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Old National Bancorp$16.59($.20)(1.19%)

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 Old National’s 4th quarter includes strong commercial loan growth and another successful partnership
   Tuesday, January 23, 2018 8:00:34 AM ET

4 Quarter 2017 Highlights:

-- Organic commercial and commercial real estate loan growth of 10.1% annualized from 3 quarter of 2017

-- Cost of total deposits remained low at 0.20%, up just 1 basis point from 3 quarter of 2017

-- Legacy noninterest expenses declined 6.8% from 4 quarter of 2016

-- Anchor Bancorp, Inc. (Anchor-Minnesota) partnership closed November 1, 2017, less than 90 days following announcement

2017 Highlights:

-- Organic loan growth of almost 5%; organic commercial and commercial real estate loan growth of 10.1%

-- Cost of total deposits increased just 2 basis points to 0.19%

-- Credit quality metrics remain strong, with net charge-offs of just 0.03% of average total loans

-- Adjusted operating leverage improved over 350 basis pointsfrom 2016

Excludes acquired loans; includes loans held for sale Non-GAAP measure - refer to Tables 3 and 4 for Non-GAAP reconciliations

Today Old National Bancorp (the "Company" or "Old National") (ONB ) reported a 4 quarter 2017 net loss of $18.5 million, or $0.13 per diluted share. Full-year 2017 net income was $95.7 million, or $0.69 per diluted share.

As was previously disclosed in a Current Report on Form 8-K filed by Old National with the Securities and Exchange Commission on December 22, 2017, the 4 quarter results included an estimated revaluation of the Company’s deferred tax asset due to the new "H.R.1" tax reform law. Old National recorded $39.3 million of additional tax expense to estimate the impact of a reduction to its deferred tax asset. Also included in the 4 quarter were the following pre-tax charges: $11.9 million for merger and integration, $3.0 million for branch consolidations, $1.6 million in severance, $1.3 million for Foundation funding and $0.7 million for a client experience improvement initiative. Excluding these items from the current quarter and netting out securities gains, Old National would have reported net income of $32.7 million, or $0.22 per share. Refer to Table 5 for Non-GAAP net income reconciliation.

"Old National capped off a very successful 2017 with another strong quarter," said Old National Chairman and CEO Bob Jones. "Our 4th quarter saw a continuation of strong operating results highlighted by double digit commercial loan growth coupled with strong credit quality, controlled deposit costs and steady core expenses. We accomplished all of this while expanding into Minnesota with the successful closing of our Anchor-Minnesota partnership. We are optimistic as we look ahead to 2018 given the strength of our franchise and the foundation we have built for sustained, positive operating leverage.

"While the immediate impact of the Tax Cut and Jobs Act is the necessary writedown of a portion of our deferred taxes, the positive impact that reduced taxes will have on Old National and our clients will be significant in 2018 and beyond," continued Jones. "We are already hearing from our clients about increased investments in technology and other capital expenditures. This is a similar story for us, as we expect to use some of the benefit to enhance our client experience through increased investments in technology. We continue to be a leader in investments in our communities, underscoring our commitment by making a contribution to our Foundation."

Committed to our Strategic Imperatives

Old National’s continued steady performance and strong credit and capital positions can be attributed to the Company’s unwavering commitment to the three strategic imperatives that have guided Old National for 13 years:

1. Strengthen the risk profile; 2. Enhance management discipline; and 3. Achieve consistent quality earnings.

Balance Sheet and Net Interest Margin

At December 31, 2017, total period-end loans, including loans held for sale, increased $1.708 billion to $11.136 billion from $9.428 billion at September 30, 2017. Total loans acquired through the partnership with Anchor-Minnesota were $1.595 billion as of the date of closing. Excluding these acquired loans, Old National reported organic loan growth during the 4 quarter of $112.4 million, or 4.8% on an annualized basis. Old National’s portfolio of commercial and commercial real estate loans grew by $1.653 billion from the 3 quarter. Of this increase, $1.516 billon was acquired through the Anchor-Minnesota partnership, resulting in $136.5 million, or 10.1% annualized, of organic commercial loan growth.

For the full-year 2017, Old National’s total loan portfolio grew $2.035 billion. Organic loan growth was $439.5 million, or 4.8%. The Company’s portfolio of commercial and commercial real estate loans grew $2.024 billion for the full year, of which $507.8 million was organic growth, an increase of 10.1% compared to 2016.

Total period-end core deposits, including demand and interest-bearing deposits, increased $1.949 billion to $12.441 billion at December 31, 2017, compared to $10.492 billion at September 30, 2017. Total core deposits assumed through the Anchor-Minnesota partnership were $1.777 billion as of the date of closing, of which $579.4 million were noninterest-bearing demand deposits. Excluding these assumed deposits, Old National reported organic deposit growth of $172.0 million for the 4 quarter while noninterest-bearing deposit balances increased $66.8 million during that same period. Old National’s cost of total deposits remained well controlled at 0.20% in the 4 quarter of 2017 compared to 0.19% in the 3 quarter of 2017 and 0.18% in the 4 quarter of 2016.

Net interest income for the 4 quarter of 2017 totaled $118.6 million compared to $108.5 million in the 3 quarter of 2017, and $109.9 million in the 4 quarter of 2016. On a fully taxable equivalent basis, net interest income was $124.7 million for the 4 quarter of 2017 and represented a net interest margin on total average earning assets of 3.47%. These results compare to net interest income on a fully taxable equivalent basis of $114.1 million and a margin of 3.52% in the 3 quarter of 2017. In the 4 quarter of 2016, Old National reported net interest income on a fully taxable equivalent basis of $115.4 million and a margin of 3.63%. Refer to Table 6 for Non-GAAP taxable equivalent reconciliations.

As part of net interest income, Old National recorded $7.5 million in accretion income, which represents 21 basis points of the Company’s net interest margin. Accretion income is related to purchase accounting discounts from the Company’s various acquisitions. Total accretion income in the 3 quarter of 2017 and the 4 quarter of 2016 reported by Old National was $11.1 million, or 34 basis points of the net interest margin, and $16.8 million, or 53 basis points of the net interest margin, respectively.

