October 24, 2017

First Busey Announces 2017 Third Quarter Earnings

Champaign, IL – (Nasdaq: BUSE)

Message from our President & CEO

First Community merger leads to positive advances in the third quarter of 2017 from the comparable quarter of the prior year:

 

· Net income of $18.8 million, up 21.8% · Total net interest income of $55.9 million, up 26.8% · Average portfolio loans of $5.035 billion, up 32.6% · Average non-interest bearing deposits of $1.329 billion, up 29.8%

 

Other significant highlights:

 

First Busey Corporation's (the "Company") net income for the third quarter of 2017 was $18.8 million, or $0.41 per diluted common share.  The Company reported net income of $16.5 million or $0.43 per diluted common share for the second quarter of 2017 and net income of $15.4 million or $0.40 per diluted common share for the third quarter of 2016.

The Company's year-to-date net income through September 30, 2017 was $50.4 million, or $1.23 per diluted common share, compared to net income of $38.2 million or $1.11 per diluted common share for the comparable period of 2016.  Year-to-date net income through September 30, 2017 increased 31.9% over the comparable period of 2016.

During the third quarter of 2017, the Company incurred $3.0 million of pre-tax expenses related to acquisitions, compared to $0.3 million in the second quarter of 2017, which primarily consisted of legal, professional, restructuring, and data processing expenses.  During the nine months ended September 30, 2017, the Company incurred $4.4 million of pre-tax acquisition costs and one-time restructuring costs.  Excluding these items, the Company's operating earnings¹ for the third quarter of 2017 would have been $20.6 million, or $0.45 per diluted common share and $53.1 million or $1.29 per diluted common share for the year-to-date net income through September 30, 2017.

On July 2, 2017, the Company completed its acquisition of First Community Financial Partners, Inc. ("First Community"), headquartered in Joliet, Illinois, pursuant to which each share of First Community common stock issued and outstanding was converted into the right to receive 0.396 shares of the Company's common stock and $1.35 cash consideration per share.  The market value of the 7.2 million shares of the Company's common stock issued at the effective time of the merger was approximately $211.1 million based on the closing stock price of $29.32 on June 30, 2017.  The purchase price of $242.6 million also included cash paid in lieu of fractional shares and the fair value of outstanding First Community stock options that were converted into options to purchase common shares of the Company.  It is anticipated that First Community Financial Bank, First Community's bank subsidiary prior to the acquisition, will be merged with and into First Busey's bank subsidiary, Busey Bank, in the fourth quarter of 2017.

Financial results for the third quarter of 2017 were significantly impacted by the First Community acquisition, resetting the baseline for financial performance in future quarters in a multitude of positive ways.  At the date of the merger, the fair value of First Community's total assets was $1.399 billion, including $1.097 billion in loans and $1.134 billion in deposits.  First Community's net income of $3.1 million had a positive impact on the third quarter of 2017.  A table below summarizes the assets acquired and liabilities assumed from First Community as of July 2, 2017.

¹ Operating earnings, a non-GAAP financial measure, see Non-GAAP Financial Information below for reconciliation

 

On October 2, 2017, the Company completed its acquisition of Mid Illinois Bancorp, Inc. ("Mid Illinois"), headquartered in Peoria, Illinois, pursuant to which each share of Mid Illinois common stock issued and outstanding as of the effective time was converted into, at the election of the stockholder the right to receive, either (i) $227.94 in cash (the "Cash Consideration Option"), (ii) 7.5149 shares of the Company's common stock, or (iii) mixed consideration of $68.38 in cash and 5.2604 shares of the Company's common stock.  In the aggregate, total consideration consisted of 70% stock and 30% cash, resulting in a purchase price of $138.2 million, including cash in lieu.  Mid Illinois stockholders electing the Cash Consideration Option were subject to proration under the terms of the merger agreement and ultimately received a mixture of cash and stock consideration.

