8-K
Old National Bancorp /In/ (ONB)
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): January 21, 2020
OLD NATIONAL BANCORP
(Exact name of Registrant as specified in its charter)
| Indiana | 001-15817 | 35-1539838 |
|---|---|---|
| (State or other jurisdiction<br> <br>of incorporation) | (Commission<br> <br>File Number) | (IRS Employer<br> <br>Identification No.) |
| One Main Street<br> <br>Evansville, Indiana | 47708 | |
| --- | --- | |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code: (800) 731-2265
(Former name or former address if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading<br> <br>Symbol(s) | Name of each exchange<br> <br>on which registered |
|---|---|---|
| Common Stock, No Par Value | ONB | The NASDAQ Stock Market LLC |
Indicate by check mark whether the Registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (s230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (s240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the Registrant has elected not to use extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02 | Results of Operations and Financial Condition. |
|---|
On January 21, 2020, Old National Bancorp (the “Company”) issued a press release (“Press Release”) reporting its financial results for the fourth quarter and full year 2019. The Press Release is furnished as Exhibit 99.1 hereto and is incorporated herein by reference. A slide presentation outlining fourth quarter and full year 2019 earnings, strategic developments, and the Company’s financial outlook will be available on the “Investor Relations” section of the Company’s website to complement the conference call to be held on January 21, 2020, at 7:00 a.m. CDT and will be accessible at http://www.oldnational.com immediately before the conference call begins.
| Item 2.05 | Costs Associated with Exit or Disposal Activities |
|---|
On January 15, 2020, the Company commenced implementation of the ONB Way strategic plan, which has various detailed business objectives designed to keep the Company’s clients at the center of all it does. The Company expects to incur an estimated aggregate of $53 million of related cash expenses. An estimate of each major type of cost is set forth below. Of the $53 million aggregate cash expenses, the Company has expensed $8.2 million, $1.8 million, and $1.4 million in the fourth, third and second quarters of 2019, respectively. The Company expects that the remaining $41.6 million of related cash expenses will all be incurred over the course of 2020. To optimize the Company’s branch network, the Company plans to close 31 retail banking centers in smaller markets: 10 banking centers in each of Wisconsin and Indiana, five in Michigan, four in Minnesota and two in Kentucky. The Company expects to incur an estimated $25 million in costs associated with the branch optimization and expects to complete the optimization by April 24, 2020.
In connection with the ONB Way strategic plan the Company is realigning its organizational structure and expects to incur an estimated $10 million in severance charges.
In addition the Company expects to incur an estimated $10 million in professional fees and $8 million in non-branch facilities and miscellaneous charges.
A copy of the press release describing the objectives of the ONB Way is attached hereto as Exhibit 99.1 and the information set forth therein is incorporated herein by reference.
Forward Looking Statements
In this report, we have made various statements regarding current expectations or forecasts of future events, which speak only as of the date the statements are made. These statements are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are also made from time-to-time in press releases and in oral statements made by the officers of the Company. Forward-looking statements can be identified by the use of the words “expect,” “may,” “could,” “intend,” “project,” “estimate,” “believe,” “anticipate,” and other words of similar meaning. Such forward-looking statements are based on assumptions and estimates, which although believed to be reasonable, may turn out to be incorrect. Therefore, undue reliance should not be placed upon these estimates and statements. We cannot assure that any of these statements, estimates, or beliefs will be realized and actual results may differ from those contemplated in these “forward-looking statements.” We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise. You are advised to consult further disclosures we may make on related subjects in our filings with the SEC.
| Item 8.01 | Other Events |
|---|
On January 15, 2020, the Company’s Board of Directors declared a quarterly cash dividend of $0.14 per common share, an increase from the $0.13 paid on December 16, 2019. The dividend is payable March 16, 2020, to shareholders of record on March 2, 2020. For purposes of broker trading, the ex-date of the cash dividend is February 28, 2020.
On January 15, 2020, the Board of Directors also approved the adoption of a stock repurchase plan that authorizes up to 7.0 million shares of Old National Bancorp common stock which may be repurchased, from time to time, through January 31, 2021.
On January 21, 2020, the Company issued a press release announcing the addition of four new executive leaders. A copy of the press release is attached hereto as Exhibit 99.1 and the information set forth therein is incorporated herein by reference.
| Item 9.01 | Financial Statements and Exhibits. |
|---|
(d) Exhibits.
| Exhibit <br>No. | Description | |
|---|---|---|
| 99.1 | Press Release issued by Old National Bancorp on January 21, 2020 | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
2
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: January 21, 2020
| OLD NATIONAL BANCORP | |
|---|---|
| By: | /s/ Brendon B. Falconer |
| Brendon B. Falconer | |
| Senior Executive Vice President and | |
| Chief Financial Officer |
3
EX-99.1
Exhibit 99.1
| Old National Bancorp<br> <br>One Main<br>Street |  |
|---|---|
| Evansville, IN 47708<br><br><br>oldnational.com | Media: Kathy A. Schoettlin (812) 465-7269<br><br><br>Investors: Lynell J. Walton (812) 464-1366 |
Old National reports 4^th^ quarter earnings, announcesdividend
increase, stock repurchase plan, and ONB Way strategic update
Evansville, Ind. (January 21, 2020)
Old National Bancorp (NASDAQ: ONB) reports 4Q19 net income of $49.2 million, diluted EPS of $0.29.
Adjusted^1^net income of $55.2 million, or $0.32 per diluted share.
2019 annual net income of $238.2 million, diluted EPS of $1.38.
Adjusted^1^ 2019 annual net income of $249.9 million, diluted EPS of $1.45.
CEO COMMENTARY:
“Our 4^th^ quarter results capped a strong year of earnings for Old National,” said CEO Jim Ryan. “Full-year 2019
results included three quarters of record net income, stellar credit metrics, well controlled expenses and record
commercial loan production, all of which was accomplished while finalizing a new strategic plan – known as
The ONB Way – that will ensure our clients remain at the center of all we do.”
FOURTH QUARTER HIGHLIGHTS ^2^:
| Net Income | • Net income of $49.2 million<br><br><br><br> <br>• Earnings per share of<br>$0.29 |
|---|---|
| Net Interest Income/NIM | • Net interest income on a fully taxable equivalent basis was $152.2 million<br>compared to $156.3 million<br> <br><br><br><br>• Net interest margin on a fully taxable equivalent basis was 3.46% compared to 3.57% |
| Operating Performance | • Pre-provision net revenue^1^ (“PPNR”) was $65.2 million<br> <br><br><br><br>• Adjusted PPNR^1^was $73.9 million, up<br>10.3% over fourth quarter of 2018<br> <br><br><br><br>• Noninterest expense was $134.7 million<br><br><br><br> <br>• Adjusted noninterest expense^1^ was $125.6 million<br> <br><br><br><br>• Efficiency ratio^1^ was 65.57%<br><br><br><br> <br>• Adjusted efficiency ratio^1^was 60.97%, a 234 basis point improvement from fourth quarter of 2018 |
| Loans and<br><br><br>Credit<br><br><br>Quality | • End-of-period total loans^3^<br>were $12,164.4 million compared to $12,075.9 million<br> <br><br><br><br>• Fourth-quarter total commercial production was a record $681 million; December 31 pipeline was a<br>record $2.2 billion<br> <br><br><br><br>• Provision for loan losses was $1.3 million<br><br><br><br> <br>• Net charge-offs were $3.6<br>million, or 0.12% annualized, compared to net charge-offs of $0.8 million<br> <br><br><br><br>• Non-performing loans were 1.19% of total loans compared to 1.31% |
| Return<br><br><br>Profile &<br><br><br>Capital | • Return on average common equity was 6.94%<br><br><br><br> <br>• Return on average tangible<br>common equity^1^ was 12.03%<br> <br><br><br><br>• Adjusted return on average tangible common<br>equity^1^ was 13.44%<br> <br><br><br><br>• Repurchased 428 thousand shares of common stock during the current quarter |
| Notable<br><br><br>Items | • $0.01 increase in quarterly cash dividend to $0.14 per share<br><br><br><br> <br>• 7 million share<br>repurchase authorization effective until January 31, 2021<br> <br><br><br><br>• Current quarter contained $8.2 million in ONB Way charges, $0.2 million in merger and<br>integration charges and $0.7 million in tax credit amortization ta |
| ^1^ | Non-GAAP financial measure that Management believes is useful inevaluating the financial results of the Company – please refer to the Non-GAAP reconciliations contained in this release |
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| ^2^ | Comparisons are on a linked-quarter basis, unless otherwise noted |
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| ^3^ | Includes loans held for sale |
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DIVIDEND AND SHARE REPURCHASE
Old National Bancorp’s Board of Directors declared an increase in its quarterly common stock cash dividend to $0.14 per share on the Company’s outstanding shares of common stock. This new dividend level represents a 7.7% increase over the previous cash dividend level of $0.13 per common share. The dividend is payable March 16, 2020, to shareholders of record on March 2, 2020. For purposes of broker trading, the ex-date of the cash dividend is February 28, 2020.
