EVANSVILLE, Ind., Oct. 22, 2018 (GLOBE NEWSWIRE) --

Old National Bancorp (NASDAQ: ONB) reports record 3Q18 net income of $51.3 million, diluted EPS of $0.34. Adjusted1 net income of $52.4 million, or $0.34 per share.

CEO COMMENTARY:

“Our record earnings for the quarter were highlighted by positive operating leverage, a modest increase in core deposit costs, stable credit, and a continued focus on expense control,” stated Chairman and CEO Bob Jones. “We were also pleased to see a 21% increase in year-over-year adjusted pre-provision net revenue. While loan balances were stable for the quarter, our loan pipeline at quarter-end remained strong. These strong 3rd quarter results position Old National very well for continued growth.”

THIRD-QUARTER HIGHLIGHTS²:  

Net Income

• Net income of $51.3 million, an increase of 30.4% from third quarter of 2017
• Earnings per share of $0.34, an increase of 17.2% from third quarter of 2017

Net Interest Income/NIM

• Net interest income on a fully taxable equivalent basis was $133.6 million, down 0.9%
• Net interest margin on a fully taxable equivalent basis was 3.51% compared to 3.55%

Operating Performance

• Pre-provision net revenue¹ (“PPNR”) was $60.2 million
• Adjusted PPNR¹ was $70.9 million, up 8.1%
• Noninterest expense was $119.4 million
• Adjusted noninterest expense¹ was $108.4 million, compared to $114.5 million
• Efficiency ratio¹ was 64.71%
• Adjusted efficiency ratio¹ was 58.67%, a 251-basis point improvement from third quarter of 2017

Loans and Credit Quality

• End-of-period total loans³ were $11,314.0 million compared to $11,321.8 million
• End-of-period commercial and industrial loans were $2,949.3 million compared to $2,962.9 million
• Third quarter total commercial production was $455.2 million; September 30 pipeline was $1.7 billion 
• Provision for loan losses of $0.8 million compared to $2.4 million in the second quarter
• Net charge-offs were $1.7 million, or 0.06% annualized, compared to net recoveries of $0.8 million
• Non-performing loans were 1.47% of total loans compared to 1.38%

Capital Returns

• Return on average equity was 9.28%
• Return on average tangible common equity¹ was 16.10%
• Adjusted return on average tangible common equity¹ was 16.42%

Notable Items

• $1.7 million in merger/integration charges and a $0.1 million net gain in branch actions
• $9.2 million in tax credit amortization
• Footprint rationalization continues with the pending sale of 10 branches, expected to close October 26, 2018

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

RESULTS OF OPERATIONS

Old National Bancorp reported record third-quarter 2018 net income of $51.3 million, or $0.34 per diluted share. 

Included in the third quarter were pre-tax charges of $1.7 million for merger and integration and a $0.1 million net gain for branch actions.  Excluding these items from the current quarter and netting out securities gains, Old National would have reported net income of $52.4 million, or $0.34 per share. 

As was previously disclosed, Old National entered into a branch purchase and assumption agreement for the sale of 10 Old National branches in Wisconsin to Marine Credit Union of La Crosse, Wisconsin.  The sale is expected to close October 26, 2018.

LOANS
Period-end pipeline remains strong; quarterly balances stable.

• Period-end total loans decreased slightly to $11,314.0 million at September 30, 2018 from $11,321.8 million at June 30, 2018.
• Third quarter commercial loan production was $455.2 million, while period-end pipeline totaled $1.7 billion.
• On average, total loans in the third quarter were $11,291.7 million, up from $11,262.0 million in the second quarter of 2018.
• Average total loans increased $29.7 million, or 1.1% annualized.    
• Average commercial and industrial loan growth was $55.0 million, or 7.7% on an annualized basis.

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

• Period-end total deposits increased to $12,598.2 million at September 30, 2018, from $12,596.4 million at June 30, 2018.
• On average, total deposits in the third quarter were $12,597.8 million, down from the $12,650.8 million in the second quarter of 2018. 

NET INTEREST INCOME AND MARGIN
Controlled deposit costs and higher levels of interest collected on nonaccruals benefited both net interest income and margin in the third quarter.

• Net interest income decreased to $130.8 million in the third quarter of 2018 from $132.0 million in the second quarter of 2018, primarily the result of a smaller balance sheet and slightly lower accretion income.
• The net interest margin on a fully taxable equivalent basis decreased 4 basis points to 3.51% compared to 3.55% in the second quarter of 2018.
• Accretion income was $7.3 million, or 19 basis points of net interest margin, in the third quarter of 2018 compared to $11.5 million, or 30 basis points of net interest margin, in the second quarter of 2018.  In the third quarter of 2018, accretion income was just 4.1% of adjusted total revenue.
• The cost of total deposits rose 7 basis points to 0.36% in the third quarter of 2018 while the cost of total interest-bearing deposits rose 8 basis points to 0.49%.