It is anticipated that South Side Trust & Savings Bank of Peoria, Mid Illinois's wholly-owned bank subsidiary ("South Side") prior to the acquisition, will be merged with and into Busey Bank in the first quarter of 2018.  Financial results for South Side, Mid Illinois's bank subsidiary, will be incorporated into First Busey's consolidated reports beginning in the fourth quarter of 2017.  At the time of the bank merger, South Side's banking offices will become branches of Busey Bank.  As of September 30, 2017, Mid Illinois had total consolidated assets of $656.7 million, total loans of $370.0 million and total deposits of $505.6 million.

Overview and Strategy:

First Busey is honored to be recognized as one of the Best Places to Work in Illinois and Best Companies to Work For in Florida for 2017 by Best Companies Group and other partners – a testament to the unique culture of our organization.  These award programs identify and honor the best places of employment in their respective states, based almost entirely on independent feedback from our associates. We are excited to receive the Florida recognition for the first time and Illinois recognition again for the second year.  Nationally, the Company has been identified for the second consecutive year among the Best Banks to Work For by American Banker magazine.  The Company takes great pride in being associated with this select group of premier banks nationwide.  Further, Busey is grateful to be internationally recognized by the Association for Talent Development with the 2017 BEST Award, recognizing our enterprise-wide focus on employee talent development.

The Bank Director's 2017 Bank Performance Scorecard ranks the 300 largest publicly traded banks and First Busey was ranked 22nd in the $5 billion to $50 billion asset category. The scorecard is based on 2016 information and uses five key metrics that measure performance across several attributes, further recognizing our commitment to strong performance.

New partnerships with talented bankers in St. Louis, Peoria and the Chicagoland area bring an expanding pool of business opportunities to generate value and diversity across new markets.  Our priorities continue to focus around balance sheet strength, profitability and growth, in that order.  Commercial loans remain a driver of balance sheet growth, while credit costs remain low.  Favorable mix changes continue to occur across our deposit base as our relationship model builds ongoing efficiency into funding sources. Net income in the banking, remittance processing and wealth management segments expanded on a comparative basis to prior year.  With our strong capital position, an attractive core funding base, a sound credit foundation, and an active growth plan, we feel confident that we are well positioned as we move into the final quarter of 2017 and into 2018.

As we acknowledge our accomplishments and continue growing forward, we are grateful for the opportunity to consistently earn the business of our customers, based on the contributions of our talented associates and the loyal support of our shareholders.

/s/ Van A. Dukeman

President & Chief Executive Officer

First Busey Corporation

¹ Results are unaudited

First Community assets acquired and liabilities assumed as of July 2, 2017 and their initial fair value estimates¹ (dollars in thousands):

¹ Fair values are subject to refinement for up to one year after the closing date as additional information regarding the closing date fair values becomes available.

Balance Sheet Growth:  Average portfolio loans increased to $5.035 billion in the third quarter of 2017, compared to $3.892 billion in the second quarter of 2017.  Ending balances of portfolio loans increased to $5.086 billion in the third quarter of 2017, compared to $3.920 billion in the second quarter of 2017 and $3.808 billion in the third quarter of 2016, as a result of the First Community acquisition and organic growth.   First Community experienced strong loan growth for the third quarter of 2017, increasing gross portfolio loan balances by $37.3 million since the July 2, 2017 acquisition.  In addition, Busey Bank saw growth in its Missouri and Indiana markets where active growth efforts are underway.

The balance of loans held for sale decreased to $139.7 million on September 30, 2017, compared to $168.4 million on June 30, 2017 and $266.4 million on September 30, 2016, due to lower mortgage volumes and increased delivery efficiency.

Total deposits of $5.373 billion at September 30, 2017 increased from $4.394 billion at June 30, 2017 and $4.337 billion at September 30, 2016, also influenced by acquisition activity.  The Company remains strongly core deposit funded with solid liquidity and significant market share in core Illinois markets.

