A change in the commercial unfunded commitments accounted for approximately $13.9 million of the commercial decline.
Average portfolio loans were $7.16 billion for the third quarter of 2020 as compared to $7.22 billion in the second quarter of 2020 and $6.56 billion in the third quarter of 2019. The average balance of PPP loans in the third quarter of 2020 were $734.2 million. Average interest-earning assets for the third quarter of 2020 increased to $9.81 billion compared to $9.49 billion for the second quarter of 2020 and $8.78 billion for the third quarter of 2019. Total deposits were $8.64 billion at September 30, 2020, compared to $8.91 billion at June 30, 2020 and $7.93 billion at September 30, 2019. Recent fluctuations in deposit balances can be attributed to the retention of PPP loan funding in customer deposit accounts, the impacts of economic stimulus, other core deposit growth and the seasonality of public funds, as well as the Company’s efforts to efficiently manage the size of its balance sheet. The Company remains funded substantially through core deposits with significant market share in its primary markets.
Net I nterest Margin and Net Interest Income
Net interest margin for the third quarter of 2020 was 2.86%, compared to 3.03% for the second quarter of 2020 and 3.35% for the third quarter of 2019. Net interest income was $69.8 million in the third quarter of 2020 compared to $70.8 million in the second quarter of 2020 and $73.5 million in the third 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 third quarter of 2020 include the sizeable balance of lower-yielding PPP loans, the Company’s significant liquidity position and the issuance of subordinated debt completed during the second quarter, with those impacts partially offset by the Company’s efforts to lower deposit funding costs. The cost of total deposits declined to 0.28% in the third quarter of 2020 from 0.36% in the second quarter of 2020, while the cost of non-time deposits declined to 0.09% in the third quarter of 2020 from 0.12% in the second quarter of 2020.
Asset Quality
Loans 30-89 days past due were $6.7 million as of September 30, 2020, compared to $5.2 million as of June 30, 2020 and $12.4 million as of September 30, 2019. Non-performing loans totaled $24.2 million as of September 30, 2020, a decrease from $25.4 million as of June 30, 2020, and $33.1 million as of September 30, 2019. Continued disciplined credit management resulted in non-performing loans as a percentage of total loans of 0.34% at September 30, 2020, as compared to 0.35% at June 30, 2020 and 0.50% at September 30, 2019. Non-performing loans as a percentage of total loans, excluding the amortized cost of PPP loans, was 0.38% at September 30, 2020.
Net charge-offs totaled $2.8 million for the quarter ended September 30, 2020 compared to $1.2 million and $1.8 million for the quarters ended June 30, 2020 and September 30, 2019, respectively. The allowance as a percentage of portfolio loans increased to 1.39% at September 30, 2020, as compared to 1.33% at June 30, 2020 and 0.79% at September 30, 2019. The allowance as a percentage of portfolio loans, excluding the amortized cost of PPP loans, was 1.55% at September 30, 2020, up from 0.79% in the comparative quarter of 2019. The allowance as a percentage of non-performing loans increased to 408.82% at September 30, 2020 compared to 378.43% at June 30, 2020 and 160.00% at September 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 Quality 1 (dollars in thousands) As of and for the Three Months Ended September 30, June 30, March 31, December 31, September 30, 2020 2020 2020 2019 2019 Portfolio loans $ 7, 121,311 $ 7,229,020 $ 6,745,499 $ 6,687,249 $ 6,669,415 Portfolio loans excluding amortized cost of PPP loans 6, 384,916 6,499,734 6,745,499 6,687,249 6,669,415 Loans 30-89 days past due 6,708 5,166 10,150 14,271 12,434 Non-performing loans: Non-accrual loans 2 3,898 25,095 25,672 27,896 31,827 Loans 90+ days past due 2 79 285 1,540 1,611 1,276 Total non-performing loans $ 2 4,177 $ 25,380 $ 27,212 $ 29,507 $ 33,103 Total non-performing loans, segregated by geography Illinois/ Indiana 15,097 16,285 17,761 20,428 24,296 Missouri 6,867 5,327 5,711 5,227 8,202 Florida 2,213 3,768 3,740 3,852 605 Other non-performing assets 4,978 3,755 3,553 3,057 926 Total non-performing assets $ 29,1 55 $ 29,135 $ 30,765 $ 32,564 $ 34,029 Total non-performing assets to total assets 0.2 8 % 0.27 % 0.32 % 0.34 % 0.35 % Total non-performing assets to portfolio loans and non- performing assets 0.4 1 % 0.40 % 0.46 % 0.49 % 0.51 % Allowance to portfolio loans 1.3 9 % 1.33 % 1.25 % 0.80 % 0.79 % Allowance to portfolio loans, excluding PPP 1. 55 % 1.48 % 1.25 % 0.80 % 0.79 % Allowance as a percentage of non-performing loans 408.82 % 378.43 % 310.10 % 182.15 % 160.00 % Net charge-offs 2,754 1,229 3,413 1,584 1,821 Provision 5,549 12,891 17,216 2,367 3,411 1 Results are unaudited.
