First Busey Announces Fourth Quarter and Full Year 2020 Earnings

Company Release - 1/26/2021 5:00 PM ET

CHAMPAIGN, Ill., Jan. 26, 2021 (GLOBE NEWSWIRE) -- First Busey Corporation (Nasdaq: BUSE)

Message from our Chairman & CEO

Highlights of fourth quarter and full-year 2020 financial results:

  • Fourth quarter 2020 net income of $28.3 million and diluted EPS of $0.52
  • Fourth quarter 2020 adjusted net income 1 of $34.3 million and adjusted diluted EPS 1 of $0.62, an increase from $32.8 million and $0.60, respectively, in the third quarter of 2020, and $31.8 million and $0.57, respectively, in the fourth quarter of 2019
  • Full year 2020 net income of $100.3 million and diluted EPS of $1.83
  • Full year 2020 adjusted net income 1 of $108.7 million and adjusted diluted EPS 1 of $1.98
  • Tangible book value per common share 1 of $16.66 at December 31, 2020, as compared to $16.32 at September 30, 2020, and $15.46 at December 31, 2019, an increase of 7.8% year-over-year
  • Wealth management assets under care of $10.23 billion at December 31, 2020, up from $9.50 billion at September 30, 2020, and $9.70 billion at December 31, 2019

Other recent highlights:

  • Completion of the previously announced branch consolidation plan
  • Definitive agreement to acquire Cummins-American Corp., the holding company for Glenview State Bank
  • Temporary relief via regulatory Interim Final Rule pronouncement on the interchange revenue impacts of the Durbin Amendment
  • January 2021 dividend of $0.23 per common share, up from $0.22 in October 2020, which represents nearly a 5% increase
  • For additional information, please refer to the 4Q20 Quarterly Earnings Supplement

Fourth Quarter Financial Results
Net income for First Busey Corporation (“First Busey” or the “Company”) for the fourth quarter of 2020 was $28.3 million, or $0.52 per diluted common share, as compared to $30.8 million, or $0.56 per diluted common share, for the third quarter of 2020 and $28.6 million, or $0.52 per diluted common share, for the fourth quarter of 2019.  Adjusted net income1 for the fourth quarter of 2020 was $34.3 million, or $0.62 per diluted common share, as compared to $32.8 million, or $0.60 per diluted common share, for the third quarter of 2020 and $31.8 million, or $0.57 per diluted common share, for the fourth quarter of 2019. For the fourth quarter of 2020, annualized return on average assets and annualized return on average tangible common equity1 were 1.08% and 12.58%, respectively.  Based on adjusted net income1, annualized return on average assets was 1.31% and annualized return on average tangible common equity1 was 15.21% for the fourth quarter of 2020.

Pre-provision net revenue1 for the fourth quarter of 2020 was $38.5 million as compared to $45.9 million for the third quarter of 2020 and $37.5 million for the fourth quarter of 2019. Adjusted pre-provision net revenue1 for the fourth quarter of 2020 was $47.2 million, as compared to $48.7 million for the third quarter of 2020 and $41.1 million for the fourth quarter of 2019. Annualized pre-provision net revenue to average assets1 for the fourth quarter of 2020 was 1.47%, as compared to 1.71% for the third quarter of 2020 and 1.53% for the fourth quarter of 2019. Annualized adjusted pre-provision net revenue to average assets1 for the fourth quarter of 2020 was 1.80%, as compared to 1.81% for the third quarter of 2020 and 1.68% for the fourth quarter of 2019.

1 See “Non-GAAP Financial Information” below.

The Company views certain non-operating items, including acquisition-related and other restructuring charges, as adjustments to net income reported under U.S. generally accepted accounting principles (“GAAP”). Non-operating pretax adjustments for the fourth quarter of 2020 included $0.8 million of expenses related to acquisitions and $6.8 million of other restructuring costs. The Company believes that non-GAAP measures (including adjusted pre-provision net revenue, adjusted net income, adjusted diluted earnings per share, adjusted return on average assets, adjusted net interest margin, adjusted efficiency ratio, tangible common equity, tangible common equity to tangible assets, tangible book value per share and return on average tangible common equity), facilitate the assessment of its financial results and peer comparability. A reconciliation of these non-GAAP measures is included in tabular form at the end of this release.

In accordance with the Company’s previously announced plans, 12 banking centers were closed on October 23, 2020, as part of the Company’s efforts to ensure a balance between its physical banking center network and robust digital banking services while also optimizing operating efficiency. When fully realized, annualized expense savings net of expected associated revenue impacts are anticipated to be approximately $3.3 million. A significant majority of these cost savings began to be realized in the fourth quarter of 2020. Non-operating pretax expenses in salaries, wages and employee benefits in relation to the banking center closings were $0.6 million during the third quarter of 2020 and $0.1 million in the fourth quarter of 2020. Further, fixed asset impairment of $6.7 million was recorded during the fourth quarter of 2020 related to these banking centers.

On January 1, 2020, the Company adopted ASU 2016-13 (Topic 326), “Measurement of Credit Losses on Financial Instruments,” commonly referenced as the Current Expected Credit Loss (“CECL”) model. Upon adoption of CECL, the Company recognized a $16.8 million increase in its allowance for credit losses, substantially attributable to the remaining loan fair value marks on prior acquisitions, and a $5.5 million increase in its reserve for unfunded commitments. Under accounting rules, the reserve for unfunded commitments is carried on the balance sheet in other liabilities rather than as a component of the allowance for credit losses. These one-time increases, net of tax, were $15.9 million and recorded as an adjustment to beginning retained earnings. Ongoing impacts of the CECL methodology will be dependent upon changes in economic conditions and forecasts, originated and acquired loan portfolio composition, credit performance trends, portfolio duration, and other factors. During the fourth quarter of 2020, the Company recorded provision for credit losses of $3.1 million, primarily as a result of economic factors and continued uncertainty due to the coronavirus disease 2019 (“COVID-19”) pandemic. An insignificant amount from provision for unfunded commitments was reversed in the fourth quarter. The allowance for credit losses increased from $53.7 million at December 31, 2019, to $101.0 million at December 31, 2020, representing 1.48% of total portfolio loans outstanding and 1.59% of portfolio loans excluding the Paycheck Protection Program (“PPP”) loans, up from 0.80% at December 31, 2019. The allowance represented 415.82% of non-performing loans at December 31, 2020.

