UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (Date of earliest event reported): January 25, 2018
Commission File Number 0-17071
FIRST MERCHANTS CORPORATION
(Exact name of registrant as specified in its charter)
INDIANA | 35-1544218 |
(State or other jurisdiction of incorporation) | (IRS Employer Identification No.) |
200 East Jackson Street
P.O. Box 792
Muncie, IN 47305-2814
(Address of principal executive offices, including zip code)
(765) 747-1500
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On Thursday, January 25, 2018, First Merchants Corporation will conduct a fourth quarter 2017 earnings conference call and web cast at 2:30 p.m. (ET). A copy of the slide presentation utilized on the conference call is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
(d) Exhibits.
Exhibit 99.1 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
First Merchants Corporation
(Registrant)
By: /s/ Mark K. Hardwick
Mark K. Hardwick
Executive Vice President,
Chief Financial Officer and Chief Operating Officer
Dated: January 25, 2018
EXHIBIT INDEX
Exhibit No. | Description |
99.1 |
4th Quarter 2017
Earnings Highlights
January 25, 2018
Michael C. Rechin
President
Chief Executive Officer
Mark K. Hardwick
Executive Vice President
Chief Financial Officer
Chief Operating Officer
John J. Martin
Executive Vice President
Chief Credit Officer
This presentation contains forward-looking statements made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform
Act of 1995. Such forward-looking statements can often, but not always, be identified by the use of words like “believe”, “continue”, “pattern”,
“estimate”, “project”, “intend”, “anticipate”, “expect” and similar expressions or future or conditional verbs such as “will”, would”, “should”,
“could”, “might”, “can”, “may”, or similar expressions. These forward-looking statements include, but are not limited to, statements relating to
First Merchants’ goals, intentions and expectations; statements regarding the First Merchants’ business plan and growth strategies; statements
regarding the asset quality of First Merchants’ loan and investment portfolios; and estimates of First Merchants’ risks and future costs and
benefits. These forward-looking statements are subject to significant risks, assumptions and uncertainties that may cause results to differ
materially from those set forth in forward-looking statements, including, among other things: possible changes in economic and business
conditions; the existence or exacerbation of general geopolitical instability and uncertainty; the ability of First Merchants to integrate recent
acquisitions and attract new customers; possible changes in monetary and fiscal policies, and laws and regulations; the effects of easing
restrictions on participants in the financial services industry; the cost and other effects of legal and administrative cases; possible changes in the
credit worthiness of customers and the possible impairment of collectability of loans; fluctuations in market rates of interest; competitive
factors in the banking industry; changes in the banking legislation or regulatory requirements of federal and state agencies applicable to bank
holding companies and banks like First Merchants’ affiliate bank; continued availability of earnings and excess capital sufficient for the lawful
and prudent declaration of dividends; changes in market, economic, operational, liquidity, credit and interest rate risks associated with the First
Merchants’ business; and other risks and factors identified in each of First Merchants’ filings with the Securities and Exchange Commission. First
Merchants undertakes no obligation to update any forward-looking statement, whether written or oral, relating to the matters discussed in this
presentation or press release. In addition, the company’s past results of operations do not necessarily indicate its anticipated future results.
NON-GAAP FINANCIAL MEASURES
These slides contain non-GAAP financial measures. For purposes of Regulation G, a non-GAAP financial measure is a numerical measure of the
registrant’s historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that
have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with
GAAP in the statement of income, balance sheet or statement of cash flows (or equivalent statements) of the issuer; or includes amounts, or is
subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated
and presented. In this regard, GAAP refers to generally accepted accounting principles in the United States. Pursuant to the requirements of
Regulation G, First Merchants Corporation has provided reconciliations within the slides, as necessary, of the non-GAAP financial measure to the
most directly comparable GAAP financial measure.