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

• Asset quality remained strong with net charge-offs in the third quarter of $1.7 million, or 0.06% of total average loans, and 30-89 day delinquencies of 0.35%.
• Provision expense for the third quarter was $0.8 million, reflected limited growth in the commercial portfolio this quarter, stable credit in the organic book, and improvement in acquired loan grades.
• Non-performing loans as a percentage of total loans was 1.47%. 
• 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 September 30, 2018, the remaining discount on these acquired loans was $103.1 million.
• The allowance for loan losses was $52.7 million, or 0.47% of total loans at September 30, 2018.

NONINTEREST INCOME
Noninterest income declined compared to second quarter and demonstrated normal seasonal patterns in several fee income businesses.

• Total noninterest income for the third quarter of 2018 was $46.0 million, a decrease of $3.3 million from the second quarter of 2018.
• Included in noninterest income in the second quarter was a gain of $2.2 million from the sale of Old National’s student loan portfolio.
• Higher capital markets income (up $1.8 million) was offset by seasonal declines in mortgage banking revenue (down $0.8 million) and wealth management fees (down $0.7 million).
• Securities gains were $0.1 million, down $1.4 million from the second quarter of 2018.

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

• Noninterest expense for the third quarter of 2018 was $119.4 million and included $1.7 million in merger and integration charges, $0.1 million in branch action charges, and $9.2 million in tax credit amortization.
• Excluding these items, adjusted noninterest expense for the third quarter was $108.4 million, compared to the $114.5 million in adjusted noninterest expense in the second quarter of 2018. 
• Adjusted operating leverage¹ was +434 basis points in the third quarter compared to a year ago.
• The third quarter efficiency ratio was 64.71%, while the adjusted efficiency ratio was 58.67%.

INCOME TAXES

• On a fully taxable-equivalent basis, income tax expense in the third quarter was $8.1 million, resulting in a 13.6% FTE tax rate.

CAPITAL
Strong quarterly earnings drove capital ratios higher.

• At the end of the third quarter, total risk-based capital was 12.1% and regulatory tier 1 capital was 11.1%.
• Tangible common equity to tangible assets was 8.08% at the end of the third quarter compared to 7.98% in the second quarter of 2018.

NON-GAAP RECONCILIATIONS

($ in millions, except EPS, shares in 000s)	3Q18			Adjustments4			Adjusted 3Q18
Total Revenues (FTE)	$179.6			($0.3)			$179.3
Less: Provision for Loan Losses		(0.8)			-			(0.8)
Less: Noninterest Expenses		(119.4)			1.8			(117.6)
Income before Income Taxes (FTE)	$59.4			$1.5			$60.9
Income Taxes		(8.1)			(0.4)			(8.5)
Net Income	$51.3			$1.1			$52.4
Average Shares Outstanding		152,784			-			152,784
Earnings Per Share	$0.34			$0.0			$0.34

⁴ Tax-effect calculations use the 2018 statutory FTE tax rates (federal + state)

($ in millions)	3Q18			2Q18
Net Interest Income	$130.8			$132.0
FTE Adjustment		2.8			2.8
Net Interest Income (FTE)	$133.6			$134.8
Average Earning Assets	$15,213.4			$15,176.7
Net Interest Margin (FTE)		3.51%			3.55%

($ in millions)	3Q18			2Q18
Net Interest Income	$130.8			$132.0
FTE Adjustment		2.8			2.8
Net Interest Income (FTE)	$133.6			$134.8
Total Noninterest Income	$46.0			$49.3
Noninterest Expense		119.4			130.5
Pre-Provision Net Revenue	$60.2			$53.6
Less: Securities Gains		(0.1)			(1.5)
Less: Gain on Student Loan Sale		-			(2.2)
Less: Gain on Branch Actions		(0.2)			(0.3)
Add: Merger and Integration Charges		1.7			2.5
Add: Branch Action Charges and Severance	.1				1.6
Add: Amortization of Tax Credit Investments		9.2			11.9
Adjusted Pre-Provision Net Revenue	$70.9			$65.6

($ in millions)	3Q18			2Q18			3Q17
Noninterest Expense	$119.4			$130.5			$103.7
Less: Merger and Integration Charges		(1.7)			(2.5)			(0.4)
Less: Branch Action Charges, Severance, Foundation Funding and Client Experience Initiative Charges	(.1)				(1.6)			(4.3)
Noninterest Expense less Charges	$117.6			$126.4			$99.0
Less: Amortization of Tax Credit Investments		(9.2)			(11.9)			-
Adjusted Noninterest Expense	$108.4			$114.5			$99.0
Less: Intangible Amortization		(3.3)			(3.4)			(2.6)
Adjusted Noninterest Expense Less Intangible Amortization	$105.1			$111.1			$96.4
Net Interest Income	$130.8			$132.0			$108.5
FTE Adjustment		2.8			2.8			5.6
Net Interest Income (FTE)	$133.6			$134.8			$114.1
Total Noninterest Income	$46.0			$49.3			$46.4
Total Revenue (FTE)	$179.6			$184.1			$160.5
Less: Securities Gains		(0.1)			(1.5)			(3.0)
Less: Gain on Student Loan Sale		-			(2.2)			-
Less: Gain on Branch Actions		(0.2)			(0.3)			-
Adjusted Total Revenue (FTE)	$179.3			$180.1			$157.5
Efficiency Ratio		64.71%			69.58%			64.17%
Adjusted Efficiency Ratio		58.67%			61.68%			61.18%
Operating Leverage5 (basis points)		(322)
Adjusted Operating Leverage6 (basis points)		434

