425

Filed by Old National Bancorp

Pursuant to Rule 425 under the Securities Act of 1933

Subject Company: Anchor BanCorp Wisconsin Inc.

Commission File No.: 001-34955


LOGO

 

    NASDAQ: ONB
 

 

oldnational.com

FOR IMMEDIATE RELEASE  
February 1, 2016   Contacts:
 

 

Media:

  Kathy A. Schoettlin – (812) 465-7269
  Executive Vice President – Communications
 

 

Financial Community:

  Lynell J. Walton – (812) 464-1366
  Senior Vice President – Investor Relations

Old National Bancorp’s 2015 Net Income of $116.7 million is 12.6% over last year; Fourth Quarter caps successful year

4TH VS. 3RD QUARTER 2015 HIGHLIGHTS:

 

    Earnings of $32.0 million, or $.27 per common share

 

    Organic loan growth of $102.0 million, or 6.0% annualized, excluding covered loans

 

    5.3% decline in operational noninterest expenses1

 

    Tangible book value1 increase of 2.3%

2015 HIGHLIGHTS:

 

    Earnings of $116.7 million represent a 12.6% increase over 2014 ($103.7 million)

 

    Organic loan growth of $324.1 million or 5.1%, excluding covered, acquired & sold loans

 

    Loan production of $2.8 billion is 39.2% over 2014 production

 

    Credit quality remains strong

 

    Transformation strategy reflects successful partnership integrations

 

1 Non-GAAP measures – refer to Tables 1 and 9 for Non-GAAP reconciliations

 

 

Evansville, Ind. (February 1, 2016) – Today Old National Bancorp (the “Company” or “Old National”) (NASDAQ: ONB) reported 4th quarter 2015 net income of $32.0 million, or $.27 per share. These reported quarterly results compare to net income of $37.7 million in the 3rd quarter of 2015 and $29.3 million recorded in the 4th quarter of 2014.

Included in 4th quarter 2015 results were $11.1 million in pre-tax gains related primarily to the repurchase of 14 banking properties. Also included in the current quarter were $2.4 million in pre-tax charges related to continued efficiency initiatives as well as a $4.8 million pre-tax charge for a litigation settlement. Excluding the impact of these items, Old National would have reported net income of $29.4 million, or $.25 per share. Refer to Table 2 for Non-GAAP reconciliation.

For the twelve months ended December 31, 2015, net income was $116.7 million, or $1.00 per share. This net income represents an increase of 12.6% to full-year 2014 net income of $103.7 million, or $.95 per share.

Old National Bancorp President & CEO Bob Jones stated, “Our strong 4th quarter performance provides a fitting ending to 2015 – a year focused on execution. Our continued loan growth, lower expenses and excellent credit quality metrics, combined with our latest partnership and entry into the state of Wisconsin, should position us for continued success in 2016.”


Committed to our Strategic Imperatives and 2015 Initiatives

Old National’s continued steady performance and strong credit and capital positions can be attributed to the Company’s unwavering commitment to the three strategic imperatives that have guided Old National for 10 years:

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

Guided by these three strategic imperatives, Old National’s primary initiatives for 2015 were: 1. Continue to grow organic revenue; 2. Improve operating leverage; and 3. Prudent use of capital, all while maintaining a strong credit culture.

Grow Organic Revenue

Balance Sheet and Net Interest Margin

Total period-end loans, including loans held for sale, increased $95.5 million to $6.962 billion from $6.867 billion at September 30, 2015. Excluding the change in covered loans, Old National had organic loan growth of $102.0 million, or 6.0% annualized, in the 4th quarter. The Louisville, Kentucky market, including the Company’s new Lexington office, and the Indianapolis and Vincennes, Indiana markets were the best producing regions, increasing $21.1 million, $20.2 million and $14.5 million, respectively, over September 30, 2015, loan balances.

At December 31, 2015, total core deposits, including demand and interest-bearing deposits, decreased $259.0 million to $8.302 billion, compared to the $8.561 billion at September 30, 2015.

Net interest income in the 4th quarter of 2015 totaled $85.9 million compared to $97.1 million in the 3rd quarter of 2015, and $90.0 million in the 4th quarter of 2014. Net interest income on a fully taxable equivalent basis was $91.1 million for the 4th quarter of 2015 and represented a net interest margin on total average earning assets of 3.50%. These results compare to net interest income on a fully taxable equivalent basis of $102.1 million and a margin of 3.94% in the 3rd quarter of 2015. In the 4th quarter of 2014, Old National reported net interest income on a fully taxable equivalent basis of $94.4 million and a margin of 3.83%. Refer to Table 6 for Non-GAAP taxable equivalent reconciliations.

As part of net interest income, Old National recorded $12.3 million, or a 48 basis point contribution to net interest margin, in accretion income in the 4th quarter of 2015 related to purchase accounting discounts from various acquisitions. Total accretion income in the 3rd quarter of 2015 and the 4th quarter of 2014 reported by Old National was $20.6 million, or an 80 basis point net interest margin contribution, and $16.6 million, or a 68 basis point net interest margin contribution, respectively. Excluding accretion income, the core net interest margin was 3.02%, 3.14% and 3.15%, for the 4th quarter of 2015, the 3rd quarter of 2015 and the 4th quarter of 2014, respectively.

