Old National reports 2nd quarter earnings of $51.7 million, or $0.32 per share

7/20, 1:00 PM (Source: GlobeNewswire)

EVANSVILLE, Ind., July 20, 2020 (GLOBE NEWSWIRE) --

Old National Bancorp (NASDAQ: ONB) reports 2Q20 net income of $51.7 million, diluted EPS of $0.32.
Adjusted1 net income of $55.1 million, or $0.33 per diluted share.

CEO COMMENTARY:

“Old National’s strong 2nd quarter loan production was driven by our ability to help more than 9,400 new and existing clients secure Paycheck Protection Program funding, which resulted in financial assistance to nearly 160,000 of their employees,” said Old National Chairman & CEO Jim Ryan. “We also maintained strong credit metrics and capital ratios during the quarter while working to finalize our recently announced technology partnership with Infosys – a partnership that will accelerate and enhance our ability to provide powerful digital solutions to our clients.”

SECOND QUARTER HIGHLIGHTS2

Net income•  Net income of $51.7 million
•  Earnings per share of $0.32
  
Net interest
income/NIM
•  Net interest income on a fully taxable equivalent basis of $149.0 million compared to $147.1 million
•  Net interest margin on a fully taxable equivalent basis of 3.14% compared to 3.31%
  
Operating
Performance
•  Pre-provision net revenue1 (“PPNR”) of $87.3 million
•  Adjusted PPNR1 of $92.1 million, up 7.6% over second quarter of 2019
•  Noninterest expense of $120.2 million
•  Adjusted noninterest expense1 of $115.0 million
•  Efficiency ratio1 of 56.29%
•  Adjusted efficiency ratio1 of 53.79%, a 552 basis point improvement
  
Loans and
Credit
Quality
•  End-of-period total loans3 of $13,738.2 million compared to $12,438.8 million
◦  Paycheck Protection Program Loans (PPP) amounted to $1,462.8 million at the end of June
•  Second-quarter total commercial production, excluding PPP loans, of $658.5 million
•  Provision for credit losses of $22.5 million
•  June 30 pipeline of $2.7 billion
•  Net charge-offs of $0.5 million, or 0.02% annualized, compared to net charge-offs of $6.5 million
•  Non-performing loans of 1.04% of total loans compared to 1.16%
 
Return
Profile &
Capital
•  Return on average common equity of 7.27%
•  Return on average tangible common equity1 of 12.41%
•  Adjusted return on average tangible common equity1 of 13.18%
•  No shares of common stock were repurchased during the current quarter
  
Notable
Items
•  $4.9 million in ONB Way charges
•  $0.3 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

THE ONB WAY, OLD NATIONAL'S STRATEGIC PLAN, CONTINUES WITH TECHNOLOGY PARTNERSHIP

In a press release dated July 10, 2020, Old National announced a strategic technology partnership with Infosys, one of the world's foremost information technology companies. This partnership will enable faster adoption of digital solutions, modernize Old National's existing technology infrastructure and enhance both the employee and client experience.

RESULTS OF OPERATIONS

Old National Bancorp reported second quarter 2020 net income of $51.7 million, or $0.32 per diluted share. 

Included in the second quarter were pre-tax charges of $5.0 million for ONB Way. Excluding these charges from the current quarter and netting out debt securities gains, adjusted net income was $55.1 million, or $0.33 per diluted share.

LOANS
Strong PPP volume drove total loan balances higher.

  • Period-end total loans were $13,738.2 million at June 30, 2020, compared to $12,438.8 million at March 31, 2020. Driving the large increase was $1,462.8 million in outstanding PPP loan balances at June 30, 2020.
  • Commercial and industrial loans increased $1,260.9 million to $4,307.5 million as a result of strong PPP loan production.
  • Commercial real estate loans increased $119.9 million to $5,403.3 million, or 9.1% annualized growth.
  • Consumer loans decreased $51.1 million to $1,675.6 million and residential mortgage loans decreased $98.6 million to $2,229.3 million.
  • Commercial loan production in the second quarter, excluding PPP loan production, was $658.5 million; period-end pipeline totaled $2.7 billion.
  • Average total loans in the second quarter were $13,450.1 million, an increase of $1,257.7 million from the first quarter of 2020.

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

  • Period-end total deposits were $16,319.4 million at June 30, 2020, compared to $14,305.4 million at March 31, 2020. PPP funds and higher client savings rates drove the increase in deposit balances.
  • On average, total deposits in the second quarter were $15,652.8 million, compared to $14,327.8 million in the first quarter of 2020. 

