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Section 1: 8-K (8-K)

8-K
OLD NATIONAL BANCORP /IN/ false 0000707179 0000707179 2020-04-20 2020-04-20

 

 

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): April 20, 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 April 20, 2020, Old National Bancorp (the “Company”) issued a press release (“Press Release”) reporting its financial results for the first quarter of 2020. The Press Release is furnished as Exhibit 99.1 hereto and is incorporated herein by reference. A slide presentation outlining first quarter 2020 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 April 20, 2020, at 8:00 a.m. CDT and will be accessible at http://www.oldnational.com immediately before the conference call begins.

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, such as statements about the potential impacts of the COVID-19 pandemic. 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 9.01 Financial Statements and Exhibits.

(d) Exhibits.

Exhibit

    No.    

   

Description

         
 

99.1

   

Press Release issued by Old National Bancorp on April 20, 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: April 20, 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

Evansville, IN 47708

oldnational.com

   LOGO
  

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

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

Old National reports 1st quarter earnings,

announces $1.2 million commitment to COVID-19 relief efforts

and support programs for clients

Evansville, Ind. (April 20, 2020)

Old National Bancorp (NASDAQ: ONB) reports 1Q20 net income of $22.6 million, diluted EPS of $0.13.

Adjusted1 net income of $42.1 million, or $0.25 per diluted share.

CEO COMMENTARY:

“While we are pleased with our 1st quarter progress and the implementation of the ONB Way strategic initiatives,

our commitment and focus today is on supporting our clients, team members and communities during the COVID-

19 pandemic,” said Chairman & CEO Jim Ryan. “With this goal in mind, we are giving $1.2 million to COVID-19 relief

efforts - both immediate and near-term - while also working diligently to help our clients take advantage of our own

internal relief programs and the various government support programs. I’d also like to thank our team members for

their hard work and unwavering commitment to serving our clients and communities during this difficult time.”

FIRST QUARTER HIGHLIGHTS2:

 

Net Income   

•  Net income of $22.6 million

 

•  Earnings per share of $0.13

Net Interest Income/NIM   

•  Net interest income on a fully taxable equivalent basis was $147.1 million compared to $152.2 million

 

•  Net interest margin on a fully taxable equivalent basis was 3.31% compared to 3.46%

Operating Performance   

•  Pre-provision net revenue1 (“PPNR”) was $45.9 million

 

•  Adjusted PPNR1 was $77.4 million, up 2.9% over first quarter of 2019

 

•  Noninterest expense was $158.7 million

 

•  Adjusted noninterest expense1 was $122.0 million

 

•  Efficiency ratio1 was 77.71%

 

•  Adjusted efficiency ratio1 was 59.31%, a 166 basis point improvement

Loans and

Credit

Quality

  

•  End-of-period total loans3 were $12,438.8 million compared to $12,164.4 million

 

•  Represents 9.0% annualized growth

 

•  End-of-period commercial and commercial real estate loans were $8,330.0 million

 

•  Represents 13.6% annualized growth

 

•  First-quarter total commercial production was $647.3 million; March 31 pipeline was $2.8 billion

 

•  Provision for credit losses was $17.0 million

 

•  Net charge-offs were $6.5 million, or 0.21% annualized, compared to net charge-offs of $3.6 million

 

•  Non-performing loans were 1.16% of total loans compared to 1.19%

Return

Profile &

Capital

  

•  Return on average common equity was 3.20%

 

•  Return on average tangible common equity1 was 5.86%

 

•  Adjusted return on average tangible common equity1 was 10.35%

 

•  Repurchased 4.9 million shares of common stock during the current quarter

Notable

Items

  

•  Day one increase to the allowance for credit losses was $41.3 million and to the unfunded commitment liability was $4.5 million due to the adoption of CECL

 

•  $31.2 million in ONB Way charges

 

•  $5.5 million in tax credit amortization

 

1

Non-GAAP financial measure that Management believes is useful in evaluating the financial results of the Company – please refer to the Non-GAAP reconciliations contained in this release

2

Comparisons are on a linked-quarter basis, unless otherwise noted

3

Includes loans held for sale


OLD NATIONAL’S RESPONSE TO COVID-19

COMMITTING $1.2 MILLION TO COVID-19 RELIEF EFFORTS WITHIN OUR COMMUNITIES

To best serve our communities during this time of need, Old National is committing $1.2 million for COVID-19 relief.

This includes:

 

   

$600,000 in funding focused on meeting the immediate needs in our communities, with an emphasis on low-to-moderate income communities.

 

   

$600,000 in Old National Bank Foundation grant funding that will focus on longer-term restorative and transformational needs within our communities.

SUPPORTING OUR CLIENTS THROUGH RELIEF MEASURES

To assist our consumer and business clients during this time of need, Old National is providing relief in several ways:

 

   

Approving loan payment extensions and waiving or refunding certain banking fees for clients experiencing a COVID-19-related hardship.

