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Section 1: 8-K (8-K)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

 

FORM 8-K

 

CURRENT REPORT

 

PURSUANT TO SECTION 13 OR 15(D) OF

THE SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported): January 25, 2018

 

BERKSHIRE HILLS BANCORP, INC.

(Exact Name of Registrant as Specified in its Charter)

 

Delaware   001-15781   04-3510455

(State or Other Jurisdiction)

of Incorporation)

  (Commission File No.)  

(I.R.S. Employer

Identification No.)

 

24 North Street, Pittsfield, Massachusetts   01201
(Address of Principal Executive Offices)   (Zip Code)

 

Registrant’s telephone number, including area code: (413) 443-5601

 

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

 

Emerging growth company ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

 

 

 

 

 

Item 2.02Results of Operations and Financial Condition

 

On January 25, 2018, Berkshire Hills Bancorp, Inc. (the “Company”), the holding company for Berkshire Bank (the “Bank”), announced its financial results for the quarter ended December 31, 2017. The news release containing the financial results is included as Exhibit 99.1 and shall not be deemed “filed” for any purpose.

 

The Company will conduct a conference call/webcast on January 26, 2018 to discuss the financial results for the quarter and provide guidance about expected future results. A telephone replay of the call will be available through Friday, February 2, 2018. The webcast will be available on the Company’s website for an extended period of time.

 

Item 8.01Other Events

 

On January 25, 2018, the Company’s Board of Directors announced the declaration of a cash dividend of $0.22 per share of Company common stock and $0.44 per share of Company Series B preferred stock to shareholders of record at the close of business on February 15, 2018 and payable on March 1, 2018.

 

In addition, on January 25, 2018, the Company announced that the Company’s Annual Meeting of Shareholders (the “Annual Meeting”) is scheduled to be held on May 17, 2018 at the Crowne Plaza Hotel, One West Street, Pittsfield, Massachusetts at 10:00 a.m., local time. The Board established March 22, 2018 as the record date for the determination of the shareholders entitled to notice of, and to vote at, the Annual Meeting.

 

Item 9.01Financial Statements and Exhibits

 

(a)Financial Statements of Businesses Acquired. Not applicable.

 

(b)Pro Forma Financial Information. Not applicable.

 

(c)Shell Company Transactions. Not applicable.

 

(d)Exhibits.

 

  Exhibit No.   Description
       
  99.1   News Release dated January 25, 2018

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

 

    Berkshire Hills Bancorp, Inc.
     
     
DATE:  January 26, 2018 By: /s/ Michael P. Daly
   

Michael P. Daly

President and Chief Executive Officer

 

 

 

(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

 

Exhibit 99.1

 

 

Berkshire Hills Reports Operating Results;

Dividend Increased; Annual Meeting Announced

 

PITTSFIELD, MA, January 25, 2018. Berkshire Hills Bancorp, Inc. (NYSE: BHLB) reported that fourth quarter pre-tax income grew by 82% to $19.5 million in 2017 compared to $10.7 million in the prior year. This improvement was due to business development and the benefit of mergers, including Worcester-based Commerce Bancshares Corp. which was acquired on October 13, 2017. Net income after-tax was impacted by an $18 million non-core charge to income tax expense resulting from federal tax reform enacted near year-end. This reform is expected to benefit future earnings due to a lower statutory federal tax rate beginning in 2018. Net income after-tax totaled $55 million in 2017 compared to $59 million in 2016.

 

The tax charge noted above reduced fourth quarter earnings per share by $0.40 and resulted in a fourth quarter net loss of $0.06 per share in 2017, compared to a profit of $0.32 per share in 2016. Fourth quarter core earnings per share improved by 4% to $0.58 in 2017, from $0.56 in 2016. The measure of core earnings excludes the above tax charge and also excludes other net non-core charges primarily related to merger costs. These costs in the fourth quarter of 2017 were mostly related to the Commerce acquisition, which increased assets by $1.8 billion, or 19%, to $11.6 billion at year-end.

 

FOURTH QUARTER FINANCIAL HIGHLIGHTS (comparisons are to prior quarter unless otherwise stated):

 

  · 15% increase in net quarterly revenue to a record $116 million
  · 19% increase in total loans; 6% annualized organic increase excluding Commerce
  · 29% increase in total deposits, 4% organic increase excluding Commerce
  · 3.50% net interest margin; increased from 3.36%
  · 57.4% efficiency ratio
  · 0.21% non-performing assets/assets
  · 0.17% net loan charge-offs/average loans

 

CEO Michael Daly stated, “During a very busy quarter, our market teams delivered solid business results in our franchise. We finished the year with double digit annualized organic growth in commercial and industrial loans, which were up 70% for the year including acquired balances. Our SBA team was very busy throughout the year, moving up to 17th spot nationally in the annual SBA 7A loan count rankings as of September 30. Organic deposit growth measured 4% during the quarter, including seasonally high year-end commercial balances. The net interest margin improved to 3.50% including the benefit of increased purchased loan accretion relating to the Commerce acquisition. Including this benefit, the efficiency ratio improved to 57.4%.”

 

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“With the completion of the Commerce acquisition, we added nearly $2 billion in assets. Including the First Choice merger in December 2016, we have grown our assets by more than 30% and have crossed the $10 billion regulatory threshold to become the third largest regional bank based in New England. The Commerce merger was also the catalyst for the move of our corporate headquarters to Boston, positioning us as the largest regional banking company located there. We recruited new leadership for our Greater Boston region, and are looking forward to further opportunities to expand in this market.”