The Board of Directors has also approved the adoption of a stock repurchase plan that authorizes up to 7.0 million shares of Old National Bancorp stock to be repurchased, as conditions warrant, through January 31, 2021. These shares may be purchased in either the open market or in privately negotiated transactions, in accordance with SEC regulations.
THE ONB WAY: OLD NATIONAL’S NEW STRATEGIC PLAN
Old National is implementing a new strategic plan – and overall way of doing business – designed to keep our clients at the center of all we do. Known as The ONB Way, it includes:
| • | Realigning the organization into clearly defined segments to align leaders and relationship managers with<br>the client segment they can best serve (while not wavering on our commitment to community). |
|---|---|
| • | Deepening client relationships through integrated Commercial, Community Banking and Wealth teams.<br> |
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| • | Simplifying and improving theend-to-end banking/borrowing journey while adhering to strong risk management principles. |
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| • | Creating a new Wealth Division that combines wealth management, investments and private banking for a<br>simplified, highly consultative client experience firmly rooted in financial planning. |
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| • | Investing in our operational and IT infrastructure to meet our clients “where they are” and<br>ensure that we keep pace with technology and client digital expectations. |
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ADDITIONS TO THE LEADERSHIP TEAM
As part of The ONB Way, Old National is pleased to welcome four new executive leaders:
| • | Chady AlAhmar, Wealth Division CEO. Most recently a Senior Executive of Wealth Management at U.S. Bank,<br>Chady is passionate about achieving business growth through driving strategy optimization, team collaboration, sales practices, business development and analytics. Prior to joining U.S. Bank, he held strategy, finance and management consulting<br>positions with GMAC (Ally Bank) and ACG in New York and ran his own management consulting firm for several years. He will be located in Minneapolis. |
|---|---|
| • | Paul Kilroy, Chief Information Officer. Paul brings a wide and impressive array of IT expertise and<br>leadership experience to his role as ONB CIO, including Cloud, data and application rationalization strategies, and robotics and automation. Most recently, he served as SVP, Segment CIO of Enterprise Shared Services, Data and Architecture for<br>Huntington National Bank, where he created a groundbreaking Robotics Center of Excellence. Prior to that, he spent 13 years in IT leadership roles at JP Morgan Chase. Paul will be located in Evansville. |
| --- | --- |
| • | Scott Fecteau, Chief Client Services Officer, Operations. Scott is an Operations, Financial and Risk<br>Management executive with nearly 30 years of industry experience. He most recently served as Managing Director/Global Delivery Lead BPO for Accenture Credit Services in Charlotte, North Carolina. Prior to that, he was Director of Residential Lending<br>at Associated Bank, in Green Bay for 12 years. We are excited to welcome Scott back to Old National as he served in our Mortgage Division in 2003-04. He will be located in Evansville. |
| --- | --- |
| • | Malinda Anthony, Treasury Management (TM) President. Malinda joined ONB from Wells Fargo in<br>Indianapolis, where she most recently served as North Division Sales Manager, overseeing TM sales supporting commercial banking in 10 states. In her role as ONB TM President, she is responsible for the entire Treasury Management business line,<br>including sales, operations and support, product and process innovation, and Merchant Services. She will be located in Indianapolis. |
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BRANCH NETWORK OPTIMIZATION
Another component of The ONB Way is the optimization of our branch network. This optimization, which includes 31 banking centers scattered throughout the footprint that will be consolidated on April 24, 2020, reflects an ongoing shift among our clients toward digital banking solutions. Many of the facilities to be consolidated are in smaller markets, several of which were added in recent years through partnership activity. By state, these consolidations include 10 banking centers in both Wisconsin and Indiana, five in Michigan, four in Minnesota and two in Kentucky.
RESULTS OF OPERATIONS
Old National Bancorp reported fourth-quarter 2019 net income of $49.2 million, or $0.29 per diluted share.
Included in the fourth quarter were pre-tax charges of $8.2 million for ONB Way and $0.2 million for merger and integration activity. Excluding these charges from the current quarter and netting out debt securities gains, adjusted net income was $55.2 million, or $0.32 per diluted share.
LOANS
Commercial activity remainsstrong with record high commercial loan production.
| • | Period-end total loans were $12,164.4 million at December 31,<br>2019, compared to $12,075.9 million at September 30, 2019. |
|---|---|
| • | Commercial and industrial loans decreased $60.3 million to $2,890.3 million; commercial real estate<br>loans increased $54.7 million to $5,166.8 million; consumer loans increased $7.8 million to $1,726.1 million and residential mortgage loans increased $86.3 million to $2,381.2 million. |
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| • | Commercial loan production in the fourth quarter was $681 million;<br>period-end pipeline totaled $2.2 billion. |
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| • | On average, total loans in the fourth quarter were $12,069.2 million, down from $12,073.8 million in<br>the third quarter of 2019. |
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DEPOSITS
A low-cost core deposit franchise continues to be one of Old National’s strengths.
| • | Period-end total deposits were $14,553.4 million at<br>December 31, 2019, an increase of $105.0 million from the third quarter of 2019. |
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| • | On average, total deposits in the fourth quarter were $14,602.9 million, compared to $14,330.5 million<br>in the third quarter of 2019. |
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NET INTEREST INCOME AND MARGIN
Net interest income and margin lower with decline in accretion income and mix shift.
| • | Net interest income decreased to $148.9 million in the fourth quarter of 2019 from $153.1 million in<br>the third quarter of 2019. |
|---|---|
| • | The net interest margin on a fully taxable equivalent basis decreased 11 basis points to 3.46% compared to 3.57%<br>in the third quarter of 2019. |
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| • | Accretion income was $9.5 million, or 21 basis points of net interest margin, in the fourth quarter of 2019<br>compared to $13.4 million, or 31 basis points of net interest margin, in the third quarter of 2019. In the fourth quarter of 2019, accretion income was 4.8% of adjusted total revenue. |
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| • | Interest collected on nonaccrual loans was $2.4 million, or 5 basis points of net interest margin, in the<br>fourth quarter of 2019 compared to $2.0 million, or 5 basis points of net interest margin, in the third quarter of 2019. |
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| • | The cost of total deposits declined 9 basis points to 0.43% in the fourth quarter of 2019 while the cost of total<br>interest-bearing deposits decreased 12 basis points to 0.59%. |
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CREDIT QUALITY AND CECL
Strong credit quality remains a hallmark of the Old National franchise.
| • | Asset quality remained strong with net charge-offs in the fourth quarter of $3.6 million, or 0.12% of total<br>average loans, and 30-89 day delinquencies of 0.25%. |
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| • | Provision expense was $1.3 million in the fourth quarter compared to $1.4 million in the third quarter.<br> |
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| • | Non-performing loans decreased as a percentage of total loans to 1.19%.<br> |
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| • | In accordance with current accounting practices, the loans acquired from recent acquisitions were recorded at<br>fair value with no allowance recorded at the acquisition date. As of December 31, 2019, the remaining discount on these acquired loans was $77.8 million. |
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| • | The allowance for loan losses was $54.6 million, or 0.45% of total loans at December 31, 2019.<br> |
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| • | Estimated day one increase to the allowance for loan losses and unfunded commitment liability of approximately<br>$35 million to $45 million upon adoption of CECL. |
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NONINTEREST INCOME
Noninterest income decreased due to normal seasonal patterns in mortgage banking and deposit service charges as well as a decline in capital markets income.
| • | Total noninterest income for the fourth quarter of 2019 was $47.7 million, a decrease of $6.2 million<br>from the third quarter of 2019. |
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| • | Mortgage banking revenue decreased $3.2 million, capital markets income decreased $1.5 million and<br>service charges on deposits declined $1.1 million when compared to the third quarter of 2019. |
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NONINTEREST EXPENSE
Fourth quarter results demonstrated continued discipline with respect to expense management, helping to drive positive operating leverage^1^.