Fees, Service Charges and Other Revenue

Total fees, service charges and other revenue represent an important component of Old National’s revenue stream and amounted to $58.9 million for the 4th quarter of 2015. This compares to $58.8 million in the 3rd quarter of 2015 and $45.6 million in the 4th quarter of 2014. Included in the 4th quarter of 2015 is a $10.8 million gain relating to the repurchase of 14 banking properties. Impacting the 3rd quarter of 2015 was a $15.4 million net gain relating to branch sales as well as a $6.6 million unfavorable change in the indemnification asset relating to the 2011 FDIC-assisted acquisition of Integra Bank. Impacting year-over-year comparisons is the Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. This Amendment became effective for Old National beginning July 1, 2015, resulting in a decline in interchange income of $2.7 million in both the 3rd and 4th quarters of 2015 as compared to the 4th quarter of 2014.

Improve Operating Leverage

Old National reported total noninterest expenses of $102.5 million in the 4th quarter of 2015 compared to $102.6 million in the 3rd quarter of 2015 and $100.1 million recorded in the 4th quarter of 2014. Included in the 4th quarter of 2015 are $2.4 million in pre-tax charges related to various efficiency initiatives (including branch consolidations


and divestitures and severance) as well as a $4.8 million pre-tax charge for the estimated full cost of the anticipated settlement of the previously disclosed overdraft class action litigation. This compares to pre-tax charges of $2.0 million relating to branch sales and consolidations and integration charges in the 3rd quarter of 2015 and $3.1 million relating to integration activity in the 4th quarter of 2014. Also impacting year-over-year comparisons are the operational costs associated with the United Bancorp, Inc., LSB Financial Corp., and Founders Financial Corporation acquisitions, which closed in July and November of 2014, and January of 2015, respectively, adding 27 branches to the Old National franchise. As of December 31, 2015, Old National has 160 branches throughout its franchise.

Prudent Use of Capital

Old National’s capital position remained well above regulatory guideline minimums at December 31, 2015, with regulatory tier 1 and total risk-based capital ratios of 12.6% and 13.3%, respectively, compared to 12.5% and 13.2% at September 30, 2015, and 12.9% and 13.6% at December 30, 2014. Old National repurchased 306 thousand shares of stock in the open market during the 4th quarter of 2015.

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

 

     Fully Phased-In
Regulatory
Guidelines Minimum
    Consolidated ONB
at December 31,
2015
 

Tier 1 Risk-Based Capital Ratio

     >8.5     12.6

Total Risk-Based Capital Ratio

     >10.5     13.3

Common Equity Tier 1 Capital Ratio

     >7.0     12.1

Tier 1 Leverage Capital Ratio

     >4.0     8.5

Old National’s ratio of tangible common equity to tangible assets was 7.66% at December 31, 2015, compared to 7.56% at September 30, 2015, and 8.09% at December 31, 2014. Refer to Table 9 for Non-GAAP reconciliations.

Maintain a Strong Credit Culture

During the 4th quarter of 2015, Old National recorded provision expense of $.5 million and had net recoveries of $.5 million. These results compare to $.2 million in provision expense and net recoveries of $.9 million, and a provision expense of $.9 million and net charge-offs of $1.3 million, in the 3rd quarter of 2015 and the 4th quarter of 2014, respectively. Net recoveries for the 4th quarter of 2015 were .03% of average total loans on an annualized basis, compared to net recoveries of .05% of average total loans in the 3rd quarter of 2015 and net charge-offs of .08% of average total loans in the 4th quarter of 2014.

Delinquencies remained low as Old National reported 30+ day delinquent loans of .31% in the 4th quarter compared to .41% in the 3rd quarter of 2015. Old National’s 90+ day delinquent loans for the 4th quarter were .01% compared to .01% in the 3rd quarter of 2015.

For the full year of 2015, Old National reported net recoveries of $1.5 million, or .02% of average total loans, and recorded provision expense of $2.9 million. This compares to the full year of 2014 with net charge-offs of $2.4 million, or .04% of average total loans, and provision expense of $3.1 million.

Old National’s allowance for loan losses at December 31, 2015, was $52.2 million, or .75% of total loans, compared to an allowance of $51.2 million, or .75% of total loans at September 30, 2015, and $47.8 million, or .76% of total loans, at December 31, 2014. The coverage ratio (allowance to non-performing loans) stood at 36% at December 31, 2015, compared to 33% at September 30, 2015, and 31% at December 31, 2014. Impacting these ratios are the Company’s recent acquisitions in which the loan portfolios were booked at fair value in accordance with ASC 805. Therefore, no allowance for loan losses is recorded on the acquisition date.