2
Forward-Looking Statements
3
4th Quarter 2017 Financial Highlights
Earnings Per Share of $.49
$24.4 Million of Net Income, a 9.4% increase over 4Q2016
Includes $6.5 Million in DTA write down and acquisition expenses, or $.12 per share
Net Interest Margin expands to 4.10% following December rate move
Completed conversion of Independent Alliance Banks on November 12, 2017
Winning marketplace execution delivering growth
Organic Loan Growth of $270 Million, a 16.7% annualized growth rate
Organic Deposit Growth of $262 Million, a 15.1% annualized growth rate
“Record Level Results”
4
Full Year 2017 Performance
Record Net Income of $96.1 Million, an 18.5% increase over 2016
Earnings per share of $2.12, a 7.1% increase over 2016; highest in Company’s history
Includes $17.3 Million, or $.29 per share of acquisition expense and DTA write down
Total Assets of $9.4 Billion; grew by 29.9% over 2016
$658 Million of organic loan growth for the year reflects a 12.8% growth rate
Tangible Book Value increased to $16.96 per share, or 7.0% over year-end 2016
Franchise expansion through The Arlington Bank and Independent Alliance Banks acquisitions
Forbes Magazine recognition as a Top 5 Ranking in “America’s Best Banks”
“Record Level Results”
Mark K. Hardwick
Executive Vice President
Chief Operating Officer and
Chief Financial Officer
Total Assets
2015 2016 2017
1. Investments $1,277 $1,305 $1,561
2. Loans Held for Sale 10 3 7
3. Loans 4,694 5,140 6,751
4. Allowance (62) (66) (75)
5. Goodwill & Intangibles 260 259 477
6. BOLI 201 202 224
7. Other 381 369 422
8. Total Assets $6,761 $7,212 $9,367
Annualized Asset Growth 16.1% 6.7% 29.9%
6 1 2017 Loans include acquired loans of $225 from The Arlington Bank and $725 from Independent Alliance Banks
($ in Millions)
1
Commercial &
Industrial
22.1%
Commercial
Real Estate Owner-
Occupied
10.4%
Commercial
Real Estate
Non-Owner
Occupied
23.9%
Construction Land
& Land
Development
9.1%
Agricultural
Land
3.6%
Agricultural
Production
1.8%
Public
Finance/Other
Commercial
5.9%
Residential
Mortgage
14.3%
Home
Equity
7.6%
Other
Consumer
1.3%
QTD Yield = 4.93%
YTD Yield = 4.76%
Total Loans = $6.8 Billion
Loan and Yield Detail
(as of 12/31/2017)
7
Mortgage-Backed
Securities
27%
Collateralized
Mortgage
Obligations
23%
U. S. Agencies
1%
Corporate
Obligations
2%
Tax-Exempt
Municipals
47%
Investment Portfolio
(as of 12/31/2017)
$1.6 Billion Portfolio
Modified duration of 5.1 years
Tax equivalent yield of 3.90%
Net unrealized gain of $23.0 Million
8
2015 2016 2017
1. Customer Non-Maturity Deposits $4,096 $4,428 $5,741
2. Customer Time Deposits 880 747 1,051
3. Brokered Deposits 314 381 381
4. Borrowings 446 572 701
5. Other Liabilities 51 60 57
6. Hybrid Capital 123 122 133
7. Common Equity 851 902 1,303
8. Total Liabilities and Capital $6,761 $7,212 $9,367
9
Total Liabilities and Capital
($ in Millions)
1 2017 includes acquired Non-Maturity Deposits of $169 from The Arlington Bank and $719 from Independent Alliance Banks
2 2017 includes acquired Time Deposits of $84 from The Arlington Bank and $143 from Independent Alliance Banks
1
2