Net interest income of $55.9 million in the third quarter of 2017 increased from $42.4 million in the second quarter of 2017 and $44.1 million in the third quarter of 2016.  Net interest income for the first nine months of 2017 was $140.3 million, compared to $110.0 million of the same period of 2016.  Purchase accounting accretion and amortization included in interest income and interest expense, was $3.1 million for the third quarter of 2017 an increase from $1.6 million for the second quarter of 2017 and $2.7 million the third quarter of 2016.

The net interest margin increased to 3.60% for the third quarter of 2017, compared to 3.47% for the second quarter of 2017 and 3.51% for the third quarter of 2016.  Net of purchase accounting, the net interest margin for the third quarter of 2017 was 3.40%, an increase from 3.34% for the second quarter of 2017 and an increase from 3.30% for the third quarter of 2016.  The net interest margin for the first nine months of 2017 increased to 3.54%, compared to 3.34% for the same period of 2016.  Net of purchase accounting, the net interest margin for the first nine months was 3.37%, an increase from 3.19% for the same period for 2016.  Average interest-earning assets for the three months ended September 30, 2017 increased to $6.283 billion, compared to $4.991 billion for the three months ended June 30, 2017 and $5.095 billion for the three months ended September 30, 2016.  Average interest-earning assets for the nine months ended September 30, 2017 increased to $5.397 billion, compared to $4.490 billion in the same period of 2016, an increase of 20.2%.

Capital Strength:  The Company's strong capital levels, coupled with its earnings, have allowed it to provide a steady return to its stockholders through dividends.  The Company will pay a cash dividend on October 27, 2017 of $0.18 per common share to stockholders of record as of October 20, 2017.  The Company has consistently paid dividends to its common stockholders since the bank holding company was originally organized in 1980.

At the end of the third quarter of 2017, First Busey continued to exceed the capital adequacy requirements necessary to be considered "well-capitalized" under applicable regulatory guidelines.  The Company's tangible stockholders' common equity³ ("TCE") increased to $600.4 million at September 30, 2017, compared to $500.7 million at June 30, 2017 and $481.9 million at September 30, 2016. TCE represented 8.99% of tangible assets at September 30, 2017, compared to 9.24% at June 30, 2017 and 8.80% at September 30, 2016.⁴

³Tangible stockholders' common equity, a non-GAAP financial measure, is defined as common equity less tax-effected goodwill and intangibles

⁴Tangible assets, a non-GAAP financial measure, is defined as total assets less tax-effected goodwill and intangibles

Asset Quality:  While much internal focus has been directed toward growth and managing the integration of its recent acquisitions, the Company's commitment to credit quality remains strong.  As of September 30, 2017, non-performing loans increased to $27.9 million, compared to $20.1 million as of June 30, 2017 and $20.1 million as of September 30, 2016 as a result of the First Community acquisition.  Non-performing loans were 0.55% of total portfolio loans as of September 30, 2017, compared to 0.51% as of June 30, 2017 and 0.53% as of September 30, 2016.

The Company recorded net recoveries of $0.3 million for the third and second quarters of 2017, a decrease from the net recoveries of $0.5 million for the third quarter of 2016.  The Company recorded net recoveries of $0.7 million for the first nine months of 2017, a favorable decrease from the net charge-offs of $3.7 million for the same period of 2016.  Allowance for loan losses as a percentage of portfolio loans was 1.00% at September 30, 2017, a decrease from 1.25% at June 30, 2017 and 1.26% at September 30, 2016. As a result of acquisitions, the Company is holding acquired loans that are carried net of a fair value adjustment for credit and interest rate marks and are only included in the allowance calculation to the extent that the reserve requirement exceeds the fair value adjustment.  The Company recorded provision for loan losses of $1.5 million in the third quarter of 2017, an increase from $0.5 million in the second quarter of 2017, but a decrease from $2.0 million in the third quarter of 2016. The Company recorded provision for loan losses of $2.5 million for the first nine months of 2017, including $1.5 million recorded on new and renewed First Community loan production.  The Company recorded provision expense of $4.1 million for the first nine months of 2016.

