Market Overview

Community Bank System Reports Record Second Quarter 2018 Results

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Community Bank System, Inc. (NYSE:CBU) reported record second quarter
2018 net income of $44.6 million or $0.86 per share on a fully diluted
basis. This compares to $17.2 million in net income or $0.35 per share
reported for the second quarter of 2017. Excluding $22.9 million of
acquisition expenses, second quarter 2017 fully diluted earnings per
share were $0.67, resulting in a $0.19 per share, or 28.4%, increase
between comparable second quarters. On a linked quarter basis,
fully-diluted earnings per share increased $0.08 or 10.3%.

Second Quarter 2018 Performance Highlights:

  • EPS of $0.86 are up 28.4% over the second quarter of 2017, excluding
    acquisition expenses
  • Deposit funding costs of 0.11%
  • Annualized net loan charge-offs of 0.06%
  • Return on assets of 1.66%
  • Return on tangible equity of 20.6%

"We extended our trend of very strong operating quarters reflecting
improvement in our banking segment results and continued growth and
contribution from our fee-based non-banking businesses," said President
and Chief Executive Officer Mark E. Tryniski. "The successful
integration of two significant acquisitions in 2017, combined with
focused asset and liability management strategies, contributed to net
interest income growth of 18.0% and noninterest revenue growth of 19.4%
through the first six months of 2018. With operating expense growth held
to 13.6% during the same period, we continued to drive increased
operating leverage and improved profitability. In addition, we continued
to demonstrate our historic discipline around asset quality and deposit
funding. As a result, we realized an increase in second quarter
operating EPS of 28% and set a new record for second quarter earnings."

Total revenues for the second quarter of 2018 were $143.4 million, an
increase of $14.2 million, or 10.9%, over the second quarter of 2017.
The Company recorded an $8.8 million or 11.3% increase in net interest
income and a $5.3 million or 10.4% increase in noninterest revenues
between comparable quarters. The increase in net interest income was
largely due to the volume-related earning asset increases in connection
with the acquisition of Merchants Bancshares, Inc. ("Merchants")
completed in the second quarter of 2017. The increase in noninterest
income was due to organic revenue growth in our employee benefit
services segment, as well as acquired and organic growth in our wealth
management and insurance businesses. Deposit service fees also increased
$2.3 million or 13.9% quarter-over-quarter, primarily the result of the
addition of Merchants and increased card-related revenues. Other banking
services, including mortgage banking services, were down marginally
year-over-year. On a linked quarter basis, total revenues increased $1.3
million or 0.9%, due principally to an increase in net interest income.
Consistent with full-year 2017 and first quarter 2018 results,
non-interest revenues contributed approximately 40% of the Company's
total operating revenues for the second quarter.

The Company recorded a $2.4 million provision for loan losses in the
second quarter 2018. This was $1.0 million greater than the amount
recorded in the second quarter of 2017, and was primarily driven by
growth in certain non-acquired loan portfolios. The non-performing loan
to total loan ratio stood at 0.47% at the end of the second quarter of
2018. This compares to 0.48% at the end of the first quarter of 2018 and
0.36% at the end of the second quarter of 2017. Comparatively, the
Company recorded a $3.7 million provision for loan losses in the first
quarter of 2018.

Total operating expenses for the second quarter of 2018 were $86.1
million. This compares to $80.0 million (excluding acquisition expenses)
in the second quarter of 2017. The increase was due primarily to the
incremental operating expenses associated with the Merchants
acquisition. During the first quarter of 2018, the Company incurred
total operating expenses of $86.3 million.