Noninterest Income

For the 4 quarter of 2017, total noninterest income amounted to $44.8 million and compares to $46.4 million reported in the 3 quarter of 2017 and $62.8 million in the 4 quarter of 2016. As compared to the 3 quarter, the 4 quarter of 2017 saw seasonal declines in service charge income (excluding the $0.9 million contribution from Anchor-Minnesota) and mortgage revenue as well as lower capital markets income. The 4 quarter of 2016 included a $12.8 million pre-tax deferred gain related to the repurchase of various bank properties as well as $6.4 million of recoveries on loans from the Company’s 2016 Wisconsin acquisition. For the two months since the closing of the partnership, Anchor-Minnesota contributed $2.6 million in noninterest income to the 4 quarter of 2017.

Noninterest Expenses

Noninterest expenses for Old National totaled $140.4 million for the 4 quarter of 2017. The current quarter included $18.5 million of pre-tax charges: $11.9 million for merger and integration, $3.0 million for branch consolidations, $1.6 million in severance, $1.3 million for Foundation funding and $0.7 million for a client experience improvement initiative. Old National also incurred $11.7 million in amortization of tax credit investments in the 4 quarter. Excluding these charges from the current quarter, Old National’s adjusted noninterest expense was $110.2 million. The newly acquired Anchor-Minnesota operations contributed $9.5 million in noninterest expenses during the 4 quarter for the two months since the closing of the partnership. Refer to Table 3 for Non-GAAP noninterest expense reconciliation.

For the 3 quarter of 2017, Old National reported total noninterest expenses of $103.7 million, which included $4.7 million of pre-tax charges: $2.1 million related to branch consolidations, $1.9 million related to a client-experience improvement initiative, $0.4 million for merger and integration and $0.3 million in severance. In the 4 quarter of 2016, noninterest expenses totaled $126.3 million and included $18.3 million of pre-tax charges: $9.8 million for the termination of the Company’s pension plan, $5.1 million related to branch consolidations, $1.8 million in merger and integration charges and $1.6 million in severance. Old National consolidated 14 branches in the 4 quarter of 2017. With the addition of the newly acquired Minnesota branches, Old National currently operates 191 branches throughout its franchise.

Capital

At December 31, 2017, Old National’s capital position remained well above regulatory guideline minimums with regulatory tier 1 and total risk-based capital ratios of 10.4% and 11.4%, respectively, compared to 12.0% and 12.5% at September 30, 2017, and 11.7% and 12.2% at December 31, 2016. Old National did not repurchase any stock in the open market during the 4 quarter or full-year 2017.

The following table presents Old National’s risk-based and leverage capital ratios compared to industry requirements:

Table 1                            Fully Phased-In Regulatory Guidelines Minimum Consolidated ONB  at December 31, 2017
Tier 1 Risk-Based Capital Ratio    > 8.5%                                        10.4%
Total Risk-Based Capital Ratio     > 10.5%                                       11.4%
Common Equity Tier 1 Capital Ratio > 7.0%                                        10.5%
Tier 1 Leverage Capital Ratio      > 4.0%                                        8.3%

Old National’s ratio of tangible common equity to tangible assets was 7.65% at December 31, 2017, compared to 8.50% at September 30, 2017, and 7.92% at December 31, 2016. Refer to Table 13 for Non-GAAP reconciliations.

Credit

Old National recorded a provision expense of $1.0 million and had net charge-offs of $0.8 million in the 4 quarter of 2017. These results compare to $0.3 million in provision expense and net charge-offs of $1.1 million, and a provision recapture of $1.8 million and net charge-offs of nearly zero, in the 3 quarter of 2017 and the 4 quarter of 2016, respectively. Net charge-offs for the 4 quarter of 2017 were 0.03% of average total loans on an annualized basis, compared to net charge-offs of 0.05% of average total loans in the 3 quarter of 2017 and 0.00% in the 4 quarter of 2016.

Delinquencies remained low as Old National reported 30-89 day delinquent loans of 0.37% in the 4 quarter of 2017 compared to 0.34% in the 3 quarter of 2017. Old National’s 90+ day delinquent loans for the 4 quarter of 2017 were 0.01%, unchanged from the 3 quarter of 2017.

For the full-year 2017, Old National recorded provision expense of $3.1 million and had net charge-offs of $2.5 million, or 0.03% of average total loans. This compares to the full-year 2016 provision expense of $1.0 million and net charge-offs of $3.4 million, or 0.04% of average total loans.

Old National’s allowance for loan losses at December 31, 2017, was $50.4 million, or 0.45% of total loans, compared to an allowance of $50.2 million, or 0.53% of total loans at September 30, 2017, and $49.8 million, or 0.55% of total loans, at December 31, 2016. The coverage ratio (allowance to non-performing loans) stood at 35% at December 31, 2017, compared to 37% at September 30, 2017, and 34% at December 31, 2016.

When reviewing Old National’s credit quality trends, it is important to remember that, 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, 2017, the remaining discount on these acquired loans was $136.5 million, of which $46.1 million is applicable to loans acquired in the Anchor-Minnesota partnership.

The following table presents certain credit quality metrics related to Old National’s loan portfolio:

Table 2 ($ in millions)                   4Q17 Excluding Anchor-Minnesota 4Q17 Anchor-Minnesota 4Q17 Consolidated 3Q17   4Q16
Non-Performing Loans (NPLs)               $128.0                          $16.5                 $144.5            $137.1 $145.8
Problem Loans (Including NPLs)            199.2                           27.4                  226.6             209.5  220.4
Special Mention Loans                     141.6                           46.5                  188.1             130.2  95.5
Net Charge-Off (Recoveries) Ratio         0.03%                           -                     0.03%             0.05%  0.00%
Provision for Loan Losses                 $1.0                            $-                    $1.0              $0.3   $(1.8)
Allowance for Loan Losses                 50.4                            -                     50.4              50.2   49.8
Remaining Loan Discount on Acquired Loans 90.4                            46.1                  136.5             96.5   129.7

Income Taxes

On a fully taxable-equivalent basis, Old National reported $46.5 million in income tax expense in the 4 quarter of 2017. Included in this number is a $39.3 million estimate for the revaluation of the Company’s deferred tax asset. This revaluation resulted from the new "H.R.1" tax reform law which was signed on December 22, 2017. As an estimate, this amount could be adjusted during the measurement period, which will end in December 2018.

