Attached files
| file | filename |
|---|---|
| 8-K - 8-K - MAINSOURCE FINANCIAL GROUP | f8-k.htm |
Exhibit 99.1
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Date: |
April 26, 2017 4:01 pm EST |
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From: |
Archie M. Brown, Jr. President and CEO |
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MainSource Financial Group, Inc. | 812-663-6734 |
NEWS RELEASE
MainSource Financial Group - NASDAQ, MSFG -
Announces First Quarter 2017 Operating Results
Net income of $12.1 million
Earnings Per Share of $0.49 (23% Increase)
Net Interest Margin of 3.76%
Non-performing Assets 0.62% of Total Assets
Greensburg, Indiana, Archie M. Brown, Jr., President and Chief Executive Officer of MainSource Financial Group, Inc. (NASDAQ: MSFG), announced today the unaudited financial results for the first quarter of 2017. For the three months ended March 31, 2017, the Company recorded net income of $12.1 million, or $0.49 per common share, compared to net income of $8.8 million, or $0.40 per common share, in the first quarter of 2016. During the first quarter of 2017 the Company recorded $274 thousand in reduced income tax expense related to the adoption of ASU 2016-09 which covers the accounting treatment for stock based compensation.
CEO Comments
Mr. Brown commented on the Company’s first quarter performance, “I am very pleased with our operating results for the first quarter. Earnings per common share increased by 23% from a year ago as we continued to benefit from the Cheviot acquisition that closed in May 2016 and the organic loan growth from 2016. Strength in our net interest margin and non-interest income were also contributors to our strong earnings performance.”
Mr. Brown continued, “We were disappointed in the decline in loan balances for the quarter. Seasonal reductions in revolving lines of credit and reductions in criticized assets placed pressure on loan balances. During the quarter, we also experienced a higher than normal level of mortgage payoffs. Commercial loan originations were similar to the first quarter of last year, but were softer than we expected. We are optimistic that origination activity will pick up in the second quarter and that we will return to growth in balances.”
Mr. Brown continued, “We continue to be pleased overall with our credit quality. We did experience a slight increase in non-performing assets during the quarter. One medium-sized commercial real estate loan acquired in our most recent bank purchase led to the increase. This loan was identified as a potential problem during our pre-merger loan due diligence and was appropriately marked when the merger was completed.”
Mr. Brown concluded, “During the quarter we were pleased to complete the acquisition of the assets of First Service Capital Management, Inc., a Raymond James brokerage agency with approximately $160 million in assets under management, located in Elizabethtown, Kentucky. We also recently received regulatory approval for our pending merger with FCB Bancorp of Louisville, Kentucky. Subject to FCB Bancorp shareholder approval and customary closing conditions, we expect to complete the merger in the second quarter.”
NET INTEREST INCOME
Net interest income was $32.3 million for the first quarter of 2017 compared to $26.4 million a year ago. The increase in net interest income was primarily due to an increase in average earning assets as well as an increase in acquisition accounting adjustments. Average earning assets increased year over year by $597 million with $430 million coming from the Cheviot acquisition and $167 million from organic growth. Net interest margin, on a fully-taxable equivalent basis, was 3.76% for the first quarter of 2017, which was a ten basis point increase from the first quarter of 2016 and an increase of seven basis points compared to the fourth quarter of 2016. The increase in the net interest margin on a linked-quarter basis was primarily attributable to an increase in the yield on investment securities and an increase in the accretion of purchase accounting marks. Overall, the accretion of acquisition accounting marks added ten basis points to the net interest margin for the first quarter of 2017.
NON-INTEREST INCOME
The Company’s non-interest income was $13.0 million for the first quarter of 2017 compared to $11.6 million for the same period in 2016. Increases in mortgage banking income ($0.6 million) and interchange income ($0.4 million) were the primary drivers of the increase.
NON-INTEREST EXPENSE
The Company’s non-interest expense was $29.4 million for the first quarter of 2017 compared to $26.2 million for the same period in 2016. The year over year increase in total expenses were primarily in the employee, occupancy and equipment expense categories and were primarily related to the acquisition of Cheviot in May 2016.
