4 th Quarter 2017 Highlights:
  • Organic commercial and commercial real estate loan growth 1 of 10.1% annualized from 3 rd quarter of 2017
  • Cost of total deposits remained low at 0.20%, up just 1 basis point from 3 rd quarter of 2017
  • Legacy noninterest expenses 2 declined 6.8% from 4 th quarter of 2016
  • Anchor Bancorp, Inc. (Anchor-Minnesota) partnership closed November 1, 2017, less than 90 days following announcement

2017 Highlights:
  • Organic loan growth 1 of almost 5%; organic commercial and commercial real estate loan growth 1 of 10.1%
  • Cost of total deposits increased just 2 basis points to 0.19%
  • Credit quality metrics remain strong, with net charge-offs of just 0.03% of average total loans
  • Adjusted operating leverage improved over 350 basis points 2 from 2016

1 Excludes acquired loans; includes loans held for sale    2 Non-GAAP measure - refer to Tables 3 and 4 for Non-GAAP reconciliations

EVANSVILLE, Ind., Jan. 23, 2018 (GLOBE NEWSWIRE) -- Today Old National Bancorp (the "Company" or "Old National") (NASDAQ:ONB) reported a 4 th quarter 2017 net loss of $18.5 million, or $0.13 per diluted share.  Full-year 2017 net income was $95.7 million, or $0.69 per diluted share.

As was previously disclosed in a Current Report on Form 8-K filed by Old National with the Securities and Exchange Commission on December 22, 2017, the 4 th quarter results included an estimated revaluation of the Company's deferred tax asset due to the new "H.R.1" tax reform law.  Old National recorded $39.3 million of additional tax expense to estimate the impact of a reduction to its deferred tax asset.  Also included in the 4 th quarter were the following pre-tax charges: $11.9 million for merger and integration, $3.0 million for branch consolidations, $1.6 million in severance, $1.3 million for Foundation funding and $0.7 million for a client experience improvement initiative.  Excluding these items from the current quarter and netting out securities gains, Old National would have reported net income of $32.7 million, or $0.22 per share.  Refer to Table 5 for Non-GAAP net income reconciliation.

"Old National capped off a very successful 2017 with another strong quarter," said Old National Chairman and CEO Bob Jones. "Our 4th quarter saw a continuation of strong operating results highlighted by double digit commercial loan growth coupled with strong credit quality, controlled deposit costs and steady core expenses.  We accomplished all of this while expanding into Minnesota with the successful closing of our Anchor-Minnesota partnership.  We are optimistic as we look ahead to 2018 given the strength of our franchise and the foundation we have built for sustained, positive operating leverage.

"While the immediate impact of the Tax Cut and Jobs Act is the necessary writedown of a portion of our deferred taxes, the positive impact that reduced taxes will have on Old National and our clients will be significant in 2018 and beyond," continued Jones. "We are already hearing from our clients about increased investments in technology and other capital expenditures. This is a similar story for us, as we expect to use some of the benefit to enhance our client experience through increased investments in technology. We continue to be a leader in investments in our communities, underscoring our commitment by making a contribution to our Foundation."

Committed to our Strategic Imperatives

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 13 years: 

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

Balance Sheet and Net Interest Margin

At December 31, 2017, total period-end loans, including loans held for sale, increased $1.708 billion to $11.136 billion from $9.428 billion at September 30, 2017.  Total loans acquired through the partnership with Anchor-Minnesota were $1.595 billion as of the date of closing.  Excluding these acquired loans, Old National reported organic loan growth during the 4 th quarter of $112.4 million, or 4.8% on an annualized basis.  Old National's portfolio of commercial and commercial real estate loans grew by $1.653 billion from the 3 rd quarter.  Of this increase, $1.516 billon was acquired through the Anchor-Minnesota partnership, resulting in $136.5 million, or 10.1% annualized, of organic commercial loan growth.  

For the full-year 2017, Old National's total loan portfolio grew $2.035 billion.  Organic loan growth was $439.5 million, or 4.8%.  The Company's portfolio of commercial and commercial real estate loans grew $2.024 billion for the full year, of which $507.8 million was organic growth, an increase of 10.1% compared to 2016.

Total period-end core deposits, including demand and interest-bearing deposits, increased $1.949 billion to $12.441 billion at December 31, 2017, compared to $10.492 billion at September 30, 2017.  Total core deposits assumed through the Anchor-Minnesota partnership were $1.777 billion as of the date of closing, of which $579.4 million were noninterest-bearing demand deposits.  Excluding these assumed deposits, Old National reported organic deposit growth of $172.0 million for the 4 th quarter while noninterest-bearing deposit balances increased $66.8 million during that same period.  Old National's cost of total deposits remained well controlled at 0.20% in the 4 th quarter of 2017 compared to 0.19% in the 3 rd quarter of 2017 and 0.18% in the 4 th quarter of 2016.

Net interest income for the 4 th quarter of 2017 totaled $118.6 million compared to $108.5 million in the 3 rd quarter of 2017, and $109.9 million in the 4 th quarter of 2016.  On a fully taxable equivalent basis, net interest income was $124.7 million for the 4 th quarter of 2017 and represented a net interest margin on total average earning assets of 3.47%.  These results compare to net interest income on a fully taxable equivalent basis of $114.1 million and a margin of 3.52% in the 3 rd quarter of 2017.   In the 4 th quarter of 2016, Old National reported net interest income on a fully taxable equivalent basis of $115.4 million and a margin of 3.63%.  Refer to Table 6 for Non-GAAP taxable equivalent reconciliations.

