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Community Bank System Reports Third Quarter 2019 Results and Agreement to Acquire Steuben Trust Corporation

SYRACUSE, N.Y.--(BUSINESS WIRE)--

Community Bank System, Inc. (CBU) (the “Company”) reported third quarter 2019 net income of $39.2 million, or $0.75 per share on a fully diluted basis. This compares to $43.1 million in net income or $0.83 per share reported for the third quarter of 2018. The Company incurred $6.1 million, or $0.09 per share, of non-recurring acquisition-related expenses during the third quarter of 2019 related to the acquisition of Kinderhook Bank Corp. (“Kinderhook”). Operating diluted earnings per share, which exclude acquisition expenses, unrealized gains on equity securities and loss on debt extinguishment, were $0.84 for the third quarter of 2019. This compares to operating diluted earnings per share of $0.81 in the third quarter of 2018. Increases in net interest income, noninterest revenues and a decrease in the provision for loan losses, were partially offset by higher operating expenses, an increase in acquisition-related expenses and an increase in fully-diluted shares outstanding.

On a linked quarter basis, fully diluted earnings per share decreased $0.11, from $0.86 in the second quarter to $0.75 in the third quarter. During the second quarter, the Company recorded $0.08 per share of realized gains on the sale of investment securities and $0.02 per share of acquisition-related expenses, as compared to acquisition-related expenses of $0.09 per share and no realized gains in the third quarter. Operating diluted earnings per share increased $0.04, or 5.0%, on a linked quarter basis, from $0.80 per share in the second quarter to $0.84 per share in the third quarter. This increase in operating earnings per share was driven by increases in net interest income and noninterest revenues, offset, in part, by increases in operating expenses, the provision for loan losses and fully-diluted shares outstanding, as well as a slightly higher effective income tax rate.

Third Quarter 2019 Highlights:

  • Completed the acquisition of Kinderhook Bank Corp.
  • Dividend increase of $0.03 per share, or 7.9%, the 27th consecutive year of increase
  • GAAP Diluted EPS of $0.75 and Operating Diluted EPS of $0.84
  • Net interest margin of 3.73%, up two basis points over the third quarter of 2018
  • Deposit funding costs of 0.26%
  • Annualized net charge-offs of 0.10%
  • Noninterest revenues represent 38.6% of operating revenues
  • Nonbanking financial services revenues were up $1.5 million, or 4.0% over the third quarter of 2018

“We booked another solid performance for the third quarter with operating earnings per share up $0.03 compared to 2018, organic growth contributing $97.4 million to ending loan balances and average deposit funding costs of 0.26%, a level well below industry and peer averages,” said Mark E. Tryniski, President and Chief Executive Officer. “We successfully completed the acquisition of the former Kinderhook Bank Corp., parent company of The National Union Bank of Kinderhook during the quarter, which added 11 branch locations in the five-county region around Albany, New York. Total ending loans increased $569.1 million, or 9.1%, during the quarter, with $471.7 million of the increase due to the Kinderhook transaction and the remaining $97.4 million driven by organic growth in the business lending, consumer mortgage and consumer installment portfolios. Total average deposits were up $423.5 million, or 5.0%, compared to the linked second quarter, and ending deposits were up $680.1 million, or 8.0%, due largely to the Kinderhook acquisition. The funding mix remained strong with 68% of total deposit balances in checking and savings accounts. Our net interest margin for the quarter of 3.73% was stable, up two basis points over the third quarter of 2018. Consistent with past performance, the Company’s asset quality remained stable and favorable. Annualized net charge-offs for the quarter were 0.10% and nonperforming loans to total loans outstanding were 0.42% at the end of the third quarter. Noninterest revenues were up by 2.3% year over year, reflective of increased revenue in all three of the Company’s non-banking fee-based businesses.”

“Reflecting the Company’s very strong capital position and ongoing performance, the Board of Directors authorized an increase in the quarterly cash dividend of $0.03 per share, marking the twenty-seventh (27th) consecutive year of dividend increases. We are also pleased to announce the execution of a definitive agreement to acquire the Steuben Trust Corporation, parent company of the Steuben Trust Company, a New York State chartered community bank. This transaction will provide additional scale to our Western New York presence by adding 15 customer service locations across a six-county area. This acquisition is another example of our ongoing commitment to build a broader and deeper banking presence across our entire service area, while at the same time effectively deploying capital resources to improve shareholder returns.”

Total revenues for the third quarter of 2019 were $148.4 million, an increase of $6.4 million, or 4.5%, over the third quarter of 2018. The Company recorded a $5.1 million, or 5.9%, increase in net interest income and a $1.3 million, or 2.3%, increase in noninterest revenues between comparable quarters. The increase in net interest income was driven by a $473.5 million, or 5.1%, increase in average earning assets due primarily to the Kinderhook acquisition and an increase in the yield on earning assets, partially offset by higher funding costs and a $282.0 million increase in average interest-bearing liabilities due primarily to the Kinderhook acquisition. The $1.3 million, or 2.3%, increase in noninterest revenues was driven by an increase in revenue for all three of the Company’s nonbanking fee-based businesses; employee benefit services, wealth management and insurance. In addition, the Company recorded a $0.2 million, or 1.1%, increase in deposit service and other banking services revenues between comparable quarters. These increases were offset, in part, by a $0.7 million decrease in unrealized gains on equity securities. On a linked quarter basis, noninterest revenues decreased $3.6 million, or 5.9%, from $60.7 million in the second quarter of 2019 to $57.1 million in the third quarter. During the second quarter, the Company recorded $4.9 million of realized gains on the sale of certain Treasury securities. Exclusive of these realized gains, noninterest revenues were up $1.3 million, or 2.3%, on a linked quarter basis primarily due to the Kinderhook acquisition and an increase in employee benefit services revenue. Noninterest revenues contributed 38.6% of total operating revenues for the third quarter, similar to the prior two quarters and full-year 2018 results.

