First Busey Announces 2022 Third Quarter Earnings

First Busey Corporation

First Busey Reports Third Quarter Net Income of $35.7 million and diluted EPS of $0.64

CHAMPAIGN, Ill., Oct. 25, 2022 (GLOBE NEWSWIRE) -- First Busey Corporation (Nasdaq: BUSE)

Message from our Chairman & CEO

Third Quarter 2022 Highlights:

• Adjusted quarterly net income¹ of $36.4 million and adjusted diluted EPS¹ of $0.65

• Net interest margin¹ of 3.00% reflects a 32-basis point increase over prior quarter

• Total deposit growth of $204.2 million, representing a 7.8% annualized growth rate; cycle-to-date non-maturity interest bearing deposit beta is 4.9%

• Core loan¹ growth of $178.5 million, representing a 9.50% annualized growth rate

• Non-performing assets of 0.14% of total assets and annualized net charge-off ratio of 0.02%

• FirsTech revenue² of $5.6 million, representing 10.8% year-over-year growth

• Adjusted core efficiency ratio¹ of 55.7%, compared to 58.7% in the third quarter of 2021

• Redeemed $60.0 million of outstanding callable subordinated notes

• For additional information, please refer to the 3Q22 Quarterly Earnings Supplement
  

Third Quarter Financial Results
Net income for First Busey Corporation (“First Busey” or the “Company”) for the third quarter of 2022 was $35.7 million, or $0.64 per diluted common share, compared to $29.8 million, or $0.53 per diluted common share, for the second quarter of 2022, and $25.9 million, or $0.46 per diluted common share, for the third quarter of 2021. Adjusted net income¹ for the third quarter of 2022 was $36.4 million, or $0.65 per diluted common share, compared to $30.1 million, or $0.54 per diluted common share, for the second quarter of 2022, and $32.8 million, or $0.58 per diluted common share, for the third quarter of 2021. For the third quarter of 2022, annualized return on average assets and annualized return on average tangible common equity¹ were 1.13% and 17.41%, respectively. Based on adjusted net income¹, annualized return on average assets was 1.15% and annualized return on average tangible common equity¹ was 17.79% for the third quarter of 2022.

Pre-provision net revenue¹ for the third quarter of 2022 was $46.5 million, compared to $39.6 million for the second quarter of 2022 and $30.5 million for the third quarter of 2021. Adjusted pre-provision net revenue¹ for the third quarter of 2022 was $48.8 million, compared to $41.3 million for the second quarter of 2022 and $39.4 million for the third quarter of 2021. Pre-provision net revenue to average assets¹ for the third quarter of 2022 was 1.47%, compared to 1.27% for the second quarter of 2022, and 0.95% for the third quarter of 2021. Adjusted pre-provision net revenue to average assets¹ for the third quarter of 2022 was 1.54%, compared to 1.33% for the second quarter of 2022 and 1.23% for the third quarter of 2021.

The Company experienced its sixth consecutive quarter of strong core loan¹ growth. Core loan¹ growth was $178.5 million in the third quarter of 2022, compared to $249.1 million in the second quarter of 2022 and $177.1 million in the third quarter of 2021. Over the last four quarters, the Company has generated $696.3 million in core loan¹ growth, equating to a year-over-year growth rate of 10.0%. Meanwhile, we experienced deposit growth of $204.2 million during the third quarter of 2022. As a result our loan to deposit ratio ended the quarter at 72.4%.

In addition, our fee-based businesses continue to add revenue diversification. Total non-interest income of $30.9 million accounted for 26.4% of total operating revenue. Beginning on July 1, 2022, we became subject to the Durbin Amendment of the Dodd-Frank Act. The Durbin Amendment requires the Federal Reserve to establish a maximum permissible interchange fee for many types of debit transactions. The third quarter impact of these rules was a $2.4 million reduction in fee income.

Asset quality remains strong by both historical as well as present-day industry standards. In the third quarter of 2022, non-performing assets declined to 0.14% of total assets, from 0.15% in the second quarter of 2022 and 0.23% in the third quarter of 2021. The Company’s results for the third quarter of 2022 include a provision expense of $2.4 million for credit losses and a provision release of $0.3 million for unfunded commitments. The total allowance for credit losses was $90.7 million at September 30, 2022, representing 1.18% of total portfolio loans outstanding. The Company recorded net charge-offs of $0.4 million in the third quarter of 2022, equating to an annualized net charge-off ratio of 0.02%.