As part of net interest income, Old National recorded $7.5 million in accretion income, which represents 21 basis points of the Company's net interest margin.  Accretion income is related to purchase accounting discounts from the Company's various acquisitions.  Total accretion income in the 3 rd quarter of 2017 and the 4 th quarter of 2016 reported by Old National was $11.1 million, or 34 basis points of the net interest margin, and $16.8 million, or 53 basis points of the net interest margin, respectively. 

Noninterest Income

For the 4 th quarter of 2017, total noninterest income amounted to $44.8 million and compares to $46.4 million reported in the 3 rd quarter of 2017 and $62.8 million in the 4 th quarter of 2016.  As compared to the 3 rd quarter, the 4 th quarter of 2017 saw seasonal declines in service charge income (excluding the $0.9 million contribution from Anchor-Minnesota) and mortgage revenue as well as lower capital markets income.  The 4 th quarter of 2016 included a $12.8 million pre-tax deferred gain related to the repurchase of various bank properties as well as $6.4 million of recoveries on loans from the Company's 2016 Wisconsin acquisition.  For the two months since the closing of the partnership, Anchor-Minnesota contributed $2.6 million in noninterest income to the 4 th quarter of 2017.

Noninterest Expenses

Noninterest expenses for Old National totaled $140.4 million for the 4 th quarter of 2017.  The current quarter included $18.5 million of pre-tax charges: $11.9 million for merger and integration, $3.0 million for branch consolidations, $1.6 million in severance, $1.3 million for Foundation funding and $0.7 million for a client experience improvement initiative.  Old National also incurred $11.7 million in amortization of tax credit investments in the 4 th quarter.  Excluding these charges from the current quarter, Old National's adjusted noninterest expense was $110.2 million. The newly acquired Anchor-Minnesota operations contributed $9.5 million in noninterest expenses during the 4 th quarter for the two months since the closing of the partnership.    Refer to Table 3 for Non-GAAP noninterest expense reconciliation.

For the 3 rd quarter of 2017, Old National reported total noninterest expenses of $103.7 million, which included $4.7 million of pre-tax charges: $2.1 million related to branch consolidations, $1.9 million related to a client-experience improvement initiative, $0.4 million for merger and integration and $0.3 million in severance.  In the 4 th quarter of 2016, noninterest expenses totaled $126.3 million and included $18.3 million of pre-tax charges: $9.8 million for the termination of the Company's pension plan, $5.1 million related to branch consolidations, $1.8 million in merger and integration charges and $1.6 million in severance.  Old National consolidated 14 branches in the 4 th quarter of 2017.  With the addition of the newly acquired Minnesota branches, Old National currently operates 191 branches throughout its franchise.

Capital

At December 31, 2017, Old National's capital position remained well above regulatory guideline minimums with regulatory tier 1 and total risk-based capital ratios of 10.4% and 11.4%, respectively, compared to 12.0% and 12.5% at September 30, 2017, and 11.7% and 12.2% at December 31, 2016.  Old National did not repurchase any stock in the open market during the 4 th quarter or full-year 2017.

The following table presents Old National's risk-based and leverage capital ratios compared to industry requirements:
    Table 1 Fully Phased-In Regulatory Guidelines Minimum   Consolidated ONB  at December 31, 2017
Tier 1 Risk-Based Capital Ratio > 8.5% 10.4%
Total Risk-Based Capital Ratio > 10.5% 11.4%
Common Equity Tier 1 Capital Ratio   > 7.0% 10.5%
Tier 1 Leverage Capital Ratio > 4.0% 8.3%

Old National's ratio of tangible common equity to tangible assets was 7.65% at December 31, 2017, compared to 8.50% at September 30, 2017, and 7.92% at December 31, 2016.  Refer to Table 13 for Non-GAAP reconciliations. 

Credit

Old National recorded a provision expense of $1.0 million and had net charge-offs of $0.8 million in the 4 th quarter of 2017.  These results compare to $0.3 million in provision expense and net charge-offs of $1.1 million, and a provision recapture of $1.8 million and net charge-offs of nearly zero, in the 3 rd quarter of 2017 and the 4 th quarter of 2016, respectively.  Net charge-offs for the 4 th quarter of 2017 were 0.03% of average total loans on an annualized basis, compared to net charge-offs of 0.05% of average total loans in the 3 rd quarter of 2017 and 0.00% in the 4 th quarter of 2016.

Delinquencies remained low as Old National reported 30-89 day delinquent loans of 0.37% in the 4 th quarter of 2017 compared to 0.34% in the 3 rd quarter of 2017.  Old National's 90+ day delinquent loans for the 4 th quarter of 2017 were 0.01%, unchanged from the 3 rd quarter of 2017.

For the full-year 2017, Old National recorded provision expense of $3.1 million and had net charge-offs of $2.5 million, or 0.03% of average total loans.  This compares to the full-year 2016 provision expense of $1.0 million and net charge-offs of $3.4 million, or 0.04% of average total loans.

Old National's allowance for loan losses at December 31, 2017, was $50.4 million, or 0.45% of total loans, compared to an allowance of $50.2 million, or 0.53% of total loans at September 30, 2017, and $49.8 million, or 0.55% of total loans, at December 31, 2016.  The coverage ratio (allowance to non-performing loans) stood at 35% at December 31, 2017, compared to 37% at September 30, 2017, and 34% at December 31, 2016.

When reviewing Old National's credit quality trends, it is important to remember that, 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 December 31, 2017, the remaining discount on these acquired loans was $136.5 million, of which $46.1 million is applicable to loans acquired in the Anchor-Minnesota partnership. 

