First Busey Corporation Announces 2023 Third Quarter Earnings

CHAMPAIGN, Ill., Oct. 24, 2023 (GLOBE NEWSWIRE) -- First Busey Corporation ( BUSE)

Third Quarter 2023 Highlights

• Net income excluding net securities losses¹ of $30.9 million and adjusted diluted EPS excluding net securities gains and losses¹ of $0.55
• Total deposits increased $269.6 million, or 2.7%, quarter-over-quarter, to $10.33 billion
• Short-term borrowings decreased to $12.0 million, compared to $212.0 million at the end of the second quarter of 2023 and $615.9 million at the end of the first quarter of 2023
• Non-performing assets declined 23.6% during the third quarter of 2023, to $12.1 million, now representing 0.10% of total assets
• Classified assets declined to $59.6 million, compared to $81.9 million at the close of the second quarter of 2023 and $103.9 million at the end of the first quarter of 2023
• Annualized net charge-off ratio of 0.01% in the quarter and 0.02% over the last twelve months²
• Noninterest income excluding net securities losses¹ increased to $31.3 million, from $30.1 million in the second quarter of 2023, representing 28.7% of total revenue
• Wealth management segment revenue of $14.4 million in the third quarter of 2023, a 14.7% increase over the comparable period in 2022
• Annualized return on average assets of 1.0%, return on average tangible common equity¹ of 14.3% and adjusted core efficiency ratio¹ of 60.23%
• For additional information, please refer to the 3Q23 Earnings Investor Presentation

Message from our Chairman & CEO

Third Quarter Financial Results
Net income for First Busey Corporation (“Busey,” “Company,” “we,” “us,” or “our”) was $30.7 million for the third quarter of 2023, or $0.54 per diluted common share, compared to $29.4 million, or $0.52 per diluted common share, for the second quarter of 2023, and $35.7 million, or $0.64 per diluted common share, for the third quarter of 2022. Adjusted net income¹ was $30.7 million, or $0.55 per diluted common share, for the third quarter of 2023. Non-operating adjustments to net income for the second quarter of 2023 were immaterial. Adjusted net income¹ was $36.4 million, or $0.65 per diluted common share, for the third quarter of 2022.

Net income includes net losses on securities of $0.3 million for the third quarter of 2023, $2.1 million for the second quarter of 2023, which are largely unrealized, and an immaterial net gain for the third quarter of 2022. Net income excluding net securities losses¹ for the third quarter of 2023 would have been $30.9 million, resulting in adjusted diluted EPS excluding net securities gains and losses¹ of $0.55.

Annualized return on average assets and annualized return on average tangible common equity¹ were 1.00% and 14.31%, respectively, for the third quarter of 2023.

Pre-provision net revenue¹ was $38.1 million for the third quarter of 2023, compared to $39.5 million for the second quarter of 2023 and $46.5 million for the third quarter of 2022. Adjusted pre-provision net revenue¹ was $40.5 million for the third quarter of 2023, compared to $42.1 million for the second quarter of 2023 and $48.8 million for the third quarter of 2022. Pre-provision net revenue to average assets³ was 1.24% for the third quarter of 2023, compared to 1.30% for the second quarter of 2023, and 1.47% for the third quarter of 2022. Adjusted pre-provision net revenue to average assets³ was 1.32% for the third quarter of 2023, compared to 1.38% for the second quarter of 2023 and 1.54% for the third quarter of 2022.

The decline in pre-provision net revenue in the third quarter, compared to the second quarter, was largely the result of a $0.9 million decrease in net interest income, which is primarily the result of deposits migrating into higher cost offerings. Net interest margin declined from 2.86% in the second quarter of 2023 to 2.80% in the third quarter of 2023.

Our fee-based businesses continue to add revenue diversification. Noninterest income excluding net securities gains and losses¹ was $31.3 million, or 28.7% of operating revenue³, during the third quarter of 2023, compared to $30.1 million, or 27.7% of total operating revenue, for the second quarter of 2023 and $30.9 million, or 26.4% of total operating revenue, for the third quarter of 2022.

During a time of decades-high inflation, we have effectively managed our noninterest expense, and have been purposeful in our efforts to rationalize our expense base given our economic outlook and our view on the future of banking. Noninterest expense was $70.9 million in the third quarter of 2023, compared to $69.2 million in the second quarter of 2023 and $70.7 million in the third quarter of 2022. Adjusted core expense¹ was $66.0 million in the third quarter of 2023, compared to $64.0 million in the second quarter of 2023 and $65.6 million in the third quarter of 2022, reflecting a less than 1% year-over-year increase in quarterly adjusted core expenses. As we enter the last quarter of 2023, we expect to continue to prudently manage our expenses.