About Old National

Old National Bancorp (ONB ), the holding company of Old National Bank, is the largest financial services holding company headquartered in Indiana. With $17.5 billion in assets, it ranks among the top 100 banking companies in the U.S. and has been recognized as a World’s Most Ethical Company by the Ethisphere Institute for six consecutive years. Since its founding in Evansville in 1834, Old National Bank has focused on community banking by building long-term, highly valued partnerships with clients. 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, investments and brokerage services. For more information and financial data, please visit Investor Relations at oldnational.com.

Conference Call

Old National will hold a conference call at 10:00 a.m. Central Time on Tuesday, January 23, 2018, to discuss 4 quarter and full-year 2017 financial results, strategic developments, and the Company’s financial outlook. 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 1:00 p.m. Central Time on January 23 through February 6. To access the replay, dial 1-855-859-2056, Conference ID Code 6268317.

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.

Table 3 - Non-GAAP Reconciliation-Noninterest Expenses

($ in millions)                                                                                     4Q17   4Q16
Noninterest Expense As Reported                                                                     $140.4 $126.3
Less: Merger and Integration Charges                                                                (11.9) (1.8)
Less: Amortization of Tax Credit Investments                                                        (11.7) -
Less: Pension Termination Charges                                                                   -      (9.8)
Less: Branch Consolidations, Severance, Foundation Funding and Client Experience Initiative Charges (6.6)  (6.7)
Adjusted Noninterest Expenses                                                                       $110.2 $108.0
Less: Anchor-Minnesota Expenses                                                                     (9.5)  -
Legacy ONB Noninterest Expenses                                                                     $100.7 $108.0

Table 4 - Non-GAAP Reconciliation-Operating Leverage

($ in millions)                                                                                        2017     2016
Noninterest Expense As Reported                                                                     $448.8   $454.1
Less: Merger and Integration Charges                                                                (12.3)   (15.9)
Less: Amortization of Tax Credit Investments                                                        (11.7)   -
Less: Pension Termination Charges                                                                   -        (9.8)
Less: Branch Consolidations, Severance, Foundation Funding and Client Experience Initiative Charges (14.0)   (13.7)
Adjusted Noninterest Expenses                                                                       $410.8   $414.7
Net Interest Income As Reported                                                                     $437.2   $402.7
FTE Adjustment                                                                                      23.1     21.3
Net Interest Income (FTE Basis)                                                                     $460.3   $424.0
Total Noninterest Income As Reported                                                                $183.4   252.8
Less: Securities Gains                                                                              (9.1)    (5.8)
Adjusted Noninterest Income                                                                         $174.2   $247.0
Total Revenue Less Securities Gains (FTE Basis)                                                     $634.5   $671.0
Less: Gain on Sale of Insurance                                                                     -        $(41.9)
Less: Gain on Repurchased Bank Properties, Other Gains                                              (.2)     (12.0)
Adjusted Total Revenue Less Securities Gains (FTE Basis)                                            $634.3   $617.1
Operating Leverage(basis points)                                                                    (426)
Adjusted Operating Leverage(basis points)                                                           373

Year-over-year basis point change in noninterest expenses plus change in total revenue

Year-over-year basis point change in adjusted noninterest expenses plus change in adjusted total revenue

Table 5 - Non-GAAP Reconciliation-Adjusted Net Income

($ in millions, shares in 000s)  Reported 4Q17 Adjustments Adjusted 4Q17
Total Revenues (FTE Basis)       $169.5        $(1.6)      $167.9
Less: Provision for Loan Losses  (1.0)         -           (1.0)
Less: Noninterest Expenses       (140.4)       18.5        (121.9)
Income before Income Taxes (FTE) $28.1         $16.9       $45.0
Income Taxes                     (46.6)        34.3        (12.3)
Net Income (Loss)                $(18.5)       $51.2       $32.7
Average Shares Outstanding       146,875       -           146,875
Earnings (Loss) Per Share        $(0.13)       $0.35       $0.22

Tax-effect calculations use estimated full-year 2017 FTE tax rate excluding the $39.3 million deferred tax asset revaluation

Table 6 - Non-GAAP Reconciliation-Fully Taxable Equivalent Net Interest Margin

($ in millions)                          4Q17      3Q17      4Q16
Net Interest Income                      $118.6    $108.5    $109.9
Taxable Equivalent Adjustment            6.1       5.6       5.5
Net Interest Income - Taxable Equivalent $124.7    $114.1    $115.4
Average Earning Assets                   $14,389.5 $12,959.7 $12,713.3
Net Interest Margin                      3.47%     3.52%     3.63%

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 and there are a number of factors that could cause actual results to differ materially from those in such statements. Factors that might cause such a difference include, but are not limited to: expected cost savings, synergies and other financial benefits from the merger with Anchor-Minnesota might not be realized within the expected timeframes and costs or difficulties relating to integration matters might be greater than expected; market, economic, operational, liquidity, credit and interest rate risks associated with Old National’s business; competition; government legislation and policies (including the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act and its related regulations); ability of Old National to execute its business plan; changes in the economy which could materially impact credit quality trends and the ability to generate loans and gather deposits; failure or circumvention of our internal controls; failure or disruption of our information systems; significant changes in accounting, tax or regulatory practices or requirements; new legal obligations or liabilities or unfavorable resolutions of litigations; disruptive technologies in payment systems and other services traditionally provided by banks; computer hacking and other cybersecurity threats; other matters discussed in this press release and other factors identified in our Annual Report on Form 10-K and other periodic filings with the SEC. These forward-looking statements are made only as of the date of this press release, and Old National does not undertake an obligation to release revisions to these forward-looking statements to reflect events or conditions after the date of this press release.