The following table presents certain credit quality metrics related to Old National's loan portfolio:
Table 2 ($ in millions) 4Q17 Excluding Anchor-Minnesota   4Q17 Anchor-Minnesota     4Q17 Consolidated       3Q17       4Q16
Non-Performing Loans (NPLs) $128.0 $16.5 $144.5 $137.1 $145.8
Problem Loans (Including NPLs) 199.2 27.4 226.6 209.5 220.4
Special Mention Loans 141.6 46.5 188.1 130.2 95.5
Net Charge-Off (Recoveries) Ratio 0.03% - 0.03% 0.05% 0.00%
Provision for Loan Losses $1.0 $- $1.0 $0.3 $(1.8)
Allowance for Loan Losses 50.4 - 50.4 50.2 49.8
Remaining Loan Discount on Acquired Loans 90.4 46.1 136.5 96.5 129.7

Income Taxes

On a fully taxable-equivalent basis, Old National reported $46.5 million in income tax expense in the 4 th quarter of 2017.  Included in this number is a $39.3 million estimate for the revaluation of the Company's deferred tax asset.  This revaluation resulted from the new "H.R.1" tax reform law which was signed on December 22, 2017.  As an estimate, this amount could be adjusted during the measurement period, which will end in December 2018. 

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. With $17.5 billion in assets, it ranks among the top 100 banking companies in the U.S. and has been recognized as a World's Most Ethical Company by the Ethisphere Institute for six consecutive years.  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, Michigan, Wisconsin and Minnesota. In addition to providing extensive services in retail and commercial banking, Old National offers comprehensive wealth management, investments and brokerage services. For more information and financial data, please visit Investor Relations at oldnational.com.

Conference CallOld National will hold a conference call at 10:00 a.m. Central Time on Tuesday, January 23, 2018, to discuss 4 th quarter and full-year 2017 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 1:00 p.m. Central Time on January 23 through February 6.  To access the replay, dial 1-855-859-2056, Conference ID Code 6268317.

Use of Non-GAAP Financial MeasuresThis 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.

Table 3 - N on-GAAP Reconciliation-Noninterest Expenses
($ in millions) 4Q17 4Q16
Noninterest Expense As Reported $140.4 $126.3
Less: Merger and Integration Charges (11.9) (1.8)
Less: Amortization of Tax Credit Investments (11.7) -
Less: Pension Termination Charges - (9.8)
Less: Branch Consolidations, Severance, Foundation Funding and Client Experience Initiative Charges  (6.6)  (6.7)
Adjusted Noninterest Expenses $110.2 $108.0
Less: Anchor-Minnesota Expenses (9.5) -
Legacy ONB Noninterest Expenses $100.7 $108.0

Table 4 - N on-GAAP Reconciliation-Operating Leverage
($ in millions)   2017     2016  
Noninterest Expense As Reported $448.8 $454.1
Less: Merger and Integration Charges (12.3) (15.9)
Less: Amortization of Tax Credit Investments (11.7) -
Less: Pension Termination Charges - (9.8)
Less: Branch Consolidations, Severance, Foundation Funding and Client Experience Initiative Charges (14.0) (13.7)
Adjusted Noninterest Expenses $410.8 $414.7
     
Net Interest Income As Reported $437.2 $402.7
FTE Adjustment 23.1 21.3
Net Interest Income (FTE Basis) $460.3 $424.0
Total Noninterest Income As Reported $183.4 252.8
Less: Securities Gains (9.1) (5.8)
Adjusted Noninterest Income $174.2 $247.0
Total Revenue Less Securities Gains (FTE Basis) $634.5 $671.0
Less: Gain on Sale of Insurance - $(41.9)
Less: Gain on Repurchased Bank Properties, Other Gains (.2) (12.0)
Adjusted Total Revenue Less Securities Gains (FTE Basis) $634.3 $617.1
     
Operating Leverage 1 (basis points) (426)  
Adjusted Operating Leverage 2 (basis points) 373  

1 Year-over-year basis point change in noninterest expenses plus change in total revenue 2 Year-over-year basis point change in adjusted noninterest expenses plus change in adjusted total revenue

Table 5 - Non-GAAP Reconciliation-Adjusted Net Income
($ in millions, shares in 000s) Reported 4Q17 Adjustments 1 Adjusted 4Q17
Total Revenues (FTE Basis) $169.5 $(1.6) $167.9
Less: Provision for Loan Losses (1.0) - (1.0)
Less: Noninterest Expenses (140.4) 18.5 (121.9)
Income before Income Taxes (FTE) $28.1 $16.9 $45.0
Income Taxes (46.6) 34.3 (12.3)
Net Income (Loss) $(18.5) $51.2 $32.7
Average Shares Outstanding 146,875 - 146,875
Earnings (Loss) Per Share $(0.13) $0.35 $0.22

1 Tax-effect calculations use estimated full-year 2017 FTE tax rate excluding the $39.3 million deferred tax asset revaluation

Table 6 - N on-GAAP Reconciliation-Fully Taxable Equivalent Net Interest Margin
($ in millions) 4Q17 3Q17 4Q16
Net Interest Income $118.6  $108.5  $109.9 
Taxable Equivalent Adjustment  6.1   5.6   5.5 
Net Interest Income - Taxable Equivalent $124.7  $114.1  $115.4 
Average Earning Assets $14,389.5  $12,959.7  $12,713.3 
Net Interest Margin  3.47%  3.52%  3.63%

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 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 merger with Anchor-Minnesota 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.