NET INTEREST INCOME AND MARGIN
Net interest income higher on net PPP loan fees while net interest margin is lower with decline in accretion income and impact of 1% PPP loan coupon.

  • Net interest income increased to $145.6 million in the second quarter of 2020 from $143.8 million in the first quarter of 2020. 
  • The net interest margin on a fully taxable equivalent basis decreased 17 basis points to 3.14% compared to 3.31% in the first quarter of 2020. 
  • PPP interest and net fees combined to have a positive impact of $6.6 million to net interest income in the second quarter while the low 1% coupon rate negatively impacted net interest margin by 5 basis points.
  • Accretion income was $5.8 million, or 12 basis points of net interest margin, in the second quarter of 2020 compared to $6.7 million, or 15 basis points of net interest margin, in the first quarter of 2020. In the second quarter of 2020, accretion income was 2.8% of adjusted total revenue.
  • Interest collected on nonaccrual loans was $0.6 million, or 1 basis point of net interest margin, in the second quarter of 2020 compared to $0.7 million, or 1 basis point of net interest margin, in the first quarter of 2020.
  • The cost of total deposits declined 17 basis points to 0.17% in the second quarter of 2020 while the cost of total interest-bearing deposits decreased 23 basis points to 0.25%.

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

  • Provision for credit losses was $22.5 million in the second quarter of 2020, compared to $16.9 million in the first quarter, and continues to be impacted by an economic forecast that includes the impact of novel coronavirus pandemic.
  • Net charge-offs in the second quarter were $0.5 million, or 0.02% of total average loans, and 30-89 day delinquencies of 0.16%.
  • Non-performing loans decreased as a percentage of total loans to 1.04%.
  • Loans acquired from previous acquisitions were recorded at fair value at the acquisition date. As of June 30, 2020, the remaining discount on these acquired loans was $61.5 million.
  • The allowance for credit losses was $128.4 million, or 0.94% of total loans at June 30, 2020.

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

  • Total noninterest income for the second quarter of 2020 was $58.5 million, an increase of $1.0 million from the first quarter of 2020.
  • Mortgage banking revenue increased $6.2 million and capital markets income increased $1.9 million when compared to the first quarter of 2020 while service charges on deposit accounts decreased $2.5 million and investment product fees decreased $1.0 million.

NONINTEREST EXPENSE
Second quarter results demonstrate benefit of The ONB Way, helping drive positive operating leverage1.

  • Noninterest expense for the second quarter of 2020 was $120.2 million and included $4.9 million in ONB Way charges and $0.3 million in tax credit amortization.
  • Excluding these items, adjusted noninterest expense for the second quarter was $115.0 million, compared to the $122.0 million in adjusted noninterest expense in the first quarter of 2020.
  • The second quarter efficiency ratio was 56.29%, while the adjusted efficiency ratio was 53.79%.
  • Adjusted operating leverage1 was +576 basis points for the second quarter of 2020 as compared to the second quarter of 2019.

INCOME TAXES

  • On a fully taxable-equivalent basis, income tax expense in the second quarter was $13.1 million, resulting in a 20.2% FTE tax rate.
  • Income tax expense included $0.3 million in tax credit benefit. 

CAPITAL AND LIQUIDITY
Capital ratios remain strong.

  • At the end of the second quarter, total risk-based capital was 12.68% and regulatory tier 1 capital was 11.70%.
  • Tangible common equity to tangible assets was 8.45% at the end of the second quarter compared to 8.81% in the first quarter of 2020.
  • The Company did not repurchase any shares of common stock during the second quarter.
  • A low loan to deposit ratio of 84.2%, combined with existing funding sources plus available unencumbered, high-quality collateral, provides strong liquidity.

NON-GAAP RECONCILIATIONS

($ in millions, except EPS, shares in 000s)2Q20Adjustments4Adjusted 2Q20
Total Revenues (FTE)$207.5  $(0.4) $207.1 
Less: Provision for Credit Losses(22.5)   (22.5)
Less: Noninterest Expenses(120.2) 4.9  (115.3)
Income before Income Taxes (FTE)$64.8  $4.5  $69.3 
Income Taxes(13.1) (1.1) (14.2)
Net Income$51.7  $3.4  $55.1 
Average Shares Outstanding165,302    165,302 
Earnings Per Share - Diluted$0.32  $0.01  $0.33 

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

($ in millions)2Q201Q20
Net Interest Income$145.6  $143.8 
Add: FTE Adjustment3.4  3.3 
Net Interest Income (FTE)$149.0  $147.1 
Average Earning Assets$19,007.7  $17,774.0 
Net Interest Margin (FTE)3.14% 3.31%
   
