First Mid Bancshares (FMBH) 8-K First Mid-Illinois Bancshares, Inc. Announces Second Quarter 2017 Results and Organizational Changes

EXHIBIT 99.1

First Mid-Illinois Bancshares, Inc. Announces Second Quarter 2017 Results and Organizational Changes

MATTOON, Ill., July 27, 2017 (GLOBE NEWSWIRE) -- First Mid-Illinois Bancshares, Inc. (NASDAQ:FMBH) (the “Company”) today announced its financial results for the quarter and year-to-date period ended June 30, 2017 and organizational changes within the leadership team.

Highlights

• Strong Year-Over-Year Growth in Net Income and Earnings per Share
• Book Value per Share Increased by 9.3% Compared to Second Quarter Last Year
• Improved Asset Quality Metrics Building Upon the Company’s Strong Credit Culture
• Awarded 2016 Central/Southern Illinois Community Bank of the Year by U.S. Small Business Administration

Second Quarter Financial Summary

• Net income of $8.2 million, or $0.66 diluted earnings per share
• Net interest income of $24.0 million
• Non-interest income of $8.0 million
• Return on average assets of 1.16%

“We delivered another strong quarter of both financial and operational results,” said Joe Dively, Chairman and Chief Executive Officer.  “We continue to execute on our strategic plan to fulfill the financial needs of our communities and customers, while driving positive shareholder value.”

“The second quarter marked the first full quarter of operations following the merger and integration of our subsidiary banks.  During the period, special focus was given to improving asset quality metrics and realizing acquisition related cost savings.  These efforts by our team led to an improved efficiency ratio and net interest margin growth, which helped drive a very strong quarter of net income.”

“Finally, I am extremely proud that First Mid was awarded the 2016 Central/Southern Illinois Community Bank of the Year Award by the U.S. Small Business Administration.  This is the fourth consecutive year we have received the award and it reflects our commitment to the small businesses in the communities we serve,” Dively concluded.

Net Interest Income

Net interest income for the second quarter of 2017 increased by $1.2 million, or 5.2% compared to the first quarter of 2017.  The increase was primarily driven by higher yields in both the loan and the investment portfolio and higher accretion income from First Clover Leaf.  The second quarter 2017 included approximately $1.2 million in accelerated accretion income, which was primarily tied to one credit.  The first quarter of 2017 included accelerated accretion income of $0.9 million.

In comparison to the second quarter of 2016, net interest income increased by $8.0 million, or 50.0%.  The increase was primarily attributable to the First Clover Leaf acquisition and associated accretion income as well as loan growth and higher yields.   

Net Interest Margin

Net interest margin, on a tax equivalent basis, was 3.84% for the second quarter compared to 3.37% in the same period last year.  The ratio was higher due to growth in loans and investments, as well as the First Clover Leaf acquisition, including the associated accretion income. 

Loan Portfolio

The Company continued to maintain a well-diversified loan portfolio.  Total loans were $1.83 billion at June 30, 2017 compared to $1.80 billion at the end of the prior quarter.  The increase was mostly in the categories of commercial and industrial and commercial real estate.  Loans increased from $1.32 billion in the second quarter of 2016 driven by both organic growth and the First Clover Leaf acquisition.    

Asset Quality

At June 30, 2017, nonperforming loans were 0.94% of total loans compared to 1.54% at March 31, 2017.  The Company’s allowance for loan losses was 1.00% of total loans at the end of the second quarter compared to 0.99% at March 31, 2017.   The allowance for loan losses to non-performing loans was 106.3% at June 30, 2017 versus 64.5% at March 31, 2017.  Non-performing loans were reduced by $10.5 million primarily due to the foreclosure and sale of certain assets tied to the $9.2 million credit mentioned in last quarter’s report.  The actions taken on this credit contributed to the higher provisioning expense and charge-offs, which was offset by the accelerated accretion income.      

