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First Mid-Illinois Bancshares, Inc. Announces Fourth Quarter and Full Year 2018 Results

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MATTOON, Ill., Jan. 24, 2019 — First Mid-Illinois Bancshares, Inc. (NASDAQ: FMBH) (the “Company”) today announced its financial results for the quarter and full year ended December 31, 2018.

Highlights

  • Net income of $9.9 million and $36.6 million for the fourth quarter and full year, respectively
  • Successfully completed the acquisition of SCB Bancorp, Inc. (“Soy Capital”) on November 15th  
  • Ended 2018 with $3.8 billion in total assets, an increase of approximately 36% for the year
  • Wealth Management division ended the year with $3.9 billion in assets under management

“The fourth quarter was a solid ending to what was an outstanding year,” said Joe Dively, Chairman and Chief Executive Officer.  “Our 2018 accomplishments were extensive and continued to support our strategic initiatives to deliver meaningful value and results for customers and shareholders.

“The quarter included one and a half months of results related to the closing of the acquisition of Soy Capital.  We delivered solid net income for the period, despite an elevated loan loss provision that was primarily tied to one credit.  In addition, loan growth was muted by a few payoffs and the delay in the closing of certain new loans that are still expected to close.  Overall loan growth, excluding 2018 acquired loans, was 5.5% for the year and we see solid loan growth opportunities for 2019.

“With respect to Soy Capital, I am extremely pleased with how the employees have come together to deliver expanded products and services to our customers.  We have already had some success in expanding and cross-selling customer relationships between the bank, insurance and wealth management business units.  The fast start validates the projected acquisition value and increases my confidence in the great things we can achieve together,” Dively concluded.    

Net Interest Income

Net interest income for the fourth quarter of 2018 increased by $0.9 million, or 3.0% compared to the third quarter of 2018.  The increase was primarily driven by the inclusion of Soy Capital for one and a half months during the quarter, partially offset by lower accretion income.  The fourth quarter included $2.1 million in total loan accretion income compared to $2.5 million in the third quarter of 2018.    

In comparison to the fourth quarter of 2017, net interest income increased by $7.5 million, or 32.1%.  The increase was primarily attributable to the additional revenue from our acquisition of Soy Capital and our acquisition of First BancTrust Corporation (“First Bank”) on May 1, 2018.  In addition, growth in the loan portfolio and higher yields were partially offset by higher funding costs.   

Net Interest Margin

Net interest margin, on a tax equivalent basis, was 3.75% for the fourth quarter compared to 3.89% in the prior quarter.  The combination of adding Soy Capital to the mix, which carried a lower net interest margin, and lower accretion income were the primary drivers to the decrease from the prior quarter.

In comparison to the fourth quarter last year, the net interest margin increased slightly.  The average yields on investment securities and loans increased at a greater pace than the average cost of funds.

Loan Portfolio

Total loans increased by $244.4 million, or 10.2%, during the quarter.  When excluding the acquired loans from Soy Capital, total loans decreased by $7.7 million.  The fourth quarter was negatively impacted by approximately $26.0 million of loans where the borrowers unexpectedly delayed the scheduled closings, which have or are expected to close in the first quarter of 2019.  In addition, the quarter included an increase in payoffs.  Loan yields for the quarter were 4.83%.  Excluding accretion income, loan yields increased by eight basis points in the quarter.   

Loans increased by $705.0 million when compared to fourth quarter last year.  The increase was a combination of strong organic growth over the last twelve months and the addition of loans from Soy Capital and First Bank.  Excluding acquired loans, growth in loans was 5.5% for the year.      

Asset Quality

Asset quality measures were generally consistent with the prior quarter when excluding the impact of purchase accounting tied to the Soy Capital acquisition.  At December 31, 2018, nonperforming loans were 1.51% of total loans.  The allowance for loan losses at quarter end was 0.99% of total loans, and the allowance for loan losses to non-performing loans was 65.7%.  Excluding approximately $786.5 million of outstanding acquired loans, the allowance for loan losses to total loans was approximately 1.41% at year-end.  The increase in non-performing loans for the quarter to $39.8 million from $27.9 million in the prior quarter was primarily tied to the addition of Soy Capital’s loans.  Excluding Soy Capital, non-performing loans were consistent with the prior quarter.       

