Fourth quarter 2018 results compared to the fourth quarter of the prior year:
Adjusted net income1 of $26.0 million, as compared to $22.5 million
Earnings per diluted common share of $0.51, as compared to $0.25
Tangible book value per common share of $14.21, as compared to $12.88
Net income for wealth management division of $2.0 million, as compared to $1.5 million
Net income for FirsTech Inc. ("FirsTech") of $0.8 million, as compared to $0.4 million
Return on average assets of 1.28%, as compared to 0.64%
Based on adjusted net income1, return on average assets of 1.31%, as compared to 1.17%
First Busey Corporation's ("First Busey" or the "Company") net income for the fourth quarter of 2018 was $25.3 million, or $0.51 per diluted common share, as compared to $26.9 million, or $0.55 per diluted common share, for the third quarter of 2018 and $12.3 million, or $0.25 per diluted common share, for the fourth quarter of 2017. Adjusted net income1 for the fourth quarter of 2018 was $26.0 million, or $0.53 per diluted common share, as compared to $27.0 million, or $0.55 per diluted common share, for the third quarter of 2018 and $22.5 million, or $0.46 per diluted common share, for the fourth quarter of 2017. Net income for the fourth quarter of 2017 was impacted by a non-recurring, non-cash charge of $8.1 million, or $0.16 per diluted common share, due to the revaluation of the Company's net deferred tax position following the enactment of the Tax Cuts and Jobs Act (the "TCJA").
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 fourth quarter of 2018 were $0.3 million of expenses related to acquisitions and $0.6 million of expenses related to 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.
For the year ended December 31, 2018, net income was $98.9 million, an increase of $36.2 million compared to $62.7 million for the year ended 2017. Earnings per diluted common share were $2.01 for the year ended December 31, 2018 as compared to $1.45 for the year ended December 31, 2017. Adjusted net income1 for the year ended December 31, 2018 was $103.5 million, or $2.10 per diluted common share, as compared to $75.7 million, or $1.75 per diluted common share for 2017. The 2018 annual results were favorably impacted by the prior year acquisitions of First Community Financial Partners Inc., the holding company of First Community Financial Bank ("First Community"), and Mid Illinois Bancorp, Inc., the holding company of South Side Trust & Savings Bank of Peoria ("South Side").
For the fourth quarter of 2018, annualized return on average assets and annualized return on average tangible common equity were 1.28% and 14.80%, respectively. Based on adjusted net income1, return on average assets was 1.31% and return on average tangible common equity was 15.19% for the fourth quarter of 2018.
1 A Non-GAAP financial measure. See "Non-GAAP Financial Information" below for reconciliation.
For the year ended December 31, 2018, return on average assets was 1.28%, an increase from 1.00% for the year ended 2017. Based on adjusted net income1, return on average assets for the year ended December 31, 2018 was 1.34% compared to 1.20% for the year ended 2017. Return on average tangible common equity was 15.20% for the year ended December 31, 2018 compared to 11.61% for the same period of 2017. Return on average tangible common equity based on adjusted net income1 was 15.89% for the year ended December 31, 2018, compared to 14.00% for the same period of 2017.
Non-interest income increased to $22.9 million as compared to $21.9 million for the third quarter 2018. The increase in non-interest income was driven, in part, by the wealth management division and FirsTech. which generated $7.5 million and $3.8 million of revenue in the fourth quarter 2018, respectively.
Total deposits at December 31, 2018 grew to $6.25 billion driven by a linked quarter increase of $26.6 million in non-interest bearing deposits.
Continued disciplined credit management resulted in a decline in non-accrual loans to $35.0 million at December 31, 2018, as compared to $40.4 million as of September 30, 2018. Non-performing assets as a percentage of total loans plus non-performing assets was 0.66% at December 31, 2018 as compared to 0.74% at September 30, 2018.
In the first quarter of 2019, the Company expects to close its acquisition of The Banc Ed Corp. ("Banc Ed"), the holding company for TheBANK of Edwardsville ("TheBANK"). TheBANK, founded in 1868, is a privately held commercial bank headquartered in Edwardsville, Illinois. As of December 31, 20182, Banc Ed held total consolidated assets of $1.76 billion, total loans of $902.1 million and total deposits of $1.47 billion.
