Old National Bancorp (NASDAQ: ONB) reports 2Q19 net income of $63.0 million, diluted EPS of $0.36.  Adjusted1 net income of $64.5 million, or $0.37 per diluted share.

CEO COMMENTARY:

“This was a quarter that saw Old National report record net income, strong loan production, good fee income and excellent credit metrics, all of which allowed us to continue to generate positive operating leverage,” said CEO Jim Ryan. “While loan prepayments and planned exits impacted overall balance sheet growth, activity levels were robust, and we successfully converted our KleinBank-Minnesota branches during the quarter.  Our granular loan portfolio and low-risk profile again resulted in very low credit costs, and Old National remains on a high-performance path.”

SECOND QUARTER HIGHLIGHTS2:

Net Income

  • Net income of $63.0 million, an increase of 43.1% from second quarter of 2018
  • Earnings per share of $0.36, an increase of 24.1% from second quarter of 2018

Net Interest Income/NIM

  • Net interest income on a fully taxable equivalent basis was $158.5 million, up 5.5%
  • Net interest margin on a fully taxable equivalent basis was 3.66% compared to 3.51%

Operating Performance

  • Pre-provision net revenue1 (“PPNR”) was $81.6 million
  • Adjusted PPNR1 was $84.2 million, up 28.4% over second quarter of 2018
  • Noninterest expense was $128.1 million
  • Adjusted noninterest expense1 was $124.3 million
  • Efficiency ratio1 was 59.35%
  • Adjusted efficiency ratio1 was 57.52%, a 416 basis point improvement from second quarter of 2018

Loans and Credit Quality

  • End-of-period total loans3 were $12,084.5 million compared to $12,083.1 million
  • Second-quarter total commercial production was a record $628.0 million; June 30 pipeline was $1.7 billion
  • Provision for loan losses was $1.0 million
  • Net charge-offs were $0.3 million, or 0.01% annualized, compared to net charge-offs of $0.9 million
  • Non-performing loans were 1.34% of total loans compared to 1.41%

Return Profile & Capital

  • Return on average common equity was 9.13%
  • Return on average tangible common equity1 was 16.04%
  • Adjusted return on average tangible common equity1 was 16.41%
  • Repurchased 1.8 million shares of common stock during the quarter

Notable Items

  • $3.2 million in merger and integration charges
  • $0.6 million in tax credit amortization

1 Non-GAAP financial measure that Management believes is useful in evaluating the financial results of the Company – please refer to the Non-GAAP reconciliations contained in this release   2 Comparisons are on a linked-quarter basis, unless otherwise noted   3 Includes loans held for sale

RESULTS OF OPERATIONS

Old National Bancorp reported second-quarter 2019 net income of $63.0 million, or $0.36 per diluted share.

Included in the second quarter were pre-tax charges of $3.2 million for merger and integration activity.  Excluding these charges from the current quarter and netting out debt securities gains, adjusted net income was $64.5 million, or $0.37 per diluted share.

LOANS
Record high commercial loan production; paydowns continued to impact outstandings.

  • Period-end total loans were $12,084.5 million at June 30, 2019, compared to $12,083.1 million at March 31, 2019.
  • Commercial and industrial loans increased to $3,074.8 million; commercial real estate loans decreased to $4,993.7 million; consumer loans decreased to $1,755.8 million.
  • Record commercial loan production in the second quarter of $628.0 million; period-end pipeline totaled $1.7 billion.
  • On average, total loans in the second quarter were $12,091.0 million, down from $12,152.1 million in the first quarter of 2019.

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

  • Period-end total deposits were $14,363.1 million at June 30, 2019, relatively flat despite normal seasonal patterns.
  • On average, total deposits in the second quarter were $14,369.5 million, compared to $14,211.0 million in the first quarter of 2019.

NET INTEREST INCOME AND MARGIN
Net interest income and margin benefit from higher accretion and interest collected on nonaccrual loans as well as higher day count.

  • Net interest income increased to $155.2 million in the second quarter of 2019 from $147.0 million in the first quarter of 2019.
  • The net interest margin on a fully taxable equivalent basis increased 15 basis points to 3.66% compared to 3.51% in the first quarter of 2019, with 3 basis points of the increase due to more days offset by a 5 basis points decline from mix change.
  • Accretion income was $11.8 million, or 27 basis points of net interest margin, in the second quarter of 2019 compared to $8.9 million, or 21 basis points of net interest margin, in the first quarter of 2019.  In the second quarter of 2019, accretion income was 5.6% of adjusted total revenue.
  • Interest collected on nonaccrual loans was $5.7 million, or 13 basis points of net interest margin, in the second quarter of 2019 compared to $1.0 million, or 2 basis points of net interest margin, in the first quarter of 2019.
  • Loan yields, excluding accretion income and interest collected on nonaccrual loans, increased 3 basis points to 4.48%.
  • The cost of total deposits rose 6 basis points to 0.52% in the second quarter of 2019 while the cost of total interest-bearing deposits rose 6 basis points to 0.70%.