The Company recorded a $1.8 million provision for loan losses in the third quarter 2019, which was $0.5 million less than the amount recorded in the third quarter of 2018. Total delinquent loans, nonperforming loans plus loans 30 to 89 days past due, to ending loans stood at 0.85% at the end of the third quarter, down eight basis points from a year earlier. The non-performing loans to total loans ratio stood at 0.42% at the end of the third quarter of 2019. This compares to 0.40% at the end of the third quarter of 2018.

Total operating expenses for the third quarter of 2019 were $96.9 million, as compared to $85.2 million in the third quarter of 2018, an increase of $11.7 million, or 13.7%. Excluding $6.1 million of acquisition related expenses in the third quarter of 2019 and a $0.8 million acquisition-related recovery recorded in the third quarter of 2018, operating expenses increased $4.8 million, or 5.6%, between comparable quarterly periods. This increase included a $5.0 million, or 9.8%, increase in salaries and employee benefits and a $0.3 million net increase in all other expenses, partially offset by a $0.5 million, or 10.5%, decrease in amortization of intangible assets. Excluding acquisition-related expenses, on a linked quarter basis operating expenses increased $0.9 million, or 1.0%, primarily due to incremental expenses associated with operating an expanded franchise subsequent to the Kinderhook acquisition. During the third quarter of 2019, the Company received a $0.7 million FDIC assessment credit for its proportional share of excess deposit insurance fund reserves. This credit favorably impacted third quarter fully-diluted earnings by $0.01 per share.

The Company generated net interest income of $91.3 million during the third quarter of 2019. This compares to $86.2 million of net interest income generated in the third quarter of 2018. The $5.1 million, or 5.9%, increase in net interest income was primarily driven by a $473.5 million increase in average earning assets between comparable quarterly periods, due to the Kinderhook acquisition, organic loan growth and a slight improvement in net interest margin. Of the $5.1 million increase in net interest income, volume-related factors contributed $4.4 million of incremental net interest income, or 86%, of the improvement, while rate-related factors contributed $0.7 million of the incremental net interest income, or 14%, of the improvement. Net interest margin improved two basis points, from 3.71% in the third quarter of 2018 to 3.73% in the third quarter of 2019. The third quarter 2019 net interest income and net interest margin results were favorably impacted by a 15 basis point increase in the yield on loans, a 59 basis point increase in the yield on cash equivalents and a six basis point increase in the yield on investment securities, offset, in part, by an 11 basis point increase in the cost of funds.

On a linked quarter basis, net interest income increased $3.0 million, or 3.4%. This improvement was largely driven by an increase in earning assets due to the Kinderhook acquisition. Net interest margin decreased seven basis points on a linked quarter basis from 3.80% in the second quarter to 3.73% in the third quarter. The second quarter net interest margin results were favorably impacted by four basis points due to the receipt of a $0.9 million Federal Reserve Bank semi-annual dividend. All other factors, including a 0.50% decrease in the prime lending rate during the quarter, the persistence of a flat or inverted Treasury yield curve, the inclusion of the Kinderhook loan, investment and deposit portfolios, and a change in the Company’s funding mix produced an additional three basis points of net interest margin compression between the linked quarters.

The Company recorded income tax expense of $10.5 million in the third quarter of 2019. This compares to income tax expense of $11.4 million recorded in the third quarter of 2018. The decrease in income tax expense was driven by lower amounts of pre-tax income recorded in the third quarter of 2019, primarily due to acquisition expenses related to the Kinderhook transaction. The effective tax rates for the third quarters of 2019 and 2018 were 21.1% and 21.0%, respectively.

The Company provides supplemental reporting of its results on an “operating,” “adjusted” and “tangible” basis, from which it excludes the after-tax effect of amortization of core deposit and other intangible assets (and the related goodwill, core deposit intangible and other intangible asset balances, net of applicable deferred tax amounts), accretion on non-impaired purchased loans, expenses associated with acquisitions, net realized gain on the sale of investments, the unrealized gain or loss on equity securities and loss on debt extinguishment. The amounts for such items are presented in the tables that accompany this release. Although these items are non-GAAP measures, the Company’s management believes this information helps investors understand the effect of acquisition and other non-recurring activity in its reported results. Diluted adjusted net earnings per share were $0.88 in the third quarter of 2019, compared to $0.84 in the third quarter of 2018, a $0.04, or 4.8%, increase between comparable periods.

