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Section 1: 8-K (FORM 8-K)

0000723188 false COMMUNITY BANK SYSTEM, INC. 0000723188 2019-10-20 2019-10-21 iso4217:USD xbrli:shares iso4217:USD xbrli:shares

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 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 21, 2019

 

 

(Exact name of registrant as specified in its charter)

 

Delaware 001-13695 16-1213679
(State or other jurisdiction of

(Commission File Number) 

(IRS Employer Identification No.)
incorporation)

 

5790 Widewaters Parkway, DeWitt, New York 13214
(Address of principal executive offices) (Zip Code)

  

Registrant’s telephone number, including area code: (315) 445-2282

 

Not Applicable

 

(Former name or former address, if changed since last report)

 

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:

 

x 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))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, $1.00 par value per share CBU New York Stock Exchange

 

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 21, 2019, Community Bank System, Inc. (“Community Bank System”) announced its results of operations for the quarter ended September 30, 2019. The public announcement was made by means of a news release, the text of which is set forth in Exhibit 99 hereto.

 

The information in this Form 8-K, including Exhibit 99 attached hereto, is being furnished under Item 2.02 and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits

 

99Press Release, dated October 21, 2019, issued by Community Bank System

 

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.

 

  Community Bank System, Inc.
   
  By: /s/ Mark E. Tryniski 
  Name:    Mark E. Tryniski
  Title: President, Chief Executive Officer and Director
Dated: October 21, 2019  
   
  By: /s/ Joseph E. Sutaris 
  Name: Joseph E. Sutaris
  Title: Executive Vice President and Chief Financial Officer
   
Dated: October 21, 2019  

 

 

 

 

Exhibit Index

 

Exhibit Number Description
   
99 Press Release, dated October 21, 2019, issued by Community Bank System, Inc.

 

 

(Back To Top)

Section 2: EX-99 (EXHIBIT 99)

Exhibit 99

 

News Release

For further information, please contact:

Joseph E. Sutaris, EVP & Chief Financial Officer

5790 Widewaters Parkway, DeWitt, N.Y. 13214

Office: (315) 445-7396

 

Community Bank System Reports

Third Quarter 2019 Results and Agreement to Acquire Steuben

Trust Corporation

 

SYRACUSE, N.Y. — October 21, 2019 — Community Bank System, Inc. (NYSE: CBU) (the “Company”) reported third quarter 2019 net income of $39.2 million, or $0.75 per share on a fully diluted basis. This compares to $43.1 million in net income or $0.83 per share reported for the third quarter of 2018. The Company incurred $6.1 million, or $0.09 per share, of non-recurring acquisition-related expenses during the third quarter of 2019 related to the acquisition of Kinderhook Bank Corp. (“Kinderhook”). Operating diluted earnings per share, which exclude acquisition expenses, unrealized gains on equity securities and loss on debt extinguishment, were $0.84 for the third quarter of 2019. This compares to operating diluted earnings per share of $0.81 in the third quarter of 2018. Increases in net interest income, noninterest revenues and a decrease in the provision for loan losses, were partially offset by higher operating expenses, an increase in acquisition-related expenses and an increase in fully-diluted shares outstanding.

 

On a linked quarter basis, fully diluted earnings per share decreased $0.11, from $0.86 in the second quarter to $0.75 in the third quarter. During the second quarter, the Company recorded $0.08 per share of realized gains on the sale of investment securities and $0.02 per share of acquisition-related expenses, as compared to acquisition-related expenses of $0.09 per share and no realized gains in the third quarter. Operating diluted earnings per share increased $0.04, or 5.0%, on a linked quarter basis, from $0.80 per share in the second quarter to $0.84 per share in the third quarter. This increase in operating earnings per share was driven by increases in net interest income and noninterest revenues, offset, in part, by increases in operating expenses, the provision for loan losses and fully-diluted shares outstanding, as well as a slightly higher effective income tax rate.

 

Third Quarter 2019 Highlights:

 

vCompleted the acquisition of Kinderhook Bank Corp.
vDividend increase of $0.03 per share, or 7.9%, the 27th consecutive year of increase
vGAAP Diluted EPS of $0.75 and Operating Diluted EPS of $0.84
vNet interest margin of 3.73%, up two basis points over the third quarter of 2018
vDeposit funding costs of 0.26%
vAnnualized net charge-offs of 0.10%
vNoninterest revenues represent 38.6% of operating revenues
vNonbanking financial services revenues were up $1.5 million, or 4.0% over the third quarter of 2018

 