| • | Noninterest expense for the fourth quarter of 2019 was $134.7 million and included $8.2 million in ONB<br>Way charges, $0.2 million in merger & integration charges and $0.7 million in tax credit amortization. |
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| • | Excluding these items, adjusted noninterest expense for the fourth quarter was $125.6 million, compared to<br>the $118.3 million in adjusted noninterest expense in the third quarter of 2019. |
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| • | The fourth quarter of 2019 also included $4.0 million in additional incentive compensation which is included<br>in adjusted noninterest expense defined above. |
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| • | The fourth quarter efficiency ratio was 65.57%, while the adjusted efficiency ratio was 60.97%.<br> |
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| • | For the full-year 2019, the efficiency ratio was 60.35%, while the adjusted efficiency ratio was 57.87%.<br> |
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| • | Adjusted operating leverage^1^ was +636 basis points for the<br>full-year 2019 as compared to 2018. |
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INCOME TAXES
| • | On a fully taxable-equivalent basis, income tax expense in the fourth quarter was $14.7 million, resulting<br>in a 23.0% FTE tax rate. |
|---|---|
| • | Income tax expense included $0.7 million in tax credit benefit. |
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CAPITAL
Capital ratios remain strong.
| • | At the end of the fourth quarter, total risk-based capital was 13.0% and regulatory tier 1 capital was 12.1%.<br> |
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| • | Tangible common equity to tangible assets was 9.09% at the end of the fourth quarter compared to 8.95% in the<br>third quarter of 2019. |
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| • | The Company repurchased 428 thousand shares of common stock during the fourth quarter of 2019 at a weighted<br>average price of $16.78, excluding commissions. |
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NON-GAAP RECONCILIATIONS
| ($ in millions, except EPS, shares in 000s) | 4Q19 | Adjustments^4^ | Adjusted 4Q19 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Total Revenues (FTE) | $ | 199.9 | ($ | 0.4 | ) | $ | 199.5 | ||||||||
| Less: Provision for Loan Losses | (1.3 | ) | — | (1.3 | ) | ||||||||||
| Less: Noninterest Expenses | (134.7 | ) | 8.4 | (126.3 | ) | ||||||||||
| Income before Income Taxes (FTE) | $ | 63.9 | $ | 8.0 | $ | 71.9 | |||||||||
| Income Taxes | 14.7 | 2.0 | 16.7 | ||||||||||||
| Net Income | $ | 49.2 | $ | 6.0 | $ | 55.2 | |||||||||
| Average Shares Outstanding | 170,186 | — | 170,186 | ||||||||||||
| Earnings Per Share - Diluted | $ | 0.29 | $ | 0.03 | $ | 0.32 | |||||||||
| ^4^ | Tax-effect calculations use the current statutory FTE tax rates(federal + state) | ||||||||||||||
| --- | --- | ||||||||||||||
| ($ in millions, except EPS, shares in 000s) | 2019 | Adjustments^4^ | Adjusted 2019 | ||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||
| Total Revenues (FTE) | $ | 816.5 | ($ | 1.9 | ) | $ | 814.6 | ||||||||
| Less: Provision for Loan Losses | (4.7 | ) | — | (4.7 | ) | ||||||||||
| Less: Noninterest Expenses | (508.5 | ) | 17.4 | (491.1 | ) | ||||||||||
| Income before Income Taxes (FTE) | $ | 303.3 | $ | 15.5 | $ | 318.8 | |||||||||
| Income Taxes | (65.1 | ) | (3.8 | ) | (68.9 | ) | |||||||||
| Net Income | $ | 238.2 | $ | 11.7 | $ | 249.9 | |||||||||
| Average Shares Outstanding | 172,687 | — | 172,687 | ||||||||||||
| Earnings Per Share | $ | 1.38 | $ | 0.07 | $ | 1.45 | |||||||||
| ^4^ | Tax-effect calculations use the current statutory FTE tax rates(federal + state) | ||||||||||||||
| --- | --- | ||||||||||||||
| ($ in millions) | 4Q19 | 3Q19 | |||||||||||||
| --- | --- | --- | --- | --- | --- | --- | |||||||||
| Net Interest Income | $ | 148.9 | $ | 153.1 | |||||||||||
| Add: FTE Adjustment | 3.3 | 3.2 | |||||||||||||
| Net Interest Income (FTE) | $ | 152.2 | $ | 156.3 | |||||||||||
| Average Earning Assets | $ | 17,577.8 | $ | 17,510.5 | |||||||||||
| Net Interest Margin (FTE) | 3.46 | % | 3.57 | % | |||||||||||
| ($ in millions) | 4Q19 | 3Q19 | |||||||||||||
| --- | --- | --- | --- | --- | --- | --- | |||||||||
| Net Interest Income | $ | 148.9 | $ | 153.1 | |||||||||||
| Add: FTE Adjustment | 3.3 | 3.2 | |||||||||||||
| Net Interest Income (FTE) | $ | 152.2 | $ | 156.3 | |||||||||||
| Add: Total Noninterest Income | 47.7 | 53.9 | |||||||||||||
| Less: Noninterest Expense | (134.7 | ) | (122.6 | ) | |||||||||||
| Pre-Provision Net Revenue | $ | 65.2 | $ | 87.6 | |||||||||||
| Less: Debt Securities Gains/Losses | (0.4 | ) | (0.4 | ) | |||||||||||
| Add: ONB Way Charges | 8.2 | 1.8 | |||||||||||||
| Add: Merger and Integration Charges | 0.2 | 1.3 | |||||||||||||
| Add: Amortization of Tax Credit Investments | 0.7 | 1.2 | |||||||||||||
| Adjusted Pre-Provision Net Revenue | $ | 73.9 | $ | 91.5 | |||||||||||
| ($ in millions) | 4Q19 | 3Q19 | 4Q18 | 2019 | 2018 | ||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Noninterest Expense | $ | 134.7 | $ | 122.6 | $ | 150.3 | $ | 508.5 | $ | 517.3 | |||||
| Less: ONB Way Charges | (8.2 | ) | (1.8 | ) | — | (11.4 | ) | — | |||||||
| Less: Merger and Integration Charges | (0.2 | ) | (1.3 | ) | (14.8 | ) | (6.0 | ) | (21.3 | ) | |||||
| Less: Branch Action Charges/Foundation Funding | — | — | (7.5 | ) | — | (12.0 | ) | ||||||||
| Noninterest Expense less Charges | $ | 126.3 | $ | 119.5 | $ | 128.0 | $ | 491.1 | $ | 484.0 | |||||
| Less: Amortization of Tax Credit Investments | (0.7 | ) | (1.2 | ) | (1.1 | ) | (2.7 | ) | (22.9 | ) | |||||
| Adjusted Noninterest Expense | $ | 125.6 | $ | 118.3 | $ | 126.9 | $ | 488.4 | $ | 461.1 | |||||
| Less: Intangible Amortization | (3.9 | ) | (4.2 | ) | (4.1 | ) | (16.9 | ) | (14.4 | ) | |||||
| Adjusted Noninterest Expense Less Intangible Amortization | $ | 121.7 | $ | 114.1 | $ | 122.8 | $ | 471.5 | $ | 446.7 | |||||
| Net Interest Income | $ | 148.9 | $ | 153.1 | $ | 146.2 | $ | 604.3 | $ | 537.5 | |||||
| FTE Adjustment | 3.3 | 3.2 | 3.1 | 12.9 | 11.5 | ||||||||||
| Net Interest Income (FTE) | $ | 152.2 | $ | 156.3 | $ | 149.3 | $ | 617.2 | $ | 549.0 | |||||
| Total Noninterest Income | 47.7 | 53.9 | 58.2 | 199.3 | 195.3 | ||||||||||
| Total Revenue (FTE) | $ | 199.9 | $ | 210.2 | $ | 207.5 | $ | 816.5 | $ | 744.3 | |||||
| Less: Debt Securities Gains/Losses | (0.4 | ) | (0.4 | ) | 0.4 | (1.9 | ) | (2.0 | ) | ||||||
| Less: Gain on Student Loan Sale | — | — | — | — | (2.2 | ) | |||||||||
| Less: Gain on Branch Actions | — | — | (14.0 | ) | — | (14.5 | ) | ||||||||
| Adjusted Total Revenue (FTE) | $ | 199.5 | $ | 209.8 | $ | 193.9 | $ | 814.6 | $ | 725.6 | |||||
| Efficiency Ratio | 65.57 | % | 56.44 | % | 70.33 | % | 60.35 | % | 67.74 | % | |||||
| Adjusted Efficiency Ratio | 60.97 | % | 54.40 | % | 63.31 | % | 57.87 | % | 61.56 | % | |||||
| Operating Leverage^5^ (basis points) | 668 | 1,140 | |||||||||||||
| Adjusted Operating Leverage^6^ (basis<br>points) | 392 | 636 | |||||||||||||
| ^5^ | Year-over-year basis point change in noninterest expenses plus change in total revenue | ||||||||||||||
| --- | --- | ||||||||||||||
| ^6^ | Year-over-year basis point change in adjusted noninterest expense plus change in adjusted total revenue | ||||||||||||||
| --- | --- | ||||||||||||||
| ($ in millions) | 4Q19 | 3Q19 | |||||||||||||
| --- | --- | --- | --- | --- | --- | --- | |||||||||
| Net Income | $ | 49.2 | $ | 69.8 | |||||||||||
| Add: Intangible Amortization (net of<br>tax^7^) | 3.0 | 3.1 | |||||||||||||
| Tangible Net Income | $ | 52.2 | $ | 72.9 | |||||||||||
| Less: Securities Gains/Losses (net of<br>tax^7^) | (0.3 | ) | (0.3 | ) | |||||||||||
| Add: ONB Way Charges (net of tax^7^) | 6.2 | 1.4 | |||||||||||||
| Add: Merger & Integration Charges (net of tax^7^) | 0.1 | 1.0 | |||||||||||||
| Adjusted Tangible Net Income | $ | 58.2 | $ | 75.0 | |||||||||||
| Average Total Shareholders’ Equity | $ | 2,832.9 | $ | 2,817.5 | |||||||||||
| Less: Average Goodwill | (1,037.0 | ) | (1,036.3 | ) | |||||||||||
| Less: Average Intangibles | (61.9 | ) | (66.0 | ) | |||||||||||
| Average Tangible Shareholders’ Equity | $ | 1,734.0 | $ | 1,715.2 | |||||||||||
| Return on Average Tangible Common Equity | 12.03 | % | 17.01 | % | |||||||||||
| Adjusted Return on Average Tangible Common Equity | 13.44 | % | 17.49 | % | |||||||||||
| ^7^ | Tax-effect calculations use the current statutory FTE tax rates(federal + state) | ||||||||||||||
| --- | --- |
CONFERENCE CALL AND WEBCAST
Old National will host a conference call and live webcast at 7:00 a.m. Central Time on Tuesday, January 21, 2020, to review fourth-quarter and full-year 2019 financial results. The live audio web cast of the call, along with the corresponding presentation slides, will be available on the Company’s Investor Relations web page at oldnational.com and will be archived there for 12 months. A replay of the call will also be available from 10:00 a.m. Central Time on January 21 through February 4. To access the replay, dial 1-855-859-2056, Conference ID Code 5278346.