Financial Position

Average earning assets were up $379.1 million, or 4.0%, on a linked quarter basis, from $9.43 billion during the second quarter of 2019 to $9.81 billion during the third quarter of 2019. Average loan balances were $6.74 billion for the third quarter, up $441.0 million, or 7.0%, over the second quarter. Average deposit balances were up $423.5 million, or 5.0%, from second quarter levels. These increases were primarily driven by the Kinderhook acquisition in the third quarter of 2019. Average borrowings in the third quarter of $291.0 million, were down $28.5 million, or 8.9%, from the second quarter average borrowings of $319.5 million. During the third quarter, the Company experienced a decline in average customer repurchase agreement balances of $40.5 million as seasonally expected. Average balances on other borrowed funds increased $12.0 million due primarily to the assumption of certain subordinated debt in connection with the Kinderhook transaction. At the end of the third quarter, the Company redeemed $22.7 million of junior subordinated debt and associated preferred securities, $20.6 million of which was acquired in connection with the Company’s 2017 acquisition of Merchants Bancshares, Inc. and $2.1 million of which was acquired in connection with the third quarter acquisition of Kinderhook.

Ending loans at September 30, 2019 were $6.85 billion. This was up $569.1 million, or 9.1%, from the end of the second quarter and $572.1 million, or 9.1%, from the end of the fourth quarter of 2018, primarily due to the Kinderhook acquisition. Outstanding balances in all loan portfolio segments including business lending, consumer mortgage, consumer indirect, consumer direct and home equity loans increased during the quarter. Outstanding balances in all of the Company’s loan portfolio segments grew organically during the quarter. Excluding acquired loans, the Company’s loan portfolio increased $97.4 million, or 1.5%, from the end of the second quarter. The business lending portfolio, excluding acquired loans, increased $56.4 million, or 2.4%, including a $31.6 million increase in the municipal loans, consistent with the prior year’s trends. Excluding acquired loans, consumer mortgage balances were up $29.4 million, or 1.3%, in the quarter, home equity balances were up $0.8 million, or 0.2%, and the consumer indirect and direct loan portfolios, on a combined basis, were up $10.8 million, or 0.9%, consistent with seasonal expectations.

Investment securities, including cash equivalents, totaled $3.26 billion at September 30, 2019. This was up $154.1 million, or 5.0%, from the end of the linked second quarter with increases in municipal securities, treasury and agency securities, mortgage backed securities and other investments totaling $84.0 million, partially offset by a decrease in collateralized mortgage obligations of $4.5 million. In addition, the net unrealized gain on the Company’s investment securities portfolio increased $8.8 million during the quarter from $36.5 million at the end of the second quarter to $45.3 million at the end of the third quarter. Investment securities balances were down $499.9 million, or 16.8%, from the end of fourth quarter of 2018, due largely to the sale of $590.2 million of Treasury securities during the second quarter. The effective duration of the securities portfolio was 2.5 years at the end of the third quarter, as compared to 2.7 years at the end of the second quarter of 2019.

Shareholders’ equity of $1.84 billion at the end of the third quarter was $172.1 million, or 10.3%, higher than the prior year period. The increase in shareholders’ equity between the third quarter of 2018 and third quarter of 2019 was primarily driven by an $86.9 million increase in retained earnings between the periods and a $64.6 million increase in accumulated other comprehensive income, from increases in the after-tax market value adjustment on the Company’s available-for-sale investment portfolio. The Company’s net tangible equity to net tangible assets ratio was 9.68% at September 30, 2019, up from 9.13% a year earlier, but down from 10.56% at the end of the second quarter of 2019 due to the impact of the Kinderhook acquisition. The Company’s Tier 1 leverage ratio was 10.76% at the end of the third quarter, down from 11.54% at the end of the second quarter due primarily to Kinderhook, but up slightly from 10.72% a year earlier.

As previously announced in December 2018, the Company’s Board of Directors approved a stock repurchase program authorizing the repurchase of up to 2.5 million shares of the Company’s common stock during a twelve-month period starting January 1, 2019. Such repurchases may be made at the discretion of the Company’s senior management based on market conditions and other relevant factors and will be acquired through open market or privately negotiated transactions as permitted under Rule 10b-18 of the Securities Exchange Act of 1934 and other applicable legal requirements. There were no shares repurchased pursuant to the program in the third quarter of 2019.

Asset Quality

The Company’s asset quality metrics continue to illustrate the long-term effectiveness of the Company’s disciplined credit risk management and underwriting standards. Total net charge-offs were $1.6 million for the third quarter, compared to $1.7 million for the third quarter of 2018 and $1.2 million for the second quarter of 2019. Net charge-offs as an annualized percentage of average loans measured 0.10% in the third quarter of 2019, compared to 0.11% in the prior year’s third quarter and 0.08% in the second quarter of 2019. Nonperforming loans as a percentage of total loans at September 30, 2019 were 0.42%, up three basis points from 0.39% at June 30, 2019 and up two basis points from 0.40% at September 30, 2018. The total loan delinquency ratio of 0.85% at the end of the third quarter was two basis points lower than the level at June 30, 2019, and eight basis points lower than one year earlier. The allowance for loan losses to nonperforming loans was 172% at September 30, 2019. This compares to 202% at June 30, 2019 and 201% at the September 30, 2018.

Dividend Increase

During the third quarter of 2019, the Company declared a quarterly cash dividend of $0.41 per share on its common stock, an increase of 7.9% compared to a $0.38 dividend declared in the third quarter of 2018. The third quarter 2019 dividend represents an annualized yield of 2.57% based upon the $63.86 closing price of the Company’s stock on October 18, 2019. The $0.03 increase in the quarterly dividend declared in the third quarter of 2019 marked the Company’s 27th consecutive year of dividend increases. “We are proud of this achievement and believe the Company’s business model, earnings generation and strong capital resources not only support this increase, but also allow us to maintain significant flexibility for future growth opportunities,” said Mark E. Tryniski, President and Chief Executive Officer.