 

Mr. Daly concluded, “We’re optimistic about the economic prospects in our regions. We expect that the recent federal tax reform will lower our future statutory tax rate, leaving us more capital to provide credit support for the growth of the businesses and communities that we serve. Due to the tax reform, we also recently announced new investment initiatives in our team and in our communities, including a higher minimum wage, employee bonuses, expansion of our AMEBU training programs, and a contribution to our Foundation to fund future community support. As we’ve done in recent years, we are announcing a penny increase in our quarterly dividend reflecting our improved profitability in 2017 and our positive future outlook.”

 

DIVIDEND INCREASED

 

The Board of Directors voted to increase the quarterly cash dividend by $0.01, or 5%, to $0.22 per common share to shareholders of record at the close of business on February 15, 2018, payable on March 1, 2018. The dividend equates to a 2.3% annualized yield based on the $38.09 average closing price of Berkshire Hills Bancorp common stock during the fourth quarter. Effective on the same dates, the Board also increased the quarterly cash dividend on preferred stock to $0.44 per share for preferred stock issued in conjunction with the Commerce acquisition.

 

ANNUAL MEETING ANNOUNCED

 

The Board of Directors voted that the Annual Meeting of Shareholders will be held on May 17, 2018 at the Crowne Plaza Hotel, One West Street, Pittsfield, Massachusetts at 10:00 a.m., local time. The date of March 22, 2018 was established as the record date for the determination of the shareholders entitled to notice of, and to vote at, the Annual Meeting.

 

FINANCIAL CONDITION

 

Total assets increased by $1.8 billion to $11.6 billion during the fourth quarter of 2017, due to the Commerce acquisition. Total loans increased by $1.4 billion to $8.3 billion, including $1.2 billion added with Commerce, net of a $104 million fair value discount. Goodwill and intangible assets increased by $137 million due primarily to the Commerce loan discounts. Commercial loans increased to 61% of total loans with the Commerce addition. Excluding the acquired balances, organic loan growth was 6% annualized in the fourth quarter, including a 10% contribution from C&I loans and a 15% contribution from residential mortgages. For the year, organic loan growth was 8%, including balanced growth among the commercial, mortgage, and consumer categories. At year-end, delinquent and non-accruing loans measured 0.83% of total loans including the Commerce addition, and quarterly annualized net loan charge-offs measured 0.17% of average loans.

 

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Total deposits increased by $2.0 billion to $8.7 billion, including $1.7 billion added with Commerce. Organic deposit growth of $247 million included a $224 million seasonal increase in commercial payroll deposits. Organic deposit growth was 6% for the year. The ratio of loans/deposits decreased to 95% at year-end due to the addition of the Commerce balances.

 

Total shareholders’ equity increased during the fourth quarter by $212 million, or 16%, to $1.5 billion. This included the $229 million in stock issued for the Commerce acquisition, including $188 million of common stock and $41 million of non-voting convertible preferred stock. For the year, book value per common share increased by 5% to $32.14, and tangible book value per common share, a non-GAAP financial measure, also increased by 5% to $19.83.

 

RESULTS OF OPERATIONS

 

Most measures of revenue and expense increased over the prior quarter due to the addition of the Commerce operations after October 13, 2017. These measures increased year-over-year due to Commerce as well as the full period benefit of integrated First Choice operations. Per share earnings included the impact of shares issued as merger consideration and in the May 2017 stock offering. Non-core charges in 2017 were mostly merger-related, including First Choice and Commerce. Non-core activity during the year also included a charge on the termination of hedges and restructuring and other expense, as well as the write-down of the net deferred tax asset as a result of federal tax reform.

 

The Company recorded a loss of $3 million in the most recent quarter, including the $18 million tax expense and $11 million in net other after-tax non-core charges primarily related to the Commerce acquisition. Core income increased to a record quarterly amount of $26 million in the most recent quarter, increasing by 12% over the prior quarter. Measured as a percent of assets, GAAP results were a loss of 0.10%, whereas core return on assets measured 0.94%. The Company’s goal is to generate future improvement in this measure, with the benefit of merger efficiencies and tax changes offsetting the higher regulatory costs related to crossing the $10 billion asset regulatory threshold.

 

Quarterly net revenue increased to a record $116 million in the most recent quarter, including Commerce operations for most of the quarter. Revenue increased by $15 million, or 15%, compared to the prior quarter, primarily due to Commerce. Berkshire’s fourth quarter net interest margin improved to 3.50% including higher purchased loan accretion and other increases in earning asset yields. Purchased loan accretion contributed 0.21% to the net interest margin in the most recent quarter, compared to 0.14% in the prior quarter, when the margin was 3.36%. Total fee income decreased 2% due to seasonal factors.

 

Total non-interest expense increased by $24 million to $90 million in the fourth quarter, compared to the prior quarter. This included a $17 million increase in non-core expense, including $14 million related to the Commerce acquisition and $3 million accrued for tax reform related investments in employees and community contributions. Additional merger-related expenses are planned in 2018 as integration activities are completed. Core non-interest expense increased by $7 million to $71 million including the new Commerce operations. The Company plans to benefit from additional efficiencies related to cost saves following the completion of the Commerce integration in 2018, including the systems conversion planned for March 2018. Berkshire had full time equivalent staff totaling 1,992 at year-end 2017, including the Commerce positions which were reported at 226 as of September 30, 2017. Berkshire reported 1,788 full time equivalent staff as of that date.

