Exhibit 99.1
QUARTERLY REPORT TO STOCKHOLDERS
2014 SECOND QUARTER
First Mid Announces:
* NASDAQ Global Exchange Listing Begins
* Record Quarterly Earnings and Earnings Per Share
* Strength in Asset Quality Metrics
* Trust and Brokerage Assets Top $1 Billion
| • | Community Banking and SBA Lending Awards |
I mentioned in our last quarterly report that First Mid-Illinois Bancshares, Inc. had been approved for listing on The NASDAQ Stock Market LLC (“NASDAQ”) under the ticker symbol “FMBH”. First Mid did begin trading on NASDAQ on May 12, 2014. This marked a historic event for the Company and another step in our ongoing strategy to enhance long-term shareholder value. We believe that utilizing this platform can increase the universe of potential investors and liquidity in the stock. We learned that our stock was added to the Russell MicroCap Index at the end of June. The Russell MicroCap is comprised of the smallest 1,000 stocks in the Russell 2,000 Index plus the next smallest 1,000 stocks.
The primary tenet of enhancing shareholder value is ensuring that our financial performance continues to be strong. We have completed the first half of 2014 and I am pleased to report that the financial results for First Mid were solid with an increase in earnings and earnings per share, strong asset quality ratios, and an increase in book value per share. Net income for the first six months of 2014 was $7,636,000 compared to $7,193,000 for the same period last year. Diluted earnings per share were $.91 per share for the first six months of 2014 compared to $.84 for the first six months of 2013. For the second quarter of 2014, net income was $4,029,000 compared to $3,665,000 for the second quarter of 2013, while diluted earnings per share for the second quarter 2014 was $.48 compared to $.43 for the same period last year. Net income for the second quarter of 2014 was the highest that we have ever had for a quarter. The quarterly performance included one-time security gains and was strong from an operating perspective.
Based upon the strength of our performance, the Board of Directors increased the common stock dividend paid for the first half of 2014. Our common stock dividends paid through June 30, 2014 were $.26 per share compared to $.21 for the same period last year.
Year-to-date net income increased due to higher net interest income with growth in loans and an increase in the net interest margin, lower provision for loan loss expense with a reduction in net charge-offs and decreased non-performing assets, and increased fee income. Comparing the second quarter of 2014 to the second quarter last year, net income increased due to greater net interest income, reduced provision expense, and higher gains recognized on the sale of securities.
Year-to-date net interest income totaled $25.4 million compared to $24.5 million for the same period last year while the second quarter was $12.8 million compared to $12.3 million for the second quarter of 2013. Loan balances have increased over the past year with total loans at $1.02 billion as of June 30, 2014 compared to $983 million at year-end 2013 and $916 million as of June 30, 2013. The growth in loans has been a mixture of commercial operating, commercial real estate, and agricultural real estate across our market area. Deposit balances have also increased since year-end at $1.291 billion as of June 30, 2014 compared to $1.288 billion at December 31, 2013 and $1.271 billion at June 30, 2013. With changing the mix of balance sheet assets from investments to higher-yielding loans and maintaining our low deposit costs, we continue to see an improvement in the net interest margin. The year-to-date net interest margin on a tax equivalent basis was 3.53% for the first six months of 2014 compared to 3.42% for the same period in 2013. The quarterly trend in net interest margin was also positive as the margin for the second quarter of 2014 was 3.54% compared to 3.44% for the second quarter of 2013.
Our year-to-date provision for loan losses declined to $451,000 for the first six months of 2014 compared to $732,000 for the first six months of 2013 while the provision for the second quarter of 2014 was $128,000 compared to $252,000 for the second quarter of 2013. During the first half of 2014, our net charge-offs were $19,000 compared to $377,000 for the same period last year. Also, our non-performing loans and other real estate owned declined to $5.2 million at June 30, 2014 compared to $7.0 million at December 31, 2013 and $7.8 million at June 30, 2013. The continued positive trend in these two metrics allowed us to reduce the provision for loan losses in 2014. We also continue to have a strong coverage ratio of the allowance for loan losses to the level of non-performing loans of 283% as of June 30, 2014.
Non-interest income for the first six months of 2014 was $9.5 million as compared to $9.3 million for the same period last year. Non-interest income for the second quarter of 2014 was $5.0 million as compared to $4.7 million for the second quarter of 2013. Year-to-date revenues from the trust and wealth management area were $176,000 higher than the first six months of last year as we had greater revenue from our retirement services area and higher brokerage fees. We reached a significant milestone during the second quarter as total trust and brokerage assets reached $1 billion. Fees from electronic services were $145,000 greater than last year as we have seen an increase in the number of electronic transactions. The quarterly trends in revenue are similar to the year-to-date comparisons. The increases in revenue offset the decline in mortgage banking revenue that we have experienced as refinances have slowed with higher interest rates. Year-to-date mortgage banking revenue is $335,000 lower than last year. As with many banks, we expected mortgage revenues would decline from their peak and we are pleased that the strength and diversity of our revenue sources have offset this decline.