Non-Interest Income
Total non-interest income of $32.3 million for the third quarter of 2020 increased as compared to $28.0 million for the second quarter of 2020 and $30.9 million in the third quarter of 2019. Revenues from wealth management fees and remittance processing activities represented 45.0% of the Company’s non-interest income for the quarter ended September 30, 2020, providing a balance to spread-based revenue from traditional banking activities.
Wealth management fees were $10.5 million for the third quarter of 2020, an increase from $10.2 million for the second quarter of 2020 and $8.8 million for the third quarter of 2019. Net income from the Wealth Management segment was $3.2 million for the third quarter of 2020, an increase from $3.1 million for the second quarter of 2020 and $2.2 million in the third quarter of 2019. First Busey’s Wealth Management division ended the third quarter of 2020 with $9.50 billion in assets under care as compared to $9.02 billion at the end of the second quarter of 2020 and $9.70 billion at December 31, 2019.
Fees for customer services were $8.0 million for the third quarter of 2020, an increase from $7.0 million for the second quarter of 2020, but decreased from $9.8 million for the third quarter of 2019. Fees for customer services in the second quarter of 2020 were significantly impacted by changing customer behaviors resulting from COVID-19 and to a lesser extent by deposit account fee waivers related to the Financial Relief Program. An increase in customer activity and a decline in customer fee waivers contributed to the increase in fees for customer services in the third quarter of 2020.
Remittance processing revenue from the Company’s subsidiary, FirsTech, of $4.0 million for the third quarter of 2020 increased from $3.7 million in the second quarter of 2020 and $3.8 million in the third quarter of 2019. The Remittance Processing operating segment generated net income of $0.6 million for the third quarter of 2020 compared to $0.5 million for the second quarter of 2020 and $1.0 million in the third quarter of 2019. The net income decline in the third and second quarters of 2020 are attributable to strategic planning initiatives and related severance expense.
Mortgage revenue of $5.8 million in the third quarter of 2020 increased compared to $2.7 million in the second quarter of 2020 and $3.3 million in the third quarter of 2019. The increase in the third quarter of 2020 over second quarter of 2020 was due to stronger gain on sale margins.
Operating Efficiency
Total non-interest expense was $56.5 million in the third quarter of 2020 as compared to $53.1 million in the second quarter of 2020 and $68.1 million in the third quarter of 2019. Non-interest expense excluding non-operating adjustment items1 was $54.0 million in the third quarter of 2020 as compared to $52.6 million in the second quarter of 2020 and $60.5 million in the third quarter of 2019. Total deferred PPP loan origination costs reduced reported non-interest expense in the second quarter of 2020 by $4.9 million.
The efficiency ratio was 52.42% for the quarter ended September 30, 2020 compared to 50.97% for the quarter ended June 30, 2020 and 62.73% for the quarter ended September 30, 2019. The adjusted efficiency ratio1 was 49.97% for the quarter ended September 30, 2020, 50.48% for the quarter ended June 30, 2020, and 55.42% for the quarter ended September 30, 2019. The Company remains focused on expense discipline.
