Exhibit 99.1
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We continue to have solid financial results in 2013 with growth in earnings, strong asset quality, and higher regulatory capital ratios. Net income for the first nine months of 2013 was $11,103,000 compared to $10,516,000 for the first nine months of last year. Diluted earnings per share for the first nine months of 2013 were $1.31 per share compared to $1.22 per share for the same period last year.
Net income is higher than last year as a result of an increase in net interest income due to growth in loans and maintaining our low funding costs, growth in trust and brokerage revenues, more gains recognized on the sale of securities, and higher electronic banking revenues.
Net interest income for the first nine months of 2013 amounted to $37.2 million compared to $36.9 million for the first nine months of 2012. Over the past year, we have deployed excess federal funds sold into loans. Since September 30, 2012, loan balances have increased by $44 million with growth in commercial and agricultural real estate loans. The growth in loans is especially positive considering that economic conditions in Illinois, while improved from the recession, continue to be strained. Over the past few years, we have placed a greater emphasis on agricultural lending by adding professionals with expertise in the industry, increasing our agricultural loan product offerings, and hosting educational sessions for customers and prospective customers. We have benefitted with growth in farmland purchase and refinance loans. While we have grown loan balances, the spread between the interest rate received on loans and investments compared to the amount paid on deposits and borrowings continues to be squeezed as we remain in a historically-low interest rate environment. Our net interest margin for the first nine months of 2013 was 3.46% compared to 3.52% for the first nine months of last year on a tax-equivalent basis. While down from last year, our margin has held up well compared to peer banks as our cost of funds is in the lower quartile of peers.
Year-to-date total non-interest income was $15 million compared to $13.6 million last year. During the third quarter, we completed the sale of two trust preferred securities resulting in a recovery of the book value and a gain of $1.4 million on the sale. These securities were comprised of community bank debt issuances and have increased in value as the banking industry recovers from the recession. This sale accounts for the majority of the increase in securities gains compared to last year. Also, revenues from ATM and debit cards increased due to a greater number of electronic transactions. Revenues from our trust and brokerage areas increased for the first nine months of 2013 compared to the same period last year while insurance revenues declined primarily due to lower contingency income received from carriers based upon our claims experience.
Operating expenses for the first nine months of 2013 were $32.6 million compared to $32 million for the same period last year with increases in salaries from additions to our sales staff and employees added for a new branch location in Decatur.
I mentioned that our asset quality ratios continue to be strong. Total non-performing assets (non-performing loans and other real estate owned) declined to $7.4 million at September 30, 2013 compared to $8.9 million at September 30, 2012. Also, net loan charge-offs for the first nine months of 2013 were $506,000 compared to $1,226,000 for the same period last year. Our coverage ratio of the allowance for loan losses to the level of non-accrual loans is 189% and compares well to other peer banks.
Our regulatory capital ratios have increased in 2013 including the Tier 1 Capital ratio which was 14.99% at September 30, 2013. Our capital ratios remain in excess of the regulatory minimums to be considered well-capitalized. I mentioned during last quarter’s communication that the regulators published capital rules relating to the Basel III initiative in July 2013. We have reviewed the proposal and believe that we will continue to exceed the capital ratios specified in the regulation as they are phased-in over the next several years.
We continue to make progress on our Excellence 2015 initiative. During the quarter, we started developing measurements for our enterprise risk management framework to ensure that our risk management systems in the various business lines are aligned to our enterprise-wide strategy. We also completed training sessions for our senior management group and board. During the third quarter, we opened a new branch facility in Decatur that resulted from our branch network assessment project. The branch is located on Route 36 and is our third location to serve customers in this community. We also completed plans to open a new facility in Bartonville that will replace our current location. Construction is expected to be completed during the 4th quarter and we are excited about the opportunity to upgrade our facility and offer more services in that community. Overall, we are pleased with the progress we are making through the Excellence 2015 initiative.
With a solid track record of performance, a strong balance sheet, and an experienced management team, First Mid is well-positioned for the future. It has been my pleasure to serve First Mid as Chairman and CEO since 1999 and previously as CFO from 1989 to 1999. I ask that you read the attached press release.
Thank you for your continued support of First Mid-Illinois Bancshares, Inc.
Very Truly Yours,
![](https://capedge.com/proxy/8-K/0000700565-13-000037/rowland.jpg)
William S. Rowland
Chairman and Chief Executive Officer
October 23, 2013
First Mid-Illinois Bancshares, Inc.