Operating expenses for the first six months of 2014 were $22.2 million compared to $21.5 million for the first six months of last year and operating expenses for the second quarter of 2014 were $11.2 million compared to $10.9 million for the second quarter of 2013. Year-to-date salaries and benefits expense increased by $338,000 from the first six months of 2013. Total occupancy costs were $118,000 higher for the first six months of 2014 than the same period last year primarily due to higher building maintenance expenses from weather related costs. Other expenses included NASDAQ listing fee expenses during the second quarter of 2014.
Our regulatory capital ratios remain strong and in excess of the regulatory minimums to be considered well-capitalized. Each of our four regulatory capital ratios increased during the second quarter and were higher at June 30, 2014 compared to December 31, 2013. Our Tier 1 Capital and Total Capital Ratios at June 30, 2014 were slightly below last June primarily due to an increase in risk-weighted assets (which is the denominator of these ratios) due to the growth in loan balances that have a higher capital requirement. I mentioned that our book value per share also increased and was $18.08 at June 30, 2014 compared to $16.54 at year-end and $16.27 last June.
During the second quarter, First Mid received some acknowledgments that are noteworthy and we made a significant addition to our management team. American Banker Magazine ranked First Mid-Illinois Bank and Trust, N.A. as one of the Top 200 community banks in the United States based upon our financial performance. In addition, First Mid-Illinois Bank and Trust, N.A. was recently named the Community Lender of the Year by the U.S. Small Business Administration’s Illinois District Office. Each year the Illinois District Office honors small businesses and small business advocates for their contributions to Illinois’ economy and society. We were honored to receive this award. Also during the quarter, we added a professional to further strengthen our management team. Danielle Niebrugge was hired as Senior Vice-President & Director of Human Resources. Danielle brings eighteen years of experience in human resource and employee benefit management to the company and we are pleased to add someone with her expertise and passion to our exceptional team.
Thank you for your continued support of First Mid-Illinois Bancshares, Inc. and please contact me if you should have any questions.
Sincerely,
Joseph R. Dively
Chairman and Chief Executive Officer
217-258-9520
jdively@firstmid.com
July 24, 2014
| Second Quarter 2014 Financial Results | |||||||||||
| FIRST MID-ILLINOIS BANCSHARES, INC. | |||||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||||||
| (In thousands) | (unaudited) | (unaudited) | |||||||||
| June 30, | December 31 | June 30, | |||||||||
| 2014 | 2013 | 2013 | |||||||||
| Assets | |||||||||||
| Cash and cash equivalents | $ | 57,535 | $ | 65,102 | $ | 31,865 | |||||
| Investment securities | 439,190 | 488,724 | 535,827 | ||||||||
| Loans (including loans held for sale) | 1,022,251 | 982,804 | 915,813 | ||||||||
| Less allowance for loan losses | (13,681 | ) | (13,249 | ) | (12,131 | ) | |||||
| Net loans | 1,008,570 | 969,555 | 903,682 | ||||||||
| Premises and equipment, net | 27,868 | 28,578 | 29,094 | ||||||||
| Goodwill and intangibles, net | 27,915 | 28,240 | 28,573 | ||||||||
| Other assets | 21,774 | 25,299 | 26,074 | ||||||||
| Total assets | $ | 1,582,852 | $ | 1,605,498 | $ | 1,555,115 | |||||
| Liabilities and Stockholders’ Equity | |||||||||||
| Deposits: | |||||||||||
| Non-interest bearing | $ | 226,544 | $ | 235,448 | $ | 231,526 | |||||
| Interest bearing | 1,064,353 | 1,052,168 | 1,039,608 | ||||||||
| Total deposits | 1,290,897 | 1,287,616 | 1,271,134 | ||||||||
| Repurchase agreements with customers | 95,159 | 119,187 | 94,694 | ||||||||
| Other borrowings | 10,000 | 20,000 | 12,500 | ||||||||
| Junior subordinated debentures | 20,620 | 20,620 | 20,620 | ||||||||
| Other liabilities | 7,552 | 8,694 | 7,220 | ||||||||
Total liabilities | 1,424,228 | 1,456,117 | 1,406,168 | ||||||||
| Total stockholders’ equity | 158,624 | 149,381 | 148,947 | ||||||||