Net charge-offs totaled $1.5 million during the second quarter compared to $0.6 million for the first quarter 2017.  The increase in net charge-offs was primarily from two credits, including the credit mentioned above where a majority of the assets were sold.

The Company recorded a provision for loan losses of $1.8 million during the second quarter compared to $1.7 million during the first quarter of 2017 and $0.7 million in the second quarter of last year.  The increase in the year-over-year provision expense is primarily related to the acquisition of First Clover Leaf and the larger overall loan portfolio as well as a higher level of non-performing loans and net charge-offs.       

Deposits

Total deposits ended the quarter at $2.29 billion, which represented a decrease of approximately $40.1 million from the prior quarter and an increase of $585.2 million from the same quarter last year.  The decrease in the current quarter was primarily seasonal and across multiple customers.  The increase from the prior year was mostly attributable to the acquisition of First Clover Leaf and the benefit of the larger combined organization where certain customers had previously maintained deposits at other financial institutions for concentration risk mitigation.  

Noninterest Income

Noninterest income for the second quarter of 2017 was $8.0 million compared to $7.5 million in the first quarter.  Increases in the second quarter were primarily in electronic banking, securities gains and a $0.9 million tax refund in other income.  As expected, insurance commissions were lower compared to the prior quarter due to the nature and seasonality of some of the business lines.  Compared to the second quarter of 2016, noninterest income increased by $1.5 million.  The year-over-year increase was primarily driven by the First Clover Leaf acquisition, the tax refund and growth in both wealth management and insurance.    

Noninterest Expenses    

Noninterest expense for the second quarter totaled $18.0 million, which was a decrease of $1.2 million versus the first quarter.  The decrease was primarily attributable to cost savings achieved from the bank merger and system integration in March and the higher acquisition related costs that were recognized in the first quarter.  The second quarter included $0.2 million in acquisition related costs. 

Noninterest expense increased by $3.8 million when compared to the second quarter of 2016 primarily due to the First Clover Leaf acquisition and related costs.  The Company’s efficiency ratio, on a tax equivalent basis, for the second quarter 2017 was 53.2% compared to 60.9% for the same period last year.

 Regulatory Capital Levels and Dividend

The Company’s capital levels remained strong at “well capitalized” levels and ended the period as follows: 

Total capital to risk-weighted assets	12.81	%
Tier 1 capital to risk-weighted assets	11.98	%
Common equity tier 1 capital to risk-weighted assets	10.88	%
Leverage ratio	9.44	%

During the second quarter, the Company paid its semi-annual dividend of $0.32, which represented a 6.7% increase over its dividend in the second quarter of last year.

Organizational Changes

First Mid announced today that Michael L. Taylor has been named Chief Operating Officer.  Mr. Taylor joined the Company in 2000 and had been serving as the Chief Financial Officer since that time.  Taylor’s expertise in the financial, operational, risk management, and regulatory compliance of the Company have been and will continue to be critical to the organization’s success.  Taylor received his Bachelor’s Degree in Finance from the University of Illinois.  He also graduated from the Graduate School of Banking in Wisconsin.  He served two terms on the Accounting Board of the American Bankers Association in Washington D.C. and also served on the Eastern Illinois University Accounting Advisory Board.  Taylor has volunteered and been involved in a number of local community events and organizations and currently serves on the Coles Together Board and First Baptist Church Diaconate.

First Mid also announced today that Matthew K. Smith has been named Chief Financial Officer.  Mr. Smith joined the Company in 2016 and has been serving as Executive Vice President, Director of Finance where he has played a role in expanding First Mid’s participation and activity in the capital markets and providing strategic guidance within the organization.  Before joining First Mid, he was the Corporate Treasurer and Vice President of Finance and Investor Relations for Consolidated Communications Holdings, Inc., a publicly traded company on NASDAQ.  Smith earned his Bachelor’s Degree in Finance and an MBA from Eastern Illinois University.  Smith also received a Master’s Degree in Accounting and Financial Management from DeVry University and is a Certified Public Accountant.  Along with volunteering in youth sports and Special Olympics, he has been involved in a number of local community boards and currently serves on the Eastern Illinois University School of Business Advisory Board.       

