Old National Bancorp (NASDAQ:ONB) reports 4Q18 net income of $47.5 million, diluted EPS of $0.28. Adjusted1 net income of $54.1 million, or $0.32 per diluted share. 2018 annual net income of $190.8 million, diluted EPS of $1.22. Adjusted1 2018 annual net income of $201.8 million, diluted EPS of $1.29.
CEO COMMENTARY:
"Old National's strong 4th quarter – punctuated by the 2nd highest commercial loan production in our history - capped a year of outstanding performance that included $283.2 million in organic commercial loan growth, positive operating leverage and strong credit and capital ratios," said Old National Chairman & CEO Bob Jones. "The 4th quarter also saw us continue to execute our growth strategy by closing on our KleinBank partnership, which effectively doubles our presence in the state of Minnesota."
FOURTH-QUARTER HIGHLIGHTS2:
Net Income
Net income of $47.5 million
Earnings per share of $0.28
Net Interest Income/NIM
Net interest income on a fully taxable equivalent basis was $149.3 million, up 11.7%
Net interest margin on a fully taxable equivalent basis was 3.64% compared to 3.51%
Operating Performance
Pre-provision net revenue1 ("PPNR") was $57.2 million
Adjusted PPNR1 was $67.0 million, up 16.0% over fourth quarter of 2017
Noninterest expense was $150.3 million
Adjusted noninterest expense1 was $126.9 million
Efficiency ratio1 was 70.33%
Adjusted efficiency ratio1 was 63.31%, a 27 basis point improvement from fourth quarter of 2017
Loans and Credit Quality
End-of-period total loans3 were $12,258.8 million compared to $11,314.0 million
End-of-period commercial and industrial loans were $3,233.0 million compared to $2,949.3 million
Fourth quarter total commercial production was $594.0 million; December 31 pipeline was $1.5 billion
Provision for loan losses was $3.4 million compared to $0.8 million
Net charge-offs were $0.6 million, or 0.02% annualized, compared to net charge-offs of $1.7 million
Non-performing loans were 1.43% of total loans compared to 1.47%
Capital Returns
Return on average common equity was 7.59%
Return on average tangible common equity1 was 13.84%
Adjusted return on average tangible common equity1 was 15.62%
Notable Items
Closing of Klein partnership on November 1, 2018
Sale of 10 Wisconsin branches resulting in a $14.0 million net gain
$14.8 million in merger/integration charges and $7.5 million in ONB Foundation funding
$7.6 million in incentive compensation annual true-ups and benefit adjustments driven by higher hospitalization costs
$1.1 million in tax credit amortization
1 Non-GAAP financial measure that Management believes is useful in evaluating the financial results of the Company – please refer to the Non-GAAP reconciliations contained in this release 2 Comparisons are on a linked-quarter basis, unless otherwise noted 3 Includes loans held for sale RESULTS OF OPERATIONS
Old National Bancorp reported fourth-quarter 2018 net income of $47.5 million, or $0.28 per diluted share.
Included in the fourth quarter were pre-tax charges of $14.8 million for merger and integration and $7.5 million in ONB Foundation funding. The current quarter also included a $14.0 million net gain resulting from the sale of 10 Wisconsin branches. Excluding these items from the current quarter and netting out securities gains, Old National would have reported net income of $54.1 million, or $0.32 per share. The fourth quarter also included $7.6 million in incentive compensation annual true-ups and benefit adjustments driven by higher hospitalization costs.
As was previously disclosed, Old National closed on its partnership with Minnesota-based Klein Financial, Inc. (Klein) as of November 1, 2018.
LOANS Pipeline and production remain strong with paydowns impacting outstandings; quarterly balances benefitted from the Klein partnership.
Period-end total loans increased to $12,258.8 million at December 31, 2018 from $11,314.0 million at September 30, 2018.
Total loans acquired though the partnership with Klein were $1,049.1 million as of the date of closing.
Fourth quarter commercial loan production was $594.0 million, second highest in company history, while period-end pipeline totaled $1.5 billion.
On average, total loans in the fourth quarter were $11,972.6 million, up from $11,291.7 million in the third quarter of 2018.
For the full-year 2018, total loans grew $1,122.8 million. Excluding the $1,049.1 million in loans acquired from Klein and the $64.9 million in student loans sold in the second quarter, organic loan growth for the full year was $138.6 million.
For the full-year 2018, total commercial loans increased to $8,191.8 million. Excluding the $836.8 million in commercial loans acquired from Klein, organic commercial loan growth was $283.2 million.
DEPOSITS A low-cost core deposit franchise continues to be one of Old National's strengths.
Period-end total deposits increased to $14,349.9 million at December 31, 2018, from $12,598.2 million at September 30, 2018.
Total deposits assumed from Klein were $1,713.1 million. Total deposits sold during the fourth quarter (as part of the Wisconsin branch sale) totaled $230.6 million. Excluding these transactions, organic deposit growth for the quarter was $269.3 million, or 8.5% annualized.
On average, total deposits in the fourth quarter were $13,620.6 million, compared to $12,597.8 million in the third quarter of 2018.
For the full-year 2018, total deposits grew $1,744.2 million. Excluding the deposits assumed and the deposits sold (as noted above), organic deposit growth was $261.7 million, or 2.1%, for the year.
NET INTEREST INCOME AND MARGIN Controlled deposit costs and the Klein partnership benefited both net interest income and margin in the fourth quarter.
Net interest income increased to $146.2 million in the fourth quarter of 2018 from $130.8 million in the third quarter of 2018, benefitting primarily from the Klein partnership.