The Company generated net interest income of $86.8 million during the
second quarter of 2018. This represents an increase of $8.8 million, or
11.3%, compared to the second quarter of 2017. In addition, net interest
margin improved one basis point, from 3.72% in the second quarter of
2017 to 3.73% in the second quarter of 2018. The second quarter 2018 net
interest income and net interest margin results included a full quarter
impact of the Merchants acquisition, versus a partial quarter impact in
2017. Although the increase in net interest income was largely driven by
volume factors, the change in mix in our funding base contributed
positively to the improvements in net interest margin. During the second
quarter of 2018, average balances in lower cost core funding sources,
including checking, savings and money market accounts, represented 87.2%
of the Company's total deposit and borrowing funding base as compared to
86.6% in the second quarter of 2017. In addition, average
noninterest-bearing demand deposits represented 25.5% of the Company's
total deposit and borrowing funding base as compared to 23.4% of the
Company's total funding base during the second quarter of 2017. This
change in the funding mix helped contain total funding costs to 0.19% in
the second quarter of 2018, a three basis point increase over the second
quarter of 2017.

Earning asset yields increased four basis points, from 3.87% in the
second quarter of 2017 to 3.91% in the second quarter of 2018. Average
loan yields increased 17 basis points from 4.41% during the second
quarter of 2017 to 4.58% during the second quarter of 2018 due largely
to an increase in market interest rates. Conversely, investment yields,
including cash equivalents, decreased 24 basis points, from 2.84% to
2.60% between comparable quarterly periods. Between the second quarter
of 2017 and the second quarter of 2018, higher yielding investment
securities matured and were not replaced with securities with similar
yields. In addition, the tax-equivalent yield on non-taxable municipal
securities and loans decreased due to the decrease in the statutory
Federal corporate tax rate between the periods. The Company also
maintained a greater proportion of its investments in lower yielding
cash equivalent investments during the second quarter of 2018, which
negatively impacted the weighted average yield of the investment
portfolio.

Net interest income increased $2.2 million or 2.6% on a linked quarter
basis. The Company recorded $0.4 million of additional interest income
on cash equivalents between the quarters. The average balances in cash
equivalents increased $80.3 million on a linked quarter basis due to a
seasonal increase in deposits. In addition, the Company received its
Federal Reserve semi-annual dividend payment of $0.5 million in the
second quarter of 2018. The Company also recorded $0.5 million of
acquired impaired loan accretion in the second quarter from the
successful resolution of an acquired impaired business loan
relationship. Net interest margin increased two basis points, from 3.71%
in the first quarter to 3.73% in the second quarter. The total cost of
deposits increased from 0.10% in the first quarter to 0.11% in the
second quarter, while the total cost of funds increased from 0.17% to
0.19%, due primarily to increased Libor-indexed borrowing costs.

The Company generated $13.9 million of wealth management and insurance
services revenues in the second quarter of 2018. This represents a $1.4
million or 11.3% increase over the second quarter 2017 revenues of $12.5
million. Between the second quarter of 2017 and the second quarter of
2018, the Company acquired four small insurance and wealth management
practices resulting in revenue growth. Employee benefit services
revenues of $22.5 million, increased $1.9 million or 9.1% from the
second quarter of 2017. These results were attributable to organic
increases in plan asset and participant levels between the periods and
incremental revenue contributions from the Northeast Retirement Services
("NRS") business acquired in the first quarter of 2017. On a linked
quarter basis, wealth management and insurance services revenues were
down $0.2 million and employee benefits services revenues were down $0.5
million, principally due to seasonal factors.

The Company recorded operating expenses of $86.0 million in the second
quarter of 2018, as compared to $80.0 million in the second quarter of
2017, excluding acquisition expenses. This increase was reflective of a
full quarter of operating activities from the Merchants transaction.
Salaries and employee benefits increased $5.8 million or 12.5%, and
included the personnel added from the former Merchants, as well as
annual merit and performance-based increases. All other expenses
increased $0.2 million, or 0.7%. On a linked quarter basis, total
operating expenses decreased $0.2 million.

The effective tax rate for the second quarter of 2018 was 18.7%, down
from 31.0% in the second quarter of last year. The decrease in the
effective tax rate between the periods is largely attributable to the
application of the lower federal tax rate due to the Tax Cuts and Jobs
Act passed in the fourth quarter of 2017. In addition, the Company had
higher levels of stock option exercise activity in the second quarter of
2018, as compared to the second quarter of 2017, resulting in a $0.9
million decrease in income tax expense between the comparable periods.
The effective tax rate for the first quarter of 2018 was 23.0%, which
included a much lower level of stock option exercise activity than the
second quarter.