“We booked another solid performance for the third quarter with operating earnings per share up $0.03 compared to 2018, organic growth contributing $97.4 million to ending loan balances and average deposit funding costs of 0.26%, a level well below industry and peer averages,” said Mark E. Tryniski, President and Chief Executive Officer. “We successfully completed the acquisition of the former Kinderhook Bank Corp., parent company of The National Union Bank of Kinderhook during the quarter, which added 11 branch locations in the five-county region around Albany, New York. Total ending loans increased $569.1 million, or 9.1%, during the quarter, with $471.7 million of the increase due to the Kinderhook transaction and the remaining $97.4 million driven by organic growth in the business lending, consumer mortgage and consumer installment portfolios. Total average deposits were up $423.5 million, or 5.0%, compared to the linked second quarter, and ending deposits were up $680.1 million, or 8.0%, due largely to the Kinderhook acquisition. The funding mix remained strong with 68% of total deposit balances in checking and savings accounts. Our net interest margin for the quarter of 3.73% was stable, up two basis points over the third quarter of 2018. Consistent with past performance, the Company’s asset quality remained stable and favorable. Annualized net charge-offs for the quarter were 0.10% and nonperforming loans to total loans outstanding were 0.42% at the end of the third quarter. Noninterest revenues were up by 2.3% year over year, reflective of increased revenue in all three of the Company’s non-banking fee-based businesses.”

 

 

 

 

“Reflecting the Company’s very strong capital position and ongoing performance, the Board of Directors authorized an increase in the quarterly cash dividend of $0.03 per share, marking the twenty-seventh (27th) consecutive year of dividend increases. We are also pleased to announce the execution of a definitive agreement to acquire the Steuben Trust Corporation, parent company of the Steuben Trust Company, a New York State chartered community bank. This transaction will provide additional scale to our Western New York presence by adding 15 customer service locations across a six-county area. This acquisition is another example of our ongoing commitment to build a broader and deeper banking presence across our entire service area, while at the same time effectively deploying capital resources to improve shareholder returns.”

 

Total revenues for the third quarter of 2019 were $148.4 million, an increase of $6.4 million, or 4.5%, over the third quarter of 2018. The Company recorded a $5.1 million, or 5.9%, increase in net interest income and a $1.3 million, or 2.3%, increase in noninterest revenues between comparable quarters. The increase in net interest income was driven by a $473.5 million, or 5.1%, increase in average earning assets due primarily to the Kinderhook acquisition and an increase in the yield on earning assets, partially offset by higher funding costs and a $282.0 million increase in average interest-bearing liabilities due primarily to the Kinderhook acquisition. The $1.3 million, or 2.3%, increase in noninterest revenues was driven by an increase in revenue for all three of the Company’s nonbanking fee-based businesses; employee benefit services, wealth management and insurance. In addition, the Company recorded a $0.2 million, or 1.1%, increase in deposit service and other banking services revenues between comparable quarters. These increases were offset, in part, by a $0.7 million decrease in unrealized gains on equity securities. On a linked quarter basis, noninterest revenues decreased $3.6 million, or 5.9%, from $60.7 million in the second quarter of 2019 to $57.1 million in the third quarter. During the second quarter, the Company recorded $4.9 million of realized gains on the sale of certain Treasury securities. Exclusive of these realized gains, noninterest revenues were up $1.3 million, or 2.3%, on a linked quarter basis primarily due to the Kinderhook acquisition and an increase in employee benefit services revenue. Noninterest revenues contributed 38.6% of total operating revenues for the third quarter, similar to the prior two quarters and full-year 2018 results.

 

The Company recorded a $1.8 million provision for loan losses in the third quarter 2019, which was $0.5 million less than the amount recorded in the third quarter of 2018. Total delinquent loans, nonperforming loans plus loans 30 to 89 days past due, to ending loans stood at 0.85% at the end of the third quarter, down eight basis points from a year earlier. The non-performing loans to total loans ratio stood at 0.42% at the end of the third quarter of 2019. This compares to 0.40% at the end of the third quarter of 2018.

 

Total operating expenses for the third quarter of 2019 were $96.9 million, as compared to $85.2 million in the third quarter of 2018, an increase of $11.7 million, or 13.7%. Excluding $6.1 million of acquisition related expenses in the third quarter of 2019 and a $0.8 million acquisition-related recovery recorded in the third quarter of 2018, operating expenses increased $4.8 million, or 5.6%, between comparable quarterly periods. This increase included a $5.0 million, or 9.8%, increase in salaries and employee benefits and a $0.3 million net increase in all other expenses, partially offset by a $0.5 million, or 10.5%, decrease in amortization of intangible assets. Excluding acquisition-related expenses, on a linked quarter basis operating expenses increased $0.9 million, or 1.0%, primarily due to incremental expenses associated with operating an expanded franchise subsequent to the Kinderhook acquisition. During the third quarter of 2019, the Company received a $0.7 million FDIC assessment credit for its proportional share of excess deposit insurance fund reserves. This credit favorably impacted third quarter fully-diluted earnings by $0.01 per share.

