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First Busey Announces 2012 Fourth Quarter Earnings And Full Year Results

Stocks in this article: BUSE

Total revenue (net of interest expense and security gains) for the year ended December 31, 2012 was $167.4 million as compared to $169.2 million for the year ended December 31, 2011. Non-interest income revenue sources helped offset declines in net interest income arising from slow asset growth and continued margin pressure. Total non-interest income (net of security gains) represented 39% of total revenue for the year ended December 31, 2012 and 34.8% for the year ended December 31, 2011. Revenues from trust, brokerage and commissions, and remittance processing activities - which are primarily generated through Busey Wealth Management and FirsTech - represented 42% of non-interest income, providing a balance to traditional banking activities in a slow growth economy. We believe the recent addition of Trevett Capital Partners to our family of financial services will broaden our business base and enhance ongoing development of revenue sources.

Busey Wealth Management's net income of $0.7 million for the fourth quarter of 2012 fell slightly from $0.8 million for the third quarter of 2012, but was comparable to the $0.7 million earned in the fourth quarter of 2011. Busey Wealth Management's net income for the year ended December 31, 2012 was $3.4 million as compared to $3.1 million for the year ended December 31, 2011. FirsTech's net income of $0.2 million for the fourth quarter of 2012 remained generally consistent with the amount earned in the third quarter of 2012 and the fourth quarter of 2011. FirsTech's net income for the year ended December 31, 2012 was $0.9 million as compared to $1.4 million for the year ended December 31, 2011 due to decreased volume of online bill payments.

Other specific areas of operating performance are detailed as follows:

  • Net interest income slightly increased to $25.6 million in the fourth quarter of 2012 from $25.5 million in the third quarter of 2012, but decreased from $26.5 million for the fourth quarter of 2011. Net interest income for the year ended December 31, 2012 was $102.1 million compared to $110.4 million for the same period of 2011. Year-over-year net interest income declines were driven by decreases in average loan volumes, which have prompted initiatives to foster quality asset growth. Additional liquidity generated by our growing deposit base has primarily been deployed into our investment portfolio over the past year.
  • Net interest margin fell slightly to 3.20% for the fourth quarter of 2012 as compared to 3.25% for the third quarter of 2012 and 3.44% for the fourth quarter of 2011. The net interest margin for the year ended December 31, 2012 decreased to 3.24% compared to 3.52% for the same period of 2011. The Company continued to experience downward pressure on its yield on interest-earning assets resulting from a protracted period of historically low rates and heightened competition for assets, which has been experienced throughout the banking industry.
  • Residential mortgage loans posted another strong quarter of gains from sales totaling $3.6 million in the fourth quarter of 2012 compared to $3.3 million in the third quarter of 2012 and $3.5 million in the fourth quarter of 2011. During 2012, gains on sales of mortgage loans increased to $12.5 million compared to $10.9 million for the year ended December 31, 2011 resulting from an active market for refinancing.
  • Other non-interest income increased to $1.6 million for the fourth quarter of 2012 from $0.9 million for the third quarter of 2012 and $0.5 million for the fourth quarter of 2011. The increase over the prior quarter was due to $0.7 million of income earned on two of the Company's private equity funds. Other non-interest income for the year ended December 31, 2012 increased to $7.2 million from $3.3 million for the comparable period of 2011. The Company recorded a total of $3.1 million from income earned on private equity funds in 2012. We have successfully invested in various private equity funds for more than ten years.
  • Salaries and wages and employee benefits increased to $17.0 million in the fourth quarter of 2012 as compared to $16.5 million in the third quarter of 2012 and $14.8 million in the fourth quarter of 2011. For the year ended December 31, 2012, salaries and wages and employee benefits totaled $64.8 million as compared to $53.2 million for the same period of 2011. The planned increase in 2012 represents our investment in additional talent to drive future business expansion, which includes our addition of Trevett Capital Partners. Temporary exit costs also added to fourth quarter expense, but these costs were partially offset by cost savings derived in other areas.
  • Data processing expense decreased to $2.7 million in the fourth quarter of 2012 from $3.6 million in the third quarter of 2012, but increased from $2.2 million for the fourth quarter of 2011. As discussed in the prior period release, we incurred various costs to implement our new core system in mid-September of 2012. Thus, the decline in data processing expense from the third quarter was anticipated due to a significantly lower level of conversion related expenses in the fourth quarter. For the year ended December 31, 2012, data processing expense totaled $11.1 million as compared to $8.6 million for the comparable period of 2011. The majority of the year-over-year increase also resulted from the costs of our core system conversion. These costs consisted of conversion fees of $0.4 million, deconversion and licensing fees to our prior provider of $0.7 million, and $0.3 million to enhance/upgrade certain non-core systems for compatibility with the new core system. The remaining increase was attributable to additional vendor fees related to the growth in online and mobile banking as well as enhancements to our internet banking service.
  • Other operating expense for the fourth quarter of 2012 increased to $6.9 million as compared to $5.1 million recorded for the third quarter of 2012 and $5.4 million recorded for the fourth quarter of 2011. The majority of the increase over the prior quarter was due to impairment charges related to previously announced branch closings scheduled for April 2013. The remaining increase was due to various conversion related expenses totaling $0.2 million. For the year ended December 31, 2012, other operating expense increased to $22.6 million as compared to $19.7 million for the comparable period of 2011. In addition to the recorded impairment charge and conversion costs, the remaining increase was due primarily to additional marketing and business development costs. These costs support our previously announced growth strategy initiatives.
  • Our quarterly efficiency ratio increased to 73.39% for the fourth quarter of 2012 from 71.71% for the third quarter of 2012 and 64.83% for the fourth quarter of 2011 due to the planned expense increases discussed in the preceding paragraphs including some non-recurring events. The efficiency ratio for the year ended December 31, 2012 was 68.54%, as compared to 59.03% for the same period of 2011. Efficiency ratios have been influenced throughout the year by a number of events (such as our core conversion and branch closures), which have been discussed either above or in previous earnings releases. Peer data from Federal Reserve system sources suggests that the Company has historically compared favorably to similarly-sized companies in terms of efficiency ratios, with averages for peers ranging between 65% and 67% during 2011 and the third quarter of 2012.   

Overview and Strategy:

The Company takes great pride in the extensive organizational transformation successfully executed by our associates during 2012. From launching a new sales model in our commercial banking division which turned the corner on loan growth, to continued strides in strengthening credit, we believe we have positioned ourselves for greater opportunities in the future. With the creation of Trevett Capital Partners, we have expanded our wealth services capabilities in Florida, while also investing in talent to promote our fee-based wealth, payment processing and cash management business in the Midwest. We also completed a core conversion to support the developing product needs of our customers and the profitability metrics needed to dynamically manage a growing business. 

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