($ in millions)2Q202Q19
Net Interest Income$145.6  $155.2 
Add: FTE Adjustment3.4  3.3 
Net Interest Income (FTE)$149.0  $158.5 
Add: Total Noninterest Income58.5  51.2 
Less: Noninterest Expense120.2  128.1 
Pre-Provision Net Revenue$87.3  $81.6 
Less: Debt Securities Gains(0.5) (1.2)
Add: Loss on Branch Actions0.1   
Add: ONB Way Charges4.9  1.4 
Add: Merger and Integration Charges  3.2 
Add: Amortization of Tax Credit Investments0.3  0.6 
Adjusted Pre-Provision Net Revenue$92.1  $85.6 


($ in millions)2Q201Q202Q19
Noninterest Expense$120.2  $158.7  $128.1 
Less: ONB Way Charges(4.9) (31.2) (1.4)
Less: Merger and Integration Charges    (3.2)
Noninterest Expense less Charges$115.3  $127.5  $123.5 
Less: Amortization of Tax Credit Investments(0.3) (5.5) (0.6)
Adjusted Noninterest Expense$115.0  $122.0  $122.9 
Less: Intangible Amortization(3.6) (3.8) (4.3)
Adjusted Noninterest Expense Less Intangible Amortization$111.4  $118.2  $118.6 
Net Interest Income$145.6  $143.8  $155.2 
FTE Adjustment3.4  3.3  3.3 
Net Interest Income (FTE)$149.0  $147.1  $158.5 
Total Noninterest Income58.5  57.5  51.2 
Total Revenue (FTE)207.5  204.6  209.7 
Less: Debt Securities Gains/Losses(0.5) (5.2) (1.2)
Add: Loss on Branch Actions0.1     
Adjusted Total Revenue (FTE)207.1  199.4  208.5 
Efficiency Ratio56.29% 77.71% 59.35%
Adjusted Efficiency Ratio53.79% 59.31% 56.85%
Operating Leverage5 (basis points)518    
Adjusted Operating Leverage6 (basis points)576    

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)2Q201Q20
Net Income$51.7  $22.6 
Add: Intangible Amortization (net of tax7)2.7  2.9 
Tangible Net Income$54.4  $25.5 
Less: Securities Gains/Losses (net of tax7)(0.4) (3.9)
Add: Loss on Branch Actions (net of tax7)0.1   
Add: ONB Way Charges (net of tax7)3.7  23.4 
Adjusted Tangible Net Income$57.8  $45.0 
Average Total Shareholders’ Equity2,845.4  2,833.5 
Less: Average Goodwill(1,037.0) (1,037.0)
Less: Average Intangibles(54.4) (58.1)
Average Tangible Shareholders’ Equity$1,754.0  $1,738.4 
Return on Average Tangible Common Equity12.41% 5.86%
Adjusted Return on Average Tangible Common Equity13.18% 10.35%

7Tax-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, July 20, 2020, to review second-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 July 20 through August 2. To access the replay, dial 1-855-859-2056, Conference ID Code 7973414.

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 $22.1 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 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 Six Months Ended
 June 30,March 31June 30, June 30,June 30,
 202020202019 20202019
Income Statement      
Net interest income$145,671 $143,771 $155,230  $289,442 $302,278 
Tax equivalent adjustment (1)3,367 3,323 3,289  6,690 6,487 
Net interest income - tax equivalent basis149,038 147,094 158,519  296,132 308,765 
Provision for loan losses (4)22,545 16,950 1,003  39,495 2,046 
Noninterest income58,461 57,502 51,214  115,963 97,630 
Noninterest expense120,121 158,744 128,118  278,865 251,159 
Net income51,705 22,640 62,964  74,345 119,240 
       
       
Per Common Share Data      
Weighted average diluted shares165,302 168,404 173,675  166,848 174,531 
Net income (diluted)$0.32 $0.13 $0.36  $0.45 $0.68 
Cash dividends0.14 0.14 0.13  0.28 0.26 
Common dividend payout ratio (2)44%108%35% 62%38%
Book value$17.35 $17.10 $16.28  $17.35 $16.28 
Stock price13.76 13.19 16.59  13.76 16.59 
Tangible common book value (3)10.75 10.48 9.86  10.75 9.86 
       