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

 

($ in millions)

   4Q15     3Q15     4Q14  

Non-Performing Loans (NPLs)

   $ 146.7      $ 154.8      $ 153.7   

Problem Loans (Including NPLs)

     213.3        252.4        250.9   

Special Mention Loans

     134.3        141.2        199.3   

Net Charge-Off(Recoveries) Ratio

     (0.03 )%      (0.05 )%      0.08

Provision for Loan Losses

   $ 0.5      $ 0.2      $ 0.9   

Allowance for Loan Losses

     52.2        51.2        47.8   

Anchor Partnership and 2016 Initiatives

“Our initial integration efforts in Wisconsin have reinforced our belief that not only is Old National entering dynamic markets, but we are doing so with a high quality team,” stated CEO Bob Jones. “This expansion of our footprint will be supported through the continued focus on execution in our current markets, which will continue to be guided by the same strategic initiatives that led to our successful 2015: 1. Continue to grow organic revenue; 2. Improve the operating leverage of the Company; and 3. Prudent use of capital. We believe the partnerships we have closed to date position the franchise in growth markets where our community bank brand and style bode well for our future performance.”

About Old National

Old National Bancorp (NASDAQ: ONB), the holding company of Old National Bank, is the largest financial services holding company headquartered in Indiana and, with $12.0 billion in assets, ranks among the top 100 banking companies in the U.S. Since its founding in Evansville in 1834, Old National Bank has focused on community banking by building long-term, highly valued partnerships with clients. Today, Old National’s footprint includes Indiana, Kentucky and Michigan. In addition to providing extensive services in retail and commercial banking, wealth management, investments and brokerage, Old National also owns Old National Insurance, one of the 100 largest brokers in the U.S. For more information and financial data, please visit Investor Relations at oldnational.com.

Conference Call

Old National will hold a conference call at 10:00 a.m. Central Time on Monday, February 1, 2016, to discuss 4th quarter and full-year 2015 financial results, strategic developments, and the Company’s financial outlook. The live audio web cast of the call, along with the corresponding presentation slides, will be available on the Company’s Investor Relations web page at oldnational.com and will be archived there for 12 months. A replay of the call will also be available from 7:00 a.m. Central Time on February 2 through February 16. To access the replay, dial 1-855-859-2056, Conference ID Code 24105575.

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 this release or the Quarterly Financial Trends supplement to this earnings release, which can be found on Investor Relations at oldnational.com.

Table 1: Non-GAAP Reconciliation-Operational Noninterest Expenses

 

($ in millions)

   4Q15      3Q15  

Total Noninterest Expenses As Reported

   $ 102.5       $ 102.6   

Anticipated Settlement of Previously Disclosed Overdraft Litigation

     (4.8      —     

Branch Consolidation/Divestiture, Integration and Severance Charges

     (2.4      (2.0

Operational Noninterest Expenses

   $ 95.3       $ 100.6   


Table 2: Non-GAAP Reconciliation-Adjusted Net Income

 

($ in millions, shares in 000s)

   Reported 4Q15      Adjustments      Adjusted 4Q15  

Total Revenues (FTE Basis)

   $ 151.7       $ (11.1    $ 140.6   

Less: Provision for Loan Losses

     (0.5      —           (0.5

Less: Noninterest Expenses

     (102.5      7.2         (95.3

Income before Income Taxes

   $ 48.7       $ (3.9    $ 44.8   

Income Taxes

     (16.7      1.3         (15.4

Net Income

   $ 32.0       $ (2.6    $ 29.4   

Average Shares Outstanding

     114,716         —           114,716   

Earnings Per Share

   $ 0.27       $ (0.02    $ 0.25   

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, statements about the expected timing, completion, financial benefits and other effects of the proposed merger between ONB and Anchor. Forward-looking statements can be identified by the use of the words “anticipate,” “believe,” “expect,” “intend,” “could” and “should,” and other words of similar meaning. These forward-looking statements express management’s current expectations or forecasts of future events and, by their nature, are subject to risks and uncertainties and there are a number of factors that could cause actual results to differ materially from those in such statements. Factors that might cause such a difference include, but are not limited to: expected cost savings, synergies and other financial benefits from the proposed merger might not be realized within the expected time frames and costs or difficulties relating to integration matters might be greater than expected; the requisite shareholder and regulatory approvals for the proposed merger might not be obtained; satisfaction of other closing conditions; delay in closing the proposed merger; the reaction to the transaction of the companies’ customers and employees; market, economic, operational, liquidity, credit and interest rate risks associated with ONB’s and Anchor’s businesses; 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 ONB and Anchor to execute their respective business plans (including integrating the ONB and Anchor businesses); 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; other matters discussed in this press release and other factors identified in ONB’s 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 neither ONB nor Anchor undertakes an obligation to release revisions to these forward-looking statements to reflect events or conditions after the date of this press release.