The net interest margin on a fully taxable equivalent basis increased 13 basis points to 3.64% compared to 3.51% in the third quarter of 2018.
Accretion income was $11.3 million, or 27 basis points of net interest margin, in the fourth quarter of 2018 compared to $7.3 million, or 19 basis points of net interest margin, in the third quarter of 2018. In the fourth quarter of 2018, accretion income was 5.8% of adjusted total revenue.
The cost of total deposits rose 4 basis points to 0.40% in the fourth quarter of 2018 while the cost of total interest-bearing deposits rose 7 basis points to 0.56%.
CREDIT QUALITY Strong credit quality remains a hallmark of the Old National franchise, with larger quarterly provision driven mostly by two specific reserves.
Asset quality remained strong with net charge-offs in the fourth quarter of $0.6 million, or 0.02% of total average loans, and 30-89 day delinquencies of 0.39%.
Provision expense for the fourth quarter was $3.4 million, driven primarily by two specific reserves.
Non-performing loans as a percentage of total loans was 1.43%.
In accordance with current accounting practices, the loans acquired from recent acquisitions were recorded at fair value with no allowance recorded at the acquisition date. As of December 31, 2018, the remaining discount on these acquired loans was $121.3 million.
The allowance for loan losses was $55.5 million, or 0.45% of total loans at December 31, 2018.
NONINTEREST INCOME Noninterest income included a gain on sale of Wisconsin branches and demonstrated normal seasonal patterns in several fee income businesses.
Total noninterest income for the fourth quarter of 2018 was $58.2 million, an increase of $12.2 million from the third quarter of 2018.
Included in noninterest income in the fourth quarter was a net gain of $14.0 million from the sale of 10 Wisconsin branches.
Klein contributed $2.8 million to noninterest income during the quarter (for the two months since the closing of the partnership), which was offset by lower capital markets income (down $1.9 million) and the normal seasonal decline in mortgage banking revenue.
Securities losses were $0.4 million, compared to securities gains of $0.1 million in the third quarter of 2018.
NONINTEREST EXPENSE Fourth quarter results demonstrated continued discipline with respect to expense management, helping to drive positive operating leverage1.
Noninterest expense for the fourth quarter of 2018 was $150.3 million and included $14.8 million in merger and integration charges, $7.5 million in ONB Foundation funding and $1.1 million in tax credit amortization.
Excluding these items, adjusted noninterest expense for the fourth quarter was $126.9 million, compared to the $108.4 million in adjusted noninterest expense in the third quarter of 2018.
Klein noninterest expenses were $7.4 million during the fourth quarter (for the two months since the closing of the partnership).
The fourth quarter of 2018 also included $7.6 million in incentive compensation true-ups and benefit adjustments, which is included in adjusted noninterest expense defined above.
The fourth quarter efficiency ratio was 70.33%, while the adjusted efficiency ratio was 63.31%.
For the full year 2018, the efficiency ratio was 67.74%, while the adjusted efficiency ratio was 61.56%.
Adjusted operating leverage1 was +215 basis points in for the full-year 2018 as compared to 2017.
INCOME TAXES
On a fully taxable-equivalent basis, income tax expense in the fourth quarter was $6.3 million, resulting in a 11.7% FTE tax rate.
CAPITAL Strong quarterly earnings drove capital ratios higher.
At the end of the fourth quarter, total risk-based capital was 12.3% and regulatory tier 1 capital was 11.4%.
Tangible common equity to tangible assets was 8.47% at the end of the fourth quarter compared to 8.08% in the third quarter of 2018.
NON-GAAP RECONCILIATIONS
($ in millions, except EPS, shares in 000s)
4Q18
Adjustments4
Adjusted 4Q18
Total Revenues (FTE)
$
207.5
$
(13.6
)
$
193.9
Less: Provision for Loan Losses
(3.4
)
-
(3.4
)
Less: Noninterest Expenses
(150.3
)
22.3
(128.0
)
Income before Income Taxes (FTE)
$
53.8
$
8.7
$
62.5
Income Taxes
(6.3
)
(2.1
)
(8.4
)
Net Income
$
47.5
$
6.6
$
54.1
Average Shares Outstanding
167,992
-
167,992
Earnings Per Share
$
0.28
$
0.04
$
0.32
4 Tax-effect calculations use the 2018 statutory FTE tax rates (federal + state)
($ in millions, except EPS, shares in 000s)
2018
Adjustments4
Adjusted 2018
Total Revenues (FTE)
$
744.3
$
(18.7
)
$
725.6
Less: Provision for Loan Losses
(7.0
)
-
(7.0
)
Less: Noninterest Expenses
(517.3
)
33.3
(484.0
)
Income before Income Taxes (FTE)
$
220.0
$
14.6
$
234.6
Income Taxes
(29.2
)
(3.6
)
(32.8
)
Net Income
$
190.8
$
11.0
$
201.8
Average Shares Outstanding
156,539
-
156,539
Earnings Per Share
$
1.22
$
0.07
$
1.29
4 Tax-effect calculations use the 2018 statutory FTE tax rates (federal + state)
($ in millions)
4Q18