With a continued commitment to asset quality and the strength of our balance sheet, near-term loan losses are expected to remain generally low.  While these results are encouraging, asset quality metrics can be generally influenced by market specific economic conditions and specific measures may fluctuate from period to period.

Fee-based Businesses:  Revenues from trust fees, commissions and brokers' fees, and remittance processing activities represented 41.8% of the Company's non-interest income for the quarter ended September 30, 2017, providing a balance to revenue from traditional banking activities.  As Pulaski Financial Corp. and First Community had no legacy fee income in these businesses, the addition of these service offerings in these markets is expected to provide attractive growth opportunities in future periods.

Trust fees and commissions and brokers' fees of $5.8 million for the third quarter of 2017 decreased seasonally from $6.6 million for the second quarter of 2017 and increased from $5.3 million for the third quarter of 2016. Trust fees and commissions and brokers' fees grew to $19.3 million for the first nine months of 2017, compared to $17.2 million for the same period of 2016.  Net income from the wealth management segment decreased to $1.2 million for the third quarter of 2017, compared to $1.7 million for the second quarter of 2017, but increased from $0.3 million for the third quarter of 2016 which was reduced by restructuring costs of $1.3 million designed to increase efficiency and drive down future costs.  Net income from the wealth management segment increased to $4.8 million for the first nine months of 2017 compared to $2.9 million for the same period of 2016, a notable 64.0% increase.

Remittance processing revenue of $2.9 million for the third quarter of 2017 remained comparable to the second quarter of 2017 and increased slightly from $2.8 million in the third quarter of 2016.  For the first nine months of 2017, remittance processing revenue remained relatively stable at $8.6 million, compared to the same period of 2016.  Net income from the remittance processing segment was also stable at $0.5 million for the second and third quarter of 2017 as well as the third quarter of 2016.  Net income from the remittance processing segment grew to $1.6 million for the nine months ended September 30, 2017, compared to $1.4 million for the nine months ended September 30, 2016.

Mortgage revenue increased to $3.5 million in the third quarter of 2017 from $2.8 million in the second quarter of 2017, but decreased from $4.8 million for the third quarter of 2016, as mortgage rates and associated costs increased, while purchase inventory declined.  Mortgage revenue of $8.4 million decreased for the nine months ended September 30, 2017, compared to $9.1 million for the nine months ended September 30, 2016.

Operating Efficiency:  An active business outreach across the Company's footprint continues to support ongoing business expansion and effectively underlies the combination of the operations acquired from recent acquisitions with that of First Busey.  The efficiency ratio, inclusive of acquisition and restructuring costs, of 58.1% for the first nine months of 2017 improved from 60.0% for the same period of 2016.  Overall costs have been influenced from prior year due to the Pulaski Financial Corp. acquisition in the second quarter of 2016 and the First Community acquisition in the third quarter of 2017, while efficiency has improved.  The Company remains consistently focused on expense discipline.

Specific areas of operating performance are detailed as follows:

· Salaries, wages and employee benefits increased to $25.5 million in the third quarter of 2017, compared to $20.1 million in the second quarter of 2017 and $21.7 million in the third quarter of 2016.  In the first nine months of 2017, salaries, wages and employee benefits increased to $67.4 million, compared to $55.6 million for the same period 2016.  The First Community acquisition added to the Company's headcount and also resulted in restructuring costs of $0.7 million in the third quarter of 2017.

Corporate Profile

As of September 30, 2017, First Busey Corporation (Nasdaq: BUSE) was a $6.9 billion financial holding company headquartered in Champaign, Illinois. Busey Bank, a wholly-owned bank subsidiary, is headquartered in Champaign, Illinois and has twenty-eight banking centers serving Illinois, thirteen banking centers in the St. Louis, Missouri metropolitan area, five banking centers serving southwest Florida and a banking center in Indianapolis, Indiana.  Trevett Capital Partners, a wealth management division of Busey Bank, provides asset management, investment and fiduciary services to high net worth clients in southwest Florida.  The wealth management professionals of Trevett Capital Partners can be reached through trevettcapitalpartners.com.  Busey Bank had total assets of $5.4 billion as of September 30, 2017.

