Attached files
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| 8-K - FORM 8-K - BERKSHIRE HILLS BANCORP INC | tm2122785d1_8k.htm |
Exhibit 99.1
BERKSHIRE HILLS REPORTS HIGHER SECOND QUARTER EARNINGS
BOSTON, July 21, 2021 - Berkshire Hills Bancorp, Inc. (NYSE: BHLB) today announced that second quarter 2021 delivered earnings per share of $0.43, compared to a loss in same quarter last year and an increase of 65% from $0.26 in the first quarter of 2021. Adjusted earnings per share, a non-GAAP measure, increased by 38% to $0.44 from $0.32 in the first quarter. Second quarter results featured year-over-year fee income growth due to higher consumer activity, disciplined expense control, credit improvement and resumption of share repurchases that were paused in 2020.
SECOND QUARTER FINANCIAL HIGHLIGHTS (Comparisons are to the prior year unless otherwise stated; non-GAAP measures are reconciled on pages F-9 and F-10).
| · | 27% increase in non-interest income |
| · | 89% decrease in non-interest expense; 2% decrease in adjusted non-interest expense (non-GAAP measure) |
| · | Stable net interest margin and net interest income over last four quarters |
| · | No provision for credit losses on loans, compared to $30 million in 2Q’20 |
| · | 53% reduction in net loan charge-offs from prior quarter, while relatively flat over 2Q’20 |
| · | 65% reduction in wholesale funding to 5% of assets |
| · | Deposit costs down to 25bps compared to 79bps in 2Q’20 and 36bps in the first quarter of 2021 |
| · | Stock repurchases of 745,000 shares (1.5% of outstanding stock) |
| · | Returned $26.8 million of capital to shareholders in 2Q’21 through buybacks and dividends amounting to 124% of 2Q’21 GAAP net income |
CEO Nitin Mhatre stated, “We posted a solid quarter of improved earnings, with increased business activity and a stable margin. Efficiency improved and our return on tangible common equity advanced to 7.9%. Credit performance improved across the board as our customers return to more normalized operations.”
Mr. Mhatre continued, “In May, we announced our new strategic plan which we call Berkshire’s Exciting Strategic Transformation, or ‘BEST’. Under this plan, we get better before we get bigger, as we target to earn in excess of our cost of capital on completion of the three-year plan. We’re taking advantage of multiple merger-related market disruptions to add customers and to supplement our strong team with additional talent. Our BEST plan includes capital optimization and returning capital to shareholders, and in the second quarter we announced a stock repurchase program and initiated share buybacks.”
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RESULTS OF OPERATIONS
Earnings: Earnings per share (EPS) of $0.43 compared to a loss in the second quarter last year and represented a 65% increase over the previous quarter. Adjusted EPS, a non-GAAP measure, were $0.44, also compared to a year ago loss, and represented a 38% increase over the previous quarter. Stable net interest income, higher fee revenue, lower expenses and a decrease in the provision for credit losses on loans drove the positive results.
Adjusted earnings exclude items not viewed as related to ongoing operations. In 2020, these items were primarily a goodwill impairment change. In 2021, these items were primarily restructuring expenses recorded in the first quarter for the consolidation of branch offices.
GAAP pre-tax pre-provision net revenue (“PPNR”) of $29 million compared to a loss in the second quarter last year and represented a 23% increase over the previous quarter. Adjusted PPNR increased by 23% over last year and by 9% over the prior quarter.
The efficiency ratio improved quarter over quarter to 67.8% from 71.3%, as non-interest expense decreased by 12% due to broad-based reductions in most categories.
The second quarter return on assets improved quarter over quarter to 0.70% from 0.42%, while adjusted return on assets improved to 0.71% from 0.51%. The second quarter return on tangible common equity was 7.9%, while the adjusted return on tangible common equity was 8.1%.
Revenue: Total net revenue increased by 3% year over year to $97 million from $95 million due to higher non-interest income resulting from increased customer activity.
Net interest income declined 3% year over year and rose modestly on a linked quarter basis. Due to the steady repricing of deposits and the reduction in higher cost wholesale funds, the net interest margin has been stable at approximately 2.62% over the last five quarters. The cost of deposits decreased year over year by 54 basis points to 0.25% and the total cost of funds decreased by 56 basis points to 0.36%.
Second quarter non-interest income increased year over year by $5 million, or 27%. This included a $2 million increase in deposit related fees reflecting increased customer activity. Additionally, SBA loan originations revenue increased by $3 million to a record $5.3 million, reflecting strong market conditions and expansion of the SBA team. Wealth management related revenue increased by 22%, reflecting account growth and improved market conditions.
Credit Loss Provision: There was no provision required for expected credit losses on loans in the second quarter. The provision expense is down from $30 million in the second quarter of 2020 and from $6.5 million linked quarter, reflecting much improved economic and credit conditions.
Expense: Non-interest expense decreased 89% year over year due to the goodwill write-off in the second quarter of 2020. Excluding this write-off, adjusted expense was down by $2 million, or 2%, due primarily to processing expenses in 2020 related to Paycheck Protection Program (“PPP”) loans. Expenses improved quarter over quarter with broad based reductions in all categories. Total branches have been reduced to 115 offices from 130 at the start of the year. Full time equivalent staff totaled 1,417 positions at midyear, compared to 1,505 positions at the start of the year. The second quarter 2021 effective income tax rate was 24%. New tax credit investments recorded in July are targeted to benefit the effective rate in the second half of the year.
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BALANCE SHEET
Loans: Total period end loans decreased in the second quarter by $426 million, or 6%, to $7.23 billion primarily due to $271 million in PPP loan forgiveness, bringing the remaining PPP loan balance down to $173 million. All other total commercial loans were stable, as growth in originations offset further paydowns in targeted COVID-19 sensitive portfolios. Residential mortgages decreased by $109 million due to ongoing rate-related refinancings. Included in assets held for sale are $253 million in Mid-Atlantic loan balances which are targeted to be sold as part of the previously announced planned branch sale.
Asset Quality. Asset quality metrics continued to improve toward pre-pandemic levels during the second quarter. Accruing delinquent loans decreased year over year by 61% to $19 million, or 0.26% of loans. Total COVID-19 related loan modifications decreased year over year by 94% to $98 million, and measured 1.4% of total loans at midyear. The allowance for credit losses on loans decreased by $5 million to $119 million primarily due to the decrease in loan balances. At period-end, the allowance measured 1.65% of total loans and 1.69% of total loans excluding PPP loans.
Deposit and Borrowings: Total deposits decreased from the prior quarter by $330 million primarily due to an $80 million paydown of maturing brokered deposits and a $190 million decrease in daily fluctuating payroll deposit balances. Average deposits increased, driven by a $250 million, or 10%, increase in average non-interest bearing demand deposits. The ratio of loans/deposits decreased to 73% from 75%. Higher cost wholesale funds, consisting of brokered deposits and borrowings, decreased by $213 million, or 24%, to $668 million and measured 5% of period-end total assets. Most of these balances are targeted to be repaid as they mature in the second half of the year. At period-end, liabilities held for sale included $633 million in Mid-Atlantic branch deposit balances which are targeted for sale in the third quarter.
Equity: During the second quarter, Berkshire announced a board authorization for the repurchase of 2.5 million shares. As of quarter end, the Company had repurchased 745 thousand shares, or 1.5% of outstanding shares, at an average price of $27.85, totaling $20.8 million. The Tier 1 common equity ratio increased to an estimated 14.3% from 14.2% in the prior quarter. Berkshire declared a regular quarterly dividend of $0.12 per share with a June 29 record date and July 8 payment date.
CORPORATE RESPONSIBILITY & ESG UPDATE
Berkshire is committed to purpose-driven, community-dedicated banking that enhances value for all its stakeholders in pursuit of its vision to be the leading socially responsible community bank in the markets it serves. Learn more about the steps Berkshire is taking at www.berkshirebank.com/csr and in its most recent Corporate Responsibility Report.