 

The Company generated net interest income of $91.3 million during the third quarter of 2019. This compares to $86.2 million of net interest income generated in the third quarter of 2018. The $5.1 million, or 5.9%, increase in net interest income was primarily driven by a $473.5 million increase in average earning assets between comparable quarterly periods, due to the Kinderhook acquisition, organic loan growth and a slight improvement in net interest margin. Of the $5.1 million increase in net interest income, volume-related factors contributed $4.4 million of incremental net interest income, or 86%, of the improvement, while rate-related factors contributed $0.7 million of the incremental net interest income, or 14%, of the improvement. Net interest margin improved two basis points, from 3.71% in the third quarter of 2018 to 3.73% in the third quarter of 2019. The third quarter 2019 net interest income and net interest margin results were favorably impacted by a 15 basis point increase in the yield on loans, a 59 basis point increase in the yield on cash equivalents and a six basis point increase in the yield on investment securities, offset, in part, by an 11 basis point increase in the cost of funds.

 

 

 

 

On a linked quarter basis, net interest income increased $3.0 million, or 3.4%. This improvement was largely driven by an increase in earning assets due to the Kinderhook acquisition. Net interest margin decreased seven basis points on a linked quarter basis from 3.80% in the second quarter to 3.73% in the third quarter. The second quarter net interest margin results were favorably impacted by four basis points due to the receipt of a $0.9 million Federal Reserve Bank semi-annual dividend. All other factors, including a 0.50% decrease in the prime lending rate during the quarter, the persistence of a flat or inverted Treasury yield curve, the inclusion of the Kinderhook loan, investment and deposit portfolios, and a change in the Company’s funding mix produced an additional three basis points of net interest margin compression between the linked quarters.

 

The Company recorded income tax expense of $10.5 million in the third quarter of 2019. This compares to income tax expense of $11.4 million recorded in the third quarter of 2018. The decrease in income tax expense was driven by lower amounts of pre-tax income recorded in the third quarter of 2019, primarily due to acquisition expenses related to the Kinderhook transaction. The effective tax rates for the third quarters of 2019 and 2018 were 21.1% and 21.0%, respectively.

 

The Company provides supplemental reporting of its results on an “operating,” “adjusted” and “tangible” basis, from which it excludes the after-tax effect of amortization of core deposit and other intangible assets (and the related goodwill, core deposit intangible and other intangible asset balances, net of applicable deferred tax amounts), accretion on non-impaired purchased loans, expenses associated with acquisitions, net realized gain on the sale of investments, the unrealized gain or loss on equity securities and loss on debt extinguishment. The amounts for such items are presented in the tables that accompany this release. Although these items are non-GAAP measures, the Company’s management believes this information helps investors understand the effect of acquisition and other non-recurring activity in its reported results. Diluted adjusted net earnings per share were $0.88 in the third quarter of 2019, compared to $0.84 in the third quarter of 2018, a $0.04, or 4.8%, increase between comparable periods.

 

Financial Position

 

Average earning assets were up $379.1 million, or 4.0%, on a linked quarter basis, from $9.43 billion during the second quarter of 2019 to $9.81 billion during the third quarter of 2019. Average loan balances were $6.74 billion for the third quarter, up $441.0 million, or 7.0%, over the second quarter. Average deposit balances were up $423.5 million, or 5.0%, from second quarter levels. These increases were primarily driven by the Kinderhook acquisition in the third quarter of 2019. Average borrowings in the third quarter of $291.0 million, were down $28.5 million, or 8.9%, from the second quarter average borrowings of $319.5 million. During the third quarter, the Company experienced a decline in average customer repurchase agreement balances of $40.5 million as seasonally expected. Average balances on other borrowed funds increased $12.0 million due primarily to the assumption of certain subordinated debt in connection with the Kinderhook transaction. At the end of the third quarter, the Company redeemed $22.7 million of junior subordinated debt and associated preferred securities, $20.6 million of which was acquired in connection with the Company’s 2017 acquisition of Merchants Bancshares, Inc. and $2.1 million of which was acquired in connection with the third quarter acquisition of Kinderhook.

 

Ending loans at September 30, 2019 were $6.85 billion. This was up $569.1 million, or 9.1%, from the end of the second quarter and $572.1 million, or 9.1%, from the end of the fourth quarter of 2018, primarily due to the Kinderhook acquisition. Outstanding balances in all loan portfolio segments including business lending, consumer mortgage, consumer indirect, consumer direct and home equity loans increased during the quarter. Outstanding balances in all of the Company’s loan portfolio segments grew organically during the quarter. Excluding acquired loans, the Company’s loan portfolio increased $97.4 million, or 1.5%, from the end of the second quarter. The business lending portfolio, excluding acquired loans, increased $56.4 million, or 2.4%, including a $31.6 million increase in the municipal loans, consistent with the prior year’s trends. Excluding acquired loans, consumer mortgage balances were up $29.4 million, or 1.3%, in the quarter, home equity balances were up $0.8 million, or 0.2%, and the consumer indirect and direct loan portfolios, on a combined basis, were up $10.8 million, or 0.9%, consistent with seasonal expectations.