       
Performance Ratios      
Return on average assets0.96%0.44%1.26% 0.71%1.20%
Return on average common equity7.27%3.20%9.13% 5.24%8.72%
Return on tangible common equity (3)12.27%5.89%15.59% 9.01%14.82%
Return on average tangible common equity (3)12.41%5.86%16.04% 9.15%15.47%
Net interest margin (FTE)3.14%3.31%3.66% 3.22%3.59%
Efficiency ratio (5)56.29%77.71%59.35% 66.80%59.79%
Net charge-offs (recoveries) to average loans0.02%0.21%0.01% 0.11%0.02%
Allowance for loan losses to ending loans (4)0.94%0.86%0.47% 0.94%0.47%
Non-performing loans to ending loans1.04%1.16%1.34% 1.04%1.34%
       
       
Balance Sheet (EOP)      
Total loans$13,615,701 $12,384,612 $12,046,578  $13,615,701 $12,046,578 
Total assets22,102,188 20,741,141 20,145,285  22,102,188 20,145,285 
Total deposits16,319,446 14,305,362 14,363,101  16,319,446 14,363,101 
Total borrowed funds2,641,436 3,245,214 2,726,481  2,641,436 2,726,481 
Total shareholders' equity2,864,255 2,823,435 2,803,139  2,864,255 2,803,139 
       
       
Capital Ratios (3)      
Risk-based capital ratios (EOP):      
Tier 1 common equity11.70%11.40%11.89% 11.70%11.89%
Tier 111.70%11.40%11.89% 11.70%11.89%
Total12.68%12.28%12.82% 12.68%12.82%
Leverage ratio (to average assets)8.12%8.46%8.82% 8.12%8.82%
       
Total equity to assets (averages)13.16%13.91%13.82% 13.53%13.76%
Tangible common equity to tangible assets8.45%8.81%8.92% 8.45%8.92%
       
       
Nonfinancial Data      
Full-time equivalent employees2,530 2,736 2,829  2,530 2,829 
Banking centers162 192 192  162 192 
       
(1) Calculated using the federal statutory tax rate in effect of 21% for all periods.
(2) Cash dividends per share divided by net income per share (basic).
(3) Represents a non-GAAP financial measure. Refer the "Non-GAAP Measures" table for reconciliations to GAAP financial measures.
(4) Beginning January 1, 2020, calculation is based on current expected loss methodology. Prior to January 1, 2020, calculation was based on incurred loss methodology.
(5) 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 Six Months Ended
 June 30,March 31,June 30, June 30,June 30,
 202020202019 20202019
Interest income$161,974 $167,999 $189,063  $329,973 $367,981 
Less: interest expense16,303 24,228 33,833  40,531 65,703 
Net interest income145,671 143,771 155,230  289,442 302,278 
Provision for loan losses (1)22,545 16,950 1,003  39,495 2,046 
Net interest income after provision for loan losses123,126 126,821 154,227  249,947 300,232 
       
Wealth management fees9,424 8,884 9,909  18,308 18,444 
Service charges on deposit accounts7,582 10,077 11,515  17,659 22,341 
Debit card and ATM fees4,832 4,998 5,419  9,830 10,922 
Mortgage banking revenue17,313 11,119 7,135  28,432 12,146 
Investment product fees4,845 5,874 5,591  10,719 10,862 
Capital markets income6,179 4,328 3,150  10,507 5,667 
Company-owned life insurance2,968 3,080 2,711  6,048 5,899 
Other income4,807 3,968 4,619  8,775 10,287 
Gains (losses) on sales of debt securities511 5,174 1,165  5,685 1,062 
Total noninterest income58,461 57,502 51,214  115,963 97,630 
       
Salaries and employee benefits66,556 79,173 71,566  145,729 142,749 
Occupancy13,245 15,133 14,559  28,378 29,137 
Equipment3,853 5,305 4,517  9,158 8,991 
Marketing2,395 3,097 4,439  5,492 8,162 
Data processing9,629 9,467 10,207  19,096 19,548 
Communication2,296 2,798 2,849  5,094 5,903 
Professional fees3,545 4,293 4,921  7,838 7,831 
FDIC assessment2,014 1,609 1,454  3,623 3,541 
Amortization of intangibles3,612 3,776 4,325  7,388 8,797 
Amortization of tax credit investments287 5,515 568  5,802 828 
Other expense12,689 28,578 8,713  41,267 15,672 
Total noninterest expense120,121 158,744 128,118  278,865 251,159 
       
Income before income taxes61,466 25,579 77,323  87,045 146,703 
Income tax expense9,761 2,939 14,359  12,700 27,463 
Net income$51,705 $22,640 $62,964  $74,345 $119,240 
       