Deposit Detail
(as of 12/31/2017) QTD Cost = .58%
YTD Cost = .49%
Total = $7.2 Billion
10
Demand Deposits
52%
Savings Deposits
28%
Certificates &
Time Deposits of
>$100,000
7%
Certificates &
Time Deposits of
<$100,000
8%
Brokered
Deposits
5%
11.49% 11.42% 11.39%
11.05%
11.10% 11.16% 11.11% 11.03% 11.00%
9.08%
9.26%
9.43% 9.48%
9.24%
9.50% 9.68%
9.39% 9.30%
14.94% 14.79%
14.67%
14.18% 14.21% 14.24%
14.01%
13.76% 13.69%
7.00%
8.00%
9.00%
10.00%
11.00%
12.00%
13.00%
14.00%
15.00%
16.00%
4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17
Total Risk-Based Capital Ratio (Target = 13.50%)
Common Equity Tier 1 Capital Ratio (Target = 10.00%)
Tangible Common Equity Ratio (TCE) (Target = 8.50%) 11
Capital Ratios
(Target)
(Target)
(Target)
12
Net Interest Margin
Q4 - '15 Q1 - '16 Q2 - '16 Q3 - '16 Q4 - '16 Q1 - '17 Q2 - '17 Q3 - '17 Q4 - '17
Net Interest Income - FTE ($millions) $ 53.2 $ 57.6 $ 59.2 $ 61.1 $ 62.1 $ 64.9 $ 67.2 $ 78.9 $ 83.5
Fair Value Accretion $ 1.9 $ 2.5 $ 3.2 $ 3.8 $ 2.9 $ 4.3 $ 2.3 $ 3.2 $ 4.1
Tax Equivalent Yield on Earning Assets 4.20% 4.28% 4.30% 4.37% 4.32% 4.42% 4.44% 4.56% 4.67%
Cost of Supporting Liabilities 0.45% 0.45% 0.44% 0.43% 0.42% 0.44% 0.49% 0.53% 0.57%
Net Interest Margin 3.75% 3.83% 3.86% 3.94% 3.90% 3.98% 3.95% 4.03% 4.10%
Fair Value Accretion Effect 0.13% 0.17% 0.21% 0.24% 0.18% 0.26% 0.14% 0.17% 0.20%
3.75%
3.83% 3.86%
3.94%
3.90%
3.98%
3.95%
4.03%
4.10%
2.80%
3.00%
3.20%
3.40%
3.60%
3.80%
4.00%
4.20%
$48
$52
$56
$60
$64
$68
$72
$76
$80
$84
Q4 - '15 Q1 - '16 Q2 - '16 Q3 - '16 Q4 - '16 Q1 - '17 Q2 - '17 Q3 - '17 Q4 - '17
Net Interest Income - FTE ($millions) Net Interest Margin 12
13
Non-Interest Income
–
–
–
–
–
–
–
–
2015 2016 2017
1. Service Charges on Deposit Accounts $16.2 $17.8 $18.7
2. Wealth Management Fees 11.3 12.6 14.7
3. Insurance Commission Income 4.1
4. Card Payment Fees 13.4 15.0 16.1
5. Cash Surrender Value of Life Ins 2.9 4.3 6.6
6. Gains on Sales Mortgage Loans 6.5 7.1 7.6
7. Securities Gains/Losses 2.7 3.4 2.6
8. Gain on Sale of Insurance Subsidiary 8.3
9. Gain on Cancellation of Trust Preferred Debt 1.3
10. Other 3.1 5.0 4.7
11. Total $69.8 $65.2 $71.0
($ in Millions)
–
–
–
-I t r st In
13
–
–
–
14
Non-Interest Expense
2015 2016 2017
1. Salary & Benefits $101.9 $102.6 $119.8
2. Premises & Equipment 25.5 29.5 30.1
3. Intangible Asset Amortization 2.8 3.9 5.6
4. Professional & Other Outside Services 9.9 6.5 12.8
5. OREO/Credit-Related Expense 3.9 2.9 1.9
6. FDIC Expense 3.7 3.0 2.6
7. Outside Data Processing 7.1 9.2 12.2
8. Marketing 3.5 3.0 3.7
9. Other 16.5 16.7 16.9
10. Non-Interest Expense $174.8 $177.3 $205.6
($ in Millions)
1 2017 includes acquisition-related expenses of $12.2 million, reflected in ($ in Millions): $3.9 Salaries & Benefits, $0.6 Premises &
Equipment, $6.3 Professional & Other Outside Services, $0.5 Outside Data Processing, $0.3 Marketing and $0.6 Other
1
2015 2016 2017
1. Net Interest Income $196.4 $226.5 $277.3
2. Provision for Loan Losses (0.4) (5.7) (9.1)
3. Net Interest Income after Provision 196.0 220.8 268.2
4. Non-Interest Income 69.8 65.2 71.0
5. Non-Interest Expense (174.8) (177.3) (205.6)