Additional Information About the Old National Bancorp/Anchor BanCorp Wisconsin Inc. Transaction

Communications in this press release do not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. In connection with the proposed merger, ONB will file with the SEC a Registration Statement on Form S-4 that will include a Proxy Statement of Anchor and a Prospectus of ONB, as well as other relevant documents concerning the proposed transaction. Shareholders are urged to read the Registration Statement and the Proxy Statement/Prospectus regarding the merger when it becomes available and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they will contain important information. A free copy of the Proxy Statement/Prospectus, as well as other filings containing information about ONB and Anchor, may be obtained at the SEC’s Internet site (http://www.sec.gov). You will also be able to obtain these documents, free of charge, from ONB at www.oldnational.com under the tab “Investor Relations” and then under the heading “Financial Information” or from Anchor by accessing Anchor’s website at www.anchorbank.com under the tab “About Us.”

ONB and Anchor and certain of their directors and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of Anchor in connection with the proposed merger. Information about the directors and executive officers of ONB is set forth in the proxy statement for ONB’s 2015 annual meeting of shareholders, as filed with the SEC on a Schedule 14A on March 13, 2015. Information about the directors and executive officers of Anchor is set forth in the proxy statement for Anchor’s 2015 annual meeting of shareholders, as filed with the SEC on a Schedule 14A on March 27, 2015. Additional information regarding the interests of those participants and other persons who may be deemed participants in the transaction may be obtained by reading the Proxy Statement/Prospectus regarding the proposed merger when it becomes available. Free copies of this document may be obtained as described in the preceding paragraph.


TABLE 3    Financial Highlights     
   ($ and shares in thousands, except per share data)   

 

     Three Months Ended     Twelve Months Ended  
     December 31,     September 30,     December 31,     December 31,     December 31,  
     2015     2015     2014     2015     2014  

Income Statement

          

Net interest income

   $ 85,922      $ 97,104      $ 90,043      $ 366,116      $ 366,370   

Provision for loan losses

     484        167        869        2,923        3,097   

Noninterest income

     60,614        59,744        50,495        230,632        165,129   

Net income

     31,985        37,669        29,250        116,716        103,667   

Per Common Share Data (Diluted)

          

Net income available to common shareholders

   $ 0.27      $ 0.33      $ 0.25      $ 1.00      $ 0.95   

Average diluted shares outstanding

     114,716        115,153        116,592        116,255        108,365   

Book value

     13.05        12.89        12.54        13.05        12.54   

Stock price

     13.56        13.93        14.88        13.56        14.88   

Dividend payout ratio

     43     36     44     48     46

Tangible common book value (1)

     7.62        7.45        7.67        7.62        7.67   

Performance Ratios

          

Return on average assets

     1.07     1.26     1.03     0.98     0.99

Return on average common equity

     8.63     10.27     8.06     7.88     7.91

Net interest margin (FTE)

     3.50     3.94     3.83     3.72     4.22

Efficiency ratio (2)

     66.42     61.97     69.54     68.65     70.03

Net charge-offs (recoveries) to average loans

     -0.03     -0.05     0.08     -0.02     0.04

Allowance for loan losses to ending loans

     0.75     0.75     0.76     0.75     0.76

Non-performing loans to ending loans

     2.11     2.26     2.43     2.11     2.43

Balance Sheet

          

Total loans

   $ 6,948,405      $ 6,847,898      $ 6,318,201      $ 6,948,405      $ 6,318,201   

Total assets

     11,991,527        11,913,786        11,646,051        11,991,527        11,646,051   

Total deposits

     8,400,860        8,621,325        8,490,664        8,400,860        8,490,664   

Total borrowed funds

     1,920,246        1,593,843        1,469,911        1,920,246        1,469,911   

Total shareholders’ equity

     1,491,170        1,476,002        1,465,764        1,491,170        1,465,764   

Capital Ratios (1)

          

Risk-based capital ratios (EOP):

          

Tier 1 common equity

     12.1     12.1     N/A        12.1     N/A   

Tier 1

     12.6     12.5     12.9     12.6     12.9

Total

     13.3     13.2     13.6     13.3     13.6

Leverage ratio (to average assets)

     8.5     8.4     8.8     8.5     8.8

Total equity to assets (averages)

     12.42     12.30     12.79     12.42     12.57

Tangible common equity to tangible assets

     7.66     7.56     8.09     7.66     8.09

Nonfinancial Data

          

Full-time equivalent employees

     2,652        2,675        2,938        2,652        2,938   

Number of branches

     160        164        195        160        195   

 

(1) See non-GAAP measures on Table 9.
(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 intangible amortization and net securities gains, as is common in other company releases, and better aligns with true operating performance.

 

FTE - Fully taxable equivalent basis   EOP - End of period actual balances   N/A - Not applicable


TABLE 4    Income Statement     
   ($ and shares in thousands, except per share data)   

 

     Three Months Ended     Twelve Months Ended  
     December 31,      September 30,     December 31,     December 31,     December 31,  
     2015      2015     2014     2015     2014  

Interest income

   $ 94,960       $ 105,671      $ 97,318      $ 399,189      $ 389,729   

Less: interest expense

     9,038         8,567        7,275        33,073        23,359   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