 

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Fourth quarter income tax expense included the $18 million one-time net charge for the write-down of the net deferred tax assets at year-end. The charge was primarily due to the unamortized balance related to fair value discounts recorded on prior acquisitions (including Commerce), as well as the accumulated excess of loan loss provisions over charge-offs. The Company expects that the effect of the federal tax reform will be to lower its future income tax expense compared to what it would have been under the previous tax rules. The income tax rate on core income was 32% for the fourth quarter and 29% for the full year 2017. The Company recorded $0.01 per share in net benefit from its tax credit investments in each quarter in 2017, which was net of amortization charges included in non-interest income.

 

INVESTOR CONFERENCE CALL

 

Berkshire will conduct a conference call/webcast at 10:00 a.m. eastern time on Friday, January 26, 2018 to discuss the results for the quarter and provide guidance about expected future results. Participants are encouraged to pre-register for the conference call using the following link: http://dpregister.com/10115690. 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. Investors may reach the registration link and access the webcast by logging in through the investor section of the Company’s website at http://ir.berkshirebank.com. Persons may also participate at the above time by dialing 1-844-792-3726 and asking the Operator to join the Berkshire Hills Bancorp (BHLB) earnings call. A telephone replay of the call will be available through Friday, February 2, 2018 by dialing 877-344-7529 and entering access number 10115690. The webcast will be available on Berkshire's website for an extended period of time.

 

BACKGROUND

 

Berkshire Hills Bancorp is the parent of Berkshire Bank - America's Most Exciting Bank®. The Company has approximately $11.6 billion in assets and 113 full service branches in Massachusetts, New York, Connecticut, Vermont, New Jersey, and Pennsylvania providing personal and business banking, insurance, and wealth management services. The Company also offers mortgages and specialized commercial lending services in targeted national markets.

 

FORWARD LOOKING STATEMENTS

 

This document contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. There are several 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. Berkshire does not undertake any obligation to update forward-looking statements.

 

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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.

 

The Company utilizes the non-GAAP measure of core earnings in evaluating operating trends, including components for core 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, and restructuring costs. Charges related to merger and acquisition activity consist primarily of severance/benefit related expenses, contract termination costs, systems conversion costs, variable compensation expenses, and professional fees. These charges are related to the following business combinations: First Choice Bank, 44 Business Capital, financial planning assets, and Commerce. Restructuring costs generally consist of costs and losses associated with the disposition of assets and liabilities and lease terminations, including costs related to branch sales. Additionally, the Company recorded charges for hedge terminations in the first quarter of 2017 and legal settlement costs during the year.

 

Non-core 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 core income. In the fourth quarter of 2017, the Company recorded an $18 million one-time non-core charge to income tax expense representing the partial write-down of its net deferred tax assets as a consequence of federal tax reform that was enacted near year-end. In conjunction with this tax reform, the Company also announced plans for certain expenditures totaling $3.4 million representing investments in employee bonuses and charitable giving; these charges were included in other non-core expense during the quarter.

 

The efficiency ratio is adjusted for non-core 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. Of note, following systems upgrades, non-material revisions were made in the first quarter of 2017 to the calculations of the net interest margin and efficiency ratio and prior period measures were revised to include these changes.

 

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CONTACTS

 

Investor Relations Contact

 

Allison O’Rourke; Executive Vice President, Investor Relations Officer; 413-236-3149

 

Media Contact

 

Elizabeth Mach; Senior Vice President, Marketing Officer; 413-445-8390

 

TABLE
INDEX
  CONSOLIDATED UNAUDITED FINANCIAL SCHEDULES
F-1   Selected Financial Highlights
     
F-2   Balance Sheets
     
F-3   Loan and Deposit Analysis
     
F-4   Statements of Operations  
     
F-5   Statements of Operations  (Five Quarter Trend)
     
F-6   Average Yields and Costs
     
F-7   Average Balances
     
F-8   Asset Quality Analysis
     
F-9   Reconciliation of Non-GAAP Financial Measures (Five Quarter Trend) and Supplementary Data
     
F-10   Reconciliation of Non-GAAP Financial Measures (Year-to-Date) and Supplementary Data

 

 6 

 

 

 

SELECTED FINANCIAL HIGHLIGHTS - UNAUDITED - (F-1)

 

   At or for the Quarters Ended (2) 
   Dec. 31,   Sept. 30,   June 30,   March 31,   Dec. 31, 
   2017 (3)   2017   2017   2017   2016 (4) 
                     
PER SHARE DATA                         
Net earnings, diluted  $(0.06)  $0.57   $0.53   $0.44   $0.32 
Core earnings, diluted (1)   0.58    0.59    0.58    0.55    0.56 
Total book value per common share   32.14    31.78    31.37    30.77    30.65 
Tangible book value per common share (1)   19.83    21.38    20.96    18.97    18.81 
Market price at period end   36.60    38.75    35.15    36.05    36.85 
Dividends   0.21    0.21    0.21    0.21    0.20 
                          
PERFORMANCE RATIOS (5)                         
Return on assets   (0.10)%   0.95%   0.84%   0.68%   0.50%
Core return on assets (1)   0.94    0.98    0.92    0.85    0.87 
Return on equity   (0.77)   7.26    6.80    5.71    4.29 
Core return on equity (1)   7.16    7.47    7.45    7.17    7.49 
Core return on tangible common equity (1)   11.90    11.42    11.96    12.05    12.23 
Net interest margin, fully taxable equivalent (FTE) (6)   3.50    3.36    3.36    3.33    3.21 
Fee income/Net interest and fee income   25.91    29.96    32.23    30.04    24.99 
Efficiency ratio (1)   57.43    59.28    61.72    61.94    58.42 
                          