6. Income before Income Taxes 91.0 108.7 133.6
7. Income Tax Expense (25.6) (27.6) (37.5)
8. Net Income Avail. for Distribution $ 65.4 $ 81.1 $ 96.1
9. EPS $ 1.72 $ 1.98 $ 2.12
10. Efficiency Ratio 61.19% 56.51% 54.56%
15
Earnings
($ in Millions)
1 2017 includes $5.1 million of additional tax expense due to revaluing deferred taxes as a result of the Tax Cuts and Jobs Act
2 Acquisition-related expenses, the impact of tax reform, and pension settlement accounting reduced EPS by $0.30 for 2017
3 Acquisition-related expenses and pension settlement accounting added 3.57% to the Efficiency Ratio
1
2
3
16
Q1-’17 Q2-’17 Q3-’17 Q4-’17
1. Net Interest Income $61.0 $63.1 $74.4 $78.8
2. Provision for Loan Losses (2.4) (2.9) (2.1) (1.8)
3. Net Interest Income after Provision 58.6 60.2 72.3 77.0
4. Non-Interest Income 14.9 18.4 18.7 19.1
5. Non-Interest Expense (43.1) (47.3) (58.7) (56.4)
6. Income before Income Taxes 30.4 31.3 32.3 39.6
7. Income Tax Expense (7.2) (7.2) (7.9) (15.2)
8. Net Income Avail. for Distribution $ 23.2 $ 24.1 $ 24.4 $ 24.4
9. EPS $ 0.56 $ 0.57 $ 0.50 $ 0.49
10. Efficiency Ratio 52.61% 53.61% 58.30% 53.29%
Quarterly Earnings
($ in Millions)
1 Includes acquisition-related expenses of ($ in millions): $0.4 in Q1-’17; $2.5 in Q2-’17; $7.9 in Q3-’17; and $1.4 in Q4-’17
2 Q4-’17 includes $5.1 million of additional tax expense due to revaluing deferred taxes as a result of the Tax Cuts and Jobs Act
3 Q4-’17 acquisition-related expenses, the impact of tax reform, and pension settlement accounting reduced EPS by $0.13
4 Q4-’17 acquisition-related expenses and pension settlement accounting added 2.14% to the Efficiency Ratio
1
3
4
2
2016 Q1 Q2 Q3 Q4 Total
1. Earnings Per Share $ .43 $ .49 $ .51 $ .55 $ 1.98
2. Dividends $ .11 $ .14 $ .14 $ .15 $ .54
3. Tangible Book Value $15.02 $15.53 $15.86 $15.85
2017 Q1 Q2 Q3 Q4 Total
1. Earnings Per Share $ .56 $ .57 $ .50 $ .49 $ 2.12
2. Dividends $ .15 $ .18 $ .18 $ .18 $ .69
3. Tangible Book Value $16.49 $16.97 $16.62 $16.96
17
Per Share Results
$9.21 $9.64
$10.95
$12.17
$13.65
$14.68
$15.85
$16.96
Dividends and Tangible Book Value
0.00
0.02
0.04
0.06
0.08
0.10
0.12
0.14
0.16
0.18
.11
.01
.03
.05
.14
.15 1.71%
Forward
Dividend
Yield
32.6%
YTD Dividend
Payout Ratio
=
Quarterly Dividends Tangible Book Value
.08
18
.18
John Martin
Executive Vice President
Chief Credit Officer
20
Loan Portfolio Trends
($ in Millions)
2015 2016 Q3-'17 2017 $ % $ %
1. Commercial & Industrial 1,057$ 1,195$ 1,436$ 1,494$ 58$ 4.0% 299$ 25.0%
2. Construction, Land and
Land Development 367 419 499 612 113 22.6% 193 46.1%
3. CRE Non-Owner Occupied 1,090 1,272 1,648 1,618 (30) (1.8%) 346 27.2%
4. CRE Owner Occupied 554 531 675 700 25 3.7% 169 31.8%
5. Agricultural Production 98 80 118 122 4 3.4% 42 52.5%
6. Agricultural Land 158 149 248 244 (4) (1.6%) 95 63.8%
7. Residential Mortgage 786 739 939 963 24 2.6% 224 30.3%
8. Home Equity 349 419 502 514 12 2.4% 95 22.7%
9. Public Finance/Other
Commercial 160 258 332 397 65 19.6% 139 53.9%
10. Other Consumer 75 78 86 87 1 1.2% 9 11.5%
11. Total Loans 4,694$ 5,140$ 6,483$ 6,751$ 268$ 4.1% 1,611$ 31.3%