The Company also provides supplemental reporting of its results on a
"net adjusted" or "tangible" basis, from which it excludes the after-tax
effect of amortization of core deposit and other intangible assets (and
the related goodwill, core deposit intangible and other intangible asset
balances, net of applicable deferred tax amounts), accretion on
non-impaired purchased loans, expenses associated with acquisitions, and
the one-time benefit from the revaluation of net deferred tax
liabilities. The amounts for such items are presented in the tables that
accompany this release. Although "adjusted net income" as defined by the
Company is a non-GAAP measure, the Company's management believes this
information helps investors understand the effect of acquisition
activity in its reported results. Adjusted net earnings per share were
$0.90 in the second quarter of 2018, compared to $0.71 in the second
quarter of 2017, or a 26.8% increase.

Financial Position

Average earning assets were up $74.3 million or 0.8% on a linked quarter
basis, from $9.38 billion during the first quarter of 2018 to $9.45
billion during the second quarter of 2018. Average loan balances were
$6.25 billion for the second quarter, up 0.2% over the first quarter.
Average deposit balances were up $82.0 million, or 1.0%, from first
quarter levels, due to a seasonal inflow of deposits near the end of the
first quarter that largely remained on the Company's balance sheet
during the second quarter. Ending deposits, however, were seasonally
down $257.1 million, or 2.9%. Average borrowings in the second quarter
of 2018 of $397.1 million, were down $56.0 million or 12.4%. This was
primarily attributable to a decrease in municipal customer repurchase
agreement balances between the periods as seasonally expected.

Ending loans at June 30, 2018 were $6.24 billion. This is up $11.0
million or 0.2% from the end of the first quarter of 2018, but down
$18.7 million or 0.3% from the end of the fourth quarter of 2017. During
the first half of 2018, increases in loans outstanding in our New York
and Pennsylvania markets were offset by decreases in loans outstanding
in our New England region, including $86.6 million of unscheduled pay
offs in the business lending portfolio. Ending loans in the municipal
sector of our business loan portfolio decreased from $90.3 million at
March 31, 2018 to $50.5 million at June 30, 2018, a $39.8 or 44.0%
decrease. Our New England region municipal customers repay certain
short-term loans and lines of credit annually at the end of the second
quarter to meet their fiscal cycle requirements and advance on new loans
and lines of credit in the third quarter for the next annual fiscal
cycle. We expect the balances in this portfolio to increase during the
third quarter of 2018.

Investment securities totaled $2.98 billion at June 30, 2018, down
slightly from the end of the linked first quarter of 2018 and fourth
quarter of 2017. The net unrealized loss in this portfolio was $32.7
million at June 30, 2018 and $17.9 million at March 31, 2018. These
compare to a net unrealized gain of $23.9 million at December 31, 2017.
The portfolio transitioned from a net unrealized gain position in
December 2017 to a net unrealized loss position during early 2018 due to
an increase in market interest rates. The effective duration of the
portfolio was 3.6 years at the end of the second quarter.

Shareholders' equity of $1.66 billion at second quarter-end was $84.1
million, or 5.3%, higher than the prior year period. The Company's net
tangible equity to net tangible assets ratio was 9.00% at June 30, 2018,
up from 8.08% a year earlier and 8.42% at the end of the first quarter
of 2018. The Company's Tier 1 leverage ratio was 10.53% at the end of
the second quarter, up from 10.19% a year earlier. These results are
primarily a result of strong earnings generation and capital retention
over the last four quarters.

As previously announced in December 2017, the Company's Board of
Directors approved a stock repurchase program authorizing the repurchase
of up to 2.5 million shares of the Company's common stock during a
twelve-month period starting January 1, 2018. Such repurchases may be
made at the discretion of the Company's senior management based on
market conditions and other relevant factors and will be acquired
through open market or privately negotiated transactions as permitted
under Rule 10b-18 of the Securities Exchange Act of 1934 and other
applicable legal requirements. There were no shares repurchased pursuant
to the program in the second quarter of 2018.