 

Investment securities, including cash equivalents, totaled $3.26 billion at September 30, 2019. This was up $154.1 million, or 5.0%, from the end of the linked second quarter with increases in municipal securities, treasury and agency securities, mortgage backed securities and other investments totaling $84.0 million, partially offset by a decrease in collateralized mortgage obligations of $4.5 million. In addition, the net unrealized gain on the Company’s investment securities portfolio increased $8.8 million during the quarter from $36.5 million at the end of the second quarter to $45.3 million at the end of the third quarter. Investment securities balances were down $499.9 million, or 16.8%, from the end of fourth quarter of 2018, due largely to the sale of $590.2 million of Treasury securities during the second quarter. The effective duration of the securities portfolio was 2.5 years at the end of the third quarter, as compared to 2.7 years at the end of the second quarter of 2019.

 

 

 

 

Shareholders’ equity of $1.84 billion at the end of the third quarter was $172.1 million, or 10.3%, higher than the prior year period. The increase in shareholders’ equity between the third quarter of 2018 and third quarter of 2019 was primarily driven by an $86.9 million increase in retained earnings between the periods and a $64.6 million increase in accumulated other comprehensive income, from increases in the after-tax market value adjustment on the Company’s available-for-sale investment portfolio. The Company’s net tangible equity to net tangible assets ratio was 9.68% at September 30, 2019, up from 9.13% a year earlier, but down from 10.56% at the end of the second quarter of 2019 due to the impact of the Kinderhook acquisition. The Company’s Tier 1 leverage ratio was 10.76% at the end of the third quarter, down from 11.54% at the end of the second quarter due primarily to Kinderhook, but up slightly from 10.72% a year earlier.

 

As previously announced in December 2018, the Company’s Board of Directors approved a stock repurchase program authorizing the repurchase of up to 2.5 million shares of the Company’s common stock during a twelve-month period starting January 1, 2019. Such repurchases may be made at the discretion of the Company’s senior management based on market conditions and other relevant factors and will be acquired through open market or privately negotiated transactions as permitted under Rule 10b-18 of the Securities Exchange Act of 1934 and other applicable legal requirements. There were no shares repurchased pursuant to the program in the third quarter of 2019.

 

Asset Quality

 

The Company’s asset quality metrics continue to illustrate the long-term effectiveness of the Company’s disciplined credit risk management and underwriting standards. Total net charge-offs were $1.6 million for the third quarter, compared to $1.7 million for the third quarter of 2018 and $1.2 million for the second quarter of 2019. Net charge-offs as an annualized percentage of average loans measured 0.10% in the third quarter of 2019, compared to 0.11% in the prior year’s third quarter and 0.08% in the second quarter of 2019. Nonperforming loans as a percentage of total loans at September 30, 2019 were 0.42%, up three basis points from 0.39% at June 30, 2019 and up two basis points from 0.40% at September 30, 2018. The total loan delinquency ratio of 0.85% at the end of the third quarter was two basis points lower than the level at June 30, 2019, and eight basis points lower than one year earlier. The allowance for loan losses to nonperforming loans was 172% at September 30, 2019. This compares to 202% at June 30, 2019 and 201% at the September 30, 2018.

 

Dividend Increase

 

During the third quarter of 2019, the Company declared a quarterly cash dividend of $0.41 per share on its common stock, an increase of 7.9% compared to a $0.38 dividend declared in the third quarter of 2018. The third quarter 2019 dividend represents an annualized yield of 2.57% based upon the $63.86 closing price of the Company’s stock on October 18, 2019. The $0.03 increase in the quarterly dividend declared in the third quarter of 2019 marked the Company’s 27th consecutive year of dividend increases. “We are proud of this achievement and believe the Company’s business model, earnings generation and strong capital resources not only support this increase, but also allow us to maintain significant flexibility for future growth opportunities,” said Mark E. Tryniski, President and Chief Executive Officer.

 

Steuben Trust Corporation

 

On October 21, 2019, the Company announced that it had entered into a definitive agreement to acquire Steuben Trust Corporation (“Steuben”), parent company of Steuben Trust Company, a New York State chartered community bank headquartered in Hornell, New York, for approximately $106.8 million in Company stock and cash. The acquisition will extend the Company’s footprint into two new counties in Western New York State, and enhance the Company’s presence in four Western New York State counties in which it currently operates. Upon completion of the merger, Community Bank will add 15 branch locations with approximately $576.6 million of assets, and deposits of $484.4 million. The Company expects this acquisition to be approximately $0.08 to $0.09 per share accretive to its first full year of GAAP earnings and $0.09 to $0.10 per share accretive to cash earnings, excluding any one-time transaction costs. The acquisition is expected to close during the second quarter of 2020, pending both customary regulatory and Steuben shareholder approval.

 

 

 

 

Conference Call Scheduled

 

Company management will conduct an investor call at 11:00 a.m. (ET) today, October 21, 2019, to discuss third quarter 2019 results. The conference call can be accessed at 800-263-0877 (646-828-8143 if outside United States and Canada) using the conference ID code 1984485. Investors may also listen live via the Internet at: https://www.webcaster4.com/Webcast/Page/995/31682.

 

This earnings release, including supporting financial tables, is available within the press releases section of the Company's investor relations website at: http://ir.communitybanksystem.com. An archived webcast of the earnings call will be available on this site for one full year.