12. Construction Concentration
1
50% 52% 50% 60%
13. Investment RE Concentration
1
197% 211% 215% 219%
1As a % of Risk Based Capital
Change
2017 Over 2016
Change
Linked Quarter
21
Asset Quality Summary
($ in Millions)
2015 2016 Q3-'17 2017 $ % $ % 186.1
1. Non-Accrual Loans 31.4$ 30.0$ 32.3$ 28.7$ (3.6)$ (11.1%) (1.3)$ (4.3%)
2. Other Real Estate 17.3 9.0 11.9 10.4 (1.5) (12.6%) 1.4 15.6%
3. Renegotiated Loans 1.9 4.7 0.6 1.0 0.4 66.7% (3.7) (78.7%)
4. 90+ Days Delinquent Loans 0.9 0.1 0.4 0.9 0.5 125.0% 0.8 800.0%
5. Total NPAs & 90+ Days Delinquent 51.5$ 43.8$ 45.2$ 41.0$ (4.2)$ (9.3%) (2.8)$ (6.4%)
6. Total NPAs & 90+ Days/Loans & ORE 1.1% 0.9% 0.7% 0.6%
7. Classified Assets 171.8$ 174.1$ 169.6$ 153.1$ (16.5)$ (9.7%) (21.0)$ (12.1%)
8. Specific Reserves 1.8$ 0.9$ 1.8$ 1.6$ (0.2)$ (11.1%) 0.7$ 77.8%
Change
Linked Quarter
Change
2017 Over 2016
22
Non-Performing Asset Reconciliation
($ in Millions)
2015 2016 2017
1. Beginning Balance NPAs & 90+ Days Delinquent 74.7$ 51.5$ 43.8$
Non-Accrual
2. Add: New Non-Accruals 20.0 24.6 30.1
3. Less: To Accrual/Payoff/Renegotiated (24.1) (17.0) (18.3)
4. Less: To OREO (5.0) (1.6) (8.1)
5. Less: Charge-offs (8.3) (7.4) (5.0)
6. Increase / (Decrease): Non-Accrual Loans (17.4) (1.4) (1.3)
Other Real Estate Owned (ORE)
7. Add: New ORE Properties 10.7 1.6 8.1
8. Less: ORE Sold (10.3) (8.2) (5.6)
9. Less: ORE Losses (write-downs) (2.4) (1.7) (1.1)
10. Increase / (Decrease): ORE (2.0) (8.3) 1.4
11. Increase / (Decrease): 90+ Days Delinquent (3.7) (0.8) 0.8
12. Increase / (Decrease): Renegotiated Loans (0.1) 2.8 (3.7)
13. Total NPAs & 90+ Days Delinquent Change (23.2) (7.7) (2.8)
14. Ending Balance NPAs & 90+ Days Delinquent 51.5$ 43.8$ 41.0$
23
ALLL and Fair Value Summary
($ in Millions) Q4-'16 Q1-'17 Q2-'17 Q3-'17 Q4-'17
1. Beginning Allowance for Loan Losses (ALLL) 63.5$ 66.0$ 68.2$ 70.5$ 73.4$
2. Net Charge-offs (Recoveries) (0.1) 0.2 0.6 (0.8) 0.2
3. Provision Expense 2.4 2.4 2.9 2.1 1.8
4. Ending Allowance for Loan Losses (ALLL) 66.0 68.2 70.5 73.4 75.0
5. ALLL/Non-Accrual Loans 220.1% 244.4% 257.7% 227.4% 261.2%
6. ALLL/Non-Purchased Loans 1.47% 1.46% 1.45% 1.44% 1.36%
7. ALLL/Loans 1.28% 1.29% 1.25% 1.13% 1.11%
8. Fair Value Adjustment (FVA) 34.9$ 30.6$ 29.7$ 50.4$ 46.3$
9. Total ALLL plus FVA 100.9 98.8 100.2 123.8 121.3
10. Purchased Loans plus FVA 700.4 639.3 792.6 1,445.8 1,304.7
11. FVA/Purchased Loans plus FVA 4.99% 4.79% 3.74% 3.49% 3.55%
24
Portfolio Summary
Strong organic quarterly loan growth led by Construction, C&I and Public
Finance
Year-over-year total loans grew $1.6 billion with a strong organic annual loan
growth rate of 12.8%
Credit quality measures continue to show improvement with Classified Assets
and Total NPAs & 90+ Days/Loans & ORE reducing both for the quarter and
the year
Net charge-offs were under $200,000 for the quarter and for the year with
provision expense of $1.8 million and $9.1 million for the quarter and year,
respectively, driven primarily by organic loan growth
Michael C. Rechin
President and Chief
Executive Officer
26
Looking Forward . . .