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

  • Asset quality remained strong with net charge-offs in the second quarter of $0.3 million, or 0.01% of total average loans, and 30-89 day delinquencies of 0.34%.
  • Provision expense was $1.0 million in both the second quarter and first quarter of 2019.
  • Non-performing loans decreased as a percentage of total loans to 1.34%.
  • In accordance with current accounting practices, the loans acquired from recent acquisitions were recorded at fair value with no allowance recorded at the acquisition date.  As of June 30, 2019, the remaining discount on these acquired loans was $100.5 million.
  • The allowance for loan losses was $56.3 million, or 0.47% of total loans at June 30, 2019.

NONINTEREST INCOME
Noninterest income increased due to wealth management tax preparation fees and increases in mortgage banking revenue and capital markets fees.

  • Total noninterest income for the second quarter of 2019 was $51.2 million, an increase of $4.8 million from the first quarter of 2019.
  • Wealth management fees benefitted from seasonal tax preparation fees of $1.0 million.
  • Mortgage banking revenue increased $2.1 million, service charges on deposit accounts increased $0.7 million, while capital markets income increased $0.6 million.

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

  • Noninterest expense for the second quarter of 2019 was $128.1 million and included $3.2 million in merger & integration charges and $0.6 million in tax credit amortization.
  • Excluding these items, adjusted noninterest expense for the second quarter was $124.3 million, compared to the $121.5 million in adjusted noninterest expense in the first quarter of 2019.
  • The second quarter efficiency ratio was 59.35%, while the adjusted efficiency ratio was 57.52%.

INCOME TAXES

  • On a fully taxable-equivalent basis, income tax expense in the second quarter was $17.6 million, resulting in a 21.9% FTE tax rate.
  • Income tax expense included the benefit of a $1.0 million state tax refund as well as $0.7 million in tax credit benefit.

CAPITAL
Strong quarterly earnings drove capital ratios higher.

  • At the end of the second quarter, total risk-based capital was 12.8% and regulatory tier 1 capital was 11.9%.
  • Tangible common equity to tangible assets was 8.92% at the end of the second quarter compared to 8.66% in the first quarter of 2019.
  • The Company repurchased 1.8 million shares of common stock during the second quarter with a weighted average price of $16.37 per share, excluding commissions.

NON-GAAP RECONCILIATIONS

($ in millions, except EPS, shares in 000s) 2Q19 Adjustments4 Adjusted 2Q19
Total Revenues (FTE) $209.7 ($1.2) $208.5
Less: Provision for Loan Losses (1.0) (1.0)
Less: Noninterest Expenses (128.1) 3.2 (124.9)
Income before Income Taxes (FTE) $80.6 $2.0 $82.6
Income Taxes 17.6 0.5 18.1
Net Income $63.0 $1.5 $64.5
Average Shares Outstanding 173,675 173,675
Earnings Per Share – Diluted $0.36 $0.01 $0.37
4 Tax-effect calculations use the current statutory FTE tax rates (federal + state)

 

($ in millions) 2Q19 1Q19
Net Interest Income $155.2 $147.0
Add: FTE Adjustment 3.3 3.2
Net Interest Income (FTE) $158.5 $150.2
Average Earning Assets $17,302.7 $17,143.6
Net Interest Margin (FTE) 3.66% 3.51%

 

($ in millions) 2Q19 1Q19
Net Interest Income $155.2 $147.0
Add: FTE Adjustment 3.3 3.2
Net Interest Income (FTE) $158.5 $150.2
Add: Total Noninterest Income 51.2 46.4
Less: Noninterest Expense 128.1 123.0
Pre-Provision Net Revenue $81.6 $73.6
Less: Debt Securities Gains/Losses (1.2 ) 0.1
Add: Merger and Integration Charges 3.2 1.2
Add: Amortization of Tax Credit Investments 0.6 0.3
Adjusted Pre-Provision Net Revenue $84.2 $75.2

 