Net charge-offs were consistent with the prior quarter at $0.8 million.  The Company recorded a provision for loan losses of $3.2 million during the fourth quarter compared to $2.6 million in the third quarter and $2.4 million in the fourth quarter of last year.  The increase in the current quarter was primarily tied to an impairment recorded on a single credit in the amount of $1.2 million.     

Deposits

Total deposits ended the period at $2.99 billion, representing an increase of $337.3 million in the quarter, including approximately $314.0 million from Soy Capital.  The Company’s average rate on cost of funds was 0.60% for the quarter compared to 0.46% in the third quarter.  The fourth quarter includes the impact of Soy Capital, which had a higher cost of funds. 

Deposits increased by $714.0 million when compared to the fourth quarter last year.  The increase was driven by a combination of organic growth and the acquisitions of Soy Capital and First Bank completed in the year.

Noninterest Income

Noninterest income for the fourth quarter of 2018 was $11.6 million compared to $7.9 million in the third quarter.  The increase in the period was primarily attributable to both organic growth and the addition of Soy Capital for one and a half months. 

In comparison to the fourth quarter of 2017, noninterest income increased by $4.4 million.  The increase from last year was attributable to organic growth as well as the Soy Capital and First Bank acquisitions completed in the year.     

Noninterest Expenses    

Noninterest expense for the fourth quarter totaled $26.3 million compared to $24.5 million in the third quarter.  The increase in the period was primarily attributable to the addition of Soy Capital, partially offset by a decrease in overall acquisition and merger related costs.  Acquisition related costs totaled $1.1 million in the current quarter compared to $4.0 million in the third quarter.  The Company’s efficiency ratio, on a tax equivalent basis, for the fourth quarter 2018 was 57.7%, which includes acquisition related costs.     

In comparison to the fourth quarter of 2017, noninterest expenses increased $7.2 million.  The increase was primarily attributable to the operating expenses from the Soy Capital and First Bank acquisitions in the year as well as higher acquisition related non-recurring costs. 

Regulatory Capital Levels

The Company’s capital levels remained comfortably above the “well capitalized” levels and ended the period as follows: 

Total capital to risk-weighted assets13.63%
Tier 1 capital to risk-weighted assets12.77%
Common equity tier 1 capital to risk-weighted assets11.81%
Leverage ratio11.14%

Capital

During the fourth quarter, the company did not sell any shares under the previously announced ‘at-the-market’ equity offering.         

About First Mid-Illinois Bancshares, Inc.: First Mid-Illinois Bancshares, Inc. is the parent company of First Mid Bank & Trust, N.A., First Mid Insurance Group, First Mid Wealth Management, and Soy Capital Bank & Trust.  First Mid Bank & Trust was first chartered in 1865 and has since grown into a $3.8 billion community-focused organization that provides financial services through a network of 67 banking centers in Illinois and Missouri and a loan production office in Indiana.  More information about the Company is available on our website at www.firstmid.com.  Our stock is traded in The NASDAQ Stock Market LLC under the ticker symbol “FMBH”.

Non-GAAP Measures:  In addition to reports presented in accordance with generally accepted accounting principles (“GAAP”), this release contains certain non-GAAP financial measures.  The Company believes that such non-GAAP financial measures provide investors with information useful in understanding the Company’s financial performance.  Readers of this release, however, are urged to review these non-GAAP financial measures in conjunction with the GAAP results as reported.  These non-GAAP financial measures are detailed as supplemental tables and include “Net Interest Margin, tax equivalent,” “Tangible Book Value per Common Share,” and “Common Equity Tier 1 Capital to Risk Weighted Assets”.  While the Company believes these non-GAAP financial measures provide investors with a broader understanding of the capital adequacy, funding profile and financial trends of the Company, this information should be considered as supplemental in nature and not as a substitute to the related financial information prepared in accordance with GAAP.  These non-GAAP financial measures may also differ from the similar measures presented by other companies.   