“Over the last couple of years the Company has grown its asset size by over 70% and significantly increased its activity and relevance in the public capital markets.  This, along with our strategic growth initiatives, is a key driver behind these organizational changes.  I am excited about the well-deserved promotions and expanded roles for Mike and Matt.  They position us well for both merger and acquisition activity and operational execution,” said Dively.

About First Mid-Illinois Bancshares, Inc.: 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 fulfill the financial needs of our communities with exceptional personal service, professionalism and integrity, and deliver meaningful value and results for customers and shareholders. 

First Mid Bank was first chartered in 1865 and has since grown into a more than $2.8 billion community-focused organization that provides financial services through a network of 52 banking centers in 37 Illinois and Missouri 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”.

Forward Looking Statements: This news release contains forward-looking statements about First Mid-Illinois Bancshares, Inc. for which the Company claims protection of the safe harbor provisions contained in the Private Securities Litigation Reform Act of 1995.  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 obligations to update or review any forward-looking information, whether as a result of new information, future events or otherwise.

Non-GAAP Measures:  In addition to reports presented in accordance with generally accepted accounting principles (“GAAP”), this release contains certain non-GAAP financial measures.  The Company believes that such non-GAAP financial measures provide investors with information useful in understanding the Company’s financial performance.  Readers of this release, however, are urged to review these non-GAAP financial measures in conjunction with the GAAP results as reported.  These non-GAAP financial measures are detailed as supplemental tables and include “Net Interest Margin, tax equivalent,” Tangible Book Value per Common Share,” and “Common Equity Tier 1 Capital to Risk Weighted Assets”.  While the Company believes these non-GAAP financial measures provide investors with a broader understanding of the capital adequacy, funding profile and financial trends of the Company, this information should be considered as supplemental in nature and not as a substitute to the related financial information prepared in accordance with GAAP.  These non-GAAP financial measures may also differ from the similar measures presented by other companies.

– Tables Follow –

FIRST MID-ILLINOIS BANCSHARES, INC.
Condensed Consolidated Balance Sheets
(In thousands)
	As of
	June 30,			December 31,			June 30,
		2017			2016			2016
	(unaudited)			(audited)			(unaudited)
Assets
Cash and cash equivalents	$	73,889		$	175,902		$	53,072
Investment securities		758,106			708,722			643,045
Loans (including loans held for sale)		1,825,634			1,825,992			1,315,187
Less allowance for loan losses		(18,209	)		(16,753	)		(15,164	)
Net loans		1,807,425			1,809,239			1,300,023
Premises and equipment, net		39,076			40,292			29,569
Goodwill and intangibles, net		69,517			70,623			49,147
Bank owned life insurance		41,881			41,318			25,183
Other assets		35,410			38,439			19,744
Total assets	$	2,825,304		$	2,884,535		$	2,119,783
Liabilities and Stockholders' Equity
Deposits:
Non-interest bearing	$	425,344		$	471,206		$	340,576
Interest bearing		1,864,062			1,858,681			1,363,623
Total deposits		2,289,406			2,329,887			1,704,199
Repurchase agreement with customers		142,411			185,763			131,099
Other borrowings		57,254			58,157			40,000
Junior subordinated debentures		23,959			23,917			20,620
Other liabilities		11,383			6,138			7,245
Total liabilities		2,524,413			2,603,862			1,903,163
Total stockholders' equity		300,891			280,673			216,620
Total liabilities and stockholders' equity	$	2,825,304		$	2,884,535		$	2,119,783