Diluted Earnings Per Share       
Net income$0.32 $0.13 $0.36  $0.45 $0.68 
       
Average Common Shares Outstanding      
Basic164,732 167,748 172,985  166,240 173,855 
Diluted165,302 168,404 173,675  166,848 174,531 
       
Common shares outstanding at end of period165,093 165,109 172,231  165,093 172,231 
       
(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)
 
 June 30, March 31, June 30,
 2020 2020 2019
Assets     
Federal Reserve Bank account$54,807  $130,295  $40,945 
Money market investments14,633  9,349  20,210 
Investments:     
Treasury and government-sponsored agencies489,232  530,904  725,327 
Mortgage-backed securities3,304,054  3,210,000  2,900,235 
States and political subdivisions1,355,959  1,302,395  1,186,311 
Other securities512,375  497,709  489,855 
Total investments5,661,620  5,541,008  5,301,728 
Loans held for sale, at fair value122,507  54,209  37,904 
Loans:     
Commercial4,307,505  3,046,579  3,074,849 
Commercial and agriculture real estate5,403,316  5,283,464  4,993,693 
Consumer:     
Home equity547,286  561,789  553,991 
Other consumer loans1,128,296  1,164,929  1,201,847 
Subtotal of commercial and consumer loans11,386,403  10,056,761  9,824,380 
Residential real estate2,229,298  2,327,851  2,222,198 
Total loans13,615,701  12,384,612  12,046,578 
Total earning assets19,469,268  18,119,473  17,447,365 
      
Allowance for loan losses (1)(128,394) (106,380) (56,292)
Non-earning Assets:     
Cash and due from banks241,054  203,533  239,831 
Premises and equipment, net462,796  462,364  493,481 
Operating lease right-of-use assets80,400  86,819  106,222 
Goodwill and other intangible assets1,089,711  1,093,323  1,104,478 
Company-owned life insurance453,116  450,148  445,749 
Other assets434,237  431,861  364,451 
Total non-earning assets2,761,314  2,728,048  2,754,212 
Total assets$22,102,188  $20,741,141  $20,145,285 
      
Liabilities and Equity     
Noninterest-bearing demand deposits$5,217,678  $4,058,559  $3,771,888 
Interest-bearing:     
Checking and NOW accounts4,567,046  4,105,006  3,950,161 
Savings accounts3,166,680  2,853,305  2,877,673 
Money market accounts1,895,809  1,746,798  1,819,716 
Other time deposits1,321,499  1,469,185  1,756,814 
Total core deposits16,168,712  14,232,853  14,176,252 
Brokered CD's150,734  72,509  186,849 
Total deposits16,319,446  14,305,362  14,363,101 
      
Federal funds purchased and interbank borrowings801  560,770  410,036 
Securities sold under agreements to repurchase367,744  318,067  334,540 
Federal Home Loan Bank advances2,035,014  2,130,263  1,730,065 
Other borrowings237,877  236,114  251,840 
Total borrowed funds2,641,436  3,245,214  2,726,481 
Operating lease liabilities91,845  95,830  110,596 
Accrued expenses and other liabilities185,206  271,300  141,968 
Total liabilities19,237,933  17,917,706  17,342,146 
Common stock, surplus, and retained earnings2,715,212  2,685,278  2,761,102 
Accumulated other comprehensive income (loss), net of tax149,043  138,157  42,037 
Total shareholders' equity2,864,255  2,823,435  2,803,139 
Total liabilities and shareholders' equity$22,102,188  $20,741,141  $20,145,285 
(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
  June 30, 2020 March 31, 2020 June 30, 2019
  AverageIncome (1)/Yield/ AverageIncome (1)/Yield/ AverageIncome (1)/Yield/
Earning Assets: BalanceExpenseRate BalanceExpenseRate BalanceExpenseRate
Money market and other interest-earning            
investments $85,680 $34 0.16% $58,406 $349 2.41% $58,321 $334 2.29%
Investments:            
Treasury and government-sponsored agencies 501,838 3,033 2.42% 583,971 3,697 2.53% 695,775 4,301 2.47%
Mortgage-backed securities 3,179,165 17,930 2.26% 3,171,650 19,065 2.40% 2,767,791 18,799 2.72%
States and political subdivisions 1,293,756 11,757 3.63% 1,273,156 11,409 3.58% 1,193,176 11,235 3.77%
Other securities 497,204 3,224 2.59% 494,500 3,216 2.60% 496,631 4,063 3.27%
Total investments 5,471,963 35,944 2.63% 5,523,277 37,387 2.71% 5,153,373 38,398 2.98%
Loans: (2)            
Commercial 4,049,403 31,729 3.10% 2,907,297 29,053 3.95% 3,063,590 37,828 4.88%
Commercial and agriculture real estate 5,340,622 58,007 4.30% 5,188,597 62,439 4.76% 5,019,859 72,214 5.69%
Consumer:            
Home equity 554,701 4,213 3.06% 558,356 5,631 4.06% 558,223 7,390 5.31%
Other consumer loans 1,135,943 11,530 4.08% 1,167,802 12,219 4.21% 1,201,752 12,408 4.14%
Subtotal commercial and consumer loans 11,080,669 105,479 3.83% 9,822,052 109,342 4.48% 9,843,424 129,840 5.29%
Residential real estate loans 2,369,407 23,884 4.03% 2,370,295 24,244 4.09% 2,247,570 23,780 4.23%
             