| Total liabilities and stockholders’ equity | $ | 1,582,852 | $ | 1,605,498 | $ | 1,555,115 | |||||
| CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'EQUITY | |||||||
| (in thousands)(unaudited) | |||||||
| Six months ended | |||||||
| June 30, | |||||||
| 2014 | 2013 | ||||||
| Balance at beginning of period | $ | 149,381 | 156,687 | ||||
| Net income | 7,636 | 7,193 | |||||
| Dividends on preferred stock and common stock | (3,731 | ) | (3,456 | ) | |||
| Issuance of preferred and common stock | 1,148 | 1,157 | |||||
| Purchase of treasury stock | (902 | ) | (1,593 | ) | |||
| Deferred compensation and other adjustments | 10 | 52 | |||||
| Changes in accumulated other comprehensive income | 5,082 | (11,093 | ) | ||||
| Balance at end of period | $ | 158,624 | $ | 148,947 | |||
| Second Quarter 2014 Financial Results | |||||||||||||||
| FIRST MID-ILLINOIS BANCSHARES, INC. | |||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||||
| (In thousands, except per share data)(unaudited) | |||||||||||||||
| Three months ended | Six months ended | ||||||||||||||
| June 30, | June 30, | ||||||||||||||
| 2014 | 2013 | 2014 | 2013 | ||||||||||||
| Interest income: | |||||||||||||||
| Interest and fees on loans | $ | 11,039 | $ | 10,390 | $ | 21,851 | $ | 20,825 | |||||||
| Interest on investment securities | 2,545 | 2,798 | 5,068 | 5,539 | |||||||||||
| Interest on federal funds sold & other deposits | 16 | 18 | 43 | 44 | |||||||||||
| Total interest income | 13,600 | 13,206 | 26,962 | 26,408 | |||||||||||
| Interest expense: | |||||||||||||||
| Interest on deposits | 583 | 664 | 1,192 | 1,460 | |||||||||||
| Interest on repurchase agreements with customers | 10 | 10 | 22 | 25 | |||||||||||
| Interest on other borrowings | 66 | 60 | 134 | 117 | |||||||||||
| Interest on subordinated debt | 129 | 131 | 255 | 261 | |||||||||||
| Total interest expense | 788 | 865 | 1,603 | 1,863 | |||||||||||
| Net interest income | 12,812 | 12,341 | 25,359 | 24,545 | |||||||||||
| Provision for loan losses | 128 | 252 | 451 | 732 | |||||||||||
| Net interest income after provision for loan losses | 12,684 | 12,089 | 24,908 | 23,813 | |||||||||||
| Non-interest income: | |||||||||||||||
| Trust revenues | 848 | 806 | 1,781 | 1,699 | |||||||||||
| Brokerage commissions | 233 | 218 | 483 | 389 | |||||||||||
| Insurance commissions | 441 | 410 | 999 | 896 | |||||||||||
| Service charges | 1,353 | 1,215 | 2,497 | 2,355 | |||||||||||
| Securities gains (losses), net | 543 | 482 | 734 | 835 | |||||||||||
| Mortgage banking revenues | 158 | 305 | 256 | 591 | |||||||||||
| ATM / debit card revenue | 1,002 | 947 | 1,975 | 1,830 | |||||||||||
| Other | 412 | 331 | 746 | 669 | |||||||||||
| Total non-interest income | 4,990 | 4,714 | 9,471 | 9,264 | |||||||||||
| Non-interest expense: | |||||||||||||||
| Salaries and employee benefits | 6,054 | 5,972 | 12,107 | 11,769 | |||||||||||
| Net occupancy and equipment expense | 2,114 | 2,102 | 4,263 | 4,145 | |||||||||||
| Amortization of intangible assets | 163 | 171 | 325 | 341 | |||||||||||
| Legal and professional expense | 677 | 614 | 1,239 | 1,162 | |||||||||||
| Other | 2,206 | 2,059 | 4,240 | 4,113 | |||||||||||
| Total non-interest expense | 11,214 | 10,918 | 22,174 | 21,530 | |||||||||||
| Income before income taxes | 6,460 | 5,885 | 12,205 | 11,547 | |||||||||||
| Income taxes | 2,431 | 2,220 | 4,569 | 4,354 | |||||||||||
| Net income | $ | 4,029 | $ | 3,665 | $ | 7,636 | $ | 7,193 | |||||||
| Per Share Information | |||||||||||||||
| Basic earnings per common share | $ | 0.49 | $ | 0.43 | $ | 0.92 | $ | 0.84 | |||||||
| Diluted earnings per common share | $ | 0.48 | $ | 0.43 | $ | 0.91 | $ | 0.84 | |||||||
| Dividends per common share | $ | 0.26 | $ | 0.21 | $ | 0.26 | $ | 0.21 | |||||||
| Second Quarter 2014 Financial Results | ||||||||
| FIRST MID-ILLINOIS BANCSHARES, INC. | ||||||||
| SELECTED FINANCIAL HIGHLIGHTS | As Of | |||||||
| (unaudited) | (unaudited) | |||||||
| June 30, | December 31, | June 30, | ||||||
| 2014 | 2013 | 2013 | ||||||
| SHARE AND PER COMMON SHARE DATA | ||||||||
| Book value per common share | $18.08 | $16.54 | $16.27 | |||||