3Q18
Net Interest Income
$
146.2
$
130.8
FTE Adjustment
3.1
2.8
Net Interest Income (FTE)
$
149.3
$
133.6
Average Earning Assets
$
16,398.3
$
15,213.4
Net Interest Margin (FTE)
3.64
%
3.51
%
($ in millions)
4Q18
3Q18
Net Interest Income
$
146.2
$
130.8
FTE Adjustment
3.1
2.8
Net Interest Income (FTE)
$
149.3
$
133.6
Total Noninterest Income
$
58.2
$
46.0
Noninterest Expense
150.3
119.4
Pre-Provision Net Revenue
$
57.2
$
60.2
Less: Securities Gains/Losses
0.4
(0.1
)
Less: Gain on Branch Actions
(14.0
)
(0.2
)
Add: Merger and Integration Charges
14.8
1.7
Add: Branch Action Charges and Severance
-
0.1
Add: ONB Foundation Funding
7.5
-
Add: Amortization of Tax Credit Investments
1.1
9.2
Adjusted Pre-Provision Net Revenue
$
67.0
$
70.9
($ in millions)
4Q18
3Q18
4Q17
2018
2017
Noninterest Expense
$
150.3
$
119.4
$
140.4
$
517.3
$
448.8
Less: Merger and Integration Charges
(14.8
)
(1.7
)
(11.9
)
(21.3
)
(12.3
)
Less: Branch Action Charges, Severance, ONB Foundation Funding and Client Experience Initiative Charges
(7.5
)
(0.1
)
(6.6
)
(12.0
)
(14.0
)
Noninterest Expense less Charges
$
128.0
$
117.6
$
121.9
$
484.0
$
422.5
Less: Amortization of Tax Credit Investments
(1.1
)
(9.2
)
(11.7
)
(22.9
)
(11.7
)
Adjusted Noninterest Expense
$
126.9
$
108.4
$
110.2
$
461.1
$
410.8
Less: Intangible Amortization
(4.1
)
(3.3
)
(3.4
)
(14.4
)
(11.8
)
Adjusted Noninterest Expense Less Intangible Amortization
$
122.8
$
105.1
$
106.8
$
446.7
$
399.0
Net Interest Income
$
146.2
$
130.8
$
118.6
$
537.5
$
437.2
FTE Adjustment
3.1
2.8
6.1
11.5
23.1
Net Interest Income (FTE)
$
149.3
$
133.6
$
124.7
$
549.0
$
460.3
Total Noninterest Income
$
58.2
$
46.0
$
44.8
$
195.3
$
183.3
Total Revenue (FTE)
$
207.5
$
179.6
$
169.5
$
744.3
$
643.6
Less: Securities Gains/Losses
0.4
(0.1
)
(1.6
)
(2.0
)
(9.1
)
Less: Gain on Student Loan Sale
-
-
-
(2.2
)
-
Less: Gain on Branch Actions
(14.0
)
(0.2
)
-
(14.5
)
(0.2
)
Adjusted Total Revenue (FTE)
$
193.9
$
179.3
$
167.9
$
725.6
$
634.3
Efficiency Ratio
70.33
%
64.71
%
81.60
%
67.74
%
68.87
%
Adjusted Efficiency Ratio
63.31
%
58.67
%
63.58
%
61.56
%
62.90
%
Operating Leverage5 (basis points)
1,536
40
Adjusted Operating Leverage6 (basis points)
30
215
5 Year-over-year basis point change in noninterest expenses plus change in total revenue 6 Year-over-year basis point change in adjusted noninterest expense plus change in adjusted total revenue
($ in millions)
4Q18
3Q18
Net Income (Loss)
$
47.5
$
51.3
Add: Intangible Amortization (net of tax7)
3.3
2.6
Tangible Net Income (Loss)
$
50.8
$
53.9
Less: Securities Gains/Losses (net of tax7)
0.3
(0.1
)
Less: Gain on Branch Sale (net of tax7)
(10.6
)
-
Add: Merger & Integration Charges (net of tax7)
11.2
1.3
Add: Branch Action Charges (net of gains) and Severance (net of tax7)
-
(0.1
)
Add: ONB Foundation Funding (net of tax7)
5.7
-
Adjusted Tangible Net Income (Loss)
$
57.4
$
55.0
Average Total Shareholders' Equity
$
2,503.8
$
2,212.7
Less: Average Goodwill
(969.4
)
(828.8
)
Less: Average Intangibles
(66.9
)
(43.7
)
Average Tangible Shareholders' Equity
$
1,467.5
$
1,340.2
Return on Average Tangible Common Equity
13.84
%
16.10
%
Adjusted Return on Average Tangible Common Equity
15.62
%
16.42
%
7Tax-effect calculations use the 2018 statutory FTE tax rates (federal + state)
CONFERENCE CALL AND WEBCAST
Old National will host a conference call and live webcast at 7:00 a.m. Central Time on Tuesday, January 22, 2019, to review fourth-quarter and full-year 2018 financial results. The live audio web cast of the call, along with the corresponding presentation slides, will be available on the Company's Investor Relations web page at oldnational.com and will be archived there for 12 months. A replay of the call will also be available from 10:00 a.m. Central Time on January 22 through February 5. To access the replay, dial 1-855-859-2056, Conference ID Code 5499497.
ABOUT OLD NATIONAL Old National Bancorp (NASDAQ:ONB) is the holding company of Old National Bank. Headquartered in Evansville with $19.7 billion in assets, it is a top 100 U.S. bank, the largest Indiana-based bank and has been recognized as a World's Most Ethical Company by the Ethisphere Institute for seven consecutive years. For nearly 185 years, Old National has been a community bank committed to building long-term, highly valued relationships with clients. With locations in Indiana, Kentucky, Michigan, Minnesota and Wisconsin, Old National provides retail and commercial banking services along with comprehensive wealth management, investment and capital markets services. For information and financial data, please visit Investor Relations at oldnational.com.
USE OF NON-GAAP FINANCIAL MEASURES This earnings release contains GAAP financial measures and non-GAAP financial measures where management believes it to be helpful in understanding Old National's results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in the tables of this release.