     85,922         97,104        90,043        366,116        366,370   

Wealth management fees

     8,142         8,290        8,251        34,395        28,737   

Service charges on deposit accounts

     10,039         11,010        11,997        43,372        47,433   

Debit card and ATM fees

     3,646         3,887        6,818        21,340        25,835   

Mortgage banking revenue

     2,145         3,170        2,390        12,540        6,017   

Insurance premiums and commissions

     10,491         9,938        9,932        42,714        41,466   

Investment product fees

     4,375         4,427        4,467        17,924        17,136   

Company-owned life insurance

     2,064         2,195        1,982        8,604        6,924   

Change in Indemnification Asset

     57         (6,582     (6,246     (9,034     (43,162

Other income

     17,958         22,477        5,963        52,851        24,650   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total fees, service charges and other revenue

     58,917         58,812        45,554        224,706        155,036   

Gains (losses) on sales of securities (1)

     1,662         861        4,869        5,718        9,730   

Gains (losses) on derivatives

     35         71        72        208        363   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total noninterest income

     60,614         59,744        50,495        230,632        165,129   

Total revenues

     146,536         156,848        140,538        596,748        531,499   

Salaries and employee benefits

     56,782         58,151        58,237        243,875        219,301   

Occupancy

     11,796         13,009        12,722        53,239        49,099   

Equipment

     2,856         2,977        2,933        13,183        12,453   

Marketing

     1,769         2,727        2,590        10,410        9,591   

Data processing

     6,020         6,622        6,918        27,309        25,382   

Communication

     2,106         2,301        2,907        9,586        10,476   

Professional fees

     2,808         2,435        3,733        11,756        16,390   

Loan expenses

     1,811         1,420        1,696        6,373        6,107   

Supplies

     565         445        688        2,275        2,958   

FDIC assessment

     1,913         1,733        1,704        7,503        6,261   

Other real estate owned expense

     482         584        330        2,703        3,101   

Intangible amortization

     2,816         2,872        2,761        11,746        9,120   

Other expense

     10,745         7,341        2,897        30,974        16,199   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total noninterest expense

     102,469         102,617        100,116        430,932        386,438   

Provision for loan losses

     484         167        869        2,923        3,097   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     43,583         54,064        39,552        162,893        141,964   

Total taxes

     11,598         16,395        10,302        46,177        38,297   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 31,985       $ 37,669      $ 29,250      $ 116,716      $ 103,667   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Diluted Earnings Per Share

           

Net income

   $ 0.27       $ 0.33      $ 0.25      $ 1.00      $ 0.95   

Average Common Shares Outstanding

           

Basic

     114,103         114,590        115,924        115,726        107,818   

Diluted

     114,716         115,153        116,592        116,255        108,365   

Common shares outstanding (EOP)

     114,297         114,523        116,847        114,297        116,847   

 

(1) Includes $0.1 million other-than-temporary impairment (OTTI) in the twelve months ended December 31, 2014.


TABLE 5   

Balance Sheet (EOP)

($ in thousands)

  

 

     December 31,     September 30,     December 31,  
     2015     2015     2014  

Assets

      

Federal Reserve Bank account

   $ 125,724      $ 10,901      $ 19,954   

Money market investments

     2,783        4,590        12,138   

Investments:

      

Treasury and government sponsored agencies

     768,564        797,713        868,324   

Mortgage-backed securities

     1,082,403        1,154,134        1,265,310   

States and political subdivisions

     1,100,501        1,079,678        967,740   

Other securities

     428,951        429,392        445,567   
  

 

 

   

 

 

   

 

 

 

Total investments

     3,380,419        3,460,917        3,546,941   
  

 

 

   

 

 

   

 

 

 

Loans held for sale

     13,810        18,783        213,490   

Loans:

      

Commercial

     1,804,615        1,740,394        1,629,600   

Commercial and agriculture real estate

     1,847,821        1,845,889        1,711,110   

Consumer:

      

Home equity

     359,954        362,055        360,320   

Other consumer loans

     1,183,814        1,145,232        950,307   
  

 

 

   

 

 

   

 

 

 

Subtotal of commercial and consumer loans

     5,196,204        5,093,570        4,651,337   

Residential real estate

     1,644,614        1,640,289        1,519,156   

Covered loans

     107,587        114,039        147,708   
  

 

 

   

 

 

   

 

 

 

Total loans

     6,948,405        6,847,898        6,318,201   
  

 

 

   

 

 

   

 

 

 

Total earning assets

     10,471,141        10,343,089        10,110,724   
  

 

 

   

 

 

   

 

 

 

Allowance for loan losses

     (52,233     (51,226     (47,849

Nonearning Assets:

      

Cash and due from banks

     91,311        157,919        207,871   

Premises and equipment

     196,676        130,341        135,892   

Goodwill and intangible assets

     619,942        622,758        569,539   

Company-owned life insurance

     341,294        339,352        325,617   

FDIC Indemnification Asset

     9,030        8,905        20,603   

Other real estate owned

     12,498        13,705        16,362   

Other assets

     301,868        348,943        307,292   
  

 

 

   

 

 

   

 

 

 

Total nonearning assets

     1,572,619        1,621,923        1,583,176   
  

 

 

   

 

 

   

 

 

 

Total assets

   $ 11,991,527      $ 11,913,786      $ 11,646,051   
  

 