 

   

Aiding thousands of our clients by administering the Small Business Administration’s Paycheck Protection Program (PPP). Through April 16, 2020, we have approved approximately $1.35 billion in total loan volume through the PPP.

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.

BRANCH NETWORK OPTIMIZATION

Another component of The ONB Way is the optimization of our branch network. This optimization, which includes 31 banking center consolidations scattered throughout the footprint, reflects an ongoing shift among our clients toward digital banking solutions. The consolidation of 12 of these banking centers occurred on April 13, 2020, and the remaining 19 are anticipated to be consolidated on April 24, 2020. 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 first-quarter 2020 net income of $22.6 million, or $0.13 per diluted share.

Included in the first quarter were pre-tax charges of $31.2 million for ONB Way. Excluding these charges from the current quarter and netting out debt securities gains, adjusted net income was $42.1 million, or $0.25 per diluted share.

 


LOANS

Strong commercial activity resulted in double-digit commercial loan growth.

 

   

Period-end total loans were $12,438.8 million at March 31, 2020, compared to $12,164.4 million at December 31, 2019, and represents an increase of 9.0% annualized growth.

 

   

Commercial and industrial loans increased $156.3 million to $3,046.6 million, or 21.6% annualized growth; commercial real estate loans increased $116.7 million to $5,283.5 million, or 9.0% annualized growth; consumer loans increased $0.6 million to $1,726.7 million and residential mortgage loans increased $0.9 million to $2,382.1 million.

 

   

Commercial loan production in the first quarter was $647.3 million; period-end pipeline totaled $2.8 billion.

 

   

Average total loans in the first quarter were $12,192.3 million, an increase of $123.2 million from the fourth quarter of 2019.

DEPOSITS

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

 

   

Period-end total deposits were $14,305.4 million at March 31, 2020, a decrease of $248.0 million from the fourth quarter of 2019.

 

   

On average, total deposits in the first quarter were $14,327.8 million, compared to $14,602.9 million in the fourth quarter of 2019.

NET INTEREST INCOME AND MARGIN

Net interest income and margin lower with decline in accretion income and fewer days.

 

   

Net interest income decreased to $143.8 million in the first quarter of 2020 from $148.9 million in the fourth quarter of 2019.

 

   

The net interest margin on a fully taxable equivalent basis decreased 15 basis points to 3.31% compared to 3.46% in the fourth quarter of 2019.

 

   

Accretion income was $6.7 million, or 15 basis points of net interest margin, in the first quarter of 2020 compared to $9.5 million, or 21 basis points of net interest margin, in the fourth quarter of 2019. In the first quarter of 2020, accretion income was 3.4% of adjusted total revenue.

 

   

Interest collected on nonaccrual loans was $0.7 million, or 1 basis point of net interest margin, in the first quarter of 2020 compared to $2.4 million, or 5 basis points of net interest margin, in the fourth quarter of 2019.

 

   

The cost of total deposits declined 9 basis points to 0.34% in the first quarter of 2020 while the cost of total interest-bearing deposits decreased 11 basis points to 0.48%.

CREDIT QUALITY AND CECL

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

 

   

Day one increase to the allowance for credit losses was $41.3 million due to the adoption of CECL. Of this day one amount, $27.1 million applies to previously acquired loans.

 

   

Day one increase to the unfunded commitment liability was $4.5 million due to the adoption of CECL.

 

   

Provision for credit losses was $17.0 million in the first quarter of 2020, driven higher by the economic forecast which now includes the impact of novel coronavirus pandemic.

 

   

Net charge-offs in the first quarter were $6.5 million, or 0.21% of total average loans, and 30-89 day delinquencies of 0.26%.

 

   

Non-performing loans decreased as a percentage of total loans to 1.16%.

 

   

Loans acquired from previous acquisitions were recorded at fair value at the acquisition date. As of March 31, 2020, the remaining discount on these acquired loans was $67.0 million.

 

   

The allowance for credit losses was $106.4 million, or 0.86% of total loans at March 31, 2020.


NONINTEREST INCOME

Noninterest income increased due to strong mortgage banking revenue and an increase in capital markets income.

 

   

Total noninterest income for the first quarter of 2020 was $57.5 million, an increase of $9.8 million from the fourth quarter of 2019.

 

   

Mortgage banking revenue increased $5.5 million and capital markets income increased $1.3 million when compared to the fourth quarter of 2019.

NONINTEREST EXPENSE

First quarter results demonstrated continued discipline with respect to expense management, helping to drive positive operating leverage1.

 

   

Noninterest expense for the first quarter of 2020 was $158.7 million and included $31.2 million in ONB Way charges and $5.5 million in tax credit amortization.

 

   

Excluding these items, adjusted noninterest expense for the first quarter was $122.0 million, compared to the $125.6 million in adjusted noninterest expense in the fourth quarter of 2019.

