October 22, 2019
First Busey Announces 2019 Third Quarter Earnings

Champaign, IL – (Nasdaq: BUSE)

Message from our President & CEO

Positive advances in the third quarter of 2019 compared to the second quarter of 2019

 Net income and adjusted net income1 increased to $24.8 million and $30.5 million, respectively
 Earnings per share of $0.45 and adjusted earnings per share1 of $0.55 compared to $0.43 and $0.53, respectively
 Portfolio loans of $6.67 billion as compared to $6.53 billion, an annualized increase of 8.3%
 Tangible book value per common share of $15.12 as compared to $14.95

First Busey Corporation’s (“First Busey” or the “Company”) net income for the third quarter of 2019 was $24.8 million, or $0.45 per diluted common share, as compared to $24.1 million, or $0.43 per diluted common share, for the second quarter of 2019 and $26.9 million, or $0.55 per diluted common share, for the third quarter of 2018.  Adjusted net income1 for the third quarter of 2019 was $30.5 million, or $0.55 per diluted common share, as compared to $29.5 million, or $0.53 per diluted common share, for the second quarter of 2019 and $27.0 million, or $0.55 per diluted common share, for the third quarter of 2018.

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 third quarter of 2019 were $7.0 million of expenses related to acquisitions and $0.7 million of expenses related to other 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.

Year-to-date net income through September 30, 2019 was $74.4 million, or $1.35 per diluted common share, compared to net income of $73.6 million, or $1.50 per diluted common share, for the comparable period of 2018. Year-to-date adjusted net income1 for the first nine months of 2019 was $86.6 million, or $1.57 per diluted common share, compared to $77.5 million or $1.58 per diluted common share for the first nine months of 2018.

For the third quarter of 2019, annualized return on average assets and annualized return on average tangible common equity were 1.02% and 11.79%, respectively.  Based on adjusted net income1, annualized return on average assets was 1.25% and annualized return on average tangible common equity was 14.50% for the third quarter of 2019.  For the nine months ended September 30, 2019, annualized return on average assets and annualized return on average tangible common equity were 1.06% and 12.37%, respectively.  Based on adjusted net income1, annualized return on average assets was 1.24% and annualized return on average tangible common equity was 14.41% for the nine months ended September 30, 2019.

On January 31, 2019, the Company completed its acquisition of The Banc Ed Corp. (“Banc Ed”), the holding company for TheBANK of Edwardsville (“TheBANK”).  First Busey operated TheBANK as a separate subsidiary from the completion of the acquisition until October 4, 2019, when it was merged with and into Busey Bank.  At that time, TheBANK’s banking centers became banking centers of Busey Bank.   When we completed the Banc Ed acquisition, we reset the baseline for the future financial performance of First Busey in a multitude of positive ways.  With TheBANK now merged and integrated, we expect to see the full contribution and synergies of TheBANK reflected in the Company’s financial performance in the quarters ahead.


1 A Non-GAAP financial measure. See “Non-GAAP Financial Information” below for reconciliation.

On October 4, 2019, in addition to TheBANK being merged into Busey Bank, the Company partnered with a new core provider.  The core conversion positions the combined organization for future growth.  Strategic process improvements and investments in technology platforms will allow the Company to serve customers more efficiently and effectively for years to come.

On August 31, 2019, the Company completed the previously announced merger of Busey Bank with Investors’ Security Trust Company (“IST”), a Fort Myers, Florida wealth management firm, which had $471.1 million assets under care.  Through this transaction, Busey Bank and IST broaden the expertise and raise the level of service available to clients—from individuals and families to institutions and foundations—and remain committed to their founding principles of being active community stewards and providing the highest level of personal service to clients delivered by experienced, local professionals.

In addition to the successful integration of these acquisitions, we are pleased to report net organic loan growth of $137.3 million in the third quarter, with total portfolio loans increasing to $6.67 billion at September 30, 2019 from $6.53 billion at June 30, 2019.  This is the result of focused initiatives and effort on the part of our associates across our markets and was accomplished while maintaining our conservative credit principles.  As of September 30, 2019, the ratio of non-performing loans to total loans declined to 0.50%, while the ratio of allowance to non-performing loans increased to 160.00%.

Our goal of being a strong community bank for the communities we serve begins with outstanding associates.  The Company is honored to be named among the 2019 Best Banks to Work For by American Banker, the 2019 Best-In-State Banks for Illinois by Forbes and Statista, the 2019 Best Places to Work in Illinois by Best Companies Group and Daily Herald Business Ledger, the 2019 Best Companies to Work For in Florida by Florida Trend magazine, the 2019 Best Place to Work in Indiana by Best Companies Group and the Indiana Chamber of Commerce and the 2019 Best Places to Work in St. Louis by Quantum Workplace and St. Louis Business Journal.

We are pleased with our third quarter 2019 operating results and feel confident that we are well positioned for growth as we move into the final quarter of 2019 and into 2020. 