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Key developments in the quarter include:
| · | Launch of new socially responsible financial solutions: In support of Berkshire’s Exciting Strategic Transformation (BEST), the Bank launched two new financial solutions which are now part of its socially responsible banking ecosystem. | |
| o | MyCheck, Berkshire’s new check cashing service helps individuals cash checks at any one of its branches or MyTeller ITM locations for a fraction of the cost of traditional services. The offering provides an on-ramp for underbanked consumers to access a full banking relationship with Berkshire. | |
| o | MyFreedom, provides a safe, transparent, affordable, and accessible checking account as part of its socially responsible banking ecosystem. The account has no charges for overdrafts or monthly maintenance fees and offers free Mobile Banking with Mobile Deposit as well as access to Berkshire Bank's Greenpath Financial Wellness programs. MyFreedom recently received national certification from the Cities for Financial Empowerment Fund through their BankOn program. | |
| · | Continued Commitment to Equity, Inclusion & Culture: Berkshire’s Be FIRST culture continues to play an important role in the Company’s transformation. Its PRIDE LGBTQIA+ Employee Resource Group celebrated Pride Month and Berkshire joined the Human Rights Campaign’s Business Coalition for the Equality Act. Its Health & Wellness and Multicultural Employee Resource Groups hosted programming for Mental Health awareness month and Berkshire came together again to celebrate the impactful significance of Black history in America on Juneteenth National Independence Day. Employees received a paid floating holiday to commemorate the day for the second consecutive year. The Company also recognized six of its employees for their commitment to volunteerism with its Volunteer Service X-ellence Awards while naming an additional 18 employees to its volunteering honor roll. | |
| · | Awards & Recognition: Berkshire was honored for the fourth consecutive year with the Communitas Award for Leadership in Corporate Social Responsibility. In addition, the Company was named a finalist for the North American Inspiring Workplaces Award for culture and social responsibility and was named a leader in Diversity, Equity and Inclusion by the Albany Business Review. | |
| · | Current ESG Performance: The Company continued to improve its Environmental, Social and Governance (ESG) ratings, generally outperforming peers. As of June 30, 2021 the Company received ratings of: MSCI ESG- BBB; ISS ESG Quality Score - Environment: 2, Social: 1, Governance: 2; and Bloomberg ESG Disclosure- 47.81. The company is also rated by Sustainalytics. | |
INVESTOR CONFERENCE CALL AND INVESTOR PRESENTATION
Berkshire will post an investor presentation at its website at ir.berkshirebank.com with additional financial information and other information about the quarter.
Berkshire will conduct a conference call/webcast at 10:00 a.m. Eastern Time on Wednesday, July 21, 2021 to discuss results for the quarter and provide guidance about expected future results.
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Participants are encouraged to pre-register for the conference call using the following link: https://dpregister.com/sreg/10157983/ea164d8160. Callers who pre-register will be given dial-in instructions and a unique PIN to gain immediate access to the call. Participants may pre-register at any time prior to the call and will immediately receive simple instructions via email.
Additionally, participants may reach the registration link and access the webcast by logging in through the investor section of Berkshire’s website at ir.berkshirebank.com.
Those parties who do not have Internet access or are otherwise unable to pre-register for this event, may still participate at the above time by dialing 1-844-792-3726 and asking the Operator to join the Berkshire Hills Bancorp (BHLB) earnings call. Participants are requested to dial in a few minutes before the scheduled start of the call.
A telephone replay of the call will be available for one week by dialing 877-344-7529 and entering access number 10157983. The webcast will be available on Berkshire's website for an extended period of time.
ABOUT BERKSHIRE HILLS BANCORP
Berkshire Hills Bancorp is the parent of Berkshire Bank, which is transforming what it means to bank its neighbors socially, humanly and digitally to empower the financial potential of people, families and businesses in its communities as it pursues its vision of being the leading socially responsible omni-channel community bank in the markets it serves. Headquartered in Boston, Berkshire has $12.3 billion in assets and operates 115 banking offices primarily in New England and New York.
FORWARD-LOOKING STATEMENTS
This document contains “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. You can identify these statements from the use of the words “may,” “will,” “should,” “could,” “would,” “plan,” “potential,” “estimate,” “project,” “believe,” “intend,” “anticipate,” “expect,” “target” and similar expressions. There are many factors that could cause actual results to differ significantly from expectations described in the forward-looking statements. For a discussion of such factors, please see Berkshire’s most recent reports on Forms 10-K and 10-Q filed with the Securities and Exchange Commission and available on the SEC’s website at www.sec.gov.
Accordingly, you should not place undue reliance on forward-looking statements, which reflect our expectations only as of the date of this document. Berkshire does not undertake any obligation to update forward-looking statements.
NON-GAAP FINANCIAL MEASURES
This document contains certain non-GAAP financial measures in addition to results presented in accordance with Generally Accepted Accounting Principles (“GAAP”). These non-GAAP measures provide supplemental perspectives on operating results, performance trends, and financial condition. They are not a substitute for GAAP measures; they should be read and used in conjunction with the Company’s GAAP financial information. A reconciliation of non-GAAP financial measures to GAAP measures is included on pages F-9 and F-10 in the accompanying financial tables. In all cases, it should be understood that non-GAAP per share measures do not depict amounts that accrue directly to the benefit of shareholders.
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The Company utilizes the non-GAAP measure of adjusted earnings in evaluating operating trends, including components for adjusted revenue and expense. These measures exclude items which the Company does not view as related to its normalized operations. These items primarily include securities gains/losses, merger costs, restructuring costs, goodwill impairment, and discontinued operations. In 2020, the Company recorded a full impairment of its goodwill and exited its discontinued national mortgage banking operations. Other adjusted expense in 2020 was primarily related to costs of the separation with the former CEO, as well as consulting for the CEO succession process. A 2020 adjusted gain was recognized on the sale of a specialty commercial insurance business line. In 2021, restructuring and other expense was primarily related to branch consolidation costs.
The Company measures of Adjusted Pre-Provision Net Revenue (“Adjusted PPNR”) which measures adjusted income before credit loss provision and tax expense. PPNR is used by the investment community due to the volatility and variability across banks related to credit loss provision expense under the Current Expected Credit Loss accounting standard. The Company also calculates adjusted PPNR/assets in order to utilize the PPNR measure in assessing its comparative operating profitability.
Non-GAAP adjustments are presented net of an adjustment for income tax expense. This adjustment is determined as the difference between the GAAP tax rate and the effective tax rate applicable to adjusted income. The efficiency ratio is adjusted for adjusted revenue and expense items and for tax preference items. The Company also calculates measures related to tangible equity, which adjust equity (and assets where applicable) to exclude intangible assets due to the importance of these measures to the investment community.
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CONTACTS
Investor Relations Contacts
Kevin Conn, SVP, Investor Relations & Corporate Development
Email: KAConn@berkshirebank.com
Tel: (617) 641-9206
David Gonci, Capital Markets Director
Email: dgonci@berkshirebank.com
Tel: (413) 281-1973
Media Contact:
Gary Levante, SVP, Corporate Responsibility & Culture