 

   

The first quarter efficiency ratio was 77.71%, while the adjusted efficiency ratio was 59.31%.

 

   

Adjusted operating leverage1 was +102 basis points for the first quarter of 2020 as compared to the first quarter of 2019.

INCOME TAXES

 

   

On a fully taxable-equivalent basis, income tax expense in the first quarter was $6.3 million, resulting in a 21.7% FTE tax rate.

 

   

Income tax expense included $1.8 million in tax credit benefit.

CAPITAL AND LIQUIDITY

Capital ratios remain strong.

 

   

At the end of the first quarter, total risk-based capital was 12.3% and regulatory tier 1 capital was 11.4%.

 

   

Tangible common equity to tangible assets was 8.81% at the end of the first quarter compared to 9.09% in the fourth quarter of 2019.

 

   

The Company repurchased 4.9 million shares of common stock during the first quarter of 2020 at a weighted average price of $16.05, excluding commissions.

 

   

A low loan to deposit ratio of 87%, combined with existing funding sources plus available unencumbered, high-quality collateral, provides strong liquidity.

NON-GAAP RECONCILIATIONS

 

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

   1Q20      Adjustments4      Adjusted 1Q20  

Total Revenues (FTE)

   $ 204.6      ($ 5.2    $ 199.4  

Less: Provision for Credit Losses

     (17.0      —          (17.0

Less: Noninterest Expenses

     (158.7      31.2        (127.5
  

 

 

    

 

 

    

 

 

 

Income before Income Taxes (FTE)

   $ 28.9      $ 26.0      $ 54.9  

Income Taxes

     6.3        6.5        12.8  
  

 

 

    

 

 

    

 

 

 

Net Income

   $ 22.6      $ 19.5      $ 42.1  
  

 

 

    

 

 

    

 

 

 

Average Shares Outstanding

     168,404        —          168,404  

Earnings Per Share - Diluted

   $ 0.13      $ 0.12      $ 0.25  

 

4

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


($ in millions)

   1Q20     4Q19  

Net Interest Income

   $ 143.8     $ 148.9  

Add: FTE Adjustment

     3.3       3.3  
  

 

 

   

 

 

 

Net Interest Income (FTE)

   $ 147.1     $ 152.2  
  

 

 

   

 

 

 

Average Earning Assets

   $ 17,774.0     $ 17,577.8  

Net Interest Margin (FTE)

     3.31     3.46

 

($ in millions)

   1Q20      1Q19  

Net Interest Income

   $ 143.8      $ 147.0  

Add: FTE Adjustment

     3.3        3.2  
  

 

 

    

 

 

 

Net Interest Income (FTE)

   $ 147.1      $ 150.2  

Add: Total Noninterest Income

     57.5        46.4  

Less: Noninterest Expense

     (158.7      (123.0
  

 

 

    

 

 

 

Pre-Provision Net Revenue

   $ 45.9      $ 73.6  

Less: Debt Securities Gains/Losses

     (5.2      0.1  

Add: ONB Way Charges

     31.2        —    

Add: Merger and Integration Charges

     —          1.2  

Add: Amortization of Tax Credit Investments

     5.5        0.3  
  

 

 

    

 

 

 

Adjusted Pre-Provision Net Revenue

   $ 77.4      $ 75.2  

 

($ in millions)

   1Q20     4Q19     1Q19  

Noninterest Expense

   $ 158.7     $ 134.7     $ 123.0  

Less: ONB Way Charges

     (31.2     (8.2     —    

Less: Merger and Integration Charges

     —         (0.2     (1.2
  

 

 

   

 

 

   

 

 

 

Noninterest Expense less Charges

   $ 127.5     $ 126.3     $ 121.8  

Less: Amortization of Tax Credit Investments

     (5.5     (0.7     (0.3
  

 

 

   

 

 

   

 

 

 

Adjusted Noninterest Expense

   $ 122.0     $ 125.6     $ 121.5  

Less: Intangible Amortization

     (3.8     (3.9     (4.5
  

 

 

   

 

 

   

 

 

 

Adjusted Noninterest Expense Less Intangible Amortization

   $ 118.2     $ 121.7     $ 117.0  
  

 

 

   

 

 

   

 

 

 

Net Interest Income

   $ 143.8     $ 148.9     $ 147.0  

FTE Adjustment

     3.3       3.3       3.2  
  

 

 

   

 

 

   

 

 

 

Net Interest Income (FTE)

   $ 147.1     $ 152.2     $ 150.2  

Total Noninterest Income

     57.5       47.7       46.4  
  

 

 

   

 

 

   

 

 

 

Total Revenue (FTE)

   $ 204.6     $ 199.9     $ 196.6  

Less: Debt Securities Gains/Losses

     (5.2     (0.4     0.1  
  

 

 

   

 

 

   

 

 

 

Adjusted Total Revenue (FTE)