Steuben Trust Corporation

On October 21, 2019, the Company announced that it had entered into a definitive agreement to acquire Steuben Trust Corporation (“Steuben”), parent company of Steuben Trust Company, a New York State chartered community bank headquartered in Hornell, New York, for approximately $106.8 million in Company stock and cash. The acquisition will extend the Company’s footprint into two new counties in Western New York State, and enhance the Company’s presence in four Western New York State counties in which it currently operates. Upon completion of the merger, Community Bank will add 15 branch locations with approximately $576.6 million of assets, and deposits of $484.4 million. The Company expects this acquisition to be approximately $0.08 to $0.09 per share accretive to its first full year of GAAP earnings and $0.09 to $0.10 per share accretive to cash earnings, excluding any one-time transaction costs. The acquisition is expected to close during the second quarter of 2020, pending both customary regulatory and Steuben shareholder approval.

Conference Call Scheduled

Company management will conduct an investor call at 11:00 a.m. (ET) today, October 21, 2019, to discuss third quarter 2019 results. The conference call can be accessed at 800-263-0877 (646-828-8143 if outside United States and Canada) using the conference ID code 1984485. Investors may also listen live via the Internet at: https://www.webcaster4.com/Webcast/Page/995/31682.

This earnings release, including supporting financial tables, is available within the press releases section of the Company's investor relations website at: http://ir.communitybanksystem.com. An archived webcast of the earnings call will be available on this site for one full year.

Community Bank System, Inc. operates over 230 customer facilities across Upstate New York, Northeastern Pennsylvania, Vermont, and Western Massachusetts through its banking subsidiary, Community Bank, N.A. With assets of over $11.5 billion, the DeWitt, N.Y. headquartered company is among the country’s 150 largest financial institutions. In addition to a full range of retail, business, and municipal banking services, the Company offers comprehensive financial planning, insurance and wealth management services through its Community Bank Wealth Management Group and OneGroup NY, Inc. operating subsidiaries. The Company's Benefit Plans Administrative Services, Inc. subsidiary is a leading provider of employee benefits administration, trust services, collective investment fund administration and actuarial consulting services to customers on a national scale. Community Bank System, Inc. is listed on the New York Stock Exchange and the Company's stock trades under the symbol CBU. For more information about Community Bank visit www.cbna.com or http://ir.communitybanksystem.com.

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The following factors, among others, could cause the actual results of CBU’s operations to differ materially from CBU’s expectations: the successful integration of operations of its acquisitions; competition; changes in economic conditions, interest rates and financial markets; changes in legislation or regulatory requirements; and the timing for receiving regulatory approvals and completing pending transactions. These statements are based on the current beliefs and expectations of CBU’s management and CBU does not assume any duty to update forward-looking statements.

Summary of Financial Data (unaudited)

 

 

 

 

(Dollars in thousands, except per share data)

 

 

 

 

 

Quarter Ended

Year-to-Date

 

September 30,
2019

September 30,
2018

September 30,
2019

September 30,
2018

Earnings

 

 

 

 

Loan income

$79,931

$72,256

$227,701

$212,849

Investment income

18,716

18,647

57,979

57,463

Total interest income

98,647

90,903

285,680

270,312

Interest expense

7,371

4,705

19,245

12,644

Net interest income

91,276

86,198

266,435

257,668

Provision for loan losses

1,751

2,215

5,573

8,342

Net interest income after provision for loan losses

89,525

83,983

260,862

249,326

Deposit service fees and other banking services

17,865

17,663

52,408

58,210

Wealth management and insurance services

14,890

14,438

44,008

42,414

Employee benefit services

24,329

23,265

72,170

68,813

Gain on sale of investments, net

0

0

4,882

0

Unrealized gain on equity securities

10

743

28

722

Loss on debt extinguishment

0

(318)

0

(318)

Total noninterest revenues

57,094

55,791

173,496

169,841

Salaries and employee benefits

56,061

51,062

163,448

155,323

Occupancy and equipment

9,801

9,770

29,708

29,738

Amortization of intangible assets

3,960

4,427

11,994

13,780

Acquisition expenses

6,061

(832)

7,789

(769)

Other

21,046

20,806

63,818

59,604

Total operating expenses

96,929

85,233

276,757

257,676

Income before income taxes

49,690

54,541

157,601

161,491

Income taxes

10,472

11,435

31,422

33,673

Net income

$39,218

$43,106

$126,179

$127,818

Basic earnings per share

$0.76

$0.84

$2.44

$2.49

Diluted earnings per share

$0.75

$0.83

$2.41

$2.46

Summary of Financial Data (unaudited)

 

 

 

 

 

 

 

 

 

(Dollars in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

2019

 

2018

 

3rd Qtr

 

2nd Qtr

 

1st Qtr

 

4th Qtr

 

3rd Qtr

Earnings

 

 

 

 

 

 

 

 

 

Loan income

$79,931

 

$74,067

 

$73,703

 

$73,316

 

$72,256

Investment income

18,716

 

20,285

 

18,978

 

19,105

 

18,647

Total interest income

98,647

 

94,352

 

92,681

 

92,421

 

90,903

Interest expense

7,371

 

6,052

 

5,822

 

5,034

 

4,705

Net interest income

91,276

 

88,300

 

86,859

 

87,387

 

86,198

Provision for loan losses

1,751

 