GROWTH (Year-to-date)                         
Total commercial loans (annualized)   38%   9%   13%   15%   18%
Total loans (annualized)   27    8    10    6    14 
Total deposits (annualized)   32    3    3    2    18 
Total net revenues (compared to prior year)   41    37    40    39    11 
Earnings per share (compared to prior year)   (25)   (2)   (8)   (15)   9 
Core earnings per share (compared to prior year)(1)   4    4    5    2    4 
                          
FINANCIAL DATA (in millions)                         
Total assets  $11,571   $9,767   $9,627   $9,298   $9,163 
Total earning assets   10,509    8,944    8,807    8,486    8,340 
Total securities   1,899    1,824    1,773    1,714    1,628 
Total loans   8,299    6,947    6,864    6,656    6,550 
Allowance for loan losses   52    49    47    46    44 
Total intangible assets   558    420    421    422    423 
Total deposits   8,750    6,790    6,715    6,656    6,622 
Total shareholders' equity   1,496    1,285    1,268    1,100    1,093 
Net (loss)/income   (2.8)   22.9    19.7    15.5    10.3 
Core income (1)   26.3    23.6    21.6    19.4    18.0 
                          
ASSET QUALITY AND CONDITION RATIOS                         
Net charge-offs (current quarter annualized)/average loans   0.17%   0.19%   0.20%   0.20%   0.21%
Total non-performing assets/total assets   0.21    0.23    0.25    0.27    0.24 
Allowance for loan losses/total loans   0.62    0.71    0.69    0.69    0.67 
Loans/deposits   95    102    102    100    99 
Shareholders' equity to total assets   12.93    13.15    13.17    11.83    11.93 
Tangible shareholders' equity to tangible assets (1)   8.52    9.25    9.20    7.64    7.68 

 

(1)Non-GAAP financial measure. Core measurements are non-GAAP financial measures that are adjusted to exclude net non-core charges primarily related to acquisitions and restructuring activities. See pages F-9 and F-10 for reconciliations of non-GAAP financial measures.
(2)Reconciliations of non-GAAP financial measures, including all references to core and tangible amounts, appear on pages F-9 and F-10.
(3)The Company acquired Commerce Bancshares Corp., the parent of Commerce Bank & Trust Company, on October 13, 2017.
(4)The Company acquired First Choice Bank on December 2, 2016.
(5)All performance ratios are annualized and are based on average balance sheet amounts, where applicable.
(6)Fully taxable equivalent considers the impact of tax advantaged investment securities and loans.

 

 F-1 

 

 

 

CONSOLIDATED BALANCE SHEETS - UNAUDITED - (F-2)

 

   December 31,   September 30,   December 31, 
(in thousands)  2017   2017   2016 
Assets               
Cash and due from banks  $91,122   $62,827   $71,494 
Short-term investments   157,641    29,219    41,581 
Total cash and short-term investments   248,763    92,046    113,075 
                
Trading security   12,277    12,603    13,229 
Securities available for sale, at fair value   1,426,099    1,341,013    1,209,537 
Securities held to maturity, at amortized cost   397,103    395,065    334,368 
Federal Home Loan Bank stock and other restricted securities   63,085    75,117    71,112 
Total securities   1,898,564    1,823,798    1,628,246 
                
Loans held for sale, at fair value   153,620    143,745    120,673 
                
Commercial real estate   3,264,742    2,671,237    2,616,438 
Commercial and industrial loans   1,803,939    1,254,947    1,062,038 
Residential mortgages   2,102,807    1,983,126    1,893,131 
Consumer loans   1,127,850    1,038,096    978,180 
Total loans   8,299,338    6,947,406    6,549,787 
Less: Allowance for loan losses   (51,834)   (49,004)   (43,998)
Net loans   8,247,504    6,898,402    6,505,789 
                
Premises and equipment, net   109,352    94,729    93,215 
Other real estate owned   -    288    151 
Goodwill   519,287    403,106    403,106 
Other intangible assets   38,296    17,136    19,445 
Cash surrender value of bank-owned life insurance   191,221    161,290    139,257 
Deferred tax asset, net   47,061    39,467    41,128 
Other assets   117,083    92,696    98,457 
Total assets  $11,570,751   $9,766,703   $9,162,542 
                
Liabilities and shareholders' equity               
Demand deposits  $1,667,323   $1,221,043   $1,278,875 
NOW deposits   673,891    573,607    570,583 
Money market deposits   2,776,157    1,751,190    1,781,605 
Savings deposits   741,954    670,683    657,486 
Time deposits   2,890,205    2,573,623    2,333,543 
Total deposits   8,749,530    6,790,146    6,622,092 
                
Senior borrowings   1,047,736    1,399,354    1,224,836 
Subordinated borrowings   89,339    89,295    89,161 
Total borrowings   1,137,075    1,488,649    1,313,997 
                
Other liabilities   187,882    203,381    133,155 
Total liabilities   10,074,487    8,482,176    8,069,244 
                
Total preferred shareholders' equity   40,633    -    - 
Total common shareholders' equity   1,455,631    1,284,527    1,093,298 
Total shareholders' equity   1,496,264    1,284,527    1,093,298 
Total liabilities and shareholders' equity  $11,570,751   $9,766,703   $9,162,542 
                
Net shares outstanding   45,290    40,424    35,673 

 

 F-2 

 

 