Total loans 13,450,076 129,363 3.82% 12,192,347 133,586 4.35% 12,090,994 153,620 5.05%
             
Total earning assets $19,007,719 $165,341 3.46% $17,774,030 $171,322 3.84% $17,302,688 $192,352 4.43%
             
Less: Allowance for loan losses (3) (107,619)   (83,244)   (56,632)  
             
Non-earning Assets:            
Cash and due from banks $332,745    $287,601    $234,337   
Other assets 2,384,934    2,388,092    2,473,255   
             
Total assets $21,617,779    $20,366,479    $19,953,648   
             
Interest-Bearing Liabilities:            
Checking and NOW accounts $4,431,074 $1,075 0.10% $4,104,778 $2,860 0.28% $3,895,881 $4,196 0.43%
Savings accounts 3,060,012 736 0.10% 2,828,177 1,298 0.18% 2,879,704 2,145 0.30%
Money market accounts 1,844,488 910 0.20% 1,784,169 2,507 0.57% 1,789,777 3,729 0.84%
Other time deposits 1,378,115 3,786 1.10% 1,562,074 5,186 1.34% 1,779,770 7,181 1.62%
Total interest-bearing deposits 10,713,689 6,507 0.24% 10,279,198 11,851 0.46% 10,345,132 17,251 0.67%
Brokered CD's 68,149 291 1.72% 84,099 447 2.14% 212,198 1,268 2.40%
Total interest-bearing deposits and CD's 10,781,838 6,798 0.25% 10,363,297 12,298 0.48% 10,557,330 18,519 0.70%
             
Federal funds purchased and interbank borrowings 143,811 44 0.12% 392,857 1,240 1.27% 300,810 1,817 2.42%
Securities sold under agreements to repurchase 350,545 185 0.21% 329,091 384 0.47% 331,695 671 0.81%
Federal Home Loan Bank advances 2,144,497 6,844 1.28% 1,965,130 7,768 1.59% 1,695,681 10,039 2.37%
Other borrowings 251,738 2,432 3.87% 240,276 2,538 4.23% 251,577 2,787 4.43%
Total borrowed funds 2,890,591 9,505 1.32% 2,927,354 11,930 1.64% 2,579,763 15,314 2.38%
             
Total interest-bearing liabilities 13,672,429 16,303 0.48% 13,290,651 24,228 0.73% 13,137,093 33,833 1.03%
             
Noninterest-Bearing Liabilities and Shareholders' Equity            
Demand deposits $4,871,002    $3,964,493    $3,812,175   
Other liabilities 228,950    277,812    246,134   
Shareholders' equity 2,845,398    2,833,523    2,758,246   
             
Total liabilities and shareholders' equity $21,617,779    $20,366,479    $19,953,648   
             
Net interest rate spread   2.98%   3.11%   3.40%
             
Net interest margin (FTE)   3.14%   3.31%   3.66%
             
FTE adjustment  $3,367    $3,323    $3,289  
             
(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.


         
Average Balance Sheet and Interest Rates (unaudited)
($ in thousands)
         
  Six Months Ended Six Months Ended
  June 30, 2020 June 30, 2019
  AverageIncome (1)/Yield/ AverageIncome (1)/Yield/
Earning Assets: BalanceExpenseRate BalanceExpenseRate
Money market and other interest-earning        
investments $72,043 $383 1.07% $58,510 $612 2.11%
Investments:        
Treasury and government-sponsored agencies 542,904 6,730 2.48% 700,569 8,203 2.34%
Mortgage-backed securities 3,175,408 36,996 2.33% 2,633,326 36,402 2.76%
States and political subdivisions 1,283,456 23,165 3.61% 1,212,658 22,688 3.74%
Other securities 495,852 6,440 2.60% 497,115 8,503 3.42%
Total investments $5,497,620 $73,331 2.67% $5,043,668 $75,796 3.01%
Loans: (2)        
Commercial 3,478,351 60,782 3.46% 3,092,833 73,863 4.75%
Commercial and agriculture real estate 5,264,610 120,446 4.53% 5,004,824 137,290 5.46%
Consumer:        
Home equity 556,528 9,845 3.56% 573,211 14,987 5.27%
Other consumer loans 1,151,871 23,748 4.15% 1,197,150 24,208 4.08%
Subtotal commercial and consumer loans 10,451,360 214,821 4.13% 9,868,018 250,348 5.12%
Residential real estate loans 2,369,852 48,128 4.06% 2,253,375 47,712 4.23%
         