Email: glevante@berkshirebank.com
Tel: (413) 447-1737
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SELECTED FINANCIAL HIGHLIGHTS - UNAUDITED - (F-1)
| June 30, | Sept. 30, | Dec. 31, | March 31, | June 30, | ||||||||||||||||
| 2020 | 2020 | 2020 | 2021 | 2021 | ||||||||||||||||
| NOMINAL AND PER SHARE DATA | ||||||||||||||||||||
| Net earnings/(loss) per common share, diluted | $ | (10.93 | ) | $ | 0.42 | $ | 0.30 | $ | 0.26 | $ | 0.43 | |||||||||
| Adjusted earnings/(loss) per common share, diluted (2) | (0.13 | ) | 0.53 | 0.28 | 0.32 | 0.44 | ||||||||||||||
| Net income/(loss), (thousands) | (549,381 | ) | 21,225 | 15,009 | 13,031 | 21,636 | ||||||||||||||
| Adjusted net income/(loss), (thousands) (2) | (6,464 | ) | 26,424 | 14,062 | 16,015 | 22,104 | ||||||||||||||
| Total common shares outstanding, period-end (thousands) | 50,192 | 50,306 | 50,833 | 50,988 | 50,453 | |||||||||||||||
| Average diluted shares, (thousands) | 50,246 | 50,329 | 50,355 | 50,565 | 50,608 | |||||||||||||||
| Total book value per common share, (end of period) | 22.79 | 23.03 | 23.37 | 23.05 | 23.30 | |||||||||||||||
| Tangible book value per common share, (end of period) (2) | 21.94 | 22.22 | 22.68 | 22.39 | 22.66 | |||||||||||||||
| Dividends per common share | 0.24 | 0.12 | 0.12 | 0.12 | 0.12 | |||||||||||||||
| Full-time equivalent staff, continuing operations | 1,511 | 1,507 | 1,505 | 1,467 | 1,417 | |||||||||||||||
| PERFORMANCE RATIOS (3) | ||||||||||||||||||||
| Return on equity | (131.17 | )% | 7.50 | % | 5.22 | % | 4.50 | % | 7.37 | % | ||||||||||
| Adjusted return on equity (2) | (1.54 | ) | 9.33 | 4.89 | 5.53 | 7.53 | ||||||||||||||
| Return on tangible common equity (2) | (206.08 | ) | 8.32 | 5.85 | 4.98 | 7.92 | ||||||||||||||
| Adjusted return on tangible common equity (2) | (2.05 | ) | 10.27 | 5.50 | 6.04 | 8.08 | ||||||||||||||
| Return on assets | (16.38 | ) | 0.67 | 0.48 | 0.42 | 0.70 | ||||||||||||||
| Adjusted return on assets (2) | (0.19 | ) | 0.84 | 0.45 | 0.51 | 0.71 | ||||||||||||||
| Net interest margin, fully taxable equivalent (FTE) (4)(5) | 2.62 | 2.61 | 2.61 | 2.62 | 2.62 | |||||||||||||||
| Efficiency ratio (2) | 71.01 | 65.39 | 71.03 | 71.32 | 67.82 | |||||||||||||||
| FINANCIAL DATA (in millions, end of period) | ||||||||||||||||||||
| Total assets | $ | 13,063 | $ | 12,614 | $ | 12,838 | $ | 12,757 | $ | 12,273 | ||||||||||
| Total earning assets | 12,267 | 11,832 | 12,090 | 12,071 | 11,571 | |||||||||||||||
| Total loans | 9,370 | 8,982 | 8,082 | 7,659 | 7,233 | |||||||||||||||
| Total deposits | 10,776 | 10,467 | 10,216 | 10,244 | 9,914 | |||||||||||||||
| Loans/deposits (%) | 87 | % | 86 | % | 79 | % | 75 | % | 73 | % | ||||||||||
| Total shareholders' equity | $ | 1,164 | $ | 1,179 | $ | 1,188 | $ | 1,175 | $ | 1,175 | ||||||||||
| ASSET QUALITY | ||||||||||||||||||||
| Allowance for credit losses, (millions) | $ | 139 | $ | 134 | $ | 127 | $ | 124 | $ | 119 | ||||||||||
| Net charge-offs, (millions) | (4 | ) | (6 | ) | (17 | ) | (10 | ) | (5 | ) | ||||||||||
| Net charge-offs (QTD annualized)/average loans | 0.17 | % | 0.27 | % | 0.80 | % | 0.51 | % | 0.26 | % | ||||||||||
| Provision expense, (millions) | $ | 30 | $ | 1 | $ | 10 | $ | 7 | $ | - | ||||||||||
| Non-performing assets, (millions) | 47 | 49 | 67 | 58 | 49 | |||||||||||||||
| Non-performing loans/total loans | 0.48 | % | 0.53 | % | 0.80 | % | 0.73 | % | 0.66 | % | ||||||||||
| Allowance for credit losses/non-performing loans | 311 | 284 | 196 | 222 | 250 | |||||||||||||||
| Allowance for credit losses/total loans | 1.49 | 1.50 | 1.58 | 1.62 | 1.65 | |||||||||||||||
| CAPITAL RATIOS | ||||||||||||||||||||
| Common equity tier 1 capital to risk weighted assets (6) | 12.7 | % | 13.2 | % | 13.8 | % | 14.2 | % | 14.3 | % | ||||||||||
| Tier 1 capital leverage ratio (6) | 8.6 | 9.2 | 9.4 | 9.5 | 9.5 | |||||||||||||||
| Tangible common shareholders' equity/tangible assets (2) | 8.5 | 8.9 | 9.0 | 9.0 | 9.3 | |||||||||||||||
(1) Reconciliations of non-GAAP financial measures, including all references to adjusted and tangible amounts, appear on pages F-9 and F-10.
(2) Non-GAAP financial measure. adjusted measurements are non-GAAP financial measures that are adjusted to exclude net non-adjusted charges primarily related to acquisitions and restructuring activities. See pages F-9 and F-10 for reconciliations of non-GAAP financial measures.
(3) All performance ratios are annualized and are based on average balance sheet amounts, where applicable.
(4) Fully taxable equivalent considers the impact of tax advantaged investment securities and loans.
(5) The effect of purchase accounting accretion for loans, time deposits, and borrowings on the quarterly net interest margin was an increase in all quarters, which is shown sequentially as follows beginning with the earliest quarter and ending with the most recent quarter: 0.07%, 0.08%, 0.07%, 0.05%, 0.08%.
(6) Presented as projected for June 30, 2021 and actual for the remaining periods.
F-1
CONSOLIDATED BALANCE SHEETS - UNAUDITED - (F-2)
| June 30, | December 31, | March 31, | June 30, | |||||||||||||
| (in thousands) | 2020 | 2020 | 2021 | 2021 | ||||||||||||
| Assets | ||||||||||||||||
| Cash and due from banks | $ | 102,105 | $ | 91,219 | $ | 81,285 | $ | 98,262 | ||||||||
| Short-term investments | 942,047 | 1,466,656 | 1,818,323 | 1,728,419 | ||||||||||||
| Total cash and short-term investments | 1,044,152 | 1,557,875 | 1,899,608 | 1,826,681 | ||||||||||||
| Trading security | 9,519 | 9,708 | 9,350 | 8,853 | ||||||||||||
| Marketable equity securities, at fair value | 33,263 | 18,513 | 15,801 | 15,709 | ||||||||||||
| Securities available for sale, at fair value | 1,458,036 | 1,695,232 | 1,627,330 | 1,640,512 | ||||||||||||
| Securities held to maturity, at amortized cost | 334,895 | 465,091 | 610,637 | 665,786 | ||||||||||||
| Federal Home Loan Bank stock and other restricted securities | 46,139 | 34,873 | 28,680 | 19,638 | ||||||||||||
| Total securities | 1,881,852 | 2,223,417 | 2,291,798 | 2,350,498 | ||||||||||||
| Less: Allowance for credit losses on investment securities | (113 | ) | (104 | ) | (111 | ) | (130 | ) | ||||||||
| Net securities | 1,881,739 | 2,223,313 | 2,291,687 | 2,350,368 | ||||||||||||
| Loans held for sale | 62,881 | 17,748 | 18,377 | 6,494 | ||||||||||||
| Total loans | 9,370,271 | 8,081,519 | 7,658,778 | 7,232,591 | ||||||||||||
| Less: Allowance for credit losses on loans | (139,394 | ) | (127,302 | ) | (123,800 | ) | (119,044 | ) | ||||||||
| Net loans | 9,230,877 | 7,954,217 | 7,534,978 | 7,113,547 | ||||||||||||
| Premises and equipment, net | 118,722 | 112,663 | 108,538 | 104,680 | ||||||||||||
| Other real estate owned | 40 | 149 | 149 | 85 | ||||||||||||
| Goodwill and other intangible assets | 42,477 | 34,819 | 33,500 | 32,203 | ||||||||||||
| Other assets | 660,404 | 619,925 | 566,809 | 562,691 | ||||||||||||
| Assets held for sale (1) | - | 317,304 | 303,697 | 276,576 | ||||||||||||
| Assets from discontinued operations | 21,692 | - | - | - | ||||||||||||
| Total assets | $ | 13,062,984 | $ | 12,838,013 | $ | 12,757,343 | $ | 12,273,325 | ||||||||
| Liabilities and shareholders' equity | ||||||||||||||||
| Demand deposits | $ | 2,573,786 | $ | 2,484,249 | $ | 2,750,393 | $ | 2,819,012 | ||||||||
| NOW and other deposits | 1,453,397 | 1,003,005 | 1,856,988 | 1,696,762 | ||||||||||||
| Money market deposits | 2,525,761 | 3,371,353 | 2,486,261 | 2,398,256 | ||||||||||||
| Savings deposits | 932,243 | 972,116 | 1,047,506 | 1,065,428 | ||||||||||||
| Time deposits | 3,290,721 | 2,385,085 | 2,103,222 | 1,934,442 | ||||||||||||
| Total deposits | 10,775,908 | 10,215,808 | 10,244,370 | 9,913,900 | ||||||||||||
| Senior borrowings | 719,638 | 474,357 | 351,354 | 217,847 | ||||||||||||
| Subordinated borrowings | 97,165 | 97,280 | 97,338 | 97,396 | ||||||||||||
| Total borrowings | 816,803 | 571,637 | 448,692 | 315,243 | ||||||||||||
| Due to broker | - | - | - | - | ||||||||||||
| Other liabilities | 280,843 | 232,730 | 229,832 | 222,105 | ||||||||||||
| Liabilities held for sale (1) | - | 630,065 | 659,310 | 646,688 | ||||||||||||
| Liabilities from discontinued operations | 25,290 | - | - | - | ||||||||||||
| Total liabilities | 11,898,844 | 11,650,240 | 11,582,204 | 11,097,936 | ||||||||||||
| Preferred shareholders' equity | 20,325 | - | - | - | ||||||||||||
| Common shareholders' equity | 1,143,815 | 1,187,773 | 1,175,139 | 1,175,389 | ||||||||||||
| Total shareholders' equity | 1,164,140 | 1,187,773 | 1,175,139 | 1,175,389 | ||||||||||||
| Total liabilities and shareholders' equity | $ | 13,062,984 | $ | 12,838,013 | $ | 12,757,343 | $ | 12,273,325 | ||||||||
(1) Includes loans and deposits from planned branch sales in the Mid-Atlantic region.
