Exhibit 99
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Our year-to-date results in 2011 are solid with growth in net income, earnings per share, book value of our stock, and reduced levels of both past due loans and non-performing assets.
Net income for the first nine months of 2011 amounted to $8,102,000 as compared to $6,342,000 during the same period in 2010 and diluted earnings per share increased to $.90 for the first nine months of 2011 as compared to $.76 per share for the same period last year. Book value per share amounted to $16.16 on September 30, 2011 as compared to $15.07 on December 31, 2010.
The overall performance of our loan portfolio has been good considering the economic environment during 2011. Loan balances grew to $815.5 million on September 30, 2011 compared to $804.6 million on December 31, 2010. During this same time frame, the total non-performing assets declined to $14.7 million (.97% of assets) from $16.6 million (1.13% of assets) on December 31, 2010. Total loans past due 30 days or more also declined to $8.9 million (1.09% of total loans) from $9.4 million (1.19% of total loans) at year-end 2010. These are all very positive. However, net charge-offs increased and totaled $2.5 million in 2011 as compared to $1.3 million during the same period in 2010. Our provision for loan losses kept pace with the net charge-offs and totaled $2.6 million in 2011 as compared to $2.7 million during the first nine months of 2010. A relationship which we monitor quite closely at First Mid is the ratio of the allowance for possible loan losses to non-accrual loans. This ratio was 115% at September 30, 2011 and remains strong when compared to other peer banks.
It has now been slightly over a year since we completed the acquisition of the branch locations in and around Bloomington, Peoria, Galesburg, and Quincy, Illinois in September 2010. As I mentioned in past communications, this was the largest acquisition in our history and has been a focal point of our managerial efforts. I believe the acquisition has been successful despite growth in these new markets being somewhat lower than anticipated. The branches we acquired are generating profit at the level we expected and positively affected our annual net interest and non-interest income comparison. We have had no meaningful credit losses, and loan totals have increased from $135 million to $140 million for these branches since acquisition. We remain optimistic about the long-term outlook for these markets.
Our net interest margin declined in 2011 as compared with the similar period in 2010 (3.46% in 2011 as compared with 3.67% in 2010). This is due to the low interest rate environment which has existed in the United States during the past several years, the fact that the interest rate yield curve has flattened in 2011 as a result of Federal Reserve monetary policy, and because we continue to have a great deal of liquidity in our balance sheet. While down from when we completed the acquisition, we still had $149.4 million of cash and federal funds sold on September 30, 2011 which is a high amount by historical standards. This is a phenomenon which is being experienced by many banks throughout the country and is a function of business and individuals seeking the protection offered by FDIC insured bank deposits and the general lack of investment opportunities available to individuals and businesses.
Given the interest rate environment, growth in non-interest income has become a high priority. Total non-interest income has increased to $11.8 million for the first nine months of 2011 as compared to $9.8 million recognized during the same period last year. Revenues from our trust, brokerage, and insurance areas increased as did fees received on debit card and ATM transactions. Additionally, impairment charges on trust preferred securities we own were lower than last year as the level of community bank defaults has slowed.
Operating expenses for the first nine months of 2011 were $32.2 million as compared to $26 million for the same period last year. The higher expenses reflect the personnel and operating costs for the 10 new branch locations for all nine months in 2011. The Company’s effective tax rate is also higher with the increase in State of Illinois taxes this year.
Our capital position remains strong with our Tier 1 Capital Ratio of 13.82% as of September 30 which is well in excess of the regulatory minimums to be considered well-capitalized.
I have mentioned in past communications that the operating environment will likely remain difficult for the foreseeable future and I continue believe that to be the case. The general economy remains sluggish and unemployment remains high. Moreover, the European debt situation creates a great deal of uncertainty in the United States. Our banking industry is also dealing with the far-reaching ramifications and costs of the Dodd-Frank legislation which was passed in 2010 and is still being implemented by banking regulators. Together, these “headwinds” have created an overall environment as difficult as I have seen in my banking career. That said, First Mid continues to focus on improving the things that are under our control and to adapt to those which are outside of our control. Our earnings capacity and the strength of our balance sheet position us well for the future.
Thank you for your continued support of First Mid-Illinois Bancshares, Inc.
