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First Busey Announces 2012 Fourth Quarter Earnings And Full Year Results

Stocks in this article: BUSE

This growth initiative drove increases in gross loan balances for the third consecutive quarter, with loan balances of $2.07 billion at December 31, 2012, which was $37.8 million higher than at September 30, 2012. Commercial loan portfolios grew $27.5 million in the aggregate, with growth of $33.9 million in commercial and industrial loans, partially offset by a decline in commercial real estate and construction loans of $6.4 million. Residential real estate loans including loans held for sale also rose $10.9 million during the quarter. Growth occurred in targeted portfolios with positive changes in mix, as loans with the strongest risk grades increased, while loans with weaker grades declined during the quarter 1.

Our non-interest-bearing deposits of $611.0 million at December 31, 2012 grew from $510.1 million at September 30, 2012 and $503.1 million at December 31, 2011. Furthermore, our core deposits of $2.8 billion at December 31, 2012 increased from $2.7 billion at September 30, 2012 and $2.5 billion at December 31, 2011. Non-interest-bearing deposit growth has a positive influence on funding costs, while increasing core deposits provide a stable platform for continued asset growth.

As stated in the prior period release, the Company was pleased to announce the founding of Trevett Capital Partners ("Trevett") during the fourth quarter of 2012. Trevett is a private wealth management boutique created to serve high net worth clientele in southwest Florida through a highly tenured team of sophisticated wealth management professionals, operating as a division of Busey Bank. Trevett builds upon our established presence in Florida and the broad capabilities of our existing Wealth Management operation to provide concierge service and tailored solutions for the accumulation and preservation of capital and generational legacies.

1A detailed description of the loan grading policy can be found in the Company's Annual Report on Form 10-K for the year ended December 31, 2011.

Capital Strength: At the end of the fourth quarter of 2012, Busey Bank continued to exceed the capital adequacy requirements necessary to be considered "well-capitalized" under the regulatory guidance. First Busey Corporation's Tangible Common Equity (TCE) 2 decreased to $308.0 million at December 31, 2012 from $316.0 million at September 30, 2012, but increased from $306.5 million at December 31, 2011. TCE represented 8.58% of tangible assets at December 31, 2012 compared to 9.03% at September 30, 2012 and 9.09% at December 31, 2011.

The decline in TCE during the fourth quarter of 2012 primarily resulted from the acceleration of the Company's 2013 first quarter dividend of $0.04 per common share into the fourth quarter of 2012 as well as an additional cash dividend of $0.04 per common share. The combined dividend of $0.08 per common share was paid on December 31, 2012 to shareholders of record as of December 24, 2012. The decision to pay both dividends on December 31, 2012 was due to the uncertainty surrounding U.S. tax policy and our desire to maximize shareholder value and return while potentially reducing the dividend income tax burden. The Company has an uninterrupted history of paying quarterly dividends to its common shareholders since it first began trading on the NASDAQ exchange in 1998.

2Tangible Common Equity is defined as common equity less tax effected goodwill and intangibles at the end of the reporting period.

Asset Quality: While much internal focus has been directed toward organic growth, our commitment to credit quality remains strong, as evidenced by another quarter of positive trends across a range of credit indicators. At December 31, 2012, various asset quality measures (including loans 30-89 days past due, other non-performing assets, the ratio of non-performing assets to total loans plus other non-performing assets, and net charge-offs) were at their lowest levels in more than three years. Non-performing loans were essentially unchanged in the fourth quarter as compared to the third quarter, with closing balances for these periods representing the two lowest levels in over three years. In addition, although the allowance for loan losses to non-performing loans ratio was down slightly from the third quarter, the ratios for these periods represented the two highest quarterly levels in over three years. We continue to expect gradual improvement in our overall asset quality during 2013; however, this remains dependent upon market-specific economic conditions, and specific measures may fluctuate from quarter to quarter. The key metrics are as follows:

  • Non-performing loans increased very slightly by $0.2 million to $25.4 million at December 31, 2012 from $25.2 million at September 30, 2012, but decreased from $38.5 million at December 31, 2011.
  • Illinois/Indiana non-performing loans slightly increased to $17.8 million at December 31, 2012 from $17.4 million at September 30, 2012, but decreased from $27.7 million at December 31, 2011.
  • Florida non-performing loans decreased to $7.6 million at December 31, 2012 from $7.8 million at September 30, 2012 and $10.8 million at December 31, 2011.
  • Loans 30-89 days past due decreased to $2.3 million at December 31, 2012 from $7.9 million at September 30, 2012 and $4.7 million at December 31, 2011.
  • Other non-performing assets, primarily consisting of other real estate owned, decreased to $3.5 million at December 31, 2012 from $8.5 million at both September 30, 2012 and December 31, 2011.
  • The ratio of non-performing assets to total loans plus other non-performing assets at December 31, 2012 decreased to 1.39% from 1.65% at September 30, 2012 and 2.28% at December 31, 2011.
  • The allowance for loan losses to non-performing loans ratio decreased to 189.32% at December 31, 2012 from 195.38% at September 30, 2012, but increased from 151.91% at December 31, 2011.
  • The allowance for loan losses to total loans ratio decreased to 2.32% at December 31, 2012 from 2.42% at September 30, 2012 and 2.85% at December 31, 2011.
  • Net charge-offs of $4.7 million recorded in the fourth quarter of 2012 were lower than the $5.2 million recorded in the third quarter of 2012 and the $10.4 million recorded in the fourth quarter of 2011.
  • Provision expense of $3.5 million remained consistent with the amount recorded for the third quarter of 2012, and decreased from the $5.0 million recorded in the fourth quarter of 2011.

Operating Performance: We believe we continue to demonstrate great progress in strengthening our balance sheet, diversifying revenue streams and developing appropriate platforms to sustain profitable organic growth. Our business outreach across our footprint has increased substantially, and we are encouraged by the volumes building in our loan pipeline and the new loan growth experienced in recent quarters.

While our expenses increased as we continued to shape our infrastructure to support our growth strategy, we were able to achieve revenue growth in the fourth quarter of 2012 relative to both the third quarter of 2012 and the fourth quarter of 2011 through diversified sources. Total revenue (net of interest expense and security gains) for the fourth quarter of 2012 was $42.2 million as compared to $40.6 million for the third quarter of 2012 and $41.3 million for the fourth quarter of 2011.

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