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
		2017		2016		2017		2016
Interest income:
Interest and fees on loans	$	21,025	$	13,610	$	40,952	$	27,202
Interest on investment securities		4,366		3,172		8,406		6,393
Interest on federal funds sold & other deposits		55		101		270		267
Total interest income		25,446		16,883		49,628		33,862
Interest expense:
Interest on deposits		933		575		1,812		1,154
Interest on securities sold under agreements to repurchase		46		21		86		39
Interest on other borrowings		287		168		561		318
Interest on subordinated debt		227		149		444		294
Total interest expense		1,493		913		2,903		1,805
Net interest income		23,953		15,970		46,725		32,057
Provision for loan losses		1,840		733		3,562		846
Net interest income after provision for loan		22,113		15,237		43,163		31,211
Non-interest income:
Trust revenues		841		794		1,771		1,775
Brokerage commissions		509		466		1,014		914
Insurance commissions		853		735		2,478		2,068
Service charges		1,690		1,644		3,402		3,153
Securities gains, net		335		404		335		664
Mortgage banking revenues		335		238		528		333
ATM/debit card revenue		1,665		1,472		3,233		2,961
Other		1,741		706		2,704		1,235
Total non-interest income		7,969		6,459		15,465		13,103
Non-interest expense:
Salaries and employee benefits		10,102		7,602		20,037		15,449
Net occupancy and equipment expense		3,116		2,646		6,249		5,525
Net other real estate owned (income) expense		127		10		145		(9	)
FDIC insurance		290		281		469		547
Amortization of intangible assets		559		402		1,106		857
Stationary and supplies		186		190		371		391
Legal and professional expense		894		917		1,725		1,701
Marketing and donations		277		239		571		1,201
Other		2,404		1,856		6,484		3,652
Total non-interest expense		17,955		14,143		37,157		29,314
Income before income taxes		12,127		7,553		21,471		15,000
Income taxes		3,927		2,624		7,007		5,265
Net income	$	8,200	$	4,929	$	14,464	$	9,735
Per Share Information
Basic earnings per common share	$	0.66	$	0.51	$	1.16	$	1.01
Diluted earnings per common share		0.66		0.50		1.16		0.99
Weighted average shares outstanding		12,491,757		9,152,709		12,483,788		8,804,107
Diluted weighted average shares outstanding		12,499,931		9,844,982		12,491,962		9,831,591