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)	3Q18			2Q18
Net Income (Loss)	$51.3			$44.0
Add: Intangible Amortization (net of tax7)		2.6			2.7
Tangible Net Income (Loss)	$53.9			$46.7
Less: Securities Gains (net of tax7)		(0.1)			(1.1)
Less: Gain on Sale of Student Loans (net of tax7)		-			(1.7)
Add: Merger & Integration Charges (net of tax7)		1.3			1.9
Add: Branch Action Charges (net of gains) and Severance (net of tax7)		(0.1)			1.0
Adjusted Tangible Net Income (Loss)	$55.0			$46.8
Average Total Shareholders’ Equity	$2,212.7			$2,183.6
Less: Average Goodwill		(828.8)			(828.8)
Less: Average Intangibles		(43.7)			(47.1)
Average Tangible Shareholders’ Equity	$1,340.2			$1,307.7
Return on Average Tangible Common Equity		16.10%			14.28%
Adjusted Return on Average Tangible Common Equity		16.42%			14.32%

⁷Tax-effect calculations use the 2018 statutory FTE tax rates (federal + state)

CONFERENCE CALL AND WEBCAST
Old National will host a conference call and live webcast at 7:00 a.m. Central Time on Monday, October 22, 2018, to review third-quarter 2018 financial results.  The live audio web cast of the call, along with the corresponding presentation slides, will be available on the Company’s Investor Relations web page at oldnational.com and will be archived there for 12 months.  A replay of the call will also be available from 10:00 a.m. Central Time on October 22 through November 5.  To access the replay, dial 1-855-859-2056, Conference ID Code 8898768.

ABOUT OLD NATIONAL
Old National Bancorp (NASDAQ: ONB) is the holding company of Old National Bank. Headquartered in Evansville with $17.6 billion in assets, it is a top 100 U.S. bank, the largest Indiana-based bank and has been recognized as a World’s Most Ethical Company by the Ethisphere Institute for seven consecutive years. For nearly 185 years, Old National has been a community bank committed to building long-term, highly valued relationships with clients. With locations in Indiana, Kentucky, Michigan, Minnesota and Wisconsin, Old National provides retail and commercial banking services along with comprehensive wealth management, investment and capital markets services. For information and financial data, please visit Investor Relations at oldnational.com.

USE OF NON-GAAP FINANCIAL MEASURES
This earnings release contains GAAP financial measures and non-GAAP financial measures where management believes it to be helpful in understanding Old National’s results of operations or financial position.  Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in the tables of this release.

FORWARD-LOOKING STATEMENT
This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  These statements include, but are not limited to, descriptions of Old National Bancorp’s (“Old National’s”) financial condition, results of operations, asset and credit quality trends and profitability.  Forward-looking statements can be identified by the use of the words “anticipate,” “believe,” “expect,” “intend,” “could” and “should,” and other words of similar meaning.  These forward-looking statements express management’s current expectations or forecasts of future events and, by their nature, are subject to risks and uncertainties. There are a number of factors that could cause actual results to differ materially from those in such statements.  Factors that might cause such a difference include, but are not limited to: expected cost savings, synergies and other financial benefits from the merger with Klein that 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.