($ in millions) 2Q19 1Q19 2Q18
Noninterest Expense $128.1 $123.0 $130.5
Less: Merger and Integration Charges (3.2) (1.2) (2.5)
Less: Branch Action Charges & Severance (1.6)
Noninterest Expense less Charges $124.9 $121.8 $126.4
Less: Amortization of Tax Credit Investments (0.6) (0.3) (11.9)
Adjusted Noninterest Expense $124.3 $121.5 $114.5
Less: Intangible Amortization (4.3) (4.5) (3.4)
Adjusted Noninterest Expense Less Intangible Amortization $120.0 $117.0 $111.1
Net Interest Income $155.2 $147.0 $132.0
FTE Adjustment 3.3 3.2 2.8
Net Interest Income (FTE) $158.5 $150.2 $134.8
Total Noninterest Income 51.2 46.4 49.3
Total Revenue (FTE) $209.7 $196.6 $184.1
Less: Debt Securities Gains/Losses (1.2) 0.1 (1.5)
Less: Gain on Student Loan Sale (2.2)
Less: Gain on Branch Actions (0.3)
Adjusted Total Revenue (FTE) $208.5 $196.7 $180.1
Efficiency Ratio 59.35% 60.26% 69.58%
Adjusted Efficiency Ratio 57.52% 59.51% 61.68%
Operating Leverage5 (basis points) 1,574
Adjusted Operating Leverage6 (basis points) 724
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) 2Q19 1Q19
Net Income $63.0 $56.3
Add: Intangible Amortization (net of tax7) 3.2 3.4
Tangible Net Income $66.2 $59.7
Less: Securities Gains/Losses (net of tax7)  (0.9)  0.1
Add: Merger & Integration Charges (net of tax7) 2.4 0.9
Adjusted Tangible Net Income $67.7 $60.7
Average Total Shareholders’ Equity $2,758.3 $2,714.2
Less: Average Goodwill (1,036.3) (1,036.3)
Less: Average Intangibles (70.3) (74.8)
Average Tangible Shareholders’ Equity $1,651.7 $1,603.1
Return on Average Tangible Common Equity 16.04% 14.88%
Adjusted Return on Average Tangible Common Equity 16.41% 15.13%
7Tax-effect calculations use the current statutory FTE tax rates (federal + state)


CONFERENCE CALL AND WEBCAST
Old National will host a conference call and live webcast at 7:00 a.m. Central Time on Monday, July 22, 2019, to review second quarter 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 July 22 through August 5.  To access the replay, dial 1-855-859-2056, Conference ID Code 4869447.

ABOUT OLD NATIONAL
Old National Bancorp (NASDAQ: ONB) is the holding company of Old National Bank. Headquartered in Evansville with $20.1 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: expected cost savings, synergies and other financial benefits from the merger with Klein that might not be realized within the expected timeframes and costs or difficulties relating to integration matters might be greater than expected;  market, economic, operational, liquidity, credit and interest rate risks associated with Old National’s business; competition; government legislation and policies (including the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act and its related regulations); ability of Old National to execute its business plan; changes in the economy which could materially impact credit quality trends and the ability to generate loans and gather deposits; failure or circumvention of our internal controls; failure or disruption of our information systems; significant changes in accounting, tax or regulatory practices or requirements; new legal obligations or liabilities or unfavorable resolutions of litigations; disruptive technologies in payment systems and other services traditionally provided by banks; computer hacking and other cybersecurity threats; other matters discussed in this press release; and other factors identified in our Annual Report on Form 10-K and other periodic filings with the SEC.  These forward-looking statements are made only as of the date of this press release, and Old National does not undertake an obligation to release revisions to these forward-looking statements to reflect events or conditions after the date of this press release.