/s/ Van A. Dukeman
President & Chief Executive Officer
First Busey Corporation

SELECTED FINANCIAL HIGHLIGHTS1
 
(dollars in thousands, except per share data)
 
As of and for the
   
As of and for the
 
   
Three Months Ended
   
Nine Months Ended
 
   
September 30,
   
June 30,
   
December 31,
   
September 30,
   
September 30,
   
September 30,
 
 
 
2019
   
2019
   
2018
   
2018
   
2019
   
2018
 
EARNINGS & PER SHARE DATA
                                   
Revenue2
 
$
104,051
   
$
102,350
   
$
83,184
   
$
82,627
   
$
300,687
   
$
247,884
 
Net income
   
24,828
     
24,085
     
25,290
     
26,859
     
74,382
     
73,638
 
Diluted earnings per share
   
0.45
     
0.43
     
0.51
     
0.55
     
1.35
     
1.50
 
Cash dividends paid per share
   
0.21
     
0.21
     
0.20
     
0.20
     
0.63
     
0.60
 
Net income by operating segment
                                               
   Banking
 
$
25,731
   
$
24,441
   
$
24,134
   
$
26,486
   
$
76,837
     
73,235
 
   Remittance Processing
   
972
     
1,105
     
814
     
957
     
3,102
     
2,896
 
   Wealth Management
   
2,184
     
2,845
     
2,040
     
2,280
     
7,670
     
7,332
 
                                                 
AVERAGE BALANCES
                                               
Cash and cash equivalents
 
$
515,965
   
$
328,414
   
$
272,811
   
$
238,000
   
$
391,029
   
$
227,806
 
Investment securities
   
1,780,066
     
1,897,486
     
1,443,054
     
1,417,708
     
1,800,069
     
1,345,996
 
Loans held for sale
   
42,418
     
25,143
     
23,380
     
28,661
     
28,326
     
31,785
 
Portfolio loans
   
6,558,519
     
6,528,326
     
5,540,852
     
5,551,753
     
6,406,779
     
5,531,087
 
Interest-earning assets
   
8,781,590
     
8,666,136
     
7,174,755
     
7,132,324
     
8,514,580
     
7,031,636
 
Total assets
   
9,659,769
     
9,522,678
     
7,846,154
     
7,802,308
     
9,352,272
     
7,707,090
 
                                                 
Non-interest bearing deposits
   
1,780,645
     
1,747,746
     
1,486,977
     
1,492,709
     
1,715,701
     
1,494,016
 
Interest-bearing deposits
   
6,086,378
     
5,970,408
     
4,852,649
     
4,784,657
     
5,884,904
     
4,658,303
 
Total deposits
   
7,867,023
     
7,718,154
     
6,339,626
     
6,277,366
     
7,600,605
     
6,152,319
 
Securities sold under agreements to repurchase
   
184,637
     
193,621
     
210,416
     
234,729
     
194,189
     
242,268
 
Interest-bearing liabilities
   
6,557,518
     
6,493,885
     
5,329,898
     
5,303,632
     
6,373,639
     
5,219,086
 
Total liabilities
   
8,446,936
     
8,326,876
     
6,866,652
     
6,840,484
     
8,179,059
     
6,760,415
 
Stockholders' common equity
   
1,212,833
     
1,195,802
     
979,502
     
961,824
     
1,173,213
     
946,675
 
Tangible stockholders' common equity3
   
835,232
     
818,951
     
678,023
     
658,910
     
804,109
     
641,937
 
 
                                               
PERFORMANCE RATIOS
                                               
Return on average assets4
   
1.02
%
   
1.01
%
   
1.28
%
   
1.37
%
   
1.06
%
   
1.28
%
Return on average common equity4
   
8.12
%
   
8.08
%
   
10.24
%
   
11.08
%
   
8.48
%
   
10.40
%
Return on average tangible common equity3,4
   
11.79
%
   
11.80
%
   
14.80
%
   
16.17
%
   
12.37
%
   
15.34
%
Net interest margin4,5
   
3.35
%
   
3.43
%
   
3.38
%
   
3.41
%
   
3.42
%
   
3.47
%
Efficiency ratio6
   
62.73
%
   
63.62
%
   
56.57
%
   
53.47
%
   
61.55
%
   
56.02
%
Non-interest revenue as a % of total revenues2
   
29.38
%
   
28.26
%
   
27.27
%
   
26.45
%
   
28.40
%
   
27.02
%
 
                                               
NON-GAAP INFORMATION
                                               
Adjusted net income6
 
$
30,535
   
$
29,498
   
$
25,958
   
$
27,006
   
$
86,647
   
$
77,518
 
Adjusted diluted earnings per share6
   
0.55
     
0.53
     
0.53
     
0.55
     
1.57
     
1.58
 
Adjusted return on average assets4
   
1.25
%
   
1.24
%
   
1.31
%
   
1.37
%
   
1.24
%
   
1.34
%
Adjusted return on average tangible common
   equity3,4
   
14.50
%
   
14.45
%
   
15.19
%
   
16.26
%
   
14.41
%
   
16.15
%
Adjusted net interest margin4,5
   
3.22
%
   
3.27
%
   
3.27
%
   
3.29
%
   
3.27
%
   
3.31
%
Adjusted efficiency ratio6
   
55.42
%
   
56.55
%
   
55.49
%
   
53.26
%
   
56.12
%
   
54.16
%
                                                 
1 Results are unaudited.
 
2 Revenues consist of net interest income plus non-interest income, excluding 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 Annualized, see “Non-GAAP Financial Information” below for reconciliation.
 