ABOUT OLD NATIONAL
Old National Bancorp (NASDAQ: ONB) is the holding company of Old National Bank. Headquartered in Evansville with $20.4 billion in assets, it is a top 100 U.S. bank, the largest Indiana-based bank and has been recognized as a World’s Most Ethical Company by the Ethisphere Institute for eight consecutive years. For 185 years, Old National has been a community bank committed to building long-term, highly valued relationships with clients. With locations in Indiana, Kentucky, Michigan, Minnesota and Wisconsin, Old National provides retail and commercial banking services along with comprehensive wealth management, investment and capital markets services. For information and financial data, please visit Investor Relations at oldnational.com.
USE OF NON-GAAP FINANCIAL MEASURES
This earnings release contains GAAP financial measures and non-GAAP financial measures where management believes it to be helpful in understanding Old National’s results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in the tables of this release.
FORWARD-LOOKING STATEMENT
This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, descriptions of Old National Bancorp’s (“Old National’s”) financial condition, results of operations, asset and credit quality trends and profitability. Forward-looking statements can be identified by the use of the words “anticipate,” “believe,” “expect,” “intend,” “could” and “should,” and other words of similar meaning. These forward-looking statements express management’s current expectations or forecasts of future events and, by their nature, are subject to risks and uncertainties. There are a number of factors that could cause actual results to differ materially from those in such statements. Factors that might cause such a difference include, but are not limited to: market, economic, operational, liquidity, credit and interest rate risks associated with Old National’s business; competition; government legislation and policies (including the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act and its related regulations); ability of Old National to execute its business plan, including the anticipated impact from the ONB Way strategic plan that may differ from current estimates; changes in the economy which could materially impact credit quality trends and the ability to generate loans and gather deposits; failure or circumvention of our internal controls; failure or disruption of our information systems; significant changes in accounting, tax or regulatory practices or requirements, including the impact of the new CECL standard; new legal obligations or liabilities or unfavorable resolutions of litigations; disruptive technologies in payment systems and other services traditionally provided by banks; computer hacking and other cybersecurity threats; other matters discussed in this press release; and other factors identified in our Annual Report on Form 10-K and other periodic filings with the SEC. These forward-looking statements are made only as of the date of this press release, and Old National does not undertake an obligation to release revisions to these forward-looking statements to reflect events or conditions after the date of this press release.
Financial Highlights (unaudited)
($ and shares in thousands, except per share data)
| Three Months Ended | Twelve Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31, | September 30, | December 31, | December 31, | December 31, | |||||||||||
| 2019 | 2019 | 2018 | 2019 | 2018 | |||||||||||
| Income Statement | |||||||||||||||
| Net interest income | $ | 148,899 | $ | 153,096 | $ | 146,225 | $ | 604,273 | $ | 537,602 | |||||
| Provision for loan losses | 1,264 | 1,437 | 3,390 | 4,747 | 6,966 | ||||||||||
| Noninterest income | 47,726 | 53,961 | 58,154 | 199,317 | 195,305 | ||||||||||
| Noninterest expense | 134,743 | 122,585 | 150,268 | 508,487 | 517,261 | ||||||||||
| Net income | 49,185 | 69,781 | 47,498 | 238,206 | 190,830 | ||||||||||
| Per Common Share Data | |||||||||||||||
| Net income (diluted) | $ | 0.29 | $ | 0.41 | $ | 0.28 | $ | 1.38 | $ | 1.22 | |||||
| Average diluted shares outstanding | 170,186 | 171,551 | 167,992 | 172,687 | 156,539 | ||||||||||
| Book value | 16.82 | 16.66 | 15.36 | 16.82 | 15.36 | ||||||||||
| Stock price | 18.29 | 17.20 | 15.40 | 18.29 | 15.40 | ||||||||||
| Dividend payout ratio | 45 | % | 32 | % | 46 | % | 37 | % | 42 | % | |||||
| Tangible common book value (1) | 10.35 | 10.18 | 9.00 | 10.35 | 9.00 | ||||||||||
| Performance Ratios | |||||||||||||||
| Return on average assets | 0.97 | % | 1.39 | % | 1.01 | % | 1.19 | % | 1.07 | % | |||||
| Return on average common equity | 6.94 | % | 9.91 | % | 7.59 | % | 8.57 | % | 8.42 | % | |||||
| Return on average tangible common equity (1) | 12.03 | % | 17.01 | % | 13.84 | % | 14.97 | % | 14.97 | % | |||||
| Net interest margin (FTE) | 3.46 | % | 3.57 | % | 3.64 | % | 3.55 | % | 3.54 | % | |||||
| Efficiency ratio (2) | 65.57 | % | 56.44 | % | 70.33 | % | 60.35 | % | 67.74 | % | |||||
| Net charge-offs (recoveries) to average loans | 0.12 | % | 0.03 | % | 0.02 | % | 0.05 | % | 0.02 | % | |||||
| Allowance for loan losses to ending loans | 0.45 | % | 0.47 | % | 0.45 | % | 0.45 | % | 0.45 | % | |||||
| Non-performing loans to ending loans | 1.19 | % | 1.31 | % | 1.43 | % | 1.19 | % | 1.43 | % | |||||
| Balance Sheet | |||||||||||||||
| Total loans | $ | 12,117,524 | $ | 12,017,648 | $ | 12,243,892 | $ | 12,117,524 | $ | 12,243,892 | |||||
| Total assets | 20,411,667 | 20,438,788 | 19,728,435 | 20,411,667 | 19,728,435 | ||||||||||
| Total deposits | 14,553,397 | 14,448,352 | 14,349,949 | 14,553,397 | 14,349,949 | ||||||||||
| Total borrowed funds | 2,744,728 | 2,831,863 | 2,493,793 | 2,744,728 | 2,493,793 | ||||||||||
| Total shareholders’ equity | 2,852,453 | 2,832,530 | 2,689,570 | 2,852,453 | 2,689,570 | ||||||||||
| Capital Ratios (1) | |||||||||||||||
| Risk-based capital ratios (EOP): | |||||||||||||||
| Tier 1 common equity | 12.1 | % | 12.0 | % | 11.4 | % | 12.1 | % | 11.4 | % | |||||
| Tier 1 | 12.1 | % | 12.0 | % | 11.4 | % | 12.1 | % | 11.4 | % | |||||
| Total | 13.0 | % | 13.0 | % | 12.3 | % | 13.0 | % | 12.3 | % | |||||
| Leverage ratio (to average assets) | 8.9 | % | 8.8 | % | 9.2 | % | 8.9 | % | 9.2 | % | |||||
