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Section 1: 8-K (8-K 3RD QTR 2019 EARNINGS RELEASE)

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false0000712534 0000712534 2019-10-24 2019-10-24

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
 
FORM 8-K
 
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
DATE OF REPORT (Date of earliest event reported): October 24, 2019

 Commission File Number 0-17071
FIRST MERCHANTS CORPORATION
(Exact name of registrant as specified in its charter)

Indiana
35-1544218
(State or other jurisdiction of incorporation)
(IRS Employer Identification No.)

200 East Jackson Street
P.O. Box 792
Muncie, IN 47305-2814
(Address of principal executive offices, including zip code)
 
(765) 747-1500
(Registrant's telephone number, including area code)
 
Not Applicable
(Former name or former address, if changed since last report)

Title of Each Class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.125 state value per share
FRME
NASDAQ

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.




ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

On October 24, 2019, First Merchants Corporation issued a press release to report its financial results for the third quarter ended September 30, 2019. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.

The information in this Current Report on Form 8-K, including Exhibit No. 99.1 hereto, shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section. The information in this Current Report shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.

(a)    Not applicable.

(b)    Not applicable.

(c)    Not applicable.

(d)    Exhibits.

Exhibit 99.1 Press Release, dated October 24, 2019, issued by First Merchants Corporation




SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
First Merchants Corporation
(Registrant)

By: /s/ Mark K. Hardwick
Mark K. Hardwick
Executive Vice President,
Chief Financial Officer and Chief Operating Officer



Dated: October 24, 2019




EXHIBIT INDEX

Exhibit No.
Description


99.1    Press Release, dated October 24, 2019, issued by First Merchants Corporation

(Back To Top)

Section 2: EX-99.1 (3RD QTR 2019 EARNINGS RELEASE)

Exhibit


N / E / W / S R / E / L / E / A / S / E
    
October 24, 2019

FOR IMMEDIATE RELEASE
For more information, contact:
Nicole M. Weaver, Vice President and Director of Corporate Administration
765-521-7619
http://www.firstmerchants.com

SOURCE: First Merchants Corporation, Muncie, Indiana


FIRST MERCHANTS CORPORATION ANNOUNCES THIRD QUARTER 2019 RESULTS WITH THE ADDITION OF MONROE BANK AND TRUST

First Merchants Corporation (NASDAQ - FRME) has reported third quarter 2019 net income of $36.8 million compared to $41.1 million during the same period in 2018. Earnings per share for the period totaled $.71 per share compared to third quarter 2018 results of $.83 per share. Included in the third quarter results are $11.2 million, or $.17 per share, of one-time charges related to the closing of our acquisition of Monroe Bank & Trust on September 1, 2019.

Total assets equaled $12.3 billion as of quarter-end and loans totaled $8.3 billion. The Corporation’s loan portfolio increased by $1.2 billion, or 17.1 percent, during the past twelve months. Investments increased $864 million, or 53.2 percent, during the same period and now total $2.5 billion. The acquisition of Monroe Bank & Trust accounted for $731 million of the increase in loans. Total deposits equaled $9.8 billion as of quarter-end and increased by $2.1 billion, or 27.9 percent, since September 30, 2018. Of the increase, Monroe Bank & Trust accounted for $1.1 billion.

The Corporations loan to deposit ratio now totals 85.1 percent and loan to asset ratio totals 67.4 percent. Additionally, the Corporation’s total risk-based capital ratio equaled 14.37 percent, common equity tier 1 capital ratio equaled 12.14 percent, and the tangible common equity ratio totaled 9.95 percent.

Michael C. Rechin, President and Chief Executive Officer, stated, “First Merchants posted strong financial results as our local economies continue to flourish and our clients look to our bank for growth solutions. The signature event for the quarter was the legal closing of the Monroe Bank & Trust transaction. The merger extends our franchise with a community bank that enjoys a dominant market share position. Our plan to operationally integrate Monroe Bank & Trust into First Merchants next month will accelerate our marketplace momentum into 2020 to include a reduction in our overall funding costs.”

Net-interest income for the quarter totaled $88.9 million, an increase of $2.4 million from third quarter 2018, even as net-interest margin declined by 43 basis points totaling 3.62 percent. Yields on earning assets totaled 4.77 percent, a decline of 11 basis points of which nearly half was due to lower fair value accretion. The cost of supporting liabilities increased by 32 basis points and totaled 1.15 percent.

Non-interest income totaled $22.1 million for the quarter, a $2.6 million, or 13.3 percent increase from the third quarter of 2018. Customer specific line items accounted for $3.1 million of the increase, with derivative hedge income accounting for $909,000 of the growth. Non-interest expense totaled $67.4 million up from the 2018 total of $55 million. Of the $12.4 million increase from the third quarter of 2018, merger related expenses accounted for $11.2 million.