Tax reform benefits in 2018 will be realized in the effective tax rate change from ~ 26% to ~ 16%
Tax benefit to be invested in announced compensation changes, technologies, and branding, all of
which augment shareholder value
Gained synergies and market expansion opportunities that The Arlington Bank and Independent
Alliance Banks acquisitions offer; continue to evaluate M&A opportunities for strategic fit
Expand specialty finance businesses in asset-based lending, sponsor finance, public finance and
loan syndication
Leverage asset-sensitive balance sheet as interest rates rise
Complete checking account migration to new product set and streamline front and back-office
processes; continue implementation of workflow technologies and automation agents for back-
office efficiency and operating leverage
Continue preparation to successfully cross $10 Billion asset level
“Responsive, Knowledgeable, High-Performing”
27
Contact Information
First Merchants Corporation common stock is
traded on the NASDAQ Global Select Market
under the symbol FRME.
Additional information can be found at
www.FIRSTMERCHANTS.COM
Investor inquiries:
Nicole M. Weaver
Investor Relations
Telephone: 765.521.7619
nweaver@firstmerchants.com
Appendix
29
Appendix – Non-GAAP Reconciliation
CAPITAL RATIOS (dollars in thousands):
4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17
Total Risk-Based Capital Ratio
Total Stockholders' Equity (GAAP) 850,509 867,263 887,550 900,865 901,657 929,470 1,035,116 1,283,120 1,303,463
Adjust for Accumulated Other Comprehensive (Income) Loss 1 1,362 (2,066) (7,035) (3,924) 13,581 3,722 (1,384) 6,358 3,534
Less: Preferred Stock (125) (125) (125) (125) (125) (125) (125) (125) (125)
Add: Qualifying Capital Securities 55,776 55,236 55,296 55,355 55,415 55,474 55,534 65,864 65,919
Less: Tier 1 Capital Deductions (2,516) (1,999) (1,828) (1,440) (376) (80) (166) - -
Less: Disallowed Goodwill and Intangible Assets (247,006) (250,367) (249,932) (249,541) (249,104) (250,493) (300,307) (462,080) (464,066)
Less: Disallowed Deferred Tax Assets (1,677) (2,998) (2,743) (2,161) (564) (320) (665) - -
Total Tier 1 Capital (Regulatory) 656,323$ 664,944$ 681,183$ 699,029$ 720,484$ 737,648$ 788,003$ 893,137$ 908,725$
Qualifying Subordinated Debentures 65,000 65,000 65,000 65,000 65,000 65,000 65,000 65,000 65,000
Allowance for Loan Losses includible in Tier 2 Capital 62,453 62,086 62,186 63,456 66,037 68,225 70,471 73,354 75,032
Total Risk-Based Capital (Regulatory) 783,776$ 792,030$ 808,369$ 827,485$ 851,521$ 870,873$ 923,474$ 1,031,491$ 1,048,757$
Net Risk-Weighted Assets (Regulatory) 5,247,617$ 5,355,827$ 5,511,557$ 5,836,806$ 5,993,381$ 6,114,112$ 6,592,710$ 7,497,321$ 7,660,604$
Total Risk-Based Capital Ratio (Regulatory) 14.94% 14.79% 14.67% 14.18% 14.21% 14.24% 14.01% 13.76% 13.69%
Common Equity Tier 1 Capital Ratio
Total Tier 1 Capital (Regulatory) 656,323$ 664,944$ 681,183$ 699,029$ 720,484$ 737,648$ 788,003$ 893,137$ 908,725$
Less: Qualified Capital Securities (55,776) (55,236) (55,296) (55,355) (55,415) (55,474) (55,534) (65,864) (65,919)
Add: Additional Tier 1 Capital Deductions 2,516 1,999 1,828 1,440 376 80 166 - -
Common Equity Tier 1 Capital (Regulatory) 603,063$ 611,707$ 627,715$ 645,114$ 665,445$ 682,254$ 732,635$ 827,273$ 842,806$
Net Risk-Weighted Assets (Regulatory) 5,247,617$ 5,355,827$ 5,511,557$ 5,836,806$ 5,993,381$ 6,114,112$ 6,592,710$ 7,497,321$ 7,660,604$
Common Equity Tier 1 Capital Ratio (Regulatory) 11.49% 11.42% 11.39% 11.05% 11.10% 11.16% 11.11% 11.03% 11.00%
1 Includes net unrealized gains or losses on securities available for sale, net gains or losses on cash flow hedges, and amounts resulting from the application of the applicable accounting
guidance for defined benefit and other postretirement plans.