F-2
CONSOLIDATED LOAN & DEPOSIT ANALYSIS - UNAUDITED - (F-3)
LOAN ANALYSIS
| Growth % | ||||||||||||||||||||
| (in millions) | December 31, 2020 Balance | March 31, 2021 Balance | June 30, 2021 Balance | Quarter ended June 30, 2021 | Year to Date | |||||||||||||||
| Total commercial real estate | $ | 3,647 | $ | 3,645 | $ | 3,652 | - | % | - | % | ||||||||||
| Commercial and industrial loans | 1,326 | 1,297 | 1,286 | (1 | ) | (6 | ) | |||||||||||||
| Paycheck Protection Program (PPP) Loans | 633 | 444 | 173 | (61 | ) | (145 | ) | |||||||||||||
| Total commercial loans | 5,606 | 5,386 | 5,111 | (5 | ) | (18 | ) | |||||||||||||
| Total residential mortgages | 1,813 | 1,668 | 1,559 | (7 | ) | (28 | ) | |||||||||||||
| Home equity | 295 | 280 | 270 | (3 | ) | (17 | ) | |||||||||||||
| Auto and other | 368 | 325 | 293 | (10 | ) | (41 | ) | |||||||||||||
| Total consumer loans | 663 | 605 | 563 | (7 | ) | (30 | ) | |||||||||||||
| Total loans | $ | 8,082 | $ | 7,659 | $ | 7,233 | (6 | )% | (21 | )% | ||||||||||
DEPOSIT ANALYSIS
| Growth % | ||||||||||||||||||||
| (in millions) | December 31, 2020 Balance | March 31, 2021 Balance | June 30, 2021 Balance | Quarter ended June 30, 2021 | Year to Date | |||||||||||||||
| Non-interest bearing | $ | 2,484 | $ | 2,750 | $ | 2,819 | 3 | % | 27 | % | ||||||||||
| NOW and other | 1,003 | 1,857 | 1,697 | (9 | ) | 138 | ||||||||||||||
| Money market | 3,372 | 2,486 | 2,398 | (4 | ) | (58 | ) | |||||||||||||
| Savings | 972 | 1,048 | 1,065 | 2 | 19 | |||||||||||||||
| Time deposits | 2,385 | 2,103 | 1,935 | (8 | ) | (38 | ) | |||||||||||||
| Total deposits (1) | $ | 10,216 | $ | 10,244 | $ | 9,914 | (3 | )% | (6 | )% | ||||||||||
(1) Included in total deposits are brokered deposits of $358.4 million, $431.5 million and $610.6 million at June 30, 2021, March 31, 2021, and December 31, 2020, respectively.
F-3
CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED - (F-4)
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| (in thousands, except per share data) | 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Interest income | 85,364 | 103,688 | 173,517 | 219,883 | ||||||||||||
| Interest expense | 9,971 | 26,098 | 23,031 | 55,865 | ||||||||||||
| Net interest income from continuing operations, not FTE | 75,393 | 77,590 | 150,486 | 164,018 | ||||||||||||
| Non-interest income from continuing operations | ||||||||||||||||
| Deposit related fees | 7,508 | 5,373 | 14,634 | 13,320 | ||||||||||||
| Loan fees and revenue | 7,431 | 5,717 | 17,677 | 7,019 | ||||||||||||
| Insurance commissions and fees | 2,292 | 2,767 | 5,422 | 5,791 | ||||||||||||
| Wealth management fees | 2,519 | 2,057 | 5,291 | 4,627 | ||||||||||||
| Mortgage banking originations | 534 | 1,644 | 1,336 | 2,603 | ||||||||||||
| Other | 2,211 | (999 | ) | 4,359 | (1,435 | ) | ||||||||||
| Total non-interest income excluding gains/(losses) | 22,495 | 16,559 | 48,719 | 31,925 | ||||||||||||
| Securities (losses)/gains, net | (484 | ) | 822 | (515 | ) | (8,908 | ) | |||||||||
| Gain on sale of business operations and assets, net | - | - | - | - | ||||||||||||
| Total non-interest income | 22,011 | 17,381 | 48,204 | 23,017 | ||||||||||||
| Total net revenue from continuing operations | 97,404 | 94,971 | 198,690 | 187,035 | ||||||||||||
| Total net revenue from continuing operations excluding (losses)/gains | 97,888 | 94,149 | 199,205 | 195,943 | ||||||||||||
| Provision for credit losses | - | 29,871 | 6,500 | 64,678 | ||||||||||||
| Non-interest expense from continuing operations | ||||||||||||||||
| Compensation and benefits | 36,970 | 39,403 | 75,705 | 76,312 | ||||||||||||
| Occupancy and equipment | 10,599 | 10,195 | 21,623 | 21,327 | ||||||||||||
| Technology and communications | 8,214 | 7,755 | 16,807 | 15,836 | ||||||||||||
| Professional services | 3,701 | 2,565 | 10,315 | 5,285 | ||||||||||||
| Other expenses | 9,382 | 10,595 | 19,084 | 23,078 | ||||||||||||
| Merger, restructuring and other non-operating expenses | 6 | 553,762 | 3,492 | 553,762 | ||||||||||||
| Total non-interest expense | 68,872 | 624,275 | 147,026 | 695,600 | ||||||||||||
| Total non-interest expense excluding merger, restructuring and other | 68,866 | 70,513 | 143,534 | 141,838 | ||||||||||||
| Income/(loss) from continuing operations before income taxes | $ | 28,532 | $ | (559,175 | ) | $ | 45,164 | $ | (573,243 | ) | ||||||
| Income tax expense/(benefit) | 6,896 | (16,130 | ) | 10,497 | (18,126 | ) | ||||||||||
| Net income/(loss) from continuing operations | $ | 21,636 | $ | (543,045 | ) | $ | 34,667 | $ | (555,117 | ) | ||||||
| (Loss) from discontinued operations before income taxes | $ | - | $ | (8,635 | ) | $ | - | $ | (19,264 | ) | ||||||
| Income tax (benefit) | - | (2,299 | ) | - | (5,130 | ) | ||||||||||
| Net (loss) from discontinued operations | $ | - | $ | (6,336 | ) | $ | - | $ | (14,134 | ) | ||||||
| Net income/(loss) | $ | 21,636 | $ | (549,381 | ) | $ | 34,667 | $ | (569,251 | ) | ||||||
| Preferred stock dividend | - | 130 | - | 255 | ||||||||||||
| Income/(loss) available to common shareholders | $ | 21,636 | $ | (549,511 | ) | $ | 34,667 | $ | (569,506 | ) | ||||||
| Basic earnings/(loss) per common share: | ||||||||||||||||
| Continuing Operations | $ | 0.43 | $ | (10.80 | ) | $ | 0.69 | $ | (11.05 | ) | ||||||
| Discontinued Operations | - | (0.13 | ) | - | (0.28 | ) | ||||||||||
| Total | $ | 0.43 | $ | (10.93 | ) | $ | 0.69 | $ | (11.33 | ) | ||||||
| Diluted earnings/(loss) per common share: | ||||||||||||||||
| Continuing Operations | $ | 0.43 | $ | (10.80 | ) | $ | 0.69 | $ | (11.05 | ) | ||||||
| Discontinued Operations | - | (0.13 | ) | - | (0.28 | ) | ||||||||||
| Total | $ | 0.43 | $ | (10.93 | ) | $ | 0.69 | $ | (11.33 | ) | ||||||
| Weighted average shares outstanding: | ||||||||||||||||
| Basic | 50,321 | 50,246 | 50,327 | 50,228 | ||||||||||||
| Diluted | 50,608 | 50,246 | 50,588 | 50,228 | ||||||||||||
F-4
CONSOLIDATED STATEMENTS OF OPERATIONS (5 Quarter Trend) - UNAUDITED - (F-5)
| June 30, | Sept. 30, | Dec. 31, | March 31, | June 30, | ||||||||||||||||
| (in thousands, except per share data) | 2020 | 2020 | 2020 | 2021 | 2021 | |||||||||||||||
| Interest income | 103,688 | 97,768 | 92,131 | 88,153 | 85,364 | |||||||||||||||
| Interest expense | 26,098 | 20,713 | 16,422 | 13,060 | 9,971 | |||||||||||||||
| Net interest income from continuing operations, not FTE | 77,590 | 77,055 | 75,709 | 75,093 | 75,393 | |||||||||||||||
| Non-interest income from continuing operations | ||||||||||||||||||||
| Deposit related fees | 5,373 | 7,062 | 7,523 | 7,126 | 7,508 | |||||||||||||||
| Loan fees and revenue | 5,717 | 4,988 | 4,833 | 10,246 | 7,431 | |||||||||||||||