5 On a tax-equivalent basis, assuming a federal income tax rate of 21%.
 
6 See “Non-GAAP Financial Information” below for reconciliation.
 


Condensed Consolidated Balance Sheets1
 
As of
 
(dollars in thousands, except per share data)
 
September 30,
   
June 30,
   
March 31,
   
December 31,
   
September 30,
 
   
2019
   
2019
   
2019
   
2018
   
2018
 
Assets
                             
Cash and cash equivalents
 
$
525,457
   
$
420,207
   
$
330,407
   
$
239,973
   
$
160,652
 
Investment securities
   
1,721,865
     
1,869,143
     
1,940,519
     
1,312,514
     
1,496,948
 
                                         
Loans held for sale
   
70,345
     
39,607
     
20,291
     
25,895
     
32,617
 
                                         
Commercial loans
   
4,900,430
     
4,759,329
     
4,744,136
     
4,060,126
     
4,141,816
 
Retail real estate and retail other loans
   
1,768,985
     
1,772,797
     
1,770,945
     
1,508,302
     
1,481,925
 
Portfolio loans
 
$
6,669,415
   
$
6,532,126
   
$
6,515,081
   
$
5,568,428
   
$
5,623,741
 
                                         
Allowance for loan losses
   
(52,965
)
   
(51,375
)
   
(50,915
)
   
(50,648
)
   
(52,743
)
Premises and equipment
   
153,641
     
149,726
     
147,958
     
117,672
     
119,162
 
Goodwill and other intangibles
   
381,323
     
375,327
     
377,739
     
300,558
     
301,963
 
Right of use asset
   
9,979
     
10,426
     
10,898
     
-
     
-
 
Other assets
   
274,700
     
267,480
     
245,356
     
187,965
     
207,045
 
Total assets
 
$
9,753,760
   
$
9,612,667
   
$
9,537,334
   
$
7,702,357
   
$
7,889,385
 
                                         
Liabilities & Stockholders' Equity
                                       
Non-interest bearing deposits
 
$
1,779,490
   
$
1,766,681
   
$
1,791,339
   
$
1,464,700
   
$
1,438,054
 
Interest-bearing checking, savings, and money market deposits
   
4,498,005
     
4,316,730
     
4,214,809
     
3,287,618
     
3,205,232
 
Time deposits
   
1,652,971
     
1,749,811
     
1,757,078
     
1,497,003
     
1,552,283
 
Total deposits
 
$
7,930,466
   
$
7,833,222
   
$
7,763,226
   
$
6,249,321
   
$
6,195,569
 
                                         
Securities sold under agreements to repurchase
   
202,500
     
190,846
     
217,077
     
185,796
     
255,906
 
Short-term borrowings
   
29,739
     
30,761
     
30,739
     
-
     
200,000
 
Long-term debt
   
183,968
     
185,576
     
188,221
     
148,686
     
148,626
 
Junior subordinated debt owed to unconsolidated trusts
   
71,269
     
71,230
     
71,192
     
71,155
     
71,118
 
Lease liability
   
10,101
     
10,531
     
10,982
     
-
     
-
 
Other liabilities
   
109,736
     
86,893
     
69,756
     
52,435
     
46,026
 
Total liabilities
 
$
8,537,779
   
$
8,409,059
   
$
8,351,193
   
$
6,707,393
   
$
6,917,245
 
Total stockholders' equity
 
$
1,215,981
   
$
1,203,608
   
$
1,186,141
   
$
994,964
   
$
972,140
 
Total liabilities & stockholders' equity
 
$
9,753,760
   
$
9,612,667
   
$
9,537,334
   
$
7,702,357
   
$
7,889,385
 
                                         
Share Data
                                       
Book value per common share
 
$
22.03
   
$
21.73
   
$
21.32
   
$
20.36
   
$
19.90
 
Tangible book value per common share2
 
$
15.12
   
$
14.95
   
$
14.53
   
$
14.21
   
$
13.72
 
Ending number of common shares outstanding
   
55,197,277
     
55,386,636
     
55,624,627
     
48,874,836
     
48,860,309
 
       
1 Results are unaudited except for amounts reported as of December 31, 2018.
 
2 See “Non-GAAP Financial Information” below for reconciliation, excludes tax effect of other intangible assets.
 

Condensed Consolidated Statements of Income1
                   
(dollars in thousands, except per share data)
             