Asset Quality

The Company's asset quality metrics continue to illustrate the long-term
effectiveness of the Company's disciplined risk management and
underwriting standards. Total net charge-offs were $0.9 million for the
second quarter, compared to $1.1 million for the second quarter of 2017
and $3.2 million for the first quarter of 2018. Net charge-offs as an
annualized percentage of average loans measured 0.06% in the second
quarter of 2018, compared to 0.08% in the prior year's second quarter
and 0.21% in the first quarter of 2018. Nonperforming loans as a
percentage of total loans at June 30, 2018 were 0.47%, compared to 0.48%
at March 31, 2018 and 0.36% at June 30, 2017. The total loan delinquency
ratio of 0.89% at the end of the second quarter was 12 basis points
lower than the level at March 31, 2018, and 10 basis points lower than
the 0.99% ratio one year earlier. The second quarter provision for loan
losses of $2.4 million was $1.0 million higher than the second quarter
of 2017, and $1.2 million lower than the first quarter of 2018. The
allowance for loan losses to nonperforming loans was 169% at June 30,
2018, compared with 162% and 207% at the end of the first quarter of
2018 and second quarter of 2017, respectively.

Dividend Increase

During the second quarter of 2018, the Company declared a quarterly cash
dividend of $0.34 per share on its common stock, compared to a $0.32
dividend declared in the second quarter of 2017, or 6.3% higher, which
represents an annualized yield of 2.2% based upon the $62.79 closing
price of the Company's stock on July 20, 2018. The two cent increase
declared in the third quarter of 2017 marked the 25th
consecutive year of dividend increases for the Company. "The
acceleration of our earnings and cash flow results will further
strengthen the Company's capital accumulation and dividend capacity into
the future," said Mark E. Tryniski, President and Chief Executive
Officer.

Conference Call Scheduled

Company management will conduct an investor call at 11:00 a.m. (ET)
today, July 23, 2018, to discuss second quarter 2018 results. The
conference call can be accessed at 866-838-2054 (719-325-2414 if outside
United States and Canada) using the conference ID code 5040007.
Investors may also listen live via the Internet at: http://www.webcaster4.com/Webcast/Page/995/26422.

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

Community Bank System, Inc. operates more than 230 customer facilities
across Upstate New York, Northeastern Pennsylvania, Vermont, and Western
Massachusetts through its banking subsidiary, Community Bank, N.A. With
assets of over $10.6 billion, the DeWitt, N.Y. headquartered company is
among the country's 150 largest financial institutions. In addition to a
full range of retail, business, and municipal banking services, the
Company offers comprehensive financial planning, insurance and wealth
management services through its' Community Bank Wealth Management Group
and OneGroup NY, Inc. operating subsidiaries. The Company's Benefit
Plans Administrative Services, Inc. subsidiary is a leading provider of
employee benefits administration, trust services, collective investment
fund administration and actuarial consulting services to customers on a
national scale. Community Bank System, Inc. is listed on the New York
Stock Exchange and the Company's stock trades under the symbol CBU. For
more information about Community Bank visit www.communitybankna.com
or http://ir.communitybanksystem.com.

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

                 

Summary of Financial Data

(Dollars in thousands, except per share data)                    
Quarter Ended     Year-to-Date
        June 30, 2018     June 30, 2017     June 30, 2018     June 30, 2017
Earnings                          
Loan income $71,152 $62,351 $140,593 $114,735
Investment income 19,853 19,071 38,816 36,645
Total interest income 91,005 81,422 179,409 151,380
Interest expense 4,159 3,393 7,939 6,077
Net interest income 86,846 78,029 171,470 145,303
Provision for loan losses 2,448 1,461 6,127 3,289
Net interest income after provision for loan losses 84,398 76,568 165,343 142,014
Deposit service fees 18,964 16,655 38,141 31,362
Revenues from mortgage banking and other banking services 1,163 1,407 2,406 2,566
Wealth management and insurance services 13,911 12,502 27,976 23,763
Employee benefit services 22,542 20,662 45,548 37,851
Gain on sale of investments 0 0 0 2
Unrealized loss on equity securities (21) 0 (21) 0
Total noninterest revenues 56,559 51,226 114,050 95,544
Salaries and employee benefits 52,402 46,564 104,261 89,471
Occupancy and equipment 9,437 8,637 19,968 16,833
Amortization of intangible assets 4,555 4,263 9,353 7,031
Acquisition expenses 71 22,896 63 24,612
Other 19,647 20,519 38,798 38,507
Total operating expenses 86,112 102,879 172,443 176,454
Income before income taxes 54,845 24,915 106,950 61,104
Income taxes 10,239 7,724 22,238 17,656
Net income $44,606 $17,191 $84,712 $43,448
Basic earnings per share $0.87 $0.35 $1.65 $0.92
Diluted earnings per share       $0.86     $0.35     $1.63     $0.91
 