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

               
Financial Highlights (unaudited)
($ and shares in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, March 31, June 30, June 30, June 30,
2019 2019 2018 2019 2018
Income Statement
Net interest income $ 155,230 $ 147,048 $ 131,963 $ 302,278 $ 260,535
Provision for loan losses 1,003 1,043 2,446 2,046 2,826
Noninterest income 51,214 46,416 49,289 97,630 91,194
Noninterest expense 128,118 123,041 130,460 251,159 247,617
Net income 62,964 56,276 44,001 119,240 91,984
Per Common Share Data
Net income (diluted) $ 0.36 $ 0.32 $ 0.29 $ 0.68 $ 0.60
Average diluted shares outstanding 173,675 175,368 152,568 174,531 152,483
Book value 16.28 15.82 14.44 16.28 14.44
Stock price 16.59 16.40 18.60 16.59 18.60
Dividend payout ratio 35 % 41 % 45 % 38 % 43 %
Tangible common book value (1) 9.86 9.44 8.70 9.86 8.70
Performance Ratios
Return on average assets 1.26 % 1.14 % 1.01 % 1.20 % 1.06 %
Return on average common equity 9.13 % 8.29 % 8.06 % 8.72 % 8.46 %
Return on average tangible common equity (1) 16.04 % 14.88 % 14.28 % 15.47 % 15.04 %
Net interest margin (FTE) 3.66 % 3.51 % 3.55 % 3.59 % 3.50 %
Efficiency ratio (2) 59.35 % 60.26 % 69.58 % 59.79 % 67.76 %
Net charge-offs (recoveries) to average loans 0.01 % 0.03 % -0.03 % 0.02 % -0.01 %
Allowance for loan losses to ending loans 0.47 % 0.46 % 0.48 % 0.47 % 0.48 %
Non-performing loans to ending loans 1.34 % 1.41 % 1.38 % 1.34 % 1.38 %
Balance Sheet
Total loans $ 12,046,578 $ 12,068,977 $ 11,295,629 $ 12,046,578 $ 11,295,629
Total assets 20,145,285 20,084,420 17,482,990 20,145,285 17,482,990
Total deposits 14,363,101 14,429,270 12,596,376 14,363,101 12,596,376
Total borrowed funds 2,726,481 2,639,038 2,530,104 2,726,481 2,530,104
Total shareholders’ equity 2,803,139 2,751,872 2,200,215 2,803,139 2,200,215
Capital Ratios (1)
Risk-based capital ratios (EOP):
Tier 1 common equity 11.9 % 11.8 % 10.9 % 11.9 % 10.9 %
Tier 1 11.9 % 11.8 % 10.9 % 11.9 % 10.9 %
Total 12.8 % 12.7 % 11.9 % 12.8 % 11.9 %
Leverage ratio (to average assets) 8.8 % 8.8 % 8.3 % 8.8 % 8.3 %
Total equity to assets (averages) 13.82 % 13.70 % 12.54 % 13.76 % 12.48 %
Tangible common equity to tangible assets 8.92 % 8.66 % 7.98 % 8.92 % 7.98 %
Nonfinancial Data
Full-time equivalent employees 2,829 2,908 2,683 2,829 2,683
Number of branches 192 193 183 192 183
(1) See “Non-GAAP Measures” table.
(2) Efficiency ratio is defined as noninterest expense before amortization of intangibles as a percent of FTE net interest income and noninterest revenues, excluding net gains from debt securities transactions.  This presentation excludes amortization of intangibles and net debt securities gains, as is common in other company releases, and better aligns with true operating performance.
FTE – Fully taxable equivalent basis  EOP – End of period actual balances
           
 Income Statement (unaudited) 
($ and shares in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, March 31, June 30, June 30, June 30,
2019 2019 2018 2019 2018
Interest income $ 189,063 $ 178,918 $ 153,736 $ 367,981 $ 301,442
Less:  interest expense 33,833 31,870 21,773 65,703 40,907
Net interest income 155,230 147,048 131,963 302,278 260,535
Provision for loan losses 1,003 1,043 2,446 2,046 2,826
Net interest income after provision for loan losses 154,227 146,005 129,517 300,232 257,709
Wealth management fees 9,909 8,535 9,746 18,444 18,772
Service charges on deposit accounts 11,515 10,826 10,765 22,341 21,524
Debit card and ATM fees 5,419 5,503 5,080 10,922 9,945
Mortgage banking revenue 7,135 5,011 5,189 12,146 9,381
Investment product fees 5,591 5,271 5,066 10,862 10,097
Capital markets income 3,150 2,517 896 5,667 1,394
Company-owned life insurance 2,711 3,188 2,430 5,899 5,035
Other income 4,716 5,702 8,586 10,418 12,716
Gains (losses) on sales of debt securities 1,165 (103 ) 1,494 1,062 2,282
Gains (losses) on derivatives (97 ) (34 ) 37 (131 ) 48
Total noninterest income 51,214 46,416 49,289 97,630 91,194
Salaries and employee benefits 71,566 71,183 66,592 142,749 130,771
Occupancy 14,559 14,578 12,873 29,137 26,153
Equipment 4,517 4,474 3,728 8,991 7,293
Marketing 4,439 3,723 3,962 8,162 7,659
Data processing 10,207 9,341 9,724 19,548 18,124
Communication 2,849 3,054 2,772 5,903 5,836
Professional fees 4,921 2,910 2,923 7,831 5,653
Loan expenses 1,657 1,912 1,843 3,569 3,587
FDIC assessment 1,454 2,087 3,161 3,541 5,806
Amortization of intangibles 4,325 4,472 3,416 8,797 7,025
Amortization of tax credit investments 568 260 11,858 828 12,574
Other expense 7,056 5,047 7,608 12,103 17,136
Total noninterest expense 128,118 123,041 130,460 251,159 247,617
Income before income taxes 77,323 69,380 48,346 146,703 101,286
Income tax expense 14,359 13,104 4,345 27,463 9,302
Net income $ 62,964 $ 56,276 $ 44,001 $ 119,240 $ 91,984
Diluted Earnings Per Share
Net income $ 0.36 $ 0.32 $ 0.29 $ 0.68 $ 0.60
Average Common Shares Outstanding
Basic 172,985 174,734 151,878 173,855 151,800
Diluted 173,675 175,368 152,568 174,531 152,483
Common shares outstanding at end of period 172,231 173,979 152,351 172,231 152,351
 
