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Section 1: 8-K (8-K)

8-K
OLD NATIONAL BANCORP /IN/ false 0000707179 0000707179 2020-01-21 2020-01-21

 

 

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): January 21, 2020

 

OLD NATIONAL BANCORP

(Exact name of Registrant as specified in its charter)

 

Indiana

 

001-15817

 

35-1539838

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

One Main Street

Evansville, Indiana

 

47708

(Address of Principal Executive Offices)

 

(Zip Code)

Registrant’s telephone number, including area code: (800) 731-2265

(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:

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, No Par Value

 

ONB

 

The NASDAQ Stock Market LLC

Indicate by check mark whether the Registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (s230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (s240.12b-2 of this chapter).

Emerging growth company  

If an emerging growth company, indicate by check mark if the Registrant has elected not to use 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 January 21, 2020, Old National Bancorp (the “Company”) issued a press release (“Press Release”) reporting its financial results for the fourth quarter and full year 2019. The Press Release is furnished as Exhibit 99.1 hereto and is incorporated herein by reference. A slide presentation outlining fourth quarter and full year 2019 earnings, strategic developments, and the Company’s financial outlook will be available on the “Investor Relations” section of the Company’s website to complement the conference call to be held on January 21, 2020, at 7:00 a.m. CDT and will be accessible at http://www.oldnational.com immediately before the conference call begins.

Item 2.05 Costs Associated with Exit or Disposal Activities

On January 15, 2020, the Company commenced implementation of the ONB Way strategic plan, which has various detailed business objectives designed to keep the Company’s clients at the center of all it does. The Company expects to incur an estimated aggregate of $53 million of related cash expenses. An estimate of each major type of cost is set forth below. Of the $53 million aggregate cash expenses, the Company has expensed $8.2 million, $1.8 million, and $1.4 million in the fourth, third and second quarters of 2019, respectively. The Company expects that the remaining $41.6 million of related cash expenses will all be incurred over the course of 2020. To optimize the Company’s branch network, the Company plans to close 31 retail banking centers in smaller markets: 10 banking centers in each of Wisconsin and Indiana, five in Michigan, four in Minnesota and two in Kentucky. The Company expects to incur an estimated $25 million in costs associated with the branch optimization and expects to complete the optimization by April 24, 2020.

In connection with the ONB Way strategic plan the Company is realigning its organizational structure and expects to incur an estimated $10 million in severance charges.

In addition the Company expects to incur an estimated $10 million in professional fees and $8 million in non-branch facilities and miscellaneous charges.

A copy of the press release describing the objectives of the ONB Way is attached hereto as Exhibit 99.1 and the information set forth therein is incorporated herein by reference.

Forward Looking Statements

In this report, we have made various statements regarding current expectations or forecasts of future events, which speak only as of the date the statements are made. These statements are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are also made from time-to-time in press releases and in oral statements made by the officers of the Company. Forward-looking statements can be identified by the use of the words “expect,” “may,” “could,” “intend,” “project,” “estimate,” “believe,” “anticipate,” and other words of similar meaning. Such forward-looking statements are based on assumptions and estimates, which although believed to be reasonable, may turn out to be incorrect. Therefore, undue reliance should not be placed upon these estimates and statements. We cannot assure that any of these statements, estimates, or beliefs will be realized and actual results may differ from those contemplated in these “forward-looking statements.” We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise. You are advised to consult further disclosures we may make on related subjects in our filings with the SEC.

Item 8.01 Other Events

On January 15, 2020, the Company’s Board of Directors declared a quarterly cash dividend of $0.14 per common share, an increase from the $0.13 paid on December 16, 2019. The dividend is payable March 16, 2020, to shareholders of record on March 2, 2020. For purposes of broker trading, the ex-date of the cash dividend is February 28, 2020.

On January 15, 2020, the Board of Directors also approved the adoption of a stock repurchase plan that authorizes up to 7.0 million shares of Old National Bancorp common stock which may be repurchased, from time to time, through January 31, 2021.

On January 21, 2020, the Company issued a press release announcing the addition of four new executive leaders. A copy of the press release is attached hereto as Exhibit 99.1 and the information set forth therein is incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

Exhibit
No.

   

Description

         
 

99.1

   

Press Release issued by Old National Bancorp on January 21, 2020

         
 

104

   

Cover Page Interactive Data File (embedded within the Inline XBRL document).

2


SIGNATURE

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.

Date: January 21, 2020

OLD NATIONAL BANCORP

     

By:

 

/s/ Brendon B. Falconer

 

Brendon B. Falconer

 

Senior Executive Vice President and

 

Chief Financial Officer

3

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Section 2: EX-99.1 (EX-99.1)

EX-99.1

Exhibit 99.1

 

Old National Bancorp

One Main Street

   LOGO

Evansville, IN 47708

oldnational.com

  

Media: Kathy A. Schoettlin (812) 465-7269

Investors: Lynell J. Walton (812) 464-1366

Old National reports 4th quarter earnings, announces dividend

increase, stock repurchase plan, and ONB Way strategic update

Evansville, Ind. (January 21, 2020)

Old National Bancorp (NASDAQ: ONB) reports 4Q19 net income of $49.2 million, diluted EPS of $0.29.

Adjusted1 net income of $55.2 million, or $0.32 per diluted share.

2019 annual net income of $238.2 million, diluted EPS of $1.38.

Adjusted1 2019 annual net income of $249.9 million, diluted EPS of $1.45.

CEO COMMENTARY:

“Our 4th quarter results capped a strong year of earnings for Old National,” said CEO Jim Ryan. “Full-year 2019

results included three quarters of record net income, stellar credit metrics, well controlled expenses and record

commercial loan production, all of which was accomplished while finalizing a new strategic plan – known as

The ONB Way – that will ensure our clients remain at the center of all we do.”