FIRST MID-ILLINOIS BANCSHARES, INC.
Consolidated Financial Highlights and Ratios
(Dollars in thousands, except per share data)
(Unaudited)
	As of and for the Quarter Ended
	June 30		March 31		December 31,		September 30,		June 30,
		2017		2017		2016		2016		2016
Loan Portfolio
Construction and land development	$	68,681	$	58,304	$	49,104	$	49,019	$	33,812
Farm loans		123,420		123,061		126,108		128,829		122,311
1-4 Family residential properties		310,522		319,713		326,415		341,900		220,487
Multifamily residential properties		72,492		74,714		83,200		83,697		47,215
Commercial real estate		632,492		624,372		630,135		636,686		445,832
Loans secured by real estate		1,207,607		1,200,164		1,214,962		1,240,131		869,657
Agricultural loans		79,759		76,757		86,685		81,414		72,776
Commercial and industrial loans		421,280		400,810		409,033		371,800		301,087
Consumer loans		32,814		34,962		38,028		40,881		38,049
All other loans		84,174		82,969		77,284		72,519		33,618
Total loans		1,825,634		1,795,662		1,825,992		1,806,745		1,315,187
Deposit Portfolio
Non-interest bearing demand deposits	$	425,344	$	456,037	$	471,206	$	431,480	$	340,576
Interest bearing demand deposits		714,918		718,699		716,204		641,327		464,732
Savings deposits		368,220		372,815		356,740		352,489		335,230
Money Market		450,685		440,551		432,656		458,019		313,854
Time deposits		330,239		341,427		353,081		381,944		249,807
Total deposits		2,289,406		2,329,529		2,329,887		2,265,259		1,704,199
Asset Quality
Non-performing loans	$	17,125	$	27,652	$	18,241	$	15,787	$	4,630
Non-performing assets		21,558		30,085		20,226		17,888		5,112
Net charge-offs		1,477		629		307		85		306
Allowance for loan losses to non-performing loans		106.33%		64.54%		91.84%		102.37%		327.52%
Allowance for loan losses to total loans outstanding		1.00%		0.99%		0.92%		0.89%		1.15%
Nonperforming loans to total loans		0.94%		1.54%		1.00%		0.87%		0.35%
Nonperforming assets to total assets		0.76%		1.06%		0.70%		0.64%		0.24%
Common Share Data
Common shares outstanding		12,505,873		12,483,787		12,470,999		12,457,462		9,843,652
Book value per common share	$	24.06	$	23.29	$	22.51	$	23.06	$	22.01
Tangible book value per common share	$	18.50	$	17.68	$	16.84	$	17.34	$	17.01
Market price of stock	$	34.10	$	33.84	$	34.00	$	27.26	$	25.00
Key Performance Ratios and Metrics
End of period earning assets	$	2,604,505	$	2,624,399	$	2,652,628	$	2,557,109	$	1,964,167
Average earning assets		2,615,792		2,633,227		2,590,488		2,134,471		1,967,281
Average rate on average earning assets (tax equivalent)		4.08%		3.85%		3.66%		3.58%		3.56%
Average rate on cost of funds		0.24%		0.22%		0.23%		0.18%		0.19%
Net interest margin (tax equivalent)		3.84%		3.63%		3.43%		3.40%		3.37%
Return on average assets		1.16%		0.88%		0.97%		0.92%		0.93%
Return on average common equity		11.11%		8.77%		9.22%		9.02%		9.44%
Efficiency ratio (tax equivalent) 1		53.17%		59.90%		55.67%		60.17%		60.90%
Full-time equivalent employees		590		590		598		596		520
1 Represents non-interest expense divided by the sum of fully tax equivalent net interest income and non-interest income.  Non-interest expense adjustments exclude foreclosed property expense
and amortization of intangibles.  Non-interest income includes tax equivalent adjustments and non-interest income excludes gains and losses on the sale of investment securities.

FIRST MID-ILLINOIS BANCSHARES, INC.
Reconciliation of Non-GAAP Financial Measures
(In thousands, unaudited)
	As of and for the Quarter Ended
	June 30		March 31		December 31,		September 30,		June 30,
		2017		2017		2016		2016		2016
Net interest income as reported	$	23,953	$	22,772	$	21,524	$	17,623	$	15,970
Net interest income, (tax equivalent)		24,844		23,620		22,324		18,221		16,493
Average earning assets		2,615,792		2,633,227		2,590,488		2,134,471		1,967,281
Net interest margin (tax equivalent) 1		3.84%		3.63%		3.43%		3.40%		3.37%
Common stockholder's equity	$	300,891	$	290,738	$	280,673	$	287,265	$	216,620
Goodwill and intangibles, net		69,517		70,076		70,623		71,209		49,147
Common shares outstanding		12,506		12,484		12,471		12,457		9,844
Tangible Book Value per common share	$	18.50	$	17.68	$	16.84	$	17.34	$	17.01
Common equity tier 1 capital	$	237,764	$	238,102	$	229,341	$	222,884	$	176,377
Risk weighted assets		2,185,041		2,171,056		2,111,787		2,053,118		1,499,731
Common equity tier 1 capital to risk weighted assets  2		10.88%		10.97%		10.86%		10.86%		11.76%
1 Annualized and calculated on a tax equivalent basis where interest earned on tax-exempt securities and loans is adjusted to an amount comparable to interest subject
to normal income taxes assuming a federal tax rate of 35% and includes the impact of non-interest bearing funds.
2 Defined as total common equity adjusted for gains/(losses) less goodwill and intangibles divided by risk weighted assets as of period end.

Investor Contact:  Aaron Holt
VP, Shareholder Relations
217-258-0463
aholt@firstmid.com