| Tangible book value per common share | $13.34 | $11.75 | $11.48 | |||||
| Common shares outstanding | 5,896,331 | 5,883,780 | 5,954,966 | |||||
| Market price of stock | $20.80 | $22.00 | $22.29 | |||||
| REGULATORY CAPITAL RATIOS | ||||||||
| Leverage ratio | 10.43 | % | 10.12 | % | 9.97 | % | ||
| Total capital to risk-weighted assets | 15.81 | % | 15.58 | % | 16.21 | % | ||
| Tier 1 capital to risk-weighted assets | 14.58 | % | 14.37 | % | 15.03 | % | ||
| Common equity tier 1 capital to risk weighted assets | 8.11 | % | 7.78 | % | 8.01 | % | ||
| Preferred stockholders' equity | $52,030,000 | $52,035,000 | $52,035,000 | |||||
| Common stockholders' equity | $106,594,000 | $97,346,000 | $96,912,000 | |||||
| ASSET QUALITY | ||||||||
| Allowance for loan losses to non-performing loans | 283.1 | % | 204.8 | % | 177.5 | % | ||
| Allowance for loan losses to total loans outstanding | 1.34 | % | 1.35 | % | 1.33 | % | ||
| Total YTD net charge-offs (1) | $19,000 | $720,000 | $377,000 | |||||
| Total non-performing loans and other real estate owned | $5,229,000 | $7,037,000 | $7,849,000 | |||||
| Quarter ended | Six months ended | |||||||||||||
| June 30, | March 31, | June 30, | June 30, | June 30, | ||||||||||
| (unaudited) | 2014 | 2014 | 2013 | 2014 | 2013 | |||||||||
PERFORMANCE RATIOS (1) | ||||||||||||||
| Return on average assets (2) | 1.02 | % | 0.91 | % | 0.94 | % | 0.96 | % | 0.91 | % | ||||
| Return on average common equity (2) | 11.30 | % | 9.96 | % | 9.69 | % | 10.84 | % | 9.45 | % | ||||
| Net interest margin (3) | 3.54 | % | 3.50 | % | 3.44 | % | 3.53 | % | 3.42 | % | ||||
(1) Financial information is provided as of the date listed except Performance Ratios and Total Net charge-offs which are as of the period ending on the date listed
(2) Annualized net income for period
(3) On a tax equivalent basis (TE), assuming a federal income tax rate of 35%
Corporate Profile
FIrst Mid-Illinois Bancshares, Inc. is the parent company of First Mid-Illinois Bank & Trust, N.A. ("First Mid Bank"), Mid-Illinois Data Services, Inc., and First Mid Insurance Group. Our mission is to satisfy the broad financial needs of our customers, provide value for our shareholders, career opportunities for employees, and contribute to the well-being of our communities. We distinguish ourselves by our actions and by our results. Our talented team is comprised of over 400 men and women who take great pride in First Mid, their work and their ability to serve our customers.
First Mid Bank was first chartered in 1865 and has since grown into a more than $1.5 billion community-focused organization that provides financial services through a network of 37 banking centers in 25 communities.
More information about the Company is available on our website at www.firstmid.com. Our stock is traded in The NASDAQ Stock Market LLC under the ticker symbol "FMBH."
Note Concerning Forward-looking Statements
This presentation may contain certain forward-looking statements, such as discussions of the Company's pricing and fee trends, credit quality and outlook, liquidity, new business results, expansion plans, anticipated expenses and planned schedules. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1955. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations of the Company, are identified by use of the words "believe," "expect," "intend," "anticipate," "estimate," "project," or similar expressions. Actual results could differ materially from the results indicated by these statements because the realization of those results is subject to many risks and uncertainties, including those described in Item 1A - "Risk Factors" and other sections of the Company's Annual Report on Form 10-K and the Company's other filings with the SEC. Furthermore, forward-looking statements speak only as of the date they are made. Except as required under the federal securities laws or the rules and regulations of the SEC, we do not undertake any obligation to update or review any forward-looking information, whether as a result of new information, future events or otherwise.
First Mid-Illinois Bancshares, Inc.
1421 Charleston Avenue
Mattoon, Illinois 61938
217-234-7454
www.firstmid.com