FOURTH QUARTER HIGHLIGHTS2:

 

Net Income   

•  Net income of $49.2 million

 

•  Earnings per share of $0.29

Net Interest Income/NIM   

•  Net interest income on a fully taxable equivalent basis was $152.2 million compared to $156.3 million

 

•  Net interest margin on a fully taxable equivalent basis was 3.46% compared to 3.57%

Operating Performance   

•  Pre-provision net revenue1 (“PPNR”) was $65.2 million

 

•  Adjusted PPNR1 was $73.9 million, up 10.3% over fourth quarter of 2018

 

•  Noninterest expense was $134.7 million

 

•  Adjusted noninterest expense1 was $125.6 million

 

•  Efficiency ratio1 was 65.57%

 

•  Adjusted efficiency ratio1 was 60.97%, a 234 basis point improvement from fourth quarter of 2018

Loans and

Credit

Quality

  

•  End-of-period total loans3 were $12,164.4 million compared to $12,075.9 million

 

•  Fourth-quarter total commercial production was a record $681 million; December 31 pipeline was a record $2.2 billion

 

•  Provision for loan losses was $1.3 million

 

•  Net charge-offs were $3.6 million, or 0.12% annualized, compared to net charge-offs of $0.8 million

 

•  Non-performing loans were 1.19% of total loans compared to 1.31%

Return

Profile &

Capital

  

•  Return on average common equity was 6.94%

 

•  Return on average tangible common equity1 was 12.03%

 

•  Adjusted return on average tangible common equity1 was 13.44%

 

•  Repurchased 428 thousand shares of common stock during the current quarter

Notable

Items

  

•  $0.01 increase in quarterly cash dividend to $0.14 per share

 

•  7 million share repurchase authorization effective until January 31, 2021

 

•  Current quarter contained $8.2 million in ONB Way charges, $0.2 million in merger and integration charges and $0.7 million in tax credit amortization ta

 

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


DIVIDEND AND SHARE REPURCHASE

Old National Bancorp’s Board of Directors declared an increase in its quarterly common stock cash dividend to $0.14 per share on the Company’s outstanding shares of common stock. This new dividend level represents a 7.7% increase over the previous cash dividend level of $0.13 per common share. The dividend is payable March 16, 2020, to shareholders of record on March 2, 2020. For purposes of broker trading, the ex-date of the cash dividend is February 28, 2020.

The Board of Directors has also approved the adoption of a stock repurchase plan that authorizes up to 7.0 million shares of Old National Bancorp stock to be repurchased, as conditions warrant, through January 31, 2021. These shares may be purchased in either the open market or in privately negotiated transactions, in accordance with SEC regulations.

THE ONB WAY: OLD NATIONAL’S NEW STRATEGIC PLAN

Old National is implementing a new strategic plan – and overall way of doing business – designed to keep our clients at the center of all we do. Known as The ONB Way, it includes:

 

   

Realigning the organization into clearly defined segments to align leaders and relationship managers with the client segment they can best serve (while not wavering on our commitment to community).

 

   

Deepening client relationships through integrated Commercial, Community Banking and Wealth teams.

 

   

Simplifying and improving the end-to-end banking/borrowing journey while adhering to strong risk management principles.

 

   

Creating a new Wealth Division that combines wealth management, investments and private banking for a simplified, highly consultative client experience firmly rooted in financial planning.

 

   

Investing in our operational and IT infrastructure to meet our clients “where they are” and ensure that we keep pace with technology and client digital expectations.

ADDITIONS TO THE LEADERSHIP TEAM

As part of The ONB Way, Old National is pleased to welcome four new executive leaders:

 

   

Chady AlAhmar, Wealth Division CEO. Most recently a Senior Executive of Wealth Management at U.S. Bank, Chady is passionate about achieving business growth through driving strategy optimization, team collaboration, sales practices, business development and analytics. Prior to joining U.S. Bank, he held strategy, finance and management consulting positions with GMAC (Ally Bank) and ACG in New York and ran his own management consulting firm for several years. He will be located in Minneapolis.

 

   

Paul Kilroy, Chief Information Officer. Paul brings a wide and impressive array of IT expertise and leadership experience to his role as ONB CIO, including Cloud, data and application rationalization strategies, and robotics and automation. Most recently, he served as SVP, Segment CIO of Enterprise Shared Services, Data and Architecture for Huntington National Bank, where he created a groundbreaking Robotics Center of Excellence. Prior to that, he spent 13 years in IT leadership roles at JP Morgan Chase. Paul will be located in Evansville.

 

   

Scott Fecteau, Chief Client Services Officer, Operations. Scott is an Operations, Financial and Risk Management executive with nearly 30 years of industry experience. He most recently served as Managing Director/Global Delivery Lead BPO for Accenture Credit Services in Charlotte, North Carolina. Prior to that, he was Director of Residential Lending at Associated Bank, in Green Bay for 12 years. We are excited to welcome Scott back to Old National as he served in our Mortgage Division in 2003-04. He will be located in Evansville.


   

Malinda Anthony, Treasury Management (TM) President. Malinda joined ONB from Wells Fargo in Indianapolis, where she most recently served as North Division Sales Manager, overseeing TM sales supporting commercial banking in 10 states. In her role as ONB TM President, she is responsible for the entire Treasury Management business line, including sales, operations and support, product and process innovation, and Merchant Services. She will be located in Indianapolis.

BRANCH NETWORK OPTIMIZATION

Another component of The ONB Way is the optimization of our branch network. This optimization, which includes 31 banking centers scattered throughout the footprint that will be consolidated on April 24, 2020, reflects an ongoing shift among our clients toward digital banking solutions. Many of the facilities to be consolidated are in smaller markets, several of which were added in recent years through partnership activity. By state, these consolidations include 10 banking centers in both Wisconsin and Indiana, five in Michigan, four in Minnesota and two in Kentucky.

RESULTS OF OPERATIONS

Old National Bancorp reported fourth-quarter 2019 net income of $49.2 million, or $0.29 per diluted share.

Included in the fourth quarter were pre-tax charges of $8.2 million for ONB Way and $0.2 million for merger and integration activity. Excluding these charges from the current quarter and netting out debt securities gains, adjusted net income was $55.2 million, or $0.32 per diluted share.

LOANS

Commercial activity remains strong with record high commercial loan production.

 

   

Period-end total loans were $12,164.4 million at December 31, 2019, compared to $12,075.9 million at September 30, 2019.