   
For the
   
For the
 
   
Three Months Ended September 30,
   
Nine Months Ended September 30,
 
   
2019
   
2018
   
2019
   
2018
 
                         
Interest and fees on loans
 
$
78,083
   
$
63,589
   
$
227,903
   
$
186,839
 
Interest on investment securities
   
11,427
     
8,523
     
35,039
     
23,300
 
Other interest income
   
2,181
     
649
     
4,496
     
1,580
 
Total interest income
 
$
91,691
   
$
72,761
   
$
267,438
   
$
211,719
 
                                 
Interest on deposits
   
14,753
     
8,946
     
41,407
     
21,837
 
Interest on securities sold under agreements to repurchase
   
579
     
426
     
1,789
     
1,131
 
Interest on short-term borrowings
   
200
     
324
     
885
     
1,265
 
Interest on long-term debt
   
1,831
     
1,437
     
5,412
     
4,200
 
Interest on junior subordinated debt owed to unconsolidated trusts
   
852
     
854
     
2,658
     
2,383
 
Total interest expense
 
$
18,215
   
$
11,987
   
$
52,151
   
$
30,816
 
                                 
Net interest income
 
$
73,476
   
$
60,774
   
$
215,287
   
$
180,903
 
Provision for loan losses
   
3,411
     
758
     
8,039
     
4,024
 
Net interest income after provision for loan losses
 
$
70,065
   
$
60,016
   
$
207,248
   
$
176,879
 
                                 
Trust fees
   
7,689
     
6,324
     
24,122
     
20,573
 
Commissions and brokers' fees, net
   
1,132
     
881
     
3,216
     
2,860
 
Fees for customer services
   
9,842
     
7,340
     
27,635
     
21,576
 
Remittance processing
   
3,780
     
3,630
     
11,277
     
10,588
 
Mortgage revenue
   
3,331
     
1,272
     
8,127
     
4,488
 
Security gains (losses), net
   
361
     
-
     
(623
)
   
160
 
Other
   
4,801
     
2,406
     
11,023
     
6,896
 
Total non-interest income
 
$
30,936
   
$
21,853
   
$
84,777
   
$
67,141
 
                                 
Salaries, wages and employee benefits
   
38,747
     
26,024
     
105,356
     
80,315
 
Net occupancy expense of premises
   
4,652
     
3,761
     
13,365
     
11,271
 
Furniture and equipment expense
   
2,489
     
1,715
     
6,936
     
5,418
 
Data processing
   
5,032
     
4,016
     
15,049
     
12,391
 
Amortization of intangible assets
   
2,360
     
1,445
     
6,866
     
4,450
 
Other
   
14,841
     
8,968
     
45,732
     
30,429
 
Total non-interest expense
 
$
68,121
   
$
45,929
   
$
193,304
   
$
144,274
 
                                 
Income before income taxes
 
$
32,880
   
$
35,940
   
$
98,721
   
$
99,746
 
Income taxes
   
8,052
     
9,081
     
24,339
     
26,108
 
Net income
 
$
24,828
   
$
26,859
   
$
74,382
   
$
73,638
 
                                 
Per Share Data
                               
Basic earnings per common share
 
$
0.45
   
$
0.55
   
$
1.36
   
$
1.51
 
Diluted earnings per common share
 
$
0.45
   
$
0.55
   
$
1.35
   
$
1.50
 
Average common shares outstanding
   
55,410,109
     
48,891,496
     
54,782,946
     
48,827,861
 
Diluted average common shares outstanding
   
55,646,104
     
49,246,542
     
55,057,518
     
49,216,307
 
                                 
1 Results are unaudited.
                               

Balance Sheet Growth

At September 30, 2019, portfolio loans were $6.67 billion, as compared to $6.53 billion as of June 30, 2019 and $5.62 billion as of September 30, 2018.  The increase as of September 30, 2019 from June 30, 2019 related to organic loan growth at both Busey Bank and TheBANK.  Average portfolio loans increased to $6.56 billion for the third quarter of 2019 compared to $6.53 billion in the second quarter of 2019 and increased 18.1% compared to $5.55 billion for the third quarter of 2018.

Average interest-earning assets for the third quarter of 2019 increased to $8.78 billion compared to $8.67 billion for the second quarter of 2019 and $7.13 billion for the third quarter of 2018.  Average interest-earning assets for the first nine months of 2019 increased 21.1% to $8.51 billion from $7.03 billion in the same period of 2018.

Total deposits were $7.93 billion at September 30, 2019, an increase from $7.83 billion at June 30, 2019 and $6.20 billion at September 30, 2018.  The Company remains funded primarily through core deposits with significant market share in its primary markets.

Net Interest Margin and Net Interest Income

Net interest margin for the third quarter of 2019 was 3.35%, compared to 3.43% for the second quarter of 2019 and 3.41% for the third quarter of 2018.  Adjusted net interest margin1 for the third quarter of 2019 was 3.22%, compared to 3.27% for the second quarter of 2019 and 3.29% in the third quarter of 2018.  Net interest margin for the first nine months of 2019 was 3.42% compared to 3.47% for the first nine months of 2018.  Adjusted net interest margin1 for the first nine months of 2019 was 3.27%, a decrease from 3.31% for the same period of 2018.