Acquisition of Cummins-American Corp.
On January 19, 2020, the Company and Cummins-American Corp. (“CAC”), the holding company for Glenview State Bank (“GSB”), jointly announced the signing of a definitive agreement pursuant to which the Company will acquire CAC and GSB through a merger transaction. The partnership will enhance the Company’s existing deposit, commercial banking and wealth management presence in the Chicago-Naperville-Elgin, IL-IN-WI Metropolitan Statistical Area.  It is anticipated GSB will be merged with and into Busey Bank at a date following the completion of the merger. At the time of the bank merger, GSB banking centers will become banking centers of Busey Bank.

Under the terms of the merger agreement, CAC’s shareholders will have the right to receive 444.4783 shares of First Busey’s common stock and $27,969.67 in cash for each share of common stock of CAC with total consideration to consist of approximately 73% cash and 27% stock. Based upon the closing price of Busey’s common stock of $23.54 on January 15, 2021, the implied per share purchase price is $38,432.69 with an aggregate transaction value of approximately $190.8 million. The transaction is expected to close in the second quarter of 2021, subject to customary closing conditions and required approvals, including the approval of CAC’s shareholders.

COVID-19 Update
The Company continues to navigate the economic environment caused by COVID-19 effectively and prudently. The Company entered this crisis from a position of strength and remains resolute in its focus on serving its customers, communities and associates while protecting its balance sheet. Nevertheless, the Company remains vigilant, given that the negative impacts of COVID-19 are expected to continue in future quarters as the course of the economic recovery remains unclear. These negative impacts may include further margin compression, increased provision expense, lower customer service fees and a deterioration in asset quality.

To alleviate some of the financial hardships qualifying customers faced as a result of COVID-19, First Busey offered an internal Financial Relief Program. The program included options for short-term loan payment deferrals and certain fee waivers. As of December 31, 2020, the Company had 98 commercial loans on payment deferrals representing $208.6 million in loans, 351 mortgage/personal loans on payment deferrals representing $47.7 million in loans and an additional loan for $0.1 million related to a purchased HELOC pool.

As part of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), Congress appropriated approximately $349 billion for the creation of PPP and then authorized a second phase for another $310 billion in PPP loans. The program provided payroll assistance for the nation’s nearly 30 million small businesses—and select nonprofits—in the form of 100% government-guaranteed low-interest loans from the U.S. Small Business Administration (“SBA”). First Busey served as a bridge for the program, actively helping existing and new business clients sign up for this important financial resource, and originated a total of $749.4 million in PPP loans representing 4,569 new and existing customers. At December 31, 2020, First Busey had $451.5 million in PPP loans outstanding, with an amortized cost of $446.4 million, representing 2,922 customers.  As of December 31, 2020, the Company had received approximately $287.8 million in borrower loan forgiveness from the SBA and had submitted forgiveness applications to the SBA on behalf of borrowers for another $167.4 million.

On December 27, 2020, the Economic Aid Act became law, extending the authority to make PPP loans through March 31, 2021 and revising certain PPP requirements. On January 6, 2021, the SBA issued Interim Final Rules related to first and second draw loans under the PPP. The Company is actively assisting customers under the extended PPP programs.

Regulatory Relief
On November 20, 2020, the federal bank regulatory agencies announced an Interim Final Rule, providing temporary relief for certain community banking organizations related to certain regulations and reporting requirements as a result of growth in size from the COVID-19 response. Programs, including the PPP, caused many community banking organizations to experience rapid and unexpected increases in size, which generally are expected to be temporary. Under the interim rule, which applies to financial institutions with less than $10 billion in total assets as of December 31, 2019, community banks that have crossed a relevant threshold will have until 2022 to either reduce their size or prepare for new regulatory and reporting standards. Asset growth in 2020 or 2021 will not trigger new regulatory requirements for the banks until January 1, 2022. The Company will be provided relief under this rule with respect to the interchange revenue impacts of the Durbin Amendment.

Announced Dividend Increase
The Company will pay a cash dividend on January 29, 2021 of $0.23 per common share to stockholders of record as of January 22, 2021, which represents nearly a 5% increase from the previous quarterly dividend of $0.22 per common share.

Community Bank
First Busey’s goal of being a strong community bank for the communities it serves begins with outstanding associates. The Company is honored to be named among the 2020 Best Banks to Work For by American Banker, the 2020 Best Places to Work in Illinois by Daily Herald Business Ledger, the 2020 Best Companies to Work For in Florida by Florida Trend magazine, the 2020 Best Place to Work in Indiana by the Indiana Chamber of Commerce, and the 2020 Best Places to Work in Money Management by Pensions and Investments.

As we reflect back on 2020 and look ahead to 2021, the Company remains steadfast in our commitment to the customers and communities we serve. The pending CAC transaction fits with our acquisition strategy as the addition of GSB will grow the Company’s current geographic footprint, allowing the Company to serve customers by expanding in the Chicago-Naperville-Elgin, IL-IN-WI Metropolitan Statistical Area and significantly adding to the Company’s wealth management business. We are excited to welcome our CAC colleagues into the Busey family and feel confident that this transaction and our continued efforts will lead to attractive financial returns in future periods.