1,400

 

2,422

 

2,495

 

2,215

Net interest income after provision for loan losses

89,525

 

86,900

 

84,437

 

84,892

 

83,983

Deposit service fees and other banking services

17,865

 

17,143

 

17,400

 

17,142

 

17,663

Wealth management and insurance services

14,890

 

14,907

 

14,211

 

13,675

 

14,438

Employee benefit services

24,329

 

23,787

 

24,054

 

23,466

 

23,265

Gain on sale of investments, net

0

 

4,882

 

0

 

0

 

0

Unrealized gain(loss) on equity securities

10

 

(13)

 

31

 

(65)

 

743

Loss on debt extinguishment

0

 

0

 

0

 

0

 

(318)

Total noninterest revenues

57,094

 

60,706

 

55,696

 

54,218

 

55,791

Salaries and employee benefits

56,061

 

54,008

 

53,379

 

52,040

 

51,062

Occupancy and equipment

9,801

 

9,619

 

10,288

 

10,210

 

9,770

Amortization of intangible assets

3,960

 

3,904

 

4,130

 

4,375

 

4,427

Acquisition expenses

6,061

 

1,194

 

534

 

0

 

(832)

Other

21,046

 

22,451

 

20,321

 

20,988

 

20,806

Total operating expenses

96,929

 

91,176

 

88,652

 

87,613

 

85,233

Income before income taxes

49,690

 

56,430

 

51,481

 

51,497

 

54,541

Income taxes

10,472

 

11,415

 

9,535

 

10,674

 

11,435

Net income

$39,218

 

$45,015

 

$41,946

 

$40,823

 

$43,106

Basic earnings per share

$0.76

 

$0.87

 

$0.81

 

$0.79

 

$0.84

Diluted earnings per share

$0.75

 

$0.86

 

$0.80

 

$0.78

 

$0.83

Profitability

 

 

 

 

 

 

 

 

 

Return on assets

1.39%

 

1.68%

 

1.59%

 

1.53%

 

1.61%

Return on equity

8.53%

 

10.18%

 

9.85%

 

9.63%

 

10.28%

Return on tangible equity(2)

14.92%

 

17.74%

 

17.61%

 

17.61%

 

19.06%

Noninterest revenues/operating revenues (FTE) (1)

38.6%

 

38.8%

 

39.1%

 

38.5%

 

39.4%

Efficiency ratio

58.8%

 

59.8%

 

59.1%

 

59.1%

 

58.0%

Components of Net Interest Margin (FTE)

 

 

 

 

 

 

 

 

 

Loan yield

4.72%

 

4.73%

 

4.78%

 

4.65%

 

4.57%

Cash equivalents yield

2.19%

 

2.37%

 

2.33%

 

1.85%

 

1.60%

Investment yield

2.61%

 

2.73%

 

2.59%

 

2.62%

 

2.55%

Earning asset yield

4.03%

 

4.06%

 

4.05%

 

3.99%

 

3.91%

Interest-bearing deposit rate

0.36%

 

0.30%

 

0.27%

 

0.22%

 

0.18%

Borrowing rate

2.06%

 

1.87%

 

1.86%

 

1.68%

 

1.96%

Cost of all interest-bearing funds

0.43%

 

0.37%

 

0.36%

 

0.31%

 

0.29%

Cost of funds (includes DDA)

0.32%

 

0.28%

 

0.27%

 

0.23%

 

0.21%

Net interest margin (FTE)

3.73%

 

3.80%

 

3.80%

 

3.77%

 

3.71%

Fully tax-equivalent adjustment

$985

 

$990

 

$1,008

 

$1,062

 

$1,071

Summary of Financial Data (unaudited)

 

 

 

 

 

 

 

 

 

(Dollars in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

2019

 

2018

 

3rd Qtr

 

2nd Qtr

 

1st Qtr

 

4th Qtr

 

3rd Qtr

Average Balances

 

 

 

 

 

 

 

 

 

Loans

$6,735,776

 

$6,294,772

 

$6,273,798

 

$6,276,231

 

$6,289,868

Cash equivalents

665,862

 

334,304

 

121,304

 

28,817

 

26,832

Taxable investment securities

1,990,979

 

2,400,516

 

2,574,902

 

2,577,366

 

2,574,116

Nontaxable investment securities

413,437

 

397,316

 

403,359

 

423,902

 

441,719

Total interest-earning assets

9,806,054

 

9,426,908

 

9,373,363

 

9,306,316

 

9,332,535

Total assets

11,229,919

 

10,771,975

 

10,687,708

 

10,575,272

 

10,619,872

Interest-bearing deposits

6,462,143

 

6,170,832

 

6,107,732

 

6,039,390

 

6,077,581

Borrowings

290,967

 

319,505

 

373,656

 

389,378

 

393,483

Total interest-bearing liabilities

6,753,110

 

6,490,337

 

6,481,388

 

6,428,768

 

6,471,064

Noninterest-bearing deposits

2,458,831

 

2,326,630

 

2,297,472

 

2,317,042

 

2,336,778

Shareholders' equity

1,824,869

 

1,774,400

 

1,726,313

 

1,682,525

 

1,664,234

Balance Sheet Data

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$1,014,042

 

$874,836

 

$508,364

 

$211,834

 

$256,838

Investment securities

2,481,742

 

2,402,272

 

2,966,147

 

2,981,658

 

2,948,057

Loans:

 

 

 

 

 

 