Contacts:

Media:

Kathy A. Schoettlin - (812) 465-7269

Executive Vice President - Communications

Financial Community:

Lynell J. Walton - (812) 464-1366

Senior Vice President - Investor Relations

 Table 7
 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,
                                                                           2017                                            2017                                            2016                                                                   2017                                            2016
 Income Statement
 Net interest income                                $                      118,556                  $                      108,478                  $                      109,917                                         $                      437,168                  $                      402,703
 Provision for loan losses                                                 1,037                                           311                                             (1,756                 )                                               3,050                                           960
 Noninterest income                                                        44,825                                          46,366                                          62,751                                                                 183,382                                         252,830
 Noninterest expense                                                       140,432                                         103,702                                         126,258                                                                448,836                                         454,147
 Net income (loss)                                                         (18,493                )                        39,372                                          33,456                                                                 95,725                                          134,264
 Per Common Share Data (Diluted)
 Net income (loss) available to common shareholders $                      (0.13                  ) $                      0.29                     $                      0.25                                            $                      0.69                     $                      1.05
 Average diluted shares outstanding                                        146,875                                         135,796                                         135,383                                                                138,513                                         128,301
 Book value                                                                14.17                                           14.07                                           13.42                                                                  14.17                                           13.42
 Stock price                                                               17.45                                           18.30                                           18.15                                                                  17.45                                           18.15
 Dividend payout ratio                                                     N/M                                             43                     %                        52                     %                                               75                     %                        50                     %
 Tangible common book value (1)                                            8.37                                            9.02                                            8.30                                                                   8.37                                            8.30
 Performance Ratios
 Return on average assets                                                  -0.45                  %                        1.05                   %                        0.91                   %                                               0.63                   %                        0.98                   %
 Return on average common equity                                           -3.51                  %                        8.31                   %                        7.33                   %                                               4.98                   %                        7.84                   %
 Return on average tangible common equity (1)                              -5.05                  %                        13.58                  %                        12.57                  %                                               8.59                   %                        13.73                  %
 Net interest margin (FTE)                                                 3.47                   %                        3.52                   %                        3.63                   %                                               3.48                   %                        3.58                   %
 Efficiency ratio (2)                                                      81.60                  %                        64.17                  %                        69.53                  %                                               68.87                  %                        65.82                  %
 Net charge-offs (recoveries) to average loans                             0.03                   %                        0.05                   %                        0.00                   %                                               0.03                   %                        0.04                   %
 Allowance for loan losses to ending loans                                 0.45                   %                        0.53                   %                        0.55                   %                                               0.45                   %                        0.55                   %
 Non-performing loans to ending loans                                      1.30                   %                        1.46                   %                        1.62                   %                                               1.30                   %                        1.62                   %
 Balance Sheet
 Total loans                                        $                      11,118,121               $                      9,398,124                $                      9,010,512                                       $                      11,118,121               $                      9,010,512
 Total assets                                                              17,518,292                                      15,065,800                                      14,860,237                                                             17,518,292                                      14,860,237
 Total deposits                                                            12,605,764                                      10,606,784                                      10,743,253                                                             12,605,764                                      10,743,253
 Total borrowed funds                                                      2,578,204                                       2,411,111                                       2,152,086                                                              2,578,204                                       2,152,086
 Total shareholders’ equity                                                2,154,397                                       1,906,823                                       1,814,417                                                              2,154,397                                       1,814,417
 Capital Ratios (1)
 Risk-based capital ratios (EOP):
 Tier 1 common equity                                                      10.5                   %                        11.7                   %                        11.5                   %                                               10.5                   %                        11.5                   %
 Tier 1                                                                    10.4                   %                        12.0                   %                        11.7                   %                                               10.4                   %                        11.7                   %
 Total                                                                     11.4                   %                        12.5                   %                        12.2                   %                                               11.4                   %                        12.2                   %
 Leverage ratio (to average assets)                                        8.3                    %                        8.8                    %                        8.4                    %                                               8.3                    %                        8.4                    %
 Total equity to assets (averages)                                         12.69                  %                        12.65                  %                        12.44                  %                                               12.57                  %                        12.55                  %
 Tangible common equity to tangible assets                                 7.65                   %                        8.50                   %                        7.92                   %                                               7.65                   %                        7.92                   %