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

 
SELECTED FINANCIAL HIGHLIGHTS 1
(dollars in thousands, except per share data)
  As of and for the As of and for the
  Three Months Ended Year Ended
  December 31, September 30, June 30, December 31, December 31, December 31,
   2020  2020  2020  2019  2020  2019
EARNINGS & PER SHARE DATA            
Net income $ 28,345   $ 30,829   $ 25,806   $ 28,571   $ 100,344   $ 102,953  
Diluted earnings per share   0.52     0.56     0.47     0.52     1.83     1.87  
Cash dividends paid per share   0.22     0.22     0.22     0.21     0.88     0.84  
Pre-provision net revenue2,3   38,507     45,922     45,394     37,479     165,672     144,862  
Revenue4   102,580     102,464     98,462     102,969     399,869     403,656  
Net income by operating segment            
Banking $ 28,573   $ 31,744   $ 25,985   $ 29,573   $ 101,226   $ 106,409  
Remittance Processing   406     578     528     958     2,372     4,060  
Wealth Management   3,334     3,166     3,082     3,465     13,181     11,135  
AVERAGE BALANCES            
Cash and cash equivalents $ 551,844   $ 836,097   $ 563,022   $ 533,519   $ 607,525   $ 427,223  
Investment securities   2,077,284     1,824,327     1,717,790     1,677,962     1,840,100     1,769,291  
Loans held for sale   52,745     104,965     108,821     68,480     82,106     38,447  
Portfolio loans   6,990,414     7,160,757     7,216,825     6,657,283     7,006,946     6,469,920  
Interest-earning assets   9,557,265     9,805,948     9,485,200     8,810,505     9,417,938     8,590,262  
Total assets   10,419,364     10,680,995     10,374,820     9,713,858     10,292,256     9,443,690  
             
Non-interest bearing deposits   2,545,830     2,592,130     2,472,568     1,838,523     2,364,442     1,746,938  
Interest-bearing deposits   5,985,020     6,169,377     6,073,795     6,052,529     6,077,539     5,927,154  
Total deposits   8,530,850     8,761,507     8,546,363     7,891,052     8,441,981     7,674,092  
Securities sold under agreements to repurchase   194,610     190,046     184,208     204,076     187,811     196,681  
Interest-bearing liabilities   6,482,475     6,694,561     6,527,709     6,537,611     6,554,428     6,414,969  
Total liabilities   9,158,066     9,432,547     9,141,550     8,489,411     9,051,882     8,257,563  
Stockholders' common equity   1,261,298     1,248,448     1,233,270     1,224,447     1,240,374     1,186,127  
Tangible stockholders' common                                    
Equity3   896,178     880,958     863,571     845,179     871,750     814,461  
PERFORMANCE RATIOS            
Pre-provision net revenue to                                    
average assets2,3   1.47 %   1.71 %   1.76 %   1.53 %   1.61 %   1.53 %
Return on average assets   1.08 %   1.15 %   1.00 %   1.17 %   0.97 %   1.09 %
Return on average common equity   8.94 %   9.82 %   8.42 %   9.26 %   8.09 %   8.68 %
Return on average tangible                                    
common equity3   12.58 %   13.92 %   12.02 %   13.41 %   11.51 %   12.64 %
Net interest margin3,5   3.06 %   2.86 %   3.03 %   3.27 %   3.03 %   3.38 %
Efficiency ratio3   59.70 %   52.42 %   50.97 %   60.54 %   55.68 %   61.29 %
Non-interest revenue as a % of total revenue4   28.90 %   31.92 %   28.08 %   30.14 %   29.24 %   28.84 %
NON-GAAP INFORMATION            
Adjusted pre-provision net revenue2,3 $ 47,156   $ 48,701   $ 46,448   $ 41,131   $ 180,516   $ 166,156  
Adjusted net income3   34,255     32,803     26,191     31,782     108,728     118,429  
Adjusted diluted earnings per share3   0.62     0.60     0.48     0.57     1.98     2.15  
Adjusted pre-provision net revenue                                    
to average assets3   1.80 %   1.81 %   1.80 %   1.68 %   1.75 %   1.76 %
Adjusted return on average assets3   1.31 %   1.22 %   1.02 %   1.30 %   1.06 %   1.25 %
Adjusted return on average tangible                                    
common equity3   15.21 %   14.81 %   12.20 %   14.92 %   12.47 %   14.54 %
Adjusted net interest margin3,5   2.96 %   2.75 %   2.93 %   3.14 %   2.92 %   3.23 %
Adjusted efficiency ratio3   52.39 %   49.97 %   50.48 %   57.02 %   53.02 %   56.35 %
1 Results are unaudited.
2 Net interest income plus non-interest income, excluding security gains and losses, less non-interest expense.
3 See “Non-GAAP Financial Information” below.
4 Revenue consist of net interest income plus non-interest income, excluding security gains and losses.
5 On a tax-equivalent basis, assuming a federal income tax rate of 21%.
 

 

Condensed Consolidated Balance Sheets 1 As of
(dollars in thousands, except per share data) December 31, September 30, June 30, March 31, December 31,
   2020  2020  2020  2020  2019
Assets          
Cash and cash equivalents $ 688,537   $ 479,721   $ 1,050,072   $ 342,848   $ 529,288  
Investment securities   2,266,717     2,098,657     1,701,992     1,770,881     1,654,209  
           
Loans held for sale   42,813     87,772     108,140     89,943     68,699  
           
Commercial loans   5,368,897     5,600,705     5,637,999     5,040,507     4,943,646  
Retail real estate and retail other loans   1,445,280     1,520,606     1,591,021     1,704,992     1,743,603  
Portfolio loans $ 6,814,177   $ 7,121,311   $    7,229,020   $ 6,745,499   $ 6,687,249  
           