Contacts:

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

Financial Community:Lynell J. Walton - (812) 464-1366Senior Vice President - Investor Relations
                   
  Table 7                
  Financial Highlights (unaudited)    
  ($ and shares in thousands, except per share data)    
                   
    Three Months Ended    Twelve Months Ended   
    December 31, September 30, December 31,   December 31, December 31,    
      2017     2017     2016       2017     2016      
  Income Statement                
  Net interest income $   118,556   $   108,478   $   109,917     $   437,168   $   402,703      
  Provision for loan losses   1,037     311     (1,756 )     3,050     960      
  Noninterest income   44,825     46,366     62,751       183,382     252,830      
  Noninterest expense     140,432       103,702       126,258         448,836       454,147      
  Net income (loss)   (18,493 )   39,372     33,456       95,725     134,264      
                   
                   
  Per Common Share Data (Diluted)                
  Net income (loss) available to common shareholders $   (0.13 ) $   0.29   $   0.25     $   0.69   $   1.05      
  Average diluted shares outstanding   146,875     135,796     135,383       138,513     128,301      
  Book value   14.17     14.07     13.42       14.17     13.42      
  Stock price   17.45     18.30     18.15       17.45     18.15      
  Dividend payout ratio   N/M     43 %   52 %     75 %   50 %    
  Tangible common book value (1)     8.37       9.02       8.30         8.37       8.30      
                   
                   
  Performance Ratios                
  Return on average assets   -0.45 %   1.05 %   0.91 %     0.63 %   0.98 %    
  Return on average common equity   -3.51 %   8.31 %   7.33 %     4.98 %   7.84 %    
  Return on average tangible common equity (1)   -5.05 %   13.58 %   12.57 %     8.59 %   13.73 %    
  Net interest margin (FTE)   3.47 %   3.52 %   3.63 %     3.48 %   3.58 %    
  Efficiency ratio (2)   81.60 %   64.17 %   69.53 %     68.87 %   65.82 %    
  Net charge-offs (recoveries) to average loans   0.03 %   0.05 %   0.00 %     0.03 %   0.04 %    
  Allowance for loan losses to ending loans   0.45 %   0.53 %   0.55 %     0.45 %   0.55 %    
  Non-performing loans to ending loans   1.30 %   1.46 %   1.62 %     1.30 %   1.62 %    
                   
                   
  Balance Sheet                
  Total loans $   11,118,121   $   9,398,124   $   9,010,512     $   11,118,121   $   9,010,512      
  Total assets   17,518,292     15,065,800     14,860,237       17,518,292     14,860,237      
  Total deposits   12,605,764     10,606,784     10,743,253       12,605,764     10,743,253      
  Total borrowed funds   2,578,204     2,411,111     2,152,086       2,578,204     2,152,086      
  Total shareholders' equity   2,154,397     1,906,823     1,814,417       2,154,397     1,814,417      
                   
                   
  Capital Ratios (1)                
  Risk-based capital ratios (EOP):                
    Tier 1 common equity   10.5 %   11.7 %   11.5 %     10.5 %   11.5 %    
    Tier 1   10.4 %   12.0 %   11.7 %     10.4 %   11.7 %    
    Total   11.4 %   12.5 %   12.2 %     11.4 %   12.2 %    
  Leverage ratio (to average assets)   8.3 %   8.8 %   8.4 %     8.3 %   8.4 %    
                   
  Total equity to assets (averages)   12.69 %   12.65 %   12.44 %     12.57 %   12.55 %    
  Tangible common equity to tangible assets   7.65 %   8.50 %   7.92 %     7.65 %   7.92 %    
                   
                   
  Nonfinancial Data                
  Full-time equivalent employees    2,801     2,592     2,733       2,801     2,733      
  Number of branches   191     188     203       191     203      
                   
  (1) See non-GAAP measures on Table 13.                
  (2) Efficiency ratio is defined as noninterest expense before amortization of intangibles as a percent of FTE net interest income and noninterest revenues, excluding net gains from securities transactions.  This presentation excludes amortization of intangibles and net securities gains, as is common in other company releases, and better aligns with true operating performance.    
  FTE - Fully taxable equivalent basis  EOP - End of period actual balances  N/M - Not meaningful    
                   

 
                   
  Table 8                
    Income Statement (unaudited)    
   ($ and shares in thousands, except per share data)   
                   
    Three Months Ended    Twelve Months Ended     
    December 31, September 30, December 31,   December 31, December 31,    
      2017     2017   2016       2017   2016    
  Interest income $   135,134   $   123,525 $   121,849     $   495,336 $   447,134    
  Less:  interest expense   16,578     15,047   11,932         58,168   44,431    
    Net interest income   118,556     108,478   109,917         437,168   402,703    
  Provision for loan losses   1,037     311   (1,756 )       3,050   960    
    Net interest income after provision for loan losses   117,519     108,167   111,673         434,118   401,743    
                   
  Wealth management fees   9,801     8,837   8,593         37,316   34,641    
  Service charges on deposit accounts   10,913     10,535   10,448         41,331   41,578    
  Debit card and ATM fees   4,756     4,248   4,183         17,676   16,769    
  Mortgage banking revenue   3,933     5,104   4,399         18,449   20,240    
  Insurance premiums and commissions   180     170   152         617   20,527    
  Investment product fees   5,791     5,193   5,155         20,977   18,822    
  Capital markets income   923     1,843   965         6,544   3,227    
  Company-owned life insurance   2,366     2,022   2,198         8,654   8,479    
  Change in FDIC indemnification asset     -        -      -          -    233    
  Other income   4,496     5,400   25,354         22,466   40,448    
  Net gain on sale of ONB Insurance Group, Inc.     -        -      -          -      41,864    
  Gains (losses) on sales of securities   1,588     2,972   1,239         9,135   5,848    
  Gains (losses) on derivatives   78     42   65         217   154    
    Total noninterest income   44,825     46,366   62,751         183,382   252,830    
                   