 Nonfinancial Data
 Full-time equivalent employees                                            2,801                                           2,592                                           2,733                                                                  2,801                                           2,733
 Number of branches                                                        191                                             188                                             203                                                                    191                                             203
 (1) See non-GAAP measures on Table 13.
 (2) Efficiency ratio is defined as noninterest expense before amortization of intangibles as a percent of FTE net interest income and noninterest revenues, excluding net gains from securities transactions.  This presentation excludes amortization of intangibles and net securities gains, as is common in other company releases, and better aligns with true operating performance.
 FTE - Fully taxable equivalent basis  EOP - End of period actual balances                                                                                                                          N/M - Not meaningful
 Table 8
 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,
                                                          2017                2017         2016                 2017           2016
 Interest income                                     $    135,134      $      123,525 $    121,849       $      495,336 $      447,134
 Less:  interest expense                                  16,578              15,047       11,932               58,168         44,431
 Net interest income                                      118,556             108,478      109,917              437,168        402,703
 Provision for loan losses                                1,037               311          (1,756  )            3,050          960
 Net interest income after provision for loan losses      117,519             108,167      111,673              434,118        401,743
 Wealth management fees                                   9,801               8,837        8,593                37,316         34,641
 Service charges on deposit accounts                      10,913              10,535       10,448               41,331         41,578
 Debit card and ATM fees                                  4,756               4,248        4,183                17,676         16,769
 Mortgage banking revenue                                 3,933               5,104        4,399                18,449         20,240
 Insurance premiums and commissions                       180                 170          152                  617            20,527
 Investment product fees                                  5,791               5,193        5,155                20,977         18,822
 Capital markets income                                   923                 1,843        965                  6,544          3,227
 Company-owned life insurance                             2,366               2,022        2,198                8,654          8,479
 Change in FDIC indemnification asset                     -                   -            -                    -              233
 Other income                                             4,496               5,400        25,354               22,466         40,448
 Net gain on sale of ONB Insurance Group, Inc.            -                   -            -                    -              41,864
 Gains (losses) on sales of securities                    1,588               2,972        1,239                9,135          5,848
 Gains (losses) on derivatives                            78                  42           65                   217            154
 Total noninterest income                                 44,825              46,366       62,751               183,382        252,830
 Salaries and employee benefits                           74,785              57,783       72,344               246,738        252,892
 Occupancy                                                12,168              11,670       11,591               46,511         50,947
 Equipment                                                3,498               3,485        3,675                13,560         13,448
 Marketing                                                3,803               2,646        3,495                13,172         14,620
 Data processing                                          8,776               7,696        7,961                32,306         32,002
 Communication                                            2,419               2,163        2,805                9,284          9,959
 Professional fees                                        5,523               4,589        3,904                16,840         15,705
 Loan expenses                                            1,730               1,542        1,963                6,596          7,632
 Supplies                                                 686                 547          885                  2,406          2,865
 FDIC assessment                                          2,666               2,197        2,583                9,480          8,681
 Other real estate owned expense                          741                 511          944                  3,376          4,195
 Amortization of intangibles                              3,399               2,641        3,241                11,841         12,486
 Amortization of tax credit investments                   11,733              -            -                    11,733         -
 Other expense                                            8,505               6,232        10,867               24,993         28,715
 Total noninterest expense                                140,432             103,702      126,258              448,836        454,147
 Income before income taxes                               21,912              50,831       48,166               168,664        200,426
 Income tax expense                                       40,405              11,459       14,710               72,939         66,162
 Net income (loss)                                   $    (18,493 )    $      39,372  $    33,456        $      95,725  $      134,264
 Diluted Earnings Per Share
 Net income (loss)                                   $    (0.13   )    $      0.29    $    0.25          $      0.69    $      1.05
 Average Common Shares Outstanding
 Basic                                                    146,073             135,120      134,670              137,821        127,705
 Diluted                                                  146,875             135,796      135,383              138,513        128,301
 Common shares outstanding at end of period               152,040             135,523      135,159              152,040        135,159
  Table 9
  Balance Sheet (unaudited)
  ($ in thousands)
                                                     December 31,          September 30,         December 31,
                                                          2017                  2017                  2016
    Assets
    Federal Reserve Bank account                     $    54,361           $    32,333           $    36,496
    Money market investments                              13,318                17,382                9,642
    Investments:
    Treasury and government sponsored agencies            669,838               582,051               541,190
    Mortgage-backed securities                            1,674,584             1,458,385             1,535,659
    States and political subdivisions                     1,207,353             1,095,975             1,131,003
    Other securities                                      453,765               451,082               441,110
    Total investments                                     4,005,540             3,587,493             3,648,962
    Loans held for sale                                   17,930                30,221                90,682
    Loans:
    Commercial                                            2,717,269             2,049,054             1,917,099
    Commercial and agriculture real estate                4,354,552             3,370,211             3,130,853
    Consumer:
    Home equity                                           507,509               477,100               476,439
    Other consumer loans                                  1,371,738             1,382,639             1,398,591
    Subtotal of commercial and consumer loans             8,951,068             7,279,004             6,922,982
    Residential real estate                               2,167,053             2,119,120             2,087,530
    Total loans                                           11,118,121            9,398,124             9,010,512
    Total earning assets                                  15,209,270            13,065,553            12,796,294
    Allowance for loan losses                             (50,381    )          (50,169    )          (49,808    )
    Non-earning Assets:
    Cash and due from banks                               222,753               202,652               209,381
    Premises and equipment                                458,074               412,488               429,622
    Goodwill and other intangible assets                  881,147               684,253               692,695
    Company-owned life insurance                          403,753               356,897               352,956
    Net deferred tax assets                               110,857               137,951               181,863
    Loan servicing rights                                 24,661                24,900                25,561