| Insurance commissions and fees | 2,767 | 2,660 | 2,319 | 3,130 | 2,292 | |||||||||||||||
| Wealth management fees | 2,057 | 2,299 | 2,359 | 2,772 | 2,519 | |||||||||||||||
| Mortgage banking originations | 1,644 | 2,044 | 543 | 802 | 534 | |||||||||||||||
| Other | (999 | ) | 1,927 | 2,105 | 2,148 | 2,211 | ||||||||||||||
| Total non-interest income excluding (losses)/gains | 16,559 | 20,980 | 19,682 | 26,224 | 22,495 | |||||||||||||||
| Securities (losses)/gains, net | 822 | (1,017 | ) | 2,405 | (31 | ) | (484 | ) | ||||||||||||
| Gain on sale of business operations and assets, net | - | - | 1,240 | - | - | |||||||||||||||
| Total non-interest income | 17,381 | 19,963 | 23,327 | 26,193 | 22,011 | |||||||||||||||
| Total net revenue from continuing operations | 94,971 | 97,018 | 99,036 | 101,286 | 97,404 | |||||||||||||||
| Total net revenue from continuing operations excluding (losses)/gains | 94,149 | 98,035 | 95,391 | 101,317 | 97,888 | |||||||||||||||
| Provision for credit losses | 29,871 | 1,200 | 10,000 | 6,500 | - | |||||||||||||||
| Compensation and benefits | 39,403 | 34,809 | 36,719 | 38,735 | 36,970 | |||||||||||||||
| Occupancy and equipment | 10,195 | 11,084 | 10,948 | 11,024 | 10,599 | |||||||||||||||
| Technology and communications | 7,755 | 8,540 | 7,988 | 8,593 | 8,214 | |||||||||||||||
| Professional services | 2,565 | 2,567 | 4,055 | 6,614 | 3,701 | |||||||||||||||
| Other expenses | 10,595 | 10,527 | 11,563 | 9,702 | 9,382 | |||||||||||||||
| Merger, restructuring and other non-operating expenses | 553,762 | 5,316 | 523 | 3,486 | 6 | |||||||||||||||
| Total non-interest expense | 624,275 | 72,843 | 71,796 | 78,154 | 68,872 | |||||||||||||||
| Total non-interest expense excluding merger, restructuring and other | 70,513 | 67,527 | 71,273 | 74,668 | 68,866 | |||||||||||||||
| Income/(loss) from continuing operations before income taxes | $ | (559,175 | ) | $ | 22,975 | $ | 17,240 | $ | 16,632 | $ | 28,532 | |||||||||
| Income tax expense/(benefit) | (16,130 | ) | (68 | ) | (1,659 | ) | 3,601 | 6,896 | ||||||||||||
| Net income/(loss) from continuing operations | $ | (543,045 | ) | $ | 23,043 | $ | 18,899 | $ | 13,031 | $ | 21,636 | |||||||||
| (Loss) from discontinued operations before income taxes | $ | (8,635 | ) | $ | (2,477 | ) | $ | (5,114 | ) | $ | - | $ | - | |||||||
| Income tax (benefit) | (2,299 | ) | (659 | ) | (1,224 | ) | - | - | ||||||||||||
| Net (loss) from discontinued operations | $ | (6,336 | ) | $ | (1,818 | ) | $ | (3,890 | ) | $ | - | $ | - | |||||||
| Net income/(loss) | $ | (549,381 | ) | $ | 21,225 | $ | 15,009 | $ | 13,031 | $ | 21,636 | |||||||||
| Preferred stock dividend | 130 | 58 | - | - | - | |||||||||||||||
| Income/(loss) available to common shareholders | $ | (549,511 | ) | $ | 21,167 | $ | 15,009 | $ | 13,031 | $ | 21,636 | |||||||||
| Diluted earnings/(loss) per common share: | ||||||||||||||||||||
| Continuing Operations | $ | (10.80 | ) | $ | 0.46 | $ | 0.38 | $ | 0.26 | $ | 0.43 | |||||||||
| Discontinued Operations | (0.13 | ) | (0.04 | ) | (0.08 | ) | - | - | ||||||||||||
| Total | $ | (10.93 | ) | $ | 0.42 | $ | 0.30 | $ | 0.26 | $ | 0.43 | |||||||||
| Weighted average shares outstanding: | ||||||||||||||||||||
| Basic | 50,246 | 50,329 | 50,308 | 50,330 | 50,321 | |||||||||||||||
| Diluted | 50,246 | 50,329 | 50,355 | 50,565 | 50,608 | |||||||||||||||
F-5
AVERAGE BALANCES AND AVERAGE YIELDS AND COSTS - UNAUDITED - (F-6)
| June 30, 2020 | Sept. 30, 2020 | Dec. 31, 2020 | March 31, 2021 | June 30, 2021 | ||||||||||||||||||||||||||||||||||||
| (in millions) | Average Balance | Average Yield/Rate | Average Balance | Average Yield/Rate | Average Balance | Average Yield/Rate | Average Balance | Average Yield/Rate | Average Balance | Average Yield/Rate | ||||||||||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||||||||||||||
| Commercial real estate | 4,005 | 3.78 | % | 3,986 | 3.52 | % | 3,843 | 3.34 | % | 3,630 | 3.27 | % | 3,625 | 3.46 | % | |||||||||||||||||||||||||
| Commercial and industrial loans | 2,153 | 4.02 | 2,192 | 3.88 | 2,056 | 4.05 | 1,865 | 4.62 | 1,605 | 4.74 | ||||||||||||||||||||||||||||||
| Residential mortgages | 2,453 | 3.78 | 2,224 | 3.78 | 1,971 | 3.78 | 1,740 | 3.71 | 1,604 | 3.79 | ||||||||||||||||||||||||||||||
| Consumer loans | 865 | 3.72 | 801 | 3.59 | 726 | 3.41 | 634 | 3.79 | 582 | 3.80 | ||||||||||||||||||||||||||||||
| Total loans (1) | 9,476 | 3.83 | 9,203 | 3.68 | 8,596 | 3.62 | 7,869 | 3.73 | 7,416 | 3.84 | ||||||||||||||||||||||||||||||
| Securities (2) | 1,793 | 3.07 | 1,874 | 2.78 | 1,968 | 2.69 | 2,195 | 2.36 | 2,259 | 2.17 | ||||||||||||||||||||||||||||||
| Short-term investments and loans held for sale | 697 | 0.50 | 766 | 0.21 | 977 | 0.14 | 1,351 | 0.13 | 1,750 | 0.10 | ||||||||||||||||||||||||||||||
| Mid-Atlantic region loans held for sale | - | - | - | - | 101 | 4.27 | 295 | 4.09 | 269 | 3.96 | ||||||||||||||||||||||||||||||
| Total earning assets (3) | 11,966 | 3.50 | 11,843 | 3.31 | 11,642 | 3.17 | 11,710 | 3.07 | 11,694 | 2.96 | ||||||||||||||||||||||||||||||
| Goodwill and other intangible assets | 591 | 41 | 40 | 34 | 33 | |||||||||||||||||||||||||||||||||||
| Other assets | 752 | 760 | 752 | 724 | 690 | |||||||||||||||||||||||||||||||||||
| Assets from discontinued operations | 110 | 16 | 12 | - | - | |||||||||||||||||||||||||||||||||||
| Total assets | 13,419 | 12,660 | 12,446 | 12,468 | 12,417 | |||||||||||||||||||||||||||||||||||
| Liabilities and shareholders' equity | ||||||||||||||||||||||||||||||||||||||||
| NOW and other | 1,184 | 0.30 | % | 1,244 | 0.24 | % | 1,279 | 0.17 | % | 1,325 | 0.15 | % | 1,389 | 0.07 | % | |||||||||||||||||||||||||
| Money market | 2,672 | 0.58 | 2,674 | 0.38 | 2,756 | 0.32 | 2,802 | 0.27 | 2,751 | 0.18 | ||||||||||||||||||||||||||||||
| Savings | 901 | 0.10 | 940 | 0.10 | 967 | 0.08 | 1,003 | 0.08 | 1,054 | 0.05 | ||||||||||||||||||||||||||||||
| Time | 3,399 | 1.84 | 3,056 | 1.63 | 2,629 | 1.35 | 2,266 | 1.12 | 2,013 | 0.94 | ||||||||||||||||||||||||||||||
| Total interest-bearing deposits | 8,156 | 1.01 | 7,914 | 0.81 | 7,631 | 0.62 | 7,396 | 0.48 | 7,207 | 0.35 | ||||||||||||||||||||||||||||||
| Borrowings | 942 | 2.38 | 777 | 2.36 | 658 | 2.50 | 500 | 2.78 | 381 | 3.12 | ||||||||||||||||||||||||||||||
| Mid-Atlantic region interest-bearing deposits | - | - | - | - | 180 | 0.80 | 518 | 0.60 | 517 | 0.51 | ||||||||||||||||||||||||||||||
| Total interest-bearing liabilities | 9,098 | 1.16 | 8,691 | 0.95 | 8,469 | 0.77 | 8,414 | 0.63 | 8,105 | 0.49 | ||||||||||||||||||||||||||||||
| Non-interest-bearing demand deposits | 2,343 | 2,559 | 2,542 | 2,537 | 2,787 | |||||||||||||||||||||||||||||||||||
| Other liabilities (4) | 274 | 254 | 279 | 358 | 351 | |||||||||||||||||||||||||||||||||||