Under the terms of the merger agreement, Banc Ed's stockholders will have the right to receive 8.2067 shares of common stock of the Company and $111.53 in cash for each share of common stock of Banc Ed, with total consideration to consist of approximately 70% stock and 30% cash. It is anticipated that TheBANK will be merged with and into the Company's bank subsidiary, Busey Bank, at a date following the completion of the holding company merger. At the time of the bank merger, TheBANK's banking centers will become branches of Busey Bank. Please reference the Company's Form 8-K, filed on August 22, 2018, for additional information regarding our pending acquisition of Banc Ed.
The pending Banc Ed transaction fits with our acquisition strategy as the addition of TheBANK will grow the Company's current geographic footprint, allowing the Company to serve customers by expanding in the St. Louis Missouri-Illinois Metropolitan Statistical Area and significantly adding to the Company's wealth management business. We are pleased to welcome our Banc Ed colleagues into the Busey family and feel confident that this transaction and our continued efforts will lead to growth and profitability in 2019.
/s/ Van A. Dukeman President & Chief Executive Officer First Busey Corporation
2 Results are unaudited.
SELECTED FINANCIAL HIGHLIGHTS1
(dollars in thousands, except per share data)
As of and for the
As of and for the
Three Months Ended
Year Ended
December 31,
September 30,
December 31,
December 31,
December 31,
2018
2018
2017
2018
2017
EARNINGS & PER SHARE DATA
Net income
$
25,290
$
26,859
$
12,293
$
98,928
$
62,726
Revenue2
83,184
82,627
86,607
331,068
286,697
Diluted earnings per share
0.51
0.55
0.25
2.01
1.45
Cash dividends paid per share
0.20
0.20
0.18
0.80
0.72
Net income by operating segment
Banking
$
24,134
$
26,486
$
16,158
$
97,369
$
65,704
Remittance Processing
814
957
440
3,710
2,007
Wealth Management
2,040
2,280
1,469
9,372
6,229
AVERAGE BALANCES
Cash and cash equivalents
$
272,811
$
238,000
$
256,626
$
239,149
$
224,648
Investment securities
1,443,054
1,417,708
1,223,103
1,370,460
964,749
Loans held for sale
23,380
28,661
109,336
29,666
119,936
Portfolio loans
5,540,852
5,551,753
5,457,077
5,533,549
4,567,259
Interest-earning assets
7,174,755
7,132,324
6,932,750
7,067,710
5,784,408
Total assets
7,846,154
7,802,308
7,632,019
7,742,142
6,294,105
Non-interest bearing deposits
1,486,977
1,492,709
1,516,233
1,492,242
1,252,363
Interest-bearing deposits
4,852,649
4,784,657
4,434,492
4,707,289
3,760,473
Total deposits
6,339,626
6,277,366
5,950,725
6,199,531
5,012,836
Securities sold under agreements to repurchase
210,416
234,729
294,389
234,239
213,527
Interest-bearing liabilities
5,329,898
5,303,632
5,126,815
5,247,017
4,257,544
Total liabilities
6,866,652
6,840,484
6,699,840
6,787,193
5,554,280
Stockholders' common equity
979,502
961,824
932,179
954,949
739,825
Tangible stockholders' common equity3
678,023
658,910
622,952
651,032
540,406
PERFORMANCE RATIOS
Return on average assets4
1.28
%
1.37
%
0.64
%
1.28
%
1.00
%
Return on average common equity4
10.24
%
11.08
%
5.23
%
10.36
%
8.48
%
Return on average tangible common equity3,6
14.80
%
16.17
%
7.83
%
15.20
%
11.61
%
Net interest margin5,6
3.38
%
3.41
%
3.68
%
3.45
%
3.58
%
Efficiency ratio6
56.57
%
53.47
%
58.69
%
56.16
%
58.27
%
Non-interest revenue as a % of total revenues2
27.27
%
26.45
%
27.20
%
27.08
%
29.07
%
1 Results are unaudited.
2 Revenues consist of net interest income plus non-interest income, net of 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 Quarterly data is annualized.