FORWARD-LOOKING STATEMENT
This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, descriptions of Old National Bancorp's ("Old National's") financial condition, results of operations, asset and credit quality trends and profitability. Forward-looking statements can be identified by the use of the words "anticipate," "believe," "expect," "intend," "could" and "should," and other words of similar meaning. These forward-looking statements express management's current expectations or forecasts of future events and, by their nature, are subject to risks and uncertainties. There are a number of factors that could cause actual results to differ materially from those in such statements. Factors that might cause such a difference include, but are not limited to: expected cost savings, synergies and other financial benefits from the merger with Klein that might not be realized within the expected timeframes and costs or difficulties relating to integration matters might be greater than expected; market, economic, operational, liquidity, credit and interest rate risks associated with Old National's business; competition; government legislation and policies (including the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act and its related regulations); ability of Old National to execute its business plan; changes in the economy which could materially impact credit quality trends and the ability to generate loans and gather deposits; failure or circumvention of our internal controls; failure or disruption of our information systems; significant changes in accounting, tax or regulatory practices or requirements; new legal obligations or liabilities or unfavorable resolutions of litigations; disruptive technologies in payment systems and other services traditionally provided by banks; computer hacking and other cybersecurity threats; other matters discussed in this press release; and other factors identified in our Annual Report on Form 10-K and other periodic filings with the SEC. These forward-looking statements are made only as of the date of this press release, and Old National does not undertake an obligation to release revisions to these forward-looking statements to reflect events or conditions after the date of this press release.
Financial Highlights (unaudited)
($ and shares in thousands, except per share data)
Three Months Ended
Twelve Months Ended
December 31,
September 30,
December 31,
December 31,
December 31,
2018
2018
2017
2018
2017
Income Statement
Net interest income
$
146,225
$
130,842
$
118,556
$
537,602
$
437,168
Provision for loan losses
3,390
750
1,037
6,966
3,050
Noninterest income
58,154
45,957
44,825
195,305
183,382
Noninterest expense
150,268
119,376
140,432
517,261
448,836
Net income (loss)
47,498
51,348
(18,493
)
190,830
95,725
Per Common Share Data(Diluted)
Net income (loss) available to common shareholders
$
0.28
$
0.34
$
(0.13
)
$
1.22
$
0.69
Average diluted shares outstanding
167,992
152,784
146,875
156,539
138,513
Book value
15.36
14.58
14.17
15.36
14.17
Stock price
15.40
19.30
17.45
15.40
17.45
Dividend payout ratio
46
%
38
%
N/M
42
%
75
%
Tangible common book value (1)
9.00
8.86
8.37
9.00
8.37
Performance Ratios
Return on average assets
1.01
%
1.18
%
-0.45
%
1.07
%
0.63
%
Return on average common equity
7.59
%
9.28
%
-3.51
%
8.42
%
4.98
%
Return on average tangible common equity (1)
13.84
%
16.10
%
-5.05
%
14.97
%
8.59
%
Net interest margin (FTE)
3.64
%
3.51
%
3.47
%
3.54
%
3.48
%
Efficiency ratio (2)
70.33
%
64.71
%
81.60
%
67.74
%
68.87
%
Net charge-offs (recoveries) to average loans
0.02
%
0.06
%
0.03
%
0.02
%
0.03
%
Allowance for loan losses to ending loans
0.45
%
0.47
%
0.45
%
0.45
%
0.45
%
Non-performing loans to ending loans
1.43
%
1.47
%
1.30
%
1.43
%
1.30
%
Balance Sheet
Total loans
$
12,243,892
$
11,292,659
$
11,118,121
$
12,243,892
$
11,118,121
Total assets
19,728,435
17,567,759
17,518,292
19,728,435
17,518,292
Total deposits
14,349,949
12,598,200
12,605,764
14,349,949
12,605,764
Total borrowed funds
2,493,793
2,576,039
2,578,204
2,493,793
2,578,204
Total shareholders' equity
2,689,570
2,220,680
2,154,397
2,689,570
2,154,397
Capital Ratios (1)
Risk-based capital ratios (EOP):
Tier 1 common equity
11.4
%
11.1
%
10.5
%
11.4
%
10.5
%
Tier 1
11.4
%
11.1
%
10.4
%
11.4
%
10.4
%
Total
12.3
%
12.1
%
11.4
%
12.3
%
11.4
%
Leverage ratio (to average assets)
9.2
%
8.6
%
8.3
%
9.2
%
8.3
%
Total equity to assets (averages)
13.28
%
12.69
%
12.69
%
12.74
%
12.57
%
Tangible common equity to tangible assets
8.47
%
8.08
%
7.65
%
8.47
%
7.65
%
Nonfinancial Data
Full-time equivalent employees
2,892
2,554
2,801
2,892
2,801
Number of branches
191
182
191
191
191
(1) See "Non-GAAP Measures" table.
(2) Efficiency ratio is defined as noninterest expense before amortization of intangibles as a percent of FTE net interest income and
noninterest revenues, excluding net gains from securities transactions. This presentation excludes amortization of intangibles
and net securities gains, as is common in other company releases, and better aligns with true operating performance.