The Corporation’s provision expense for the quarter totaled $600,000 and net charge-offs were $1.3 million. The allowance for loan losses reached $80.6 million as of September 30, 2019, up from $78.4 million as of September 30, 2018. Non-accrual loans declined to $22.7 million as of quarter-end and the allowance is .97 percent of total loans and 1.16 percent of non-purchased loans.







CONFERENCE CALL

First Merchants Corporation will conduct a third quarter earnings conference call and web cast at 2:30 p.m. (ET) on Thursday, October 24, 2019.

To participate, dial (Toll Free) 877-507-0578 and reference First Merchants Corporation's third quarter earnings release. International callers please call +1 412-317-1073. A replay of the call will be available until November 24, 2019. To access a replay of the call, US participants should dial (Toll Free) 877-344-7529, Canada participants should dial 855-669-9658, or for International participants, dial +1 412-317-0088. The replay access code is 10134821.

In order to view the web cast and presentation slides, please go to http://services.choruscall.com/links/frme191024.html during the time of the call. A replay of the web cast will be available until October 24, 2020.

Detailed financial results are reported on the attached pages.

About First Merchants Corporation

First Merchants Corporation is a financial holding company headquartered in Muncie, Indiana. The Corporation has one full-service bank charter, First Merchants Bank. The Bank also operates as First Merchants Private Wealth Advisors (as a division of First Merchants Bank).

First Merchants Corporation’s common stock is traded on the NASDAQ Global Select Market System under the symbol FRME. Quotations are carried in daily newspapers and can be found on the company’s Internet web page (http://www.firstmerchants.com).

FIRST MERCHANTS and the Shield Logo are federally registered trademarks of First Merchants Corporation.

Forward-Looking Statements

This release contains forward-looking statements made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements can often, but not always, be identified by the use of words like “believe”, “continue”, “pattern”, “estimate”, “project”, “intend”, “anticipate”, “expect” and similar expressions or future or conditional verbs such as “will”, would”, “should”, “could”, “might”, “can”, “may”, or similar expressions. These statements include statements of First Merchants’ goals, intentions and expectations; statements regarding the First Merchants’ business plan and growth strategies; statements regarding the asset quality of First Merchants’ loan and investment portfolios; and estimates of First Merchants’ risks and future costs and benefits. These forward-looking statements are subject to significant risks, assumptions and uncertainties that may cause results to differ materially from those set forth in forward-looking statements, including, among other things: possible changes in monetary and fiscal policies, and laws and regulations; the effects of easing restrictions on participants in the financial services industry; the cost and other effects of legal and administrative cases; possible changes in the credit worthiness of customers and the possible impairment of collectability of loans; fluctuations in market rates of interest; competitive factors in the banking industry; changes in the banking legislation or regulatory requirements of federal and state agencies applicable to bank holding companies and banks like First Merchants’ affiliate bank; continued availability of earnings and excess capital sufficient for the lawful and prudent declaration of dividends; changes in market, economic, operational, liquidity, credit and interest rate risks associated with the First Merchants’ business; and other risks and factors identified in each of First Merchants’ filings with the Securities and Exchange Commission. First Merchants does not undertake any obligation to update any forward-looking statement, whether written or oral, relating to the matters discussed in this press release. In addition, First Merchants’ past results of operations do not necessarily indicate its anticipated future results.

* * * *




CONSOLIDATED BALANCE SHEETS
 
 
 
(Dollars In Thousands)
September 30,
 
2019
 
2018
ASSETS
 
 
 
Cash and cash equivalents
$
202,383

 
$
142,501

Interest-bearing time deposits
230,101

 
66,763

Investment securities
2,489,420

 
1,625,251

Loans held for sale
7,910

 
3,022

Loans
8,299,260

 
7,088,071

Less: Allowance for loan losses
(80,571
)
 
(78,406
)
Net loans
8,218,689

 
7,009,665

Premises and equipment
113,446

 
93,728

Federal Home Loan Bank stock
28,736

 
24,588

Interest receivable
45,923

 
38,531

Goodwill and other intangibles
579,751

 
471,409

Cash surrender value of life insurance
286,747

 
223,865

Other real estate owned
7,156

 
8,859

Tax asset, deferred and receivable
15,187

 
25,933

Other assets
99,612

 
53,167

TOTAL ASSETS
$
12,325,061

 
$
9,787,282

LIABILITIES
 
 
 
Deposits:
 
 
 
Noninterest-bearing
$
1,777,365

 
$
1,464,190

Interest-bearing
7,988,086

 
6,168,962

Total Deposits
9,765,451

 
7,633,152

Borrowings:
 
 
 
Federal funds purchased

 
90,000

Securities sold under repurchase agreements
191,603

 
118,824

Federal Home Loan Bank advances
354,609

 
385,458

Subordinated debentures and term loans
138,630

 
138,408

Total Borrowings
684,842

 
732,690

Interest payable
7,855

 
5,920

Other liabilities
117,901

 
54,094

Total Liabilities
10,576,049

 
8,425,856

STOCKHOLDERS' EQUITY
 
 
 