5 On a tax-equivalent basis, assuming an income tax rate of 21% for 2018 and 35% for 2017.
6 See "Non-GAAP Financial Information" below for reconciliation.
Condensed Consolidated Balance Sheets1
As of
(dollars in thousands, except per share data)
December 31,
September 30,
June 30,
March 31,
December 31,
2018
2018
2018
2018
2017
Assets
Cash and cash equivalents
$
239,973
$
160,652
$
230,730
$
367,525
$
353,272
Investment securities
1,312,514
1,496,948
1,384,807
1,286,136
1,321,610
Loans held for sale
25,895
32,617
33,974
29,034
94,848
Commercial loans
4,060,126
4,141,816
4,076,253
4,061,181
4,030,821
Retail real estate and retail other loans
1,508,302
1,481,925
1,479,034
1,470,272
1,488,679
Portfolio loans
$
5,568,428
$
5,623,741
$
5,555,287
$
5,531,453
$
5,519,500
Allowance for loan losses
(50,648
)
(52,743
)
(53,305
)
(52,649
)
(53,582
)
Premises and equipment
117,672
119,162
119,835
118,985
116,913
Goodwill and other intangibles
300,558
301,963
303,407
304,897
308,073
Other assets
187,965
207,045
200,809
193,365
200,006
Total assets
$
7,702,357
$
7,889,385
$
7,775,544
$
7,778,746
$
7,860,640
Liabilities & Stockholders' Equity
Non-interest bearing deposits
$
1,464,700
$
1,438,054
$
1,496,671
$
1,651,333
$
1,597,421
Interest-bearing checking, savings, and money market deposits
3,287,618
3,205,232
3,192,735
3,270,963
3,192,382
Time deposits
1,497,003
1,552,283
1,474,506
1,408,878
1,336,162
Total deposits
$
6,249,321
$
6,195,569
$
6,163,912
$
6,331,174
$
6,125,965
Securities sold under agreements to repurchase
185,796
255,906
240,109
235,311
304,566
Short-term borrowings
-
200,000
150,000
-
220,000
Long-term debt
148,686
148,626
154,125
154,122
154,119
Junior subordinated debt owed to unconsolidated trusts
71,155
71,118
71,081
71,044
71,008
Other liabilities
52,435
46,026
39,135
44,949
49,979
Total liabilities
$
6,707,393
$
6,917,245
$
6,818,362
$
6,836,600
$
6,925,637
Total stockholders' equity
$
994,964
$
972,140
$
957,182
$
942,146
$
935,003
Total liabilities & stockholders' equity
$
7,702,357
$
7,889,385
$
7,775,544
$
7,778,746
$
7,860,640
Share Data
Book value per common share
$
20.36
$
19.90
$
19.62
$
19.34
$
19.21
Tangible book value per common share2
$
14.21
$
13.72
$
13.40
$
13.08
$
12.88
Ending number of common shares outstanding
48,874,836
48,860,309
48,776,404
48,717,239
48,684,943
1 Results are unaudited except for amounts reported as of December 31, 2017.
2 See "Non-GAAP Financial Information" below for reconciliation.
Condensed Consolidated Statements of Income1
(dollars in thousands, except per share data)