Higher aggregate yields from loan production partially offset increases in funding costs in 2019 as compared to 2018. Funding costs in 2019 increased from 2018, primarily due to resetting of time deposit rates to reflect market rates and additional borrowings in conjunction with the Banc Ed acquisition.  The Federal Open Market Committee lowered Federal Funds Target rates for the first time in 11 years on July 31, 2019 and then again on September 18, 2019, for a combined decrease of 50 basis points.  This contributed to the decline in net interest margin for the quarter ended September 30, 2019 as compared to the quarter ended June 30, 2019, as assets, in particular commercial loans, repriced more quickly and to a greater extent than liabilities.

Net interest income was $73.5 million in the third quarter of 2019 compared to $73.4 million in the second quarter of 2019 and $60.8 million in the third quarter of 2018.  Net interest income was $215.3 million for the first nine months of 2019 compared to $180.9 million for the same period of 2018.  Net purchase accounting accretion and amortization included in interest income and interest expense was $3.0 million for the third quarter of 2019, a decrease from $3.5 million for the second quarter of 2019 and an increase from $2.3 million for the third quarter of 2018.  Net purchase accounting accretion and amortization included in interest income and interest expense for the first nine months of 2019 was $9.4 million compared to $8.7 million for the same period of 2018. As of September 30, 2019, the Company has $22.5 million of purchase discount to be accreted over the remaining life of our acquired loans.

Asset Quality

Non-performing loans totaled $33.1 million as of September 30, 2019 and June 30, 2019 as compared to $40.8 million as of September 30, 2018. Continued disciplined credit management resulted in non-performing loans as a percentage of total loans of 0.50% at September 30, 2019 as compared to 0.51% at June 30, 2019 and 0.72% at September 30, 2018.

The Company recorded net charge-offs of $1.8 million for the third quarter of 2019. The allowance for loan loss as a percentage of portfolio loans was 0.79% at September 30, 2019 and June 30, 2019 as compared to 0.94% at September 30, 2018. The decline in the allowance coverage ratio in 2019 is primarily attributed to the Banc Ed acquisition.  Acquired loans are initially recorded at their acquisition date fair value so a separate allowance is not initially recognized.  An allowance is recorded subsequent to acquisition to the extent the reserve requirement exceeds the recorded fair value adjustment.

1 A Non-GAAP financial measure. See “Non-GAAP Financial Information” below for reconciliation.

The Company recorded provision for loan losses of $3.4 million in the third quarter of 2019, compared to $2.5 million in the second quarter of 2019 and $0.8 million in the third quarter of 2018.  The Company recorded provision for loan losses of $8.0 million in the first nine months of 2019 and $4.0 million in the first nine months of 2018.

Asset Quality1
 
(dollars in thousands)
 
As of and for the Three Months Ended
 
   
September 30,
   
June 30,
   
March 31,
   
December 31,
   
September 30,
 
   
2019
   
2019
   
2019
   
2018
   
2018
 
                               
Portfolio loans
 
$
6,669,415
   
$
6,532,126
   
$
6,515,081
   
$
5,568,428
   
$
5,623,741
 
Loans 30-89 days past due
   
12,434
     
18,040
     
10,780
     
7,121
     
8,189
 
Non-performing loans:
                                       
     Non-accrual loans
   
31,827
     
32,816
     
36,230
     
34,997
     
40,395
 
     Loans 90+ days past due
   
1,276
     
258
     
356
     
1,601
     
364
 
Total non-performing loans
   
33,103
     
33,074
     
36,586
     
36,598
     
40,759
 
Total non-performing loans, segregated by geography
                                       
     Illinois/ Indiana
   
24,296
     
24,509
     
28,847
     
28,319
     
33,699
 
     Missouri
   
8,202
     
7,778
     
6,593
     
7,242
     
6,222
 
     Florida
   
605
     
787
     
1,146
     
1,037
     
838
 
Other non-performing assets
   
926
     
936
     
921
     
376
     
1,093
 
Total non-performing assets
   
34,029
     
34,010
     
37,507
     
36,974
     
41,852
 
Total non-performing assets to portfolio loans and
    non-performing assets
   
0.51
%
   
0.52
%
   
0.58
%
   
0.66
%
   
0.74
%
Allowance for loan losses to portfolio loans
   
0.79
%
   
0.79
%
   
0.78
%
   
0.91
%
   
0.94
%
Allowance as a percentage of non-performing loans
   
160.00
%
   
155.33
%
   
139.17
%
   
138.39
%
   
129.40
%
Net charge-offs
   
1,821
     
2,057
     
1,844
     
2,500
     
1,320
 
Provision for loan losses
   
3,411
     
2,517
     
2,111
     
405
     
758
 
                                         
1 Results are unaudited.
                 

Non-Interest Income

Total non-interest income of $30.9 million for the third quarter of 2019 increased as compared to $27.9 million in the second quarter of 2019 and $21.9 million in the third quarter of 2018.