Allowance   (101,048 )   (98,841 )   (96,046 )   (84,384 )   (53,748 )
Premises and equipment   135,191     144,001     146,951     149,772     151,267  
Goodwill and other intangibles   363,521     365,960     368,053     370,572     373,129  
Right of use asset   7,714     7,251     8,511     9,074     9,490  
Other assets   326,425     333,796     319,272     327,200     276,146  
Total assets $ 10,544,047   $ 10,539,628   $ 10,835,965   $ 9,721,405   $ 9,695,729  
           
Liabilities & Stockholders' Equity          
Non-interest bearing deposits $ 2,552,039   $ 2,595,075   $     2,764,408   $ 1,910,673   $ 1,832,619  
Interest-bearing checking, savings, and money                              
market deposits   5,006,462     4,819,859     4,781,761     4,580,547     4,534,927  
Time deposits   1,119,348     1,227,767     1,363,497     1,482,013     1,534,850  
Total deposits $ 8,677,849   $ 8,642,701   $     8,909,666   $ 7,973,233   $ 7,902,396  
           
Securities sold under agreements to                              
repurchase   175,614     201,641     194,249     167,250     205,491  
Short-term borrowings   4,658     4,651     24,648     21,358     8,551  
Long-term debt   226,792     226,801     256,837     134,576     182,522  
Junior subordinated debt owed to                              
unconsolidated trusts   71,468     71,427     71,387     71,347     71,308  
Lease liability   7,757     7,342     8,601     9,150     9,552  
Other liabilities   109,840     129,360     134,493     126,906     95,475  
Total liabilities $ 9,273,978   $ 9,283,923   $    9,599,881   $ 8,503,820   $ 8,475,295  
Total stockholders' equity $ 1,270,069   $ 1,255,705   $    1,236,084   $ 1,217,585   $ 1,220,434  
Total liabilities & stockholders' equity $ 10,544,047   $ 10,539,628   $ 10,835,965   $ 9,721,405   $ 9,695,729  
           
Share Data          
Book value per common share $ 23.34   $ 23.03   $ 22.67   $ 22.38   $ 22.28  
Tangible book value per common share2 $ 16.66   $ 16.32   $ 15.92   $ 15.57   $ 15.46  
Ending number of common shares outstanding   54,404,379     54,522,231     54,516,000     54,401,208     54,788,772  
  
1 Results are unaudited except for amounts reported as of December 31, 2019.
2 See “Non-GAAP Financial Information” below, excludes tax effect of other intangible assets.
 

 

Condensed Consolidated Statements of Income 1  
(dollars in thousands, except per share data)      
  For the   For the
  Three Months Ended December 31,   Year Ended December 31,
   2020
 2019
   2020
2019
           
Interest and fees on loans $ 71,525   $ 76,290     $ 284,959   $ 304,193  
Interest on investment securities   9,651     10,682           39,916         45,721  
Other interest income   127     1,824       1,723     6,320  
Total interest income $ 81,303   $ 88,796     $ 326,598   $ 356,234  
           
Interest on deposits   4,638     13,670           30,691         55,077  
Interest on securities sold under agreements to                          
repurchase   64     559       660     2,348  
Interest on short-term borrowings        19          156       234     1,041  
Interest on long-term debt          2,906     1,719            9,118          7,131  
Interest on junior subordinated debt owed to                          
unconsolidated trusts      740        756       2,960     3,414  
Total interest expense $    8,367   $ 16,860     $ 43,663   $ 69,011  
           
Net interest income $ 72,936   $ 71,936     $ 282,935   $ 287,223  
Provision for credit losses   3,141     2,367           38,797        10,406  
Net interest income after provision for credit losses $ 69,795   $ 69,569     $ 244,138   $ 276,817  
           
Wealth management fees   10,632     11,223       42,928     38,561  
Fees for customer services      8,204     9,048           31,604         36,683  
Remittance processing   3,930     3,765           15,396         15,042  
Mortgage revenue   3,159     3,576           13,038         11,703  
Income on bank owned life insurance   1,019     1,142           5,380         5,795  
Security gains (losses), net         855           605       1,331     (18 )
Other      2,700        2,279          8,588         8,649  
Total non-interest income $ 30,499   $ 31,638     $ 118,265   $ 116,415  
           
Salaries, wages and employee benefits        31,322     35,117       126,719     140,473  
Data processing   4,043     6,462           16,426        21,511  
Net occupancy expense of premises   4,188     4,811       17,607     18,176  
Furniture and equipment expense   2,239     2,570           9,550         9,506  
Professional fees   2,888     2,103           8,396         11,104  
Amortization of intangible assets   2,439     2,681           10,008         9,547  
Other   16,954     11,746           45,491         48,477  
Total non-interest expense $ 64,073   $ 65,490     $ 234,197   $ 258,794  
           
Income before income taxes $ 36,221   $ 35,717     $ 128,206   $ 134,438  
Income taxes   7,876     7,146           27,862         31,485  
Net income $ 28,345   $ 28,571     $ 100,344   $ 102,953  
           
Per Share Data          
Basic earnings per common share $ 0.52   $ 0.52     $ 1.84   $ 1.88  
Diluted earnings per common share $ 0.52   $ 0.52     $ 1.83   $ 1.87  
Average common shares outstanding   54,532,705     55,055,530       54,567,429     54,851,652  
Diluted average common shares outstanding   54,911,458     55,363,258       54,826,939     55,132,494  
           
1 Results are unaudited.          
           

Balance Sheet Growth

Total assets were $10.54 billion at December 31, 2020 and September 30, 2020, up from $9.70 billion at December 31, 2019.  At December 31, 2020, portfolio loans were $6.81 billion, as compared to $7.12 billion as of September 30, 2020 and $6.69 billion as of December 31, 2019. The amortized cost of PPP loans of $446.4 million are included in the December 31, 2020 balance. When excluding the PPP loans, total commercial loans increased by $58.2 million and retail real estate and retail other loans declined by $75.3 million during the fourth quarter.