| Total equity to assets (averages) | 14.01 | % | 13.98 | % | 13.28 | % | 13.88 | % | 12.74 | % | |||||
| Tangible common equity to tangible assets | 9.09 | % | 8.95 | % | 8.47 | % | 9.09 | % | 8.47 | % | |||||
| Nonfinancial Data | |||||||||||||||
| Full-time equivalent employees | 2,709 | 2,778 | 2,892 | 2,709 | 2,892 | ||||||||||
| Number of branches | 192 | 192 | 191 | 192 | 191 | ||||||||||
| (1) | See “Non-GAAP Measures” table. <br> | ||||||||||||||
| --- | --- | ||||||||||||||
| (2) | Efficiency ratio is defined as noninterest expense before amortization of intangibles as a percent of FTE net<br>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<br>true operating performance. | ||||||||||||||
| --- | --- |
FTE - Fully taxable equivalent basis EOP - End of period actual balances
Income Statement (unaudited)
($ and shares in thousands, except per share data)
| Three Months Ended | Twelve Months Ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31, | September 30, | December 31, | December 31, | December 31, | |||||||||
| 2019 | 2019 | 2018 | 2019 | 2018 | |||||||||
| Interest income | $ | 176,553 | $ | 185,853 | $ | 175,234 | $ | 730,387 | $ | 632,045 | |||
| Less: interest expense | 27,654 | 32,757 | 29,009 | 126,114 | 94,443 | ||||||||
| Net interest income | 148,899 | 153,096 | 146,225 | 604,273 | 537,602 | ||||||||
| Provision for loan losses | 1,264 | 1,437 | 3,390 | 4,747 | 6,966 | ||||||||
| Net interest income after provision for loan losses | 147,635 | 151,659 | 142,835 | 599,526 | 530,636 | ||||||||
| Wealth management fees | 9,468 | 9,160 | 9,069 | 37,072 | 36,863 | ||||||||
| Service charges on deposit accounts | 10,714 | 11,860 | 11,474 | 44,915 | 44,026 | ||||||||
| Debit card and ATM fees | 5,360 | 5,370 | 5,565 | 21,652 | 20,216 | ||||||||
| Mortgage banking revenue | 5,626 | 8,850 | 3,928 | 26,622 | 17,657 | ||||||||
| Investment product fees | 5,679 | 5,244 | 5,369 | 21,785 | 20,539 | ||||||||
| Capital markets income | 3,043 | 4,560 | 840 | 13,270 | 4,934 | ||||||||
| Company-owned life insurance | 2,937 | 2,703 | 2,591 | 11,539 | 10,584 | ||||||||
| Other income | 4,329 | 5,900 | 5,700 | 20,648 | 24,402 | ||||||||
| Net gain on branch divestitures | — | — | 13,989 | — | 13,989 | ||||||||
| Gains (losses) on sales of debt securities | 437 | 424 | (357 | ) | 1,923 | 2,060 | |||||||
| Gains (losses) on derivatives | 133 | (110 | ) | (14 | ) | (109 | ) | 35 | |||||
| Total noninterest income | 47,726 | 53,961 | 58,154 | 199,317 | 195,305 | ||||||||
| Salaries and employee benefits | 74,974 | 71,729 | 87,346 | 289,452 | 281,275 | ||||||||
| Occupancy | 14,184 | 11,934 | 13,210 | 55,255 | 51,941 | ||||||||
| Equipment | 3,958 | 3,954 | 3,916 | 16,903 | 14,861 | ||||||||
| Marketing | 3,631 | 4,105 | 4,782 | 15,898 | 15,847 | ||||||||
| Data processing | 9,080 | 8,961 | 9,418 | 37,589 | 36,170 | ||||||||
| Communication | 2,450 | 2,349 | 2,537 | 10,702 | 10,846 | ||||||||
| Professional fees | 9,986 | 5,037 | 5,615 | 22,854 | 14,503 | ||||||||
| Loan expenses | 1,873 | 1,811 | 1,877 | 7,253 | 7,028 | ||||||||
| FDIC assessment | 1,529 | 960 | 2,110 | 6,030 | 10,638 | ||||||||
| Amortization of intangibles | 3,946 | 4,168 | 4,134 | 16,911 | 14,442 | ||||||||
| Amortization of tax credit investments | 710 | 1,211 | 1,142 | 2,749 | 22,949 | ||||||||
| Other expense | 8,422 | 6,366 | 14,181 | 26,891 | 36,761 | ||||||||
| Total noninterest expense | 134,743 | 122,585 | 150,268 | 508,487 | 517,261 | ||||||||
| Income before income taxes | 60,618 | 83,035 | 50,721 | 290,356 | 208,680 | ||||||||
| Income tax expense | 11,433 | 13,254 | 3,223 | 52,150 | 17,850 | ||||||||
| Net income | $ | 49,185 | $ | 69,781 | $ | 47,498 | $ | 238,206 | $ | 190,830 | |||
| Diluted Earnings Per Share | |||||||||||||
| Net income | $ | 0.29 | $ | 0.41 | $ | 0.28 | $ | 1.38 | $ | 1.22 | |||
| Average Common Shares Outstanding | |||||||||||||
| Basic | 169,235 | 170,746 | 167,044 | 171,907 | 155,675 | ||||||||
| Diluted | 170,186 | 171,551 | 167,992 | 172,687 | 156,539 | ||||||||
| Common shares outstanding at end of period | 169,616 | 170,031 | 175,141 | 169,616 | 175,141 |
Balance Sheet (unaudited)
($ in thousands)
| December 31, | September 30, | December 31, | |||||||
|---|---|---|---|---|---|---|---|---|---|
| 2019 | 2019 | 2018 | |||||||
| Assets | |||||||||
| Federal Reserve Bank account | $ | 29,141 | $ | 80,018 | $ | 26,182 | |||
| Money market investments | 12,430 | 19,410 | 6,980 | ||||||
| Investments: | |||||||||
| Treasury and government-sponsored agencies | 610,666 | 524,919 | 707,438 | ||||||
| Mortgage-backed securities | 3,183,861 | 3,248,367 | 2,336,415 | ||||||
| States and political subdivisions | 1,275,643 | 1,231,248 | 1,245,657 | ||||||
| Other securities | 485,862 | 490,389 | 488,802 | ||||||
| Total investments | 5,556,032 | 5,494,923 | 4,778,312 | ||||||
| Loans held for sale, at fair value | 46,898 | 58,285 | 14,911 | ||||||
| Loans: | |||||||||
| Commercial | 2,890,296 | 2,950,559 | 3,232,970 | ||||||
| Commercial and agriculture real estate | 5,166,792 | 5,112,123 | 4,958,851 | ||||||
| Consumer: | |||||||||
| Home equity | 559,021 | 555,905 | 589,322 | ||||||
| Other consumer loans | 1,167,126 | 1,162,438 | 1,214,345 | ||||||
| Subtotal of commercial and consumer loans | 9,783,235 | 9,781,025 | 9,995,488 | ||||||
| Residential real estate | 2,334,289 | 2,236,623 | 2,248,404 | ||||||
| Total loans | 12,117,524 | 12,017,648 | 12,243,892 | ||||||
| Total earning assets | 17,762,025 | 17,670,284 | 17,070,277 | ||||||
| Allowance for loan losses | (54,619 | ) | (56,910 | ) | (55,461 | ) | |||
| Non-earning Assets: | |||||||||
| Cash and due from banks | 234,766 | 320,822 | 284,003 | ||||||
| Premises and equipment, net | 490,925 | 492,065 | 485,912 | ||||||
| Operating lease<br>right-of-use assets | 95,477 | 102,976 | — | ||||||
| Goodwill and other intangible assets | 1,097,099 | 1,101,045 | 1,113,274 | ||||||
| Company-owned life insurance | 448,967 | 447,110 | 444,224 | ||||||
| Net deferred tax assets | 29,705 | 26,523 | 87,048 | ||||||
| Loan servicing rights | 25,368 | 24,623 | 24,497 | ||||||
| Other assets | 281,954 | 310,250 | 274,661 | ||||||
| Total non-earning assets | 2,704,261 | 2,825,414 | 2,713,619 | ||||||
| Total assets | $ | 20,411,667 | $ | 20,438,788 | $ | 19,728,435 | |||
| Liabilities and Equity | |||||||||