 

 

 

Business lending

2,779,612

 

2,395,684

 

2,410,477

 

2,396,977

 

2,403,624

Consumer mortgage

2,405,191

 

2,255,782

 

2,237,430

 

2,235,408

 

2,220,022

Consumer indirect

1,091,980

 

1,082,834

 

1,070,840

 

1,083,207

 

1,098,943

Home equity

389,029

 

371,619

 

374,297

 

386,709

 

393,950

Consumer direct

187,379

 

178,151

 

173,042

 

178,820

 

184,349

Total loans

6,853,191

 

6,284,070

 

6,266,086

 

6,281,121

 

6,300,888

Allowance for loan losses

49,423

 

49,310

 

49,107

 

49,284

 

50,133

Intangible assets, net

840,685

 

800,515

 

804,419

 

807,349

 

811,700

Other assets

457,060

 

433,005

 

420,558

 

374,617

 

392,217

Total assets

11,597,297

 

10,745,388

 

10,916,467

 

10,607,295

 

10,659,567

Deposits:

 

 

 

 

 

 

 

 

 

Noninterest-bearing

2,549,395

 

2,363,408

 

2,346,635

 

2,312,816

 

2,346,932

Non-maturity interest-bearing

5,672,825

 

5,356,448

 

5,517,141

 

5,270,015

 

5,366,488

Time

946,065

 

768,349

 

755,886

 

739,540

 

750,401

Total deposits

9,168,285

 

8,488,205

 

8,619,662

 

8,322,371

 

8,463,821

Borrowings

237,661

 

144,290

 

251,833

 

315,743

 

276,559

Subordinated notes payable

13,814

 

0

 

0

 

0

 

0

Subordinated debt held by unconsolidated subsidiary trusts

77,320

 

97,939

 

97,939

 

97,939

 

97,939

Accrued interest and other liabilities

259,796

 

205,444

 

189,905

 

157,459

 

152,903

Total liabilities

9,756,876

 

8,935,878

 

9,159,339

 

8,893,512

 

8,991,222

Shareholders' equity

1,840,421

 

1,809,510

 

1,757,128

 

1,713,783

 

1,668,345

Total liabilities and shareholders' equity

11,597,297

 

10,745,388

 

10,916,467

 

10,607,295

 

10,659,567

Capital

 

 

 

 

 

 

 

 

 

Tier 1 leverage ratio

10.76%

 

11.54%

 

11.27%

 

11.08%

 

10.72%

Tangible equity/net tangible assets (2)

9.68%

 

10.56%

 

9.83%

 

9.68%

 

9.13%

Diluted weighted average common shares O/S

52,382

 

52,356

 

52,195

 

52,122

 

52,086

Period end common shares outstanding

51,660

 

51,571

 

51,471

 

51,258

 

51,137

Cash dividends declared per common share

$0.41

 

$0.38

 

$0.38

 

$0.38

 

$0.38

Book value

$35.63

 

$35.09

 

$34.14

 

$33.43

 

$32.63

Tangible book value(2)

$20.24

 

$20.45

 

$19.40

 

$18.59

 

$17.67

Common stock price (end of period)

$61.69

 

$65.84

 

$59.77

 

$58.30

 

$61.07

       

Summary of Financial Data (unaudited)

 

 

 

 

 

 

 

 

 

(Dollars in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

2019

 

2018

 

3rd Qtr

 

2nd Qtr

 

1st Qtr

 

4th Qtr

 

3rd Qtr

Asset Quality

 

 

 

 

 

 

 

 

 

Nonaccrual loans

$23,610

 

$21,413

 

$21,252

 

$22,544

 

$21,982

Accruing loans 90+ days delinquent

5,064

 

3,047

 

3,019

 

2,455

 

2,951

Total nonperforming loans

28,674

 

24,460

 

24,271

 

24,999

 

24,933

Other real estate owned (OREO)

1,258

 

1,736

 

1,524

 

1,320

 

1,142

Total nonperforming assets

29,932

 

26,196

 

25,795

 

26,319

 

26,075

Net charge-offs

1,638

 

1,197

 

2,599

 

3,345

 

1,700

Allowance for loan losses/loans outstanding

0.72%

 

0.78%

 

0.78%

 

0.78%

 

0.80%

Nonperforming loans/loans outstanding

0.42%

 

0.39%

 

0.39%

 

0.40%

 

0.40%

Allowance for loan losses/nonperforming loans

172%

 

202%

 

202%

 

197%

 

201%

Net charge-offs/average loans

0.10%

 

0.08%

 

0.17%

 

0.21%

 

0.11%

Delinquent loans/ending loans

0.85%

 

0.87%

 

0.88%

 

1.00%

 

0.93%

Loan loss provision/net charge-offs

107%

 

117%

 

93%

 

75%

 

130%

Nonperforming assets/total assets

0.26%

 

0.24%

 

0.24%

 

0.25%

 

0.24%

Asset Quality (excluding loans acquired since 1/1/09)

 

 

 

 

 

 

 

 

 

Nonaccrual loans

$16,644

 

$15,529

 

$15,524

 

$16,182

 

$14,684

Accruing loans 90+ days delinquent

3,734

 

2,863

 

2,593

 

2,106

 

2,688

Total nonperforming loans

20,378

 

18,392

 

18,117

 

18,288

 

17,372

Other real estate owned (OREO)

1,258

 

1,145

 

898

 

669

 