Average portfolio loans were $6.99 billion for the fourth quarter of 2020 as compared to $7.16 billion for the third quarter of 2020 and $6.66 billion in the fourth quarter of 2019. The average balance of PPP loans in the fourth quarter of 2020 were $608.9 million compared to $734.2 million in the third quarter of 2020. Average interest-earning assets for the fourth quarter of 2020 were $9.56 billion compared to $9.81 billion for the third quarter of 2020 and $8.81 billion for the fourth quarter of 2019.
  
Total deposits were $8.68 billion at December 31, 2020, compared to $8.64 billion at September 30, 2020 and $7.90 billion at December 31, 2019. Recent fluctuations in deposit balances can be attributed to the retention of PPP loan funding in customer deposit accounts, the impacts of economic stimulus, other core deposit growth and the seasonality of public funds, as well as the Company’s efforts to efficiently manage the size of its balance sheet. The Company remains funded substantially through core deposits with significant market share in its primary markets.

Net Interest Margin and Net Interest Income

Net interest margin for the fourth quarter of 2020 was 3.06%, compared to 2.86% for the third quarter of 2020 and 3.27% for the fourth quarter of 2019. Net interest income was $72.9 million in the fourth quarter of 2020 compared to $69.8 million in the third quarter of 2020 and $71.9 million in the fourth quarter of 2019.

During the fourth quarter of 2020, PPP loan interest and net fees combined were $9.5 million, contributing 21 basis points to net interest margin, as compared to $6.1 million and 4 basis points in the third quarter of 2020. The Federal Open Market Committee rate cuts during the first quarter of 2020 contributed to the decline in net interest margin over the year, as assets, in particular commercial loans, repriced more quickly and to a greater extent than liabilities.

Net interest margin was also negatively impacted by the sizeable balance of lower-yielding PPP loans, the Company’s significant liquidity position and the issuance of subordinated debt completed during the second quarter. Those impacts were partially offset by the Company’s efforts to lower deposit funding costs (cost of deposits declined to 0.22% in the fourth quarter of 2020, as compared to 0.69% in the fourth quarter of 2019) as well as the fees recognized related to the PPP loans described above.

Asset Quality

The Company continues to see sound and stable asset quality metrics. Loans 30-89 days past due were $7.6 million as of December 31, 2020, compared to $6.7 million as of September 30, 2020 and $14.3 million as of December 31, 2019. Non-performing loans totaled $24.3 million as of December 31, 2020, compared to $24.2 million as of September 30, 2020, and $29.5 million as of December 31, 2019. Continued disciplined credit management resulted in non-performing loans as a percentage of total loans of 0.36% at December 31, 2020, as compared to 0.34% at September 30, 2020 and 0.44% at December 31, 2019. Non-performing loans as a percentage of total loans, excluding the amortized cost of PPP loans, was 0.38% at December 31, 2020.

Net charge-offs totaled $0.9 million for the quarter ended December 31, 2020 compared to $2.8 million and $1.6 million for the quarters ended September 30, 2020 and December 31, 2019, respectively.  The allowance as a percentage of portfolio loans increased to 1.48% at December 31, 2020, as compared to 1.39% at September 30, 2020 and 0.80% at December 31, 2019. The allowance as a percentage of portfolio loans, excluding the amortized cost of PPP loans, was 1.59% at December 31, 2020. The allowance as a percentage of non-performing loans increased to 415.82% at December 31, 2020 compared to 408.82% at September 30, 2020 and 182.15% at December 31, 2019.  

As a matter of policy and practice, the Company limits the level of concentration exposure in any particular loan segment and maintains a well-diversified loan portfolio.

 
Asset Quality 1
(dollars in thousands) As of and for the Three Months Ended
  December 31, September 30, June 30, March 31, December 31,
  2020 2020 2020 2020 2019
           
Portfolio loans $ 6,814,177   $ 7,121,311   $ 7,229,020   $ 6,745,499   $ 6,687,249  
Portfolio loans excluding                              
amortized cost of PPP loans   6,367,774     6,384,916     6,499,734     6,745,499     6,687,249  
Loans 30-89 days past due   7,578     6,708     5,166     10,150     14,271  
Non-performing loans:          
Non-accrual loans   22,930     23,898     25,095     25,672     27,896  
Loans 90+ days past due   1,371     279     285     1,540     1,611  
Total non-performing loans $ 24,301   $ 24,177   $ 25,380   $ 27,212   $ 29,507  
Total non-performing loans,          
segregated by geography          
Illinois/ Indiana   16,234     15,097     16,285     17,761     20,428  
Missouri   6,764     6,867     5,327     5,711     5,227  
Florida   1,303     2,213     3,768     3,740     3,852  
Other non-performing assets   4,571     4,978     3,755     3,553     3,057  
Total non-performing assets $ 28,872   $ 29,155   $ 29,135   $ 30,765   $ 32,564  
Total non-performing assets to                              
total assets   0.27 %   0.28 %   0.27 %   0.32 %   0.34 %
Total non-performing assets to                              
portfolio loans and non-                              
performing assets   0.42 %   0.41 %   0.40 %   0.46 %   0.49 %
Allowance to portfolio loans   1.48 %   1.39 %   1.33 %   1.25 %   0.80 %
Allowance to portfolio loans,                              
excluding PPP   1.59 %   1.55 %   1.48 %   1.25 %   0.80 %
Allowance as a percentage of                              
non-performing loans   415.82 %   408.82 %   378.43 %   310.10 %   182.15 %
Net charge-offs $ 934   $ 2,754   $ 1,229   $ 3,413   $ 1,584  
Provision   3,141     5,549     12,891     17,216     2,367  
   
1 Results are unaudited.  
 

Non-Interest Income

Total non-interest income of $30.5 million for the fourth quarter of 2020 decreased as compared to $32.3 million for the third quarter of 2020 and $31.6 million in the fourth quarter of 2019. The decline in non-interest income in the fourth quarter of 2020 compared to the third quarter of 2020 is substantially attributable to lower mortgage revenue, which is described further below. Revenues from wealth management fees and remittance processing activities represented 47.7% of the Company’s non-interest income for the quarter ended December 31, 2020, providing a balance to spread-based revenue from traditional banking activities.