FTE - Fully taxable equivalent basis EOP - End of period actual balances N/M - Not meaningful
Income Statement (unaudited)
($ and shares in thousands, except per share data)
Three Months Ended
Twelve Months Ended
December 31,
September 30,
December 31,
December 31,
December 31,
2018
2018
2017
2018
2017
Interest income
$
175,234
$
155,369
$
135,134
$
632,045
$
495,336
Less: interest expense
29,009
24,527
16,578
94,443
58,168
Net interest income
146,225
130,842
118,556
537,602
437,168
Provision for loan losses
3,390
750
1,037
6,966
3,050
Net interest income after provision for loan losses
142,835
130,092
117,519
530,636
434,118
Wealth management fees
9,069
9,022
9,801
36,863
37,316
Service charges on deposit accounts
11,474
11,028
10,913
44,026
41,331
Debit card and ATM fees
5,565
4,706
4,756
20,216
17,676
Mortgage banking revenue
3,928
4,348
3,933
17,657
18,449
Investment product fees
5,369
5,073
5,791
20,539
20,977
Capital markets income
840
2,700
923
4,934
6,544
Company-owned life insurance
2,591
2,958
2,366
10,584
8,654
Other income
5,700
5,986
4,676
24,402
23,083
Net gain on branch divestitures
13,989
-
-
13,989
-
Gains (losses) on sales of securities
(357
)
135
1,588
2,060
9,135
Gains (losses) on derivatives
(14
)
1
78
35
217
Total noninterest income
58,154
45,957
44,825
195,305
183,382
Salaries and employee benefits
87,346
63,158
74,785
281,275
246,738
Occupancy
13,210
12,578
12,168
51,941
46,511
Equipment
3,916
3,652
3,498
14,861
13,560
Marketing
4,782
3,406
3,803
15,847
13,172
Data processing
9,418
8,628
8,776
36,170
32,306
Communication
2,537
2,473
2,419
10,846
9,284
Professional fees
5,615
3,235
5,523
14,503
16,840
Loan expenses
1,877
1,564
1,730
7,028
6,596
Supplies
705
707
686
3,037
2,406
FDIC assessment
2,110
2,722
2,666
10,638
9,480
Other real estate owned expense
176
157
741
878
3,376
Amortization of intangibles
4,134
3,283
3,399
14,442
11,841
Amortization of tax credit investments
1,142
9,233
11,733
22,949
11,733
Other expense
13,300
4,580
8,505
32,846
24,993
Total noninterest expense
150,268
119,376
140,432
517,261
448,836
Income before income taxes
50,721
56,673
21,912
208,680
168,664
Income tax expense
3,223
5,325
40,405
17,850
72,939
Net income (loss)
$
47,498
$
51,348
$
(18,493
)
$
190,830
$
95,725
Diluted Earnings Per Share
Net income (loss)
$
0.28
$
0.34
$
(0.13
)
$
1.22
$
0.69
Average Common Shares Outstanding
Basic
167,044
151,930
146,073
155,675
137,821
Diluted
167,992
152,784
146,875
156,539
138,513
Common shares outstanding at end of period
175,141
152,352
152,040
175,141
152,040
Balance Sheet (unaudited)
($ in thousands)
December 31,
September 30,
December 31,
2018
2018
2017
Assets
Federal Reserve Bank account
$
26,182
$
65,878
$
54,361
Money market investments
6,980
5,859
13,318
Investments:
Treasury and government-sponsored agencies
707,438
690,709
669,838
Mortgage-backed securities
2,336,415
1,640,254
1,674,584
States and political subdivisions
1,245,657
1,099,535
1,207,353
Other securities
488,802
496,199
453,765
Total investments
4,778,312
3,926,697
4,005,540
Loans held for sale, at fair value
14,911
21,384
17,930
Loans:
Commercial
3,232,970
2,949,277
2,717,269
Commercial and agriculture real estate
4,958,851
4,481,554
4,354,552
Consumer:
Home equity
589,322
498,325
507,507
Other consumer loans
1,214,345
1,197,300
1,371,740
Subtotal of commercial and consumer loans
9,995,488
9,126,456
8,951,068
Residential real estate
2,248,404
2,166,203
2,167,053
Total loans
12,243,892
11,292,659
11,118,121
Total earning assets
17,070,277
15,312,477
15,209,270
Allowance for loan losses
(55,461
)
(52,713
)
(50,381
)
Non-earning Assets:
Cash and due from banks
284,003
215,024
222,753
Premises and equipment, net
485,912
450,253
458,074
Goodwill and other intangible assets
1,113,274
870,938
881,147
Company-owned life insurance
444,224
405,245
403,753
Net deferred tax assets
87,048
94,667
110,857
Loan servicing rights
24,497
24,336
24,661
Other real estate owned and repossessed personal property
3,232
3,563
8,810
Other assets
271,429
243,969
249,348
Total non-earning assets
2,713,619
2,307,995
2,359,403
Total assets
$
19,728,435
$
17,567,759
$
17,518,292
Liabilities and Equity
Noninterest-bearing demand deposits
$
3,965,380
$
3,588,370
$
3,680,807
Interest-bearing:
Checking and NOW accounts
3,788,339
3,011,544
3,115,822
Savings accounts
2,944,092
2,920,712
3,035,622
Money market accounts
1,627,882
1,185,439
1,139,077
Other time deposits
1,845,149
1,667,055
1,470,118
Total core deposits
14,170,842
12,373,120
12,441,446
Brokered CD's