 

   

Commercial and industrial loans decreased $60.3 million to $2,890.3 million; commercial real estate loans increased $54.7 million to $5,166.8 million; consumer loans increased $7.8 million to $1,726.1 million and residential mortgage loans increased $86.3 million to $2,381.2 million.

 

   

Commercial loan production in the fourth quarter was $681 million; period-end pipeline totaled $2.2 billion.

 

   

On average, total loans in the fourth quarter were $12,069.2 million, down from $12,073.8 million in the third quarter of 2019.

DEPOSITS

A low-cost core deposit franchise continues to be one of Old National’s strengths.

 

   

Period-end total deposits were $14,553.4 million at December 31, 2019, an increase of $105.0 million from the third quarter of 2019.

 

   

On average, total deposits in the fourth quarter were $14,602.9 million, compared to $14,330.5 million in the third quarter of 2019.

NET INTEREST INCOME AND MARGIN

Net interest income and margin lower with decline in accretion income and mix shift.

 

   

Net interest income decreased to $148.9 million in the fourth quarter of 2019 from $153.1 million in the third quarter of 2019.

 

   

The net interest margin on a fully taxable equivalent basis decreased 11 basis points to 3.46% compared to 3.57% in the third quarter of 2019.

 

   

Accretion income was $9.5 million, or 21 basis points of net interest margin, in the fourth quarter of 2019 compared to $13.4 million, or 31 basis points of net interest margin, in the third quarter of 2019. In the fourth quarter of 2019, accretion income was 4.8% of adjusted total revenue.


   

Interest collected on nonaccrual loans was $2.4 million, or 5 basis points of net interest margin, in the fourth quarter of 2019 compared to $2.0 million, or 5 basis points of net interest margin, in the third quarter of 2019.

 

   

The cost of total deposits declined 9 basis points to 0.43% in the fourth quarter of 2019 while the cost of total interest-bearing deposits decreased 12 basis points to 0.59%.

CREDIT QUALITY AND CECL

Strong credit quality remains a hallmark of the Old National franchise.

 

   

Asset quality remained strong with net charge-offs in the fourth quarter of $3.6 million, or 0.12% of total average loans, and 30-89 day delinquencies of 0.25%.

 

   

Provision expense was $1.3 million in the fourth quarter compared to $1.4 million in the third quarter.

 

   

Non-performing loans decreased as a percentage of total loans to 1.19%.

 

   

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, 2019, the remaining discount on these acquired loans was $77.8 million.

 

   

The allowance for loan losses was $54.6 million, or 0.45% of total loans at December 31, 2019.

 

   

Estimated day one increase to the allowance for loan losses and unfunded commitment liability of approximately $35 million to $45 million upon adoption of CECL.

NONINTEREST INCOME

Noninterest income decreased due to normal seasonal patterns in mortgage banking and deposit service charges as well as a decline in capital markets income.

 

   

Total noninterest income for the fourth quarter of 2019 was $47.7 million, a decrease of $6.2 million from the third quarter of 2019.

 

   

Mortgage banking revenue decreased $3.2 million, capital markets income decreased $1.5 million and service charges on deposits declined $1.1 million when compared to the third quarter of 2019.

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 2019 was $134.7 million and included $8.2 million in ONB Way charges, $0.2 million in merger & integration charges and $0.7 million in tax credit amortization.

 

   

Excluding these items, adjusted noninterest expense for the fourth quarter was $125.6 million, compared to the $118.3 million in adjusted noninterest expense in the third quarter of 2019.

 

   

The fourth quarter of 2019 also included $4.0 million in additional incentive compensation which is included in adjusted noninterest expense defined above.

 

   

The fourth quarter efficiency ratio was 65.57%, while the adjusted efficiency ratio was 60.97%.

 

   

For the full-year 2019, the efficiency ratio was 60.35%, while the adjusted efficiency ratio was 57.87%.

 

   

Adjusted operating leverage1 was +636 basis points for the full-year 2019 as compared to 2018.

INCOME TAXES

 

   

On a fully taxable-equivalent basis, income tax expense in the fourth quarter was $14.7 million, resulting in a 23.0% FTE tax rate.

 

   

Income tax expense included $0.7 million in tax credit benefit.

CAPITAL

Capital ratios remain strong.

 

   

At the end of the fourth quarter, total risk-based capital was 13.0% and regulatory tier 1 capital was 12.1%.


   

Tangible common equity to tangible assets was 9.09% at the end of the fourth quarter compared to 8.95% in the third quarter of 2019.

 

   

The Company repurchased 428 thousand shares of common stock during the fourth quarter of 2019 at a weighted average price of $16.78, excluding commissions.

NON-GAAP RECONCILIATIONS

 

($ in millions, except EPS, shares in 000s)

   4Q19      Adjustments4      Adjusted 4Q19  

Total Revenues (FTE)

   $ 199.9      ($ 0.4    $ 199.5  

Less: Provision for Loan Losses

     (1.3      —          (1.3

Less: Noninterest Expenses

     (134.7      8.4        (126.3
  

 

 

    

 

 

    

 

 

 

Income before Income Taxes (FTE)

   $ 63.9      $ 8.0      $ 71.9  

Income Taxes

     14.7        2.0        16.7  
  

 

 

    

 

 

    

 

 

 

Net Income

   $ 49.2      $ 6.0      $ 55.2  
  

 

 

    

 

 

    

 

 

 

Average Shares Outstanding

     170,186        —          170,186  

Earnings Per Share - Diluted

   $ 0.29      $ 0.03      $ 0.32  

 

4

Tax-effect calculations use the current statutory FTE tax rates (federal + state)

 

($ in millions, except EPS, shares in 000s)

   2019      Adjustments4      Adjusted 2019  

Total Revenues (FTE)

   $ 816.5      ($ 1.9    $ 814.6  

Less: Provision for Loan Losses

     (4.7      —          (4.7

Less: Noninterest Expenses

     (508.5      17.4        (491.1
  

 

 

    

 

 

    

 

 

 

Income before Income Taxes (FTE)

   $ 303.3      $ 15.5      $ 318.8  

Income Taxes

     (65.1      (3.8      (68.9
  

 

 

    

 

 

    

 

 

 

Net Income

   $ 238.2      $ 11.7      $ 249.9  
  

 