Balance Sheet (unaudited)
($ in thousands)
June 30, March 31, June 30,
2019 2019 2018
Assets
Federal Reserve Bank account $ 40,945 $ 101,033 $ 43,889
Money market investments 20,210 10,909 10,359
Investments:
Treasury and government-sponsored agencies 725,327 782,486 647,058
Mortgage-backed securities 2,900,235 2,684,330 1,588,120
States and political subdivisions 1,186,311 1,252,448 1,110,087
Other securities 489,855 498,977 503,920
Total investments 5,301,728 5,218,241 3,849,185
Loans held for sale, at fair value 37,904 14,082 26,198
Loans:
Commercial 3,074,849 3,042,790 2,962,895
Commercial and agriculture real estate 4,993,693 5,023,620 4,451,772
Consumer:
Home equity 553,991 553,264 488,038
Other consumer loans 1,201,847 1,205,418 1,238,951
Subtotal of commercial and consumer loans 9,824,380 9,825,092 9,141,656
Residential real estate 2,222,198 2,243,885 2,153,973
Total loans 12,046,578 12,068,977 11,295,629
Total earning assets 17,447,365 17,413,242 15,225,260
Allowance for loan losses (56,292 ) (55,559 ) (53,660 )
Non-earning Assets:
Cash and due from banks 239,831 211,174 219,626
Premises and equipment, net 493,481 490,216 449,304
Operating lease right-of-use assets 106,222 109,916
Goodwill and other intangible assets 1,104,478 1,108,802 874,221
Company-owned life insurance 445,749 444,551 405,492
Net deferred tax assets 36,002 59,430 90,187
Loan servicing rights 24,332 24,254 24,303
Other assets 304,117 278,394 248,257
Total non-earning assets 2,754,212 2,726,737 2,311,390
Total assets $ 20,145,285 $ 20,084,420 $ 17,482,990
Liabilities and Equity
Noninterest-bearing demand deposits $ 3,771,888 $ 3,903,314 $ 3,600,793
Interest-bearing:
Checking and NOW accounts 3,950,161 3,742,241 3,054,302
Savings accounts 2,877,673 2,941,361 3,026,110
Money market accounts 1,819,716 1,780,756 1,090,621
Other time deposits 1,756,814 1,835,110 1,648,390
Total core deposits 14,176,252 14,202,782 12,420,216
Brokered CD’s 186,849 226,488 176,160
Total deposits 14,363,101 14,429,270 12,596,376
Federal funds purchased and interbank borrowings 410,036 325,030 175,044
Securities sold under agreements to repurchase 334,540 342,480 347,511
Federal Home Loan Bank advances 1,730,065 1,719,944 1,757,308
Other borrowings 251,840 251,584 250,241
Total borrowed funds 2,726,481 2,639,038 2,530,104
Operating lease liabilities 110,596 114,040
Accrued expenses and other liabilities 141,968 150,200 156,295
Total liabilities 17,342,146 17,332,548 15,282,775
Common stock, surplus, and retained earnings 2,761,102 2,749,252 2,266,918
Accumulated other comprehensive income (loss), net of tax 42,037 2,620 (66,703 )
Total shareholders’ equity 2,803,139 2,751,872 2,200,215
Total liabilities and shareholders’ equity $ 20,145,285 $ 20,084,420 $ 17,482,990
                           
Average Balance Sheet and Interest Rates (unaudited)
($ in thousands)
Three Months Ended Three Months Ended Three Months Ended
June 30, 2019 March 31, 2019 June 30, 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 $ 58,321 $ 334 2.29 % $ 58,701 $ 278 1.92 % $ 51,724 $ 117 0.91 %
Investments:
Treasury and government-sponsored agencies 695,775 4,301 2.47 % 705,417 3,902 2.21 % 648,778 3,387 2.09 %
Mortgage-backed securities 2,767,791 18,799 2.72 % 2,497,368 17,603 2.82 % 1,588,140 8,904 2.24 %
States and political subdivisions 1,193,176 11,235 3.77 % 1,232,355 11,453 3.72 % 1,118,395 10,591 3.79 %
Other securities 496,631 4,063 3.27 % 497,604 4,440 3.57 % 507,646 3,909 3.08 %
Total investments 5,153,373 38,398 2.98 % 4,932,744 37,398 3.03 % 3,862,959 26,791 2.77 %
Loans: (2)
Commercial 3,063,590 37,828 4.88 % 3,122,402 36,035 4.62 % 2,873,781 32,527 4.48 %
Commercial and agriculture real estate 5,019,859 72,214 5.69 % 4,989,622 65,076 5.22 % 4,449,839 57,251 5.09 %
Consumer:
Home equity 558,223 7,390 5.31 % 588,366 7,596 5.24 % 492,151 6,076 4.95 %
Other consumer loans 1,201,752 12,408 4.14 % 1,192,496 11,802 4.01 % 1,268,670 11,591 3.66 %
Subtotal commercial and consumer loans 9,843,424 129,840 5.29 % 9,892,886 120,509 4.94 % 9,084,441 107,445 4.74 %
Residential real estate loans 2,247,570 23,780 4.23 % 2,259,243 23,931 4.24 % 2,177,587 22,208 4.08 %
Total loans 12,090,994 153,620 5.05 % 12,152,129 144,440 4.76 % 11,262,028 129,653 4.57 %
Total earning assets $ 17,302,688 $ 192,352 4.43 % $ 17,143,574 $ 182,116 4.26 % $ 15,176,711 $ 156,561 4.11 %
 