    Other real estate owned                               8,810                 10,259                18,546
    Other assets                                          249,348               221,016               203,127
    Total non-earning assets                              2,359,403             2,050,416             2,113,751
    Total assets                                     $    17,518,292       $    15,065,800       $    14,860,237
    Liabilities and Equity
    Noninterest-bearing demand deposits              $    3,680,807        $    3,034,696        $    3,016,093
    NOW accounts                                          3,115,822             2,539,233             2,596,595
    Savings accounts                                      3,035,622             2,932,488             2,954,709
    Money market accounts                                 1,139,077             648,378               707,748
    Other time deposits                                   1,470,118             1,337,156             1,353,614
    Total core deposits                                   12,441,446            10,491,951            10,628,759
    Brokered CD’s                                         164,318               114,833               114,494
    Total deposits                                        12,605,764            10,606,784            10,743,253
    Federal funds purchased and interbank borrowings      335,033               317,021               213,003
    Securities sold under agreements to repurchase        384,810               285,409               367,052
    Federal Home Loan Bank advances                       1,609,579             1,589,367             1,353,092
    Other borrowings                                      248,782               219,314               218,939
    Total borrowed funds                                  2,578,204             2,411,111             2,152,086
    Accrued expenses and other liabilities                179,927               141,082               150,481
    Total liabilities                                     15,363,895            13,158,977            13,045,820
    Common stock, surplus, and retained earnings          2,204,669             1,941,020             1,873,789
    Accumulated other comprehensive income (loss)         (50,272    )          (34,197    )          (59,372    )
    Total shareholders’ equity                            2,154,397             1,906,823             1,814,417
    Total liabilities and shareholders’ equity       $    17,518,292       $    15,065,800       $    14,860,237
 Table 10
 Average Balance Sheet and Interest Rates (unaudited)
 ($ in thousands)
                                                  Three Months Ended                                      Three Months Ended                       Three Months Ended
                                                  December 31, 2017                                       September 30, 2017                       December 31, 2016
                                                  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                                      $          54,611       $          87         0.63 %    $  32,755        $     85      1.03 %    $  40,791        $     37      0.36 %
 Investments:
 Treasury and gov’t sponsored agencies                       611,982                 3,031      1.98 %       585,354             2,844   1.94 %       551,665             2,754   2.00 %
 Mortgage-backed securities                                  1,573,578               8,139      2.07 %       1,456,034           7,235   1.99 %       1,504,887           7,182   1.91 %
 States and political subdivisions                           1,178,113               13,312     4.52 %       1,103,721           13,065  4.73 %       1,141,703           13,458  4.72 %
 Other securities                                            454,824                 3,126      2.75 %       453,782             3,043   2.68 %       445,877             2,868   2.57 %
 Total investments                                           3,818,497               27,608     2.89 %       3,598,891           26,187  2.91 %       3,644,132           26,262  2.88 %
 Loans: (2)
 Commercial                                                  2,480,987               26,577     4.19 %       2,021,614           20,731  4.01 %       1,871,338           17,453  3.65 %
 Commercial and agriculture real estate                      3,989,684               47,683     4.68 %       3,298,435           43,646  5.18 %       3,125,500           45,375  5.68 %
 Consumer:
 Home equity                                                 502,837                 5,442      4.29 %       479,492             5,065   4.19 %       485,984             4,597   3.76 %
 Other consumer loans                                        1,371,986               12,248     3.54 %       1,384,057           12,242  3.51 %       1,384,017           11,942  3.43 %
 Subtotal commercial and consumer loans                      8,345,494               91,950     4.37 %       7,183,598           81,684  4.51 %       6,866,839           79,367  4.60 %
 Residential real estate loans                               2,170,900               21,628     3.99 %       2,144,478           21,190  3.95 %       2,161,583           21,689  4.00 %
 Total loans                                                 10,516,394              113,578    4.26 %       9,328,076           102,874 4.35 %       9,028,422           101,056 4.42 %
 Total earning assets                             $          14,389,502   $          141,273    3.88 %    $  12,959,722    $     129,146 3.95 %    $  12,713,345    $     127,355 3.97 %
 Less: Allowance for loan losses                             (50,601    )                                    (51,130    )                             (52,691    )
 Non-earning Assets:
 Cash and due from banks                          $          201,520                                      $  233,017                               $  209,957
 Other assets                                                2,046,544                                       1,845,612                                1,806,507
 Total assets                                     $          16,586,965                                   $  14,987,221                            $  14,677,118
 Interest-Bearing Liabilities:
 NOW accounts                                     $          2,905,440    $          714        0.10 %    $  2,570,321     $     544     0.08 %    $  2,560,533     $     430     0.07 %
 Savings accounts                                            3,010,761               1,324      0.17 %       2,934,445           1,289   0.17 %       2,952,666           1,138   0.15 %
 Money market accounts                                       994,574                 394        0.16 %       661,635             142     0.09 %       703,904             142     0.08 %
 Other time deposits                                         1,443,050               3,203      0.88 %       1,347,095           2,800   0.82 %       1,392,410           2,714   0.78 %
 Total interest-bearing deposits                             8,353,825               5,635      0.27 %       7,513,496           4,775   0.25 %       7,609,513           4,424   0.23 %
 Brokered CD’s                                               154,521                 489        1.26 %       119,707             350     1.16 %       132,901             293     0.88 %
 Total interest-bearing deposits and CD’s                    8,508,346               6,124      0.29 %       7,633,203           5,125   0.27 %       7,742,414           4,717   0.24 %
 Federal funds purchased and interbank borrowings            172,838                 533        1.22 %       220,918             655     1.18 %       79,913              107     0.53 %
 Securities sold under agreements to repurchase              370,095                 400        0.43 %       315,285             280     0.35 %       354,709             370     0.41 %
 Federal Home Loan Bank advances                             1,543,690               6,871      1.77 %       1,506,606           6,618   1.74 %       1,264,368           4,383   1.38 %
 Other borrowings                                            241,695                 2,650      4.39 %       219,241             2,369   4.32 %       218,860             2,355   4.30 %
 Total borrowed funds                                        2,328,318               10,454     1.78 %       2,262,050           9,922   1.74 %       1,917,850           7,215   1.50 %
 Total interest-bearing liabilities               $          10,836,664   $          16,578     0.61 %    $  9,895,253     $     15,047  0.61 %    $  9,660,264     $     11,932  0.49 %
 Noninterest-Bearing Liabilities
 Demand deposits                                  $          3,486,412                                    $  3,049,503                             $  3,006,263
 Other liabilities                                           159,243                                         146,271                                  184,598
 Shareholders’ equity                                        2,104,646                                       1,896,194                                1,825,993
 Total liabilities and shareholders’ equity       $          16,586,965                                   $  14,987,221                            $  14,677,118
 Net interest rate spread                                                                       3.27 %                                   3.34 %                                   3.48 %
 Net interest margin (FTE)                                                                      3.47 %                                   3.52 %                                   3.63 %