30
Appendix – Non-GAAP Reconciliation
TANGIBLE COMMON EQUITY RATIO (dollars in thousands):
4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17
Total Stockholders' Equity (GAAP) $ 850,509 $ 867,263 $ 887,550 $ 900,865 $ 901,657 $ 929,470 $ 1,035,116 $ 1,283,120 $ 1,303,463
Less: Preferred Stock (125) (125) (125) (125) (125) (125) (125) (125) (125)
Less: Intangible Assets (259,764) (261,799) (260,822) (259,844) (258,866) (257,963) (309,686) (478,558) (476,503)
Tangible Common Equity (non-GAAP) $ 590,620 $ 605,339 $ 626,603 $ 640,896 $ 642,666 $ 671,382 $ 725,305 $ 804,437 $ 826,835
Total Assets (GAAP) $ 6,761,003 $ 6,798,539 $ 6,906,418 $ 7,022,352 $ 7,211,611 $ 7,326,193 $ 7,805,029 $ 9,049,403 $ 9,367,478
Less: Intangible Assets (259,764) (261,799) (260,822) (259,844) (258,866) (257,963) (309,686) (478,558) (476,503)
Tangible Assets (non-GAAP) $ 6,501,239 $ 6,536,740 $ 6,645,596 $ 6,762,508 $ 6,952,745 $ 7,068,230 $ 7,495,343 $ 8,570,845 $ 8,890,975
Tangible Common Equity Ratio (non-GAAP) 9.08% 9.26% 9.43% 9.48% 9.24% 9.50% 9.68% 9.39% 9.30%
NGIBLE COMMON EQUITY PER SHARE (dollars in thousands):
4Q10 4Q11 4Q12 4Q13 4Q14 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17
Total Stockholders' Equity (GAAP) 454,408$ 514,467$ 552,236$ 634,923$ 726,827$ 850,509$ 867,263$ 887,550$ 900,865$ 901,657$ 929,470$ 1,035,116$ 1,283,120$ 1,303,463$
Less: Preferre Stock (67,880) (90,783) (90,908) (125) (125) (125) (125) (125) (125) (125) (125) (125) (125) (125)
Less: Intangible Assets (154,019) (150,471) (149,529) (202,767) (218,755) (259,764) (261,799) (260,822) (259,844) (258,866) (257,963) (309,686) (478,558) (476,503)
Tax Be efit 2,907 2,224 2,249 4,973 6,085 6,278 6,753 6,453 6,204 5,930 5,659 6,941 12,510 6,788
Tangible Common Equity, Net of Tax (non-GAAP) 235,416$ 275,437$ 314,048$ 437,004$ 514,032$ 596,898$ 612,092$ 633,056$ 647,100$ 648,596$ 677,041$ 732,246$ 816,947$ 833,623$
0
Shares Outstanding 25,574,251 28,559,707 28,692,616 35,921,761 37,669,948 40,664,258 40,749,340 40,772,896 40,799,025 40,912,697 41,047,543 43,153,509 49,140,594 49,158,238
Tangible Common Equity per Share (non-GAAP) 9.21$ 9.64$ 10.95$ 12.17$ 13.65$ 14.68$ 15.02$ 15.53$ 15.86$ 15.85$ 16.49$ 16.97$ 16.62$ 16.96$
31
Appendix – Non-GAAP Reconciliation
EFFICIENCY RATIO (dollars in thousands):
2015 2016 1Q17 2Q17 3Q17 4Q17 2017
Non Interest Expense (GAAP) $ 174,806 $ 177,359 $ 43,099 $ 47,316 $ 58,708 $ 56,433 $ 205,556
Less: Intangible Asset Amortization (2,835) (3,910)
(903) (991) (1,698) (2,055) (5,647)
Less: OREO and Foreclosure Expenses (3,956) (2,877)
(531) (731) (330) (311) (1,903)
Adjusted Non Interest Expense (non-GAAP) 168,015 170,572 41,665 45,594 56,680 54,067 198,006
Net Interest Income (GAAP) 196,404 226,473 60,999 63,100 74,420 78,765 277,284
Plus: Fully Taxable Equivalent Adjustment 10,975 13,541 3,950 4,083 4,472 4,764 17,270
Net Interest Income on a Fully Taxable Equivalent Basis (non-GAAP) 207,379 240,014 64,949 67,183 78,892 83,529 294,554
Non Interest Income (GAAP) 69,868 65,203 14,846 18,434 18,668 19,061 71,009
Less: Investment Securities Gains (Losses) (2,670) (3,389)
(598) (567) (332) (1,134) (2,631)