First Community Financial Bank, First Busey Corporation's wholly-owned bank subsidiary, is headquartered in Joliet, Illinois and has nine locations.  First Community Bank had total assets of $1.5 billion as of September 30, 2017.

In addition, Busey Bank owns a retail payment processing subsidiary, FirsTech, Inc., which processes approximately 28 million transactions per year using online bill payment, lockbox processing and walk-in payments at its 3,000 agent locations in 36 states.  More information about FirsTech, Inc. can be found at firstechpayments.com.

Busey Wealth Management is a wholly-owned subsidiary of First Busey Corporation.  Through Busey Trust Company, Busey Wealth Management provides asset management, investment and fiduciary services to individuals, businesses and foundations.  As of September 30, 2017, Busey Wealth Management's assets under care were approximately $5.9 billion.

For more information about us, visit www.busey.com.

Contacts:

Robin N. Elliott, Chief Operating Officer & Chief Financial Officer, 217-365-4120

Susan K. Miller, Chief Accounting Officer & Deputy Chief Financial Officer, 217-365-4578

Non-GAAP Financial Information

This press release contains certain financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America ("GAAP"). These measures include acquisition and other notable pre-tax items, operating earnings, tangible common equity, tangible common equity to tangible assets and efficiency ratios. 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.

Management believes that notable pre-tax items and operating earnings are useful in assessing our core operating performance and in understanding the primary drivers of our non-interest income and non-interest expense when comparing periods.  Management believes that operating earnings adjusted for acquisition related expenses are a useful measure because it excludes expenses that can significantly fluctuate from acquisition to acquisition. In addition, management believes that excluding these expenses provides investors and analysts a measure to better understand the Company's primary operations when comparing the periods presented in the earnings release.

Operating earnings reconciliation (dollars in thousands):

Management believes that tangible common equity, tangible common equity to tangible assets and efficiency ratios are standard financial measures used in the banking industry to evaluate performance.

The non-GAAP disclosures contained herein should not be viewed as substitutes for the results determined to be in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

Special Note Concerning Forward-Looking Statements

Statements made in this report, 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 First Busey.  Forward-looking statements, which may be based upon beliefs, expectations and assumptions of First Busey's management and on information currently available to management, are generally identifiable by the use of words such as "believe," "expect," "anticipate," "plan," "intend," "estimate," "may," "will," "would," "could," "should" or other similar expressions.  Additionally, all statements in this document, including forward-looking statements, speak only as of the date they are made, and we undertake no obligation to update any statement in light of new information or future events.  A number of factors, many of which are beyond our ability to control or predict, could cause actual results to differ materially from those in our forward-looking statements.  These factors include, among others, the following: (i) the strength of the local, national and international economy; (ii) the economic impact of any future terrorist threats or attacks; (iii) changes in state and federal laws, regulations and governmental policies concerning First Busey's general business; (iv) changes in interest rates and prepayment rates of First Busey's assets; (v) increased competition in the financial services sector and the inability to attract new customers; (vi) changes in technology and the ability to develop and maintain secure and reliable electronic systems; (vii) the loss of key executives or employees; (viii) changes in consumer spending; (ix) unexpected results of current and/or future acquisitions, which may include, failure to realize the anticipated benefits of the acquisition and the possibility that the transaction costs may be greater than anticipated; (x) unexpected outcomes of existing or new litigation involving First Busey;  (xi) changes in accounting policies and practices; and (xii) the economic impact of exceptional weather occurrences such as tornadoes, hurricanes, floods, and blizzards.  These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.  Additional information concerning First Busey and its business, including additional factors that could materially affect its financial results, is included in First Busey's filings with the Securities and Exchange Commission.