859

Total nonperforming assets

21,636

 

19,537

 

19,015

 

18,957

 

18,231

Net charge-offs

1,602

 

1,234

 

1,516

 

3,053

 

1,533

Allowance for loan losses/loans outstanding

0.89%

 

0.93%

 

0.94%

 

0.93%

 

0.96%

Nonperforming loans/loans outstanding

0.38%

 

0.36%

 

0.36%

 

0.36%

 

0.35%

Allowance for loan losses/nonperforming loans

231%

 

260%

 

262%

 

256%

 

274%

Net charge-offs/average loans

0.12%

 

0.10%

 

0.12%

 

0.24%

 

0.12%

Delinquent loans/ending loans

0.88%

 

0.89%

 

0.89%

 

1.06%

 

0.97%

Loan loss provision/net charge-offs

51%

 

123%

 

142%

 

76%

 

138%

Nonperforming assets/total assets

0.22%

 

0.20%

 

0.20%

 

0.20%

 

0.20%

Summary of Financial Data (unaudited)

 

 

 

 

 

 

(Dollars in thousands, except per share data)

 

 

 

 

 

 

 

2019

 

2018

 

3rd Qtr

 

2nd Qtr

 

1st Qtr

 

4th Qtr

 

3rd Qtr

Quarterly GAAP to Non-GAAP Reconciliations

 

 

 

 

 

 

 

 

 

Income statement data

 

 

 

 

 

 

 

 

 

Net income

       

Net income (GAAP)

$39,218

 

$45,015

 

$41,946

 

$40,823

 

$43,106

Acquisition expenses

6,061

 

1,194

 

534

 

0

 

(832)

Tax effect of acquisition expenses

(1,277)

 

(242)

 

(99)

 

0

 

174

Subtotal (non-GAAP)

44,002

 

45,967

 

42,381

 

40,823

 

42,448

Gain on sale of investments, net

0

 

(4,882)

 

0

 

0

 

0

Tax effect of gain on sale of investments, net

0

 

988

 

0

 

0

 

0

Subtotal (non-GAAP)

44,002

 

42,073

 

42,381

 

40,823

 

42,448

Unrealized (gain)loss on equity securities

(10)

 

13

 

(31)

 

65

 

(743)

Tax effect of unrealized (gain)loss on equity securities

2

 

(3)

 

6

 

(13)

 

156

Subtotal (non-GAAP)

43,994

 

42,083

 

42,356

 

40,875

 

41,861

Loss on debt extinguishment

0

 

0

 

0

 

0

 

318

Tax effect of loss on debt extinguishment

0

 

0

 

0

 

0

 

(67)

Operating net income (non-GAAP)

43,994

 

42,083

 

42,356

 

40,875

 

42,112

Amortization of intangibles

3,960

 

3,904

 

4,130

 

4,375

 

4,427

Tax effect of amortization of intangibles

(835)

 

(790)

 

(765)

 

(907)

 

(928)

Subtotal (non-GAAP)

47,119

 

45,197

 

45,721

 

44,343

 

45,611

Acquired non-impaired loan accretion

(1,637)

 

(1,302)

 

(1,330)

 

(1,838)

 

(1,980)

Tax effect of acquired non-impaired loan accretion

345

 

263

 

246

 

381

 

415

Adjusted net income (non-GAAP)

$45,827

 

$44,158

 

$44,637

 

$42,886

 

$44,046

 

 

 

 

 

 

 

 

 

 

Return on average assets

 

 

 

 

 

 

 

 

 

Adjusted net income (non-GAAP)

$45,827

 

$44,158

 

$44,637

 

$42,886

 

$44,046

Average total assets

11,229,919

 

10,771,975

 

10,687,708

 

10,575,272

 

10,619,872

Adjusted return on average assets

1.62%

 

1.64%

 

1.69%

 

1.61%

 

1.65%

 

 

 

 

 

 

 

 

 

 

Return on average equity

 

 

 

 

 

 

 

 

 

Adjusted net income (non-GAAP)

$45,827

 

$44,158

 

$44,637

 

$42,886

 

$44,046

Average total equity

1,824,869

 

1,774,400

 

1,726,313

 

1,682,525

 

1,664,234

Adjusted return on average equity

9.96%

 

9.98%

 

10.49%

 

10.11%

 

10.50%

 

 

 

 

 

 

 

 

 

 

Earnings per common share

 

 

 

 

 

 

 

 

 

Diluted earnings per share (GAAP)

$0.75

 

$0.86

 

$0.80

 

$0.78

 

$0.83

Acquisition expenses

0.12

 

0.02

 

0.01

 

0.00

 

(0.02)

Tax effect of acquisition expenses

(0.03)

 

0.00

 

0.00

 

0.00

 

0.00

Subtotal (non-GAAP)

0.84

 

0.88

 

0.81

 

0.78

 

0.81

Gain on sale of investments, net

0.00

 

(0.10)

 

0.00

 

0.00

 

0.00

Tax effect of gain on sale of investments, net

0.00

 

0.02

 

0.00

 

0.00

 

0.00

Subtotal (non-GAAP)

0.84

 

0.80

 

0.81

 

0.78

 

0.81

Unrealized (gain)loss on equity securities

0.00

 

0.00

 

0.00

 

0.00

 

(0.01)

Tax effect of unrealized (gain)loss on equity securities

0.00

 

0.00

 

0.00

 

0.00

 

0.00

Subtotal (non-GAAP)