                     

Summary of Financial Data

(Dollars in thousands, except per share data)                          
2018     2017
        2nd Qtr     1st Qtr     4th Qtr     3rd Qtr     2nd Qtr
Earnings                                
Loan income $71,152 $69,441 $69,716 $69,498 $62,351
Investment income 19,853 18,963 19,872 18,989 19,071
Total interest income 91,005 88,404 89,588 88,487 81,422
Interest expense 4,159 3,780 3,611 4,092 3,393
Net interest income 86,846 84,624 85,977 84,395 78,029
Provision for loan losses 2,448 3,679 5,381 2,314 1,461
Net interest income after provision for loan losses 84,398 80,945 80,596 82,081 76,568
Deposit service fees 18,964 19,177 18,115 18,419 16,655
Revenues from mortgage banking and other banking services 1,163 1,243 1,196 1,704 1,407
Wealth management and insurance services 13,911 14,065 12,415 12,051 12,502
Employee benefit services 22,542 23,006 22,212 20,767 20,662
Unrealized loss on equity securities (21) 0 0 0 0
Total noninterest revenues 56,559 57,491 53,938 52,941 51,226
Salaries and employee benefits 52,402 51,859 49,006 48,426 46,564
Occupancy and equipment 9,437 10,531 9,622 9,106 8,637
Amortization of intangible assets 4,555 4,798 4,961 4,949 4,263
Acquisition expenses 71 (8) 794 580 22,896
Other 19,647 19,151 22,536 20,715 20,519
Total operating expenses 86,112 86,331 86,919 83,776 102,879
Income before income taxes 54,845 52,105 47,615 51,246 24,915
Income taxes 10,239 11,999 (24,411) 16,003 7,724
Net income $44,606 $40,106 $72,026 $35,243 $17,191
Basic earnings per share $0.87 $0.78 $1.41 $0.69 $0.35
Diluted earnings per share       $0.86     $0.78     $1.40     $0.68     $0.35
Profitability                                
Return on assets 1.66% 1.52% 2.66% 1.29% 0.69%
Return on equity 10.91% 10.00% 17.88% 8.81% 4.74%
Return on tangible equity(2) 20.58% 19.11% 34.11% 16.74% 7.72%
Noninterest income/operating income (FTE) (1) 39.1% 40.7% 37.9% 38.4% 39.4%
Efficiency ratio       57.2%     57.8%     57.8%     56.8%     58.3%
Components of Net Interest Margin (FTE)                                
Loan yield 4.58% 4.53% 4.43% 4.37% 4.41%
Cash equivalents yield 1.73% 1.54% 1.19% 1.09% 0.99%
Investment yield 2.65% 2.60% 2.81% 2.69% 2.87%
Earning asset yield 3.91% 3.87% 3.89% 3.81% 3.87%
Interest-bearing deposit rate 0.15% 0.14% 0.14% 0.14% 0.14%
Borrowing rate 1.80% 1.48% 1.32% 1.44% 1.54%
Cost of all interest-bearing funds 0.25% 0.23% 0.22% 0.24% 0.21%
Cost of funds (includes DDA) 0.19% 0.17% 0.16% 0.18% 0.16%
Net interest margin (FTE) 3.73% 3.71% 3.74% 3.64% 3.72%
Fully tax-equivalent adjustment       $1,094     $1,118     $2,375     $2,381     $2,374
 