Less: Allowance for loan losses (56,632 ) (55,789 ) (51,493 )
 
Non-earning Assets:
Cash and due from banks $ 234,337 $ 229,957 $ 205,617
Other assets 2,473,255 2,490,524 2,086,822
Total assets $ 19,953,648 $ 19,808,266 $ 17,417,657
Interest-Bearing Liabilities:
Checking and NOW accounts $ 3,895,881 $ 4,196 0.43 % $ 3,693,886 $ 3,142 0.34 % $ 3,097,635 $ 969 0.13 %
Savings accounts 2,879,704 2,145 0.30 % 2,935,710 2,283 0.32 % 3,036,936 1,777 0.23 %
Money market accounts 1,789,777 3,729 0.84 % 1,702,655 2,826 0.67 % 1,103,177 702 0.26 %
Other time deposits 1,779,770 7,181 1.62 % 1,840,514 7,102 1.56 % 1,615,527 4,813 1.20 %
Total interest-bearing deposits 10,345,132 17,251 0.67 % 10,172,765 15,353 0.61 % 8,853,275 8,261 0.37 %
Brokered CD’s 212,198 1,268 2.40 % 191,443 1,091 2.31 % 194,801 878 1.81 %
Total interest-bearing deposits and CD’s 10,557,330 18,519 0.70 % 10,364,208 16,444 0.64 % 9,048,076 9,139 0.41 %
Federal funds purchased and interbank borrowings 300,810 1,817 2.42 % 316,998 1,918 2.45 % 140,471 647 1.85 %
Securities sold under agreements to repurchase 331,695 671 0.81 % 361,261 662 0.74 % 332,599 434 0.52 %
Federal Home Loan Bank advances 1,695,681 10,039 2.37 % 1,672,376 9,931 2.41 % 1,713,832 8,824 2.07 %
Other borrowings 251,577 2,787 4.43 % 249,794 2,915 4.67 % 249,291 2,729 4.38 %
Total borrowed funds 2,579,763 15,314 2.38 % 2,600,429 15,426 2.41 % 2,436,193 12,634 2.08 %
Total interest-bearing liabilities $ 13,137,093 $ 33,833 1.03 % $ 12,964,637 $ 31,870 1.00 % $ 11,484,269 $ 21,773 0.76 %
Noninterest-Bearing Liabilities and Shareholders’ Equity
Demand deposits $ 3,812,175 $ 3,846,828 $ 3,602,732
Other liabilities 246,134 282,615 147,052
Shareholders’ equity 2,758,246 2,714,186 2,183,604
Total liabilities and shareholders’ equity $ 19,953,648 $ 19,808,266 $ 17,417,657
Net interest rate spread 3.40 % 3.26 % 3.35 %
Net interest margin (FTE) 3.66 % 3.51 % 3.55 %
FTE adjustment $ 3,289 $ 3,198 $ 2,825
(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)
Six Months Ended Six Months Ended
June 30, 2019 June 30, 2018
Average Income (1)/ Yield/ Average Income (1)/ Yield/
Earning Assets: Balance Expense Rate Balance Expense Rate
Money market and other interest-earning
investments $ 58,510 $ 612 2.11 % $ 59,089 $ 207 0.71 %
Investments:
Treasury and government-sponsored agencies 700,569 8,203 2.34 % 655,897 6,811 2.08 %
Mortgage-backed securities 2,633,326 36,402 2.76 % 1,610,252 18,424 2.29 %
States and political subdivisions 1,212,658 22,688 3.74 % 1,161,386 21,069 3.63 %
Other securities 497,115 8,503 3.42 % 483,685 7,578 3.13 %
Total investments 5,043,668 75,796 3.01 % 3,911,220 53,882 2.76 %
Loans: (2)
Commercial 3,092,833 73,863 4.75 % 2,817,050 60,733 4.29 %
Commercial and agriculture real estate 5,004,824 137,290 5.46 % 4,422,075 113,037 5.08 %
Consumer:
Home equity 573,211 14,987 5.27 % 496,978 11,765 4.77 %
Other consumer loans 1,197,150 24,208 4.08 % 1,307,805 23,730 3.66 %
Subtotal commercial and consumer loans 9,868,018 250,348 5.12 % 9,043,908 209,265 4.67 %
Residential real estate loans 2,253,375 47,712 4.23 % 2,177,003 43,680 4.01 %
Total loans 12,121,393 298,060 4.91 % 11,220,911 252,945 4.50 %
Total earning assets $ 17,223,571 $ 374,468 4.34 % $ 15,191,220 $ 307,034 4.04 %
 