| Liabilities from discontinued operations | 29 | 23 | 6 | - | - | |||||||||||||||||||||||||||||||||||
| Total liabilities | 11,744 | 11,527 | 11,296 | 11,309 | 11,243 | |||||||||||||||||||||||||||||||||||
| Preferred shareholders' equity | 20 | 20 | 7 | - | - | |||||||||||||||||||||||||||||||||||
| Common shareholders' equity | 1,655 | 1,113 | 1,143 | 1,159 | 1,174 | |||||||||||||||||||||||||||||||||||
| Total shareholders' equity | 1,675 | 1,133 | 1,150 | 1,159 | 1,174 | |||||||||||||||||||||||||||||||||||
| Total liabilities and shareholders' equity | 13,419 | 12,660 | 12,446 | 12,468 | 12,417 | |||||||||||||||||||||||||||||||||||
| Net interest spread | 2.34 | % | 2.36 | % | 2.40 | % | 2.44 | % | 2.47 | % | ||||||||||||||||||||||||||||||
| Net interest margin, FTE (5) | 2.62 | 2.61 | 2.61 | 2.62 | 2.62 | |||||||||||||||||||||||||||||||||||
| Cost of funds | 0.92 | 0.73 | 0.60 | 0.48 | 0.36 | |||||||||||||||||||||||||||||||||||
| Cost of deposits | 0.79 | 0.61 | 0.47 | 0.36 | 0.25 | |||||||||||||||||||||||||||||||||||
| Supplementary data | ||||||||||||||||||||||||||||||||||||||||
| Net Interest Income, not FTE | 78 | 77 | 76 | 75 | 75 | |||||||||||||||||||||||||||||||||||
| Fully taxable equivalent income adjustment | 2 | 2 | 1 | 1 | 2 | |||||||||||||||||||||||||||||||||||
| Net Interest Income, FTE | 79 | 79 | 77 | 77 | 77 | |||||||||||||||||||||||||||||||||||
| Average PPP loans | 461 | 707 | 685 | 546 | 321 | |||||||||||||||||||||||||||||||||||
| Average loans excluding PPP loans | 9,015 | 8,496 | 7,911 | 7,323 | 7,095 | |||||||||||||||||||||||||||||||||||
| Total PPP loans, end of period | 706 | 708 | 633 | 444 | 173 | |||||||||||||||||||||||||||||||||||
| Total loans excluding PPP loans, end of period | 8,664 | 8,274 | 7,448 | 7,215 | 7,059 | |||||||||||||||||||||||||||||||||||
| PPP interest income | 3 | 4 | 6 | 7 | 5 | |||||||||||||||||||||||||||||||||||
| Total average non-maturity deposits | 7,100 | 7,417 | 7,544 | 7,666 | 7,981 | |||||||||||||||||||||||||||||||||||
| Total average deposits | 10,500 | 10,473 | 10,173 | 9,932 | 9,994 | |||||||||||||||||||||||||||||||||||
| Purchased loan accretion | 2 | 3 | 2 | 1 | 2 | |||||||||||||||||||||||||||||||||||
| Total average tangible equity (6) | 1,085 | 1,091 | 1,110 | 1,125 | 1,141 | |||||||||||||||||||||||||||||||||||
(1) Total loans include non-accruing loans.
(2) Average balances for securities available-for-sale are based on amortized cost.
(3) Excludes discontinued operations for presentation purposes. Performance ratios are calculated including the impact of discontinued operations.
(4) Includes the Mid-Atlantic region non-interesting bearing deposits. As of June 30, 2021 and December 31, 2020, the Mid-Atlantic region average non-interest bearing deposits were $125 million and $37 million, respectively.
(5) The effect of PPP loans on the quarterly net interest margin is shown sequentially as follows beginning with the earliest quarter and ending with the most recent quarter: 0.00%, (0.01%), 0.05%, 0.11%, 0.11%. This calculation excludes gross interest income on PPP loans and average PPP loan balances.
(6) See page F-9 for details on the calculation of total average tangible equity.
F-6
ASSET QUALITY ANALYSIS - UNAUDITED - (F-7)
| June 30, | Sept. 30, | Dec. 31, | March 31, | June 30, | ||||||||||||||||
| (in thousands) | 2020 | 2020 | 2020 | 2021 | 2021 | |||||||||||||||
| NON-PERFORMING ASSETS | ||||||||||||||||||||
| Non-accruing loans: | ||||||||||||||||||||
| Commercial real estate | $ | 12,486 | $ | 14,777 | $ | 35,581 | $ | 28,325 | $ | 22,799 | ||||||||||
| Commercial and industrial loans | 15,045 | 15,035 | 12,921 | 9,371 | 9,427 | |||||||||||||||
| Residential mortgages | 9,840 | 7,928 | 8,347 | 10,674 | 9,238 | |||||||||||||||
| Consumer loans | 7,513 | 9,650 | 8,099 | 7,447 | 6,141 | |||||||||||||||
| Total non-accruing loans | 44,884 | 47,390 | 64,948 | 55,817 | 47,605 | |||||||||||||||
| Other real estate owned | 517 | 401 | 149 | 149 | 85 | |||||||||||||||
| Repossessed assets | 1,581 | 1,646 | 1,932 | 1,701 | 1,666 | |||||||||||||||
| Total non-performing assets | $ | 46,982 | $ | 49,437 | $ | 67,029 | $ | 57,667 | $ | 49,356 | ||||||||||
| Total non-accruing loans/total loans | 0.48 | % | 0.53 | % | 0.80 | % | 0.73 | % | 0.66 | % | ||||||||||
| Total non-accruing loans/total loans excluding PPP loans | 0.52 | % | 0.57 | % | 0.87 | % | 0.77 | % | 0.67 | % | ||||||||||
| Total non-performing assets/total assets | 0.36 | % | 0.39 | % | 0.52 | % | 0.45 | % | 0.40 | % | ||||||||||
| PROVISION AND ALLOWANCE FOR CREDIT LOSSES ON LOANS | ||||||||||||||||||||
| Balance at beginning of period | $ | 113,510 | $ | 139,394 | $ | 134,414 | $ | 127,302 | $ | 123,800 | ||||||||||
| Charged-off loans | (7,274 | ) | (7,776 | ) | (18,314 | ) | (11,460 | ) | (7,248 | ) | ||||||||||
| Recoveries on charged-off loans | 3,259 | 1,580 | 1,209 | 1,465 | 2,492 | |||||||||||||||
| Net loans charged-off | (4,015 | ) | (6,196 | ) | (17,105 | ) | (9,995 | ) | (4,756 | ) | ||||||||||
| Provision for loan credit losses | 29,899 | 1,216 | 9,993 | 6,493 | - | |||||||||||||||
| Balance at end of period | $ | 139,394 | $ | 134,414 | $ | 127,302 | $ | 123,800 | $ | 119,044 | ||||||||||
| Allowance for credit losses/total loans | 1.49 | % | 1.50 | % | 1.58 | % | 1.62 | % | 1.65 | % | ||||||||||
| Allowance for credit losses/total loans excluding PPP loans | 1.61 | % | 1.62 | % | 1.71 | % | 1.72 | % | 1.69 | % | ||||||||||
| Allowance for credit losses/non-accruing loans | 311 | % | 284 | % | 196 | % | 222 | % | 250 | % | ||||||||||
| NET LOAN CHARGE-OFFS | ||||||||||||||||||||
| Commercial real estate | $ | (1,679 | ) | $ | (635 | ) | $ | (11,862 | ) | $ | (6,959 | ) | $ | (2,325 | ) | |||||
| Commercial and industrial loans | (1,059 | ) | (5,551 | ) | (5,089 | ) | (2,662 | ) | (2,331 | ) | ||||||||||
| Residential mortgages | (966 | ) | 517 | 250 | 80 | 176 | ||||||||||||||
| Home equity | (10 | ) | (57 | ) | 141 | (42 | ) | (136 | ) | |||||||||||
| Auto and other consumer | (301 | ) | (470 | ) | (545 | ) | (412 | ) | (140 | ) | ||||||||||
| Total, net | $ | (4,015 | ) | $ | (6,196 | ) | $ | (17,105 | ) | $ | (9,995 | ) | $ | (4,756 | ) | |||||
| Net charge-offs (QTD annualized)/average loans | 0.17 | % | 0.27 | % | 0.80 | % | 0.51 | % | 0.26 | % | ||||||||||
| Net charge-offs (YTD annualized)/average loans | 0.31 | % | 0.29 | % | 0.41 | % | 0.51 | % | 0.39 | % | ||||||||||
F-7
ASSET QUALITY ANALYSIS - UNAUDITED (F-8)
| June 30, 2020 | September 30, 2020 | December 31, 2020 | March 31, 2021 | June 30, 2021 | ||||||||||||||||||||||||||||||||||||