CONSOLIDATED LOAN & DEPOSIT ANALYSIS - UNAUDITED - (F-3)

LOAN ANALYSIS

 

                   Organic Annualized Growth % (1) 
(in millions)  December 31, 2017
Balance
   Acquired Commerce
Balances
   September 30, 2017
Balance
   December 31, 2016
Balance
   Quarter ended
December 31, 2017
   Year to Date 
                         
Commercial real estate - construction  $266   $64   $284   $288    (114)%   (29)%
Commercial real estate - other   2,998    510    2,387    2,329    17    7 
Total commercial real estate   3,264    574    2,671    2,617    3    3 
Commercial and industrial loans   1,804    519    1,255    1,062    10    21 
Total commercial loans   5,068    1,093    3,926    3,679    5    8 
                               
Total residential mortgages   2,103    48    1,983    1,893    15    9 
                               
Home equity   410    26    386    394    (2)   (3)
Auto and other   718    74    652    584    (5)   10 
Total consumer loans   1,128    100    1,038    978    (4)   5 
Total loans (2)  $8,299   $1,241   $6,947   $6,550    6%   8%

 

(1) Non-GAAP financial measure.

(2) Acquired Commerce loans are as of October 13, 2017.

 

DEPOSIT ANALYSIS

 

                   Organic Annualized Growth % (1) 
(in millions)  December 31, 2017
Balance
   Acquired Commerce
Balances
   September 30, 2017
Balance
   December 31, 2016
Balance
   Quarter ended
December 31, 2017
   Year to Date 
Demand  $1,667   $456   $1,221   $1,279    (3)%   (5)%
NOW   674    53    574    571    33    9 
Money market   2,776    849    1,751    1,782    40    8 
Savings   742    82    671    657    (7)   0 
Time deposits   2,890    272    2,573    2,333    7    12 
Total deposits (2)  $8,749   $1,712   $6,790   $6,622    15%   6%

 

(1) Non-GAAP financial measure.

(2) Acquired Commerce deposits are as of October 13, 2017.

 

 F-3 

 

 

 

CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED - (F-4)

 

   Three Months Ended   Years Ended 
   December 31,   December 31, 
(in thousands, except per share data)  2017   2016   2017   2016 
Interest and dividend income                    
Loans  $91,149   $62,884   $308,099   $242,600 
Securities and other   14,674    9,550    52,159    37,839 
Total interest and dividend income   105,823    72,434    360,258    280,439 
Interest expense                    
Deposits   13,802    8,556    43,855    30,883 
Borrowings   5,655    4,720    21,608    17,289 
Total interest expense   19,457    13,276    65,463    48,172 
Net interest income   86,366    59,158    294,795    232,267 
Non-interest income                    
Mortgage banking originations   11,918    3,537    54,251    16,694 
Loan related income   5,866    5,648    21,401    7,555 
Deposit related fees   7,871    6,285    27,165    24,963 
Insurance commissions and fees   2,284    2,323    10,589    10,477 
Wealth management fees   2,268    1,911    9,395    8,917 
Total fee income   30,207    19,704    122,801    68,606 
Other   (939)   (2,849)   (3,377)   (3,289)
Securities gains (losses), net   30    (652)   12,598    (551)
Gain on sale of business operations, net   -    522    296    1,085 
Loss on termination of hedges   -    -    (6,629)   - 
Total non-interest income   29,298    16,725    125,689    65,851 
Total net revenue   115,664    75,883    420,484    298,118 
Provision for loan losses   6,141    4,100    21,025    17,362 
Non-interest expense                    
Compensation and benefits   42,220    28,103    152,979    104,600 
Occupancy and equipment   9,451    7,320    35,422    27,220 
Technology and communications   6,286    5,310    25,900    19,883 
Marketing and promotion   4,573    1,080    11,877    3,161 
Professional services   2,277    1,666    9,165    6,199 
FDIC premiums and assessments   1,920    1,422    6,457    5,066 
Other real estate owned and foreclosures   9    (11)   44    691 
Amortization of intangible assets   1,183    572    3,493    2,927 
Merger, restructuring and other expense   15,553    11,633    31,558    15,461 
Other   6,569    3,995    22,815    18,094 
Total non-interest expense   90,041    61,090    299,710    203,302 
                     
Income before income taxes   19,482    10,693    99,749    77,454 
Income tax expense   22,292    362    44,502    18,784 
Net (loss)/income  $(2,810)  $10,331   $55,247   $58,670 
Preferred stock dividend   219    -    219    - 
(Loss)/income available to common shareholders  $(3,029)  $10,331   $55,028   $58,670 
                     
Earnings per common share:                    
Basic  $(0.06)  $0.32   $1.41   $1.89 
Diluted  $(0.06)  $0.32   $1.39   $1.88 
                     
Weighted average shares outstanding:                    
Basic   44,215    32,185    39,228    30,988 
Diluted   44,215    32,381    39,620    31,167 

 

 F-4 

 

 

 

CONSOLIDATED STATEMENTS OF OPERATIONS (5 Quarter Trend) - UNAUDITED - (F-5)

 