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 other restructuring charges in the third quarter of 2022 included $0.1 million of expenses related to non-operating professional fees and $0.9 million of loss on leases and fixed asset impairment. The Company believes that non-GAAP measures—including pre-provision net revenue, adjusted pre-provision net revenue, pre-provision net revenue to average assets, adjusted pre-provision net revenue to average assets, adjusted net income, adjusted diluted earnings per share, adjusted return on average assets, return on average tangible common equity, adjusted return on average tangible common equity, adjusted net interest income, adjusted net interest margin, adjusted noninterest expense, adjusted core expense, efficiency ratio, adjusted efficiency ratio, adjusted core efficiency ratio, tangible book value per common share, tangible common equity, tangible common equity to tangible assets, core loans, core loans to portfolio loans, core deposits, core deposits to total deposits, and core loans to core deposits—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 (see "Non-GAAP Financial Information").

Debt Redemption
On August 25, 2022, the Company redeemed $60.0 million of outstanding callable subordinated notes originally issued in 2017, using proceeds obtained from our successful public offering of $100.0 million subordinated debt in the second quarter of 2022. At the time of redemption, the redeemed subordinated notes carried interest at a floating rate of 3-month LIBOR plus 2.919%.

Hurricane Ian
On September 28, 2022, Hurricane Ian made landfall in southwest Florida impacting our operations in the region. We are focused on assisting our clients and employees as they navigate the challenges from this historic storm. As of today, two of our three branches are fully operational, while services are expected to be restored imminently via a temporary facility at our third location. Efforts undertaken to date include: 1) financial assistance for associates impacted by the storm; 2) creation of a relief center for associates to access much needed supplies; 3) staffing resource reallocation to support our southwest Florida operations; 4) fee waivers for impacted customers; and 5) loan modification program for impacted commercial customers. These are but a few of the initiatives and efforts implemented to date in response to Hurricane Ian.

Efficiency Initiative
Early in the fourth quarter of 2022, we implemented a targeted restructuring and efficiency optimization plan that is expected to generate annual salary and benefits savings of $4.0 million to $4.4 million. We also expect to incur one-time severance-related costs associated with this initiative of $1.1 million to $1.3 million, most of which are expected to be realized in the fourth quarter. We expect to largely reinvest the anticipated savings to support ongoing growth initiatives across our franchise over the next several quarters.

Community Banking
First Busey’s goal of being a strong community bank begins with outstanding associates. The Company is humbled to be named among the 2021 Best Banks to Work For by American Banker, the 2021 Best Places to Work in Money Management by Pensions and Investments, the 2022 Best Places to Work in Illinois by Daily Herald Business Ledger, and the 2022 Best Companies to Work For in Florida by Florida Trend magazine.

We are grateful for the opportunities to earn the business of our customers, based on the contributions of our talented associates and the continued support of our loyal shareholders. We feel confident that we are well positioned to navigate these uncertain times while continuing to produce quality growth and profitability as we move into the final quarter of 2022 and into 2023.

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

SELECTED FINANCIAL HIGHLIGHTS (unaudited)
(dollars in thousands, except per share amounts)