Revenues from trust fees, commissions and brokers’ fees, and remittance processing activities represented 40.7% of the Company’s non-interest income for the quarter ended September 30, 2019, providing a balance to spread-based revenue from traditional banking activities.  Trust fees and commissions and brokers’ fees were $8.8 million for the third quarter of 2019, a seasonal decrease from $9.5 million for the second quarter 2019 and increased from $7.2 million for the third quarter of 2018. Trust fees and commissions and brokers’ fees increased to $27.3 million for the first nine months of 2019 compared to $23.4 million for the first nine months of 2018.

Net income from the wealth management segment was $2.2 million for the third quarter of 2019 compared to $2.8 million in the second quarter of 2019 and $2.3 million in the third quarter of 2018.  Net income from the wealth management segment for the nine months ended September 30, 2019 was $7.7 million compared to $7.3 million for the same period of 2018, an 4.6% increase. First Busey’s wealth management division ended the third quarter of 2019 with $9.41 billion in assets under care.

Remittance processing revenue from the Company’s subsidiary, FirsTech, of $3.8 million for the third quarter of 2019 increased slightly compared to $3.7 million in the second quarter of 2019 and $3.6 million for the third quarter of 2018.  Remittance processing revenue for the nine months ended September 30, 2019 was $11.3 million, an increase of 6.5%, compared to $10.6 million during the same period of 2018. The FirsTech operating segment generated net income of $1.0 million for the third quarter of 2019 and $3.1 million for the first nine months of 2019. FirsTech has seen a relative slowdown in new business onboarding as compared to recent quarters that showed significant growth, which is consistent with the business’ typical sales cycle.

The mortgage line of business generated $3.3 million of revenue in the third quarter of 2019, an increase compared to $2.9 million of revenue in the second quarter of 2019 and $1.3 million of revenue in the third quarter of 2018.  Mortgage revenue for the first nine months of 2019 was $8.1 million, an increase over the comparable period of 2018 of $4.5 million, following a long period of restructuring and additional revenue from TheBANK. A decline in prevailing market rates for mortgages also contributed to increased production in recent periods.

Operating Efficiency

The efficiency ratio was 62.73% for the quarter ended September 30, 2019 compared to 63.62% for the quarter ended June 30, 2019 and 53.47% for the quarter ended September 30, 2018. The adjusted efficiency ratio1 was 55.42% for the quarter ended September 30, 2019, 56.55% for the quarter ended June 30, 2019, and 53.26% for the quarter ended September 30, 2018.  The efficiency ratio for the first nine months of 2019 was 61.55% compared to 56.02% for the first nine months of 2018. The adjusted efficiency ratio1 was 56.12% for the first nine months of 2019 compared to 54.16% for the first nine months of 2018.  Total non-interest expenses have been influenced by acquisition expenses and other restructuring costs.  For the third quarter of 2019, adjusted non-interest expenses, including amortization, were $60.5 million compared to reported non-interest expense of $68.1 million.  The Company remains focused on expense discipline.

Specific areas of non-interest expense are as follows:

 Salaries, wages and employee benefits were $38.7 million in the third quarter of 2019, an increase from $34.3 million in the second quarter of 2019 and $26.0 million from the third quarter of 2018.  In the first nine months of 2019, salaries, wages and employee benefits increased to $105.4 million compared to $80.3 million for the same period of 2018.  For the three and nine months ended September 30, 2019, salaries, wages and employee benefits included $3.9 million and $4.2 million, respectively, of non-operating expenses. Total full time equivalents (“FTE”) at September 30, 2019 was 1,595 compared to 1,579 at June 30, 2019 and 1,298 at September 30, 2018. Included in the September 30, 2019 FTE are 293 FTEs of TheBANK.

 Data processing expense in the third quarter of 2019 of $5.0 million decreased compared to $5.6 million in the second quarter of 2019 and increased compared to $4.0 million in the third quarter of 2018.  In the first nine months of 2019, data processing expense increased to $15.0 million compared to $12.4 million for the same period of 2018.  For the three and nine months ended September 30, 2019, data processing included $0.3 million and $1.0 million, respectively, of non-operating expenses, related to payment of conversion expenses.   Data processing for 2019 also includes data processing related to TheBANK.

 Other expense in the third quarter of 2019 of $14.8 million decreased compared to $18.9 million in the second quarter of 2019 and increased compared to $9.0 million in the third quarter of 2018. In the first nine months of 2019, other expense increased to $45.7 million compared to $30.4 million for the same period of 2018. For the three and nine months ended September 30, 2019, other expenses included $3.6 million and $11.3 million, respectively, of non-operating expenses which primarily includes professional and legal expenses and check card conversion expenses.

Capital Strength

The Company's strong capital levels, coupled with its earnings, has allowed First Busey to provide a steady return to its stockholders through dividends.  The Company will pay a cash dividend on October 25, 2019 of $0.21 per common share to stockholders of record as of October 18, 2019.  The Company has consistently paid dividends to its common stockholders since the bank holding company was organized in 1980.