  Salaries and employee benefits   74,785     57,783   72,344         246,738   252,892    
  Occupancy   12,168     11,670   11,591         46,511   50,947    
  Equipment   3,498     3,485   3,675         13,560   13,448    
  Marketing   3,803     2,646   3,495         13,172   14,620    
  Data processing   8,776     7,696   7,961         32,306   32,002    
  Communication   2,419     2,163   2,805         9,284   9,959    
  Professional fees   5,523     4,589   3,904         16,840   15,705    
  Loan expenses   1,730     1,542   1,963         6,596   7,632    
  Supplies   686     547   885         2,406   2,865    
  FDIC assessment   2,666     2,197   2,583         9,480   8,681    
  Other real estate owned expense   741     511   944         3,376   4,195    
  Amortization of intangibles   3,399     2,641   3,241         11,841   12,486    
  Amortization of tax credit investments   11,733       -      -          11,733     -     
  Other expense     8,505       6,232     10,867         24,993     28,715    
    Total noninterest expense     140,432       103,702     126,258         448,836     454,147    
                   
    Income before income taxes     21,912       50,831     48,166         168,664     200,426    
    Income tax expense   40,405     11,459   14,710         72,939     66,162    
    Net income (loss) $   (18,493 ) $   39,372 $   33,456     $   95,725 $   134,264    
                   
  Diluted Earnings Per Share                  
  Net income (loss) $   (0.13 ) $   0.29 $   0.25     $   0.69 $   1.05    
                   
  Average Common Shares Outstanding                
    Basic     146,073       135,120     134,670         137,821     127,705    
    Diluted     146,875       135,796     135,383         138,513     128,301    
                   
  Common shares outstanding at end of period     152,040       135,523     135,159         152,040     135,159    
                   

 
                     
    Table 9   
    Balance Sheet (unaudited)  
    ($ in thousands)  
                     
        December 31,   September 30,   December 31,    
          2017       2017       2016      
      Assets              
        Federal Reserve Bank account $   54,361     $   32,333     $   36,496      
        Money market investments     13,318         17,382         9,642      
        Investments:              
        Treasury and government sponsored agencies     669,838         582,051         541,190      
        Mortgage-backed securities     1,674,584         1,458,385         1,535,659      
        States and political subdivisions     1,207,353         1,095,975         1,131,003      
        Other securities     453,765         451,082         441,110      
        Total investments     4,005,540         3,587,493         3,648,962      
        Loans held for sale     17,930         30,221         90,682      
        Loans:              
        Commercial     2,717,269         2,049,054         1,917,099      
        Commercial and agriculture real estate     4,354,552         3,370,211         3,130,853      
        Consumer:               
        Home equity     507,509         477,100         476,439      
        Other consumer loans     1,371,738         1,382,639         1,398,591      
        Subtotal of commercial and consumer loans     8,951,068         7,279,004         6,922,982      
        Residential real estate     2,167,053         2,119,120         2,087,530      
        Total loans     11,118,121         9,398,124         9,010,512      
        Total earning assets     15,209,270         13,065,553         12,796,294      
                     
      Allowance for loan losses     (50,381 )       (50,169 )       (49,808 )    
      Non-earning Assets:              
        Cash and due from banks     222,753         202,652         209,381      
        Premises and equipment     458,074         412,488         429,622      
        Goodwill and other intangible assets     881,147         684,253         692,695      
        Company-owned life insurance     403,753         356,897         352,956      
        Net deferred tax assets     110,857         137,951         181,863      
        Loan servicing rights     24,661         24,900         25,561      
        Other real estate owned     8,810         10,259         18,546      
        Other assets      249,348         221,016         203,127      
        Total non-earning assets     2,359,403         2,050,416         2,113,751      
        Total assets $   17,518,292     $   15,065,800     $   14,860,237      
                     
      Liabilities and Equity              
        Noninterest-bearing demand deposits $   3,680,807     $   3,034,696     $   3,016,093      
        NOW accounts     3,115,822         2,539,233         2,596,595      
        Savings accounts     3,035,622         2,932,488         2,954,709      
        Money market accounts     1,139,077         648,378         707,748      
        Other time deposits     1,470,118         1,337,156         1,353,614      
        Total core deposits     12,441,446         10,491,951         10,628,759      
        Brokered CD's     164,318         114,833         114,494      
        Total deposits     12,605,764         10,606,784         10,743,253      
                     
        Federal funds purchased and interbank borrowings     335,033         317,021         213,003      
        Securities sold under agreements to repurchase     384,810         285,409         367,052      
        Federal Home Loan Bank advances     1,609,579         1,589,367         1,353,092      
        Other borrowings     248,782         219,314         218,939      
        Total borrowed funds     2,578,204         2,411,111         2,152,086      
      Accrued expenses and other liabilities     179,927         141,082         150,481      
        Total liabilities     15,363,895         13,158,977         13,045,820      
                     
      Common stock, surplus, and retained earnings     2,204,669         1,941,020         1,873,789      
      Accumulated other comprehensive income (loss)     (50,272 )       (34,197 )       (59,372 )    
        Total shareholders' equity     2,154,397         1,906,823         1,814,417      
        Total liabilities and shareholders' equity $   17,518,292     $   15,065,800     $   14,860,237      
                   

 
                               
  Table 10                            
  Average Balance Sheet and Interest Rates (unaudited)    
  ($ in thousands)    
                               