	Three Months Ended									Nine Months Ended
	September 30,			June 30,			September 30,			September 30,			September 30,
		2022			2022			2021			2022			2021
EARNINGS & PER SHARE AMOUNTS
Net income	$	35,661		$	29,824		$	25,941		$	93,924		$	93,523
Diluted earnings per common share		0.64			0.53			0.46			1.67			1.67
Cash dividends paid per share		0.23			0.23			0.23			0.69			0.69
Pre-provision net revenue1, 2		46,498			39,569			30,470			122,133			104,698
Revenue3		117,234			108,661			103,957			332,337			295,309
Net income by operating segments:
Banking		37,082			30,499			25,124			94,032			89,889
FirsTech		353			397			384			1,300			1,214
Wealth Management		3,756			5,092			4,718			14,688			14,285
AVERAGE BALANCES
Cash and cash equivalents		331,397			351,697			1,009,750			455,545			732,958
Investment securities		3,667,753			3,841,011			3,721,740			3,825,265			3,109,140
Loans held for sale		4,195			3,089			15,589			6,376			23,060
Portfolio loans		7,617,918			7,378,969			7,133,108			7,387,582			6,921,226
Interest-earning assets		11,497,783			11,453,198			11,730,637			11,550,887			10,651,386
Total assets		12,531,856			12,452,070			12,697,795			12,547,816			11,571,270
Noninterest bearing deposits		3,583,693			3,535,110			3,365,823			3,569,562			3,010,999
Interest-bearing deposits		6,993,125			6,971,083			7,253,242			6,997,106			6,577,531
Total deposits		10,576,818			10,506,193			10,619,065			10,566,668			9,588,530
Securities sold under agreements to repurchase and federal funds purchased		233,032			235,733			221,813			246,481			203,777
Interest-bearing liabilities		7,605,148			7,574,677			7,842,805			7,611,314			7,114,856
Total liabilities		11,350,408			11,255,018			11,346,379			11,328,171			10,247,699
Stockholders' equity - common		1,181,448			1,197,052			1,351,416			1,219,645			1,323,571
Average tangible common equity2		812,467			825,162			970,531			847,772			952,742
PERFORMANCE RATIOS
Pre-provision net revenue to average assets1, 2		1.47	%		1.27	%		0.95	%		1.30	%		1.21	%
Return on average assets		1.13	%		0.96	%		0.81	%		1.00	%		1.08	%
Return on average common equity		11.98	%		9.99	%		7.62	%		10.30	%		9.45	%
Return on average tangible common equity2		17.41	%		14.50	%		10.60	%		14.81	%		13.12	%
Net interest margin2, 4		3.00	%		2.68	%		2.41	%		2.71	%		2.54	%
Efficiency ratio2		57.62	%		60.56	%		67.27	%		60.30	%		61.40	%
Noninterest revenue as a % of total revenues3		26.38	%		30.12	%		31.94	%		30.10	%		32.21	%
NON-GAAP FINANCIAL INFORMATION
Adjusted pre-provision net revenue1, 2	$	48,800		$	41,267		$	39,409		$	129,421		$	119,648
Adjusted net income2		36,435			30,081			32,845			95,620			102,831
Adjusted diluted earnings per share2		0.65			0.54			0.58			1.70			1.84
Adjusted pre-provision net revenue to average assets2		1.54	%		1.33	%		1.23	%		1.38	%		1.38	%
Adjusted return on average assets2		1.15	%		0.97	%		1.03	%		1.02	%		1.19	%
Adjusted return on average tangible common equity2		17.79	%		14.62	%		13.43	%		15.08	%		14.43	%
Adjusted net interest margin2, 4		2.97	%		2.66	%		2.35	%		2.68	%		2.46	%
Adjusted efficiency ratio2		56.81	%		60.29	%		58.97	%		59.67	%		57.46	%

________________
^1. Net interest income plus noninterest income, excluding securities gains and losses, less noninterest expense.
^2. See “Non-GAAP Financial Information” for reconciliation.
^3. Revenue consists of net interest income plus noninterest income, excluding securities gains and losses.
^4. On a tax-equivalent basis, assuming a federal income tax rate of 21%.

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(dollars in thousands, except per share amounts)

							As of
	September 30, 2022			June 30, 2022			March 31, 2022			December 31, 2021			September 30, 2021
ASSETS
Cash and cash equivalents	$	347,149		$	230,852		$	479,228		$	836,095		$	883,845
Investment securities		3,494,710			3,708,922			3,941,656			3,994,822			4,010,256
Loans held for sale		4,546			4,813			6,765			23,875			20,225
Commercial loans		5,724,137			5,613,955			5,486,817			5,449,689			5,431,342
Retail real estate and retail other loans		1,945,977			1,883,823			1,786,056			1,739,309			1,719,293
Portfolio loans		7,670,114			7,497,778			7,272,873			7,188,998			7,150,635
Allowance for credit losses		(90,722	)		(88,757	)		(88,213	)		(87,887	)		(92,802	)
Premises and equipment		128,175			130,892			133,658			136,147			142,031
Goodwill and other intangible assets, net		367,091			369,962			372,913			375,924			378,891
Right of use asset		10,202			8,615			9,014			10,533			11,068
Other assets		566,123			493,356			439,615			381,182			395,181
Total assets	$	12,497,388		$	12,356,433		$	12,567,509		$	12,859,689		$	12,899,330
LIABILITIES & STOCKHOLDERS' EQUITY
Noninterest bearing deposits	$	3,628,169		$	3,505,299		$	3,568,651		$	3,670,267		$	3,453,906
Interest checking, savings, and money market deposits		6,173,041			6,074,108			6,132,355			6,162,661			6,337,026
Time deposits		800,187			817,821			890,830			935,649			1,026,935
Total deposits	$	10,601,397		$	10,397,228		$	10,591,836		$	10,768,577		$	10,817,867
Securities sold under agreements to repurchase	$	234,597		$	228,383		$	255,668		$	270,139		$	241,242
Short-term borrowings		16,225			16,396			17,683			17,678			17,673
Long-term debt		254,835			317,304			265,769			268,773			271,780
Junior subordinated debt owed to unconsolidated trusts		71,765			71,721			71,678			71,635			71,593
Lease liability		10,311			8,655			9,067			10,591			11,120
Other liabilities		201,670			154,789			137,783			133,184			134,979
Total liabilities		11,390,800			11,194,476			11,349,484			11,540,577			11,566,254
Total stockholders' equity		1,106,588			1,161,957			1,218,025			1,319,112			1,333,076
Total liabilities & stockholders' equity	$	12,497,388		$	12,356,433		$	12,567,509		$	12,859,689		$	12,899,330
SHARE AND PER SHARE AMOUNTS
Book value per common share	$	20.04		$	21.00		$	22.03		$	23.80		$	23.88
Tangible book value per common share1	$	13.39		$	14.31		$	15.29		$	17.01		$	17.09
Ending number of common shares outstanding		55,232,434			55,335,703			55,278,785			55,434,910			55,826,984
1. See "Non-GAAP Financial Information" for reconciliation.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(dollars in thousands, except per share amounts)