1 A Non-GAAP financial measure. See “Non-GAAP Financial Information” below for reconciliation.

As of September 30, 2019, 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 equity1 (“TCE”) increased to $851.1 million at September 30, 2019, compared to $845.4 million at June 30, 2019 and $679.1 million at September 30, 2018. TCE represented 9.06% of tangible assets at September 30, 2019, compared to 9.13% at June 30, 2019 and 8.94% at September 30, 2018.1

During the third quarter of 2019, the Company purchased 194,062 shares of its common stock at an average price of $25.19 per share for a total of $4.9 million under the Company’s stock repurchase plan.  At September 30, 2019, the Company held 713,456 shares in treasury and had 805,938 shares available to be purchased under the plan. The Company grants share-based compensation awards to its employees and members of its board of directors as provided for under the Company’s 2010 Equity Incentive Plan.  The Company may source stock option exercises and grants of restricted stock units and deferred stock units from its inventory of treasury stock as an alternative to using newly issued shares.  Repurchases were executed in contemplation of maintaining levels of treasury stock appropriate to satisfy compensation awards, in addition to favorable pricing of our shares during the third quarter of 2019.

1 A Non-GAAP financial measure. See “Non-GAAP Financial Information” below for reconciliation.

Corporate Profile

As of September 30, 2019, First Busey Corporation (Nasdaq: BUSE) was a $9.75 billion financial holding company headquartered in Champaign, Illinois. First Busey’s wealth management division ended the third quarter of 2019 with $9.41 billion in assets under care.

As of September 30, 2019, Busey Bank, a wholly-owned bank subsidiary, with total assets of $7.80 billion is headquartered in Champaign, Illinois and has 44 banking centers serving Illinois, 13 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 September 30, 2019, assets under care were approximately $7.96 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.

As of September 30, 2019, TheBANK, a wholly-owned bank subsidiary, with total assets of $1.94 billion is headquartered in Edwardsville, Illinois and has 17 banking centers.  Through TheBANK Wealth Management division, the Company provides asset management, investment and fiduciary services to individuals, businesses and foundations.  As of September 30, 2019, assets under care were approximately $1.45 billion.  Subsequent to the end of the quarter, on October 4, 2019, the merger of TheBANK into Busey Bank was completed.

Busey Bank was named among Forbes’ 2019 Best-In-State Banks—one of five in Illinois and 173 from across the country, equivalent to 2.8% 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.

For more information about us, visit busey.com.

Contacts:

Jeffrey D. Jones, Chief Financial Officer
217-365-4130

Non-GAAP Financial Information

This earnings 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, tangible common equity to tangible assets and adjusted return on average tangible common equity. 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, for example, – 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
   
Nine Months Ended
 
   
September 30,
2019
   
June 30,
2019
   
September 30,
2018
   
September 30,
2019
   
September 30,
2018
 
Net income
 
$
24,828
   
$
24,085
   
$
26,859
   
$
74,382
   
$
73,638
 
Acquisition expenses
                                       
     Salaries, wages and employee benefits
   
3,673
     
43
     
-
     
3,716
     
1,233
 
     Data processing
   
172
     
327
     
-
     
506
     
406
 
     Lease impairment
   
-
     
415
     
-
     
415
     
-
 
     Other (includes professional and legal)
   
3,100
     
3,293
     
167
     
7,598
     
2,224
 
Other restructuring costs
                                       
     Salaries, wages and employee benefits
   
182
     
275
     
-
     
457
     
417
 
     Fixed asset impairment
   
-
     
-
     
-
     
-
     
817
 
     Data processing
   
84
     
292
     
-
     
476
     
-
 
     Other (includes professional and legal)
   
459
     
826
     
-
     
1,452
     
-
 
MSR Valuation
   
-
     
1,822
     
-
     
1,822
     
-
 
Related tax benefit
   
(1,963
)
   
(1,880
)
   
(20
)
   
(4,177
)
   
(1,217
)
Adjusted net income
 
$
30,535
   
$
29,498
   
$
27,006
   
$
86,647
   
$
77,518
 
                                         
Average total assets
 
$
9,659,769
   
$
9,522,678
   
$
7,802,308
   
$
9,352,272
   
$
7,707,090
 
                                         
Reported: Return on average assets1
   
1.02
%
   
1.01
%
   
1.37
%
   
1.06
%
   
1.28
%
Adjusted: Return on average assets 1
   
1.25
%
   
1.24
%
   
1.37
%
   
1.24
%
   
1.34
%
                                         
1 Annualized measure.
 

Reconciliation of Non-GAAP Financial Measures – Adjusted Net Interest Margin
 
(dollars in thousands)
 
               
   
Three Months Ended
   
Nine Months Ended
 
   
September 30,
2019
   
June 30,
2019
   
September 30,
2018
   
September 30,
2019
   
September 30,
2018
 
                               
Reported: Net interest income
 
$
73,476
   
$
73,428
   
$
60,774
   
$
215,287
   
$
180,903
 
        Tax-equivalent adjustment
   
778
     
777
     
574
     
2,232
     
1,713
 
        Purchase accounting accretion
   
(2,974
)
   
(3,471
)
   
(2,273
)
   
(9,439
)
   