 

    

 

 

    

 

 

 

Average Shares Outstanding

     172,687        —          172,687  

Earnings Per Share

   $ 1.38      $ 0.07      $ 1.45  

 

4

Tax-effect calculations use the current statutory FTE tax rates (federal + state)

 

($ in millions)

   4Q19     3Q19  

Net Interest Income

   $ 148.9     $ 153.1  

Add: FTE Adjustment

     3.3       3.2  
  

 

 

   

 

 

 

Net Interest Income (FTE)

   $ 152.2     $ 156.3  
  

 

 

   

 

 

 

Average Earning Assets

   $ 17,577.8     $ 17,510.5  

Net Interest Margin (FTE)

     3.46     3.57

 

($ in millions)

   4Q19      3Q19  

Net Interest Income

   $ 148.9      $ 153.1  

Add: FTE Adjustment

     3.3        3.2  
  

 

 

    

 

 

 

Net Interest Income (FTE)

   $ 152.2      $ 156.3  

Add: Total Noninterest Income

     47.7        53.9  

Less: Noninterest Expense

     (134.7      (122.6
  

 

 

    

 

 

 

Pre-Provision Net Revenue

   $ 65.2      $ 87.6  

Less: Debt Securities Gains/Losses

     (0.4      (0.4

Add: ONB Way Charges

     8.2        1.8  

Add: Merger and Integration Charges

     0.2        1.3  

Add: Amortization of Tax Credit Investments

     0.7        1.2  
  

 

 

    

 

 

 

Adjusted Pre-Provision Net Revenue

   $ 73.9      $ 91.5  


($ in millions)

   4Q19     3Q19     4Q18     2019     2018  

Noninterest Expense

   $ 134.7     $ 122.6     $ 150.3     $ 508.5     $ 517.3  

Less: ONB Way Charges

     (8.2     (1.8     —         (11.4     —    

Less: Merger and Integration Charges

     (0.2     (1.3     (14.8     (6.0     (21.3

Less: Branch Action Charges/Foundation Funding

     —         —         (7.5     —         (12.0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Noninterest Expense less Charges

   $ 126.3     $ 119.5     $ 128.0     $ 491.1     $ 484.0  

Less: Amortization of Tax Credit Investments

     (0.7     (1.2     (1.1     (2.7     (22.9
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Noninterest Expense

   $ 125.6     $ 118.3     $ 126.9     $ 488.4     $ 461.1  

Less: Intangible Amortization

     (3.9     (4.2     (4.1     (16.9     (14.4
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Noninterest Expense Less Intangible Amortization

   $ 121.7     $ 114.1     $ 122.8     $ 471.5     $ 446.7  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net Interest Income

   $ 148.9     $ 153.1     $ 146.2     $ 604.3     $ 537.5  

FTE Adjustment

     3.3       3.2       3.1       12.9       11.5  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net Interest Income (FTE)

   $ 152.2     $ 156.3     $ 149.3     $ 617.2     $ 549.0  

Total Noninterest Income

     47.7       53.9       58.2       199.3       195.3  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Revenue (FTE)

   $ 199.9     $ 210.2     $ 207.5     $ 816.5     $ 744.3  

Less: Debt Securities Gains/Losses

     (0.4     (0.4     0.4       (1.9     (2.0

Less: Gain on Student Loan Sale

     —         —         —         —         (2.2

Less: Gain on Branch Actions

     —         —         (14.0     —         (14.5
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Total Revenue (FTE)

   $ 199.5     $ 209.8     $ 193.9     $ 814.6     $ 725.6  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Efficiency Ratio

     65.57     56.44     70.33     60.35     67.74

Adjusted Efficiency Ratio

     60.97     54.40     63.31     57.87     61.56

Operating Leverage5 (basis points)

     668           1,140    

Adjusted Operating Leverage6 (basis points)

     392           636    

 

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)

   4Q19     3Q19  

Net Income

   $ 49.2     $ 69.8  

Add: Intangible Amortization (net of tax7)

     3.0       3.1  
  

 

 

   

 

 

 

Tangible Net Income

   $ 52.2     $ 72.9  

Less: Securities Gains/Losses (net of tax7)

     (0.3     (0.3

Add: ONB Way Charges (net of tax7)

     6.2       1.4  

Add: Merger & Integration Charges (net of tax7)

     0.1       1.0  
  

 

 

   

 

 

 

Adjusted Tangible Net Income

   $ 58.2     $ 75.0  
  

 

 

   

 

 

 

Average Total Shareholders’ Equity

   $ 2,832.9     $ 2,817.5  

Less: Average Goodwill

     (1,037.0     (1,036.3

Less: Average Intangibles

     (61.9     (66.0
  

 

 

   

 

 

 

Average Tangible Shareholders’ Equity

   $ 1,734.0     $ 1,715.2  
  

 

 

   

 

 

 

Return on Average Tangible Common Equity

     12.03     17.01

Adjusted Return on Average Tangible Common Equity

     13.44     17.49

 

7 

Tax-effect calculations use the current 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 21, 2020, to review fourth-quarter and full-year 2019 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 21 through February 4. To access the replay, dial 1-855-859-2056, Conference ID Code 5278346.


ABOUT OLD NATIONAL

Old National Bancorp (NASDAQ: ONB) is the holding company of Old National Bank. Headquartered in Evansville with $20.4 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 eight consecutive years. For 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: 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, including the anticipated impact from the ONB Way strategic plan that may differ from current estimates; 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, including the impact of the new CECL standard; 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,  
     2019     2019     2018     2019     2018  

Income Statement

          

Net interest income

   $ 148,899     $ 153,096     $ 146,225     $ 604,273     $ 537,602  

Provision for loan losses

     1,264       1,437       3,390       4,747       6,966  

Noninterest income

     47,726       53,961       58,154       199,317       195,305  

Noninterest expense

     134,743       122,585       150,268       508,487       517,261  

Net income

     49,185       69,781       47,498       238,206       190,830  

Per Common Share Data

          

Net income (diluted)