| (in thousands) | Balance | Percent of Total Loans | Balance | Percent of Total Loans | Balance | Percent of Total Loans | Balance | Percent of Total Loans | Balance | Percent of Total Loans | ||||||||||||||||||||||||||||||
| 30-89 Days delinquent | $ | 35,128 | 0.37 | % | $ | 27,626 | 0.31 | % | $ | 16,310 | 0.20 | % | $ | 28,565 | 0.37 | % | $ | 15,483 | 0.22 | % | ||||||||||||||||||||
| 90+ Days delinquent and still accruing | 13,056 | 0.14 | % | 12,876 | 0.14 | % | 11,450 | 0.14 | % | 6,124 | 0.08 | % | 3,129 | 0.04 | % | |||||||||||||||||||||||||
| Total accruing delinquent loans | 48,184 | 0.51 | % | 40,502 | 0.45 | % | 27,760 | 0.34 | % | 34,689 | 0.45 | % | 18,612 | 0.26 | % | |||||||||||||||||||||||||
| Non-accruing loans | 44,884 | 0.48 | % | 47,390 | 0.53 | % | 64,948 | 0.80 | % | 55,817 | 0.73 | % | 47,605 | 0.66 | % | |||||||||||||||||||||||||
| Total delinquent and non-accruing loans | $ | 93,068 | 0.99 | % | $ | 87,892 | 0.98 | % | $ | 92,708 | 1.14 | % | $ | 90,506 | 1.18 | % | $ | 66,217 | 0.92 | % | ||||||||||||||||||||
F-8
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND SUPPLEMENTARY DATA- UNAUDITED - (F-9)
| June 30, | Sept. 30, | Dec. 31, | March 31, | June 30, | ||||||||||||||||||
| (in thousands) | 2020 | 2020 | 2020 | 2021 | 2021 | |||||||||||||||||
| Total revenue from continuing operations | (A) | $ | 94,971 | $ | 97,018 | $ | 99,036 | $ | 101,286 | $ | 97,404 | |||||||||||
| Adj: Net securities losses/(gains) (1) | (822 | ) | 1,017 | (2,405 | ) | 31 | 484 | |||||||||||||||
| Adj: Net (gains) on sale of business operations and assets | - | - | (1,240 | ) | - | - | ||||||||||||||||
| Total adjusted revenue (2) | (B) | $ | 94,149 | $ | 98,035 | $ | 95,391 | $ | 101,317 | $ | 97,888 | |||||||||||
| Total non-interest expense from continuing operations | (C) | $ | 624,275 | $ | 72,843 | $ | 71,796 | $ | 78,154 | $ | 68,872 | |||||||||||
| Less: Merger, restructuring and other expense | - | (5,316 | ) | (523 | ) | (3,486 | ) | (6 | ) | |||||||||||||
| Less: Goodwill impairment | (553,762 | ) | - | - | - | - | ||||||||||||||||
| Adjusted non-interest expense (2) | (D) | $ | 70,513 | $ | 67,527 | $ | 71,273 | $ | 74,668 | $ | 68,866 | |||||||||||
| Pre-tax, pre-provision net revenue (PPNR) from continuing operations | (A-C) | $ | (529,304 | ) | $ | 24,175 | $ | 27,240 | $ | 23,132 | $ | 28,532 | ||||||||||
| Adjusted pre-tax, pre-provision net revenue (PPNR) (2) | (B-D) | 23,636 | 30,508 | 24,118 | 26,649 | 29,022 | ||||||||||||||||
| Net income/(loss) | $ | (549,381 | ) | $ | 21,225 | $ | 15,009 | $ | 13,031 | $ | 21,636 | |||||||||||
| Adj: Net securities losses/(gains) (1) | (822 | ) | 1,017 | (2,405 | ) | 31 | 484 | |||||||||||||||
| Adj: Goodwill impairment | 553,762 | - | - | - | - | |||||||||||||||||
| Adj: Net (gains) on sale of business operations and assets | - | - | (1,240 | ) | - | - | ||||||||||||||||
| Adj: Restructuring expense and other expense | - | 5,316 | 523 | 3,486 | 6 | |||||||||||||||||
| Adj: Loss from discontinued operations before income taxes | 8,635 | 2,477 | 5,114 | - | - | |||||||||||||||||
| Adj: Income taxes benefit/(expense) | (18,658 | ) | (3,611 | ) | (2,939 | ) | (533 | ) | (22 | ) | ||||||||||||
| Total adjusted income/(loss) (2) | (E) | $ | (6,464 | ) | $ | 26,424 | $ | 14,062 | $ | 16,015 | $ | 22,104 | ||||||||||
| (in millions, except per share data) | ||||||||||||||||||||||
| Total average assets | (F) | $ | 13,419 | $ | 12,660 | $ | 12,446 | $ | 12,468 | $ | 12,417 | |||||||||||
| Total average shareholders' equity | (G) | 1,675 | 1,133 | 1,150 | 1,159 | 1,174 | ||||||||||||||||
| Total average tangible shareholders' equity (2)(3) | (H) | 1,085 | 1,091 | 1,110 | 1,125 | 1,141 | ||||||||||||||||
| Total average tangible common shareholders' equity (2)(3) | (I) | 1,064 | 1,071 | 1,103 | 1,125 | 1,141 | ||||||||||||||||
| Total tangible shareholders' equity, period-end (2)(3) | (J) | 1,122 | 1,138 | 1,153 | 1,142 | 1,143 | ||||||||||||||||
| Total tangible common shareholders' equity, period-end (2)(3) | (K) | 1,101 | 1,118 | 1,153 | 1,142 | 1,143 | ||||||||||||||||
| Total tangible assets, period-end (2)(3) | (L) | 13,021 | 12,574 | 12,803 | 12,724 | 12,241 | ||||||||||||||||
| Total common shares outstanding, period-end (thousands) | (M) | 50,192 | 50,306 | 50,833 | 50,988 | 50,453 | ||||||||||||||||
| Average diluted shares outstanding (thousands) | (N) | 50,246 | 50,329 | 50,355 | 50,565 | 50,608 | ||||||||||||||||
| GAAP earnings/(loss) per common share, diluted (2) | $ | (10.93 | ) | $ | 0.42 | $ | 0.30 | $ | 0.26 | $ | 0.43 | |||||||||||
| Adjusted earnings/(loss) per common share, diluted (2) | (E/N) | (0.13 | ) | 0.53 | 0.28 | 0.32 | 0.44 | |||||||||||||||
| Tangible book value per common share, period-end (2) | (K/M) | 21.94 | 22.22 | 22.68 | 22.39 | 22.66 | ||||||||||||||||
| Total tangible shareholders' equity/total tangible assets (2) | (J/L) | 8.61 | 9.05 | 9.01 | 8.98 | 9.34 | ||||||||||||||||
| Performance ratios (4) | ||||||||||||||||||||||
| GAAP return on equity | (131.17 | )% | 7.50 | % | 5.22 | % | 4.50 | % | 7.37 | % | ||||||||||||
| Adjusted return on equity (2) | (E/G) | (1.54 | ) | 9.33 | 4.89 | 5.53 | 7.53 | |||||||||||||||
| Return on tangible common equity (2)(5) | (206.08 | ) | 8.32 | 5.85 | 4.98 | 7.92 | ||||||||||||||||
| Adjusted return on tangible common equity (2)(5) | (E+Q)/(I) | (2.05 | ) | 10.27 | 5.50 | 6.04 | 8.08 | |||||||||||||||
| GAAP return on assets | (16.38 | ) | 0.67 | 0.48 | 0.42 | 0.70 | ||||||||||||||||
| Adjusted return on assets (2) | (0.19 | ) | 0.84 | 0.45 | 0.51 | 0.71 | ||||||||||||||||
| PPNR from continuing operations/assets (2) | (15.78 | ) | 0.76 | 0.88 | 0.74 | 0.92 | ||||||||||||||||
| Adjusted PPNR/assets (2) | 0.71 | 0.97 | 0.78 | 0.85 | 0.93 | |||||||||||||||||
| Efficiency ratio (2)(6) | (D-Q)/(B+O+R) | 71.01 | 65.39 | 71.03 | 71.32 | 67.82 | ||||||||||||||||
| Net interest margin, FTE | 2.62 | 2.61 | 2.61 | 2.62 | 2.62 | |||||||||||||||||
| Supplementary data (in thousands) | ||||||||||||||||||||||
| Tax benefit on tax-credit investments (7) | (O) | $ | 1,379 | $ | 1,377 | $ | 1,334 | $ | 41 | $ | 79 | |||||||||||
| Non-interest income charge on tax-credit investments (8) | (P) | (1,097 | ) | (1,090 | ) | (971 | ) | (33 | ) | (175 | ) | |||||||||||
| Net income on tax-credit investments | (O+P) | 282 | 287 | 363 | 9 | (96 | ) | |||||||||||||||
| Intangible amortization | (Q) | $ | 1,558 | $ | 1,530 | $ | 1,513 | $ | 1,319 | $ | 1,297 | |||||||||||
| Fully taxable equivalent income adjustment | (R) | 1,580 | 1,512 | 1,485 | 1,494 | 1,660 | ||||||||||||||||
(1) Net securities losses/(gains) include the change in fair value of the Company's equity securities in compliance with the Company's adoption of ASU 2016-01.