 

 

Community Bank System, Inc. operates over 230 customer facilities across Upstate New York, Northeastern Pennsylvania, Vermont, and Western Massachusetts through its banking subsidiary, Community Bank, N.A. With assets of over $11.5 billion, the DeWitt, N.Y. headquartered company is among the country’s 150 largest financial institutions. In addition to a full range of retail, business, and municipal banking services, the Company offers comprehensive financial planning, insurance and wealth management services through its Community Bank Wealth Management Group and OneGroup NY, Inc. operating subsidiaries. The Company's Benefit Plans Administrative Services, Inc. subsidiary is a leading provider of employee benefits administration, trust services, collective investment fund administration and actuarial consulting services to customers on a national scale. Community Bank System, Inc. is listed on the New York Stock Exchange and the Company's stock trades under the symbol CBU. For more information about Community Bank visit www.cbna.com or http://ir.communitybanksystem.com.

 

# # #

 

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The following factors, among others, could cause the actual results of CBU’s operations to differ materially from CBU’s expectations: the successful integration of operations of its acquisitions; competition; changes in economic conditions, interest rates and financial markets; changes in legislation or regulatory requirements; and the timing for receiving regulatory approvals and completing pending transactions. These statements are based on the current beliefs and expectations of CBU’s management and CBU does not assume any duty to update forward-looking statements.

 

 

 

 


Summary of Financial Data (unaudited)
       
(Dollars in thousands, except per share data)        
  Quarter Ended Year-to-Date
 

September 30,

2019

September 30,

2018

September 30,

2019

September 30,

2018

Earnings        
Loan income $79,931 $72,256 $227,701 $212,849
Investment income 18,716 18,647 57,979 57,463
Total interest income 98,647 90,903 285,680 270,312
Interest expense 7,371 4,705 19,245 12,644
Net interest income 91,276 86,198 266,435 257,668
Provision for loan losses 1,751 2,215 5,573 8,342
Net interest income after provision for loan losses 89,525 83,983 260,862 249,326
Deposit service fees and other banking services 17,865 17,663 52,408 58,210
Wealth management and insurance services 14,890 14,438 44,008 42,414
Employee benefit services 24,329 23,265 72,170 68,813
Gain on sale of investments, net 0 0 4,882 0
Unrealized gain on equity securities 10 743 28 722
Loss on debt extinguishment 0 (318) 0 (318)
Total noninterest revenues 57,094 55,791 173,496 169,841
Salaries and employee benefits 56,061 51,062 163,448 155,323
Occupancy and equipment 9,801 9,770 29,708 29,738
Amortization of intangible assets 3,960 4,427 11,994 13,780
Acquisition expenses 6,061 (832) 7,789 (769)
Other 21,046 20,806 63,818 59,604
Total operating expenses 96,929 85,233 276,757 257,676
Income before income taxes 49,690 54,541 157,601 161,491
Income taxes 10,472 11,435 31,422 33,673
Net income $39,218 $43,106 $126,179 $127,818
Basic earnings per share $0.76 $0.84 $2.44 $2.49
Diluted earnings per share $0.75 $0.83 $2.41 $2.46

 

 

 

 


Summary of Financial Data (unaudited)
         
(Dollars in thousands, except per share data)          
 

2019

2018
  3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr
Earnings          
Loan income $79,931 $74,067 $73,703 $73,316 $72,256
Investment income 18,716 20,285 18,978 19,105 18,647
Total interest income 98,647 94,352 92,681 92,421 90,903
Interest expense 7,371 6,052 5,822 5,034 4,705
Net interest income 91,276 88,300 86,859 87,387 86,198
Provision for loan losses 1,751 1,400 2,422 2,495 2,215
Net interest income after provision for loan losses 89,525 86,900 84,437 84,892 83,983
Deposit service fees and other banking services 17,865 17,143 17,400 17,142 17,663
Wealth management and insurance services 14,890 14,907 14,211 13,675 14,438
Employee benefit services 24,329 23,787 24,054 23,466 23,265
Gain on sale of investments, net 0 4,882 0 0 0
Unrealized gain(loss) on equity securities 10  (13) 31  (65) 743
Loss on debt extinguishment 0 0 0 0 (318)
Total noninterest revenues 57,094 60,706 55,696 54,218 55,791
Salaries and employee benefits 56,061 54,008 53,379 52,040 51,062
Occupancy and equipment 9,801 9,619 10,288 10,210 9,770
Amortization of intangible assets 3,960 3,904 4,130 4,375 4,427
Acquisition expenses 6,061 1,194 534 0  (832)
Other 21,046 22,451 20,321 20,988 20,806
Total operating expenses 96,929 91,176 88,652 87,613 85,233
Income before income taxes 49,690 56,430 51,481 51,497 54,541
Income taxes 10,472 11,415 9,535 10,674 11,435
Net income $39,218 $45,015 $41,946 $40,823 $43,106
Basic earnings per share $0.76 $0.87 $0.81 $0.79 $0.84
Diluted earnings per share $0.75 $0.86 $0.80 $0.78 $0.83
Profitability          
Return on assets 1.39% 1.68% 1.59% 1.53% 1.61%
Return on equity 8.53% 10.18% 9.85% 9.63% 10.28%
Return on tangible equity(2) 14.92% 17.74% 17.61% 17.61% 19.06%
Noninterest revenues/operating revenues (FTE) (1) 38.6% 38.8% 39.1% 38.5% 39.4%
Efficiency ratio 58.8% 59.8% 59.1% 59.1% 58.0%
Components of Net Interest Margin (FTE)          
Loan yield 4.72% 4.73% 4.78% 4.65% 4.57%
Cash equivalents yield 2.19% 2.37% 2.33% 1.85% 1.60%
Investment yield 2.61% 2.73% 2.59% 2.62% 2.55%
Earning asset yield 4.03% 4.06% 4.05% 3.99% 3.91%
Interest-bearing deposit rate 0.36% 0.30% 0.27% 0.22% 0.18%
Borrowing rate 2.06% 1.87% 1.86% 1.68% 1.96%
Cost of all interest-bearing funds 0.43% 0.37% 0.36% 0.31% 0.29%
Cost of funds (includes DDA) 0.32% 0.28% 0.27% 0.23% 0.21%
Net interest margin (FTE) 3.73% 3.80% 3.80% 3.77% 3.71%
Fully tax-equivalent adjustment $985 $990 $1,008 $1,062 $1,071