179,107
225,080
164,318
Total deposits
14,349,949
12,598,200
12,605,764
Federal funds purchased and interbank borrowings
270,135
450,031
335,033
Securities sold under agreements to repurchase
362,294
319,831
384,810
Federal Home Loan Bank advances
1,613,481
1,554,515
1,609,579
Other borrowings
247,883
251,662
248,782
Total borrowed funds
2,493,793
2,576,039
2,578,204
Accrued expenses and other liabilities
195,123
172,840
179,927
Total liabilities
17,038,865
15,347,079
15,363,895
Common stock, surplus, and retained earnings
2,734,520
2,300,610
2,204,669
Accumulated other comprehensive income (loss), net of tax
(44,950
)
(79,930
)
(50,272
)
Total shareholders' equity
2,689,570
2,220,680
2,154,397
Total liabilities and shareholders' equity
$
19,728,435
$
17,567,759
$
17,518,292
Average Balance Sheet and Interest Rates (unaudited)
($ in thousands)
Three Months Ended
Three Months Ended
Three Months Ended
December 31, 2018
September 30, 2018
December 31, 2017
Average
Income (1)/
Yield/
Average
Income (1)/
Yield/
Average
Income (1)/
Yield/
Earning Assets:
Balance
Expense
Rate
Balance
Expense
Rate
Balance
Expense
Rate
Money market and other interest-earning
investments
$
39,207
$
205
2.07
%
$
35,928
$
140
1.54
%
$
54,611
$
87
0.63
%
Investments:
Treasury and government-sponsored agencies
694,409
3,874
2.23
%
685,919
3,748
2.19
%
611,982
3,031
1.98
%
Mortgage-backed securities
2,011,275
13,688
2.72
%
1,595,630
9,381
2.35
%
1,573,578
8,139
2.07
%
States and political subdivisions
1,187,404
11,147
3.76
%
1,103,347
10,110
3.67
%
1,178,113
13,312
4.52
%
Other securities
493,426
4,017
3.26
%
500,837
4,116
3.29
%
454,824
3,126
2.75
%
Total investments
4,386,514
32,726
2.98
%
3,885,733
27,355
2.82
%
3,818,497
27,608
2.89
%
Loans: (2)
Commercial
3,133,153
37,358
4.67
%
2,928,744
33,381
4.46
%
2,480,987
26,577
4.19
%
Commercial and agriculture real estate
4,834,589
65,461
5.30
%
4,465,105
57,377
5.03
%
3,989,684
47,683
4.68
%
Consumer:
Home equity
562,801
7,159
5.05
%
495,161
6,070
4.86
%
502,837
5,442
4.29
%
Other consumer loans
1,203,436
11,702
3.86
%
1,215,583
11,263
3.68
%
1,371,986
12,248
3.54
%
Subtotal commercial and consumer loans
9,733,979
121,680
4.96
%
9,104,593
108,091
4.71
%
8,345,494
91,950
4.37
%
Residential real estate loans
2,238,588
23,672
4.23
%
2,187,130
22,536
4.12
%
2,170,900
21,628
3.99
%
Total loans
11,972,567
145,352
4.78
%
11,291,723
130,627
4.56
%
10,516,394
113,578
4.26
%
Total earning assets
$
16,398,288
$
178,283
4.30
%
$
15,213,384
$
158,122
4.11
%
$
14,389,502
$
141,273
3.88
%
Less: Allowance for loan losses
(53,045
)
(53,734
)
(50,601
)
Non-earning Assets:
Cash and due from banks
$
232,360
$
205,446
$
201,520
Other assets
2,275,907
2,068,469
2,046,544
Total assets
$
18,853,510
$
17,433,565
$
16,586,965
Interest-Bearing Liabilities:
Checking and NOW accounts
$
3,391,630
$
2,004
0.23
%
$
3,026,289
$
1,180
0.15
%
$
2,905,440
$
714
0.10
%
Savings accounts
2,919,900
2,225
0.30
%
2,974,147
2,119
0.28
%
3,010,761
1,324
0.17
%
Money market accounts
1,482,022
1,922
0.51
%
1,153,906
1,254
0.43
%
994,574
394
0.16
%
Other time deposits
1,769,243
6,519
1.46
%
1,669,039
5,780
1.37
%
1,443,050
3,203
0.88
%
Total interest-bearing deposits
9,562,795
12,670
0.53
%
8,823,381
10,333
0.46
%
8,353,825
5,635
0.27
%
Brokered CD's
193,455
1,024
2.10
%
178,283
856
1.90
%
154,521
489
1.26
%
Total interest-bearing deposits and CD's
9,756,250
13,694
0.56
%
9,001,664
11,189
0.49
%
8,508,346
6,124
0.29
%
Federal funds purchased and interbank borrowings
312,730
1,938
2.46
%
238,514
1,191
1.98
%
172,838
533
1.22
%
Securities sold under agreements to repurchase
351,392
634
0.72
%
352,998
535
0.60
%
370,095
400
0.43
%
Federal Home Loan Bank advances
1,649,304
9,441
2.27
%
1,624,661
8,880
2.17
%
1,543,690
6,871
1.77
%
Other borrowings
250,926
3,302
5.26
%
250,255
2,732
4.37
%
241,695
2,650
4.39
%
Total borrowed funds
2,564,352
15,315
2.37
%
2,466,428
13,338
2.15
%
2,328,318
10,454
1.78
%
Total interest-bearing liabilities
$
12,320,602
$
29,009
0.93
%
$
11,468,092
$
24,527
0.85
%
$
10,836,664
$
16,578
0.61
%
Noninterest-Bearing Liabilities
Demand deposits
$
3,864,302
$
3,596,159
$
3,486,412
Other liabilities
164,771
156,614
159,243
Shareholders' equity
2,503,835
2,212,700
2,104,646
Total liabilities and shareholders' equity
$
18,853,510
$
17,433,565
$
16,586,965
Net interest rate spread
3.37
%
3.26
%
3.27
%
Net interest margin (FTE)
3.64
%
3.51
%
3.47
%
FTE adjustment
$
3,049
$
2,753
$
6,139
(1) Interest income is reflected on a fully taxable equivalent basis (FTE).