(2) Non-GAAP financial measure.
(3) Total tangible shareholders' equity is computed by taking total shareholders' equity less the intangible assets at period-end. Total tangible assets is computed by taking intangible assets at period-end.
(4) Ratios are annualized and based on average balance sheet amounts, where applicable. Quarterly data may not sum to year-to-date data due to rounding.
(5) Adjusted return on tangible equity is computed by dividing the total adjusted income/(loss) adjusted for the tax-effected amortization of intangible assets, assuming a 27% marginal rate, by tangible equity.
(6) Efficiency ratio is computed by dividing total adjusted tangible non-interest expense by the sum of total net interest income on a fully taxable equivalent basis and total adjusted non-interest income adjusted to include tax credit benefit of tax shelter investments. The Company uses this non-GAAP measure to provide important information regarding its operational efficiency.
(7) The tax benefit is the direct reduction to the income tax provision due to tax credits and deductions generated from investments in historic rehabilitation and low-income housing.
(8) The non-interest income charge is the reduction to the tax-advantaged investments, which are incurred as the tax credits are generated.
F-9
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND SUPPLEMENTARY DATA- UNAUDITED - (F-10)
| At or for the Six Months Ended | ||||||||||
| June 30, | June 30, | |||||||||
| (in thousands) | 2020 | 2021 | ||||||||
| Total revenue from continuing operations | (A) | $ | 187,035 | $ | 198,690 | |||||
| Adj: Net securities losses (1) | 8,908 | 515 | ||||||||
| Total adjusted revenue (2) | (B) | $ | 195,943 | $ | 199,205 | |||||
| Total non-interest expense from continuing operations | (C) | $ | 695,600 | $ | 147,026 | |||||
| Less: Merger, restructuring and other expense | - | (3,492 | ) | |||||||
| Less: Goodwill impairment | (553,762 | ) | - | |||||||
| Adjusted non-interest expense (2) | (D) | $ | 141,838 | $ | 143,534 | |||||
| Pre-tax, pre-provision net revenue (PPNR) from continuing operations | (A-C) | $ | (508,565 | ) | $ | 51,664 | ||||
| Adjusted pre-tax, pre-provision net revenue (PPNR) (2) | (B-D) | 54,105 | 55,671 | |||||||
| Net income/(loss) | $ | (569,251 | ) | $ | 34,667 | |||||
| Adj: Net securities losses (1) | 8,908 | 515 | ||||||||
| Adj: Goodwill impairment | 553,762 | - | ||||||||
| Adj: Restructuring expense and other expense | - | 3,492 | ||||||||
| Adj: Loss from discontinued operations before income taxes | 19,264 | - | ||||||||
| Adj: Income taxes benefit/(expense) | (22,792 | ) | (555 | ) | ||||||
| Total adjusted income/(loss) (2) | (E) | $ | (10,109 | ) | $ | 38,119 | ||||
| (in millions, except per share data) | ||||||||||
| Total average assets | (F) | $ | 13,173 | $ | 12,442 | |||||
| Total average shareholders' equity | (G) | 1,705 | 1,166 | |||||||
| Total average tangible shareholders' equity (2)(3) | (H) | 1,110 | 1,133 | |||||||
| Total average tangible common shareholders' equity (2)(3) | (I) | 1,090 | 1,133 | |||||||
| Total tangible shareholders' equity, period-end (2)(3) | (J) | 1,122 | 1,143 | |||||||
| Total tangible common shareholders' equity, period-end (2)(3) | (K) | 1,101 | 1,143 | |||||||
| Total tangible assets, period-end (2)(3) | (L) | 13,021 | 12,241 | |||||||
| Total common shares outstanding, period-end (thousands) | (M) | 50,192 | 50,453 | |||||||
| Average diluted shares outstanding (thousands) | (N) | 50,228 | 50,588 | |||||||
| GAAP earnings/(loss) per common share, diluted (2) | $ | (11.33 | ) | $ | 0.69 | |||||
| Adjusted earnings/(loss) per common share, diluted (2) | (E/N) | (0.20 | ) | 0.75 | ||||||
| Tangible book value per common share, period-end (2) | (K/M) | 21.94 | 22.66 | |||||||
| Total tangible shareholders' equity/total tangible assets (2) | (J/L) | 8.61 | 9.34 | |||||||
| Performance ratios (4) | ||||||||||
| GAAP return on equity | (66.79 | )% | 5.95 | % | ||||||
| Adjusted return on equity (2) | (E/G) | (1.19 | ) | 6.54 | ||||||
| Return on tangible common equity (2)(5) | (104.08 | ) | 6.46 | |||||||
| Adjusted return on tangible common equity (2)(5) | (E+Q)/(I) | (1.48 | ) | 7.07 | ||||||
| GAAP return on assets | (8.67 | ) | 0.56 | |||||||
| Adjusted return on assets (2) | (0.15 | ) | 0.61 | |||||||
| PPNR from continuing operations/assets (2) | (7.72 | ) | 0.83 | |||||||
| Adjusted PPNR/assets (2) | 0.82 | 0.89 | ||||||||
| Efficiency ratio (2)(6) | (D-Q)/(B+O+R) | 68.89 | 69.60 | |||||||
| Net interest margin, FTE | 2.82 | 2.62 | ||||||||
| Supplementary data (in thousands) | ||||||||||
| Tax benefit on tax-credit investments (7) | (O) | $ | 1,987 | $ | 120 | |||||
| Non-interest income charge on tax-credit investments (8) | (P) | (1,583 | ) | (208 | ) | |||||
| Net income on tax-credit investments | (O+P) | 404 | (88 | ) | ||||||
| Intangible amortization | (Q) | $ | 3,138 | $ | 2,616 | |||||
| Fully taxable equivalent income adjustment | (R) | 3,404 | 3,154 | |||||||
(1) Net securities (gains)/losses include the change in fair value of the Company's equity securities in compliance with the Company's adoption of ASU 2016-01.
(2) Non-GAAP financial measure.
(3) Total tangible shareholders' equity is computed by taking total shareholders' equity less the intangible assets at period-end. Total tangible assets is computed by taking intangible assets at period-end.
(4) Ratios are annualized and based on average balance sheet amounts, where applicable. Quarterly data may not sum to year-to-date data due to rounding.
(5) Adjusted return on tangible equity is computed by dividing the total adjusted income/(loss) adjusted for the tax-effected amortization of intangible assets, assuming a 27% marginal rate, by tangible equity.
(6) Efficiency ratio is computed by dividing total adjusted tangible non-interest expense by the sum of total net interest income on a fully taxable equivalent basis and total adjusted non-interest income adjusted to include tax credit benefit of tax shelter investments. The Company uses this non-GAAP measure to provide important information regarding its operational efficiency.
(7) The tax benefit is the direct reduction to the income tax provision due to tax credits and deductions generated from investments in historic rehabilitation and low-income housing.
(8) The non-interest income charge is the reduction to the tax-advantaged investments, which are incurred as the tax credits are generated.
F-10