BALANCE SHEET AND CAPITAL
Total assets were $4.0 billion at March 31, 2017, which represents a $628 million increase from a year ago. The increase in assets was primarily related to the acquisition of Cheviot ($535 million) and organic loan growth over the past twelve months. Loan balances (including loans that are classified as held for sale) decreased $45 million on a linked quarter basis which represents a 7% decrease on an annualized basis. Higher than normal payoffs and weaker than expected loan demand were the primary drivers of the decrease. The Company’s regulatory capital ratios remain strong and as of March 31, 2017 were as follows: leverage ratio of 9.9%, tier one capital to risk-weighted assets of 14.3%, common equity tier one capital ratio of 12.8%, and total capital to risk-weighted assets of 15.1%. In addition, as of March 31, 2017, the Company’s tangible common equity ratio was 8.9% compared to 8.6% as of December 31, 2016.
ASSET QUALITY
Non-performing assets (NPAs) were $25.2 million as of March 31, 2017, an increase of $2.1 million on a linked-quarter basis. The increase in NPAs was primarily related to one $3.0 million credit that moved to non-performing status during the quarter. NPAs represented 0.62% of total assets as of March 31, 2017 compared to 0.57% as of December 31, 2016 and 0.48% as of March 31, 2016. The Company incurred net charge-offs of $130 thousand and recorded no loan loss provision expense for the first quarter of 2017. This level of provision expense was a result of the decrease in loan balances during the current quarter. The Company’s allowance for loan losses as a percent of total outstanding loans was 0.85% as of March 31, 2017 compared to 0.84% as of December 31, 2016 and 0.97% as of March 31, 2016. The decrease in this metric year over year was primarily driven by the increase in acquired loans that were marked to fair value at the acquisition date and not included in the loan loss reserve analysis.
FORWARD LOOKING STATEMENTS
Except for historical information contained herein, the discussion in this press release includes certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are covered by the safe harbor provisions of such sections. These statements are based upon management expectations, goals and projections, which are subject to numerous assumptions, risks and uncertainties (many of which are beyond management’s control). Factors which could cause future results to differ materially from these expectations include, but are not limited to, the following: general economic conditions; legislative and regulatory initiatives; monetary and fiscal policies of the federal government; deposit flows; the costs of funds; general market rates of interest; interest rates on competing investments; demand for loan products; demand for financial services; changes in accounting policies or guidelines; changes in the quality or composition of the Company’s loan and investment portfolios; the Company’s ability to integrate acquisitions; and other factors, including various “risk factors” as set forth in our most recent Annual Report on Form 10-K and in other reports we file from time to time with the Securities and Exchange Commission. These reports are available publicly on the SEC website, www.sec.gov, and on the Company’s website, www.mainsourcefinancial.com.
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Three months ended March 31 |
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2017 |
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2016 |
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Income Statement Summary |
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Interest Income |
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$ |
35,206 |
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$ |
28,746 |
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Interest Expense |
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2,919 |
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2,374 |
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Net Interest Income |
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32,287 |
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26,372 |
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Provision for Loan Losses |
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— |
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500 |
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Noninterest Income: |
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Trust and investment product fees |
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1,197 |
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1,210 |
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Mortgage banking |
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2,392 |
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1,790 |
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Service charges on deposit accounts |
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4,791 |
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4,682 |
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Securities gains/(losses) |
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13 |
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17 |
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Interchange income |
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3,054 |
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2,635 |
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Other |
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1,549 |
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1,255 |
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Total Noninterest Income |
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12,996 |
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11,589 |
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Noninterest Expense: |
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Employee |
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17,717 |
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14,860 |
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Occupancy & equipment |
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5,813 |
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5,324 |
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Intangible amortization |
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304 |
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328 |
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Marketing |
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765 |
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654 |
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Interchange expense |
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797 |
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813 |
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Collection expenses |
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231 |
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252 |
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FDIC assessment |
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324 |
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420 |
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Other |
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3,478 |
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3,506 |
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Total Noninterest Expense |
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29,429 |
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26,157 |
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Earnings Before Income Taxes |
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15,854 |
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11,304 |
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Provision for Income Taxes |
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3,781 |
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2,538 |
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Net Income Available to Common Shareholders |
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$ |
12,073 |
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$ |
8,766 |
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Three months ended March 31 |
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2017 |
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2016 |