| Noninterest-bearing demand deposits | $ | 4,042,286 | $ | 3,996,264 | $ | 3,965,380 | |||
| Interest-bearing: | |||||||||
| Checking and NOW accounts | 4,149,639 | 3,936,318 | 3,788,339 | ||||||
| Savings accounts | 2,845,423 | 2,863,718 | 2,944,092 | ||||||
| Money market accounts | 1,833,819 | 1,821,989 | 1,627,882 | ||||||
| Other time deposits | 1,589,988 | 1,704,238 | 1,845,149 | ||||||
| Total core deposits | 14,461,155 | 14,322,527 | 14,170,842 | ||||||
| Brokered CD’s | 92,242 | 125,825 | 179,107 | ||||||
| Total deposits | 14,553,397 | 14,448,352 | 14,349,949 | ||||||
| Federal funds purchased and interbank borrowings | 350,414 | 240,589 | 270,135 | ||||||
| Securities sold under agreements to repurchase | 327,782 | 337,551 | 362,294 | ||||||
| Federal Home Loan Bank advances | 1,822,847 | 2,001,960 | 1,613,481 | ||||||
| Other borrowings | 243,685 | 251,763 | 247,883 | ||||||
| Total borrowed funds | 2,744,728 | 2,831,863 | 2,493,793 | ||||||
| Operating lease liabilities | 99,500 | 107,272 | — | ||||||
| Accrued expenses and other liabilities | 161,589 | 218,771 | 195,123 | ||||||
| Total liabilities | 17,559,214 | 17,606,258 | 17,038,865 | ||||||
| Common stock, surplus, and retained earnings | 2,796,246 | 2,774,016 | 2,734,520 | ||||||
| Accumulated other comprehensive income (loss), net of tax | 56,207 | 58,514 | (44,950 | ) | |||||
| Total shareholders’ equity | 2,852,453 | 2,832,530 | 2,689,570 | ||||||
| Total liabilities and shareholders’ equity | $ | 20,411,667 | $ | 20,438,788 | $ | 19,728,435 |
Average Balance Sheet and Interest Rates (unaudited)
($ in thousands)
| Three Months Ended | Three Months Ended | Three Months Ended | ||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31, 2019 | September 30, 2019 | December 31, 2018 | ||||||||||||||||||||||
| Average | Income (1)/ | Yield/ | Average | Income (1)/ | Yield/ | Average | Income (1)/ | Yield/ | ||||||||||||||||
| Earning Assets: | Balance | Expense | Rate | Balance | Expense | Rate | Balance | Expense | Rate | |||||||||||||||
| Money market and other interest-earning investments | $ | 87,835 | $ | 530 | 2.39 | % | $ | 63,142 | $ | 528 | 3.32 | % | $ | 39,207 | $ | 205 | 2.07 | % | ||||||
| Investments: | ||||||||||||||||||||||||
| Treasury and government-sponsored agencies | 546,266 | 3,547 | 2.60 | % | 682,940 | 4,341 | 2.54 | % | 694,409 | 3,874 | 2.23 | % | ||||||||||||
| Mortgage-backed securities | 3,172,818 | 18,844 | 2.38 | % | 3,019,322 | 18,589 | 2.46 | % | 2,011,275 | 13,688 | 2.72 | % | ||||||||||||
| States and political subdivisions | 1,211,850 | 11,133 | 3.67 | % | 1,172,017 | 10,896 | 3.72 | % | 1,187,404 | 11,147 | 3.76 | % | ||||||||||||
| Other securities | 489,889 | 3,585 | 2.93 | % | 499,308 | 4,049 | 3.24 | % | 493,426 | 4,017 | 3.26 | % | ||||||||||||
| Total investments | 5,420,823 | 37,109 | 2.74 | % | 5,373,587 | 37,875 | 2.82 | % | 4,386,514 | 32,726 | 2.98 | % | ||||||||||||
| Loans: (2) | ||||||||||||||||||||||||
| Commercial | 2,891,641 | 31,925 | 4.32 | % | 3,018,638 | 35,428 | 4.59 | % | 3,133,153 | 37,358 | 4.67 | % | ||||||||||||
| Commercial and agriculture real estate | 5,129,638 | 66,959 | 5.11 | % | 5,037,909 | 71,604 | 5.56 | % | 4,834,589 | 65,461 | 5.30 | % | ||||||||||||
| Consumer: | ||||||||||||||||||||||||
| Home equity | 561,125 | 6,426 | 4.54 | % | 557,607 | 7,102 | 5.05 | % | 562,801 | 7,159 | 5.05 | % | ||||||||||||
| Other consumer loans | 1,153,924 | 12,245 | 4.21 | % | 1,175,900 | 12,226 | 4.13 | % | 1,203,436 | 11,702 | 3.86 | % | ||||||||||||
| Subtotal commercial and consumer loans | 9,736,328 | 117,555 | 4.79 | % | 9,790,054 | 126,360 | 5.12 | % | 9,733,979 | 121,680 | 4.96 | % | ||||||||||||
| Residential real estate loans | 2,332,835 | 24,641 | 4.23 | % | 2,283,704 | 24,261 | 4.25 | % | 2,238,588 | 23,672 | 4.23 | % | ||||||||||||
| Total loans | 12,069,163 | 142,196 | 4.64 | % | 12,073,758 | 150,621 | 4.91 | % | 11,972,567 | 145,352 | 4.78 | % | ||||||||||||
| Total earning assets | $ | 17,577,821 | $ | 179,835 | 4.05 | % | $ | 17,510,487 | $ | 189,024 | 4.27 | % | $ | 16,398,288 | $ | 178,283 | 4.30 | % | ||||||
| Less: Allowance for loan losses | (57,162 | ) | (56,894 | ) | (53,045 | ) | ||||||||||||||||||
| Non-earning Assets: | ||||||||||||||||||||||||
| Cash and due from banks | $ | 278,324 | $ | 264,145 | $ | 232,360 | ||||||||||||||||||
| Other assets | 2,419,792 | 2,429,466 | 2,275,907 | |||||||||||||||||||||
| Total assets | $ | 20,218,775 | $ | 20,147,204 | $ | 18,853,510 | ||||||||||||||||||
| Interest-Bearing Liabilities: | ||||||||||||||||||||||||
| Checking and NOW accounts | $ | 4,121,021 | $ | 3,812 | 0.37 | % | $ | 3,895,654 | $ | 4,448 | 0.45 | % | $ | 3,391,630 | $ | 2,004 | 0.23 | % | ||||||
| Savings accounts | 2,842,996 | 1,586 | 0.22 | % | 2,855,401 | 2,128 | 0.30 | % | 2,919,900 | 2,225 | 0.30 | % | ||||||||||||
| Money market accounts | 1,839,258 | 3,558 | 0.77 | % | 1,822,698 | 4,017 | 0.87 | % | 1,482,022 | 1,922 | 0.51 | % | ||||||||||||
| Other time deposits | 1,642,773 | 6,101 | 1.47 | % | 1,733,492 | 7,016 | 1.61 | % | 1,769,243 | 6,519 | 1.46 | % | ||||||||||||
| Total interest-bearing deposits | 10,446,048 | 15,057 | 0.57 | % | 10,307,245 | 17,609 | 0.68 | % | 9,562,795 | 12,670 | 0.53 | % | ||||||||||||
| Brokered CD’s | 109,504 | 637 | 2.31 | % | 181,425 | 1,098 | 2.40 | % | 193,455 | 1,024 | 2.10 | % | ||||||||||||
| Total interest-bearing deposits and CD’s | 10,555,552 | 15,694 | 0.59 | % | 10,488,670 | 18,707 | 0.71 | % | 9,756,250 | 13,694 | 0.56 | % | ||||||||||||
| Federal funds purchased and interbank borrowings | 95,973 | 437 | 1.80 | % | 254,971 | 1,484 | 2.31 | % | 312,730 | 1,938 | 2.46 | % | ||||||||||||
| Securities sold under agreements to repurchase | 337,786 | 469 | 0.55 | % | 340,158 | 715 | 0.83 | % | 351,392 | 634 | 0.72 | % | ||||||||||||
| Federal Home Loan Bank advances | 1,843,357 | 8,359 | 1.80 | % | 1,889,407 | 9,123 | 1.92 | % | 1,649,304 | 9,441 | 2.27 | % | ||||||||||||
| Other borrowings | 251,565 | 2,695 | 4.29 | % | 251,817 | 2,728 | 4.33 | % | 250,926 | 3,302 | 5.26 | % | ||||||||||||
| Total borrowed funds | 2,528,681 | 11,960 | 1.88 | % | 2,736,353 | 14,050 | 2.04 | % | 2,564,352 | 15,315 | 2.37 | % | ||||||||||||
| Total interest-bearing liabilities | $ | 13,084,233 | $ | 27,654 | 0.84 | % | $ | 13,225,023 | $ | 32,757 | 0.98 | % | $ | 12,320,602 | $ | 29,009 | 0.93 | % | ||||||