                     
Summary of Financial Data
(Dollars in thousands, except per share data)                          
2018     2017
        2nd Qtr     1st Qtr     4th Qtr     3rd Qtr     2nd Qtr
Average Balances                                
Loans $6,250,739 $6,237,824 $6,274,679 $6,343,468 $5,695,781
Cash equivalents 170,745 90,406 34,223 26,986 52,956
Taxable investment securities 2,575,962 2,583,446 2,572,703 2,571,459 2,408,020
Nontaxable investment securities 457,254 468,773 491,578 511,182 526,962
Total interest-earning assets 9,454,700 9,380,449 9,373,183 9,453,095 8,683,719
Total assets 10,752,203 10,715,529 10,757,836 10,862,613 9,958,553
Interest-bearing deposits 6,282,098 6,219,052 6,206,663 6,230,591 6,021,696
Borrowings 397,101 453,114 449,377 541,036 346,975
Total interest-bearing liabilities 6,679,199 6,672,166 6,656,040 6,771,627 6,368,671
Noninterest-bearing deposits 2,287,722 2,268,778 2,307,155 2,307,205 1,948,434
Shareholders' equity       1,640,076     1,625,951     1,598,056     1,587,279     1,455,847
Balance Sheet Data                                
Cash and cash equivalents $250,154 $543,899 $221,038 $241,480 $219,695
Investment securities 2,983,352 3,032,642 3,081,379 3,125,218 3,145,013
Loans:
Business lending 2,384,629 2,426,086 2,424,223 2,458,981 2,479,152
Consumer mortgage 2,210,051 2,211,882 2,220,298 2,206,527 2,211,412
Consumer indirect 1,063,679 1,008,198 1,011,978 1,034,716 1,057,664
Home equity 398,433 407,832 420,329 424,598 427,483
Consumer direct 181,217 173,032 179,929 183,898 185,589
Total loans 6,238,009 6,227,030 6,256,757 6,308,720 6,361,300
Allowance for loan losses 49,618 48,103 47,583 47,983 47,451
Intangible assets, net 816,127 820,584 825,088 824,355 831,403
Other assets 395,070 390,503 409,519 398,428 374,086
Total assets 10,633,094 10,966,555 10,746,198 10,850,218 10,884,046
Deposits:
Noninterest-bearing 2,332,745 2,372,824 2,293,057 2,310,954 2,283,138
Non-maturity interest-bearing 5,439,101 5,642,109 5,377,059 5,495,377 5,508,504
Time 742,147 756,159 774,304 799,659 833,963
Total deposits 8,513,993 8,771,092 8,444,420 8,605,990 8,625,605
Borrowings 183,785 281,744 363,082 314,289 373,053
Subordinated debt held by unconsolidated subsidiary trusts 122,826 122,820 122,814 122,808 122,802
Accrued interest and other liabilities 155,531 159,433 180,567 213,886 189,686
Total liabilities 8,976,135 9,335,089 9,110,883 9,256,973 9,311,146
Shareholders' equity 1,656,959 1,631,466 1,635,315 1,593,245 1,572,900
Total liabilities and shareholders' equity       10,633,094     10,966,555     10,746,198     10,850,218     10,884,046
Capital                                
Tier 1 leverage ratio 10.53% 10.19% 10.00% 9.54% 10.19%
Tangible equity/net tangible assets (2) 9.00% 8.42% 8.61% 8.36% 8.08%
Diluted weighted average common shares O/S 51,939 51,677 51,569 51,526 49,386
Period end common shares outstanding 51,086 50,884 50,696 50,587 50,512
Cash dividends declared per common share $0.34 $0.34 $0.34 $0.34 $0.32
Book value $32.43 $32.06 $32.26 $31.50 $31.14
Tangible book value(2) $17.39 $16.88 $16.94 $16.70 $16.21
Common stock price (end of period)       $59.07     $53.56     $53.75     $55.25     $55.77
 