   Dec. 31,   Sept. 30,   June 30,   March 31,   Dec. 31, 
(in thousands, except per share data)  2017   2017   2017   2017   2016 
Interest and dividend income                         
Loans  $91,149   $76,024   $71,983   $68,943   $62,884 
Securities and other   14,674    13,036    12,683    11,766    9,550 
Total interest and dividend income   105,823    89,060    84,666    80,709    72,434 
Interest expense                         
Deposits   13,802    10,984    9,971    9,098    8,556 
Borrowings   5,655    6,078    5,150    4,725    4,720 
Total interest expense   19,457    17,062    15,121    13,823    13,276 
Net interest income   86,366    71,998    69,545    66,886    59,158 
Non-interest income                         
Mortgage banking originations   11,918    13,374    16,281    12,678    3,537 
Loan related income   5,866    6,081    5,275    4,179    5,648 
Deposit related fees   7,871    6,445    6,645    6,204    6,285 
Insurance commissions and fees   2,284    2,581    2,588    3,136    2,323 
Wealth management fees   2,268    2,315    2,286    2,526    1,911 
Total fee income   30,207    30,796    33,075    28,723    19,704 
Other   (939)   (2,255)   (276)   93    (2,849)
Securities gains (losses), net   30    (1)   (1)   12,570    (652)
Gain on sale of business operations, net   -    296    -    -    522 
Loss on termination of hedges   -    -    -    (6,629)   - 
Total non-interest income   29,298    28,836    32,798    34,757    16,725 
Total net revenue   115,664    100,834    102,343    101,643    75,883 
Provision for loan losses   6,141    4,900    4,889    5,095    4,100 
Non-interest expense                         
Compensation and benefits   42,220    37,643    36,997    36,119    28,103 
Occupancy and equipment   9,451    8,267    8,678    9,026    7,320 
Technology and communications   6,286    6,644    6,883    6,087    5,310 
Marketing and promotion   4,573    2,128    3,177    1,999    1,080 
Professional services   2,277    2,247    2,190    2,451    1,666 
FDIC premiums and assessments   1,920    1,651    1,588    1,298    1,422 
Other real estate owned and foreclosures   9    (23)   30    28    (11)
Amortization of intangible assets   1,183    739    770    801    572 
Merger, restructuring and other expense   15,553    1,420    2,903    11,682    11,633 
Other   6,569    5,104    6,307    4,835    3,995 
Total non-interest expense   90,041    65,820    69,523    74,326    61,090 
                          
Income before income taxes   19,482    30,114    27,931    22,222    10,693 
Income tax expense   22,292    7,211    8,237    6,762    362 
Net (loss)/income  $(2,810)  $22,903   $19,694   $15,460   $10,331 
Preferred stock dividend   219    -    -    -    - 
(Loss)/income available to common shareholders  $(3,029)  $22,903   $19,694   $15,460   $10,331 
                          
                          
Earnings per common share:                         
Basic  $(0.06)  $0.57   $0.53   $0.44   $0.32 
Diluted  $(0.06)  $0.57   $0.53   $0.44   $0.32 
                          
Weighted average shares outstanding:                         
Basic   44,215    39,984    37,324    35,280    32,185 
Diluted   44,215    40,145    37,474    35,452    32,381 

 

 F-5 

 

 

 

AVERAGE YIELDS AND COSTS (Fully Taxable Equivalent - Annualized) - UNAUDITED - (F-6)

 

   Quarters Ended 
   Dec. 31,   Sept. 30,   June 30,   March 31,   Dec. 31, 
   2017   2017   2017   2017   2016 
                     
Earning assets                         
Loans:                         
Commercial real estate   4.73%   4.64%   4.41%   4.58%   4.17%
Commercial and industrial loans   5.25    5.09    5.30    4.86    4.88 
Residential mortgages   3.76    3.68    3.62    3.56    3.57 
Consumer loans   3.94    3.88    3.81    3.62    3.44 
Total loans   4.47    4.33    4.25    4.19    4.00 
Securities   3.55    3.43    3.45    3.38    3.58 
Short-term investments and loans held for sale   2.90    3.40    3.07    2.40    2.13 
Total earning assets   4.27    4.13    4.07    4.00    3.91 
                          
Funding liabilities                         
Deposits:                         
NOW   0.27    0.26    0.23    0.22    0.16 
Money market   0.66    0.57    0.54    0.52    0.48 
Savings   0.14    0.14    0.14    0.13    0.12 
Time   1.25    1.20    1.13    1.08    1.14 
Total interest-bearing deposits   0.82    0.78    0.73    0.69    0.69 
Borrowings   1.81    1.65    1.46    1.38    1.63 
Total interest-bearing liabilities   0.98    0.96    0.88    0.83    0.87 
                          
Net interest spread   3.29    3.17    3.19    3.17    3.04 
Net interest margin (1)   3.50    3.36    3.36    3.33    3.21 
                          
Cost of funds (2)   0.81    0.82    0.75    0.70    0.73 
Cost of deposits   0.66    0.64    0.60    0.56    0.56 

 

 

(1)The effect of purchased loan accretion on the quarterly net interest margin was an increase in all quarters, which is shown sequentially as follows beginning with the most recent quarter and ending with the earliest quarter:  0.21%, 0.14%, 0.12%, 0.18%, 0.10%. See page F-7 for purchased loan accretion.
(2)Cost of funds includes all deposits and borrowings.