Cumulative Preferred Stock, $1,000 par value, $1,000 liquidation value:
 
 
 
Authorized -- 600 shares
 
 
 
Issued and outstanding - 125 shares
125

 
125

Common Stock, $.125 stated value:
 
 
 
Authorized -- 100,000,000 shares
 
 
 
Issued and outstanding - 55,345,672 and 49,304,542 shares
6,918

 
6,163

Additional paid-in capital
1,053,148

 
837,996

Retained earnings
663,173

 
552,551

Accumulated other comprehensive income (loss)
25,648

 
(35,409
)
Total Stockholders' Equity
1,749,012

 
1,361,426

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
12,325,061

 
$
9,787,282








CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
 
Nine Months Ended
(Dollars In Thousands, Except Per Share Amounts)
September 30,
 
September 30,
 
2019
 
2018
 
2019
 
2018
INTEREST INCOME
 
 
 
 
 
 
 
Loans receivable:
 
 
 
 
 
 
 
Taxable
$
96,850

 
$
88,479

 
$
280,155

 
$
251,409

Tax-exempt
4,500

 
3,761

 
12,897

 
10,989

Investment securities:
 
 
 
 
 
 
 
Taxable
6,729

 
5,514

 
19,822

 
16,044

Tax-exempt
8,335

 
6,493

 
22,660

 
18,865

Deposits with financial institutions
1,363

 
270

 
3,022

 
1,034

Federal Home Loan Bank stock
355

 
283

 
1,028

 
950

Total Interest Income
118,132

 
104,800

 
339,584

 
299,291

INTEREST EXPENSE
 
 
 
 
 
 
 
Deposits
24,830

 
13,685

 
67,511

 
34,852

Federal funds purchased
15

 
229

 
225

 
670

Securities sold under repurchase agreements
385

 
174

 
1,057

 
519

Federal Home Loan Bank advances
1,894

 
2,137

 
5,400

 
6,141

Subordinated debentures and term loans
2,076

 
2,089

 
6,315

 
6,136

Total Interest Expense
29,200

 
18,314

 
80,508

 
48,318

NET INTEREST INCOME
88,932

 
86,486

 
259,076

 
250,973

Provision for loan losses
600

 
1,400

 
2,300

 
5,563

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
88,332

 
85,086

 
256,776

 
245,410

OTHER INCOME
 
 
 
 
 
 
 
Service charges on deposit accounts
6,107

 
5,619

 
16,639

 
15,434

Fiduciary and wealth management fees
4,429

 
3,673

 
12,178

 
11,064

Card payment fees
5,158

 
4,586

 
14,813

 
13,642

Net gains and fees on sales of loans
2,227

 
1,841

 
5,258

 
5,262

Derivative hedge fees
1,684

 
775

 
3,952

 
1,848

Other customer fees
450

 
452

 
1,230

 
1,349

Earnings on cash surrender value of life insurance
1,144

 
961

 
3,079

 
3,144

Net realized gains on sales of available for sale securities
393

 
1,285

 
3,376

 
4,016

Other income
524

 
335

 
1,918

 
1,520

Total Other Income
22,116

 
19,527

 
62,443

 
57,279

OTHER EXPENSES
 
 
 
 
 
 
 
Salaries and employee benefits
38,942

 
32,936

 
104,679

 
97,354

Net occupancy
4,777

 
4,586

 
14,273

 
13,604

Equipment
4,030

 
3,483

 
11,789

 
10,707

Marketing
1,332

 
1,216

 
5,158

 
3,574

Outside data processing fees
4,435

 
3,422

 
12,048

 
9,848

Printing and office supplies
312

 
334

 
961

 
992

Intangible asset amortization
1,356

 
1,650

 
4,404

 
5,094

FDIC assessments
(668
)
 
856

 
717

 
2,286

Other real estate owned and foreclosure expenses
294

 
455

 
2,362

 
1,219

Professional and other outside services
8,251

 
1,844

 
12,511

 
5,174

Other expenses
4,293

 
4,240

 
12,660

 
12,361

Total Other Expenses
67,354

 
55,022

 
181,562

 
162,213

INCOME BEFORE INCOME TAX
43,094

 
49,591

 
137,657

 
140,476

Income tax expense
6,337

 
8,478

 
21,027

 
23,050

NET INCOME AVAILABLE TO COMMON STOCKHOLDERS
$
36,757

 
$
41,113

 
$
116,630

 
$
117,426

Per Share Data:
 
 
 
 
 
 
 