Very Truly Yours,
/s/ William S. Rowland
William S. Rowland
Chairman and Chief Executive Officer
October 27, 2011
First Mid-Illinois Bancshares, Inc.
1515 Charleston Avenue
Mattoon, Illinois 61938
217-234-7454
www.firstmid.com
| CONDENSED CONSOLIDATED BALANCE SHEETS | | | | | | |
| | | (unaudited) | | | | |
| (in thousands, except share data) | | Sep 30 | | | Dec 31 | |
| | | 2011 | | | 2010 | |
| | | | | | | |
| Assets | | | | | | |
| Cash and due from banks | | $ | 28,052 | | | $ | 21,008 | |
| Federal funds sold and other interest-bearing deposits | | | 121,387 | | | | 210,485 | |
| Certificates of deposit investments | | | 12,781 | | | | 10,000 | |
| Investment securities: | | | | | | | | |
| Available-for-sale, at fair value | | | 449,749 | | | | 342,816 | |
| Held-to-maturity, at amortized cost (estimated fair value of $51 | | | | | | | | |
| at September 30, 2011 and $53 at December 31, 2010, respectively) | | | 50 | | | | 50 | |
| Loans | | | 815,491 | | | | 804,581 | |
| Less allowance for loan losses | | | (10,429 | ) | | | (10,393 | ) |
| Net loans | | | 805,062 | | | | 794,188 | |
| Premises and equipment, net | | | 30,851 | | | | 28,544 | |
| Goodwill, net | | | 25,753 | | | | 25,753 | |
| Intangible assets, net | | | 4,210 | | | | 5,068 | |
| Other assets | | | 26,058 | | | | 30,333 | |
| Total assets | | $ | 1,503,953 | | | $ | 1,468,245 | |
| | | | | | | | | |
| Liabilities and Stockholders’ Equity | | | | | | | | |
| Deposits: | | | | | | | | |
| Non-interest bearing | | $ | 203,415 | | | $ | 183,932 | |
| Interest bearing | | | 995,474 | | | | 1,028,778 | |
| Total deposits | | | 1,198,889 | | | | 1,212,710 | |
| Repurchase agreements with customers | | | 116,395 | | | | 94,057 | |
| Other borrowings | | | 19,750 | | | | 22,750 | |
| Junior subordinated debentures | | | 20,620 | | | | 20,620 | |
| Other liabilities | | | 7,307 | | | | 5,843 | |
| Total liabilities | | | 1,362,961 | | | | 1,355,980 | |
| Stockholders’ Equity: | | | | | | | | |
| Preferred stock (no par value, authorized 1,000,000 shares; issued | | | | | | | | |
| 8,777 shares in 2011 and 4,927 shares in 2010) | | | 43,885 | | | | 24,635 | |
| Common stock ($4 par value; authorized 18,000,000 shares; issued | | | | | | | | |
| 7,537,363 shares in 2011 and 7,477,132 shares in 2010) | | | 30,149 | | | | 29,909 | |
| Additional paid-in capital | | | 29,172 | | | | 28,223 | |
| Retained earnings | | | 70,669 | | | | 66,356 | |
| Deferred compensation | | | 2,879 | | | | 2,929 | |
| Accumulated other comprehensive income (loss) | | | 4,043 | | | | (2,066 | ) |
| Treasury stock at cost, 1,526,662 shares in 2011 | | | | | | | | |
| and 1,418,456 in 2010 | | | (39,805 | ) | | | (37,721 | ) |
| Total stockholders’ equity | | | 140,992 | | | | 112,265 | |
| Total liabilities and stockholders’ equity | | $ | 1,503,953 | | | $ | 1,468,245 | |
| CONDENSED CONSOLIDATED STATEMENTS OF INCOME | |
| (In thousands) (unaudited) | | | | | | |
| For the period ended September 30, | | 2011 | | | 2010 | |
| | | | | | | |
| Interest income: | | | | | | |
| Interest and fees on loans | | $ | 33,947 | | | $ | 29,944 | |
| Interest on investment securities | | | 8,063 | | | | 6,589 | |
| Interest on certificates of deposit | | | 60 | | | | 88 | |
| Interest on federal funds sold & other deposits | | | 249 | | | | 124 | |