 

   

 

 

   

 

 

 

Liabilities and Equity

      

Noninterest-bearing demand deposits

   $ 2,488,855      $ 2,388,854      $ 2,427,748   

NOW accounts

     2,133,536        2,001,077        2,176,879   

Savings accounts

     2,201,352        2,201,066        2,222,557   

Money market accounts

     577,050        1,043,135        574,462   

Other time deposits

     901,352        926,981        1,052,508   
  

 

 

   

 

 

   

 

 

 

Total core deposits

     8,302,145        8,561,113        8,454,154   

Brokered CD’s

     98,715        60,212        36,510   
  

 

 

   

 

 

   

 

 

 

Total deposits

     8,400,860        8,621,325        8,490,664   

Short-term borrowings

     628,499        474,894        551,309   

Other borrowings

     1,291,747        1,118,949        918,603   
  

 

 

   

 

 

   

 

 

 

Total borrowed funds

     1,920,246        1,593,843        1,469,911   

Accrued expenses and other liabilities

     179,251        222,616        219,712   
  

 

 

   

 

 

   

 

 

 

Total liabilities

     10,500,357        10,437,784        10,180,287   

Common stock, surplus, and retained earnings

     1,525,967        1,510,382        1,497,319   

Other comprehensive income

     (34,797     (34,380     (31,555
  

 

 

   

 

 

   

 

 

 

Total shareholders’ equity

     1,491,170        1,476,002        1,465,764   
  

 

 

   

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 11,991,527      $ 11,913,786      $ 11,646,051   
  

 

 

   

 

 

   

 

 

 

EOP - End of period actual balances


TABLE 6    Average Balance Sheet and Interest Rates
   ($ in thousands)

 

    Three Months Ended     Three Months Ended     Three Months Ended  
    December 31, 2015     September 30, 2015     December 31, 2014  
    Average
Balance
    Income (1)/
Expense
    Yield/
Rate
    Average
Balance
    Income (1)/
Expense
    Yield/
Rate
    Average
Balance
    Income (1)/
Expense
    Yield/
Rate
 

Earning Assets:

                 

Fed Funds sold, resell agr, Fed Reserve Bank account, and money market

  $ 94,660      $ 29        0.12   $ 33,215      $ 4        0.05   $ 21,398      $ 20        0.38

Investments:

                 

Treasury and gov’t sponsored agencies

    770,472        3,658        1.90     820,424        3,926        1.91     839,774        4,171        1.99

Mortgage-backed securities

    1,134,521        5,356        1.89     1,123,701        5,179        1.84     1,255,051        5,297        1.69

States and political subdivisions

    1,088,917        12,935        4.75     1,052,494        12,610        4.79     908,662        11,325        4.99

Other securities

    431,541        2,635        2.44     440,588        2,773        2.52     433,442        2,766        2.54
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total investments

    3,425,451        24,584        2.87     3,437,207        24,488        2.85     3,436,929        23,558        2.73
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loans:

                 

Commercial (2)

    1,773,804        16,861        3.72     1,765,028        20,106        4.46     1,661,863        18,919        4.45

Commercial and agriculture real estate (2)

    1,860,536        27,496        5.78     1,873,068        34,303        7.23     1,737,031        29,566        6.66

Consumer:

                 

Home equity (2)

    424,013        4,218        3.95     433,517        4,230        3.87     423,370        3,501        3.28

Other consumer loans (2)

    1,160,652        9,747        3.33     1,140,330        9,976        3.47     965,511        9,467        3.89
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal commercial and consumer loans

    5,219,005        58,322        4.43     5,195,768        68,615        5.24     4,787,775        61,453        5.09

Residential real estate loans (2)

    1,675,707        17,188        4.10     1,698,501        17,529        4.13     1,612,419        16,611        4.10
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total loans (2)

    6,894,712        75,510        4.32     6,894,269        86,144        4.92     6,400,194        78,064        4.81
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total earning assets

  $ 10,414,823      $ 100,123        3.80   $ 10,364,691      $ 110,636        4.22   $ 9,858,522      $ 101,642        4.09
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Interest-bearing Liabilities:

                 

NOW accounts

  $ 2,063,815      $ 289        0.06   $ 2,099,658      $ 148        0.03   $ 2,190,919      $ 184        0.03

Savings accounts

    2,207,640        784        0.14     2,278,466        797        0.14     2,204,138        751        0.14

Money market accounts

    828,501        263        0.13     607,060        104        0.07     557,842        72        0.05

Other time deposits

    909,985        2,123        0.93     973,729        2,351        0.96     1,048,183        2,331        0.88
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total interest-bearing deposits

    6,009,941        3,459        0.23     5,958,913        3,401        0.23     6,001,083        3,338        0.22

Brokered CD’s

    80,951        141        0.69     43,201        74        0.68     38,004        43        0.45
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total interest-bearing deposits and CD’s

    6,090,892        3,600        0.23     6,002,114        3,474        0.23     6,039,087        3,381        0.22
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Short-term borrowings

    479,760        144        0.12     527,368        140        0.11     437,388        84        0.08