Less: Allowance for loan losses (56,213 ) (51,225 )
 
Non-earning Assets:
Cash and due from banks $ 232,159 $ 202,392
Other assets 2,481,842 2,088,299
Total assets $ 19,881,359 $ 17,430,686
Interest-Bearing Liabilities:
Checking and NOW accounts $ 3,795,441 $ 7,338 0.39 % $ 3,082,619 $ 1,788 0.12 %
Savings accounts 2,907,552 4,428 0.31 % 3,044,748 3,120 0.21 %
Money market accounts 1,746,456 6,555 0.76 % 1,130,939 1,248 0.22 %
Other time deposits 1,809,975 14,283 1.59 % 1,588,884 8,713 1.11 %
Total interest-bearing deposits 10,259,424 32,604 0.64 % 8,847,190 14,869 0.34 %
Brokered CD’s 201,878 2,359 2.36 % 184,975 1,525 1.66 %
Total interest-bearing deposits and CD’s 10,461,302 34,963 0.67 % 9,032,165 16,394 0.37 %
Federal funds purchased and interbank borrowings 308,860 3,735 2.44 % 200,578 1,664 1.67 %
Securities sold under agreements to repurchase 346,396 1,333 0.78 % 337,612 793 0.47 %
Federal Home Loan Bank advances 1,684,093 19,970 2.39 % 1,694,871 16,604 1.98 %
Other borrowings 250,690 5,702 4.55 % 249,062 5,452 4.38 %
Total borrowed funds 2,590,039 30,740 2.39 % 2,482,123 24,513 1.99 %
Total interest-bearing liabilities $ 13,051,341 $ 65,703 1.02 % $ 11,514,288 $ 40,907 0.72 %
Noninterest-Bearing Liabilities and Shareholders’ Equity
Demand deposits $ 3,829,406 $ 3,583,027
Other liabilities 264,274 158,493
Shareholders’ equity 2,736,338 2,174,878
Total liabilities and shareholders’ equity $ 19,881,359 $ 17,430,686
Net interest rate spread 3.32 % 3.32 %
Net interest margin (FTE) 3.59 % 3.50 %
FTE adjustment $ 6,487 $ 5,592
(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 Six Months Ended
June 30, March 31, June 30, June 30, June 30,
2019 2019 2018 2019 2018
Beginning allowance for loan losses $ 55,559 $ 55,461 $ 50,381 $ 55,461 $ 50,381
Provision for loan losses 1,003 1,043 2,446 2,046 2,826
Gross charge-offs (2,876 ) (2,892 ) (3,054 ) (5,769 ) (5,739 )
Gross recoveries 2,606 1,947 3,887 4,554 6,192
Net (charge-offs) recoveries (270 ) (945 ) 833 (1,215 ) 453
Ending allowance for loan losses $ 56,292 $ 55,559 $ 53,660 $ 56,292 $ 53,660
Net charge-offs (recoveries) / average loans (1) 0.01 % 0.03 % -0.03 % 0.02 % -0.01 %
 
Average loans outstanding (1) $ 12,083,609 $ 12,147,560 $ 11,257,585 $ 12,115,408 $ 11,216,684
EOP loans outstanding (1) 12,046,578 $ 12,068,977 $ 11,295,629 $ 12,046,578 $ 11,295,629
Allowance for loan losses / EOP loans (1) 0.47 % 0.46 % 0.48 % 0.47 % 0.48 %
 
Underperforming Assets:
Loans 90 Days and over (still accruing) $ 423 $ 560 $ 1,575 $ 423 $ 1,575
Non-performing loans:
Nonaccrual loans (2) 142,421 152,881 139,082 142,421 139,082
Renegotiated loans 19,031 17,123 17,139 19,031 17,139
Total non-performing loans 161,452 170,004 156,221 161,452 156,221
Foreclosed properties 2,819 3,279 3,729 2,819 3,729
Total underperforming assets $ 164,694 $ 173,843 $ 161,525 $ 164,694 $ 161,525
Classified and Criticized Assets:
Nonaccrual loans (2) 142,421 152,881 139,082 142,421 139,082
Substandard accruing loans 174,728 210,680 109,051 174,728 109,051
Loans 90 days and over (still accruing) 423 560 1,575 423 1,575
Total classified loans – “problem loans” $ 317,572 $ 364,121 $ 249,708 $ 317,572 $ 249,708
Other classified assets 2,550 2,715 3,149 2,550 3,149
Criticized loans – “special mention loans” 220,455 268,836 154,891 220,455 154,891
Total classified and criticized assets $ 540,577 $ 635,672 $ 407,748 $ 540,577 $ 407,748
Non-performing loans / EOP loans (1) 1.34 % 1.41 % 1.38 % 1.34 % 1.38 %
 