| Total interest income | | | 42,319 | | | | 36,745 | |
| Interest expense: | | | | | | | | |
| Interest on deposits | | | 5,260 | | | | 6,412 | |
| Interest on repurchase agreements with customers | | | 122 | | | | 97 | |
| Interest on other borrowings | | | 579 | | | | 867 | |
| Interest on subordinated debt | | | 632 | | | | 790 | |
| Total interest expense | | | 6,593 | | | | 8,166 | |
| Net interest income | | | 35,726 | | | | 28,579 | |
| Provision for loan losses | | | 2,584 | | | | 2,727 | |
| Net interest income after provision for loan losses | | | 33,142 | | | | 25,852 | |
| Non-interest income: | | | | | | | | |
| Trust revenues | | | 2,181 | | | | 1,838 | |
| Brokerage commissions | | | 485 | | | | 395 | |
| Insurance commissions | | | 1,503 | | | | 1,453 | |
| Services charges | | | 3,583 | | | | 3,447 | |
| Securities gains (losses), net | | | 412 | | | | 543 | |
| Impairment losses on securities | | | (584 | ) | | | (1,403 | ) |
| Mortgage banking revenues | | | 428 | | | | 432 | |
| ATM / debit card revenue | | | 2,603 | | | | 2,013 | |
| Other | | | 1,153 | | | | 1,045 | |
| Total non-interest income | | | 11,764 | | | | 9,763 | |
| Non-interest expense: | | | | | | | | |
| Salaries and employee benefits | | | 16,483 | | | | 13,078 | |
| Net occupancy and equipment expense | | | 6,008 | | | | 4,046 | |
| FDIC insurance | | | 937 | | | | 1,036 | |
| Amortization of intangible assets | | | 858 | | | | 528 | |
| Legal and professional expense | | | 1,666 | | | | 1,842 | |
| Other | | | 6,215 | | | | 5,504 | |
| Total non-interest expense | | | 32,167 | | | | 26,034 | |
| Income before income taxes | | | 12,739 | | | | 9,581 | |
| Income taxes | | | 4,637 | | | | 3,239 | |
| Net income | | $ | 8,102 | | | $ | 6,342 | |
| | | | | | | | | |
Per Share Information (unaudited) | | | | | | | | |
| For the period ended Sep 30, | | | 2011 | | | | 2010 | |
| Basic earnings per common share | | $ | 0.90 | | | $ | 0.76 | |
| Diluted earnings per common share | | $ | 0.90 | | | $ | 0.76 | |
| Book value per share at Sep 30 | | $ | 16.16 | | | $ | 15.07 | |
| OTCBB market price of stock at Sep 30 | | $ | 18.70 | | | $ | 18.10 | |
| CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY | |
| (In thousands) (unaudited) | | | | | | |
| For the period ended September 30, | | 2011 | | | 2010 | |
| | | | | | | |
| Balance at beginning of period | | $ | 112,265 | | | $ | 111,221 | |
| Net income | | | 8,102 | | | | 6,342 | |
| Dividends on preferred stock and common stock | | | (3,789 | ) | | | (2,843 | ) |
| Issuance of preferred and common stock | | | 20,300 | | | | 940 | |
| Purchase of treasury stock | | | (2,015 | ) | | | (958 | ) |
| Deferred compensation and other adjustments | | | 20 | | | | 85 | |
| Changes in accumulated other comprehensive income | | | 6,109 | | | | 1,632 | |
| Balance at end of period | | $ | 140,992 | | | $ | 116,419 | |
| | |
| CONSOLIDATED CAPITAL RATIOS | | | | | Threshold | |
| | | As of | | | for “Well- | |
| First Mid-Illinois Bancshares, Inc. | | Sep 30 | | | Capitalized” | |
| Primary Capital Measurements (unaudited): | | 2011 | | | Designation | |
| | | | | | | |
| Leverage ratio | | | 8.95 | % | | | 5 | % |
| Tier 1 capital to risk-weighted assets | | | 13.82 | % | | | 6 | % |
| Total capital to risk-weighted assets | | | 14.91 | % | | | 10 | % |