   $ 199.4     $ 199.5     $ 196.7  
  

 

 

   

 

 

   

 

 

 

Efficiency Ratio

     77.71     65.57     60.26

Adjusted Efficiency Ratio

     59.31     60.97     59.51

Operating Leverage5 (basis points)

     (2,498    

Adjusted Operating Leverage6 (basis points)

     102      

 

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)

   1Q20     4Q19  

Net Income

   $ 22.6     $ 49.2  

Add: Intangible Amortization (net of tax7)

     2.9       3.0  
  

 

 

   

 

 

 

Tangible Net Income

   $ 25.5     $ 52.2  

Less: Securities Gains/Losses (net of tax7)

     (3.9     (0.3

Add: ONB Way Charges (net of tax7)

     23.4       6.2  

Add: Merger & Integration Charges (net of tax7)

     —         0.1  
  

 

 

   

 

 

 

Adjusted Tangible Net Income

   $ 45.0     $ 58.2  
  

 

 

   

 

 

 

Average Total Shareholders’ Equity

   $ 2,833.5     $ 2,832.9  

Less: Average Goodwill

     (1,037.0     (1,037.0

Less: Average Intangibles

     (58.1     (61.9
  

 

 

   

 

 

 

Average Tangible Shareholders’ Equity

   $ 1,738.4     $ 1,734.0  
  

 

 

   

 

 

 

Return on Average Tangible Common Equity

     5.86     12.03

Adjusted Return on Average Tangible Common Equity

     10.35     13.44

 

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 8:00 a.m. Central Time on Monday, April 20, 2020, to review first-quarter 2020 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 11:00 a.m. Central Time on April 20 through May 4. To access the replay, dial 1-855-859-2056, Conference ID Code 9178738.

ABOUT OLD NATIONAL

Old National Bancorp (NASDAQ: ONB), the holding company of Old National Bank, is the largest bank holding company headquartered in Indiana. With $20.7 billion in assets, it ranks among the top 100 banking companies in the U.S. and has been recognized as a Worlds Most Ethical Company by the Ethisphere Institute for nine consecutive years. Since its founding in Evansville in 1834, Old National Bank has focused on community banking by building long-term, highly valued partnerships and keeping our clients at the center of all we do. This is an approach to business that we call The ONB Way. Today, Old National’s footprint includes Indiana, Kentucky, Michigan, Wisconsin and Minnesota. In addition to providing extensive services in retail and commercial banking, Old National offers comprehensive wealth management, investment and capital market services. For more 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, such as statements about the potential impacts of the COVID-19 pandemic. 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: the severity, magnitude and duration of the COVID-19 pandemic, including impacts of the pandemic and of businesses’ and governments’ responses to the pandemic on our operations and personnel, and on commercial activity and demand across our and our customers’ businesses; market, economic, operational, liquidity, credit and interest rate risks associated with Old National’s business(including developments and volatility arising from the COVID-19 pandemic); 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 as well as changes to address the impact of COVID-19; 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  
     March 31,     December 31,     March 31,  
     2020     2019     2019  

Income Statement

      

Net interest income

   $ 143,771     $ 148,899     $ 147,048  

Provision for loan losses (1)

     16,950       1,264       1,043  

Noninterest income

     57,502       47,726       46,416  

Noninterest expense

     158,744       134,743       123,041  

Net income

     22,640       49,185       56,276  

Per Common Share Data

      

Net income (diluted)

   $ 0.13     $ 0.29     $ 0.32  

Average diluted shares outstanding

     168,404       170,186       175,368  

Book value

     17.10       16.82       15.82  

Stock price

     13.19       18.29       16.40  

Dividend payout ratio

     108     45     41

Tangible common book value (2)

     10.48       10.35       9.44  

Performance Ratios

      

Return on average assets

     0.44     0.97     1.14

Return on average common equity

     3.20     6.94     8.29

Return on average tangible common equity (2)

     5.86     12.03     14.88

Net interest margin (FTE)

     3.31     3.46     3.51

Efficiency ratio (3)

     77.71     65.57     60.26

Net charge-offs (recoveries) to average loans

     0.21     0.12     0.03

Allowance for loan losses to ending loans (1)

     0.86     0.45     0.46

Non-performing loans to ending loans

     1.16     1.19     1.41

Balance Sheet

      

Total loans

   $  12,384,612     $  12,117,524     $  12,068,977  

Total assets

     20,741,141       20,411,667       20,084,420  

Total deposits

     14,305,362       14,553,397       14,429,270  

Total borrowed funds

     3,245,214       2,744,728       2,639,038  

Total shareholders’ equity

     2,823,435       2,852,453       2,751,872  

Capital Ratios (2)

      

Risk-based capital ratios (EOP):

      

Tier 1 common equity

     11.4     12.1     11.8

Tier 1

     11.4     12.1     11.8

Total

     12.3     13.0     12.7

Leverage ratio (to average assets)

     8.5     8.9     8.8

Total equity to assets (averages)

     13.91     14.01     13.70

Tangible common equity to tangible assets

     8.81     9.09     8.66
Nonfinancial Data                   

Full-time equivalent employees

     2,736       2,709       2,908  

Number of branches

     192       192       193  

 

(1)

Beginning January 1, 2020, calculation is based on current expected loss methodology. Prior to January 1, 2020, calculation was based on incurred loss methodology.