Wealth management fees were $10.6 million for the fourth quarter of 2020, an increase from $10.5 million for the third quarter of 2020 but a decrease from $11.2 million for the fourth quarter of 2019. Net income from the Wealth Management segment was $3.3 million for the fourth quarter of 2020, an increase from $3.2 million for the third quarter of 2020 but a decrease from $3.5 million in the fourth quarter of 2019. First Busey’s Wealth Management division ended the fourth quarter of 2020 with $10.23 billion in assets under care as compared to $9.50 billion at the end of the third quarter of 2020 and $9.70 billion at the end of the fourth quarter 2019.

Remittance processing revenue from the Company’s subsidiary, FirsTech, of $3.9 million for the fourth quarter of 2020 decreased from $4.0 million for the third quarter of 2020 but increased from $3.8 million in the fourth quarter of 2019. The Remittance Processing operating segment generated net income of $0.4 million for the fourth quarter of 2020 compared to $0.6 million for the third quarter of 2020 and $1.0 million in the fourth quarter of 2019. The net income decline in 2020 is attributable to the cost of strategic planning initiatives to enhance future growth.

Fees for customer services were $8.2 million for the fourth quarter of 2020, an increase from $8.0 million for the third quarter of 2020, but below the $9.0 million reported for the fourth quarter of 2019. Fees for customer services have been impacted by changing customer behaviors resulting from COVID-19.

Mortgage revenue of $3.2 million in the fourth quarter of 2020 decreased compared to $5.8 million in the third quarter of 2020 and $3.6 million in the fourth quarter of 2019. The decrease in the fourth quarter of 2020 was due to closed and sold loan volume declines and increased mortgage servicing revenue (“MSR”) amortization.

Operating Efficiency

Total non-interest expense was $64.1 million in the fourth quarter of 2020 as compared to $56.5 million in the third quarter of 2020 and $65.5 million in the fourth quarter of 2019. Non-interest expense including amortization of intangible assets but excluding non-operating adjustment items1 was $56.5 million in the fourth quarter of 2020 as compared to $54.0 million in the third quarter of 2020 and $61.8 million in the fourth quarter of 2019.

The efficiency ratio was 59.70% for the quarter ended December 31, 2020 compared to 52.42% for the quarter ended September 30, 2020 and 60.54% for the quarter ended December 31, 2019. The adjusted efficiency ratio1 was 52.39% for the quarter ended December 31, 2020, 49.97% for the quarter ended September 30, 2020, and 57.02% for the quarter ended December 31, 2019. The Company remains focused on expense discipline.

Noteworthy components of non-interest expense are as follows:

  • Salaries, wages and employee benefits were $31.3 million in the fourth quarter of 2020, a decrease from $32.8 million in the third quarter of 2020 and $35.1 million from the fourth quarter of 2019. Excluding non-operating adjustments1, salaries, wages and employee benefits increased from $30.8 million in the third quarter of 2020 to $31.2 million in the fourth quarter of 2020. The third quarter of 2020 included $2.0 million in non-operating severance expense related to the banking center closures and operating model reorganization. Total full-time equivalents at December 31, 2020 numbered 1,346 compared to 1,371 at September 30, 2020 and 1,531 at December 31, 2019, a decline of 12% year-over-year.

  • Data processing expenses were $4.0 million in the fourth quarter of 2020 as compared to $3.9 million in the third quarter of 2020 and $6.5 million in the fourth quarter of 2019. The fourth quarter of 2019 included $1.4 million of non-operating expenses related to payment of merger and conversion expenses.

  • Other expense in the fourth quarter of 2020 of $17.0 million increased as compared to $9.0 million in the third quarter of 2020 and $11.7 million in the fourth quarter of 2019. Non-operating pretax acquisition expenses and other restructuring costs recorded in the fourth quarter of 2020 included $6.9 million of fixed asset impairments related to the October 2020 banking centers closures and further impairment on a banking center that had been closed related to a past acquisition. Excluding those items, other expense increased $1.1 million in the quarter, primarily related to Federal new market tax credit amortization which reduces income taxes.

Capital Strength

The Company's strong capital levels, coupled with its earnings, have allowed First Busey to provide a steady return to its stockholders through dividends.  The Company will pay a cash dividend on January 29, 2021 of $0.23 per common share to stockholders of record as of January 22, 2021, which represents nearly a 5% increase from the previous quarterly dividend of $0.22 per common share. The Company has consistently paid dividends to its common stockholders since the bank holding company was organized in 1980.

As of December 31, 2020, the Company continued to exceed the capital adequacy requirements necessary to be considered “well-capitalized” under applicable regulatory guidelines. The Company’s tangible common equity1 (“TCE”) was $921.1 million at December 31, 2020, compared to $905.0 million at September 30, 2020 and $864.6 million at December 31, 2019. TCE represented 9.03% of tangible assets at December 31, 2020, compared to 8.88% at September 30, 2020 and 9.26% at December 31, 2019.1

1 See “Non-GAAP Financial Information” below.

4Q20 Quarterly Earnings Supplement

For additional information on the Company’s response to COVID-19, financial condition and operating results, please refer to the 4Q20 Quarterly Earnings Supplement presentation furnished via Form 8-K on January 26, 2021, in conjunction with this earnings release.

Corporate Profile

As of December 31, 2020, First Busey Corporation (Nasdaq: BUSE) was a $10.54 billion financial holding company headquartered in Champaign, Illinois.