For the
For the
Three Months Ended December 31,
Year Ended December 31,
2018
2017
2018
2017
Interest and fees on loans held for sale and portfolio loans
$
64,410
$
64,048
$
251,249
$
202,643
Interest on investment securities
9,904
6,799
34,784
21,659
Total interest income
$
74,314
$
70,847
$
286,033
$
224,302
Interest on deposits
10,764
4,874
32,601
12,932
Interest on short-term borrowings
766
935
3,162
2,074
Interest on long-term debt
1,414
1,323
5,614
3,404
Interest on junior subordinated debt owed to unconsolidated trusts
867
669
3,250
2,526
Total interest expense
$
13,811
$
7,801
$
44,627
$
20,936
Net interest income
$
60,503
$
63,046
$
241,406
$
203,366
Provision for loan losses
405
2,809
4,429
5,303
Net interest income after provision for loan losses
$
60,098
$
60,237
$
236,977
$
198,063
Trust fees
6,611
6,577
27,184
23,665
Commissions and brokers' fees, net
930
1,133
3,790
3,372
Fees for customer services
7,303
7,183
28,879
25,841
Remittance processing
3,757
2,846
14,345
11,427
Mortgage revenue
1,057
2,710
5,545
11,140
Security gains, net
171
-
331
1,143
Other
3,023
3,112
9,919
7,886
Total non-interest income
$
22,852
$
23,561
$
89,993
$
84,474
Salaries, wages and employee benefits
27,529
28,185
107,844
95,633
Net occupancy expense of premises
3,532
3,805
14,803
13,830
Furniture and equipment expense
1,815
1,966
7,233
7,089
Data processing
3,992
5,368
16,383
16,716
Amortization of intangible assets
1,404
1,570
5,854
5,245
Other
10,497
12,206
40,926
35,913
Total non-interest expense
$
48,769
$
53,100
$
193,043
$
174,426
Income before income taxes
$
34,181
$
30,698
$
133,927
$
108,111
Income taxes
8,891
18,405
34,999
45,385
Net income
$
25,290
$
12,293
$
98,928
$
62,726
Per Share Data
Basic earnings per common share
$
0.52
$
0.25
$
2.02
$
1.47
Diluted earnings per common share
$
0.51
$
0.25
$
2.01
$
1.45
Diluted average common shares outstanding
49,225,480
49,085,648
49,215,455
43,126,245
1 Results are unaudited except for amounts reported as of December 31, 2017.
Balance Sheet Growth
At December 31, 2018, portfolio loans were $5.57 billion, as compared to $5.62 billion as of September 30, 2018 and $5.52 billion as of December 31, 2017. The change in portfolio loan balance was driven by continued high level of payoffs. Average portfolio loans increased 21.2% to $5.53 billion for the year ended December 31, 2018 compared to $4.57 billion for the year ended December 31, 2017.
Average interest-earning assets for the three months ended December 31, 2018 increased to $7.18 billion compared to $7.13 billion for the three months ended September 30, 2018 and $6.93 billion for the three months ended December 31, 2017. Average interest-earning assets for the year ended December 31, 2018 increased to $7.07 billion from $5.78 billion for the year ended 2017, a 22.2% increase.
Total deposits were $6.25 billion at December 31, 2018, an increase from $6.20 billion at September 30, 2018 and $6.13 billion at December 31, 2017. The Company remains funded primarily through core deposits with significant market share in its core markets.
Net Interest Margin and Net Interest Income
Net interest income was $60.5 million in the fourth quarter of 2018 compared to $60.8 million in the third quarter of 2018 and $63.0 million in the fourth quarter of 2017. Higher yields on fourth quarter loan production partially offset the increase in funding costs. Net interest income for the year ended December 31, 2018 was $241.4 million compared to $203.4 million for the year ended 2017, an 18.7% increase. Net purchase accounting accretion and amortization included in interest income and interest expense was $1.9 million for the fourth quarter of 2018, a decrease from $2.3 million for the third quarter of 2018 and $5.8 million for the fourth quarter of 2017. Net purchase accounting accretion and amortization included in interest income and interest expense for the year ended December 31, 2018 was $10.6 million compared to $12.5 million for the year ended 2017.
Net interest margin for the fourth quarter of 2018 was 3.38%, compared to 3.41% for the third quarter of 2018 and 3.68% for the fourth quarter of 2017. Net of purchase accounting accretion and amortization, net interest margin for the fourth quarter of 2018 was 3.27%, compared to 3.29% for the third quarter of 2018 and 3.34% for the fourth quarter of 2017. Net interest margin for the year ended December 31, 2018 was 3.45% compared to 3.58% for the year ended December 31, 2017. Net of purchase accounting accretion and amortization, net interest margin for the year ended December 31, 2018 was 3.30%, compared to 3.36% for the same period of 2017.
Asset Quality
As of December 31, 2018, non-performing loans totaled $36.6 million, compared to $40.8 million as of September 30, 2018, and $27.4 million as of December 31, 2017. Non-performing loans were 0.66% of total portfolio loans as of December 31, 2018, compared to 0.72% as of September 30, 2018 and 0.50% as of December 31, 2017.
The Company recorded net charge-offs of $2.5 million for the fourth quarter of 2018. The $2.5 million net charge-off in the fourth quarter was predominately related to a single note which was resolved via the sale of the note in the fourth quarter of 2018. The allowance for loan loss as a percentage of portfolio loans was 0.91% at December 31, 2018 as compared to 0.94% at September 30, 2018 and 0.97% at December 31, 2017. The Company recorded provision for loan losses of $0.4 million in the fourth quarter of 2018, compared to $0.8 million in the third quarter of 2018 and $2.8 million in the fourth quarter of 2017. The Company recorded provision for loan losses of $4.4 million for the year ended December 31, 2018 and $5.3 million for the year ended December 31, 2017. As a result of acquisitions, the Company is holding acquired loans that are carried net of a fair value adjustment for credit and interest rate marks and are only included in the allowance calculation to the extent that the reserve requirement exceeds the fair value adjustment.