Other borrowings

    1,196,166        5,294        1.75     1,230,541        4,952        1.59     827,658        3,811        1.81
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total borrowed funds

    1,675,926        5,438        1.29     1,757,909        5,092        1.15     1,265,047        3,895        1.19
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total interest-bearing liabilities

  $ 7,766,818      $ 9,038        0.46   $ 7,760,023      $ 8,567        0.44   $ 7,304,134      $ 7,276        0.40
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest rate spread

        3.34         3.78         3.69

Net interest margin (FTE)

        3.50         3.94         3.83

FTE adjustment

    $ 5,163          $ 4,965          $ 4,324     

 

(1) Interest income is reflected on a fully taxable equivalent basis (FTE).
(2) Includes loans held for sale.


TABLE 7    Average Balance Sheet and Interest Rates
   ($ in Thousands)

 

     Twelve Months Ended
December 31, 2015
    Twelve Months Ended
December 31, 2014
 
     Average
Balance
     Income (1)/
Expense
     Yield/
Rate
    Average
Balance
     Income (1)/
Expense
     Yield/
Rate
 

Earning Assets:

                

Fed Funds sold, resell agr, Fed Reserve Bank account, and money market

   $ 43,383       $ 47         0.11   $ 20,148       $ 42         0.21

Investments:

                

Treasury and gov’t sponsored agencies

     829,728         16,080         1.94     760,566         15,612         2.05

Mortgage-backed securities

     1,137,565         20,645         1.81     1,281,412         23,130         1.81

States and political subdivisions

     1,023,983         49,162         4.80     889,343         45,112         5.07

Other securities

     444,520         10,903         2.45     418,714         11,322         2.70
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total investments

     3,435,796         96,790         2.82     3,350,035         95,176         2.84
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Loans:

                

Commercial (2)

     1,754,141         75,900         4.33     1,527,436         70,471         4.61

Commercial and agriculture real estate (2)

     1,862,055         118,237         6.35     1,474,136         130,780         8.87

Consumer:

                

Home equity (2)

     439,657         17,480         3.98     374,320         15,281         4.08

Other consumer loans (2)

     1,115,430         39,370         3.53     839,571         34,074         4.06
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Subtotal commercial and consumer loans

     5,170,591         250,987         4.85     4,215,463         250,606         5.94

Residential real estate loans (2)

     1,712,636         70,908         4.14     1,497,122         60,904         4.07
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total loans (2)

     6,883,919         321,895         4.68     5,712,585         311,510         5.45
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total earning assets

   $ 10,363,098       $ 418,732         4.04   $ 9,082,768       $ 406,728         4.48
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Interest-bearing Liabilities:

                

NOW accounts

   $ 2,160,019       $ 758         0.04   $ 1,989,794       $ 595         0.03

Savings accounts

     2,299,357         3,199         0.14     2,104,076         2,875         0.14

Money market accounts

     677,414         577         0.09     490,247         250         0.05

Other time deposits

     1,001,436         9,270         0.93     996,405         9,453         0.91
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total interest-bearing deposits

     6,138,226         13,804         0.23     5,580,522         13,173         0.24

Brokered CD’s

     62,346         364         0.58     27,973         153         0.55
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total interest-bearing deposits and CD’s

     6,200,572         14,168         0.23     5,608,494         13,326         0.24
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Short-term borrowings

     482,241         493         0.10     404,919         310         0.08

Other borrowings

     1,061,681         18,412         1.73     753,358         9,723         1.29
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total borrowed funds

     1,543,922         18,905         1.22     1,158,277         10,033         0.86
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total interest-bearing liabilities

   $ 7,744,494       $ 33,073         0.43   $ 6,766,771       $ 23,359         0.35
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Net interest rate spread

           3.61           4.12

Net interest margin (FTE)

           3.72           4.22

FTE adjustment

      $ 19,543            $ 16,999      

 

(1) Interest income is reflected on a fully taxable equivalent basis (FTE).
(2) Includes loans held for sale.


TABLE 8    Asset Quality (EOP)
   ($ in thousands)

 

    Three Months Ended     Twelve Months Ended  
    December 31,
2015
    September 30,
2015
    December 31,
2014
    December 31,
2015
    December 31,
2014
 

Beginning allowance for loan losses

  $ 51,226      $ 50,191      $ 48,279      $ 47,849      $ 47,145   

Provision for loan losses

    484        167        869        2,923        3,097   

Gross charge-offs

    (3,499     (2,468     (3,524     (10,818     (11,216

Gross recoveries

    4,022        3,336        2,225        12,279        8,823   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (charge-offs) recoveries

    523        869        (1,298     1,461        (2,393
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending allowance for loan losses

  $ 52,233      $ 51,226      $ 47,849      $ 52,233      $ 47,849   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net charge-offs (recoveries) / average loans (1)

    -0.03     -0.05     0.08     -0.02     0.04

Average loans outstanding (1)

  $ 6,891,197      $ 6,791,601      $ 6,387,085      $ 6,756,135      $ 5,703,294   

EOP loans outstanding (1)