(2)

See “Non-GAAP Measures” table. Ratios are estimated at March 31, 2020.

(3)

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                 N/A - Not applicable


Income Statement (unaudited)

($ and shares in thousands, except per share data)

 

     Three Months Ended  
     March 31,     December 31,      March 31,  
     2020     2019      2019  

Interest income

   $  167,999     $  176,553      $  178,918  

Less: interest expense

     24,228       27,654        31,870  
  

 

 

   

 

 

    

 

 

 

Net interest income

     143,771       148,899        147,048  

Provision for loan losses (1)

     16,950       1,264        1,043  
  

 

 

   

 

 

    

 

 

 

Net interest income after provision for loan losses

     126,821       147,635        146,005  

Wealth management fees

     8,884       9,468        8,535  

Service charges on deposit accounts

     10,077       10,714        10,826  

Debit card and ATM fees

     4,998       5,360        5,503  

Mortgage banking revenue

     11,119       5,626        5,011  

Investment product fees

     5,874       5,679        5,271  

Capital markets income

     4,328       3,043        2,517  

Company-owned life insurance

     3,080       2,937        3,188  

Other income

     4,452       4,329        5,702  

Gains (losses) on sales of debt securities

     5,174       437        (103

Gains (losses) on derivatives

     (484     133        (34
  

 

 

   

 

 

    

 

 

 

Total noninterest income

     57,502       47,726        46,416  

Salaries and employee benefits

     79,173       74,974        71,183  

Occupancy

     15,133       14,184        14,578  

Equipment

     5,305       3,958        4,474  

Marketing

     3,097       3,631        3,723  

Data processing

     9,467       9,080        9,341  

Communication

     2,798       2,450        3,054  

Professional fees

     4,293       9,986        2,910  

Loan expenses

     1,771       1,873        1,912  

FDIC assessment

     1,609       1,529        2,087  

Amortization of intangibles

     3,776       3,946        4,472  

Amortization of tax credit investments

     5,515       710        260  

Other expense

     26,807       8,422        5,047  
  

 

 

   

 

 

    

 

 

 

Total noninterest expense

     158,744       134,743        123,041  

Income before income taxes

     25,579       60,618        69,380  

Income tax expense

     2,939       11,433        13,104  
  

 

 

   

 

 

    

 

 

 

Net income

   $ 22,640     $ 49,185      $ 56,276  
  

 

 

   

 

 

    

 

 

 

Diluted Earnings Per Share

       

Net income

   $ 0.13     $ 0.29      $ 0.32  

Average Common Shares Outstanding

       

Basic

     167,748       169,235        174,734  

Diluted

     168,404       170,186        175,368  

Common shares outstanding at end of period

     165,109       169,616        173,979  

 

(1)

Beginning January 1, 2020, calculation is based on current expected loss methodology. Prior to January 1, 2020, calculation was based on incurred loss methodology.


Balance Sheet (unaudited)

($ in thousands)

 

     March 31,     December 31,     March 31,  
     2020     2019     2019  

Assets

      

Federal Reserve Bank account

   $ 130,295     $ 29,141     $ 101,033  

Money market investments

     9,349       12,430       10,909  

Investments:

      

Treasury and government-sponsored agencies

     530,904       610,666       782,486  

Mortgage-backed securities

     3,210,000       3,183,861       2,684,330  

States and political subdivisions

     1,302,395       1,275,643       1,252,448  

Other securities

     497,709       485,862       498,977  
  

 

 

   

 

 

   

 

 

 

Total investments

     5,541,008       5,556,032       5,218,241  
  

 

 

   

 

 

   

 

 

 

Loans held for sale, at fair value

     54,209       46,898       14,082  

Loans:

      

Commercial

     3,046,579       2,890,296       3,042,790  

Commercial and agriculture real estate

     5,283,464       5,166,792       5,023,620  

Consumer:

      

Home equity

     561,789       559,021       553,264  

Other consumer loans

     1,164,929       1,167,126       1,205,418  
  

 

 

   

 

 

   

 

 

 

Subtotal of commercial and consumer loans

     10,056,761       9,783,235       9,825,092  

Residential real estate

     2,327,851       2,334,289       2,243,885  
  

 

 

   

 

 

   

 

 

 

Total loans

     12,384,612       12,117,524       12,068,977  
  

 

 

   

 

 

   

 

 

 

Total earning assets

     18,119,473       17,762,025       17,413,242  
  

 

 