Total loans 12,821,212 262,949 4.07% 12,121,393 298,060 4.91%
         
Total earning assets $18,390,875 $336,663 3.64% $17,223,571 $374,468 4.34%
         
Less: Allowance for loan losses (3) (95,432)   (56,213)  
         
Non-earning Assets:        
Cash and due from banks $310,173    $232,159   
Other assets 2,386,513    2,481,842   
         
Total assets $20,992,129    $19,881,359   
         
Interest-Bearing Liabilities:        
Checking and NOW accounts $4,267,926 $3,934 0.19% $3,795,441 $7,338 0.39%
Savings accounts 2,944,094 2,034 0.14% 2,907,552 4,428 0.31%
Money market accounts 1,814,328 3,417 0.38% 1,746,456 6,555 0.76%
Other time deposits 1,470,094 8,972 1.23% 1,809,975 14,283 1.59%
Total interest-bearing deposits 10,496,442 18,357 0.35% 10,259,424 32,604 0.64%
Brokered CD's 76,124 739 1.95% 201,878 2,359 2.36%
Total interest-bearing deposits and CD's 10,572,566 19,096 0.36% 10,461,302 34,963 0.67%
         
Federal funds purchased and interbank borrowings 268,334 1,284 0.96% 308,860 3,735 2.44%
Securities sold under agreements to repurchase 339,818 569 0.34% 346,396 1,333 0.78%
Federal Home Loan Bank advances 2,054,814 14,612 1.43% 1,684,093 19,970 2.39%
Other borrowings 246,007 4,970 4.04% 250,690 5,702 4.55%
Total borrowed funds 2,908,973 21,435 1.48% 2,590,039 30,740 2.39%
         
Total interest-bearing liabilities 13,481,539 40,531 0.60% 13,051,341 65,703 1.02%
         
Noninterest-Bearing Liabilities and Shareholders' Equity        
Demand deposits $4,417,748    $3,829,406   
Other liabilities 253,382    264,274   
Shareholders' equity 2,839,460    2,736,338   
         
Total liabilities and shareholders' equity $20,992,129    $19,881,359   
         
Net interest rate spread   3.04%   3.32%
         
Net interest margin (FTE)   3.22%   3.59%
         
FTE adjustment  $6,690    $6,487  
         
(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 Six Months Ended
 June 30,March 31,June 30, June 30,June 30,
 202020202019 20202019
       
Beginning allowance for loan losses$106,380 $54,619 $55,559  $54,619 $55,461 
Impact of adopting ASC 326 on 1/1/2020 (1) 41,347 N/A  41,347 N/A 
       
Provision for loan losses (1)22,545 16,950 1,003  39,495 2,046 
       
Gross charge-offs(2,232)(8,445)(2,876) (10,677)(5,769)
Gross recoveries1,701 1,909 2,606  3,610 4,554 
Net (charge-offs) recoveries(531)(6,536)(270) (7,067)(1,215)
       
Ending allowance for loan losses (1)$128,394 $106,380 $56,292  $128,394 $56,292 
       
Net charge-offs (recoveries) / average loans (2)0.02%0.21%0.01% 0.11%0.02%
       
Average loans outstanding (2)$13,435,260 $12,182,704 $12,083,609  $12,808,982 $12,115,408 
       
EOP loans outstanding (2)13,615,701 12,384,612 12,046,578  13,615,701 12,046,578 
       
Allowance for loan losses / EOP loans (1)(2)0.94%0.86%0.47% 0.94%0.47%
       
Underperforming Assets:      
Loans 90 Days and over (still accruing)$779 $658 $423  $779 $423 
       
Non-performing loans:      
Nonaccrual loans (3)125,546 126,987 142,421  125,546 142,421 
TDRs still accruing16,582 17,040 19,031  16,582 19,031 
Total non-performing loans142,128 144,027 161,452  142,128 161,452 
       