Asset Quality1
(dollars in thousands)
As of and for the Three Months Ended
December 31,
September 30,
June 30,
March 31,
December 31,
2018
2018
2018
2018
2017
Portfolio loans
$
5,568,428
$
5,623,741
$
5,555,287
$
5,531,453
$
5,519,500
Non-performing loans
Non-accrual loans
34,997
40,395
25,215
32,588
24,624
Loans 90+ days past due
1,601
364
1,142
995
2,741
Non-performing loans, segregated by geography
Illinois/ Indiana
28,319
33,699
21,534
28,743
23,093
Missouri
7,242
6,222
3,338
3,641
2,964
Florida
1,037
838
1,485
1,199
1,308
Loans 30-89 days past due
7,121
8,189
10,017
9,506
12,897
Other non-performing assets
376
1,093
3,694
1,001
1,283
Non-performing assets to portfolio loans and non-performing assets
0.66
%
0.74
%
0.54
%
0.63
%
0.52
%
Allowance as a percentage of non-performing loans
138.39
%
129.40
%
202.24
%
156.77
%
195.80
%
Allowance for loan losses to portfolio loans
0.91
%
0.94
%
0.96
%
0.95
%
0.97
%
Net charge-offs
2,500
1,320
1,602
1,941
262
Provision for loan losses
405
758
2,258
1,008
2,809
1 Results are unaudited.
Fee-based Businesses
Revenues from trust fees, commissions and brokers' fees, and remittance processing activities represented 49.5% of the Company's non-interest income for the quarter ended December 31, 2018, providing a balance to revenue from traditional banking activities. Two of the Company's acquisitions, Pulaski Financial Corp. and First Community, had no legacy fee income in these businesses; therefore, the addition of these fee-based service offerings in these acquired bank markets is expected to continue providing attractive growth opportunities in future periods.
Trust fees and commissions and brokers' fees of $7.5 million for the fourth quarter of 2018 increased from $7.2 million for the third quarter 2018 and decreased slightly from $7.7 million for the fourth quarter of 2017. Trust fees and commissions and brokers' fees increased to $31.0 million for the year ended December 31, 2018 compared to $27.0 million for the year ended December 31, 2017. Net income from the wealth management segment was $2.0 million for the fourth quarter of 2018 a decrease from $2.3 million in the third quarter of 2018 but an increase from $1.5 million from the fourth quarter of 2017. Net income from the wealth management segment for the year ended December 31, 2018 was $9.4 million compared to $6.2 million for the same period of 2017, a 50.5% increase. The wealth management line of business continues to build upon recent acquisitions, expanding market share. First Busey's wealth management division ended the fourth quarter of 2018 with $7.12 billion in assets under care.
Remittance processing revenue from the Company's subsidiary, FirsTech, of $3.8 million for the fourth quarter of 2018 increased from $3.6 million for the third quarter of 2018 and $2.8 million for the fourth quarter of 2017. Remittance processing revenue for the year ended December 31, 2018 was $14.3 million, an increase of 25.5%, compared to $11.4 million during the same period of 2017. The FirsTech operating segment generated net income of $0.8 million for the fourth quarter of 2018. The positive 2018 results are a reflection of new customer activity and volume increases from existing customers.
The mortgage line of business generated $1.1 million of revenue in the fourth quarter of 2018. Mortgage revenue for the year ended December 31, 2018 was $5.5 million compared to $11.1 million in the same period of 2017. In the fourth quarter 2017, mortgage origination offices obtained in connection with the acquisition of Pulaski Financial Corp. which were outside the Company's footprint were sold, reducing year over year mortgage revenue.
Operating Efficiency
The efficiency ratio was 56.57% for the quarter ended December 31, 2018 compared to 53.47% for the quarter ended September 30, 2018 and 58.69% for the quarter ended December 31, 2017. The efficiency ratio for the year ended December 31, 2018 was 56.16% compared to 58.27% for the year ended December 31, 2017. The adjusted efficiency ratio3 was 55.49% for the quarter ended December 31, 2018, 53.26% for the quarter ended September 30, 2018, and 54.74% for the quarter ended December 31, 2017.