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

Financial Highlights (unaudited)
($ and shares in thousands, except per share data)
	Three Months Ended										Nine Months Ended
	September 30,			June 30,			September 30,				September 30,			September 30,
		2018			2018			2017				2018			2017
Income Statement
Net interest income	$	130,842		$	131,963		$	108,478			$	391,377		$	318,612
Provision for loan losses		750			2,446			311				3,576			2,013
Noninterest income		45,957			49,289			46,366				137,151			138,557
Noninterest expense		119,376			130,460			103,702				366,993			308,404
Net income		51,348			44,001			39,372				143,332			114,218
Per Common Share Data (Diluted)
Net income available to common shareholders	$	0.34		$	0.29		$	0.29			$	0.94		$	0.84
Average diluted shares outstanding		152,784			152,568			135,796				152,616			135,693
Book value		14.58			14.44			14.07				14.58			14.07
Stock price		19.30			18.60			18.30				19.30			18.30
Dividend payout ratio		38	%		45	%		43	%			41	%		46	%
Tangible common book value (1)		8.86			8.70			9.02				8.86			9.02
Performance Ratios
Return on average assets		1.18	%		1.01	%		1.05	%			1.10	%		1.02	%
Return on average common equity		9.28	%		8.06	%		8.31	%			8.74	%		8.18	%
Return on average tangible common equity (1)		16.10	%		14.28	%		13.58	%			15.40	%		13.59	%
Net interest margin (FTE)		3.51	%		3.55	%		3.52	%			3.51	%		3.48	%
Efficiency ratio (2)		64.71	%		69.58	%		64.17	%			66.74	%		64.29	%
Net charge-offs (recoveries) to average loans		0.06	%		-0.03	%		0.05	%			0.01	%		0.02	%
Allowance for loan losses to ending loans		0.47	%		0.48	%		0.53	%			0.47	%		0.53	%
Non-performing loans to ending loans		1.47	%		1.38	%		1.46	%			1.47	%		1.46	%
Balance Sheet
Total loans	$	11,292,659		$	11,295,629		$	9,398,124			$	11,292,659		$	9,398,124
Total assets		17,567,759			17,482,990			15,065,800				17,567,759			15,065,800
Total deposits		12,598,200			12,596,376			10,606,784				12,598,200			10,606,784
Total borrowed funds		2,576,039			2,530,104			2,411,111				2,576,039			2,411,111
Total shareholders' equity		2,220,680			2,200,215			1,906,823				2,220,680			1,906,823
Capital Ratios (1)
Risk-based capital ratios (EOP):
Tier 1 common equity		11.1	%		10.9	%		11.7	%			11.1	%		11.7	%
Tier 1		11.1	%		10.9	%		12.0	%			11.1	%		12.0	%
Total		12.1	%		11.9	%		12.5	%			12.1	%		12.5	%
Leverage ratio (to average assets)		8.6	%		8.3	%		8.8	%			8.6	%		8.8	%
Total equity to assets (averages)		12.69	%		12.54	%		12.65	%			12.55	%		12.53	%
Tangible common equity to tangible assets		8.08	%		7.98	%		8.50	%			8.08	%		8.50	%
Nonfinancial Data
Full-time equivalent employees		2,554			2,683			2,592				2,554			2,592
Number of branches		182			183			188				182			188
(1) See "Non-GAAP Measures" table.
(2) Efficiency ratio is defined as noninterest expense before amortization of intangibles as a percent of FTE net interest income and
noninterest revenues, excluding net gains from 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

 

Income Statement (unaudited)
($ and shares in thousands, except per share data)
	Three Months Ended							Nine Months Ended
	September 30,		June 30,		September 30,			September 30,		September 30,
	2018		2018		2017			2018		2017
Interest income	$	155,369	$	153,736	$	123,525		$	456,811	$	360,202
Less:  interest expense		24,527		21,773		15,047			65,434		41,590
Net interest income		130,842		131,963		108,478			391,377		318,612
Provision for loan losses		750		2,446		311			3,576		2,013
Net interest income after provision for loan losses		130,092		129,517		108,167			387,801		316,599
Wealth management fees		9,022		9,746		8,837			27,794		27,515
Service charges on deposit accounts		11,028		10,765		10,535			32,552		30,418
Debit card and ATM fees		4,706		5,080		4,248			14,651		12,920
Mortgage banking revenue		4,348		5,189		5,104			13,729		14,516
Investment product fees		5,073		5,066		5,193			15,170		15,186
Capital markets income		2,700		896		1,843			4,094		5,621
Company-owned life insurance		2,958		2,430		2,022			7,993		6,288
Other income		5,986		8,586		5,570			18,702		18,407
Gains (losses) on sales of securities		135		1,494		2,972			2,417		7,547
Gains (losses) on derivatives		1		37		42			49		139
Total noninterest income		45,957		49,289		46,366			137,151		138,557
Salaries and employee benefits		63,158		66,592		57,783			193,929		171,953
Occupancy		12,578		12,873		11,670			38,731		34,343
Equipment		3,652		3,728		3,485			10,945		10,062
Marketing		3,406		3,962		2,646			11,065		9,369
Data processing		8,628		9,724		7,696			26,752		23,530
Communication		2,473		2,772		2,163			8,309		6,865
Professional fees		3,235		2,923		4,589			8,888		11,317
Loan expenses		1,564		1,843		1,542			5,151		4,866
Supplies		707		903		547			2,332		1,720
FDIC assessment		2,722		3,161		2,197			8,528		6,814
Other real estate owned expense		157		196		511			702		2,635
Amortization of intangibles		3,283		3,416		2,641			10,308		8,442
Amortization of tax credit investments		9,233		11,858		-			21,807		-
Other expense		4,580		6,509		6,232			19,546		16,488
Total noninterest expense		119,376		130,460		103,702			366,993		308,404
Income before income taxes		56,673		48,346		50,831			157,959		146,752
Income tax expense		5,325		4,345		11,459			14,627		32,534
Net income	$	51,348	$	44,001	$	39,372		$	143,332	$	114,218
Diluted Earnings Per Share
Net income	$	0.34	$	0.29	$	0.29		$	0.94	$	0.84
Average Common Shares Outstanding
Basic		151,930		151,878		135,120			151,844		135,040
Diluted		152,784		152,568		135,796			152,616		135,693
Common shares outstanding at end of period		152,352		152,351		135,523			152,352		135,523