   

 

 

   

 

 

 

Allowance for loan losses (1)

     (106,380     (54,619     (55,559

Non-earning Assets:

      

Cash and due from banks

     203,533       234,766       211,174  

Premises and equipment, net

     462,364       490,925       490,216  

Operating lease right-of-use assets

     86,819       95,477       109,916  

Goodwill and other intangible assets

     1,093,323       1,097,099       1,108,802  

Company-owned life insurance

     450,148       448,967       444,551  

Net deferred tax assets

     17,576       29,705       59,430  

Loan servicing rights

     24,132       25,368       24,254  

Other assets

     390,153       281,954       278,394  
  

 

 

   

 

 

   

 

 

 

Total non-earning assets

     2,728,048       2,704,261       2,726,737  
  

 

 

   

 

 

   

 

 

 

Total assets

   $  20,741,141     $  20,411,667     $  20,084,420  
  

 

 

   

 

 

   

 

 

 

Liabilities and Equity

      

Noninterest-bearing demand deposits

   $ 4,058,559     $ 4,042,286     $ 3,903,314  

Interest-bearing:

      

Checking and NOW accounts

     4,105,006       4,149,639       3,742,241  

Savings accounts

     2,853,305       2,845,423       2,941,361  

Money market accounts

     1,746,798       1,833,819       1,780,756  

Other time deposits

     1,469,185       1,589,988       1,835,110  
  

 

 

   

 

 

   

 

 

 

Total core deposits

     14,232,853       14,461,155       14,202,782  

Brokered CD’s

     72,509       92,242       226,488  
  

 

 

   

 

 

   

 

 

 

Total deposits

     14,305,362       14,553,397       14,429,270  

Federal funds purchased and interbank borrowings

     560,770       350,414       325,030  

Securities sold under agreements to repurchase

     318,067       327,782       342,480  

Federal Home Loan Bank advances

     2,130,263       1,822,847       1,719,944  

Other borrowings

     236,114       243,685       251,584  
  

 

 

   

 

 

   

 

 

 

Total borrowed funds

     3,245,214       2,744,728       2,639,038  

Operating lease liabilities

     95,830       99,500       114,040  

Accrued expenses and other liabilities

     271,300       161,589       150,200  
  

 

 

   

 

 

   

 

 

 

Total liabilities

     17,917,706       17,559,214       17,332,548  

Common stock, surplus, and retained earnings

     2,685,278       2,796,246       2,749,252  

Accumulated other comprehensive income (loss), net of tax

     138,157       56,207       2,620  
  

 

 

   

 

 

   

 

 

 

Total shareholders’ equity

     2,823,435       2,852,453       2,751,872  
  

 

 

   

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 20,741,141     $ 20,411,667     $ 20,084,420  
  

 

 

   

 

 

   

 

 

 

 

(1)

Beginning January 1, 2020, calculation is based on current expected loss methodology. Prior to January 1, 2020,calculation was based on incurred loss methodology.


Average Balance Sheet and Interest Rates (unaudited)

($ in thousands)

 

    Three Months Ended     Three Months Ended     Three Months Ended  
    March 31, 2020     December 31, 2019     March 31, 2019  
    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

  $ 58,406     $ 349       2.41   $ 87,835     $ 530       2.39   $ 58,701     $ 278       1.92

Investments:

                 

Treasury and government-sponsored agencies

    583,971       3,697       2.53     546,266       3,547       2.60     705,417       3,902       2.21

Mortgage-backed securities

    3,171,650       19,065       2.40     3,172,818       18,844       2.38     2,497,368       17,603       2.82

States and political subdivisions

    1,273,156       11,409       3.58     1,211,850       11,133       3.67     1,232,355       11,453       3.72

Other securities

    494,500       3,216       2.60     489,889       3,585       2.93     497,604       4,440       3.57
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total investments

    5,523,277       37,387       2.71     5,420,823       37,109       2.74     4,932,744       37,398       3.03
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loans: (2)

                 

Commercial

    2,907,297       29,053       3.95     2,891,641       31,925       4.32     3,122,402       36,035       4.62

Commercial and agriculture real estate

    5,188,597       62,439       4.76     5,129,638       66,959       5.11     4,989,622       65,076       5.22

Consumer:

                 

Home equity

    558,356       5,631       4.06     561,125       6,426       4.54     588,366       7,596       5.24

Other consumer loans

    1,167,802       12,219       4.21     1,153,924       12,245       4.21     1,192,496       11,802       4.01
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal commercial and consumer loans

    9,822,052       109,342       4.48     9,736,328       117,555       4.79     9,892,886       120,509       4.94

Residential real estate loans

    2,370,295       24,244       4.09     2,332,835       24,641       4.23     2,259,243       23,931       4.24
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total loans

    12,192,347       133,586       4.35     12,069,163       142,196       4.64     12,152,129       144,440       4.76
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total earning assets