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Average Balance Sheet Data |
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Gross Loans |
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$ |
2,638,684 |
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$ |
2,149,184 |
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Earning Assets |
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3,693,212 |
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3,096,634 |
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Total Assets |
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4,053,417 |
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3,398,105 |
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Noninterest Bearing Deposits |
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754,746 |
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639,404 |
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Interest Bearing Deposits |
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2,341,177 |
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1,999,445 |
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Total Interest Bearing Liabilities |
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2,822,362 |
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2,350,590 |
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Shareholders’ Equity |
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453,971 |
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389,204 |
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Three months ended March 31 |
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2017 |
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2016 |
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Per Share Data |
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Diluted Earnings Per Common Share |
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$ |
0.49 |
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$ |
0.40 |
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Cash Dividends Per Common Share |
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0.16 |
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0.15 |
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Market Value - High |
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35.21 |
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22.18 |
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Market Value - Low |
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31.57 |
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19.95 |
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Average Outstanding Shares (diluted) |
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24,521,161 |
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21,873,038 |
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Three months ended March 31 |
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2017 |
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2016 |
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Key Ratios (annualized) |
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Return on Average Assets |
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1.21 |
% |
1.04 |
% |
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Return on Average Equity |
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10.79 |
% |
9.06 |
% |
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Net Interest Margin |
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3.76 |
% |
3.66 |
% |
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Efficiency Ratio |
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62.32 |
% |
65.73 |
% |
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Net Overhead to Average Assets |
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1.64 |
% |
1.72 |
% |
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March 31 |
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December 31 |
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September 30 |
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June 30 |
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March 31 |
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2017 |
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2016 |
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2016 |
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2016 |
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2016 |
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Balance Sheet Highlights |
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Total Loans (Including Loans Held for Sale) |
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$ |
2,618,980 |
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$ |
2,664,152 |
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$ |
2,591,884 |
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$ |
2,561,765 |
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$ |
2,165,511 |
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Allowance for Loan Losses |
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22,369 |
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22,499 |
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21,828 |
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21,468 |
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21,079 |
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Total Securities |
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1,022,208 |
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1,007,540 |
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1,025,048 |
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1,032,380 |
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937,719 |
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Goodwill and Intangible Assets |
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110,180 |
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108,734 |
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108,651 |
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108,477 |
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|
80,287 |
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Total Assets |
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4,042,475 |
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4,080,257 |
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4,013,943 |
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3,995,541 |
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3,414,276 |
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Noninterest Bearing Deposits |
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812,301 |
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|
767,159 |
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|
705,428 |
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|
677,654 |
|
|
647,187 |
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Interest Bearing Deposits |
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2,342,836 |
|
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2,343,712 |
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2,418,600 |
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2,421,705 |
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1,997,657 |
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Other Borrowings |
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270,976 |
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290,897 |
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300,877 |
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|
291,047 |
|
|
326,796 |
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Shareholders’ Equity |
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459,779 |
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|
449,494 |
|
|
459,608 |
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|
453,782 |
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|
394,204 |
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March 31 |
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December 31 |
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September 30 |
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June 30 |
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March 31 |
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2017 |
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2016 |