 

Balance Sheet (unaudited)
($ in thousands)
		September 30,				June 30,				September 30,
		2018				2018				2017
Assets
	Federal Reserve Bank account	$	65,878			$	43,889			$	32,333
	Money market investments		5,859				10,359				17,382
	Investments:
	Treasury and government-sponsored agencies		690,709				647,058				582,051
	Mortgage-backed securities		1,640,254				1,588,120				1,458,385
	States and political subdivisions		1,099,535				1,110,087				1,095,975
	Other securities		496,199				503,920				451,082
	Total investments		3,926,697				3,849,185				3,587,493
	Loans held for sale, at fair value		21,384				26,198				30,221
	Loans:
	Commercial		2,949,277				2,962,895				2,049,054
	Commercial and agriculture real estate		4,481,554				4,451,772				3,370,211
	Consumer:
	Home equity		498,325				488,038				477,100
	Other consumer loans		1,197,300				1,238,951				1,382,639
	Subtotal of commercial and consumer loans		9,126,456				9,141,656				7,279,004
	Residential real estate		2,166,203				2,153,973				2,119,120
	Total loans		11,292,659				11,295,629				9,398,124
	Total earning assets		15,312,477				15,225,260				13,065,553
Allowance for loan losses			(52,713	)			(53,660	)			(50,169	)
Non-earning Assets:
	Cash and due from banks		215,024				219,626				202,652
	Premises and equipment, net		450,253				449,304				412,488
	Goodwill and other intangible assets		870,938				874,221				684,253
	Company-owned life insurance		405,245				405,492				356,897
	Net deferred tax assets		94,667				90,187				137,951
	Loan servicing rights		24,336				24,303				24,900
	Other real estate owned and repossessed personal property		3,563				3,729				10,259
	Other assets		243,969				244,528				221,016
	Total non-earning assets		2,307,995				2,311,390				2,050,416
	Total assets	$	17,567,759			$	17,482,990			$	15,065,800
	Liabilities and Equity
	Noninterest-bearing demand deposits	$	3,588,370			$	3,600,793			$	3,034,696
	Interest-bearing:
	Checking and NOW accounts		3,011,544				3,054,302				2,539,233
	Savings accounts		2,920,712				3,026,110				2,932,488
	Money market accounts		1,185,439				1,090,621				648,378
	Other time deposits		1,667,055				1,648,390				1,337,156
	Total core deposits		12,373,120				12,420,216				10,491,951
	Brokered CD's		225,080				176,160				114,833
	Total deposits		12,598,200				12,596,376				10,606,784
	Federal funds purchased and interbank borrowings		450,031				175,044				317,021
	Securities sold under agreements to repurchase		319,831				347,511				285,409
	Federal Home Loan Bank advances		1,554,515				1,757,308				1,589,367
	Other borrowings		251,662				250,241				219,314
	Total borrowed funds		2,576,039				2,530,104				2,411,111
Accrued expenses and other liabilities			172,840				156,295				141,082
	Total liabilities		15,347,079				15,282,775				13,158,977
Common stock, surplus, and retained earnings			2,300,610				2,266,918				1,941,020
Accumulated other comprehensive income (loss), net of tax			(79,930	)			(66,703	)			(34,197	)
	Total shareholders' equity		2,220,680				2,200,215				1,906,823
	Total liabilities and shareholders' equity	$	17,567,759			$	17,482,990			$	15,065,800

 