 

 

 

 

Summary of Financial Data (unaudited)          
(Dollars in thousands, except per share data)          
 

2019

2018
  3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr
Average Balances          
Loans $6,735,776 $6,294,772 $6,273,798 $6,276,231 $6,289,868
Cash equivalents 665,862 334,304 121,304 28,817 26,832
Taxable investment securities 1,990,979 2,400,516 2,574,902 2,577,366 2,574,116
Nontaxable investment securities 413,437 397,316 403,359 423,902 441,719
Total interest-earning assets 9,806,054 9,426,908 9,373,363 9,306,316 9,332,535
Total assets 11,229,919 10,771,975 10,687,708 10,575,272 10,619,872
Interest-bearing deposits 6,462,143 6,170,832 6,107,732 6,039,390 6,077,581
Borrowings 290,967 319,505 373,656 389,378 393,483
Total interest-bearing liabilities 6,753,110 6,490,337 6,481,388 6,428,768 6,471,064
Noninterest-bearing deposits 2,458,831 2,326,630 2,297,472 2,317,042 2,336,778
Shareholders' equity 1,824,869 1,774,400 1,726,313 1,682,525 1,664,234
Balance Sheet Data          
Cash and cash equivalents $1,014,042 $874,836 $508,364 $211,834 $256,838
Investment securities 2,481,742 2,402,272 2,966,147 2,981,658 2,948,057
Loans:          
Business lending 2,779,612 2,395,684 2,410,477 2,396,977 2,403,624
Consumer mortgage 2,405,191 2,255,782 2,237,430 2,235,408 2,220,022
Consumer indirect 1,091,980 1,082,834 1,070,840 1,083,207 1,098,943
Home equity 389,029 371,619 374,297 386,709 393,950
Consumer direct 187,379 178,151 173,042 178,820 184,349
Total loans 6,853,191 6,284,070 6,266,086 6,281,121 6,300,888
Allowance for loan losses 49,423 49,310 49,107 49,284 50,133
Intangible assets, net 840,685 800,515 804,419 807,349 811,700
Other assets 457,060 433,005 420,558 374,617 392,217
Total assets 11,597,297 10,745,388 10,916,467 10,607,295 10,659,567
Deposits:          
   Noninterest-bearing 2,549,395 2,363,408 2,346,635 2,312,816 2,346,932
   Non-maturity interest-bearing 5,672,825 5,356,448 5,517,141 5,270,015 5,366,488
   Time 946,065 768,349 755,886 739,540 750,401
Total deposits 9,168,285 8,488,205 8,619,662 8,322,371 8,463,821
Borrowings 237,661 144,290 251,833 315,743 276,559
Subordinated notes payable 13,814 0 0 0 0
Subordinated debt held by unconsolidated subsidiary trusts 77,320 97,939 97,939 97,939 97,939
Accrued interest and other liabilities 259,796 205,444 189,905 157,459 152,903
Total liabilities 9,756,876 8,935,878 9,159,339 8,893,512 8,991,222
Shareholders' equity 1,840,421 1,809,510 1,757,128 1,713,783 1,668,345
Total liabilities and shareholders' equity 11,597,297 10,745,388 10,916,467 10,607,295 10,659,567
Capital          
Tier 1 leverage ratio 10.76% 11.54% 11.27% 11.08% 10.72%
Tangible equity/net tangible assets (2) 9.68% 10.56% 9.83% 9.68% 9.13%
Diluted weighted average common shares O/S 52,382 52,356 52,195 52,122 52,086
Period end common shares outstanding 51,660 51,571 51,471 51,258 51,137
Cash dividends declared per common share $0.41 $0.38 $0.38 $0.38 $0.38
Book value $35.63 $35.09 $34.14 $33.43 $32.63
Tangible book value(2) $20.24 $20.45 $19.40 $18.59 $17.67
Common stock price (end of period) $61.69 $65.84 $59.77 $58.30 $61.07
                   