 

 F-6 

 

 

 

AVERAGE BALANCES - UNAUDITED - (F-7)

 

   Quarters Ended 
   Dec. 31,   Sept. 30,   June 30,   March 31,   Dec. 31, 
(in thousands)  2017   2017   2017   2017   2016 
Assets                         
Loans                         
Commercial real estate  $3,161,902   $2,669,558   $2,691,804   $2,631,281   $2,442,515 
Commercial and industrial loans   1,645,719    1,183,980    1,130,384    1,072,716    998,543 
Residential mortgages   2,081,548    1,977,538    1,871,329    1,906,457    1,833,530 
Consumer loans   1,123,683    1,030,032    996,488    978,683    936,957 
Total loans (1)   8,012,852    6,861,108    6,690,005    6,589,137    6,211,545 
Securities (2)   1,921,724    1,779,379    1,701,443    1,625,769    1,255,207 
Short-term investments and loans held for sale   146,101    167,724    148,276    118,537    83,057 
Total earning assets   10,080,677    8,808,211    8,539,724    8,333,443    7,549,809 
Goodwill and other intangible assets   533,157    420,853    421,601    422,331    362,641 
Other assets   516,802    402,188    369,317    388,211    363,248 
Total assets  $11,130,636   $9,631,252   $9,330,642   $9,143,985   $8,275,698 
                          
Liabilities and shareholders' equity                         
Deposits                         
NOW  $644,890   $570,864   $572,688   $574,799   $499,852 
Money market   2,371,203    1,768,108    1,794,693    1,804,738    1,612,160 
Savings   733,157    669,690    667,863    648,839    620,092 
Time   2,906,423    2,587,702    2,472,990    2,351,183    2,171,325 
Total interest-bearing deposits   6,655,673    5,596,364    5,508,234    5,379,559    4,903,429 
Borrowings   1,229,781    1,445,700    1,398,653    1,374,620    1,144,846 
Total interest-bearing liabilities   7,885,454    7,042,064    6,906,887    6,754,179    6,048,275 
Non-interest-bearing demand deposits   1,648,894    1,196,451    1,155,533    1,178,790    1,178,308 
Other liabilities   127,562    131,003    110,367    128,573    85,951 
Total liabilities   9,661,910    8,369,518    8,172,787    8,061,542    7,312,534 
                          
Total preferred shareholders' equity   34,892    -    -    -    - 
Total common shareholders' equity   1,433,834   1,261,734    1,157,855    1,082,443    963,164 
Total shareholders' equity   1,468,726    1,261,734    1,157,855    1,082,443    963,164 
Total liabilities and shareholders' equity  $11,130,636   $9,631,252   $9,330,642   $9,143,985   $8,275,698 
                          
Supplementary data                         
Total non-maturity deposits  $5,398,144   $4,205,113   $4,190,777   $4,207,166   $3,910,412 
Total deposits   8,304,567    6,792,815    6,663,767    6,558,349    6,081,737 
Fully taxable equivalent income adjustment   3,122    2,950    2,644    2,511    2,228 
Purchased loan accretion   5,507    3,066    2,550    3,687    1,886 
Total average tangible equity (3)   935,569    840,881    736,254    660,112    600,523 

 

 

(1) Total loans include non-accruing loans.

(2) Average balances for securities available-for-sale are based on amortized cost.

(3) See page F-9 for details on the calculation of total average tangible equity.

 

 F-7 

 

 

 

ASSET QUALITY ANALYSIS - UNAUDITED - (F-8)

  

   At or for the Quarters Ended 
   Dec. 31,   Sept. 30,   June 30,   March 31,   Dec. 31, 
(in thousands)  2017   2017   2017   2017   2016 
NON-PERFORMING ASSETS                         
Non-accruing loans:                         
Commercial real estate  $7,266   $5,228   $7,587   $7,718   $5,883 
Commercial and industrial loans   7,311    9,681    8,387    8,327    7,523 
Residential mortgages   2,883    3,092    3,245    3,971    3,795 
Consumer loans   5,438    4,350    4,977    5,109    5,039 
Total non-accruing loans   22,898    22,351    24,196    25,125    22,240 
Other real estate owned   -    288    279    71    151 
Repossessed assets   1,147    -    -    -    - 
Total non-performing assets  $24,045   $22,639   $24,475   $25,196   $22,391 
                          
Total non-accruing loans/total loans   0.28%   0.32%   0.35%   0.38%   0.34%
Total non-performing assets/total assets   0.21%   0.23%   0.25%   0.27%   0.24%
                          
PROVISION AND ALLOWANCE FOR LOAN LOSSES                         
Balance at beginning of period  $49,004   $47,359   $45,804   $43,998   $43,105 
Charged-off loans   (3,734)   (3,796)   (3,431)   (3,623)   (3,488)
Recoveries on charged-off loans   423    541    97    334    281 
Net loans charged-off   (3,311)   (3,255)   (3,334)   (3,289)   (3,207)
Provision for loan losses   6,141    4,900    4,889    5,095    4,100 
Balance at end of period  $51,834   $49,004   $47,359   $45,804   $43,998 
                          
Allowance for loan losses/total loans   0.62%   0.71%   0.69%   0.69%   0.67%
Allowance for loan losses/non-accruing loans   226%   219%   196%   182%   198%
                          
NET LOAN CHARGE-OFFS                         
Commercial real estate  $(881)  $(1,425)  $(1,474)  $(633)  $(676)
Commercial and industrial loans   (960)   (573)   (625)   (1,634)   (1,148)
Residential mortgages   (759)   130    (337)   (324)   (768)
Home equity   (123)   (634)   (268)   (95)   (47)
Auto and other consumer   (588)   (753)   (630)   (603)   (568)
Total, net  $(3,311)  $(3,255)  $(3,334)  $(3,289)  $(3,207)
                          
Net charge-offs (QTD annualized)/average loans   0.17%   0.19%   0.20%   0.20%   0.21%
Net charge-offs (YTD annualized)/average loans   0.19%   0.20%   0.20%   0.20%   0.21%
                          