Noteworthy components of non-interest expense are as follows:
Salaries, wages and employee benefits were $32.8 million in the third quarter of 2020, an increase from $28.6 million in the second quarter of 2020 and a decrease from $38.7 million from the third quarter of 2019. The third quarter of 2020 included $2.0 million in non-operating severance expense. The deferral of PPP loan origination costs of $3.8 million lowered salaries, wages and benefits expense in the second quarter of 2020. Total full-time equivalents at September 30, 2020 numbered 1,371 compared to 1,480 at June 30, 2020 and 1,595 at September 30, 2019, a decline of 14% year-over-year. Combined net occupancy expense of premises and furniture and equipment expenses totaled $6.6 million in the third quarter of 2020, a decline from $7.0 million in the second quarter of 2020 and $7.1 million in the third quarter of 2019. Data processing expenses were $3.9 million in the third quarter of 2020 as compared to $4.1 million in the second quarter of 2020 and $5.0 million in the third quarter of 2019. Other expense in the third quarter of 2020 of $9.0 million was steady with the second quarter of 2020 and decreased from $12.2 million in the third quarter of 2019. Provision for unfunded commitments of $0.3 million and $0.6 million were recorded in the third and second quarters of 2020, respectively. Non-operating pretax acquisition expenses and other restructuring costs of $0.5 million were recorded in the third quarter of 2020, compared to $0.1 million in the second quarter of 2020 and $3.6 million in the third quarter of 2019. 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 October 30, 2020 of $0.22 per common share to stockholders of record as of October 23, 2020. The Company has consistently paid dividends to its common stockholders since the bank holding company was organized in 1980.
As of September 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 $905.0 million at September 30, 2020, compared to $883.9 million at June 30, 2020 and $851.1 million at September 30, 2019. TCE represented 8.88% of tangible assets at September 30, 2020, compared to 8.43% at June 30, 2020 and 9.06% at September 30, 2019.1
1 A Non-GAAP financial measure. See “Non-GAAP Financial Information” below for reconciliation.
3Q20 Quarterly Earnings Supplement
For additional information on the Company’s response to COVID-19, financial condition and operating results, please refer to the 3Q20 Quarterly Earnings Supplement presentation furnished via Form 8-K on October 27, 2020, in conjunction with this earnings release.
Corporate Profile
As of September 30, 2020, First Busey Corporation (Nasdaq: BUSE) was a $10.54 billion financial holding company headquartered in Champaign, Illinois.
Busey Bank, the wholly-owned bank subsidiary of First Busey Corporation, had total assets of $10.51 billion as of September 30, 2020 and is headquartered in Champaign, Illinois. Busey Bank currently has 53 banking centers serving Illinois, ten banking centers serving Missouri, four banking centers serving southwest Florida and a banking center in Indianapolis, Indiana. Through Busey Bank’s Wealth Management division, the Company provides asset management, investment and fiduciary services to individuals, businesses and foundations. As of September 30, 2020, assets under care were approximately $9.50 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 4,220 agent locations in 46 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 diluted 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 Nine Months Ended September 30, 2020 June 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019 Net interest income $ 69,753 $ 70,813 $ 73,476 $ 209,999 $ 215,287 Non-interest income 32,285 27,964 30,936 87,766 84,777 Less securities (gains) and losses, net 426 (315 ) (361 ) ( 476 ) 623 Non-interest expense (5 6,542 ) (53,068 ) (68,121 ) (1 70,124 ) (193,304 ) Pre-provision net revenue $ 45, 922 $ 45,394 $ 35,930 $ 127,165 $ 107,383 Acquisition and other restructuring expenses 2,529 487 7,670 3,161 16,442 Provision for