                               
      Three Months Ended   Three Months Ended   Three Months Ended    
      December 31, 2017   September 30, 2017   December 31, 2016    
      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   $   54,611   $   87 0.63 %   $   32,755   $   85 1.03 %   $   40,791   $   37 0.36 %    
    Investments:                            
    Treasury and gov't sponsored agencies     611,982       3,031 1.98 %       585,354       2,844 1.94 %       551,665       2,754 2.00 %    
    Mortgage-backed securities     1,573,578       8,139 2.07 %       1,456,034       7,235 1.99 %       1,504,887       7,182 1.91 %    
    States and political subdivisions     1,178,113       13,312 4.52 %       1,103,721       13,065 4.73 %       1,141,703       13,458 4.72 %    
    Other securities       454,824       3,126 2.75 %       453,782       3,043 2.68 %       445,877       2,868 2.57 %    
    Total investments       3,818,497       27,608 2.89 %       3,598,891       26,187 2.91 %       3,644,132       26,262 2.88 %    
    Loans: (2)                            
    Commercial       2,480,987       26,577 4.19 %       2,021,614       20,731 4.01 %       1,871,338       17,453 3.65 %    
    Commercial and agriculture real estate     3,989,684       47,683 4.68 %       3,298,435       43,646 5.18 %       3,125,500       45,375 5.68 %    
    Consumer:                            
    Home equity       502,837       5,442 4.29 %       479,492       5,065 4.19 %       485,984       4,597 3.76 %    
    Other consumer loans     1,371,986       12,248 3.54 %       1,384,057       12,242 3.51 %       1,384,017       11,942 3.43 %    
    Subtotal commercial and consumer loans     8,345,494       91,950 4.37 %       7,183,598       81,684 4.51 %       6,866,839       79,367 4.60 %    
    Residential real estate loans     2,170,900       21,628 3.99 %       2,144,478       21,190 3.95 %       2,161,583       21,689 4.00 %    
                               
    Total loans       10,516,394       113,578 4.26 %       9,328,076       102,874 4.35 %       9,028,422       101,056 4.42 %    
                               
    Total earning assets $   14,389,502   $   141,273 3.88 %   $   12,959,722   $   129,146 3.95 %   $   12,713,345   $   127,355 3.97 %    
                               
  Less: Allowance for loan losses     (50,601 )           (51,130 )           (52,691 )        
                               
  Non-earning Assets:                            
  Cash and due from banks $   201,520         $   233,017         $   209,957          
  Other assets       2,046,544             1,845,612             1,806,507          
                               
    Total assets   $   16,586,965         $   14,987,221         $   14,677,118          
                               
  Interest-Bearing Liabilities:                          
    NOW accounts   $   2,905,440   $   714 0.10 %   $   2,570,321   $   544 0.08 %   $   2,560,533   $   430 0.07 %    
    Savings accounts       3,010,761       1,324 0.17 %       2,934,445       1,289 0.17 %       2,952,666       1,138 0.15 %    
    Money market accounts     994,574       394 0.16 %       661,635       142 0.09 %       703,904       142 0.08 %    
    Other time deposits       1,443,050       3,203 0.88 %       1,347,095       2,800 0.82 %       1,392,410       2,714 0.78 %    
    Total interest-bearing deposits     8,353,825       5,635 0.27 %       7,513,496       4,775 0.25 %       7,609,513       4,424 0.23 %    
    Brokered CD's        154,521       489 1.26 %       119,707       350 1.16 %       132,901       293 0.88 %    
    Total interest-bearing deposits and CD's     8,508,346       6,124 0.29 %       7,633,203       5,125 0.27 %       7,742,414       4,717 0.24 %    
                               
    Federal funds purchased and interbank borrowings     172,838       533 1.22 %       220,918       655 1.18 %       79,913       107 0.53 %    
    Securities sold under agreements to repurchase     370,095       400 0.43 %       315,285       280 0.35 %       354,709       370 0.41 %    
    Federal Home Loan Bank advances      1,543,690       6,871 1.77 %       1,506,606       6,618 1.74 %       1,264,368       4,383 1.38 %    
    Other borrowings        241,695       2,650 4.39 %       219,241       2,369 4.32 %       218,860       2,355 4.30 %    
    Total borrowed funds     2,328,318       10,454 1.78 %       2,262,050       9,922 1.74 %       1,917,850       7,215 1.50 %    
                               
    Total interest-bearing liabilities $   10,836,664   $   16,578 0.61 %   $   9,895,253   $   15,047 0.61 %   $   9,660,264   $   11,932 0.49 %    
                               
  Noninterest-Bearing Liabilities                          
  Demand deposits   $   3,486,412         $   3,049,503         $   3,006,263          
  Other liabilities       159,243             146,271             184,598          
  Shareholders' equity       2,104,646             1,896,194             1,825,993          
                               
  Total liabilities and shareholders' equity $   16,586,965         $   14,987,221         $   14,677,118          
                               
  Net interest rate spread       3.27 %       3.34 %       3.48 %    
                               
  Net interest margin (FTE)     3.47 %       3.52 %       3.63 %    
                               
  FTE adjustment     $   6,139       $   5,621       $   5,506      
                               
  (1) Interest income is reflected on a fully taxable equivalent basis (FTE).                      
  (2) Includes loans held for sale.                          
                               

 
                         
    Table 11                    
    Average Balance Sheet and Interest Rates (unaudited)    
    ($ in thousands)    
                         