Forward Looking Statements:  This document may contain certain forward-looking statements about First Mid, such as discussions of First Mid’s pricing and fee trends, credit quality and outlook, liquidity, new business results, expansion plans, anticipated expenses and planned schedules. First Mid intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1955. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations of First Mid, are identified by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project,” or similar expressions. Actual results could differ materially from the results indicated by these statements because the realization of those results is subject to many risks and uncertainties, including, among other things, the possibility that any of the anticipated benefits of the acquisition of Soy Capital will not be realized or will not be realized within the expected time period; the risk that integration of the operations of Soy Capital with First Mid will be materially delayed or will be more costly or difficult than expected; changes in interest rates; general economic conditions and those in the market areas of First Mid; legislative/regulatory changes; monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board; the quality or composition of First Mid’s loan or investment portfolios and the valuation of those investment portfolios; demand for loan products; deposit flows; competition, demand for financial services in the market areas of First Mid; and accounting principles, policies and guidelines. Additional information concerning First Mid, including additional factors and risks that could materially affect First Mid’s financial results, are included in First Mid’s filings with the Securities and Exchange Commission (the “SEC”), including its Annual Reports on Form 10-K. Forward-looking statements speak only as of the date they are made. Except as required under the federal securities laws or the rules and regulations of the SEC, we do not undertake any obligation to update or review any forward-looking information, whether as a result of new information, future events or otherwise.

Investor Contact:  Aaron Holt VP, Shareholder Relations 217-258-0463 [email protected]

– Tables Follow –

 
FIRST MID-ILLINOIS BANCSHARES, INC.
Condensed Consolidated Balance Sheets
(In thousands, unaudited)
  
 As of
 December 31, September 30, December 31,
 2018 2018 2017
      
Assets     
Cash and cash equivalents$141,400  $64,485  $88,879 
Investment securities 769,279   670,672   649,596 
Loans (including loans held for sale) 2,644,519   2,400,160   1,939,501 
Less allowance for loan losses (26,189)  (23,839)  (19,977)
Net loans 2,618,330   2,376,321   1,919,524 
Premises and equipment, net 59,117   47,327   38,266 
Goodwill and intangibles, net 139,097   102,014   70,829 
Bank owned life insurance 65,484   51,443   41,883 
Other assets 47,027   43,215   32,562 
Total assets$3,839,734  $3,355,477  $2,841,539 
      
Liabilities and Stockholders’ Equity     
Deposits:     
Non-interest bearing$575,784  $493,935  $480,283 
Interest bearing 2,412,902   2,157,462   1,794,356 
Total deposits 2,988,686   2,651,397   2,274,639 
Repurchase agreement with customers 192,330   98,875   155,388 
Other borrowings 127,469   150,236   70,351 
Junior subordinated debentures 29,000   28,958   24,000 
Other liabilities 26,385   9,178   9,197 
Total liabilities 3,363,870   2,938,644   2,533,575 
      
Total stockholders’ equity 475,864   416,833   307,964 
Total liabilities and stockholders’ equity$3,839,734  $3,355,477  $2,841,539 
      
 
FIRST MID-ILLINOIS BANCSHARES, INC.
Condensed Consolidated Statements of Income
(In thousands, except per share data, unaudited)
 