Basic Net Income Available to Common Stockholders
$
0.71

 
$
0.83

 
$
2.33

 
$
2.38

Diluted Net Income Available to Common Stockholders
$
0.71

 
$
0.83

 
$
2.32

 
$
2.37

Cash Dividends Paid
$
0.26

 
$
0.22

 
$
0.74

 
$
0.62

Average Diluted Shares Outstanding (in thousands)
51,570

 
49,492

 
50,227

 
49,458





FINANCIAL HIGHLIGHTS
 
 
 
 
 
 
 
(Dollars in thousands)
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2019
 
2018
 
2019
 
2018
NET CHARGE-OFFS
$
1,303

 
$
537

 
$
2,281

 
$
2,189

 

 

 

 

AVERAGE BALANCES:

 

 

 

Total Assets
$
11,277,742

 
$
9,756,680

 
$
10,623,664

 
$
9,610,219

Total Loans
7,773,328

 
7,099,694

 
7,464,910

 
6,962,460

Total Earning Assets
10,192,183

 
8,810,758

 
9,618,285

 
8,657,152

Total Deposits
8,922,222

 
7,603,625

 
8,397,056

 
7,466,187

Total Stockholders' Equity
1,596,595

 
1,358,904

 
1,502,474

 
1,331,867

 
 
 
 
 
 
 
 
FINANCIAL RATIOS:
 
 
 
 
 
 
 
Return on Average Assets
1.30
%
 
1.69
%
 
1.46
%
 
1.63
%
Return on Average Stockholders' Equity
9.21

 
12.10

 
10.35

 
11.76

Return on Average Common Stockholders' Equity
9.21

 
12.10

 
10.35

 
11.76

Average Earning Assets to Average Assets
90.37

 
90.30

 
90.54

 
90.08

Allowance for Loan Losses as % of Total Loans
0.97

 
1.11

 
0.97

 
1.11

Net Charge-offs as % of Average Loans (Annualized)
0.07

 
0.03

 
0.04

 
0.04

Average Stockholders' Equity to Average Assets
14.16

 
13.93

 
14.14

 
13.86

Tax Equivalent Yield on Average Earning Assets
4.77

 
4.88

 
4.84

 
4.73

Interest Expense/Average Earning Assets
1.15

 
0.83

 
1.12

 
0.74

Net Interest Margin (FTE) on Average Earning Assets
3.62

 
4.05

 
3.72

 
3.99

Efficiency Ratio
57.60


49.25


53.36


49.94

Tangible Common Book Value Per Share
$
21.26

 
$
18.16

 
$
21.26

 
$
18.16



NON-PERFORMING ASSETS
 
 
 
 
 
 
 
 
 
(Dollars In Thousands)
September 30,
 
June 30,
 
March 31,
 
December 31,
 
September 30,
 
2019
 
2019
 
2019
 
2018
 
2018
Non-Accrual Loans
$
22,728

 
$
25,635

 
$
27,949

 
$
26,148

 
$
20,421

Renegotiated Loans
576

 
640

 
709

 
1,103

 
968

Non-Performing Loans (NPL)
23,304

 
26,275

 
28,658

 
27,251

 
21,389

Other Real Estate Owned
7,156

 
1,131

 
1,877

 
2,179

 
8,859

Non-Performing Assets (NPA)
30,460

 
27,406

 
30,535

 
29,430

 
30,248

90+ Days Delinquent
82

 
209

 
134

 
1,855

 
50

NPAs & 90 Day Delinquent
$
30,542

 
$
27,615

 
$
30,669

 
$
31,285

 
$
30,298

 
 
 
 
 
 
 
 
 
 
Allowance for Loan Losses
$
80,571

 
$
81,274

 
$
80,902

 
$
80,552

 
$
78,406

Quarterly Net Charge-offs
1,303

 
128

 
850

 
(482
)
 
537

NPAs / Actual Assets %
0.25
%
 
0.26
%
 
0.30
%
 
0.30
 %
 
0.31
%
NPAs & 90 Day / Actual Assets %
0.25
%
 
0.26
%
 
0.30
%
 
0.32
 %
 
0.31
%
NPAs / Actual Loans and OREO %
0.37
%
 
0.36
%
 
0.42
%
 
0.41
 %
 
0.43
%
Allowance for Loan Losses / Actual Loans (%)
0.97
%
 
1.08
%
 
1.11
%
 
1.11
 %
 
1.11
%
Net Charge-offs as % of Average Loans (Annualized)
0.07
%
 
0.01
%
 
0.05
%
 
(0.03
)%
 
0.03
%




CONSOLIDATED BALANCE SHEETS
 
 
 
 
 
 
 
 
 
(Dollars In Thousands)
September 30,
 
June 30,
 
March 31,
 
December 31,
 
September 30,
 
2019
 
2019
 
2019
 
2018
 
2018
ASSETS
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
202,383

 
$
128,185

 
$
115,878

 
$
139,247

 
$
142,501

Interest-bearing time deposits
230,101

 
129,614

 
70,672

 
36,963

 
66,763

Investment securities
2,489,420

 
2,092,924

 
1,862,659

 
1,632,582

 
1,625,251

Loans held for sale
7,910

 
5,854

 
3,330

 
4,778

 
3,022

Loans
8,299,260

 
7,511,370

 
7,299,320

 
7,224,467

 
7,088,071

Less: Allowance for loan losses
(80,571
)
 