 

 

           
Summary of Financial Data (unaudited)          
(Dollars in thousands, except per share data)          
 

2019

2018
  3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr
Asset Quality          
Nonaccrual loans $23,610 $21,413 $21,252 $22,544 $21,982
Accruing loans 90+ days delinquent 5,064 3,047 3,019 2,455 2,951
    Total nonperforming loans 28,674 24,460 24,271 24,999 24,933
Other real estate owned (OREO) 1,258 1,736 1,524 1,320 1,142
         Total nonperforming assets 29,932 26,196 25,795 26,319 26,075
Net charge-offs 1,638 1,197 2,599 3,345 1,700
Allowance for loan losses/loans outstanding 0.72% 0.78% 0.78% 0.78% 0.80%
Nonperforming loans/loans outstanding 0.42% 0.39% 0.39% 0.40% 0.40%
Allowance for loan losses/nonperforming loans 172% 202% 202% 197% 201%
Net charge-offs/average loans 0.10% 0.08% 0.17% 0.21% 0.11%
Delinquent loans/ending loans 0.85% 0.87% 0.88% 1.00% 0.93%
Loan loss provision/net charge-offs 107% 117% 93% 75% 130%
Nonperforming assets/total assets 0.26% 0.24% 0.24% 0.25% 0.24%
Asset Quality (excluding loans acquired since 1/1/09)          
Nonaccrual loans $16,644 $15,529 $15,524 $16,182 $14,684
Accruing loans 90+ days delinquent 3,734 2,863 2,593 2,106 2,688
Total nonperforming loans 20,378 18,392 18,117 18,288 17,372
Other real estate owned (OREO) 1,258 1,145 898 669 859
Total nonperforming assets 21,636 19,537 19,015 18,957 18,231
Net charge-offs 1,602 1,234 1,516 3,053 1,533
Allowance for loan losses/loans outstanding 0.89% 0.93% 0.94% 0.93% 0.96%
Nonperforming loans/loans outstanding 0.38% 0.36% 0.36% 0.36% 0.35%
Allowance for loan losses/nonperforming loans 231% 260% 262% 256% 274%
Net charge-offs/average loans 0.12% 0.10% 0.12% 0.24% 0.12%
Delinquent loans/ending loans 0.88% 0.89% 0.89% 1.06% 0.97%
Loan loss provision/net charge-offs 51% 123% 142% 76% 138%
Nonperforming assets/total assets 0.22% 0.20% 0.20% 0.20% 0.20%
           
                 

 

 

 

Summary of Financial Data (unaudited)          
(Dollars in thousands, except per share data)          
  2019 2018
  3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr
Quarterly GAAP to Non-GAAP Reconciliations          
Income statement data          
Net income          
  Net income (GAAP) $39,218 $45,015 $41,946 $40,823 $43,106
  Acquisition expenses 6,061 1,194 534 0  (832)
  Tax effect of acquisition expenses  (1,277)  (242) (99) 0 174
    Subtotal (non-GAAP) 44,002 45,967 42,381 40,823 42,448
  Gain on sale of investments, net 0  (4,882) 0 0 0
  Tax effect of gain on sale of investments, net 0 988 0 0 0
     Subtotal (non-GAAP) 44,002 42,073 42,381 40,823 42,448
  Unrealized (gain)loss on equity securities (10) 13 (31) 65  (743)
  Tax effect of unrealized (gain)loss on equity securities 2  (3) 6  (13) 156
     Subtotal (non-GAAP) 43,994 42,083 42,356 40,875 41,861
  Loss on debt extinguishment 0 0 0 0 318
  Tax effect of loss on debt extinguishment 0 0 0 0  (67)
     Operating net income (non-GAAP) 43,994 42,083 42,356 40,875 42,112
  Amortization of intangibles 3,960 3,904 4,130 4,375 4,427
  Tax effect of amortization of intangibles  (835)  (790)  (765)  (907)  (928)
     Subtotal (non-GAAP) 47,119 45,197 45,721 44,343 45,611
  Acquired non-impaired loan accretion  (1,637)  (1,302)  (1,330)  (1,838)  (1,980)
  Tax effect of acquired non-impaired loan accretion 345 263 246 381 415
     Adjusted net income (non-GAAP) $45,827 $44,158 $44,637 $42,886 $44,046
           
Return on average assets          
  Adjusted net income (non-GAAP) $45,827 $44,158 $44,637 $42,886 $44,046
  Average total assets 11,229,919 10,771,975 10,687,708 10,575,272 10,619,872
     Adjusted return on average assets 1.62% 1.64% 1.69% 1.61% 1.65%
           