                         
        Twelve Months Ended   Twelve Months Ended    
      December 31, 2017   December 31, 2016    
        Average Income (1)/ Yield/   Average Income (1)/ Yield/    
    Earning Assets:   Balance Expense Rate   Balance Expense Rate    
      Money market and other interest-earning                  
      investments   $   35,584   $   258 0.72 %   $   32,697   $   130 0.40 %    
      Investments:                    
      Treasury and gov't sponsored agencies     578,640       11,453 1.98 %       672,659       13,207 1.96 %    
      Mortgage-backed securities     1,506,677       30,782 2.04 %       1,295,749       24,174 1.87 %    
      States and political subdivisions     1,134,532       53,359 4.70 %       1,125,713       53,003 4.71 %    
      Other securities       450,127       11,863 2.64 %       438,832       10,391 2.37 %    
      Total investments       3,669,976       107,457 2.93 %       3,532,953       100,775 2.85 %    
      Loans: (2)                    
      Commercial       2,083,779       85,747 4.11 %       1,835,317       70,591 3.85 %    
      Commercial and agriculture real estate     3,426,757       171,483 5.00 %       2,648,911       150,592 5.69 %    
      Consumer:                    
      Home equity       483,310       20,003 4.14 %       459,648       20,356 4.43 %    
      Other consumer loans     1,392,221       48,139 3.46 %       1,336,381       45,020 3.37 %    
      Subtotal commercial and consumer loans     7,386,067       325,372 4.41 %       6,280,257       286,559 4.56 %    
      Residential real estate loans     2,146,279       85,340 3.98 %       1,995,060       80,963 4.06 %    
                         
      Total loans       9,532,346       410,712 4.31 %       8,275,317       367,522 4.44 %    
                         
      Total earning assets $   13,237,906   $   518,427 3.92 %   $   11,840,967   $   468,427 3.96 %    
                         
    Less: Allowance for loan losses     (50,845 )           (52,215 )        
                         
    Non-earning Assets:                    
    Cash and due from banks $   207,677         $   192,401          
    Other assets       1,907,963             1,661,200          
                         
      Total assets   $   15,302,701         $   13,642,353          
                         
    Interest-Bearing Liabilities:                  
      NOW accounts   $   2,676,760   $   2,224 0.08 %   $   2,389,143   $   1,529 0.06 %    
      Savings accounts       2,964,875       4,980 0.17 %       2,595,622       3,723 0.14 %    
      Money market accounts     762,540       831 0.11 %       763,909       840 0.11 %    
      Other time deposits       1,363,529       10,907 0.80 %       1,209,414       9,898 0.82 %    
      Total interest-bearing deposits     7,767,704       18,942 0.24 %       6,958,088       15,990 0.23 %    
      Brokered CD's        123,548       1,414 1.14 %       152,233       1,293 0.85 %    
      Total interest-bearing deposits and CD's     7,891,252       20,356 0.26 %       7,110,321       17,283 0.24 %    
                         
      Federal funds purchased and interbank borrowings     187,426       1,966 1.05 %       137,997       673 0.49 %    
      Securities sold under agreements to repurchase     336,539       1,270 0.38 %       368,757       1,509 0.41 %    
      Federal Home Loan Bank advances      1,481,314       24,818 1.68 %       1,121,413       15,547 1.39 %    
      Other borrowings        224,793       9,758 4.34 %       222,708       9,419 4.23 %    
      Total borrowed funds     2,230,072       37,812 1.70 %       1,850,875       27,148 1.47 %    
                         
      Total interest-bearing liabilities $   10,121,324   $   58,168 0.57 %   $   8,961,196   $   44,431 0.50 %    
                         
    Noninterest-Bearing Liabilities                  
    Demand deposits   $   3,111,672         $   2,776,140          
    Other liabilities       146,060             192,443          
    Shareholders' equity       1,923,645             1,712,574          
                         
    Total liabilities and shareholders' equity $   15,302,701         $   13,642,353          
                         
    Net interest rate spread       3.35 %       3.46 %    
                         
    Net interest margin (FTE)     3.48 %       3.58 %    
                         
    FTE adjustment     $   23,091       $   21,293      
                         
    (1) Interest income is reflected on a fully taxable equivalent basis (FTE).                
    (2) Includes loans held for sale.                  
                         

 
                 
  Table 12              
  Asset Quality (EOP) (unaudited)  
  ($ in thousands)  
                 
    Three Months Ended   Twelve Months Ended  
    December 31, September 30, December 31,   December 31, December 31,  
      2017     2017     2016       2017     2016    
                 
  Beginning allowance for loan losses $   50,169   $   50,986   $   51,547     $   49,808   $   52,233    
                 
    Provision for loan losses     1,037       311       (1,756 )       3,050       960    
                 
    Gross charge-offs     (3,278 )     (2,821 )     (3,472 )       (12,717 )     (14,610 )  
    Gross recoveries     2,453       1,693       3,489         10,240       11,225    
    Net (charge-offs) recoveries     (825 )     (1,128 )     17         (2,477 )     (3,385 )  
                 
  Ending allowance for loan losses $   50,381   $   50,169   $   49,808     $   50,381   $   49,808    
                 
  Net charge-offs (recoveries) / average loans (1)   0.03 %   0.05 %   0.00 %     0.03 %   0.04 %  
                 
  Average loans outstanding (1) $   10,509,552   $   9,320,868   $   9,018,280     $   9,525,888   $   8,265,169    
                 
  EOP loans outstanding (1) $   11,118,121   $   9,398,124   $   9,010,512     $   11,118,121   $   9,010,512    
                 
  Allowance for loan losses / EOP loans (1)   0.45 %   0.53 %   0.55 %     0.45 %   0.55 %  
                 
  Underperforming Assets:              
    Loans 90 Days and over (still accruing) $   894   $   879   $   328     $   894   $   328    
                 
    Non-performing loans:              
    Nonaccrual loans (2)     124,927       119,256       131,407         124,927       131,407    
    Renegotiated loans     19,589       17,886       14,376         19,589       14,376    
    Total non-performing loans     144,516       137,142       145,783         144,516       145,783    
                 