 Three Months Ended Twelve Months Ended
 December 31, December 31,
 2018 2017 2018 2017
Interest income:       
Interest and fees on loans$30,553 $21,333 $105,772 $82,670
Interest on investment securities 4,966  3,897  18,237  16,482
Interest on federal funds sold & other deposits 269  83  556  403
Total interest income 35,788  25,313  124,565  99,555
Interest expense:       
Interest on deposits 3,422  1,155  8,571  3,995
Interest on securities sold under agreements to repurchase 134  44  330  181
Interest on other borrowings 834  392  2,517  1,379
Interest on subordinated debt 396  247  1,409  927
Total interest expense 4,786  1,838  12,827  6,482
Net interest income  31,002    23,475    111,738    93,073
Provision for loan losses 3,184  2,411  8,667  7,462
Net interest income after provision for loan 27,818  21,064  103,071  85,611
Non-interest income:       
Trust revenues 2,852  1,048  5,786  3,744
Brokerage commissions 688  611  2,674  2,161
Insurance commissions 2,390  724  5,592  3,872
Service charges 1,988  1,760  7,435  6,920
Securities gains, net 0  27  901  616
Mortgage banking revenues 266  309  1,205  1,184
ATM/debit card revenue 2,044  1,667  7,487  6,495
Other 1,419  1,064  4,334  5,344
Total non-interest income 11,647  7,210  35,414  30,336
Non-interest expense:       
Salaries and employee benefits 13,952  10,071  46,803  39,756
Net occupancy and equipment expense 4,225  3,218  14,533  12,596
Net other real estate owned (income) expense 260  30  282  560
FDIC insurance 319  226  1,059  905
Amortization of intangible assets 1,156  502  3,215  2,153
Stationary and supplies 238  185  963  724
Legal and professional expense 1,318  1,291  5,243  3,887
Marketing and donations 541  447  1,794  1,356
Other 4,311  3,182  16,088  12,284
Total non-interest expense 26,320  19,152  89,980  74,221
Income before income taxes 13,145  9,122  48,505  41,726
Income taxes 3,206  4,497  11,905  15,042
Net income$ 9,939  $ 4,625  $ 36,600  $ 26,684
        
Per Share Information       
Basic earnings per common share$0.62 $0.37 $2.53 $2.13
Diluted earnings per common share 0.62  0.37  2.52  2.13
        
Weighted average shares outstanding 15,985,021  12,628,828  14,487,126  12,531,659
Diluted weighted average shares outstanding 15,998,551  12,634,560  14,500,585  12,536,534
            
 
FIRST MID-ILLINOIS BANCSHARES, INC.
Condensed Consolidated Statements of Income
(In thousands, except per share data, unaudited)
 
 For the Quarter Ended
 December 31, September 30, June 30, March 31,  December 31,
 2018 2018 2018 2018 2017
Interest income:         
Interest and fees on loans$30,553 $28,850  $25,362 $21,007 $21,333
Interest on investment securities 4,966  4,511   4,679  4,081  3,897
Interest on federal funds sold & other deposits 269  127   90  70  83
Total interest income 35,788  33,488   30,131  25,158  25,313
Interest expense:         
Interest on deposits 3,422  2,217   1,670  1,262  1,155
Interest on securities sold under agreements to repurchase 134  72   65  59  44
Interest on other borrowings 834  707   593  383  392
Interest on subordinated debt 396  405   349  259  247
Total interest expense 4,786  3,401   2,677  1,963  1,838
Net interest income  31,002    30,087     27,454    23,195    23,475
Provision for loan losses 3,184  2,551   1,877  1,055  2,411
Net interest income after provision for loan 27,818  27,536   25,577  22,140  21,064
Non-interest income:         
Trust revenues 2,852  919   938  1,077  1,048
Brokerage commissions 688  660   661  665  611
Insurance commissions 2,390  877   838  1,487  724
Service charges 1,988  2,009   1,803  1,635  1,760
Securities gains, net 0  0   881  20  27
Mortgage banking revenues 266  368   410  161  309
ATM/debit card revenue 2,044  1,979   1,860  1,604  1,667
Other 1,419  1,107   970  838  1,064
Total non-interest income 11,647  7,919   8,361  7,487  7,210
Non-interest expense:         
Salaries and employee benefits 13,952  11,600   11,057  10,194  10,071
Net occupancy and equipment expense 4,225  3,530   3,505  3,273  3,218
Net other real estate owned (income) expense 260  (61)  7  76  30
FDIC insurance 319  174   285  281  226
Amortization of intangible assets 1,156  838   716  505  502
Stationary and supplies 238  328   186  211  185
Legal and professional expense 1,318  1,071   1,717  1,137  1,291
Marketing and donations 541  468   431  354  447
Other 4,311  6,542   2,892  2,343  3,182
Total non-interest expense 26,320  24,490   20,796  18,374  19,152
Income before income taxes 13,145  10,965   13,142  11,253  9,122
Income taxes 3,206  2,731   3,105  2,863  4,497
Net income$ 9,939  $ 8,234   $ 10,037  $ 8,390  $ 4,625
          