   $ 0.29     $ 0.41     $ 0.28     $ 1.38     $ 1.22  

Average diluted shares outstanding

     170,186       171,551       167,992       172,687       156,539  

Book value

     16.82       16.66       15.36       16.82       15.36  

Stock price

     18.29       17.20       15.40       18.29       15.40  

Dividend payout ratio

     45     32     46     37     42

Tangible common book value (1)

     10.35       10.18       9.00       10.35       9.00  

Performance Ratios

          

Return on average assets

     0.97     1.39     1.01     1.19     1.07

Return on average common equity

     6.94     9.91     7.59     8.57     8.42

Return on average tangible common equity (1)

     12.03     17.01     13.84     14.97     14.97

Net interest margin (FTE)

     3.46     3.57     3.64     3.55     3.54

Efficiency ratio (2)

     65.57     56.44     70.33     60.35     67.74

Net charge-offs (recoveries) to average loans

     0.12     0.03     0.02     0.05     0.02

Allowance for loan losses to ending loans

     0.45     0.47     0.45     0.45     0.45

Non-performing loans to ending loans

     1.19     1.31     1.43     1.19     1.43

Balance Sheet

          

Total loans

   $ 12,117,524     $ 12,017,648     $ 12,243,892     $ 12,117,524     $ 12,243,892  

Total assets

     20,411,667       20,438,788       19,728,435       20,411,667       19,728,435  

Total deposits

     14,553,397       14,448,352       14,349,949       14,553,397       14,349,949  

Total borrowed funds

     2,744,728       2,831,863       2,493,793       2,744,728       2,493,793  

Total shareholders’ equity

     2,852,453       2,832,530       2,689,570       2,852,453       2,689,570  

Capital Ratios (1)

          

Risk-based capital ratios (EOP):

          

Tier 1 common equity

     12.1     12.0     11.4     12.1     11.4

Tier 1

     12.1     12.0     11.4     12.1     11.4

Total

     13.0     13.0     12.3     13.0     12.3

Leverage ratio (to average assets)

     8.9     8.8     9.2     8.9     9.2

Total equity to assets (averages)

     14.01     13.98     13.28     13.88     12.74

Tangible common equity to tangible assets

     9.09     8.95     8.47     9.09     8.47
Nonfinancial Data                               

Full-time equivalent employees

     2,709       2,778       2,892       2,709       2,892  

Number of branches

     192       192       191       192       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 debt securities transactions. This presentation excludes amortization of intangibles and net debt 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


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,  
     2019      2019     2018     2019     2018  

Interest income

   $ 176,553      $ 185,853     $ 175,234     $ 730,387     $ 632,045  

Less: interest expense

     27,654        32,757       29,009       126,114       94,443  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

     148,899        153,096       146,225       604,273       537,602  

Provision for loan losses

     1,264        1,437       3,390       4,747       6,966  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income after provision for loan losses

     147,635        151,659       142,835       599,526       530,636  

Wealth management fees

     9,468        9,160       9,069       37,072       36,863  

Service charges on deposit accounts

     10,714        11,860       11,474       44,915       44,026  

Debit card and ATM fees

     5,360        5,370       5,565       21,652       20,216  

Mortgage banking revenue

     5,626        8,850       3,928       26,622       17,657  

Investment product fees

     5,679        5,244       5,369       21,785       20,539  

Capital markets income

     3,043        4,560       840       13,270       4,934  

Company-owned life insurance

     2,937        2,703       2,591       11,539       10,584  

Other income

     4,329        5,900       5,700       20,648       24,402  

Net gain on branch divestitures

     —          —         13,989       —         13,989  

Gains (losses) on sales of debt securities

     437        424       (357     1,923       2,060  

Gains (losses) on derivatives

     133        (110     (14     (109     35  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total noninterest income

     47,726        53,961       58,154       199,317       195,305  

Salaries and employee benefits

     74,974        71,729       87,346       289,452       281,275  

Occupancy

     14,184        11,934       13,210       55,255       51,941  

Equipment

     3,958        3,954       3,916       16,903       14,861  

Marketing

     3,631        4,105       4,782       15,898       15,847  

Data processing

     9,080        8,961       9,418       37,589       36,170  

Communication

     2,450        2,349       2,537       10,702       10,846  

Professional fees

     9,986        5,037       5,615       22,854       14,503  

Loan expenses

     1,873        1,811       1,877       7,253       7,028  

FDIC assessment

     1,529        960       2,110       6,030       10,638  

Amortization of intangibles

     3,946        4,168       4,134       16,911       14,442  

Amortization of tax credit investments

     710        1,211       1,142       2,749       22,949  

Other expense

     8,422        6,366       14,181       26,891       36,761  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total noninterest expense

     134,743        122,585       150,268       508,487       517,261  

Income before income taxes

     60,618        83,035       50,721       290,356       208,680  

Income tax expense

     11,433        13,254       3,223       52,150       17,850  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 49,185      $ 69,781     $ 47,498     $ 238,206     $ 190,830  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Diluted Earnings Per Share

           

Net income

   $ 0.29      $ 0.41     $ 0.28     $ 1.38     $ 1.22  

Average Common Shares Outstanding

           

Basic

     169,235        170,746       167,044       171,907       155,675  

Diluted

     170,186        171,551       167,992       172,687       156,539  

Common shares outstanding at end of period

     169,616        170,031       175,141       169,616       175,141  


Balance Sheet (unaudited)

($ in thousands)

 

     December 31,     September 30,     December 31,  
     2019     2019     2018  

Assets

      

Federal Reserve Bank account

   $ 29,141     $ 80,018     $ 26,182  

Money market investments

     12,430       19,410       6,980  

Investments:

      

Treasury and government-sponsored agencies

     610,666       524,919       707,438  

Mortgage-backed securities

     3,183,861       3,248,367       2,336,415  

States and political subdivisions

     1,275,643       1,231,248       1,245,657  

Other securities

     485,862       490,389       488,802  
  

 

 

   

 

 

   

 

 

 

Total investments

     5,556,032       5,494,923       4,778,312  
  

 

 

   

 

 

   

 

 

 

Loans held for sale, at fair value

     46,898       58,285       14,911  

Loans:

      

Commercial

     2,890,296       2,950,559       3,232,970  

Commercial and agriculture real estate

     5,166,792       5,112,123       4,958,851  

Consumer:

      

Home equity

     559,021       555,905       589,322  

Other consumer loans

     1,167,126       1,162,438       1,214,345  
  

 

 

   

 

 

   

 

 

 

Subtotal of commercial and consumer loans

     9,783,235       9,781,025       9,995,488  

Residential real estate

     2,334,289       2,236,623       2,248,404  
  

 

 

   

 

 

   

 

 

 

Total loans

     12,117,524       12,017,648       12,243,892  
  

 

 

   

 

 

   

 

 

 

Total earning assets

     17,762,025       17,670,284       17,070,277  
  

 

 

   

 

 

   

 

 

 

Allowance for loan losses

     (54,619     (56,910     (55,461

Non-earning Assets:

      

Cash and due from banks

     234,766       320,822       284,003  

Premises and equipment, net

     490,925       492,065       485,912  

Operating lease right-of-use assets

     95,477       102,976       —    

Goodwill and other intangible assets

     1,097,099       1,101,045       1,113,274  

Company-owned life insurance

     448,967       447,110       444,224  

Net deferred tax assets

     29,705       26,523       87,048  

Loan servicing rights

     25,368       24,623       24,497  

Other assets

     281,954       310,250       274,661  
  

 

 

   

 

 

   

 

 

 

Total non-earning assets

     2,704,261       2,825,414       2,713,619  
  

 

 

   

 

 

   

 

 

 

Total assets

   $ 20,411,667     $ 20,438,788     $ 19,728,435  
  

 

 

   

 

 

   

 

 

 

Liabilities and Equity

      

Noninterest-bearing demand deposits

   $ 4,042,286     $ 3,996,264     $ 3,965,380  

Interest-bearing:

      

Checking and NOW accounts

     4,149,639       3,936,318       3,788,339  

Savings accounts

     2,845,423       2,863,718       2,944,092  

Money market accounts

     1,833,819       1,821,989       1,627,882  

Other time deposits

     1,589,988       1,704,238       1,845,149  
  

 

 

   

 

 

   

 

 

 

Total core deposits

     14,461,155       14,322,527       14,170,842  

Brokered CD’s

     92,242       125,825       179,107  
  

 

 

   

 

 

   

 

 

 

Total deposits

     14,553,397       14,448,352       14,349,949  

Federal funds purchased and interbank borrowings

     350,414       240,589       270,135  

Securities sold under agreements to repurchase

     327,782       337,551       362,294  

Federal Home Loan Bank advances

     1,822,847       2,001,960       1,613,481  

Other borrowings

     243,685       251,763       247,883  
  

 

 

   

 

 

   

 

 

 

Total borrowed funds

     2,744,728       2,831,863       2,493,793  

Operating lease liabilities

     99,500       107,272       —    

Accrued expenses and other liabilities

     161,589       218,771       195,123  
  

 

 

   

 

 

   

 

 

 

Total liabilities

     17,559,214       17,606,258       17,038,865  

Common stock, surplus, and retained earnings

     2,796,246       2,774,016       2,734,520  

Accumulated other comprehensive income (loss), net of tax

     56,207       58,514       (44,950
  

 

 

   

 

 

   

 

 

 

Total shareholders’ equity

     2,852,453       2,832,530       2,689,570  
  

 

 

   

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 20,411,667     $ 20,438,788     $ 19,728,435  
  

 

 

   

 

 

   

 

 

 


Average Balance Sheet and Interest Rates (unaudited)

($ in thousands)

 

    Three Months Ended     Three Months Ended     Three Months Ended  
    December 31, 2019     September 30, 2019     December 31, 2018  
    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

  $ 87,835     $ 530       2.39   $ 63,142     $ 528       3.32   $ 39,207     $ 205       2.07

Investments:

                 

Treasury and government-sponsored agencies

    546,266       3,547       2.60     682,940       4,341       2.54     694,409       3,874       2.23

Mortgage-backed securities

    3,172,818       18,844       2.38     3,019,322       18,589       2.46     2,011,275       13,688       2.72

States and political subdivisions

    1,211,850       11,133       3.67     1,172,017       10,896       3.72     1,187,404       11,147       3.76

Other securities

    489,889       3,585       2.93     499,308       4,049       3.24     493,426       4,017       3.26
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total investments

    5,420,823       37,109       2.74     5,373,587       37,875       2.82     4,386,514       32,726       2.98
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loans: (2)

                 

Commercial

    2,891,641       31,925       4.32     3,018,638       35,428       4.59     3,133,153       37,358       4.67

Commercial and agriculture real estate

    5,129,638       66,959       5.11     5,037,909       71,604       5.56     4,834,589       65,461       5.30

Consumer:

                 

Home equity

    561,125       6,426       4.54     557,607       7,102       5.05     562,801       7,159       5.05

Other consumer loans

    1,153,924       12,245       4.21     1,175,900       12,226       4.13     1,203,436       11,702       3.86
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal commercial and consumer loans

    9,736,328       117,555       4.79     9,790,054       126,360       5.12     9,733,979       121,680       4.96

Residential real estate loans

    2,332,835       24,641       4.23     2,283,704       24,261       4.25     2,238,588       23,672       4.23
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total loans

    12,069,163       142,196       4.64     12,073,758       150,621       4.91     11,972,567       145,352       4.78
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total earning assets

  $ 17,577,821     $ 179,835       4.05   $ 17,510,487     $ 189,024       4.27   $ 16,398,288     $ 178,283       4.30
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less: Allowance for loan losses

    (57,162         (56,894         (53,045    

Non-earning Assets:

                 

Cash and due from banks

  $ 278,324         $ 264,145         $ 232,360      

Other assets

    2,419,792           2,429,466           2,275,907      
 

 

 

       

 

 

       

 

 

     

Total assets

  $ 20,218,775         $ 20,147,204         $ 18,853,510      
 

 

 

       

 

 

       

 

 

     

Interest-Bearing Liabilities:

                 

Checking and NOW accounts

  $ 4,121,021     $ 3,812       0.37   $ 3,895,654     $ 4,448       0.45   $ 3,391,630     $ 2,004       0.23