  $  17,774,030     $  171,322       3.84   $  17,577,821     $  179,835       4.05   $  17,143,574     $  182,116       4.26
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less: Allowance for loan losses (3)

    (83,244         (57,162         (55,789    

Non-earning Assets:

                 

Cash and due from banks

  $ 287,601         $ 278,324         $ 229,957      

Other assets

    2,388,092           2,419,792           2,490,524      
 

 

 

       

 

 

       

 

 

     

Total assets

  $ 20,366,479         $ 20,218,775         $ 19,808,266      
 

 

 

       

 

 

       

 

 

     

Interest-Bearing Liabilities:

                 

Checking and NOW accounts

  $ 4,104,778     $ 2,860       0.28   $ 4,121,021     $ 3,812       0.37   $ 3,693,886     $ 3,142       0.34

Savings accounts

    2,828,177       1,298       0.18     2,842,996       1,586       0.22     2,935,710       2,283       0.32

Money market accounts

    1,784,169       2,507       0.57     1,839,258       3,558       0.77     1,702,655       2,826       0.67

Other time deposits

    1,562,074       5,186       1.34     1,642,773       6,101       1.47     1,840,514       7,102       1.56
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total interest-bearing deposits

    10,279,198       11,851       0.46     10,446,048       15,057       0.57     10,172,765       15,353       0.61

Brokered CD’s

    84,099       447       2.14     109,504       637       2.31     191,443       1,091       2.31
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total interest-bearing deposits and CD’s

    10,363,297       12,298       0.48     10,555,552       15,694       0.59     10,364,208       16,444       0.64
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Federal funds purchased and interbank borrowings

    392,857       1,240       1.27     95,973       437       1.80     316,998       1,918       2.45

Securities sold under agreements to repurchase

    329,091       384       0.47     337,786       469       0.55     361,261       662       0.74

Federal Home Loan Bank advances

    1,965,130       7,768       1.59     1,843,357       8,359       1.80     1,672,376       9,931       2.41

Other borrowings

    240,276       2,538       4.23     251,565       2,695       4.29     249,794       2,915       4.67
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total borrowed funds

    2,927,354       11,930       1.64     2,528,681       11,960       1.88     2,600,429       15,426       2.41
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total interest-bearing liabilities

  $ 13,290,651     $ 24,228       0.73   $ 13,084,233     $ 27,654       0.84   $ 12,964,637     $ 31,870       1.00
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Noninterest-Bearing Liabilities and Shareholders’ Equity

                 

Demand deposits

  $ 3,964,493         $ 4,047,308         $ 3,846,828      

Other liabilities

    277,812           254,296           282,615      

Shareholders’ equity

    2,833,523           2,832,938           2,714,186      
 

 

 

       

 

 

       

 

 

     

Total liabilities and shareholders’ equity

  $ 20,366,479         $ 20,218,775         $ 19,808,266      
 

 

 

       

 

 

       

 

 

     

Net interest rate spread

        3.11         3.21         3.26

Net interest margin (FTE)

        3.31         3.46         3.51

FTE adjustment

    $ 3,323         $ 3,282         $ 3,198    

 

(1)

Interest income is reflected on a fully taxable equivalent basis (FTE).                

(2)

Includes loans held for sale.                

(3)

Beginning January 1, 2020, calculation is based on current expected loss methodology. Prior to January 1, 2020, calculation was based on incurred loss methodology.


Asset Quality (EOP) (unaudited)

($ in thousands)

 

     Three Months Ended  
     March 31,     December 31,     March 31,  
     2020     2019     2019  

Beginning allowance for loan losses

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

Impact of adopting ASC 326 on 1/1/2020 (1)

     41,347       N/A       N/A  

Provision for loan losses (1)

     16,950       1,264       1,043  

Gross charge-offs

     (8,445     (6,304     (2,892

Gross recoveries

     1,909       2,749       1,947  
  

 

 

   

 

 

   

 

 

 

Net (charge-offs) recoveries

     (6,536     (3,555     (945
  

 

 

   

 

 

   

 

 

 

Ending allowance for loan losses (1)

   $ 106,380     $ 54,619     $ 55,559  
  

 

 

   

 

 

   

 

 

 

Net charge-offs (recoveries) / average loans (2)

     0.21     0.12     0.03

Average loans outstanding (2)

   $  12,182,704     $  12,058,109     $  12,147,560  

EOP loans outstanding (2)

     12,384,612     $ 12,117,524     $ 12,068,977  

Allowance for loan losses / EOP loans (1)(2)

     0.86     0.45     0.46

Underperforming Assets:

      

Loans 90 Days and over (still accruing)

   $ 658     $ 570     $ 560  

Non-performing loans:

      

Nonaccrual loans (3)

     126,987       126,412       152,881  

Renegotiated loans

     17,040       18,338       17,123  
  

 

 

   

 

 

   

 

 

 