Allowance to non-performing loans (3) 35 % 33 % 34 % 35 % 34 %
Under-performing assets / EOP loans (1) 1.37 % 1.44 % 1.43 % 1.37 % 1.43 %
EOP total assets $ 20,145,285 $ 20,084,420 $ 17,482,990 $ 20,145,285 $ 17,482,990
Under-performing assets / EOP assets 0.82 % 0.87 % 0.92 % 0.82 % 0.92 %
EOP – End of period actual balances
(1) Excludes loans held for sale.
(2) Includes renegotiated loans totaling $24.7 million at June 30, 2019, $27.0 million at March 31, 2019, and $34.0 million at June 30, 2018.
(3) Includes acquired loans that were recorded at fair value in accordance with ASC 805 at the date of acquisition.  As such, the credit risk was incorporated in the fair value recorded and no allowance for loan losses was recorded on the acquisition date.
                 
Non-GAAP Measures (unaudited)
($ in thousands)
Three Months Ended Six Months Ended
June 30, March 31, June 30, June 30, June 30,
2019 2019 2018 2019 2018
Actual End of Period Balances
GAAP shareholders’ equity $ 2,803,139 $ 2,751,872 $ 2,200,215 $ 2,803,139 $ 2,200,215
Deduct:
Goodwill 1,036,258 1,036,258 828,804 1,036,258 828,804
Intangibles 68,220 72,544 45,417 68,220 45,417
1,104,478 1,108,802 874,221 1,104,478 874,221
Tangible shareholders’ equity  $ 1,698,661 $ 1,643,070 $ 1,325,994 $ 1,698,661 $ 1,325,994
Average Balances
GAAP shareholders’ equity $ 2,758,246 $ 2,714,186 $ 2,183,604 $ 2,736,338 $ 2,174,878
Deduct:
Goodwill 1,036,258 1,036,258 828,804 1,036,258 828,474
Intangibles 70,282 74,849 47,052 72,554 49,061
1,106,540 1,111,107 875,856 1,108,812 877,535
Average tangible shareholders’ equity  $ 1,651,706 $ 1,603,079 $ 1,307,748 $ 1,627,526 $ 1,297,343
Actual End of Period Balances
GAAP assets $ 20,145,285 $ 20,084,420 $ 17,482,990 $ 20,145,285 $ 17,482,990
Add:
Trust overdrafts 29 28 46 29 46
Deduct:
Goodwill 1,036,258 1,036,258 828,804 1,036,258 828,804
Intangibles 68,220 72,544 45,417 68,220 45,417
1,104,478 1,108,802 874,221 1,104,478 874,221
Tangible assets  $ 19,040,836 $ 18,975,646 $ 16,608,815 $ 19,040,836 $ 16,608,815
Risk-weighted assets $ 13,996,770 $ 13,966,569 $ 12,648,732 $ 13,996,770 $ 12,648,732
GAAP net income $ 62,964 $ 56,276 $ 44,001 $ 119,240 $ 91,984
Add:
Amortization of intangibles (net of tax) 3,262 3,373 2,699 6,635 5,550
Tangible net income $ 66,226 $ 59,649 $ 46,700 $ 125,875 $ 97,534
Tangible Ratios
Return on tangible common equity 15.59 % 14.52 % 14.09 % 14.82 % 14.71 %
Return on average tangible common equity 16.04 % 14.88 % 14.28 % 15.47 % 15.04 %
Return on tangible assets 1.39 % 1.26 % 1.12 % 1.32 % 1.17 %
Tangible common equity to tangible assets 8.92 % 8.66 % 7.98 % 8.92 % 7.98 %
Tangible common equity to risk-weighted assets 12.14 % 11.76 % 10.48 % 12.14 % 10.48 %
Tangible common book value (1) 9.86 9.44 8.70 9.86 8.70
Tangible common equity presentation includes other comprehensive income as is common in other company releases.
(1) Tangible common shareholders’ equity divided by common shares issued and outstanding at period-end.
Tier 1 capital $ 1,664,277 $ 1,643,496 $ 1,371,918 $ 1,664,277 $ 1,371,918
Deduct:
Tier 1 capital adjustments
Tier 1 common equity  $ 1,664,277 $ 1,643,496 $ 1,371,918 $ 1,664,277 $ 1,371,918
Risk-weighted assets 13,996,770 13,966,569 12,648,732 13,996,770 12,648,732
Tier 1 common equity to risk-weighted assets  11.89 % 11.77 % 10.85 % 11.89 % 10.85 %

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