| Noninterest-Bearing Liabilities and Shareholders’ Equity | ||||||||||||||||||||||||
| Demand deposits | $ | 4,047,308 | $ | 3,841,867 | $ | 3,864,302 | ||||||||||||||||||
| Other liabilities | 254,296 | 262,862 | 164,771 | |||||||||||||||||||||
| Shareholders’ equity | 2,832,938 | 2,817,452 | 2,503,835 | |||||||||||||||||||||
| Total liabilities and shareholders’ equity | $ | 20,218,775 | $ | 20,147,204 | $ | 18,853,510 | ||||||||||||||||||
| Net interest rate spread | 3.21 | % | 3.29 | % | 3.37 | % | ||||||||||||||||||
| Net interest margin (FTE) | 3.46 | % | 3.57 | % | 3.64 | % | ||||||||||||||||||
| FTE adjustment | $ | 3,282 | $ | 3,171 | $ | 3,049 | ||||||||||||||||||
| (1) | Interest income is reflected on a fully taxable equivalent basis (FTE). | |||||||||||||||||||||||
| --- | --- | |||||||||||||||||||||||
| (2) | Includes loans held for sale. | |||||||||||||||||||||||
| --- | --- |
Average Balance Sheet and Interest Rates (unaudited)
($ in thousands)
| Twelve Months Ended | Twelve Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31, 2019 | December 31, 2018 | |||||||||||||||
| Earning Assets: | Average<br>Balance | Income (1)/<br>Expense | Yield/<br>Rate | Average<br>Balance | Income (1)/<br>Expense | Yield/<br>Rate | ||||||||||
| Money market and other interest-earning investments | $ | 67,069 | $ | 1,670 | 2.49 | % | $ | 48,240 | $ | 630 | 1.31 | % | ||||
| Investments: | ||||||||||||||||
| Treasury and government-sponsored agencies | 657,233 | 16,091 | 2.45 | % | 673,171 | 14,433 | 2.14 | % | ||||||||
| Mortgage-backed securities | 2,866,600 | 73,835 | 2.58 | % | 1,707,646 | 41,493 | 2.43 | % | ||||||||
| States and political subdivisions | 1,202,210 | 44,716 | 3.72 | % | 1,153,315 | 42,326 | 3.67 | % | ||||||||
| Other securities | 495,847 | 16,138 | 3.25 | % | 490,464 | 15,633 | 3.19 | % | ||||||||
| Total investments | 5,221,890 | 150,780 | 2.89 | % | 4,024,596 | 113,885 | 2.83 | % | ||||||||
| Loans: (2) | ||||||||||||||||
| Commercial | 3,023,421 | 141,215 | 4.67 | % | 2,924,878 | 131,471 | 4.49 | % | ||||||||
| Commercial and agriculture real estate | 5,044,623 | 275,853 | 5.47 | % | 4,536,897 | 235,876 | 5.20 | % | ||||||||
| Consumer: | ||||||||||||||||
| Home equity | 566,232 | 28,515 | 5.04 | % | 513,111 | 25,029 | 4.88 | % | ||||||||
| Other consumer loans | 1,180,898 | 48,681 | 4.12 | % | 1,258,253 | 46,660 | 3.71 | % | ||||||||
| Subtotal commercial and consumer loans | 9,815,174 | 494,264 | 5.04 | % | 9,233,139 | 439,036 | 4.76 | % | ||||||||
| Residential real estate loans | 2,281,047 | 96,613 | 4.24 | % | 2,195,078 | 89,888 | 4.09 | % | ||||||||
| Total loans | 12,096,221 | 590,877 | 4.88 | % | 11,428,217 | 528,924 | 4.63 | % | ||||||||
| Total earning assets | $ | 17,385,180 | $ | 743,327 | 4.28 | % | $ | 15,501,053 | $ | 643,439 | 4.15 | % | ||||
| Less: Allowance for loan losses | (56,624 | ) | (52,316 | ) | ||||||||||||
| Non-earning Assets: | ||||||||||||||||
| Cash and due from banks | $ | 251,857 | $ | 210,716 | ||||||||||||
| Other assets | 2,453,001 | 2,130,588 | ||||||||||||||
| Total assets | $ | 20,033,414 | $ | 17,790,041 | ||||||||||||
| Interest-Bearing Liabilities: | ||||||||||||||||
| Checking and NOW accounts | $ | 3,902,765 | $ | 15,598 | 0.40 | % | $ | 3,146,309 | $ | 4,973 | 0.16 | % | ||||
| Savings accounts | 2,878,135 | 8,142 | 0.28 | % | 2,995,484 | 7,464 | 0.25 | % | ||||||||
| Money market accounts | 1,789,065 | 14,130 | 0.79 | % | 1,225,220 | 4,424 | 0.36 | % | ||||||||
| Other time deposits | 1,748,552 | 27,400 | 1.57 | % | 1,654,548 | 21,012 | 1.27 | % | ||||||||
| Total interest-bearing deposits | 10,318,517 | 65,270 | 0.63 | % | 9,021,561 | 37,873 | 0.42 | % | ||||||||
| Brokered CD’s | 173,439 | 4,094 | 2.36 | % | 185,426 | 3,404 | 1.84 | % | ||||||||
| Total interest-bearing deposits and CD’s | 10,491,956 | 69,364 | 0.66 | % | 9,206,987 | 41,277 | 0.45 | % | ||||||||
| Federal funds purchased and interbank borrowings | 241,618 | 5,656 | 2.34 | % | 238,408 | 4,793 | 2.01 | % | ||||||||
| Securities sold under agreements to repurchase | 342,654 | 2,517 | 0.73 | % | 344,964 | 1,962 | 0.57 | % | ||||||||
| Federal Home Loan Bank advances | 1,775,987 | 37,452 | 2.11 | % | 1,665,689 | 34,925 | 2.10 | % | ||||||||
| Other borrowings | 251,194 | 11,125 | 4.43 | % | 249,832 | 11,486 | 4.60 | % | ||||||||
| Total borrowed funds | 2,611,453 | 56,750 | 2.17 | % | 2,498,893 | 53,166 | 2.13 | % | ||||||||
| Total interest-bearing liabilities | $ | 13,103,409 | $ | 126,114 | 0.96 | % | $ | 11,705,880 | $ | 94,443 | 0.81 | % | ||||
| Noninterest-Bearing Liabilities and Shareholders’ Equity | ||||||||||||||||
| Demand deposits | $ | 3,887,470 | $ | 3,657,234 | ||||||||||||
| Other liabilities | 261,403 | 159,600 | ||||||||||||||
| Shareholders’ equity | 2,781,132 | 2,267,327 | ||||||||||||||
| Total liabilities and shareholders’ equity | $ | 20,033,414 | $ | 17,790,041 | ||||||||||||
| Net interest rate spread | 3.32 | % | 3.34 | % | ||||||||||||
| Net interest margin (FTE) | 3.55 | % | 3.54 | % | ||||||||||||
| FTE adjustment | $ | 12,940 | $ | 11,394 | ||||||||||||
| (1) | Interest income is reflected on a fully taxable equivalent basis (FTE). | |||||||||||||||
| --- | --- | |||||||||||||||
| (2) | Includes loans held for sale. | |||||||||||||||
| --- | --- |
Asset Quality (EOP) (unaudited)
($ in thousands)
| Three Months Ended | Twelve Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31, | September 30, | December 31, | December 31, | December 31, | |||||||||||
| 2019 | 2019 | 2018 | 2019 | 2018 | |||||||||||
| Beginning allowance for loan losses | $ | 56,910 | $ | 56,292 | $ | 52,713 | $ | 55,461 | $ | 50,381 | |||||
| Provision for loan losses | 1,264 | 1,437 | 3,390 | 4,747 | 6,966 | ||||||||||
| Gross charge-offs | (6,304 | ) | (2,716 | ) | (2,969 | ) | (14,789 | ) | (12,969 | ) | |||||
| Gross recoveries | 2,749 | 1,897 | 2,327 | 9,200 | 11,083 | ||||||||||
| Net (charge-offs) recoveries | (3,555 | ) | (819 | ) | (642 | ) | (5,589 | ) | (1,886 | ) | |||||
| Ending allowance for loan losses | $ | 54,619 | $ | 56,910 | $ | 55,461 | $ | 54,619 | $ | 55,461 | |||||
| Net charge-offs (recoveries) / average loans (1) | 0.12 | % | 0.03 | % | 0.02 | % | 0.05 | % | 0.02 | % | |||||