(8,698
)
Adjusted: Net interest income
 
$
71,280
   
$
70,734
   
$
59,075
   
$
208,080
   
$
173,918
 
                                         
Average interest-earning assets
 
$
8,781,590
   
$
8,666,136
   
$
7,132,324
   
$
8,514,580
   
$
7,031,636
 
                                         
Reported: Net interest margin1
   
3.35
%
   
3.43
%
   
3.41
%
   
3.42
%
   
3.47
%
Adjusted: Net Interest margin1
   
3.22
%
   
3.27
%
   
3.29
%
   
3.27
%
   
3.31
%
                                         
1 Annualized measure.
                                       


Reconciliation of Non-GAAP Financial Measures – Adjusted Efficiency Ratio
 
(dollars in thousands)
 
                               
   
Three Months Ended
   
Nine Months Ended
 
   
September 30,
2019
   
June 30,
2019
   
September 30,
2018
   
September 30,
2019
   
September 30,
2018
 
Reported: Net Interest income
 
$
73,476
   
$
73,428
   
$
60,774
   
$
215,287
   
$
180,903
 
   Tax- equivalent adjustment
   
778
     
777
     
574
     
2,232
     
1,713
 
Tax equivalent interest income
 
$
74,254
   
$
74,205
   
$
61,348
   
$
217,519
   
$
182,616
 
                                         
Reported: Non-interest income
   
30,936
     
27,896
     
21,853
     
84,777
     
67,141
 
   Less security gains (losses), net
   
361
     
(1,026
)
   
-
     
(623
)
   
160
 
Adjusted: Non-interest income
 
$
30,575
   
$
28,922
   
$
21,853
   
$
85,400
   
$
66,981
 
                                         
Reported: Non-interest expense
   
68,121
     
68,020
     
45,929
     
193,304
     
144,274
 
   Amortization of intangible assets
   
(2,360
)
   
(2,412
)
   
(1,445
)
   
(6,866
)
   
(4,450
)
   Non-operating adjustments:
                                       
       Salaries, wages and employee benefits
   
(3,855
)
   
(318
)
   
-
     
(4,173
)
   
(1,650
)
       Data processing
   
(256
)
   
(619
)
   
-
     
(982
)
   
(406
)
       Other
   
(3,559
)
   
(6,356
)
   
(167
)
   
(11,287
)
   
(2,596
)
Adjusted: Non-interest expense
 
$
58,091
   
$
58,315
   
$
44,317
   
$
169,996
   
$
135,172
 
                                         
Reported: Efficiency ratio
   
62.73
%
   
63.62
%
   
53.47
%
   
61.55
%
   
56.02
%
Adjusted: Efficiency ratio
   
55.42
%
   
56.55
%
   
53.26
%
   
56.12
%
   
54.16
%


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)
 
                   
   
As of and for the Three Months Ended
 
   
September 30,
2019
   
June 30,
2019
   
September 30,
2018
 
                   
Total assets
 
$
9,753,760
   
$
9,612,667
   
$
7,889,385
 
   Goodwill and other intangible assets, net
   
(381,323
)
   
(375,327
)
   
(301,963
)
   Tax effect of other intangible assets, net
   
16,415
     
17,075
     
8,912
 
Tangible assets
 
$
9,388,852
   
$
9,254,415
   
$
7,596,334
 
                         
Total stockholders’ equity
   
1,215,981
     
1,203,608
     
972,140
 
   Goodwill and other intangible assets, net
   
(381,323
)
   
(375,327
)
   
(301,963
)
   Tax effect of other intangible assets, net
   
16,415
     
17,075
     
8,912
 
Tangible common equity
 
$
851,073
   
$
845,356
   
$
679,089
 
                         
Ending number of common shares outstanding
   
55,197,277
     
55,386,636
     
48,860,309
 
                         
Tangible common equity to tangible assets1
   
9.06
%
   
9.13
%
   
8.94
%
Tangible book value per share
 
$
15.12
   
$
14.95
   
$
13.72
 
                         
Average common equity
 
$
1,212,833
   
$
1,195,802
   
$
961,824
 
   Average goodwill and intangibles, net
   
(377,601
)
   
(376,851
)
   
(302,914
)
Average tangible common equity
 
$
835,232
   
$
818,951
   
$
658,910
 
                         
Reported: Return on average tangible common equity2
   
11.79
%
   
11.80
%
   
16.17
%
Adjusted: Return on average tangible common equity2,3
   
14.50
%
   
14.45
%
   
16.26
%
                         
   
Nine Months Ended
         
   
September 30,
2019
   
September 30,
2018
         
Average stockholders' common equity
 
$
1,173,213
   
$
946,675
         
   Average goodwill and intangibles, net
   
(369,104
)
   
(304,738
)
       
Average tangible stockholders' common equity
 
$
804,109
   
$
641,937
         
                         
Reported: Return on average tangible common equity2
   
12.37
%
   
15.34
%
       
Adjusted: Return on average tangible common equity2,3
   
14.41
%
   
16.15
%
       
                         
1 Tax-effected measure.
                       
2 Annualized measure.
                       
3 Calculated using adjusted net income.
                       

Special Note Concerning Forward-Looking Statements
Statements made in this document, 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.


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