Specific areas of non-interest expense are as follows:
Salaries, wages and employee benefits were $27.5 million in the fourth quarter of 2018, an increase from $26.0 million in the third quarter of 2018 but a decrease from $28.2 million from the fourth quarter of 2017.In the fourth quarter 2018, the Company recorded specific amounts for severance and other employee related benefit expenses. For the year ended December 31, 2018, salaries, wages and employee benefits were $107.8 million compared to $95.6 million for the same period of 2017, reflecting additions to headcount as a result of recent acquisitions. The company recorded total restructuring costs of $2.3 million in 2018.
Data processing expense in the fourth quarter of 2018 of $4.0 million remained flat compared to the third quarter of 2018 and reflects a decrease as compared to $5.4 million in the fourth quarter of 2017. For the year ended December 31, 2018, data processing expense decreased to $16.4 million compared to $16.7 million for the same period of 2017. The decline in data processing expense reflect efficiencies realized as the Company has integrated recent acquisitions.
3 A Non-GAAP financial measure, see "Non-GAAP Financial Information" below for reconciliation.
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 February 1, 2019 of $0.21 per common share to stockholders of record as of January 25, 2019, which represents a 5% increase from the previous quarterly dividend. The Company has consistently paid dividends to its common stockholders since the bank holding company was organized in 1980.
As of December 31, 2018, 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 equity4 ("TCE") increased to $703.0 million at December 31, 2018, compared to $679.1 million at September 30, 2018 and $638.0 million at December 31, 2017. TCE represented 9.49% of tangible assets at December 31, 2018, compared to 8.94% at September 30, 2018 and 8.43% at December 31, 2017.5
4 Tangible stockholders' common equity, see "Non-GAAP Financial Information" below for reconciliation. 5 Tangible assets, see "Non-GAAP Financial Information" below for reconciliation.
Corporate Profile
As of December 31, 2018, First Busey Corporation (NASDAQ:BUSE) was a $7.70 billion financial holding company headquartered in Champaign, Illinois. Busey Bank, the wholly-owned bank subsidiary with total assets of $7.69 billion as of December 31, 2018, is headquartered in Champaign, Illinois and has forty-four banking centers serving Illinois, thirteen 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 December 31, 2018, assets under care were approximately $7.12 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.
Busey Bank was named among Forbes' 2018 Best-In-State Banks—one of five in Illinois and 124 from across the country, equivalent to 2.2% 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.
Robin N. Elliott, Chief Operating Officer & Chief Financial Officer, 217-365-4120
Jennifer L. Simons, Chief Accounting Officer, 217-365-4309
Non-GAAP Financial Information
This press 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, and tangible common equity to tangible assets. 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 – 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
Year Ended
December 31, 2018
September 30, 2018
December 31, 2017
December 31, 2018
December 31, 2017
Net income
$
25,290
$
26,859
$
12,293
$
98,928
$
62,726
Acquisition expenses
Salaries, wages and employee benefits
-
-
120
1,233
840
Data processing
-
-
1,268
406
2,616
Other (includes professional and legal)
262
167
1,569
2,486
3,617
Other restructuring costs
Salaries, wages and employee benefits
640
-
496
1,058
711
Fixed asset impairments
-
-
-
817
-
Other
-
-
20
-
66
TCJA related adjustment
8,098
-
8,098
Related tax benefit
(234
)
(20
)
(1,330
)
(1,451
)
(3,012
)