(81,274
)
 
(80,902
)
 
(80,552
)
 
(78,406
)
Net loans
8,218,689

 
7,430,096

 
7,218,418

 
7,143,915

 
7,009,665

Premises and equipment
113,446

 
91,767

 
91,863

 
93,420

 
93,728

Federal Home Loan Bank stock
28,736

 
24,588

 
24,588

 
24,588

 
24,588

Interest receivable
45,923

 
45,150

 
40,931

 
40,881

 
38,531

Goodwill and other intangibles
579,751

 
466,736

 
468,256

 
469,784

 
471,409

Cash surrender value of life insurance
286,747

 
226,241

 
225,928

 
224,939

 
223,865

Other real estate owned
7,156

 
1,131

 
1,877

 
2,179

 
8,859

Tax asset, deferred and receivable
15,187

 
12,340

 
16,094

 
23,668

 
25,933

Other assets
99,612

 
83,231

 
70,431

 
47,772

 
53,167

TOTAL ASSETS
$
12,325,061

 
$
10,737,857

 
$
10,210,925

 
$
9,884,716

 
$
9,787,282

LIABILITIES
 
 
 
 
 
 
 
 
 
Deposits:
 
 
 
 
 
 
 
 
 
Noninterest-bearing
$
1,777,365

 
$
1,353,165

 
$
1,381,183

 
$
1,447,907

 
$
1,464,190

Interest-bearing
7,988,086

 
6,966,163

 
6,666,615

 
6,306,686

 
6,168,962

Total Deposits
9,765,451

 
8,319,328

 
8,047,798

 
7,754,593

 
7,633,152

Borrowings:
 
 
 
 
 
 
 
 
 
Federal funds purchased

 
75,000

 
20,000

 
104,000

 
90,000

Securities sold under repurchase agreements
191,603

 
119,674

 
111,783

 
113,512

 
118,824

Federal Home Loan Bank advances
354,609

 
460,042

 
345,013

 
314,986

 
385,458

Subordinated debentures and term loans
138,630

 
138,574

 
138,519

 
138,463

 
138,408

Total Borrowings
684,842

 
793,290

 
615,315

 
670,961

 
732,690

Interest payable
7,855

 
6,740

 
7,313

 
5,607

 
5,920

Other liabilities
117,901

 
116,863

 
84,651

 
45,295

 
54,094

Total Liabilities
10,576,049

 
9,236,221

 
8,755,077

 
8,476,456

 
8,425,856

STOCKHOLDERS' EQUITY
 
 
 
 
 
 
 
 
 
Cumulative Preferred Stock, $1,000 par value, $1,000 liquidation value:
 
 
 
 
 
 
 
 
 
Authorized -- 600 shares
 
 
 
 
 
 
 
 
 
Issued and outstanding
125

 
125

 
125

 
125

 
125

Common Stock, $.125 stated value:
 
 
 
 
 
 
 
 
 
Authorized -- 100,000,000 shares
 
 
 
 
 
 
 
 
 
Issued and outstanding
6,918

 
6,182

 
6,179

 
6,169

 
6,163

Additional paid-in capital
1,053,148

 
841,365

 
839,919

 
840,052

 
837,996

Retained earnings
663,173

 
639,362

 
611,220

 
583,336

 
552,551

Accumulated other comprehensive income (loss)
25,648

 
14,602

 
(1,595
)
 
(21,422
)
 
(35,409
)
Total Stockholders' Equity
1,749,012

 
1,501,636

 
1,455,848

 
1,408,260

 
1,361,426

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
12,325,061

 
$
10,737,857

 
$
10,210,925

 
$
9,884,716

 
$
9,787,282

 
 
 
 
 
 
 
 
 
 








CONSOLIDATED STATEMENTS OF INCOME
 
 
 
 
 
 
 
 
 
(Dollars In Thousands, Except Per Share Amounts)
September 30,
 
June 30,
 
March 31,
 
December 31,
 
September 30,
 
2019
 
2019
 
2019
 
2018
 
2018
INTEREST INCOME
 
 
 
 
 
 
 
 
 
Loans receivable:
 
 
 
 
 
 
 
 
 
Taxable
$
96,850

 
$
92,824

 
$
90,481

 
$
91,092

 
$
88,479

Tax-exempt
4,500

 
4,244

 
4,153

 
3,873

 
3,761

Investment securities:
 
 
 
 
 
 
 
 
 
