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First Busey Announces Fourth Quarter and Full Year 2020 Earnings

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 income1 of $34.3 million and adjusted diluted EPS1 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 income1 of $108.7 million and adjusted diluted EPS1 of $1.98
  • Tangible book value per common share1 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 HIGHLIGHTS1
(dollars in thousands, except per share data)
 As of and for theAs of and for the
 Three Months EndedYear 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 Sheets1As 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 Income1 
(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 Quality1
(dollars in thousands)As of and for the Three Months Ended
 December 31,September 30,June 30,March 31,December 31,
 20202020202020202019
      
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,
 202020202019 20202019
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,
 202020202019 20202019
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,
 202020202019 20202019
       
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,
 202020202019 20202019
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,
 202020202019
    
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 assets1 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, 
 20202019 
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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