 
FIRST MID-ILLINOIS BANCSHARES, INC.
Consolidated Financial Highlights and Ratios
(Dollars in thousands, except per share data)
(Unaudited)
 As of and for the Quarter Ended
 December 31, September 30, June 30, March 31, December 31,
 2018 2018 2018 2018 2017
          
Loan Portfolio          
Construction and land development$50,618  $91,355  $88,481  $109,076  $107,594 
Farm loans 231,700   191,724   184,887   122,564   127,183 
1-4 Family residential properties 373,518   367,343   378,573   289,899   293,667 
Multifamily residential properties 184,051   100,368   105,948   60,881   61,798 
Commercial real estate 906,850   814,574   803,362   699,142   681,757 
Loans secured by real estate 1,746,737   1,565,364   1,561,251   1,281,562   1,271,999 
Agricultural loans 135,877   120,770   113,533   74,336   86,631 
Commercial and industrial loans 557,011   540,387   502,211   458,697   444,263 
Consumer loans 91,517   57,248   59,090   28,784   29,749 
All other loans 113,377   116,391   140,598   134,318   106,859 
Total loans 2,644,519   2,400,160   2,376,683   1,977,697   1,939,501 
          
Deposit Portfolio          
Non-interest bearing demand deposits$575,784  $493,935  $526,117  $478,303  $480,283 
Interest bearing demand deposits 903,426   749,396   781,360   707,759   700,376 
Savings deposits 432,319   397,910   405,287   374,594   359,065 
Money Market 485,388   481,799   434,559   389,020   390,880 
Time deposits 591,769   528,357   523,541   342,215   344,035 
Total deposits 2,988,686   2,651,397   2,670,864   2,291,891   2,274,639 
          
Asset Quality         
Non-performing loans$39,839  $27,924  $24,729  $17,869  $17,513 
Non-performing assets 42,434   30,065   27,237   19,849   20,347 
Net charge-offs 834   757   603   261   1,022 
Allowance for loan losses to non-performing loans 65.74%  85.37%  89.15%  116.24%  114.07%
Allowance for loan losses to total loans outstanding 0.99%  0.99%  0.93%  1.05%  1.03%
Nonperforming loans to total loans 1.51%  1.16%  1.04%  0.90%  0.90%
Nonperforming assets to total assets 1.11%  0.90%  0.81%  0.70%  0.72%
          
Common Share Data         
Common shares outstanding 16,644,635   15,294,925   15,285,146   12,677,846   12,660,748 
Book value per common share$28.57  $27.25  $26.91  $24.50  $24.32 
Tangible book value per common share$20.22  $20.58  $20.20  $18.95  $18.73 
Market price of stock$31.92  $40.33  $39.30  $36.45  $38.54 
          
Key Performance Ratios and Metrics         
End of period earning assets$3,491,606  $3,081,929  $3,103,956  $2,634,223  $2,602,578 
Average earning assets 3,307,437   3,090,835   2,949,144   2,625,684   2,581,277 
Average rate on average earning assets (tax equivalent) 4.35%  4.35%  4.16%  3.95%  4.01%
Average rate on cost of funds 0.60%  0.46%  0.38%  0.32%  0.29%
Net interest margin (tax equivalent) 3.75%  3.89%  3.79%  3.65%  3.72%
Return on average assets 1.10%  0.98%  1.27%  1.18%  0.66%
Return on average common equity 8.99%  7.92%  11.23%  10.86%  5.95%
Efficiency ratio (tax equivalent) 1 57.66%  61.56%  56.65%  57.16%  59.08%
Full-time equivalent employees 818   686   711   591   592 
          
          
1 Represents non-interest expense divided by the sum of fully tax equivalent net interest income and non-interest income.  Non-interest expense adjustments exclude foreclosed property expense
and amortization of intangibles.  Non-interest income includes tax equivalent adjustments and non-interest income excludes gains and losses on the sale of investment securities.
 