| Average loans outstanding (1) | $ | 12,058,109 | $ | 12,061,705 | $ | 11,967,241 | $ | 12,087,429 | $ | 11,422,967 | |||||
| EOP loans outstanding (1) | 12,117,524 | $ | 12,017,648 | $ | 12,243,892 | $ | 12,117,524 | $ | 12,243,892 | ||||||
| Allowance for loan losses / EOP loans (1) | 0.45 | % | 0.47 | % | 0.45 | % | 0.45 | % | 0.45 | % | |||||
| Underperforming Assets: | |||||||||||||||
| Loans 90 Days and over (still accruing) | $ | 570 | $ | 703 | $ | 1,353 | $ | 570 | $ | 1,353 | |||||
| Non-performing loans: | |||||||||||||||
| Nonaccrual loans (2) | 126,412 | 138,498 | 157,484 | 126,412 | 157,484 | ||||||||||
| Renegotiated loans | 18,338 | 18,884 | 17,356 | 18,338 | 17,356 | ||||||||||
| Total non-performing loans | 144,750 | 157,382 | 174,840 | 144,750 | 174,840 | ||||||||||
| Foreclosed properties | 2,169 | 2,941 | 3,232 | 2,169 | 3,232 | ||||||||||
| Total underperforming assets | $ | 147,489 | $ | 161,026 | $ | 179,425 | $ | 147,489 | $ | 179,425 | |||||
| Classified and Criticized Assets: | |||||||||||||||
| Nonaccrual loans (2) | 126,412 | 138,498 | 157,484 | 126,412 | 157,484 | ||||||||||
| Substandard accruing loans | 169,689 | 145,987 | 175,948 | 169,689 | 175,948 | ||||||||||
| Loans 90 days and over (still accruing) | 570 | 703 | 1,353 | 570 | 1,353 | ||||||||||
| Total classified loans - “problem loans” | $ | 296,671 | $ | 285,188 | $ | 334,785 | $ | 296,671 | $ | 334,785 | |||||
| Other classified assets | 2,933 | 2,556 | 2,820 | 2,933 | 2,820 | ||||||||||
| Criticized loans - “special mention loans” | 234,841 | 233,519 | 238,752 | 234,841 | 238,752 | ||||||||||
| Total classified and criticized assets | $ | 534,445 | $ | 521,263 | $ | 576,357 | $ | 534,445 | $ | 576,357 | |||||
| Non-performing loans / EOP loans (1) | 1.19 | % | 1.31 | % | 1.43 | % | 1.19 | % | 1.43 | % | |||||
| Allowance to non-performing loans (3) | 38 | % | 36 | % | 32 | % | 38 | % | 32 | % | |||||
| Under-performing assets / EOP loans (1) | 1.22 | % | 1.34 | % | 1.47 | % | 1.22 | % | 1.47 | % | |||||
| EOP total assets | $ | 20,411,667 | $ | 20,438,788 | $ | 19,728,435 | $ | 20,411,667 | $ | 19,728,435 | |||||
| Under-performing assets / EOP assets | 0.72 | % | 0.79 | % | 0.91 | % | 0.72 | % | 0.91 | % |
EOP - End of period actual balances
| (1) | Excludes loans held for sale. |
|---|---|
| (2) | Includes renegotiated loans totaling $13.8 million at December 31, 2019, $21.8 million at<br>September 30, 2019, and $26.3 million at December 31, 2018. |
| --- | --- |
| (3) | Includes acquired loans that were recorded at fair value in accordance with ASC 805 at the date of acquisition.<br>As such, the credit risk was incorporated in the fair value recorded and no allowance for loan losses was recorded on the acquisition date. |
| --- | --- |
Non-GAAP Measures (unaudited)
($ in thousands)
| Three Months Ended | Twelve Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31, | September 30, | December 31, | December 31, | December 31, | |||||||||||
| 2019 | 2019 | 2018 | 2019 | 2018 | |||||||||||
| Actual End of Period Balances | |||||||||||||||
| GAAP shareholders’ equity | $ | 2,852,453 | $ | 2,832,530 | $ | 2,689,570 | $ | 2,852,453 | $ | 2,689,570 | |||||
| Deduct: | |||||||||||||||
| Goodwill | 1,036,994 | 1,036,994 | 1,036,258 | 1,036,994 | 1,036,258 | ||||||||||
| Intangibles | 60,105 | 64,051 | 77,016 | 60,105 | 77,016 | ||||||||||
| 1,097,099 | 1,101,045 | 1,113,274 | 1,097,099 | 1,113,274 | |||||||||||
| Tangible shareholders’ equity | $ | 1,755,354 | $ | 1,731,485 | $ | 1,576,296 | $ | 1,755,354 | $ | 1,576,296 | |||||
| Average Balances | |||||||||||||||
| GAAP shareholders’ equity | $ | 2,832,938 | $ | 2,817,452 | $ | 2,503,835 | $ | 2,781,132 | $ | 2,267,327 | |||||
| Deduct: | |||||||||||||||
| Goodwill | 1,036,994 | 1,036,306 | 969,403 | 1,036,456 | 864,079 | ||||||||||
| Intangibles | 61,963 | 66,047 | 66,927 | 68,244 | 52,209 | ||||||||||
| 1,098,957 | 1,102,353 | 1,036,330 | 1,104,700 | 916,288 | |||||||||||
| Average tangible shareholders’ equity | $ | 1,733,981 | $ | 1,715,099 | $ | 1,467,505 | $ | 1,676,432 | $ | 1,351,039 | |||||
| Actual End of Period Balances | |||||||||||||||
| GAAP assets | $ | 20,411,667 | $ | 20,438,788 | $ | 19,728,435 | $ | 20,411,667 | $ | 19,728,435 | |||||
| Add: | |||||||||||||||
| Trust overdrafts | 31 | 24 | 11 | 31 | 11 | ||||||||||
| Deduct: | |||||||||||||||
| Goodwill | 1,036,994 | 1,036,994 | 1,036,258 | 1,036,994 | 1,036,258 | ||||||||||
| Intangibles | 60,105 | 64,051 | 77,016 | 60,105 | 77,016 | ||||||||||
| 1,097,099 | 1,101,045 | 1,113,274 | 1,097,099 | 1,113,274 | |||||||||||
| Tangible assets | $ | 19,314,599 | $ | 19,337,767 | $ | 18,615,172 | $ | 19,314,599 | $ | 18,615,172 | |||||
| Risk-weighted assets | $ | 14,073,929 | $ | 13,975,295 | $ | 14,248,562 | $ | 14,073,929 | $ | 14,248,562 | |||||
| GAAP net income | $ | 49,185 | $ | 69,781 | $ | 47,498 | $ | 238,206 | $ | 190,830 | |||||
| Add: | |||||||||||||||
| Amortization of intangibles (net of tax) | 2,976 | 3,145 | 3,266 | 12,756 | 11,410 | ||||||||||
| Tangible net income | $ | 52,161 | $ | 72,926 | $ | 50,764 | $ | 250,962 | $ | 202,240 | |||||
| Tangible Ratios | |||||||||||||||
| Return on tangible common equity | 11.89 | % | 16.85 | % | 12.88 | % | 14.30 | % | 12.83 | % | |||||
| Return on average tangible common equity | 12.03 | % | 17.01 | % | 13.84 | % | 14.97 | % | 14.97 | % | |||||
| Return on tangible assets | 1.08 | % | 1.51 | % | 1.09 | % | 1.30 | % | 1.09 | % | |||||
| Tangible common equity to tangible assets | 9.09 | % | 8.95 | % | 8.47 | % | 9.09 | % | 8.47 | % | |||||
| Tangible common equity to risk-weighted assets | 12.47 | % | 12.39 | % | 11.06 | % | 12.47 | % | 11.06 | % | |||||
| Tangible common book value (1) | 10.35 | 10.18 | 9.00 | 10.35 | 9.00 | ||||||||||
| Tangible common equity presentation includes other<br>comprehensive income as is common in other company releases.<br> <br>(1) Tangible common<br>shareholders’ equity divided by common shares issued and outstanding at period-end. | |||||||||||||||
| Tier 1 common equity | $ | 1,706,727 | $ | 1,681,457 | $ | 1,617,936 | $ | 1,706,727 | $ | 1,617,936 | |||||
| Risk-weighted assets | 14,073,929 | 13,975,295 | 14,248,562 | 14,073,929 | 14,248,562 | ||||||||||
| Tier 1 common equity to risk-weighted assets | 12.13 | % | 12.03 | % | 11.36 | % | 12.13 | % | 11.36 | % |