Taxable
6,729

 
6,998

 
6,095

 
5,553

 
5,514

Tax-exempt
8,335

 
7,454

 
6,871

 
6,644

 
6,493

Deposits with financial institutions
1,363

 
784

 
875

 
1,207

 
270

Federal Home Loan Bank stock
355

 
335

 
338

 
284

 
283

Total Interest Income
118,132

 
112,639

 
108,813

 
108,653

 
104,800

INTEREST EXPENSE
 
 
 
 
 
 
 
 
 
Deposits
24,830

 
23,087

 
19,594

 
16,690

 
13,685

Federal funds purchased
15

 
117

 
93

 
48

 
229

Securities sold under repurchase agreements
385

 
342

 
330

 
243

 
174

Federal Home Loan Bank advances
1,894

 
1,692

 
1,814

 
1,691

 
2,137

Subordinated debentures and term loans
2,076

 
2,123

 
2,116

 
2,097

 
2,089

Total Interest Expense
29,200

 
27,361

 
23,947

 
20,769

 
18,314

NET INTEREST INCOME
88,932

 
85,278

 
84,866

 
87,884

 
86,486

Provision for loan losses
600

 
500

 
1,200

 
1,664

 
1,400

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
88,332

 
84,778

 
83,666

 
86,220

 
85,086

OTHER INCOME
 
 
 
 
 
 
 
 
 
Service charges on deposit accounts
6,107

 
5,437

 
5,095

 
5,516

 
5,619

Fiduciary and wealth management fees
4,429

 
3,931

 
3,818

 
3,842

 
3,673

Card payment fees
5,158

 
4,829

 
4,826

 
4,393

 
4,586

Net gains and fees on sales of loans
2,227

 
1,736

 
1,295

 
1,767

 
1,841

Derivative hedge fees
1,684

 
1,487

 
781

 
645

 
775

Other customer fees
450

 
341

 
439

 
511

 
452

Earnings on cash surrender value of life insurance
1,144

 
946

 
989

 
1,074

 
961

Net realized gains on sales of available for sale securities
393

 
1,843

 
1,140

 
253

 
1,285

Other income
524

 
1,064

 
330

 
1,179

 
335

Total Other Income
22,116

 
21,614

 
18,713

 
19,180

 
19,527

OTHER EXPENSES
 
 
 
 
 
 
 
 
 
Salaries and employee benefits
38,942

 
32,709

 
33,028

 
34,350

 
32,936

Net occupancy
4,777

 
4,469

 
5,027

 
4,737

 
4,586

Equipment
4,030

 
4,117

 
3,642

 
3,627

 
3,483

Marketing
1,332

 
2,752

 
1,074

 
1,107

 
1,216

Outside data processing fees
4,435

 
3,929

 
3,684

 
3,367

 
3,422

Printing and office supplies
312

 
334

 
315

 
433

 
334

Intangible asset amortization
1,356

 
1,520

 
1,528

 
1,625

 
1,650

FDIC assessments
(668
)
 
678

 
707

 
634

 
856

Other real estate owned and foreclosure expenses
294

 
903

 
1,165

 
251

 
455

Professional and other outside services
8,251

 
2,376

 
1,884

 
3,002

 
1,844

Other expenses
4,293

 
3,800

 
4,567

 
4,605

 
4,240

Total Other Expenses
67,354

 
57,587

 
56,621

 
57,738

 
55,022

INCOME BEFORE INCOME TAX
43,094

 
48,805

 
45,758

 
47,662

 
49,591

Income tax expense
6,337

 
7,749

 
6,941

 
5,949

 
8,478

NET INCOME AVAILABLE TO COMMON STOCKHOLDERS
$
36,757

 
$
41,056

 
$
38,817

 
$
41,713

 
$
41,113

 
 
 
 
 
 
 
 
 
 
Per Share Data:
 
 
 
 
 
 
 
 
 
Basic Net Income Available to Common Stockholders
$
0.71

 
$
0.83

 
$
0.79

 
$
0.85

 
$
0.83

Diluted Net Income Available to Common Stockholders
$
0.71

 
$
0.83

 
$
0.78

 
$
0.85

 
$
0.83

Cash Dividends Paid
$
0.26

 
$
0.26

 
$
0.22

 
$
0.22

 
$
0.22

Average Diluted Shares Outstanding (in thousands)
51,570

 
49,550

 
49,541

 
49,511

 
49,492

FINANCIAL RATIOS:
 
 
 
 
 
 
 
 
 
Return on Average Assets
1.30
%
 
1.56
%
 
1.54
%
 
1.68
%
 
1.69
%
Return on Average Stockholders' Equity
9.21

 
11.10

 
10.86

 
12.10

 
12.10

Return on Average Common Stockholders' Equity
9.21

 
11.10

 
10.86

 
12.10

 
12.10

Average Earning Assets to Average Assets
90.37

 
90.66

 
90.60

 
90.41

 
90.30

Allowance for Loan Losses as % of Total Loans
0.97

 
1.08

 
1.11

 
1.11

 
1.11

Net Charge-offs as % of Average Loans (Annualized)
0.07

 
0.01

 
0.05

 
(0.03
)
 