unfunded commitments 250 567 - 1, 834 - New Market Tax Credit amortization - - - 1,200 1,200 Adjusted pre-provision net revenue $ 4 8,701 $ 46,448 $ 43,600 $ 133,360 $ 125,025 Average total assets $ 10, 680,995 $ 10,374,820 $ 9,659,769 $ 10, 249,578 $ 9,352,272 Reported : Pre-provision net revenue to average assets1 1.7 1 % 1.76 % 1.48 % 1.6 6 % 1.54 % Adjusted : Pre-provision net revenue to average assets1 1.8 1 % 1.80 % 1.79 % 1.7 4 % 1.79 % 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 Nine Months Ended September 30, 2020 June 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019 Net income $ 30,829 $ 25,806 $ 24,828 $ 71,999 $ 74,382 Acquisition expenses Salaries, wages and employee benefits - - 3,673 - 3,716 Data processing - - 172 - 506 Lease or fixed asset impairment 234 - - 234 415 Other (includes professional and legal) 99 141 3,100 385 7,598 Other restructuring costs Salaries, wages and employee benefits 2,011 346 182 2,357 457 Data processing - - 84 - 476 Other (includes professional and legal) 185 - 459 185 1,452 MSR valuation impairment - - - - 1,822 Related tax benefit ( 555 ) (102 ) (1,963 ) ( 687 ) (4,177 ) Adjusted net income $ 32,803 $ 26,191 $ 30,535 $ 74,473 $ 86,647 Diluted average common shares outstanding 54, 737,920 54,705,273 55,646,104 54, 796,354 55,057,518 Reported : Diluted earnings per share$ 0. 56 $ 0.47 $ 0.45 $ 1.31 $ 1.35 Adjusted : Diluted earnings per share$ 0. 60 $ 0.48 $ 0.55 $ 1.36 $ 1.57 Average total assets $ 10, 680,995 $ 10,374,820 $ 9,659,769 $ 10, 249,578 $ 9,352,272 Reported : Return on average assets1 1. 15 % 1.00 % 1.02 % 0. 94 % 1.06 % Adjusted : Return on average assets 1 1. 22 % 1.02 % 1.25 % 0. 97 % 1.24 % 1 Annualized measure.
Reconciliation of Non-GAAP Financial Measures – Adjusted Net Interest Margin (dollars in thousands) Three Months Ended Nine Months Ended September 30, 2020 June 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019 Reported : Net interest income$ 69,753 $ 70,813 $ 73,476 $ 209,999 $ 215,287 Tax-equivalent adjustment 638 717 778 2,085 2,232 Purchase accounting accretion related to business combinations (2, 618 ) (2,477 ) (2,974 ) ( 7,922 ) (9,439 ) Adjusted : Net interest income$ 6 7,773 $ 69,053 $ 71,280 $ 204,162 $ 208,080 Average interest-earning assets $ 9, 805,948 $ 9,485,200 $ 8,781,590 $ 9, 371,157 $ 8,514,580 Reported : Net interest margin1 2.86 % 3.03 % 3.35 % 3. 02 % 3.42 % Adjusted : Net Interest margin1 2. 75 % 2.93 % 3.22 % 2.91 % 3.27 % 1 Annualized measure.
Reconciliation of Non-GAAP Financial Measures – Adjusted Efficiency Ratio (dollars in thousands) Three Months Ended Nine Months Ended September 30, 2020 June 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019 Reported : Net Interest income$ 69,753 $ 70,813 $ 73,476 $ 209,999 $ 215,287 Tax- equivalent adjustment 638 717 778 2,085 2,232 Tax-equivalent interest income $ 7 0,391 $
BUSE Rankings
#3747 Ranked by Stock Gains
BUSE Stock Data
Industry
Commercial Banking
Sector
Finance and Insurance
Tags
Finance, Regional Banks, Finance and Insurance, Commercial Banking
Country
US
City
Urbana
About BUSE
from outstanding product offerings to committed, service-driven associates—first busey corporation (nasdaq: buse) is the premier provider of financial services. busey is a $3.9 billion diversified financial holding company for busey bank and busey wealth management in champaign, illinois; firstech, inc. in decatur, illinois; and trevett capital partners in fort myers, florida. with a dedicated team of nearly 900 associates, busey serves the personal, business and wealth management needs of communities in central illinois, indianapolis, indiana and southwest florida. with more than 145 years of service, our strength is in our numbers. ranked in the top 3 percent of banks nationally, busey is consistently rated 5-star “superior” – the highest rating awarded by bauerfinancial. in addition, busey received the illinois bankers’ association community service award and honorable mentions in both the illinois governor’s sustainability award & green leaf award from banknews. join the award-