Busey Bank, the wholly-owned bank subsidiary of First Busey Corporation, had total assets of $10.52 billion as of December 31, 2020 and is headquartered in Champaign, Illinois. Busey Bank currently has 53 banking centers serving Illinois, ten banking centers serving Missouri, four banking centers serving southwest Florida and a banking center in Indianapolis, Indiana.  Through Busey Bank’s Wealth Management division, the Company provides asset management, investment and fiduciary services to individuals, businesses and foundations. As of December 31, 2020, assets under care were $10.23 billion. Busey Bank owns a retail payment processing subsidiary, FirsTech, Inc., which processes approximately 28 million transactions for a total of $8.3 billion on an annual basis. FirsTech, Inc. operates across all of North America, providing payment solutions which include but are not limited to; electronic payments, mobile payments, phone payments, remittance processing, in person payments and merchant services. FirsTech, Inc. partners with 5,800+ agents across the U.S. More information about FirsTech, Inc. can be found at firstechpayments.com.

Busey has been named a Best Place to Work across the company footprint since 2016 by Best Companies Group. We are honored to be consistently recognized by national and local organizations for our engaged culture of integrity and commitment to community development.

For more information about us, visit busey.com.

Category: Financial
Source: First Busey Corporation

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 pre-provision net revenue, adjusted net income, adjusted diluted earnings per share, adjusted return on average assets, adjusted net interest margin, adjusted efficiency ratio, tangible common equity, tangible common equity to tangible assets, tangible book value per share and 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 direct compared GAAP financial measures, specifically total net interest income in the case of adjusted pre-provision net revenue, net income in the case of adjusted net income, adjusted diluted earnings per share and adjusted return on average assets, total net interest income in the case of adjusted net interest margin, total non-interest income and total non-interest expense in the case of adjusted efficiency ratio, and total stockholders’ equity in the case of tangible common equity, tangible common equity to tangible assets, tangible book value per share and return on average tangible common equity, 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 or effective rates as appropriate.

 
Reconciliation of Non-GAAP Financial Measures – Adjusted Pre-Provision Net Revenue
(dollars in thousands)
             
  Three Months Ended   Year Ended
  December 31, September 30, December 31,   December 31, December 31,
  2020 2020 2019   2020 2019
Net interest income $     72,936   $     69,753   $      71,936     $ 282,935   $ 287,223  
Non-interest income   30,499     32,285     31,638       118,265     116,415  
Less securities (gains) and losses, net
  (855 )   426     (605 )     (1,331 )   18  
Non-interest expense   (64,073 )   (56,542 )   (65,490 )     (234,197 )   (258,794 )
Pre-provision net revenue $           38,507   $          45,922   $      37,479     $       165,672   $ 144,862  
             
Acquisition and other restructuring expenses   7,550     2,529     3,652       10,711     20,094  
Provision for unfunded commitments   (12 )   250     -       1,822     -  
New Market Tax Credit amortization   1,111     -     -       2,311     1,200  
Adjusted pre-provision net revenue $    47,156   $    48,701   $     41,131     $ 180,516   $ 166,156  
             
Average total assets $ 10,419,364   $ 10,680,995   $    9,713,858     $ 10,292,256   $     9,443,690  
             
Reported: Pre-provision net revenue to                                
average assets1   1.47 %   1.71 %   1.53 %     1.61 %   1.53 %
Adjusted: Pre-provision net revenue to                                
average assets1   1.80 %   1.81 %   1.68 %     1.75 %   1.76 %
             
1 Annualized measure.
 

 

Reconciliation of Non-GAAP Financial Measures – Adjusted Net Income, Adjusted Diluted Earnings Per Share and Adjusted Return on Average Assets
(dollars in thousands)
             
  Three Months Ended   Year Ended
  December 31, September 30, December 31,   December 31, December 31,
  2020 2020 2019   2020 2019
Net income $ 28,345   $ 30,829   $ 28,571     $ 100,344   $ 102,953  
Acquisition expenses            
Salaries, wages and employee benefits   -     -     367       -     4,083  
Data processing   56     -     1,017       56     1,523  
Lease or fixed asset impairment   245     234     165       479     580  
Professional fees and other   479     99     879       864     8,477  
Other restructuring costs            
Salaries, wages and employee benefits   113     2,011     38       2,470     495  
Data processing   -     -     351       -     827  
Fixed asset impairment   6,657     -     1,861       6,657     1,861  
Professional fees and other   -     185     796       185     2,248  
MSR valuation impairment   -     -     (1,822 )     -     -  
Related tax benefit   (1,640 )   (555 )   (441 )     (2,327 )   (4,618 )
Adjusted net income $ 34,255   $ 32,803   $ 31,782     $ 108,728   $ 118,429  
             
Diluted average common shares                                
outstanding   54,911,458     54,737,920     55,363,258       54,826,939     55,132,494  
Reported: Diluted earnings per share $ 0.52   $ 0.56   $ 0.52     $ 1.83   $ 1.87  
Adjusted: Diluted earnings per share $ 0.62   $ 0.60   $ 0.57     $ 1.98   $ 2.15  
             
Average total assets $ 10,419,364   $ 10,680,995   $ 9,713,858     $ 10,292,256   $ 9,443,690  
             
Reported: Return on average assets1   1.08 %   1.15 %   1.17 %     0.97 %   1.09 %
Adjusted: Return on average assets 1   1.31 %   1.22 %   1.30 %     1.06 %   1.25 %
             
1 Annualized measure.
 

 

Reconciliation of Non-GAAP Financial Measures – Adjusted Net Interest Margin
(dollars in thousands)
       
  Three Months Ended   Year Ended
  December 31, September 30, December 31,   December 31, December 31,
  2020 2020 2019   2020 2019
             