	Three Months Ended									Nine Months Ended
	September 30, 2022			June 30, 2022			September 30, 2021			September 30, 2022			September 30, 2021
INTEREST INCOME
Interest and fees on loans held for sale and portfolio	$	76,081		$	65,567		$	65,163		$	202,530		$	189,132
Interest on investment securities		18,249			16,671			12,239			49,852			31,894
Other interest income		1,085			358			462			1,720			857
Total interest income	$	95,415		$	82,596		$	77,864		$	254,102		$	221,883
INTEREST EXPENSE
Interest on deposits	$	3,565		$	2,146		$	3,059		$	7,835		$	10,086
Interest on securities sold under agreements to repurchase and federal funds purchased		459			147			60			665			177
Interest on short-term borrowings		190			147			112			426			195
Interest on long-term debt		4,110			3,520			3,150			10,739			9,050
Junior subordinated debt owed to unconsolidated trusts		786			708			728			2,148			2,185
Total interest expense	$	9,110		$	6,668		$	7,109		$	21,813		$	21,693
Net interest income	$	86,305		$	75,928		$	70,755		$	232,289		$	200,190
Provision for credit losses		2,364			1,653			(1,869	)		3,764			(10,365	)
Net interest income after provision for credit losses	$	83,941		$	74,275		$	72,624		$	228,525		$	210,555
NONINTEREST INCOME
Wealth management fees	$	12,508		$	14,135		$	13,749		$	42,422		$	39,335
Fees for customer services		7,627			9,588			9,288			26,122			25,936
Payment technology solutions		5,080			4,888			4,620			15,045			13,771
Mortgage revenue		438			284			1,740			1,697			6,153
Income on bank owned life insurance		958			874			999			2,716			3,439
Net securities gains (losses)		4			(1,714	)		57			(2,324	)		2,596
Other noninterest income		4,318			2,964			2,806			12,046			6,485
Total noninterest income	$	30,933		$	31,019		$	33,259		$	97,724		$	97,715
NONINTEREST EXPENSE
Salaries, wages, and employee benefits	$	39,762		$	38,110		$	41,949		$	117,226		$	107,222
Data processing expense		5,447			5,375			7,782			15,800			16,881
Net occupancy expense		4,705			4,720			4,797			14,492			13,606
Furniture and equipment expense		1,799			2,045			2,208			5,874			6,300
Professional fees		1,579			1,607			1,361			4,693			5,617
Amortization of intangible assets		2,871			2,951			3,149			8,833			8,200
Interchange expense		1,574			1,487			1,434			4,606			4,360
Other operating expenses		12,999			12,797			10,807			38,680			28,425
Total noninterest expense	$	70,736		$	69,092		$	73,487		$	210,204		$	190,611
Income before income taxes	$	44,138		$	36,202		$	32,396		$	116,045		$	117,659
Income taxes		8,477			6,378			6,455			22,121			24,136
Net income	$	35,661		$	29,824		$	25,941		$	93,924		$	93,523
SHARE AND PER SHARE AMOUNTS
Basic earnings per common share	$	0.64		$	0.54		$	0.46		$	1.70		$	1.69
Diluted earnings per common share	$	0.64		$	0.53		$	0.46		$	1.67		$	1.67
Average common shares outstanding		55,349,547			55,421,887			56,227,816			55,399,424			55,256,348
Diluted average common shares outstanding		56,073,164			56,104,017			56,832,518			56,123,756			55,872,835

Balance Sheet Growth

Our balance sheet remains a source of strength. Total assets were $12.50 billion at September 30, 2022, compared to $12.36 billion at June 30, 2022, and $12.90 billion at September 30, 2021. At September 30, 2022, portfolio loans were $7.67 billion, compared to $7.50 billion as of June 30, 2022, and $7.15 billion as of September 30, 2021. Amortized costs of Paycheck Protection Program (PPP) loans of $1.4 million, $7.6 million, and $178.2 million are included in the September 30, 2022, June 30, 2022, and September 30, 2021, portfolio loan balances, respectively. During the third quarter of 2022, Busey Bank experienced another strong quarter of core loan¹ growth of $178.5 million, consisting of growth in commercial balances³ of $116.4 million and growth in retail real estate and retail other balances of $62.1 million. Growth was principally driven by our Northern Illinois, Gateway, and Indiana service centers. As has been our practice, we remain steadfast in our disciplined underwriting.