Adjusted Non Interest Income (non-GAAP) 67,198 61,814 14,248 17,867 18,336 17,927 68,378
Adjusted Revenue (non-GAAP) 274,577 301,828 79,197 85,050 97,228 101,456 362,932
Efficiency Ratio (non-GAAP) 61.19% 56.51% 52.61% 53.61% 58.30% 53.29% 54.56%
FORWARD DIVIDEND YIELD
4Q17
Most recent quarter's dividend per share $ 0.18
Most recent quarter's dividend per share - Annualized $ 0.72
Stock Price at 12/31/17 $ 42.06
Forward Dividend Yield 1.71%
DIVIDEND PAYOUT RATIO
2017
Dividends per share $ 0.69
Earnings Per Share $ 2.12
Dividend Payout Ratio 32.6%
32
Appendix – Non-GAAP Reconciliation ALLOWANCE AS A PERCENTAGE OF NON-PURCHASED LOANS (dollars in thousands):
4Q16 1Q17 2Q17 3Q17 4Q17
Loans Held for Sale (GAAP) 2,929$ 1,262$ 4,036$ 4,514$ 7,216$
Loans (GAAP) 5,139,645 5,274,909 5,613,144 6,483,448 6,751,199
Total Loans 5,142,574 5,276,171 5,617,180 6,487,962 6,758,415
Less: Purchased Loans (665,417) (608,724) (762,893) (1,395,368) (1,258,386)
Non-Purchased Loans (non-GAAP) 4,477,157$ 4,667,447$ 4,854,287$ 5,092,594$ 5,500,029$
Allowance for Loan Losses (GAAP) 66,037$ 68,225$ 70,471$ 73,354$ 75,032$
Fair Value Adjustment (FVA) (GAAP) 34,936 30,623 29,664 50,434 46,304
Allowance plus FVA (non-GAAP) 100,973$ 98,848$ 100,135$ 123,788$ 121,336$
Purchased Loans (GAAP) 665,417$ 608,724$ 762,893$ 1,395,368$ 1,258,386$
Fair Value Adjustment (FVA) (GAAP) 34,936 30,623 29,664 50,434 46,304
Purchased Loans plus FVA (non-GAAP) 700,353$ 639,347$ 792,557$ 1,445,802$ 1,304,690$
Allowance as a Percentage of Non-Purchased Loans (non-GAAP) 1.47% 1.46% 1.45% 1.44% 1.36%
FVA as a Percentage of Purchased Loans plus FVA (non-GAAP) 4.99% 4.79% 3.74% 3.49% 3.55%
CONSTRUCTION AND INVESTMENT REAL ESTATE CONCENTRATIONS (dollars in thousands):
2015 2016 3Q17 2017
Total Risk-Based Capital (Subsidiary Bank Only)
Total Stockholders' Equity (GAAP) 927,774$ 973,641$ 1,384,867$ 1,404,303$
Adjust for Accumulated Other Comprehensive (Income) Loss 1 (579) 9,701 3,170 763
Less: Preferred Stock (125) (125) (125) (125)
Less: Tier 1 Capital Deductions (1,903) - - -
Less: Disallowed Goodwill and Intangible Assets (246,558) (248,656) (461,632) (463,618)
Less: Disallowed Deferred Tax Assets (1,269) - - -
Total Tier 1 Capital (Regulatory) 677,340 734,561 926,280 941,323
Allowance for Loan Losses includible in Tier 2 Capital 62,453 66,037 73,354 75,032
Total Risk-Based Capital (Regulatory) 739,793$ 800,598$ 999,634$ 1,016,355$
Construction, Land and Land Development Loans 366,704$ 418,703$ 498,862$ 612,219$
Concentration as a % of the Bank's Risk-Based Capital 50% 52% 50% 60%
Construction, Land and Land Development Loans 366,704$ 418,703$ 498,862$ 612,219$
Investment Real Estate Loans 1,090,573 1,272,415 1,647,797 1,617,943
Total C nstruction and Investment RE Loans 1,457,277$ 1,691,118$ 2,146,659$ 2,230,162$
Concentration as a % of the Bank's Risk-Based Capital 19 % 211% 215% 219%
1 Includes net unrealized gains or losses on securities available for sale, net gains or losses on cash flow hedges, and amounts resulting
from the application of the applicable accounting guidance for defined benefit and other postretirement plans.