(2) Includes loans held for sale.
Average Balance Sheet and Interest Rates (unaudited)
($ in thousands)
Twelve Months Ended
Twelve Months Ended
December 31, 2018
December 31, 2017
Average
Income (1)/
Yield/
Average
Income (1)/
Yield/
Earning Assets:
Balance
Expense
Rate
Balance
Expense
Rate
Money market and other interest-earning
investments
$
48,240
$
630
1.31
%
$
35,584
$
258
0.72
%
Investments:
Treasury and government-sponsored agencies
673,171
14,433
2.14
%
578,640
11,453
1.98
%
Mortgage-backed securities
1,707,646
41,493
2.43
%
1,506,677
30,782
2.04
%
States and political subdivisions
1,153,315
42,326
3.67
%
1,134,532
53,359
4.70
%
Other securities
490,464
15,633
3.19
%
450,127
11,863
2.64
%
Total investments
4,024,596
113,885
2.83
%
3,669,976
107,457
2.93
%
Loans: (2)
Commercial
2,924,878
131,471
4.49
%
2,083,779
85,747
4.11
%
Commercial and agriculture real estate
4,536,897
235,876
5.20
%
3,426,757
171,483
5.00
%
Consumer:
Home equity
513,111
25,029
4.88
%
483,310
20,003
4.14
%
Other consumer loans
1,258,253
46,660
3.71
%
1,392,221
48,139
3.46
%
Subtotal commercial and consumer loans
9,233,139
439,036
4.76
%
7,386,067
325,372
4.41
%
Residential real estate loans
2,195,078
89,888
4.09
%
2,146,279
85,340
3.98
%
Total loans
11,428,217
528,924
4.63
%
9,532,346
410,712
4.31
%
Total earning assets
$
15,501,053
$
643,439
4.15
%
$
13,237,906
$
518,427
3.92
%
Less: Allowance for loan losses
(52,316
)
(50,845
)
Non-earning Assets:
Cash and due from banks
$
210,716
$
207,677
Other assets
2,130,588
1,907,963
Total assets
$
17,790,041
$
15,302,701
Interest-Bearing Liabilities:
Checking and NOW accounts
$
3,146,309
$
4,973
0.16
%
$
2,676,760
$
2,224
0.08
%
Savings accounts
2,995,484
7,464
0.25
%
2,964,875
4,980
0.17
%
Money market accounts
1,225,220
4,424
0.36
%
762,540
831
0.11
%
Other time deposits
1,654,548
21,012
1.27
%
1,363,529
10,907
0.80
%
Total interest-bearing deposits
9,021,561
37,873
0.42
%
7,767,704
18,942
0.24
%
Brokered CD's
185,426
3,404
1.84
%
123,548
1,414
1.14
%
Total interest-bearing deposits and CD's
9,206,987
41,277
0.45
%
7,891,252
20,356
0.26
%
Federal funds purchased and interbank borrowings
238,408
4,793
2.01
%
187,426
1,966
1.05
%
Securities sold under agreements to repurchase
344,964
1,962
0.57
%
336,539
1,270
0.38
%
Federal Home Loan Bank advances
1,665,689
34,925
2.10
%
1,481,314
24,818
1.68
%
Other borrowings
249,832
11,486
4.60
%
224,793
9,758
4.34
%
Total borrowed funds
2,498,893
53,166
2.13
%
2,230,072
37,812
1.70
%
Total interest-bearing liabilities
$
11,705,880
$
94,443
0.81
%
$
10,121,324
$
58,168
0.57
%
Noninterest-Bearing Liabilities
Demand deposits
$
3,657,234
$
3,111,672
Other liabilities
159,600
146,060
Shareholders' equity
2,267,327
1,923,645
Total liabilities and shareholders' equity
$
17,790,041
$
15,302,701
Net interest rate spread
3.34
%
3.35
%
Net interest margin (FTE)
3.54
%
3.48
%
FTE adjustment
$
11,394
$
23,091
(1) Interest income is reflected on a fully taxable equivalent basis (FTE).
(2) Includes loans held for sale.
Asset Quality (EOP) (unaudited)
($ in thousands)
Three Months Ended
Twelve Months Ended
December 31,
September 30,
December 31,
December 31,
December 31,
2018
2018
2017
2018
2017
Beginning allowance for loan losses
$
52,713
$
53,660
$
50,169
$
50,381
$
49,808
Provision for loan losses
3,390
750
1,037
6,966
3,050
Gross charge-offs
(2,969
)
(4,261
)
(3,278
)
(12,969
)
(12,717
)
Gross recoveries
2,327
2,564
2,453
11,083
10,240
Net (charge-offs) recoveries
(642
)
(1,697
)
(825
)
(1,886
)
(2,477
)
Ending allowance for loan losses
$
55,461
$
52,713
$
50,381
$
55,461
$
50,381
Net charge-offs (recoveries) / average loans (1)
0.02
%
0.06
%
0.03
%
0.02
%
0.03
%
Average loans outstanding (1)
$
11,967,241
$
11,284,531
$
10,509,552
$
11,422,967
$
9,525,888
EOP loans outstanding (1)
12,243,892
$
11,292,659
$
11,118,121
$
12,243,892
$
11,118,121
Allowance for loan losses / EOP loans (1)
0.45
%
0.47
%
0.45
%
0.45
%
0.45
%
Underperforming Assets:
Loans 90 Days and over (still accruing)
$
1,353
$
980
$
894
$
1,353
$
894
Non-performing loans:
Nonaccrual loans (2)
157,484
148,816
124,927
157,484
124,927
Renegotiated loans
17,356
17,547
19,589
17,356
19,589
Total non-performing loans
174,840
166,363
144,516
174,840
144,516
Foreclosed properties
3,232
3,563
8,810
3,232
8,810
Total underperforming assets
$
179,425
$
170,906
$
154,220
$
179,425
$
154,220
Classified and Criticized Assets:
Nonaccrual loans (2)
157,484
148,816
124,927
157,484
124,927
Substandard accruing loans
175,948
107,257
100,762
175,948
100,762
Loans 90 days and over (still accruing)
1,353
980
894
1,353
894
Total classified loans - "problem loans"
$
334,785
$
257,053
$
226,583
$
334,785
$
226,583
Other classified assets
2,820
3,070
4,556
2,820
4,556
Criticized loans - "special mention loans"
238,752
181,165
188,085
238,752
188,085
Total classified and criticized assets
$
576,357
$
441,288
$
419,224
$
576,357
$
419,224
Non-performing loans / EOP loans (1)
1.43
%
1.47
%
1.30
%
1.43
%
1.30
%
Allowance to non-performing loans (3)
32
%
32
%
35
%
32
%
35
%
Under-performing assets / EOP loans (1)
1.47
%
1.51
%
1.39
%
1.47
%
1.39
%
EOP total assets
$
19,728,435
$
17,567,759
$
17,518,292
$
19,728,435
$
17,518,292
Under-performing assets / EOP assets
0.91
%
0.97
%
0.88
%
0.91
%
0.88
%
EOP - End of period actual balances
(1) Excludes loans held for sale.