0.84

 

0.80

 

0.81

 

0.78

 

0.80

Loss on debt extinguishment

0.00

 

0.00

 

0.00

 

0.00

 

0.01

Tax effect of loss on debt extinguishment

0.00

 

0.00

 

0.00

 

0.00

 

0.00

Operating diluted earnings per share (non-GAAP)

0.84

 

0.80

 

0.81

 

0.78

 

0.81

Amortization of intangibles

0.08

 

0.07

 

0.08

 

0.08

 

0.08

Tax effect of amortization of intangibles

(0.02)

 

(0.02)

 

(0.01)

 

(0.02)

 

(0.02)

Subtotal (non-GAAP)

0.90

 

0.85

 

0.88

 

0.84

 

0.87

Acquired non-impaired loan accretion

(0.03)

 

(0.02)

 

(0.03)

 

(0.04)

 

(0.04)

Tax effect of acquired non-impaired loan accretion

0.01

 

0.01

 

0.00

 

0.01

 

0.01

Diluted adjusted net earnings per share (non-GAAP)

$0.88

 

$0.84

 

$0.85

 

$0.81

 

$0.84

 

 

 

 

 

 

 

 

 

 

       

 

Summary of Financial Data (unaudited)

 

 

 

 

 

 

 

 

(Dollars in thousands, except per share data)

 

 

 

 

 

 

 

 

 

2019

 

2018

 

3rd Qtr

 

2nd Qtr

 

1st Qtr

 

4th Qtr

 

3rd Qtr

Quarterly GAAP to Non-GAAP Reconciliations

 

 

 

 

 

 

 

 

 

Income statement data (continued)

 

 

 

 

 

 

 

 

 

Noninterest operating expenses

 

 

 

 

 

 

 

 

 

Noninterest expenses (GAAP)

$96,929

 

$91,176

 

$88,652

 

$87,613

 

$85,233

Amortization of intangibles

(3,960)

 

(3,904)

 

(4,130)

 

(4,375)

 

(4,427)

Acquisition expenses

(6,061)

 

(1,194)

 

(534)

 

0

 

832

Total adjusted noninterest expenses (non-GAAP)

$86,908

 

$86,078

 

$83,988

 

$83,238

 

$81,638

 

 

 

 

 

 

 

 

 

 

Efficiency ratio

 

 

 

 

 

 

 

 

 

Adjusted noninterest expenses (non-GAAP) - numerator

$86,908

 

$86,078

 

$83,988

 

$83,238

 

$81,638

Tax-equivalent net interest income

92,261

 

89,290

 

87,867

 

88,449

 

87,269

Noninterest revenues

57,094

 

60,706

 

55,696

 

54,218

 

55,791

Acquired non-impaired loan accretion

(1,637)

 

(1,302)

 

(1,330)

 

(1,838)

 

(1,980)

Gain on sale of investments, net

0

 

(4,882)

 

0

 

0

 

0

Unrealized (gain)loss on equity securities

(10)

 

13

 

(31)

 

65

 

(743)

Loss on debt extinguishment

0

 

0

 

0

 

0

 

318

Operating revenues (non-GAAP) - denominator

147,708

 

143,825

 

142,202

 

140,894

 

140,655

Efficiency ratio (non-GAAP)

58.8%

 

59.8%

 

59.1%

 

59.1%

 

58.0%

 

 

 

 

 

 

 

 

 

 

Balance sheet data

 

 

 

 

 

 

 

 

 

Total assets

 

 

 

 

 

 

 

 

 

Total assets (GAAP)

$11,597,297

 

$10,745,388

 

$10,916,467

 

$10,607,295

 

$10,659,567

Intangible assets

(840,685)

 

(800,515)

 

(804,419)

 

(807,349)

 

(811,700)

Deferred taxes on intangible assets

46,048

 

45,576

 

45,994

 

46,370

 

46,882

Total tangible assets (non-GAAP)

10,802,660

 

9,990,449

 

10,158,042

 

9,846,316

 

9,894,749

 

 

 

 

 

 

 

 

 

 

Total common equity

 

 

 

 

 

 

 

 

 

Shareholders' Equity (GAAP)

1,840,421

 

1,809,510

 

1,757,128

 

1,713,783

 

1,668,345

Intangible assets

(840,685)

 

(800,515)

 

(804,419)

 

(807,349)

 

(811,700)

Deferred taxes on intangible assets

46,048

 

45,576

 

45,994

 

46,370

 

46,882

Total tangible common equity (non-GAAP)

1,045,784

 

1,054,571

 

998,703

 

952,804

 

903,527

 

 

 

 

 

 

 

 

 

 

Net tangible equity-to-assets ratio at quarter end

 

 

 

 

 

 

 

 

 

Total tangible common equity (non-GAAP) - numerator

$1,045,784

 

$1,054,571

 

$998,703

 

$952,804

 

$903,527

Total tangible assets (non-GAAP) - denominator

10,802,660

 

9,990,449

 

10,158,042

 

9,846,316

 

9,894,749

Net tangible equity-to-assets ratio at quarter end (non-GAAP)

9.68%

 

10.56%

 

9.83%

 

9.68%

 

9.13%

 

 

 

 

 

 

 

 

 

 

 

(1) Excludes gain on sales of investments, unrealized gain and loss on equity securities and loss on debt extinguishment.

(2) Includes deferred tax liabilities related to certain intangible assets.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20191021005132/en/