Adjusted net income
$
25,958
$
27,006
$
22,534
$
103,477
$
75,662
Average total assets
$
7,846,154
$
7,802,308
$
7,632,019
$
7,742,142
$
6,294,105
Reported: Return on average assets1
1.28
%
1.37
%
0.64
%
1.28
%
1.00
%
Adjusted: Return on average assets 1
1.31
%
1.37
%
1.17
%
1.34
%
1.20
%
1 Quarterly measures are annualized.
Reconciliation of Non-GAAP Financial Measures – Adjusted Net Interest Margin
(dollars in thousands)
Three Months Ended
Year Ended
December 31, 2018
September 30, 2018
December 31, 2017
December 31, 2018
December 31, 2017
Reported: Net interest income
$
60,503
$
60,774
$
63,046
$
241,406
$
203,366
Tax-equivalent adjustment
545
574
1,192
2,258
3,656
Less: Purchase accounting amortization
(1,852
)
(2,273
)
(5,848
)
(10,550
)
(12,458
)
Adjusted: Net interest income
$
59,196
$
59,075
$
58,390
$
233,114
$
194,564
Average interest-earning assets
$
7,174,755
$
7,132,324
$
6,932,750
$
7,067,710
$
5,784,408
Reported: Net interest margin1
3.38
%
3.41
%
3.68
%
3.45
%
3.58
%
Adjusted: Net Interest margin1
3.27
%
3.29
%
3.34
%
3.30
%
3.36
%
1 Quarterly measures are annualized.
Reconciliation of Non-GAAP Financial Measures – Adjusted Efficiency Ratio
(dollars in thousands)
Three Months Ended
Year Ended
December 31, 2018
September 30, 2018
December 31, 2017
December 31, 2018
December 31 2017
Reported: Net Interest income
$
60,503
$
60,774
$
63,046
$
241,406
$
203,366
Tax- equivalent adjustment
545
574
1,192
2,258
3,656
Tax equivalent interest income
$
61,048
$
61,348
$
64,238
$
243,664
$
207,022
Reported: Non-interest income
22,852
21,853
23,561
89,993
84,474
Less: Security gain net
171
-
-
331
1,143
Adjusted: Non-interest income
$
22,681
$
21,853
$
23,561
$
89,662
$
83,331
Reported: Non-interest expense
48,769
45,929
53,100
193,043
174,426
Less:
Amortization of intangible assets
(1,404
)
(1,445
)
(1,570
)
(5,854
)
(5,245
)
Non-operating adjustments:
Salaries, wages and employee benefits
(640
)
-
(616
)
(2,290
)
(1,551
)
Data processing
-
-
(1,268
)
(406
)
(2,616
)
Other
(262
)
(167
)
(1,589
)
(2,858
)
(3,683
)
Adjusted: Non-interest expense
$
46,463
$
44,317
$
48,057
$
181,635
$
161,331
Reported: Efficiency ratio
56.57
%
53.47
%
58.69
%
56.16
%
58.27
%
Adjusted: Efficiency ratio
55.49
%
53.26
%
54.74
%
54.49
%
55.56
%
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, except per share data)
As of
December 31, 2018
September 30, 2018
December 31, 2017
Total assets
$
7,702,357
$
7,889,385
$
7,860,640
Less:
Goodwill and other intangible assets, net
(300,558
)
(301,963
)
(308,073
)
Tax effect of other intangible assets, net
8,547
8,912
11,039
Tangible assets
$
7,410,346
$
7,596,334
$
7,563,606
Total stockholders' equity
994,964
972,140
935,003
Less:
Goodwill and other intangible assets, net
(300,558
)
(301,963
)
(308,073
)
Tax effect of other intangible assets, net
8,547
8,912
11,039
Tangible stockholders' equity
$
702,953
$
679,089
$
637,969
Tangible common equity to tangible assets1
9.49
%
8.94
%
8.43
%
Tangible book value per share
$
14.21
$
13.72
$
12.88
Three Months Ended
December 31, 2018
September 30, 2018
December 31, 2017
Average stockholders' common equity
$
979,502
$
961,824
$
932,179
Less: Average goodwill and intangibles, net
(301,479
)
(302,914
)
(309,227
)
Average tangible stockholders' common equity
$
678,023
$
658,910
$
622,952
Reported: Return on average tangible common equity2
14.80
%
16.17
%
7.83
%
Adjusted: Return on average tangible common equity2,3
15.19
%
16.26
%
14.35
%
Year Ended
December 31, 2018
December 31, 2017
Average stockholders' common equity
$
954,949
$
739,825
Less: Average goodwill and intangibles, net
(303,917
)
(199,419
)
Average tangible stockholders' common equity
$
651,032
$
540,406
Reported: Return on average tangible common equity
15.20
%
11.61
%
Adjusted: Return on average tangible common equity3
15.89
%
14.00
%
1 Tax-effected measure.
2 Quarterly measures are annualized.
3 Calculated using adjusted net income.
Special Note Concerning Forward-Looking Statements
Statements made in this report, 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.