(2) Includes renegotiated loans totaling $26.3 million at December 31, 2018, $29.9 million at September 30, 2018, and $34.0 million
at December 31, 2017.
(3) Includes acquired loans that were recorded at fair value in accordance with ASC 805 at the date of acquisition. As such, the
credit risk was incorporated in the fair value recorded and no allowance for loan losses was recorded on the acquisition date.
Non-GAAP Measures (unaudited)
($ in thousands)
Three Months Ended
Twelve Months Ended
December 31,
September 30,
December 31,
December 31,
December 31,
2018
2018
2017
2018
2017
Actual End of Period Balances
GAAP shareholders' equity
$
2,689,570
$
2,220,680
$
2,154,397
$
2,689,570
$
2,154,397
Deduct:
Goodwill
1,036,258
828,804
828,051
1,036,258
828,051
Intangibles
77,016
42,134
53,096
77,016
53,096
1,113,274
870,938
881,147
1,113,274
881,147
Tangible shareholders' equity
$
1,576,296
$
1,349,742
$
1,273,250
$
1,576,296
$
1,273,250
Average Balances
GAAP shareholders' equity
$
2,503,835
$
2,212,700
$
2,104,646
$
2,267,327
$
1,923,645
Deduct:
Goodwill
969,403
828,804
776,862
864,079
685,729
Intangibles
66,927
43,685
37,802
52,209
34,392
1,036,330
872,489
814,664
916,288
720,121
Average tangible shareholders' equity
$
1,467,505
$
1,340,211
$
1,289,982
$
1,351,039
$
1,203,524
Actual End of Period Balances
GAAP assets
$
19,728,435
$
17,567,759
$
17,518,292
$
19,728,435
$
17,518,292
Add:
Trust overdrafts
11
118
59
11
59
Deduct:
Goodwill
1,036,258
828,804
828,051
1,036,258
828,051
Intangibles
77,016
42,134
53,096
77,016
53,096
1,113,274
870,938
881,147
1,113,274
881,147
Tangible assets
$
18,615,172
$
16,696,939
$
16,637,204
$
18,615,172
$
16,637,204
Risk-weighted assets
$
14,248,562
$
12,715,665
$
12,491,430
$
14,248,562
$
12,491,430
GAAP net income (loss)
$
47,498
$
51,348
$
(18,493
)
$
190,830
$
95,725
Add:
Amortization of intangibles (net of tax)
3,266
2,593
2,210
11,410
7,697
Tangible net income (loss)
$
50,764
$
53,941
$
(16,283
)
$
202,240
$
103,422
Tangible Ratios
Return on tangible common equity
12.88
%
15.99
%
-5.12
%
12.83
%
8.12
%
Return on average tangible common equity
13.84
%
16.10
%
-5.05
%
14.97
%
8.59
%
Return on tangible assets
1.09
%
1.29
%
-0.39
%
1.09
%
0.62
%
Tangible common equity to tangible assets
8.47
%
8.08
%
7.65
%
8.47
%
7.65
%
Tangible common equity to risk-weighted assets
11.06
%
10.61
%
10.19
%
11.06
%
10.19
%
Tangible common book value (1)
9.00
8.86
8.37
9.00
8.37
Tangible common equity presentation includes other comprehensive income as is common in other company releases.
(1) Tangible common shareholders' equity divided by common shares issued and outstanding at period-end.
Tier 1 capital
$
1,617,936
$
1,409,775
$
1,298,327
$
1,617,936
$
1,298,327
Deduct:
Tier 1 capital adjustments
-
-
(10,000
)
-
(10,000
)
-
-
(10,000
)
-
(10,000
)
Tier 1 common equity
$
1,617,936
$
1,409,775
$
1,308,327
$
1,617,936
$
1,308,327
Risk-weighted assets
14,248,562
12,715,665
12,491,430
14,248,562
12,491,430
Tier 1 common equity to risk-weighted assets
11.36
%
11.09
%
10.47
%
11.36
%
10.47
%
Media: Kathy A. Schoettlin (812) 465-7269 Investors: Lynell J. Walton (812) 464-1366