0.03

Average Stockholders' Equity to Average Assets
14.16

 
14.09

 
14.18

 
13.90

 
13.93

Tax Equivalent Yield on Average Earning Assets
4.77

 
4.86

 
4.89

 
4.97

 
4.88

Interest Expense/Average Earning Assets
1.15

 
1.15

 
1.05

 
0.93

 
0.83

Net Interest Margin (FTE) on Average Earning Assets
3.62

 
3.71

 
3.84

 
4.04

 
4.05

Efficiency Ratio
57.60

 
51.00

 
51.18

 
50.97

 
49.25

Tangible Common Book Value Per Share
$
21.26

 
$
21.01

 
$
20.07

 
$
19.12

 
$
18.16





LOANS
 
 
 
 
 
 
 
 
 
(Dollars In Thousands)
September 30,
 
June 30,
 
March 31,
 
December 31,
 
September 30,
 
2019
 
2019
 
2019
 
2018
 
2018
Commercial and industrial loans
$
2,034,311

 
$
1,877,042

 
$
1,788,628

 
$
1,726,664

 
$
1,655,569

Agricultural production financing and other loans to farmers
90,462

 
83,452

 
80,357

 
92,404

 
88,504

Real estate loans:
 
 
 
 
 
 
 
 
 
Construction
670,138

 
624,548

 
542,501

 
545,729

 
668,608

Commercial and farmland
3,144,649

 
2,821,689

 
2,838,798

 
2,832,102

 
2,699,629

Residential
1,155,403

 
993,802

 
976,668

 
966,421

 
965,893

Home equity
601,335

 
548,006

 
536,208

 
528,157

 
517,303

Individuals' loans for household and other personal expenditures
131,246

 
98,384

 
108,216

 
99,788

 
98,709

Public finance and other commercial loans
471,716

 
464,447

 
427,944

 
433,202

 
393,856

Loans
8,299,260

 
7,511,370

 
7,299,320

 
7,224,467

 
7,088,071

Allowance for loan losses
(80,571
)
 
(81,274
)
 
(80,902
)
 
(80,552
)
 
(78,406
)
NET LOANS
$
8,218,689

 
$
7,430,096

 
$
7,218,418

 
$
7,143,915

 
$
7,009,665



DEPOSITS
 
 
 
 
 
 
 
 
 
(Dollars In Thousands)
September 30,
 
June 30,
 
March 31,
 
December 31,
 
September 30,
 
2019
 
2019
 
2019
 
2018
 
2018
Demand deposits
$
5,183,971

 
$
4,309,473

 
$
4,101,156

 
$
3,985,178

 
$
3,870,816

Savings deposits
2,808,745

 
2,358,720

 
2,338,266

 
2,282,701

 
2,212,675

Certificates and other time deposits of $100,000 or more
731,693

 
720,536

 
670,199

 
593,592

 
602,002

Other certificates and time deposits
811,780

 
729,392

 
704,527

 
646,682

 
625,341

Brokered deposits
229,262

 
201,207

 
233,650

 
246,440

 
322,318

TOTAL DEPOSITS
$
9,765,451

 
$
8,319,328

 
$
8,047,798

 
$
7,754,593

 
$
7,633,152





CONSOLIDATED AVERAGE BALANCE SHEET AND NET INTEREST MARGIN ANALYSIS
 
 
 
 
 
 
 
(Dollars in Thousands)
 
 
 
 
 
 
 
 
 
 
 

For the Three Months Ended
 
September 30, 2019
 
September 30, 2018
 
Average Balance
 
Interest
 Income /
Expense
 
Average
Rate
 
Average Balance
 
Interest
 Income /
Expense
 
Average
Rate
Assets:
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing time deposits
$
262,082

 
$
1,363

 
2.06
%
 
$
52,027

 
$
270

 
2.08
%
Federal Home Loan Bank stock
24,633

 
355

 
5.76

 
24,588

 
283

 
4.60

Investment Securities: (1)
 
 
 
 
 
 
 
 
 
 
 
Taxable
1,104,612

 
6,729

 
2.44

 
857,507

 
5,514

 
2.57

Tax-Exempt (2)
1,027,528

 
10,551

 
4.11

 
776,942

 
8,219

 
4.23

Total Investment Securities
2,132,140

 
17,280

 
3.24

 
1,634,449

 
13,733

 
3.36

Loans held for sale
21,913

 
274

 
5.00

 
11,038

 
142

 
5.15

Loans: (3)
 
 
 
 
 
 
 
 
 
 
 