Average Balance Sheet and Interest Rates (unaudited)
($ in thousands)
		Three Months Ended								Three Months Ended								Three Months Ended
		September 30, 2018								June 30, 2018								September 30, 2017
		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		$	35,928		$	140	1.54	%		$	51,724		$	117	0.91	%		$	32,755		$	85	1.03	%
Investments:
Treasury and government-sponsored agencies			685,919			3,748	2.19	%			648,778			3,387	2.09	%			585,354			2,844	1.94	%
Mortgage-backed securities			1,595,630			9,381	2.35	%			1,588,140			8,904	2.24	%			1,456,034			7,235	1.99	%
States and political subdivisions			1,103,347			10,110	3.67	%			1,118,395			10,591	3.79	%			1,103,721			13,065	4.73	%
Other securities			500,837			4,116	3.29	%			507,646			3,909	3.08	%			453,782			3,043	2.68	%
Total investments			3,885,733			27,355	2.82	%			3,862,959			26,791	2.77	%			3,598,891			26,187	2.91	%
Loans: (2)
Commercial			2,928,744			33,381	4.46	%			2,873,781			32,527	4.48	%			2,021,614			20,731	4.01	%
Commercial and agriculture real estate			4,465,105			57,377	5.03	%			4,449,839			57,251	5.09	%			3,298,435			43,646	5.18	%
Consumer:
Home equity			495,161			6,070	4.86	%			492,151			6,076	4.95	%			479,492			5,065	4.19	%
Other consumer loans			1,215,583			11,263	3.68	%			1,268,670			11,591	3.66	%			1,384,057			12,242	3.51	%
Subtotal commercial and consumer loans			9,104,593			108,091	4.71	%			9,084,441			107,445	4.74	%			7,183,598			81,684	4.51	%
Residential real estate loans			2,187,130			22,536	4.12	%			2,177,587			22,208	4.08	%			2,144,478			21,190	3.95	%
Total loans			11,291,723			130,627	4.56	%			11,262,028			129,653	4.57	%			9,328,076			102,874	4.35	%
Total earning assets		$	15,213,384		$	158,122	4.11	%		$	15,176,711		$	156,561	4.11	%		$	12,959,722		$	129,146	3.95	%
Less: Allowance for loan losses			(53,734	)							(51,493	)							(51,130	)
Non-earning Assets:
Cash and due from banks		$	205,446							$	205,617							$	233,017
Other assets			2,068,469								2,086,822								1,845,612
Total assets		$	17,433,565							$	17,417,657							$	14,987,221
Interest-Bearing Liabilities:
Checking and NOW accounts		$	3,026,289		$	1,180	0.15	%		$	3,097,635		$	969	0.13	%		$	2,570,321		$	544	0.08	%
Savings accounts			2,974,147			2,119	0.28	%			3,036,936			1,777	0.23	%			2,934,445			1,289	0.17	%
Money market accounts			1,153,906			1,254	0.43	%			1,103,177			702	0.26	%			661,635			142	0.09	%
Other time deposits			1,669,039			5,780	1.37	%			1,615,527			4,813	1.20	%			1,347,095			2,800	0.82	%
Total interest-bearing deposits			8,823,381			10,333	0.46	%			8,853,275			8,261	0.37	%			7,513,496			4,775	0.25	%
Brokered CD's			178,283			856	1.90	%			194,801			878	1.81	%			119,707			350	1.16	%
Total interest-bearing deposits and CD's			9,001,664			11,189	0.49	%			9,048,076			9,139	0.41	%			7,633,203			5,125	0.27	%
Federal funds purchased and interbank borrowings			238,514			1,191	1.98	%			140,471			647	1.85	%			220,918			655	1.18	%
Securities sold under agreements to repurchase			352,998			535	0.60	%			332,599			434	0.52	%			315,285			280	0.35	%
Federal Home Loan Bank advances			1,624,661			8,880	2.17	%			1,713,832			8,824	2.07	%			1,506,606			6,618	1.74	%
Other borrowings			250,255			2,732	4.37	%			249,291			2,729	4.38	%			219,241			2,369	4.32	%
Total borrowed funds			2,466,428			13,338	2.15	%			2,436,193			12,634	2.08	%			2,262,050			9,922	1.74	%
Total interest-bearing liabilities		$	11,468,092		$	24,527	0.85	%		$	11,484,269		$	21,773	0.76	%		$	9,895,253		$	15,047	0.61	%
Noninterest-Bearing Liabilities
Demand deposits		$	3,596,159							$	3,602,732							$	3,049,503
Other liabilities			156,614								147,052								146,271
Shareholders' equity			2,212,700								2,183,604								1,896,194
Total liabilities and shareholders' equity		$	17,433,565							$	17,417,657							$	14,987,221
Net interest rate spread							3.26	%							3.35	%							3.34	%
Net interest margin (FTE)							3.51	%							3.55	%							3.52	%
FTE adjustment					$	2,753							$	2,825							$	5,621
(1) Interest income is reflected on a fully taxable equivalent basis (FTE).
(2) Includes loans held for sale.

 