 
FIRST MID-ILLINOIS BANCSHARES, INC.
Net Interest Margin
 
 For the Quarter Ended December 2018
 QTD Average   Average
 Balance Interest Rate
INTEREST EARNING ASSETS     
Interest bearing deposits 54,768   234 1.70%
Federal funds sold 663   3 1.80%
Certificates of deposits investments 5208   32 2.44%
Investment Securities:     
Taxable (total less Municipals) 541,393   3,574 2.64%
Tax-exempt (Municipals) 182,812   1,762 3.86%
Loans (Net of Unearned Income) 2,522,593   30,727 4.83%
      
Total Interest Earning Assets 3,307,437   36,332 4.35%
      
NONEARNING ASSETS     
Cash and Due From Banks 52,519     
Premises and Equipment 53,041     
Other Nonearning Assets 213,637     
Allowance for Loan Losses (24,731)    
      
Total Assets$3,601,903     
      
INTEREST BEARING LIABILITIES     
Demand Deposits 1,307,643   1,256 0.38%
Savings Deposits 415,224   150 0.14%
Time Deposits 574,446   2,016 1.39%
Repurchase Agreements 131,469   134 0.40%
FHLB Advances 121,954   762 2.48%
Federal Funds Purchased 563   4 2.82%
Subordinated Debt 28,972   396 5.42%
Other Debt 10,108   68 2.67%
      
Total Interest Bearing Deposits 2,590,379   4,786 0.73%
      
NONINTEREST BEARING LIABILITIES     
Demand Deposits 548,710  Average cost of funds 0.60%
Other Liabilities 20,448     
Stockholders’ Equity 442,366     
      
Total Liabilities & Equity$3,601,903     
      
Net Interest Earnings / Spread  $31,546 3.62%
      
Impact of Non-Interest Bearing Funds    0.13%
      
Net Interest Earnings as a % of Interest     
Earnings Assets    3.75%
      
 
FIRST MID-ILLINOIS BANCSHARES, INC.
Reconciliation of Non-GAAP Financial Measures
(In thousands, unaudited)
          
 As of and for the Quarter Ended
 December 31, September 30, June 30, March 31,  December 31,
 2018 2018 2018 2018 2017
          
Net interest income as reported$31,002  $30,087  $27,454  $23,195  $23,475 
Net interest income, (tax equivalent) 31,546   30,604   27,951   23,660   24,332 
Average earning assets 3,307,437   3,090,835   2,949,144   2,625,685   2,581,277 
Net interest margin (tax equivalent) 1 3.75%  3.89%  3.79%  3.65%  3.72%
          
          
Common stockholder’s equity$475,864  $416,833  $411,326  $310,587  $307,964 
Goodwill and intangibles, net 139,097   102,014   102,618   70,324   70,829 
Common shares outstanding 16,645   15,295   15,285   12,678   12,661 
Tangible Book Value per common share$20.22  $20.58  $20.20  $18.95  $18.73 
          
          
Common equity tier 1 capital$357,952  $335,552  $325,572  $254,487  $246,798 
Risk weighted assets 3,030,259   2,662,706   2,678,691   2,289,235   2,290,253 
Common equity tier 1 capital to risk weighted assets  2 11.81%  12.60%  12.15%  11.12%  10.78%
          
          
1 Annualized and calculated on a tax equivalent basis where interest earned on tax-exempt securities and loans is adjusted to an amount comparable to interest subject
to normal income taxes assuming a federal tax rate of 21% during 2018 and 35% during 2017 and includes the impact of non-interest bearing funds.
 
2 Defined as total common equity adjusted for gains/(losses) less goodwill and intangibles divided by risk weighted assets as of period end.

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