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2016 |
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2016 |
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2016 |
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Other Balance Sheet Data |
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Tangible Book Value Per Common Share (1) |
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$ |
14.48 |
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$ |
14.16 |
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$ |
14.60 |
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$ |
14.38 |
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$ |
14.51 |
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Loan Loss Reserve to Loans |
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0.85 |
% |
|
0.84 |
% |
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0.84 |
% |
|
0.84 |
% |
|
0.97 |
% |
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Loan Loss Reserve to Non-performing Loans |
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110.84 |
% |
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125.39 |
% |
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146.07 |
% |
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131.54 |
% |
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186.05 |
% |
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Nonperforming Assets to Total Assets |
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0.54 |
% |
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0.49 |
% |
|
0.43 |
% |
|
0.49 |
% |
|
0.39 |
% |
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NPA’s (w/ TDR’s) to Total Assets |
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0.62 |
% |
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0.57 |
% |
|
0.51 |
% |
|
0.58 |
% |
|
0.48 |
% |
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Tangible Common Equity/Tangible Assets (1) |
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8.89 |
% |
|
8.58 |
% |
|
8.99 |
% |
|
8.88 |
% |
|
9.42 |
% |
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Outstanding Shares |
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24,148,132 |
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24,067,364 |
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24,033,381 |
|
|
24,005,307 |
|
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21,627,452 |
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March 31 |
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December 31 |
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September 30 |
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June 30 |
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March 31 |
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2017 |
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2016 |
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2016 |
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2016 |
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2016 |
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Asset Quality |
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Special Mention Loans |
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$ |
12,987 |
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$ |
20,526 |
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$ |
20,050 |
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$ |
18,088 |
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$ |
11,796 |
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Substandard Loans (Accruing) |
|
|
15,531 |
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|
18,626 |
|
|
19,805 |
|
|
22,239 |
|
|
15,116 |
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New Non-accrual Loans (for the 3 months ended) |
|
|
9,051 |
|
|
3,416 |
|
|
3,073 |
|
|
3,668 |
|
|
1,627 |
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Loans Past Due 90 Days or More and Still Accruing |
|
$ |
— |
|
$ |
2,135 |
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$ |
— |
|
$ |
126 |
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$ |
— |
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Non-accrual Loans |
|
|
20,181 |
|
|
15,808 |
|
|
14,944 |
|
|
16,195 |
|
|
11,330 |
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Other Real Estate Owned |
|
|
1,783 |
|
|
1,875 |
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|
2,242 |
|
|
3,180 |
|
|
1,911 |
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Total Nonperforming Assets (NPA’s) |
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$ |
21,964 |
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$ |
19,818 |
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$ |
17,186 |
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$ |
19,501 |
|
$ |
13,241 |
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Troubled Debt Restructurings (Accruing) |
|
|
3,227 |
|
|
3,270 |
|
|
3,333 |
|
|
3,508 |
|
|
3,098 |
|
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Total NPA’s with Troubled Debt Restructurings |
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$ |
25,191 |
|
$ |
23,088 |
|
$ |
20,519 |
|
$ |
23,009 |
|
$ |
16,339 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Net Charge-offs - QTD |
|
$ |
130 |
|
$ |
179 |
|
$ |
(210) |
|
$ |
(184) |
|
$ |
1,441 |
|
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Net Charge-offs as a % of average loans (annualized) |
|
|
0.02 |
% |
|
0.03 |
% |
|
(0.03) |
% |
|
(0.03) |
% |
|
0.27 |
% |
(1) Use Of Non-GAAP Financial Measures
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These financial statements include financial measures prepared other than in accordance with generally accepted accounting principles in the United States (“GAAP”). These non-GAAP financial measures should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. We believe this information is helpful in understanding the Company’s results of operations separate and apart from items that may, or could, have a disproportionate positive or negative impact in any given period, such as acquisition accounting impacts, one-time costs of acquisitions or other non-core items.
Tangible common equity, tangible assets and tangible book value per share are non-GAAP financial measures calculated using GAAP amounts. Tangible common equity is calculated by excluding the balance of preferred stock, goodwill and other intangible assets from the calculation of stockholders’ equity. Tangible assets are calculated by excluding the balance of goodwill and other intangible assets from the calculation of total assets. Tangible book value per share is calculated by dividing tangible common equity by the number of shares outstanding. Because not all companies use the same calculation of tangible common equity and tangible assets, this presentation may not be comparable to other similarly titled measures calculated by other companies. A reconciliation of these non-GAAP financial measures is provided below (dollars in thousands, except per share data).
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March 31 |
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December 31 |
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September 30 |
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June 30 |
|
March 31 |
|
|||||
|
|
|
2017 |
|
2016 |
|
2016 |
|
2016 |
|
2016 |
|
|||||
|
Shareholders’ Equity |
|
$ |
459,779 |
|
$ |
449,494 |
|
$ |
459,608 |
|
$ |
453,782 |
|
|
394,204 |
|
|
Less: Intangible Assets |
|
|
110,180 |
|
|
108,734 |
|
|
108,651 |
|
|
108,477 |
|
|
80,287 |
|
|
Tangible Common Equity |
|
|
349,599 |
|
|
340,760 |
|
|
350,957 |
|
|
345,305 |
|
|
313,917 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
|
4,042,475 |
|
|
4,080,257 |
|
|
4,013,943 |
|
|
3,995,541 |
|
|
3,414,276 |
|
|
Less: Intangible Assets |
|
|
110,180 |
|
|
108,734 |
|
|
108,651 |
|
|
108,477 |
|
|
80,287 |
|
|
Tangible Assets |
|
|
3,932,295 |
|
|
3,971,523 |
|
|
3,905,292 |
|
|
3,887,064 |
|
|
3,333,989 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Shares Outstanding |
|
|
24,148,132 |
|
|
24,067,364 |
|
|
24,033,381 |
|
|
24,005,307 |
|
|
21,627,452 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible Book Value Per Common Share |
|
$ |
14.48 |
|
$ |
14.16 |
|
$ |
14.60 |
|
$ |
14.38 |
|
$ |
14.51 |
|
|
Tangible Common Equity/Tangible Assets |
|
|
8.89 |
% |
|
8.58 |
% |
|
8.99 |
% |
|
8.88 |
% |
|
9.42 |
% |