                     
Summary of Financial Data
(Dollars in thousands, except per share data)                          
2018     2017
        2nd Qtr     1st Qtr     4th Qtr     3rd Qtr     2nd Qtr
Asset Quality                                
Nonaccrual loans $22,807 $23,239 $24,740 $21,510 $21,033
Accruing loans 90+ days delinquent 6,532 6,425 2,706 1,861 1,882
Total nonperforming loans 29,339 29,664 27,446 23,371 22,915
Other real estate owned (OREO) 1,310 1,865 1,915 1,873 2,491
Total nonperforming assets 30,649 31,529 29,361 25,244 25,406
Net charge-offs 933 3,159 5,781 1,782 1,106
Allowance for loan losses/loans outstanding 0.80% 0.77% 0.76% 0.76% 0.75%
Nonperforming loans/loans outstanding 0.47% 0.48% 0.44% 0.37% 0.36%
Allowance for loan losses/nonperforming loans 169% 162% 173% 205% 207%
Net charge-offs/average loans 0.06% 0.21% 0.37% 0.11% 0.08%
Delinquent loans/ending loans 0.89% 1.01% 1.10% 1.05% 0.99%
Loan loss provision/net charge-offs 262% 116% 93% 130% 132%
Nonperforming assets/total assets       0.29%     0.29%     0.27%     0.23%     0.23%
Asset Quality (excluding loans acquired since 1/1/09)                                
Nonaccrual loans $14,644 $15,161 $16,020 $15,069 $14,359
Accruing loans 90+ days delinquent 6,243 5,894 2,502 1,589 1,640
Total nonperforming loans 20,887 21,055 18,522 16,658 15,999
Other real estate owned (OREO) 1,025 1,336 1,221 1,257 1,681
Total nonperforming assets 21,912 22,391 19,743 17,915 17,680
Net charge-offs 552 1,800 2,279 1,624 692
Allowance for loan losses/loans outstanding 0.98% 0.97% 0.98% 1.00% 1.01%
Nonperforming loans/loans outstanding 0.43% 0.45% 0.40% 0.36% 0.35%
Allowance for loan losses/nonperforming loans 225% 216% 244% 276% 284%
Net charge-offs/average loans 0.05% 0.16% 0.20% 0.14% 0.06%
Delinquent loans/ending loans 0.91% 1.01% 1.12% 1.16% 1.06%
Loan loss provision/net charge-offs 364% 122% 67% 125% 153%
Nonperforming assets/total assets       0.24%     0.24%     0.22%     0.20%     0.20%
 
                     
Summary of Financial Data
(Dollars in thousands, except per share data)                          
2018     2017
        2nd Qtr     1st Qtr     4th Qtr     3rd Qtr     2nd Qtr
Quarterly GAAP to Non-GAAP Reconciliations                                
Income statement data
Net income
Net income (GAAP) $44,606 $40,106 $72,026 $35,243 $17,191
Acquisition expenses 71 (8) 794 580 22,896
Tax effect of acquisition expenses (13) 2 (227) (181) (7,098)
Tax Cuts and Jobs Act deferred tax impact 0     0     (38,010)     0     0
Subtotal (non-GAAP) 44,664 40,100 34,583 35,642 32,989
Amortization of intangibles 4,555 4,798 4,961 4,949 4,263
Tax effect of amortization of intangibles (850)     (1,105)     (1,417)     (1,545)     (1,322)
Subtotal (non-GAAP) 48,369 43,793 38,127 39,046 35,930
Acquired non-impaired loan accretion (2,040) (2,063) (1,930) (1,879) (1,642)
Tax effect of acquired non-impaired loan accretion 381     475     551     587     509
Adjusted net income (non-GAAP) $46,710     $42,205     $36,748     $37,754     $34,797
 
Return on average assets
Adjusted net income (non-GAAP) $46,710 $42,205 $36,748 $37,754 $34,797
Average total assets 10,752,203     10,715,529     10,757,836     10,862,613     9,958,553
Adjusted return on average assets 1.74%     1.60%     1.36%     1.38%     1.40%
 