Average portfolio loans were $7.62 billion for the third quarter of 2022, compared to $7.38 billion for the second quarter of 2022 and $7.13 billion for the third quarter of 2021. The average balance of PPP loans for the third quarter of 2022 was $4.2 million, compared to $19.3 million for the second quarter of 2022 and $291.8 million for the third quarter of 2021. Average interest-earning assets for the third quarter of 2022 were $11.50 billion, compared to $11.45 billion for the second quarter of 2022, and $11.73 billion for the third quarter of 2021.

Total deposits were $10.60 billion at September 30, 2022, compared to $10.40 billion at June 30, 2022, and $10.82 billion at September 30, 2021. Fluctuations in deposit balances can be attributed to the retention of PPP loan funding in customer deposit accounts, the impacts of fiscal stimulus, inflation and related economic effects on our customers, as well as typical seasonality aspects within our portfolio, and other core deposit¹ growth. The Company remains funded substantially through core deposits¹ with significant market share in its primary markets. Core deposits¹ accounted for 99.0% of total deposits as of September 30, 2022. Cost of deposits was 0.13% in the third quarter of 2022, which represents a 5 basis points increase from the second quarter of 2022. Excluding time deposits, the Company’s cost of deposits was 0.11% in the third quarter of 2022, an increase of 0.06% from June 30, 2022.

Asset Quality

Credit quality continues to be exceptionally strong. Loans 30-89 days past due totaled $6.3 million as of September 30, 2022, compared to $5.2 million as of June 30, 2022, and $6.4 million as of September 30, 2021. Non-performing loans decreased to $16.7 million as of September 30, 2022, compared to $17.5 million as of June 30, 2022, and $25.9 million as of September 30, 2021. Continued disciplined credit management resulted in non-performing loans as a percentage of portfolio loans of 0.22% at September 30, 2022, compared to 0.23% as of June 30, 2022, and 0.36% as of September 30, 2021. Non-performing assets were 0.14% of total assets at the end of the third quarter of 2022, compared to 0.15% at June 30, 2022 and 0.23% at September 30, 2021.

Net charge-offs totaled $0.4 million for the third quarter of 2022, compared to $1.1 million for the second quarter of 2022 and $0.7 million for the third quarter of 2021. The allowance as a percentage of portfolio loans was 1.18% at both September 30, 2022, and June 30, 2022, compared to 1.30% at September 30, 2021. The allowance as a percentage of non-performing loans was 544.75% at September 30, 2022, compared to 507.36% at June 30, 2022, and 358.86% at September 30, 2021.

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

ASSET QUALITY (unaudited)
(dollars in thousands)

									As of
	September 30, 2022				June 30, 2022				March 31, 2022				December 31, 2021				September 30, 2021
Total assets	$	12,497,388			$	12,356,433			$	12,567,509			$	12,859,689			$	12,899,330
Portfolio loans		7,670,114				7,497,778				7,272,873				7,188,998				7,150,635
Portfolio loans excluding amortized cost of PPP loans		7,668,688				7,490,162				7,241,104				7,114,040				6,972,404
Loans 30 – 89 days past due		6,307				5,157				3,916				6,261				6,446
Non-performing loans:
Non-accrual loans		15,425				15,840				12,488				15,946				25,369
Loans 90+ days past due and still accruing		1,229				1,654				197				906				491
Non-performing loans	$		16,654		$		17,494		$		12,685		$		16,852		$		25,860
Non-performing loans, segregated by geography:
Illinois / Indiana	$	10,531			$	11,261			$	6,467			$	10,450			$	17,824
Missouri		5,008				5,259				5,263				5,349				6,736
Florida		1,115				974				955				1,053				1,300
Other non-performing assets		1,219				1,429				3,606				4,416				3,184
Non-performing assets	$	17,873			$	18,923			$	16,291			$	21,268			$	29,044
Allowance for credit losses	$		90,722		$		88,757		$		88,213		$		87,887		$		92,802
RATIOS
Non-performing loans to portfolio loans		0.22		%		0.23		%		0.17		%		0.23