1421 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 | ||||
2013 | 2012 | |||||
Assets | ||||||
Cash and due from banks | $ | 31,447 | $ | 38,110 | ||
Federal funds sold and other interest-bearing deposits | 532 | 44,602 | ||||
Certificates of deposit investments | — | 6,665 | ||||
Investment securities: | ||||||
Available-for-sale, at fair value | 500,304 | 508,309 | ||||
Loans | 943,091 | 911,065 | ||||
Less allowance for loan losses | (12,977 | ) | (11,776 | ) | ||
Net loans | 930,114 | 899,289 | ||||
Premises and equipment, net | 28,828 | 29,670 | ||||
Goodwill, net | 25,753 | 25,753 | ||||
Intangible assets, net | 2,650 | 3,161 | ||||
Other assets | 26,829 | 22,473 | ||||
Total assets | $ | 1,546,457 | $ | 1,578,032 | ||
Liabilities and Stockholders’ Equity | ||||||
Deposits: | ||||||
Non-interest bearing | $ | 224,732 | $ | 263,838 | ||
Interest bearing | 1,039,209 | 1,010,227 | ||||
Total deposits | 1,263,941 | 1,274,065 | ||||
Repurchase agreements with customers | 78,114 | 113,484 | ||||
Other borrowings | 25,000 | 5,000 | ||||
Junior subordinated debentures | 20,620 | 20,620 | ||||
Other liabilities | 8,193 | 8,176 | ||||
Total liabilities | 1,395,868 | 1,421,345 | ||||
Stockholders’ Equity: | ||||||
Preferred stock (no par value, authorized 1,000,000 shares; | ||||||
issued 10,427 shares in 2013 and 2012) | 52,035 | 52,035 | ||||
Common stock ($4 par value; authorized 18,000,000 shares; | ||||||
issued 7,743,254 shares in 2013 and 7,682,535 shares in 2012) | 30,973 | 30,730 | ||||
Additional paid-in capital | 32,963 | 31,685 | ||||
Retained earnings | 85,529 | 78,986 | ||||
Deferred compensation | 2,909 | 2,953 | ||||
Accumulated other comprehensive income (loss) | (6,922 | ) | 4,544 | |||
Treasury stock at cost, 1,824,648 shares in 2013 and | ||||||
and 1,711,646 in 2012 | (46,898 | ) | (44,246 | ) | ||
Total stockholders’ equity | 150,589 | 156,687 | ||||
Total liabilities and stockholders’ equity | $ | 1,546,457 | $ | 1,578,032 |
CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||||
(In thousands) (unaudited) | ||||||
For the period ended September 30, | 2013 | 2012 | ||||
Interest income: | ||||||
Interest and fees on loans | $ | 31,371 | $ | 32,863 | ||
Interest on investment securities | 8,435 | 8,893 | ||||
Interest on certificates of deposit | 14 | 46 | ||||
Interest on federal funds sold & other deposits | 34 | 62 | ||||
Total interest income | 39,854 | 41,864 | ||||
Interest expense: | ||||||
Interest on deposits | 2,071 | 3,845 | ||||
Interest on repurchase agreements with customers | 34 | 100 | ||||
Interest on other borrowings | 189 | 570 | ||||
Interest on subordinated debt | 393 | 428 | ||||
Total interest expense | 2,687 | 4,943 | ||||
Net interest income | 37,167 | 36,921 | ||||
Provision for loan losses | 1,707 | 1,751 | ||||
Net interest income after provision for loan losses | 35,460 | 35,170 | ||||
Non-interest income: | ||||||
Trust revenues | 2,476 | 2,371 | ||||
Brokerage commissions | 590 | 494 | ||||
Insurance commissions | 1,317 | 1,476 | ||||
Services charges | 3,620 | 3,537 | ||||
Securities gains (losses), net | 2,291 | 1,060 | ||||
Mortgage banking revenues | 826 | 1,038 | ||||
ATM / debit card revenue | 2,819 | 2,543 | ||||
Other | 1,022 | 1,081 | ||||
Total non-interest income | 14,961 | 13,600 | ||||
Non-interest expense: | ||||||
Salaries and employee benefits | 18,036 | 17,437 | ||||
Net occupancy and equipment expense | 6,212 | 6,042 | ||||
FDIC insurance | 632 | 665 | ||||
Amortization of intangible assets | 511 | 603 | ||||
Legal and professional expense | 1,621 | 1,665 | ||||
Other | 5,600 | 5,549 | ||||
Total non-interest expense | 32,612 | 31,961 | ||||
Income before income taxes | 17,809 | 16,809 | ||||
Income taxes | 6,706 | 6,293 | ||||
Net income | $ | 11,103 | $ | 10,516 | ||
Per Share Information (unaudited) | ||||||
For the period ended September 30, | 2013 | 2012 | ||||
Basic earnings per common share | $ | 1.31 | $ | 1.22 | ||
Diluted earnings per common share | $ | 1.31 | $ | 1.22 | ||
Dividends per common share | $ | 0.21 | $ | 0.21 | ||
Book value per share at Sep 30 | $ | 16.51 | $ | 17.53 | ||
OTCBB market price of stock at Sep 30 | $ | 22.33 | $ | 25.50 |
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY | ||||||
(In thousands) (unaudited) | ||||||
For the period ended September 30, | 2013 | 2012 | ||||
Balance at beginning of period | $ | 156,687 | $ | 140,967 | ||
Net income | 11,103 | 10,516 | ||||
Dividends on preferred stock and common stock | (6,778 | ) | (5,989 | ) | ||
Issuance of preferred and common stock | 1,345 | 9,942 | ||||
Purchase of treasury stock | (2,614 | ) | (1,637 | ) | ||
Deferred compensation and other adjustments | 94 | 68 | ||||
Changes in accumulated other comprehensive income | (11,466 | ) | 2,244 | |||
Balance at end of period | $ | 150,589 | $ | 157,688 |
CONSOLIDATED CAPITAL RATIOS | ||||
Primary Capital Measurements (unaudited) | 2013 | 2012 | ||
For the period ended September 30, | ||||
Leverage ratio | 10.2 | % | 9.83 | % |
Tier 1 capital to risk-weighted assets | 14.99 | % | 14.73 | % |
Total capital to risk-weighted assets | 16.21 | % | 15.88 | % |