 FTE adjustment                                                           $          6,139                                 $     5,621                              $     5,506
 (1) Interest income is reflected on a fully taxable equivalent basis (FTE).
 (2) Includes loans held for sale.
  Table 11
  Average Balance Sheet and Interest Rates (unaudited)
  ($ in thousands)
                                                   Twelve Months Ended                                       Twelve Months Ended
                                                   December 31, 2017                                         December 31, 2016
                                                   Average                           Income (1)/   Yield/    Average            Income (1)/   Yield/
  Earning Assets:                                  Balance                           Expense       Rate      Balance            Expense       Rate
  Money market and other interest-earning
  investments                                      $               35,584            $     258     0.72 %    $   32,697         $     130     0.40 %
  Investments:
  Treasury and gov’t sponsored agencies                            578,640                 11,453  1.98 %        672,659              13,207  1.96 %
  Mortgage-backed securities                                       1,506,677               30,782  2.04 %        1,295,749            24,174  1.87 %
  States and political subdivisions                                1,134,532               53,359  4.70 %        1,125,713            53,003  4.71 %
  Other securities                                                 450,127                 11,863  2.64 %        438,832              10,391  2.37 %
  Total investments                                                3,669,976               107,457 2.93 %        3,532,953            100,775 2.85 %
  Loans: (2)
  Commercial                                                       2,083,779               85,747  4.11 %        1,835,317            70,591  3.85 %
  Commercial and agriculture real estate                           3,426,757               171,483 5.00 %        2,648,911            150,592 5.69 %
  Consumer:
  Home equity                                                      483,310                 20,003  4.14 %        459,648              20,356  4.43 %
  Other consumer loans                                             1,392,221               48,139  3.46 %        1,336,381            45,020  3.37 %
  Subtotal commercial and consumer loans                           7,386,067               325,372 4.41 %        6,280,257            286,559 4.56 %
  Residential real estate loans                                    2,146,279               85,340  3.98 %        1,995,060            80,963  4.06 %
  Total loans                                                      9,532,346               410,712 4.31 %        8,275,317            367,522 4.44 %
  Total earning assets                             $               13,237,906        $     518,427 3.92 %    $   11,840,967     $     468,427 3.96 %
  Less: Allowance for loan losses                                  (50,845         )                             (52,215    )
  Non-earning Assets:
  Cash and due from banks                          $               207,677                                   $   192,401
  Other assets                                                     1,907,963                                     1,661,200
  Total assets                                     $               15,302,701                                $   13,642,353
  Interest-Bearing Liabilities:
  NOW accounts                                     $               2,676,760         $     2,224   0.08 %    $   2,389,143      $     1,529   0.06 %
  Savings accounts                                                 2,964,875               4,980   0.17 %        2,595,622            3,723   0.14 %
  Money market accounts                                            762,540                 831     0.11 %        763,909              840     0.11 %
  Other time deposits                                              1,363,529               10,907  0.80 %        1,209,414            9,898   0.82 %
  Total interest-bearing deposits                                  7,767,704               18,942  0.24 %        6,958,088            15,990  0.23 %
  Brokered CD’s                                                    123,548                 1,414   1.14 %        152,233              1,293   0.85 %
  Total interest-bearing deposits and CD’s                         7,891,252               20,356  0.26 %        7,110,321            17,283  0.24 %
  Federal funds purchased and interbank borrowings                 187,426                 1,966   1.05 %        137,997              673     0.49 %
  Securities sold under agreements to repurchase                   336,539                 1,270   0.38 %        368,757              1,509   0.41 %
  Federal Home Loan Bank advances                                  1,481,314               24,818  1.68 %        1,121,413            15,547  1.39 %
  Other borrowings                                                 224,793                 9,758   4.34 %        222,708              9,419   4.23 %
  Total borrowed funds                                             2,230,072               37,812  1.70 %        1,850,875            27,148  1.47 %
  Total interest-bearing liabilities               $               10,121,324        $     58,168  0.57 %    $   8,961,196      $     44,431  0.50 %
  Noninterest-Bearing Liabilities
  Demand deposits                                  $               3,111,672                                 $   2,776,140
  Other liabilities                                                146,060                                       192,443
  Shareholders’ equity                                             1,923,645                                     1,712,574
  Total liabilities and shareholders’ equity       $               15,302,701                                $   13,642,353
  Net interest rate spread                                                                         3.35 %                                     3.46 %
  Net interest margin (FTE)                                                                        3.48 %                                     3.58 %
  FTE adjustment                                                                     $     23,091                               $     21,293
  (1) Interest income is reflected on a fully taxable equivalent basis (FTE).
  (2) Includes loans held for sale.
 Table 12
 Asset Quality (EOP) (unaudited)
 ($ in thousands)
                                                  Three Months Ended                                                                                     Twelve Months Ended
                                                  December 31,                      September 30,                     December 31,                       December 31,                      December 31,
                                                                  2017                              2017                              2016                               2017                              2016
 Beginning allowance for loan losses              $               50,169            $               50,986            $               51,547             $               49,808            $               52,233
 Provision for loan losses                                        1,037                             311                               (1,756          )                  3,050                             960
 Gross charge-offs                                                (3,278          )                 (2,821          )                 (3,472          )                  (12,717         )                 (14,610         )
 Gross recoveries                                                 2,453                             1,693                             3,489                              10,240                            11,225
 Net (charge-offs) recoveries                                     (825            )                 (1,128          )                 17                                 (2,477          )                 (3,385          )
 Ending allowance for loan losses                 $               50,381            $               50,169            $               49,808             $               50,381            $               49,808
 Net charge-offs (recoveries) / average loans (1)                 0.03            %                 0.05            %                 0.00            %                  0.03            %                 0.04            %
 Average loans outstanding (1)                    $               10,509,552        $               9,320,868         $               9,018,280          $               9,525,888         $               8,265,169
 EOP loans outstanding (1)                        $               11,118,121        $               9,398,124         $               9,010,512          $               11,118,121        $               9,010,512
 Allowance for loan losses / EOP loans (1)                        0.45            %                 0.53            %                 0.55            %                  0.45            %                 0.55            %
 Underperforming Assets:
 Loans 90 Days and over (still accruing)          $               894               $               879               $               328                $               894               $               328
 Non-performing loans:
 Nonaccrual loans (2)                                             124,927                           119,256                           131,407                            124,927                           131,407