Savings accounts

    2,842,996       1,586       0.22     2,855,401       2,128       0.30     2,919,900       2,225       0.30

Money market accounts

    1,839,258       3,558       0.77     1,822,698       4,017       0.87     1,482,022       1,922       0.51

Other time deposits

    1,642,773       6,101       1.47     1,733,492       7,016       1.61     1,769,243       6,519       1.46
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total interest-bearing deposits

    10,446,048       15,057       0.57     10,307,245       17,609       0.68     9,562,795       12,670       0.53

Brokered CD’s

    109,504       637       2.31     181,425       1,098       2.40     193,455       1,024       2.10
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total interest-bearing deposits and CD’s

    10,555,552       15,694       0.59     10,488,670       18,707       0.71     9,756,250       13,694       0.56
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Federal funds purchased and interbank borrowings

    95,973       437       1.80     254,971       1,484       2.31     312,730       1,938       2.46

Securities sold under agreements to repurchase

    337,786       469       0.55     340,158       715       0.83     351,392       634       0.72

Federal Home Loan Bank advances

    1,843,357       8,359       1.80     1,889,407       9,123       1.92     1,649,304       9,441       2.27

Other borrowings

    251,565       2,695       4.29     251,817       2,728       4.33     250,926       3,302       5.26
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total borrowed funds

    2,528,681       11,960       1.88     2,736,353       14,050       2.04     2,564,352       15,315       2.37
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total interest-bearing liabilities

  $ 13,084,233     $ 27,654       0.84   $ 13,225,023     $ 32,757       0.98   $ 12,320,602     $ 29,009       0.93
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Noninterest-Bearing Liabilities and Shareholders’ Equity

                 

Demand deposits

  $ 4,047,308         $ 3,841,867         $ 3,864,302      

Other liabilities

    254,296           262,862           164,771      

Shareholders’ equity

    2,832,938           2,817,452           2,503,835      
 

 

 

       

 

 

       

 

 

     

Total liabilities and shareholders’ equity

  $ 20,218,775         $ 20,147,204         $ 18,853,510      
 

 

 

       

 

 

       

 

 

     

Net interest rate spread

        3.21         3.29         3.37

Net interest margin (FTE)

        3.46         3.57         3.64

FTE adjustment

    $ 3,282         $ 3,171         $ 3,049    

 

(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, 2019     December 31, 2018  
Earning Assets:    Average
Balance
    Income (1)/
Expense
     Yield/
Rate
    Average
Balance
    Income (1)/
Expense
     Yield/
Rate
 

Money market and other interest-earning investments

   $ 67,069     $ 1,670        2.49   $ 48,240     $ 630        1.31

Investments:

              

Treasury and government-sponsored agencies

     657,233       16,091        2.45     673,171       14,433        2.14

Mortgage-backed securities

     2,866,600       73,835        2.58     1,707,646       41,493        2.43

States and political subdivisions

     1,202,210       44,716        3.72     1,153,315       42,326        3.67

Other securities

     495,847       16,138        3.25     490,464       15,633        3.19
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Total investments

     5,221,890       150,780        2.89     4,024,596       113,885        2.83
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Loans: (2)

              

Commercial

     3,023,421       141,215        4.67     2,924,878       131,471        4.49

Commercial and agriculture real estate

     5,044,623       275,853        5.47     4,536,897       235,876        5.20

Consumer:

              

Home equity

     566,232       28,515        5.04     513,111       25,029        4.88

Other consumer loans

     1,180,898       48,681        4.12     1,258,253       46,660        3.71
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Subtotal commercial and consumer loans

     9,815,174       494,264        5.04     9,233,139       439,036        4.76

Residential real estate loans

     2,281,047       96,613        4.24     2,195,078       89,888        4.09
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Total loans

     12,096,221       590,877        4.88     11,428,217       528,924        4.63
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Total earning assets

   $ 17,385,180     $ 743,327        4.28   $ 15,501,053     $ 643,439        4.15
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Less: Allowance for loan losses

     (56,624          (52,316     

Non-earning Assets:

              

Cash and due from banks

   $ 251,857          $ 210,716       

Other assets

     2,453,001            2,130,588       
  

 

 

        

 

 

      

Total assets

   $ 20,033,414          $ 17,790,041       
  

 

 

        

 

 

      

Interest-Bearing Liabilities:

              

Checking and NOW accounts

   $ 3,902,765     $ 15,598        0.40   $ 3,146,309     $ 4,973        0.16

Savings accounts

     2,878,135       8,142        0.28     2,995,484       7,464        0.25

Money market accounts

     1,789,065       14,130        0.79     1,225,220       4,424        0.36

Other time deposits

     1,748,552       27,400        1.57     1,654,548       21,012        1.27
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Total interest-bearing deposits

     10,318,517       65,270        0.63     9,021,561       37,873        0.42

Brokered CD’s

     173,439       4,094        2.36     185,426       3,404        1.84
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Total interest-bearing deposits and CD’s

     10,491,956       69,364        0.66     9,206,987       41,277        0.45
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Federal funds purchased and interbank borrowings

     241,618       5,656        2.34     238,408       4,793        2.01

Securities sold under agreements to repurchase

     342,654       2,517        0.73     344,964       1,962        0.57

Federal Home Loan Bank advances

     1,775,987       37,452        2.11     1,665,689       34,925        2.10

Other borrowings

     251,194       11,125        4.43     249,832       11,486        4.60
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Total borrowed funds

     2,611,453       56,750        2.17     2,498,893       53,166        2.13
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Total interest-bearing liabilities

   $ 13,103,409     $ 126,114        0.96   $ 11,705,880     $ 94,443        0.81
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Noninterest-Bearing Liabilities and Shareholders’ Equity

              

Demand deposits

   $ 3,887,470          $ 3,657,234       

Other liabilities

     261,403            159,600       

Shareholders’ equity

     2,781,132            2,267,327       
  

 

 

        

 

 

      

Total liabilities and shareholders’ equity

   $ 20,033,414          $ 17,790,041       
  

 

 

        

 

 

      

Net interest rate spread

          3.32          3.34

Net interest margin (FTE)

          3.55          3.54

FTE adjustment

     $ 12,940          $ 11,394     

 