Average Balance Sheet and Interest Rates (unaudited)
($ in thousands)
		Nine Months Ended								Nine Months Ended
		September 30, 2018								September 30, 2017
		Average			Income (1)/		Yield/			Average			Income (1)/		Yield/
Earning Assets:		Balance			Expense		Rate			Balance			Expense		Rate
Money market and other interest-earning
investments		$	51,284		$	347	0.90	%		$	29,172		$	171	0.78	%
Investments:
Treasury and government-sponsored agencies			666,015			10,559	2.11	%			567,403			8,422	1.98	%
Mortgage-backed securities			1,605,324			27,805	2.31	%			1,484,132			22,643	2.03	%
States and political subdivisions			1,141,827			31,179	3.64	%			1,119,846			40,047	4.77	%
Other securities			489,465			11,694	3.19	%			448,544			8,738	2.60	%
Total investments			3,902,631			81,237	2.78	%			3,619,925			79,850	2.94	%
Loans: (2)
Commercial			2,854,691			94,114	4.35	%			1,949,921			59,171	4.00	%
Commercial and agriculture real estate			4,436,576			170,414	5.07	%			3,237,053			123,800	5.04	%
Consumer:
Home equity			496,365			17,834	4.80	%			476,729			14,560	4.08	%
Other consumer loans			1,276,727			34,994	3.66	%			1,399,040			35,890	3.43	%
Subtotal commercial and consumer loans			9,064,359			317,356	4.68	%			7,062,743			233,421	4.42	%
Residential real estate loans			2,180,416			66,216	4.05	%			2,137,982			63,712	3.97	%
Total loans			11,244,775			383,572	4.52	%			9,200,725			297,133	4.28	%
Total earning assets		$	15,198,690		$	465,156	4.06	%		$	12,849,822		$	377,154	3.90	%
Less: Allowance for loan losses			(52,070	)							(50,927	)
Non-earning Assets:
Cash and due from banks		$	203,421							$	209,752
Other assets			2,081,615								1,861,261
Total assets		$	17,431,656							$	14,869,908
Interest-Bearing Liabilities:
Checking and NOW accounts		$	3,063,636		$	2,969	0.13	%		$	2,599,696		$	1,511	0.08	%
Savings accounts			3,020,955			5,239	0.23	%			2,949,412			3,655	0.17	%
Money market accounts			1,138,679			2,502	0.29	%			684,346			437	0.09	%
Other time deposits			1,615,896			14,493	1.20	%			1,336,729			7,704	0.77	%
Total interest-bearing deposits			8,839,166			25,203	0.38	%			7,570,183			13,307	0.24	%
Brokered CD's			182,720			2,380	1.74	%			113,111			925	1.09	%
Total interest-bearing deposits and CD's			9,021,886			27,583	0.41	%			7,683,294			14,232	0.25	%
Federal funds purchased and interbank borrowings			213,362			2,855	1.79	%			192,343			1,433	1.00	%
Securities sold under agreements to repurchase			342,797			1,328	0.52	%			325,230			870	0.36	%
Federal Home Loan Bank advances			1,671,211			25,484	2.04	%			1,460,293			17,947	1.64	%
Other borrowings			249,464			8,184	4.37	%			219,097			7,108	4.33	%
Total borrowed funds			2,476,834			37,851	2.04	%			2,196,963			27,358	1.66	%
Total interest-bearing liabilities		$	11,498,720		$	65,434	0.76	%		$	9,880,257		$	41,590	0.56	%
Noninterest-Bearing Liabilities
Demand deposits		$	3,587,453							$	2,985,386
Other liabilities			157,859								141,616
Shareholders' equity			2,187,624								1,862,649
Total liabilities and shareholders' equity		$	17,431,656							$	14,869,908
Net interest rate spread							3.30	%							3.34	%
Net interest margin (FTE)							3.51	%							3.48	%
FTE adjustment					$	8,345							$	16,952
(1) Interest income is reflected on a fully taxable equivalent basis (FTE).
(2) Includes loans held for sale.

 

Asset Quality (EOP) (unaudited)
($ in thousands)
	Three Months Ended										Nine Months Ended
	September 30,			June 30,			September 30,				September 30,			September 30,
	2018			2018			2017				2018			2017
Beginning allowance for loan losses	$	53,660		$	50,381		$	50,986			$	50,381		$	49,808
Provision for loan losses		750			2,446			311				3,576			2,013
Gross charge-offs		(4,261	)		(3,054	)		(2,821	)			(10,000	)		(9,440	)
Gross recoveries		2,564			3,887			1,693				8,756			7,788
Net (charge-offs) recoveries		(1,697	)		833			(1,128	)			(1,244	)		(1,652	)
Ending allowance for loan losses	$	52,713		$	53,660		$	50,169			$	52,713		$	50,169
Net charge-offs (recoveries) / average loans (1)		0.06	%		-0.03	%		0.05	%			0.01	%		0.02	%
Average loans outstanding (1)	$	11,284,531		$	11,257,585		$	9,320,868			$	11,239,549		$	9,194,396
EOP loans outstanding (1)		11,292,659		$	11,295,629		$	9,398,124			$	11,292,659		$	9,398,124
Allowance for loan losses / EOP loans (1)		0.47	%		0.48	%		0.53	%			0.47	%		0.53	%
Underperforming Assets:
Loans 90 Days and over (still accruing)	$	980		$	1,575		$	879			$	980		$	879
Non-performing loans:
Nonaccrual loans (2)		148,816			139,082			119,256				148,816			119,256
Renegotiated loans		17,547			17,139			17,886				17,547			17,886
Total non-performing loans		166,363			156,221			137,142				166,363			137,142
Foreclosed properties		3,563			3,729			10,259				3,563			10,259
Total underperforming assets	$	170,906		$	161,525		$	148,280			$	170,906		$	148,280
Classified and Criticized Assets:
Nonaccrual loans (2)		148,816			139,082			119,256				148,816			119,256
Substandard accruing loans		107,257			109,051			89,389				107,257			89,389
Loans 90 days and over (still accruing)		980			1,575			879				980			879
Total classified loans - "problem loans"	$	257,053		$	249,708		$	209,524			$	257,053		$	209,524
Other classified assets		3,070			3,149			7,526				3,070			7,526
Criticized loans - "special mention loans"		181,165			154,891			130,197				181,165			130,197
Total classified and criticized assets	$	441,288		$	407,748		$	347,247			$	441,288		$	347,247
Non-performing loans / EOP loans (1)		1.47	%		1.38	%		1.46	%			1.47	%		1.46	%
Allowance to non-performing loans (3)		32	%		34	%		37	%			32	%		37	%
Under-performing assets / EOP loans (1)		1.51	%		1.43	%		1.58	%			1.51	%		1.58	%
EOP total assets	$	17,567,759		$	17,482,990		$	15,065,800			$	17,567,759		$	15,065,800
Under-performing assets / EOP assets		0.97	%		0.92	%		0.98	%			0.97	%		0.98	%
EOP - End of period actual balances
(1) Excludes loans held for sale.
(2) Includes renegotiated loans totaling $29.9 million at September 30, 2018, $34.0 million at June 30, 2018, and $43.7 million
at September 30, 2017.
(3) Includes acquired loans that were recorded at fair value in accordance with ASC 805 at the date of acquisition.  As such, the
credit risk was incorporated in the fair value recorded and no allowance for loan losses was recorded on the acquisition date.