Total non-performing loans

     144,027       144,750       170,004  
  

 

 

   

 

 

   

 

 

 

Foreclosed properties

     2,163       2,169       3,279  
  

 

 

   

 

 

   

 

 

 

Total underperforming assets

   $ 146,848     $ 147,489     $ 173,843  
  

 

 

   

 

 

   

 

 

 

Classified and Criticized Assets:

      

Nonaccrual loans (3)

     126,987       126,412       152,881  

Substandard accruing loans

     181,157       169,689       210,680  

Loans 90 days and over (still accruing)

     658       570       560  
  

 

 

   

 

 

   

 

 

 

Total classified loans - “problem loans”

   $ 308,802     $ 296,671     $ 364,121  
  

 

 

   

 

 

   

 

 

 

Other classified assets

     2,616       2,933       2,715  

Criticized loans - “special mention loans”

     238,011       234,841       268,836  
  

 

 

   

 

 

   

 

 

 

Total classified and criticized assets

   $ 549,429     $ 534,445     $ 635,672  
  

 

 

   

 

 

   

 

 

 

Non-performing loans / EOP loans (2)

     1.16     1.19     1.41

Allowance to non-performing loans (1)(4)

     74     38     33

Under-performing assets / EOP loans (2)

     1.19     1.22     1.44

EOP total assets

   $ 20,741,141     $ 20,411,667     $ 20,084,420  

Under-performing assets / EOP assets

     0.71     0.72     0.87

EOP - End of period actual balances

(1)

Beginning January 1, 2020, calculation is based on current expected loss methodology. Prior to January 1, 2020, calculation was based on incurred loss methodology.

(2)

Excludes loans held for sale.

(3)

Includes renegotiated loans totaling $11.8 million at March 31, 2020, $13.8 million at December 31, 2019 and $27.0 million at March 31, 2019.

(4)

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 for 2019 quarter ends.


Non-GAAP Measures (unaudited)

($ in thousands)

 

     Three Months Ended  
     March 31,
2020
    December 31,
2019
    March 31,
2019
 

Actual End of Period Balances

      

GAAP shareholders’ equity

   $ 2,823,435     $ 2,852,453     $ 2,751,872  

Deduct:

      

Goodwill

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

Intangibles

     56,329       60,105       72,544  
  

 

 

   

 

 

   

 

 

 
     1,093,323       1,097,099       1,108,802  
  

 

 

   

 

 

   

 

 

 

Tangible shareholders’ equity

   $ 1,730,112     $ 1,755,354     $ 1,643,070  
  

 

 

   

 

 

   

 

 

 

Average Balances

      

GAAP shareholders’ equity

   $ 2,833,523     $ 2,832,938     $ 2,714,186  

Deduct:

      

Goodwill

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

Intangibles

     58,127       61,963       74,849  
  

 

 

   

 

 

   

 

 

 
     1,095,121       1,098,957       1,111,107  
  

 

 

   

 

 

   

 

 

 

Average tangible shareholders’ equity

   $ 1,738,402     $ 1,733,981     $ 1,603,079  
  

 

 

   

 

 

   

 

 

 

Actual End of Period Balances

      

GAAP assets

   $ 20,741,141     $ 20,411,667     $ 20,084,420  

Add:

      

Trust overdrafts

     119       31       28  

Deduct:

      

Goodwill

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

Intangibles

     56,329       60,105       72,544  
  

 

 

   

 

 

   

 

 

 
     1,093,323       1,097,099       1,108,802  
  

 

 

   

 

 

   

 

 

 

Tangible assets

   $ 19,647,937     $ 19,314,599     $ 18,975,646  
  

 

 

   

 

 

   

 

 

 

Risk-weighted assets

   $ 14,420,130     $ 14,073,929     $ 13,966,569  
  

 

 

   

 

 

   

 

 

 

GAAP net income

   $ 22,640     $ 49,185     $ 56,276  

Add:

      

Amortization of intangibles (net of tax)

     2,849       2,976       3,373  
  

 

 

   

 

 

   

 

 

 

Tangible net income

   $ 25,489     $ 52,161     $ 59,649  
  

 

 

   

 

 

   

 

 

 

Tangible Ratios

      

Return on tangible common equity

     5.89     11.89     14.52

Return on average tangible common equity

     5.86     12.03     14.88

Return on tangible assets

     0.52     1.08     1.26

Tangible common equity to tangible assets

     8.81     9.09     8.66

Tangible common equity to risk-weighted assets

     12.00     12.47     11.76

Tangible common book value (1)

     10.48       10.35       9.44  

 

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 (2)

   $ 1,643,912     $ 1,706,727     $ 1,643,496  

Risk-weighted assets

     14,420,130       14,073,929       13,966,569  

Tier 1 common equity to risk-weighted assets (2)

     11.40     12.13     11.77

(2)   Amounts are estimated at March 31, 2020.

 

    

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