(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,  
     2019     2019     2018     2019     2018  

Beginning allowance for loan losses

   $ 56,910     $ 56,292     $ 52,713     $ 55,461     $ 50,381  

Provision for loan losses

     1,264       1,437       3,390       4,747       6,966  

Gross charge-offs

     (6,304     (2,716     (2,969     (14,789     (12,969

Gross recoveries

     2,749       1,897       2,327       9,200       11,083  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (charge-offs) recoveries

     (3,555     (819     (642     (5,589     (1,886
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending allowance for loan losses

   $ 54,619     $ 56,910     $ 55,461     $ 54,619     $ 55,461  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net charge-offs (recoveries) / average loans (1)

     0.12     0.03     0.02     0.05     0.02

Average loans outstanding (1)

   $ 12,058,109     $ 12,061,705     $ 11,967,241     $ 12,087,429     $ 11,422,967  

EOP loans outstanding (1)

     12,117,524     $ 12,017,648     $ 12,243,892     $ 12,117,524     $ 12,243,892  

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)

   $ 570     $ 703     $ 1,353     $ 570     $ 1,353  

Non-performing loans:

          

Nonaccrual loans (2)

     126,412       138,498       157,484       126,412       157,484  

Renegotiated loans

     18,338       18,884       17,356       18,338       17,356  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total non-performing loans

     144,750       157,382       174,840       144,750       174,840  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Foreclosed properties

     2,169       2,941       3,232       2,169       3,232  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total underperforming assets

   $ 147,489     $ 161,026     $ 179,425     $ 147,489     $ 179,425  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Classified and Criticized Assets:

          

Nonaccrual loans (2)

     126,412       138,498       157,484       126,412       157,484  

Substandard accruing loans

     169,689       145,987       175,948       169,689       175,948  

Loans 90 days and over (still accruing)

     570       703       1,353       570       1,353  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total classified loans - “problem loans”

   $ 296,671     $ 285,188     $ 334,785     $ 296,671     $ 334,785  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other classified assets

     2,933       2,556       2,820       2,933       2,820  

Criticized loans - “special mention loans”

     234,841       233,519       238,752       234,841       238,752  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total classified and criticized assets

   $ 534,445     $ 521,263     $ 576,357     $ 534,445     $ 576,357  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-performing loans / EOP loans (1)

     1.19     1.31     1.43     1.19     1.43

Allowance to non-performing loans (3)

     38     36     32     38     32

Under-performing assets / EOP loans (1)

     1.22     1.34     1.47     1.22     1.47

EOP total assets

   $ 20,411,667     $ 20,438,788     $ 19,728,435     $ 20,411,667     $ 19,728,435  

Under-performing assets / EOP assets

     0.72     0.79     0.91     0.72     0.91

EOP - End of period actual balances

(1)

Excludes loans held for sale.

(2)

Includes renegotiated loans totaling $13.8 million at December 31, 2019, $21.8 million at September 30, 2019, and $26.3 million at December 31, 2018.

(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,  
     2019     2019     2018     2019     2018  

Actual End of Period Balances

          

GAAP shareholders’ equity

   $ 2,852,453     $ 2,832,530     $ 2,689,570     $ 2,852,453     $ 2,689,570  

Deduct:

          

Goodwill

     1,036,994       1,036,994       1,036,258       1,036,994       1,036,258  

Intangibles

     60,105       64,051       77,016       60,105       77,016  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     1,097,099       1,101,045       1,113,274       1,097,099       1,113,274  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Tangible shareholders’ equity

   $ 1,755,354     $ 1,731,485     $ 1,576,296     $ 1,755,354     $ 1,576,296  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average Balances

          

GAAP shareholders’ equity

   $ 2,832,938     $ 2,817,452     $ 2,503,835     $ 2,781,132     $ 2,267,327  

Deduct:

          

Goodwill

     1,036,994       1,036,306       969,403       1,036,456       864,079  

Intangibles

     61,963       66,047       66,927       68,244       52,209  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     1,098,957       1,102,353       1,036,330       1,104,700       916,288  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average tangible shareholders’ equity

   $ 1,733,981     $ 1,715,099     $ 1,467,505     $ 1,676,432     $ 1,351,039  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Actual End of Period Balances

          

GAAP assets

   $ 20,411,667     $ 20,438,788     $ 19,728,435     $ 20,411,667     $ 19,728,435  

Add:

          

Trust overdrafts

     31       24       11       31       11  

Deduct:

          

Goodwill

     1,036,994       1,036,994       1,036,258       1,036,994       1,036,258  

Intangibles

     60,105       64,051       77,016       60,105       77,016  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     1,097,099       1,101,045       1,113,274       1,097,099       1,113,274  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Tangible assets

   $ 19,314,599     $ 19,337,767     $ 18,615,172     $ 19,314,599     $ 18,615,172  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Risk-weighted assets

   $ 14,073,929     $ 13,975,295     $ 14,248,562     $ 14,073,929     $ 14,248,562  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

GAAP net income

   $ 49,185     $ 69,781     $ 47,498     $ 238,206     $ 190,830  

Add:

          

Amortization of intangibles (net of tax)

     2,976       3,145       3,266       12,756       11,410  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Tangible net income

   $ 52,161     $ 72,926     $ 50,764     $ 250,962     $ 202,240  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Tangible Ratios

          

Return on tangible common equity

     11.89     16.85     12.88     14.30     12.83

Return on average tangible common equity

     12.03     17.01     13.84     14.97     14.97

Return on tangible assets

     1.08     1.51     1.09     1.30     1.09

Tangible common equity to tangible assets

     9.09     8.95     8.47     9.09     8.47

Tangible common equity to risk-weighted assets

     12.47     12.39     11.06     12.47     11.06

Tangible common book value (1)

     10.35       10.18       9.00       10.35       9.00  

 

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 common equity

   $ 1,706,727     $ 1,681,457     $ 1,617,936     $ 1,706,727     $ 1,617,936  

Risk-weighted assets

     14,073,929       13,975,295       14,248,562       14,073,929       14,248,562  

Tier 1 common equity to risk-weighted assets

     12.13     12.03     11.36     12.13     11.36
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