 Renegotiated loans                                               19,589                            17,886                            14,376                             19,589                            14,376
 Total non-performing loans                                       144,516                           137,142                           145,783                            144,516                           145,783
 Foreclosed properties                                            8,810                             10,259                            18,546                             8,810                             18,546
 Total underperforming assets                     $               154,220           $               148,280           $               164,657            $               154,220           $               164,657
 Classified loans - "problem loans"               $               226,583           $               209,524           $               220,429            $               226,583           $               220,429
 Other classified assets                                          4,556                             7,526                             7,063                              4,556                             7,063
 Criticized loans - "special mention loans"                       188,085                           130,197                           95,462                             188,085                           95,462
 Total classified and criticized assets           $               419,224           $               347,247           $               322,954            $               419,224           $               322,954
 Non-performing loans / EOP loans (1)                             1.30            %                 1.46            %                 1.62            %                  1.30            %                 1.62            %
 Allowance to non-performing loans (3)                            35              %                 37              %                 34              %                  35              %                 34              %
 Under-performing assets / EOP loans (1)                          1.39            %                 1.58            %                 1.83            %                  1.39            %                 1.83            %
 EOP total assets                                 $               17,518,292        $               15,065,800        $               14,860,237         $               17,518,292        $               14,860,237
 Under-performing assets / EOP assets                             0.88            %                 0.98            %                 1.11            %                  0.88            %                 1.11            %
 EOP - End of period actual balances
 (1) Excludes loans held for sale.
 (2) Includes renegotiated loans totaling $34.0 million at December 31, 2017, $43.7 million at September 30, 2017 and $26.3 million at December 31, 2016.
 (3) Includes acquired loans that were recorded at fair value in accordance with ASC 805 at the date of acquisition.  As such, the credit risk was incorporated in the fair value recorded and no allowance for loan losses was recorded on the acquisition date.
 Table 13
 Non-GAAP Measures (unaudited)
 ($ in thousands)
                                                     Three Months Ended                                                    Twelve Months Ended
                                                     December 31,           September 30,          December 31,            December 31,           December 31,
                                                               2017                   2017                   2016                    2017                   2016
      Actual End of Period Balances
      GAAP shareholders’ equity                      $         2,154,397    $         1,906,823    $         1,814,417     $         2,154,397    $         1,814,417
      Deduct:
      Goodwill                                                 828,051                655,018                655,018                 828,051                655,018
      Intangibles                                              53,096                 29,235                 37,677                  53,096                 37,677
                                                               881,147                684,253                692,695                 881,147                692,695
      Tangible shareholders’ equity                  $         1,273,250    $         1,222,570    $         1,121,722     $         1,273,250    $         1,121,722
      Average Balances
      GAAP shareholders’ equity                      $         2,104,646    $         1,896,194    $         1,825,993     $         1,923,645    $         1,712,574
      Deduct:
      Goodwill                                                 776,862                655,018                655,041                 685,729                635,440
      Intangibles                                              37,802                 30,502                 39,239                  34,392                 40,317
                                                               814,664                685,520                694,280                 720,121                675,757
      Average tangible shareholders’ equity          $         1,289,982    $         1,210,674    $         1,131,713     $         1,203,524    $         1,036,817
      Actual End of Period Balances
      GAAP assets                                    $         17,518,292   $         15,065,800   $         14,860,237    $         17,518,292   $         14,860,237
      Add:
      Trust overdrafts                                         59                     45                     122                     59                     122
      Deduct:
      Goodwill                                                 828,051                655,018                655,018                 828,051                655,018
      Intangibles                                              53,096                 29,235                 37,677                  53,096                 37,677
                                                               881,147                684,253                692,695                 881,147                692,695
      Tangible assets                                $         16,637,204   $         14,381,592   $         14,167,664    $         16,637,204   $         14,167,664
      Risk-weighted assets                           $         12,491,430   $         10,495,407   $         10,099,613    $         12,491,430   $         10,099,613
      GAAP net income (loss)                         $         (18,493    ) $         39,372       $         33,456        $         95,725       $         134,264
      Add:
      Amortization of intangibles (net of tax)                 2,210                  1,717                  2,107                   7,697                  8,116
      Tangible net income (loss)                     $         (16,283    ) $         41,089       $         35,563        $         103,422      $         142,380
      Tangible Ratios
      Return on tangible common equity                         -5.12      %           13.44      %           12.68      %            8.12       %           12.69      %
      Return on average tangible common equity                 -5.05      %           13.58      %           12.57      %            8.59       %           13.73      %
      Return on tangible assets                                -0.39      %           1.14       %           1.00       %            0.62       %           1.00       %
      Tangible common equity to tangible assets                7.65       %           8.50       %           7.92       %            7.65       %           7.92       %
      Tangible common equity to risk-weighted assets           10.19      %           11.65      %           11.11      %            10.19      %           11.11      %
      Tangible common book value (1)                           8.37                   9.02                   8.30                    8.37                   8.30
      Tangible common equity presentation includes other comprehensive income as is common in other company releases.
      (1) Tangible common shareholders’ equity divided by common shares issued and outstanding at period-end.
      Tier 1 capital                                 $         1,298,327    $         1,254,790    $         1,176,849     $         1,298,327    $         1,176,849
      Deduct:
      Trust Preferred Securities (2)                           -                      45,000                 45,000                  -                      45,000
      Additional Tier 1 capital deductions                     (10,000    )           (13,498    )           (30,968    )            (10,000    )           (30,968    )
                                                               (10,000    )           31,502                 14,032                  (10,000    )           14,032
      Tier 1 common equity                           $         1,308,327    $         1,223,288    $         1,162,817     $         1,308,327    $         1,162,817
      Risk-weighted assets                                     12,491,430             10,495,407             10,099,613              12,491,430             10,099,613
      Tier 1 common equity to risk-weighted assets             10.47      %           11.66      %           11.51      %            10.47      %           11.51      %
      (2) Trust Preferred Securities are now included in Tier 2 capital as a result of exceeding the $15 billion asset threshold from the Anchor-Minnesota acquisition.

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