  $ 6,948,405      $ 6,847,898      $ 6,318,201      $ 6,948,405      $ 6,318,201   

Allowance for loan loss / EOP loans (1)

    0.75     0.75     0.76     0.75     0.76

Underperforming Assets:

         

Loans 90 Days and over (still accruing)

  $ 916      $ 575      $ 457      $ 916      $ 457   

Non-performing loans:

         

Nonaccrual loans (2)

    132,373        140,666        140,860        132,373        140,860   

Renegotiated loans

    14,285        14,121        12,858        14,285        12,858   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total non-performing loans

    146,658        154,787        153,718        146,658        153,718   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Foreclosed properties

    12,498        13,705        16,362        12,498        16,362   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total underperforming assets

  $ 160,072      $ 169,067      $ 170,537      $ 160,072      $ 170,537   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Classified loans - “problem loans”

  $ 213,294      $ 252,397      $ 250,899      $ 213,294      $ 250,899   

Other classified assets

    6,857        22,111        26,479        6,857        26,479   

Criticized loans - “special mention loans”

    134,347        141,187        199,334        134,347        199,334   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total classified and criticized assets

  $ 354,498      $ 415,695      $ 476,712      $ 354,498      $ 476,712   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-performing loans / EOP loans (1)

    2.11     2.26     2.43     2.11     2.43

Allowance to non-performing loans (3)

    36     33     31     36     31

Under-performing assets / EOP loans (1)

    2.30     2.47     2.70     2.30     2.70

EOP total assets

  $ 11,991,527      $ 11,913,786      $ 11,646,051      $ 11,991,527      $ 11,646,051   

Under-performing assets / EOP assets

    1.33     1.42     1.46     1.33     1.46

EOP - End of period actual balances

(1) Excludes loans held for sale.
(2) Includes renegotiated loans totaling $30.0 million at December 31, 2015, $38.6 million at September 30, 2015, and $22.1 million at December 31, 2014.
(3) Includes acquired loans that were recorded at fair value in accordance with ASC 805 at the date of acquisition. As such, the credit risk was incorporated in the fair value recorded and no allowance for loan losses was recorded on the acquisition date.


TABLE 9    Non-GAAP Measures
   ($ in thousands)

 

    Three Months Ended     Twelve Months Ended  
    December 31,
2015
    September 30,
2015
    December 31,
2014
    December 31,
2015
    December 31,
2014
 

Actual EOP Balances

         

GAAP shareholders’ equity

  $ 1,491,170      $ 1,476,002      $ 1,465,764      $ 1,491,170      $ 1,465,764   

Deduct:

         

Goodwill

    584,634        584,634        530,845        584,634        530,845   

Intangibles

    35,308        38,124        38,694        35,308        38,694   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    619,942        622,758        569,539        619,942        569,539   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Tangible shareholders’ equity

  $ 871,228      $ 853,244      $ 896,225      $ 871,228      $ 896,225   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Actual EOP Balances

         

GAAP assets

  $ 11,991,527      $ 11,913,786      $ 11,646,051      $ 11,991,527      $ 11,646,051   

Add:

         

Trust overdrafts

    29        127        227        29        227   

Deduct:

         

Goodwill

    584,634        584,634        530,845        584,634        530,845   

Intangibles

    35,308        38,124        38,694        35,308        38,694   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    619,942        622,758        569,539        619,942        569,539   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Tangible Assets

  $ 11,371,614      $ 11,291,155      $ 11,076,739      $ 11,371,614      $ 11,076,739   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Risk weighted assets

    7,718,065        7,597,349        7,334,027        7,718,065        7,334,027   

Actual EOP Balances

         

GAAP net income

  $ 31,985      $ 37,669      $ 29,250      $ 116,716      $ 103,667   

Add:

         

Intangible amortization (net of tax)

    2,545        2,596        2,461        10,593        7,797   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Tangible net income

  $ 34,530      $ 40,265      $ 31,711      $ 127,309      $ 111,464   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Tangible Ratios

         

Return on tangible common equity

    15.85     18.88     14.15     14.61     12.44

Return on tangible assets

    1.21     1.43     1.15     1.12     1.01

Tangible common equity to tangible assets

    7.66     7.56     8.09     7.66     8.09

Tangible common equity to risk weighted assets

    11.29     11.23     12.22     11.29     12.22

Tangible common book value (1)

    7.62        7.45        7.67        7.62        7.67   
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

  $ 968,772      $ 950,915      $ 944,649      $ 968,772      $ 944,649   

Deduct:

         

Trust Preferred Securities

    45,000        45,000        45,000        45,000        45,000   

Additional Tier 1 capital deductions

    (10,725     (11,392     —          (10,725     —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    34,275        33,608        45,000        34,275        45,000   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Tier 1 common equity

  $ 934,497      $ 917,307      $ 899,649      $ 934,497      $ 899,649   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Risk weighted assets

    7,718,065        7,597,349        7,334,027        7,718,065        7,334,027   

Tier 1 common equity to risk weighted assets

    12.11     12.07     12.27     12.11     12.27