Reported: Net interest income $ 72,936   $ 69,753   $ 71,936     $ 282,935   $ 287,223  
Tax-equivalent adjustment   655     638     781       2,740     3,013  
Purchase accounting                                
accretion related to                                
business combinations   (2,469 )   (2,618 )   (2,983 )     (10,391 )   (12,422 )
Adjusted: Net interest income $ 71,122   $ 67,773   $ 69,734     $ 275,284   $ 277,814  
             
Average interest-earning assets $ 9,557,265   $ 9,805,948   $ 8,810,505     $ 9,417,938   $ 8,590,262  
             
Reported: Net interest margin1   3.06 %   2.86 %   3.27 %     3.03 %   3.38 %
Adjusted: Net Interest margin1   2.96 %   2.75 %   3.14 %     2.92 %   3.23 %
             
1 Annualized measure.            
 

 

Reconciliation of Non-GAAP Financial Measures – Adjusted Efficiency Ratio
(dollars in thousands)
             
  Three Months Ended   Year Ended
  December 31, September 30, December 31,   December 31, December 31,
  2020 2020 2019   2020 2019
Reported: Net Interest income $ 72,936   $ 69,753   $ 71,936     $ 282,935   $ 287,223  
Tax- equivalent adjustment   655     638     781       2,740     3,013  
Tax-equivalent interest income $ 73,591   $ 70,391   $ 72,717     $ 285,675   $ 290,236  
             
Reported: Non-interest income   30,499     32,285   $ 31,638       118,265   $ 116,415  
Less securities (gains) and losses,                                
net   (855 )   426     (605 )     (1,331 )   18  
Adjusted: Non-interest income $ 29,644   $ 32,711   $ 31,033     $ 116,934   $ 116,433  
             
Reported: Non-interest expense   64,073     56,542   $ 65,490       234,197   $ 258,794  
Amortization of intangible assets   (2,439 )   (2,493 )   (2,681 )     (10,008 )   (9,547 )
Non-operating adjustments:            
Salaries, wages and employee                                
benefits   (113 )   (2,011 )   (405 )     (2,470 )   (4,578 )
Data processing   (56 )   -     (1,368 )     (56 )   (2,350 )
Impairment, professional fees and other   (7,381 )   (518 )   (1,879 )     (8,185 )   (13,166 )
Adjusted: Non-interest expense $ 54,084   $ 51,520   $ 59,157     $ 213,478   $ 229,153  
             
Reported: Efficiency ratio   59.70 %   52.42 %   60.54 %     55.68 %   61.29 %
Adjusted: Efficiency ratio   52.39 %   49.97 %   57.02 %     53.02 %   56.35 %
                                 

 

Reconciliation of Non-GAAP Financial Measures – Tangible Common Equity, Tangible Common Equity to Tangible Assets, Tangible Book Value per Share and Return on Average Tangible Common Equity
(dollars in thousands)
       
  As of and for the Three Months Ended
  December 31, September 30, December 31,
  2020 2020 2019
       
Total assets $ 10,544,047   $ 10,539,628   $ 9,695,729  
Goodwill and other intangible assets, net   (363,521 )   (365,960 )   (373,129 )
Tax effect of other intangible assets, net   14,556     15,239     17,247  
Tangible assets $ 10,195,082   $ 10,188,907   $ 9,339,847  
       
Total stockholders’ equity   1,270,069     1,255,705     1,220,434  
Goodwill and other intangible assets, net   (363,521 )   (365,960 )   (373,129 )
Tax effect of other intangible assets, net   14,556     15,239     17,247  
Tangible common equity $ 921,104   $ 904,984   $ 864,552  
       
Ending number of common shares outstanding   54,404,379     54,522,231     54,788,772  
       
Tangible common equity to tangible assets 1   9.03 %   8.88 %   9.26 %
Tangible book value per share $ 16.66   $ 16.32   $ 15.46  
       
Average common equity $ 1,261,298   $ 1,248,448   $ 1,224,447  
Average goodwill and other intangible assets, net   (365,120 )   (367,490 )   (379,268 )
Average tangible common equity $ 896,178   $ 880,958   $ 845,179  
       
Reported: Return on average tangible common equity2   12.58 %   13.92 %   13.41 %
Adjusted: Return on average tangible common equity2,3   15.21 %   14.81 %   14.92 %
       
  Year Ended  
  December 31, December 31,  
  2020 2019  
Average common equity $ 1,240,374   $ 1,186,127    
Average goodwill and other intangible assets, net   (368,624 )   (371,666 )  
Average tangible common equity $ 871,750   $ 814,461    
       
Reported: Return on average tangible common equity2   11.51 %   12.64 %  
Adjusted: Return on average tangible common equity2,3   12.47 %   14.54 %  
       
1 Tax-effected measure, 28% estimated deferred tax rate.   
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 the Company undertakes no obligation to update any statement in light of new information or future events. A number of factors, many of which are beyond the Company’s ability to control or predict, could cause actual results to differ materially from those in the Company’s 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 the new presidential administration and 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, widespread disease or pandemics (including the COVID-19 pandemic in the United States), or other adverse external events that could cause economic deterioration or instability in credit markets; (iii) changes in state and federal laws, regulations and governmental policies concerning the Company’s general business; (iv) changes in accounting policies and practices, including CECL, which changed how the Company estimates credit losses; (v) changes in interest rates and prepayment rates of the Company’s assets (including the impact of the London Inter-bank Offered Rate phase-out); (vi) increased competition in the financial services sector and the inability to attract new customers; (vii) changes in technology and the ability to develop and maintain secure and reliable electronic systems; (viii) the loss of key executives or associates; (ix) changes in consumer spending; (x) unexpected results of current and/or future acquisitions, which may include failure to realize the anticipated benefits of any acquisition and the possibility that the transaction costs may be greater than anticipated; (xi) unexpected outcomes of existing or new litigation involving the Company; 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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Source: First Busey Corporation