 

Non-GAAP Measures (unaudited)
($ in thousands)
		Three Months Ended										Nine Months Ended
		September 30,			June 30,			September 30,				September 30,			September 30,
			2018			2018			2017				2018			2017
	Actual End of Period Balances
	GAAP shareholders' equity	$	2,220,680		$	2,200,215		$	1,906,823			$	2,220,680		$	1,906,823
	Deduct:
	Goodwill		828,804			828,804			655,018				828,804			655,018
	Intangibles		42,134			45,417			29,235				42,134			29,235
			870,938			874,221			684,253				870,938			684,253
	Tangible shareholders' equity	$	1,349,742		$	1,325,994		$	1,222,570			$	1,349,742		$	1,222,570
	Average Balances
	GAAP shareholders' equity	$	2,212,700		$	2,183,604		$	1,896,194			$	2,187,624		$	1,862,649
	Deduct:
	Goodwill		828,804			828,804			655,018				828,585			655,018
	Intangibles		43,685			47,052			30,502				47,249			33,242
			872,489			875,856			685,520				875,834			688,260
	Average tangible shareholders' equity	$	1,340,211		$	1,307,748		$	1,210,674			$	1,311,790		$	1,174,389
	Actual End of Period Balances
	GAAP assets	$	17,567,759		$	17,482,990		$	15,065,800			$	17,567,759		$	15,065,800
	Add:
	Trust overdrafts		118			46			45				118			45
	Deduct:
	Goodwill		828,804			828,804			655,018				828,804			655,018
	Intangibles		42,134			45,417			29,235				42,134			29,235
			870,938			874,221			684,253				870,938			684,253
	Tangible assets	$	16,696,939		$	16,608,815		$	14,381,592			$	16,696,939		$	14,381,592
	Risk-weighted assets	$	12,715,665		$	12,648,732		$	10,495,407			$	12,715,665		$	10,495,407
	GAAP net income	$	51,348		$	44,001		$	39,372			$	143,332		$	114,218
	Add:
	Amortization of intangibles (net of tax)		2,593			2,699			1,717				8,143			5,487
	Tangible net income	$	53,941		$	46,700		$	41,089			$	151,475		$	119,705
	Tangible Ratios
	Return on tangible common equity		15.99	%		14.09	%		13.44	%			14.96	%		13.06	%
	Return on average tangible common equity		16.10	%		14.28	%		13.58	%			15.40	%		13.59	%
	Return on tangible assets		1.29	%		1.12	%		1.14	%			1.21	%		1.11	%
	Tangible common equity to tangible assets		8.08	%		7.98	%		8.50	%			8.08	%		8.50	%
	Tangible common equity to risk-weighted assets		10.61	%		10.48	%		11.65	%			10.61	%		11.65	%
	Tangible common book value (1)		8.86			8.70			9.02				8.86			9.02
	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	$	1,409,775		$	1,371,918		$	1,254,790			$	1,409,775		$	1,254,790
	Deduct:
	Trust Preferred Securities (2)		-			-			45,000				-			45,000
	Additional Tier 1 capital deductions		-			-			(13,498	)			-			(13,498	)
			-			-			31,502				-			31,502
	Tier 1 common equity	$	1,409,775		$	1,371,918		$	1,223,288			$	1,409,775		$	1,223,288
	Risk-weighted assets		12,715,665			12,648,732			10,495,407				12,715,665			10,495,407
	Tier 1 common equity to risk-weighted assets		11.09	%		10.85	%		11.66	%			11.09	%		11.66	%
	(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.