Busey’s Conservative Banking Strategy
Busey’s financial strength is built on a long-term conservative operating approach. That focus will not change now or in the future.

Busey's growth trend for portfolio loans continued during the third quarter of 2023, with loans being originated at attractive spreads while maintaining our prudent underwriting standards. Loan growth was $50.9 million in the third quarter of 2023, compared to growth of $21.5 million in the second quarter of 2023 and $172.3 million in the third quarter of 2022. Over the last four quarters, Busey has generated $186.0 million in portfolio loan growth, equating to a year-over-year growth rate of 2.4%. Our reported loan growth has been reduced by a $22.2 million reduction in classified assets during the third quarter of 2023, largely attributable to pay-offs from customers in the manufacturing, nursing home, and senior housing industries, and a $47.5 million reduction in classified assets since the beginning of the year, a positive development and consistent with our prudent credit risk management philosophy, particularly given our outlook for the economy. Our loan to deposit ratio was 76.0% at the end of the third quarter of 2023, compared to 77.6% for the second quarter of 2023 and 72.4% for the third quarter of 2022.

The quality of our core deposit franchise is a critical value driver of our institution. Over the last two quarters our deposit base has grown by more than $530 million, allowing us to substantially reduce our exposure to higher cost wholesale borrowings. Our granular deposit base continues to position us well, and as of September 30, 2023 our estimated uninsured and uncollateralized deposits⁴ percentage was 28% and 96.6% of our deposits were core deposits¹. Our retail deposit base was comprised of more than 257,000 accounts with an average balance of $21 thousand and an average tenure of 16.4 years as of September 30, 2023. Our commercial deposit base was comprised of more than 33,000 accounts with an average balance of $105 thousand and an average tenure of 12.3 years as of September 30, 2023. Furthermore, we have sufficient on- and off-balance sheet liquidity to manage deposit fluctuations and the liquidity needs of our customers.

Asset quality remains strong by both Busey’s historical and current industry trends. Non-performing assets saw a further 23.6% decline during the third quarter of 2023 to $12.1 million, now representing only 0.10% of total assets. We experienced our third consecutive quarter of declines in total classified assets. Total classified assets of $59.6 million at the end of the third quarter of 2023 now represent a historically low 3.9% of consolidated total capital. Busey’s results for the third quarter of 2023 include a $0.4 million provision expense for credit losses and an immaterial provision expense for unfunded commitments. The allowance for credit losses was $91.7 million as of September 30, 2023, representing 1.17% of total portfolio loans outstanding, and 763.8% of non-performing loans. Busey recorded net charge offs of $0.3 million in the third quarter of 2023, which equates to 0.01% of average loans on an annualized basis. As of September 30, 2023, our commercial real estate loan portfolio of investor-owned office properties within Central Business District⁵ areas remained low at $9.5 million. Our credit performance continues to reflect our highly diversified, conservatively underwritten loan portfolio, which has been originated predominantly to established customers with tenured relationships with our company.

The strength of our balance sheet is also reflected in our capital foundation. In the third quarter, Common Equity Tier 1 and Total Capital to Risk Weighted Assets ratios⁶ increased to 12.52% and 16.72%, respectively. In fact, our regulatory capital ratios continue to provide a buffer of more than $480 million above levels required to be designated well-capitalized. Our Tangible Common Equity ratio¹ declined modestly to 7.06% during the third quarter of 2023 as a result of the impact of rising rates on the market value of our securities portfolio, but remains substantially above the 6.17% reported for the third quarter of 2022. During the third quarter of 2023, we paid a common share dividend of $0.24 and repurchased 65,123 shares of our common stock at a weighted average price of $19.63 per share.

Community Banking
Busey’s goal of being a strong community bank begins with outstanding associates. Busey is humbled to be named among the 2023 Best Banks to Work For by American Banker, the 2022 Best Places to Work in Money Management by Pensions and Investments, the 2023 Best Places to Work in Illinois by Daily Herald Business Ledger, and the 2023 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 remain cognizant of the evolving economic outlook and extremely focused on balance sheet strength, profitability, and growth, in that order. With our strong capital position, an attractive core funding base, and a sound credit foundation, we feel confident that we are well positioned to continue producing quality growth and profitability as we move into the final quarter of 2023 and into 2024.

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