    Foreclosed properties     8,810       10,259       18,546         8,810       18,546    
                 
  Total underperforming assets $   154,220   $   148,280   $   164,657     $   154,220   $   164,657    
                 
  Classified loans - "problem loans" $   226,583   $   209,524   $   220,429     $   226,583   $   220,429    
  Other classified assets     4,556       7,526       7,063         4,556       7,063    
  Criticized loans - "special mention loans"     188,085       130,197       95,462         188,085       95,462    
  Total classified and criticized assets $   419,224   $   347,247   $   322,954     $   419,224   $   322,954    
                 
  Non-performing loans / EOP loans (1)   1.30 %   1.46 %   1.62 %     1.30 %   1.62 %  
                 
  Allowance to non-performing loans (3)   35 %   37 %   34 %     35 %   34 %  
                 
  Under-performing assets / EOP loans (1)   1.39 %   1.58 %   1.83 %     1.39 %   1.83 %  
                 
  EOP total assets $   17,518,292   $   15,065,800   $   14,860,237     $   17,518,292   $   14,860,237    
                 
  Under-performing assets / EOP assets   0.88 %   0.98 %   1.11 %     0.88 %   1.11 %  
                 
   EOP - End of period actual balances               
  (1) Excludes loans held for sale.               
  (2) Includes renegotiated loans totaling $34.0 million at December 31, 2017, $43.7 million at September 30, 2017 and $26.3 million at December 31, 2016.   
  (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 13                
  Non-GAAP Measures (unaudited)    
  ($ in thousands)    
                     
      Three Months Ended    Twelve Months Ended     
      December 31, September 30, December 31,   December 31, December 31,    
        2017     2017     2016       2017     2016      
                     
    Actual End of Period Balances                
    GAAP shareholders' equity  $   2,154,397   $   1,906,823   $   1,814,417     $   2,154,397   $   1,814,417      
                     
    Deduct:                
    Goodwill      828,051       655,018       655,018         828,051       655,018      
    Intangibles      53,096       29,235       37,677         53,096       37,677      
          881,147       684,253       692,695         881,147       692,695      
                     
    Tangible shareholders' equity   $   1,273,250   $   1,222,570   $   1,121,722     $   1,273,250   $   1,121,722      
                     
    Average Balances                
    GAAP shareholders' equity  $   2,104,646   $   1,896,194   $   1,825,993     $   1,923,645   $   1,712,574      
                     
    Deduct:                
    Goodwill      776,862       655,018       655,041         685,729       635,440      
    Intangibles      37,802       30,502       39,239         34,392       40,317      
          814,664       685,520       694,280         720,121       675,757      
                     
    Average tangible shareholders' equity   $   1,289,982   $   1,210,674   $   1,131,713     $   1,203,524   $   1,036,817      
                     
    Actual End of Period Balances                
    GAAP assets  $   17,518,292   $   15,065,800   $   14,860,237     $   17,518,292   $   14,860,237      
                     
    Add:                
    Trust overdrafts     59       45       122         59       122      
                     
    Deduct:                
    Goodwill      828,051       655,018       655,018         828,051       655,018      
    Intangibles      53,096       29,235       37,677         53,096       37,677      
          881,147       684,253       692,695         881,147       692,695      
                     
    Tangible assets   $   16,637,204   $   14,381,592   $   14,167,664     $   16,637,204   $   14,167,664      
                     
    Risk-weighted assets $   12,491,430   $   10,495,407   $   10,099,613     $   12,491,430   $   10,099,613      
                     
    GAAP net income (loss) $   (18,493 ) $   39,372   $   33,456     $   95,725   $   134,264      
                     
    Add:                
    Amortization of intangibles (net of tax)     2,210       1,717       2,107         7,697       8,116      
                     
    Tangible net income (loss) $   (16,283 ) $   41,089   $   35,563     $   103,422   $   142,380      
                     
    Tangible Ratios                  
    Return on tangible common equity   -5.12 %   13.44 %   12.68 %     8.12 %   12.69 %    
    Return on average tangible common equity   -5.05 %   13.58 %   12.57 %     8.59 %   13.73 %    
    Return on tangible assets    -0.39 %   1.14 %   1.00 %     0.62 %   1.00 %    
    Tangible common equity to tangible assets    7.65 %   8.50 %   7.92 %     7.65 %   7.92 %    
    Tangible common equity to risk-weighted assets    10.19 %   11.65 %   11.11 %     10.19 %   11.11 %    
    Tangible common book value (1)     8.37       9.02       8.30         8.37       8.30      
                     
    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 $   1,298,327   $   1,254,790   $   1,176,849     $   1,298,327   $   1,176,849      
                     
    Deduct:                
    Trust Preferred Securities (2)     -        45,000       45,000         -        45,000      
    Additional Tier 1 capital deductions     (10,000 )     (13,498 )     (30,968 )       (10,000 )     (30,968 )    
          (10,000 )     31,502       14,032         (10,000 )     14,032      
                     
    Tier 1 common equity   $   1,308,327   $   1,223,288   $   1,162,817     $   1,308,327   $   1,162,817      
                     
    Risk-weighted assets     12,491,430       10,495,407       10,099,613         12,491,430       10,099,613      
                     
    Tier 1 common equity to risk-weighted assets     10.47 %   11.66 %   11.51 %     10.47 %   11.51 %    
                     
    (2) Trust Preferred Securities are now included in Tier 2 capital as a result of exceeding the $15 billion asset threshold from the Anchor-Minnesota acquisition.    
                     
                     

 

 

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