Return on average equity          
  Adjusted net income (non-GAAP) $45,827 $44,158 $44,637 $42,886 $44,046
  Average total equity 1,824,869 1,774,400 1,726,313 1,682,525 1,664,234
     Adjusted return on average equity 9.96% 9.98% 10.49% 10.11% 10.50%
           
Earnings per common share          
  Diluted earnings per share (GAAP) $0.75 $0.86 $0.80 $0.78 $0.83
  Acquisition expenses 0.12 0.02 0.01 0.00 (0.02)
  Tax effect of acquisition expenses (0.03) 0.00 0.00 0.00 0.00
     Subtotal (non-GAAP) 0.84 0.88 0.81 0.78 0.81
  Gain on sale of investments, net 0.00 (0.10) 0.00 0.00 0.00
  Tax effect of gain on sale of investments, net 0.00 0.02 0.00 0.00 0.00
     Subtotal (non-GAAP) 0.84 0.80 0.81 0.78 0.81
  Unrealized (gain)loss on equity securities 0.00 0.00 0.00 0.00 (0.01)
  Tax effect of unrealized (gain)loss on equity securities 0.00 0.00 0.00 0.00 0.00
     Subtotal (non-GAAP) 0.84 0.80 0.81 0.78 0.80
  Loss on debt extinguishment 0.00 0.00 0.00 0.00 0.01
  Tax effect of loss on debt extinguishment 0.00 0.00 0.00 0.00 0.00
     Operating diluted earnings per share (non-GAAP) 0.84 0.80 0.81 0.78 0.81
  Amortization of intangibles 0.08 0.07 0.08 0.08 0.08
  Tax effect of amortization of intangibles (0.02) (0.02) (0.01) (0.02) (0.02)
     Subtotal (non-GAAP) 0.90 0.85 0.88 0.84 0.87
  Acquired non-impaired loan accretion (0.03) (0.02) (0.03) (0.04) (0.04)
  Tax effect of acquired non-impaired loan accretion 0.01 0.01 0.00 0.01 0.01
     Diluted adjusted net earnings per share (non-GAAP) $0.88 $0.84 $0.85 $0.81 $0.84
           
                 

 

 

 

Summary of Financial Data (unaudited)            
(Dollars in thousands, except per share data)            
  2019 2018
  3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr
Quarterly GAAP to Non-GAAP Reconciliations          
Income statement data (continued)          
Noninterest operating expenses          
  Noninterest expenses (GAAP) $96,929 $91,176 $88,652 $87,613 $85,233
  Amortization of intangibles  (3,960)  (3,904)  (4,130)  (4,375)  (4,427)
  Acquisition expenses  (6,061)  (1,194) (534) 0 832
     Total adjusted noninterest expenses (non-GAAP) $86,908 $86,078 $83,988 $83,238 $81,638
           
Efficiency ratio          
  Adjusted noninterest expenses (non-GAAP) - numerator $86,908 $86,078 $83,988 $83,238 $81,638
  Tax-equivalent net interest income 92,261 89,290 87,867 88,449 87,269
  Noninterest revenues 57,094 60,706 55,696 54,218 55,791
  Acquired non-impaired loan accretion  (1,637)  (1,302)  (1,330)  (1,838)  (1,980)
  Gain on sale of investments, net  0  (4,882) 0 0 0
  Unrealized (gain)loss on equity securities (10) 13 (31) 65  (743)
  Loss on debt extinguishment 0 0 0 0 318
  Operating revenues (non-GAAP) - denominator 147,708 143,825 142,202 140,894 140,655
     Efficiency ratio (non-GAAP) 58.8% 59.8% 59.1% 59.1% 58.0%
           
Balance sheet data          
Total assets          
  Total assets (GAAP) $11,597,297 $10,745,388 $10,916,467 $10,607,295 $10,659,567
  Intangible assets  (840,685)  (800,515)  (804,419)  (807,349)  (811,700)
  Deferred taxes on intangible assets 46,048 45,576 45,994 46,370 46,882
     Total tangible assets (non-GAAP) 10,802,660 9,990,449 10,158,042 9,846,316 9,894,749
           
Total common equity          
  Shareholders' Equity (GAAP) 1,840,421 1,809,510 1,757,128 1,713,783 1,668,345
  Intangible assets  (840,685)  (800,515)  (804,419)  (807,349)  (811,700)
  Deferred taxes on intangible assets 46,048 45,576 45,994 46,370 46,882
     Total tangible common equity (non-GAAP) 1,045,784 1,054,571 998,703 952,804 903,527
           
Net tangible equity-to-assets ratio at quarter end          
  Total tangible common equity (non-GAAP) - numerator $1,045,784 $1,054,571 $998,703 $952,804 $903,527
  Total tangible assets (non-GAAP) - denominator 10,802,660 9,990,449 10,158,042 9,846,316 9,894,749
     Net tangible equity-to-assets ratio at quarter end (non-GAAP) 9.68% 10.56% 9.83% 9.68% 9.13%
           
 

(1) Excludes gain on sales of investments, unrealized gain and loss on equity securities and loss on debt extinguishment.
(2) Includes deferred tax liabilities related to certain intangible assets.

 

 

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