Commercial
5,674,956

 
77,370

 
5.45

 
5,226,284

 
71,223

 
5.45

Real Estate Mortgage
822,874

 
9,518

 
4.63

 
739,356

 
8,383

 
4.54

Installment
715,428

 
9,688

 
5.42

 
655,738

 
8,731

 
5.33

Tax-Exempt (2)
538,157

 
5,696

 
4.23

 
467,278

 
4,761

 
4.08

Total Loans
7,773,328

 
102,546

 
5.28

 
7,099,694

 
93,240

 
5.25

Total Earning Assets
10,192,183

 
121,544

 
4.77
%
 
8,810,758

 
107,526

 
4.88
%
Net unrealized gain (loss) on securities available for sale
30,353

 
 
 
 
 
(15,245
)
 
 
 
 
Allowance for loan losses
(80,918
)
 
 
 
 
 
(77,763
)
 
 
 
 
Cash and cash equivalents
143,266

 
 
 
 
 
128,557

 
 
 
 
Premises and equipment
99,021

 
 
 
 
 
94,422

 
 
 
 
Other assets
893,837

 
 
 
 
 
815,951

 
 
 
 
Total Assets
$
11,277,742

 
 
 
 
 
$
9,756,680

 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing deposits:
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing deposits
$
3,134,675

 
$
9,285

 
1.18
%
 
$
2,399,477

 
$
4,909

 
0.82
%
Money market deposits
1,307,647

 
3,766

 
1.14

 
1,062,154

 
1,551

 
0.58

Savings deposits
1,244,859

 
2,523

 
0.80

 
1,081,369

 
1,500

 
0.55

Certificates and other time deposits
1,736,759

 
9,256

 
2.11

 
1,536,697

 
5,725

 
1.49

Total Interest-bearing Deposits
7,423,940

 
24,830

 
1.33

 
6,079,697

 
13,685

 
0.90

Borrowings
660,107

 
4,370

 
2.59

 
741,092

 
4,629

 
2.50

Total Interest-bearing Liabilities
8,084,047

 
29,200

 
1.43

 
6,820,789

 
18,314

 
1.07

Noninterest-bearing deposits
1,498,282

 
 
 
 
 
1,523,928

 
 
 
 
Other liabilities
98,818

 
 
 
 
 
53,059

 
 
 
 
Total Liabilities
9,681,147

 
 
 
 
 
8,397,776

 
 
 
 
Stockholders' Equity
1,596,595

 
 
 
 
 
1,358,904

 
 
 
 
Total Liabilities and Stockholders' Equity
$
11,277,742

 
29,200

 


 
$
9,756,680

 
18,314

 


Net Interest Income (FTE)
 
 
$
92,344

 
 
 
 
 
$
89,212

 
 
Net Interest Spread (FTE) (4)
 
 
 
 
3.34
%
 
 
 
 
 
3.81
%












Net Interest Margin (FTE):











Interest Income (FTE) / Average Earning Assets




4.77
%





4.88
%
Interest Expense / Average Earning Assets




1.15
%





0.83
%
Net Interest Margin (FTE) (5)




3.62
%





4.05
%
 
 
 
 
 
 
 
 
 
 
 
 
(1)  Average balance of securities is computed based on the average of the historical amortized cost balances without the effects of the fair value adjustments.
(2) Tax-exempt securities and loans are presented on a fully taxable equivalent basis, using a marginal tax rate of 21 percent for 2019 and 2018. These totals equal $3,412 and $2,726 for the three months ended September 30, 2019 and 2018, respectively.
(3)  Non accruing loans have been included in the average balances.
(4)  Net Interest Spread (FTE) is interest income expressed as a percentage of average earning assets minus interest expense expressed as a percentage of average interest-bearing liabilities.
(5)  Net Interest Margin (FTE) is interest income expressed as a percentage of average earning assets minus interest expense expressed as a percentage of average earning assets.



CONSOLIDATED AVERAGE BALANCE SHEET AND NET INTEREST MARGIN ANALYSIS
 
 
 
 
 
 
(Dollars in Thousands)
 
 
 
 
 
 
 
 
 
 
 

For the Nine Months Ended

September 30, 2019

September 30, 2018

Average Balance

Interest
 Income /
Expense

Average
Rate

Average Balance

Interest
 Income /
Expense

Average
Rate
Assets:






 



 
Interest-bearing time deposits
$
184,640


$
3,022


2.18
%

$
76,570


$
1,034


1.80
%
Federal Home Loan Bank stock
24,603


1,028


5.57


24,521


950


5.17

Investment Securities: (1)











Taxable
1,021,102


19,822


2.59


840,425


16,044


2.55

Tax-Exempt (2)
923,030


28,684


4.14


753,176


23,880


4.23

Total Investment Securities
1,944,132


48,506


3.33


1,593,601


39,924


3.34

Loans held for sale
13,618


512


5.01


9,520


363


5.08

Loans: (3)











Commercial
5,469,377


224,766


5.48


5,116,405


200,886