Return on average equity
Adjusted net income (non-GAAP) $46,710 $42,205 $36,748 $37,754 $34,797
Average total equity 1,640,076     1,625,951     1,598,056     1,587,279     1,455,847
Adjusted return on average equity 11.42%     10.53%     9.12%     9.44%     9.59%
 
Earnings per common share
Diluted earnings per share (GAAP) $0.86 $0.78 $1.40 $0.68 $0.35
Acquisition expenses 0.00 0.00 0.02 0.01 0.46
Tax effect of acquisition expenses 0.00 0.00 (0.01) 0.00

(0.14)

Tax Cuts and Jobs Act deferred tax impact 0.00     0.00     (0.74)     0.00     0.00
Subtotal (non-GAAP) 0.86 0.78 0.67 0.69 0.67
Amortization of intangibles 0.09 0.09 0.10 0.09 0.09
Tax effect of amortization of intangibles (0.02)     (0.02)     (0.03)     (0.03)     (0.03)
Subtotal (non-GAAP) 0.93 0.85 0.74 0.75 0.73
Acquired non-impaired loan accretion (0.04) (0.04) (0.04) (0.04) (0.03)
Tax effect of acquired non-impaired loan accretion 0.01     0.01     0.01     0.01     0.01
Diluted adjusted net earnings per share (non-GAAP) 0.90     0.82     0.71     0.72     0.71
 
Noninterest operating expenses
Noninterest expenses (GAAP) $86,112 $86,331 $86,919 $83,776 $102,879
Amortization of intangibles (4,555) (4,798) (4,961) (4,949) (4,263)
Acquisition expenses (71)     8     (794)     (580)     (22,896)
Total adjusted noninterest expenses (non-GAAP) $81,486     81,541     81,164     78,247     75,720
 
Efficiency ratio
Adjusted noninterest expenses (non-GAAP) - numerator $81,486     $81,541     $81,164     $78,247     $75,720
Tax-equivalent net interest income 87,940 85,742 88,352 86,776 80,403
Noninterest revenues 56,559 57,491 53,938 52,941 51,226
Acquired non-impaired loan accretion (2,040) (2,063) (1,930) (1,879) (1,642)
Unrealized loss on equity securities 21     0     0     0     0
Operating revenues (non-GAAP) - denominator 142,480 141,170 140,360 137,838 129,987
Efficiency ratio (non-GAAP)       57.2%     57.8%     57.8%     56.8%     58.3%
 
                 
Summary of Financial Data
(Dollars in thousands, except per share data)                  
2018     2017
        2nd Qtr     1st Qtr     4th Qtr     3rd Qtr     2nd Qtr
Quarterly GAAP to Non-GAAP Reconciliations                                
Balance sheet data        
Total assets
Total assets (GAAP) $10,633,094 $10,966,555 $10,746,198 $10,850,218 $10,884,046
Intangible assets (816,127) (820,584) (825,088) (824,355) (831,403)
Deferred taxes on intangible assets 47,334     47,904     48,419     75,820     77,097
Total tangible assets (non-GAAP) 9,864,301     10,193,875     9,969,529     10,101,683     10,129,740
 
Total common equity
Shareholders' Equity (GAAP) 1,656,959 1,631,466 1,635,315 1,593,245 1,572,900
Intangible assets (816,127) (820,584) (825,088) (824,355) (831,403)
Deferred taxes on intangible assets 47,334     47,904     48,419     75,820     77,097
Total tangible common equity (non-GAAP) 888,166     858,786     858,646     844,710     818,594
 
Net tangible equity-to-assets ratio at quarter end
Total tangible common equity (non-GAAP) - numerator $888,166     $858,786     $858,646     $844,710     $818,594
Total tangible assets (non-GAAP) - denominator 9,864,301     10,193,875     9,969,529     10,101,683     10,129,740
Net tangible equity-to-assets ratio at quarter end (non-GAAP) 9.00%     8.42%     8.61%     8.36%     8.08%
                                 
 
(1) Excludes gains and losses on sales of
investment securities.
(2) Includes deferred tax liabilities related
to certain intangible assets.
 

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