Foreclosed properties1,786 2,163 2,819  1,786 2,819 
       
Total underperforming assets$144,693 $146,848 $164,694  $144,693 $164,694 
       
Classified and Criticized Assets:      
Nonaccrual loans (3)125,546 126,987 142,421  125,546 142,421 
Substandard accruing loans192,433 181,157 174,728  192,433 174,728 
Loans 90 days and over (still accruing)779 658 423  779 423 
Total classified loans - "problem loans"$318,758 $308,802 $317,572  $318,758 $317,572 
       
Other classified assets2,565 2,616 2,550  2,565 2,550 
Criticized loans - "special mention loans"220,300 238,011 220,455  220,300 220,455 
       
Total classified and criticized assets$541,623 $549,429 $540,577  $541,623 $540,577 
       
Non-performing loans / EOP loans (2)1.04%1.16%1.34% 1.04%1.34%
       
Allowance to non-performing loans (1)(4)90%74%35% 90%35%
       
Under-performing assets / EOP loans (2)1.06%1.19%1.37% 1.06%1.37%
       
EOP total assets$22,102,188 $20,741,141 $20,145,285  $22,102,188 $20,145,285 
       
Under-performing assets / EOP assets0.65%0.71%0.82% 0.65%0.82%
       
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 TDRs totaling $11.3 million at June 30, 2020, $11.8 million at March 31, 2020, and $24.7 million at June 30, 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 Six Months Ended
 June 30,March 31,June 30, June 30,June 30,
 202020202019 20202019
       
Actual End of Period Balances      
GAAP shareholders' equity$2,864,255 $2,823,435 $2,803,139  $2,864,255 $2,803,139 
       
Deduct:      
Goodwill 1,036,994  1,036,994  1,036,258   1,036,994  1,036,258 
Intangibles 52,717  56,329  68,220   52,717  68,220 
  1,089,711  1,093,323  1,104,478   1,089,711  1,104,478 
       
Tangible shareholders' equity $1,774,544 $1,730,112 $1,698,661  $1,774,544 $1,698,661 
       
Average Balances      
GAAP shareholders' equity$2,845,398 $2,833,523 $2,758,246  $2,839,460 $2,736,338 
       
Deduct:      
Goodwill 1,036,994  1,036,994  1,036,258   1,036,994  1,036,258 
Intangibles 54,449  58,127  70,282   56,288  72,554 
  1,091,443  1,095,121  1,106,540   1,093,282  1,108,812 
       
Average tangible shareholders' equity $1,753,955 $1,738,402 $1,651,706  $1,746,178 $1,627,526 
       
Actual End of Period Balances      
GAAP assets$22,102,188 $20,741,141 $20,145,285  $22,102,188 $20,145,285 
       
Add:      
Trust overdrafts 15  119  29   15  29 
       
Deduct:      
Goodwill 1,036,994  1,036,994  1,036,258   1,036,994  1,036,258 
Intangibles 52,717  56,329  68,220   52,717  68,220 
  1,089,711  1,093,323  1,104,478   1,089,711  1,104,478 
       
Tangible assets $21,012,492 $19,647,937 $19,040,836  $21,012,492 $19,040,836 
       
       
Risk-weighted assets$14,416,184 $14,420,130 $13,996,770  $14,416,184 $13,996,770 
       
GAAP net income$51,705 $22,640 $62,964  $74,345 $119,240 
       
Add:      
Amortization of intangibles (net of tax) 2,708  2,849  3,262   5,557  6,635 
       
Tangible net income$54,413 $25,489 $66,226  $79,902 $125,875 
       
       
Tangible Ratios       
Return on tangible common equity 12.27% 5.89% 15.59%  9.01% 14.82%
Return on average tangible common equity 12.41% 5.86% 16.04%  9.15% 15.47%
Return on tangible assets 1.04% 0.52% 1.39%  0.76% 1.32%
Tangible common equity to tangible assets 8.45% 8.81% 8.92%  8.45% 8.92%
Tangible common equity to risk-weighted assets 12.31% 12.00% 12.14%  12.31% 12.14%
Tangible common book value (1) 10.75  10.48  9.86   10.75  9.86 
       
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$1,686,714 $1,643,249 $1,664,277  $1,686,714 $1,664,277 
       
Risk-weighted assets 14,416,184  14,420,130  13,996,770   14,416,184  13,996,770 
       
Tier 1 common equity to risk-weighted assets 11.70% 11.40% 11.89%  11.70% 11.89%
       


Media: Kathy A. Schoettlin (812) 465-7269
Investors: Lynell J. Walton (812) 464-1366


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