DELINQUENT AND NON-ACCRUING LOANS/TOTAL LOANS                         
30-89 Days delinquent   0.35%   0.25%   0.23%   0.24%   0.35%
90+ Days delinquent and still accruing   0.20%   0.17%   0.12%   0.16%   0.15%
Total accruing delinquent loans   0.55%   0.42%   0.35%   0.40%   0.50%
Non-accruing loans   0.28%   0.32%   0.35%   0.38%   0.34%
Total delinquent and non-accruing loans   0.83%   0.74%   0.70%   0.78%   0.84%

 

 F-8 

 

 

 

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND SUPPLEMENTARY DATA- UNAUDITED - (F-9)

 

      At or for the Quarters Ended 
      Dec. 31,   Sept. 30,   June 30,   March 31,   Dec. 31, 
(in thousands)     2017   2017   2017   2017   2016 
Net (loss)/income     $(2,810)  $22,903   $19,694   $15,460   $10,331 
Adj: Net securities (gains)/losses      (30)   1    1    (12,570)   652 
Adj: Loss on termination of hedges      -    -    -    6,629    - 
Adj: Net (gains) on sale of business operations      -    (296)   -    -    (522)
Adj: Merger and acquisition expense      15,553    1,110    2,266    5,947    10,820 
Adj: Restructuring expense and other expense      -    310    637    5,735    1,113 
Adj: Employee and community investment      3,400    -    -    -    - 
Adj: Deferred tax asset impairment      18,145    -    -    -    - 
Adj: Income taxes      (7,963)   (474)   (1,039)   (1,801)   (4,373)
Total core income (4)  (A)  $26,295   $23,554   $21,559   $19,400   $18,021 
                             
Total revenue     $115,664   $100,834   $102,343   $101,643   $75,883 
Adj: Net securities losses/(gains)      (30)   1    1    (12,570)   652 
Adj: Net (gains) on sale of business operations      -    (296)   -    -    (522)
Adj: Loss on termination of hedges      -    -    -    6,629    - 
Total core revenue (4)  (B)  $115,634   $100,539   $102,344   $95,702   $76,013 
                             
Total non-interest expense     $90,041   $65,820   $69,523   $74,326   $61,090 
Less: Merger, restructuring and other expense (see above)      (15,553)   (1,420)   (2,903)   (11,682)   (11,933)
Less: Employee and community investment      (3,400)   -    -    -    - 
Core non-interest expense (4)  (C)  $71,088   $64,400   $66,620   $62,644   $49,157 
                             
(in millions, except per share data)                            
Total average assets  (D)  $11,131   $9,631   $9,331   $9,144   $8,276 
Total average shareholders' equity  (E)   1,469    1,262    1,158    1,082    963 
Total average tangible shareholders' equity (4)  (F)   936    841    736    660    601 
Total average tangible common shareholders' equity (4)  (G)   901    841    736    660    601 
Total tangible shareholders' equity, period-end (1)(4)  (H)   939    864    847    678    671 
Total tangible common shareholders' equity, period-end (1)(4)  (I)   898    864    847    678    671 
Total tangible assets, period-end (1)(4)  (J)   11,013    9,346    9,206    8,876    8,740 
                             
Total common shares outstanding, period-end (thousands)  (K)   45,290    40,424    40,428    35,729    35,673 
Average diluted shares outstanding (thousands)  (L)   45,295    40,145    37,474    35,452    32,381 
                             
Core earnings per share, diluted (4)  (A/L)  $0.58   $0.59   $0.58   $0.55   $0.56 
Tangible book value per common share, period-end (4)  (I/K)   19.83    21.38    20.96    18.97    18.81 
Total tangible shareholders' equity/total tangible assets (4)  (H)/(J)   8.53    9.25    9.20    7.64    7.68 
                             
Performance ratios (2)                            
GAAP return on assets      (0.10)%   0.95%   0.84%   0.68%   0.50%
Core return on assets (4)  (A/D)   0.94    0.98    0.92    0.85    0.87 
GAAP return on equity      (0.77)   7.26    6.80    5.71    4.29 
Core return on equity (4)  (A/E)   7.16    7.47    7.45    7.17    7.49 
Core return on tangible common equity (3)(4)  (A+O)/(G)   11.90    11.42    11.96    12.05    12.23 
Efficiency ratio (4)(5)  (C-O)/(B+M+P)   57.43    59.28    61.72    61.94    58.42 
Net interest margin      3.50    3.36    3.36    3.33    3.21 
                             
Supplementary data (in thousands)                            
Tax benefit on tax-credit investments (6)  (M)  $2,957   $3,905   $1,696   $1,624   $4,918 
Non-interest income charge on tax-credit investments (7)  (N)   (2,564)   (3,347)   (1,453)   (1,329)   (4,428)
Net income on tax-credit investments  (M+N)   393    558    243    295    490 
                             
Intangible amortization  (O)  $1,183   $739   $770   $801   $572 
Fully taxable equivalent income adjustment  (P)   3,122    2,950    2,644    2,511    2,228 

 

 

(1)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 total assets less the intangible assets at period-end.
(2)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.
(3)Core return on tangible equity is computed by dividing the total core income adjusted for the tax-effected amortization of intangible assets, assuming a 40% marginal rate, by tangible equity.
(4)Non-GAAP financial measure.
(5)Efficiency ratio is computed by dividing total core tangible non-interest expense by the sum of total net interest income on a fully taxable equivalent basis and total core 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.
(6)The tax benefit is the direct reduction to the income tax provision due to tax credits and deductions generated from investments in historic rehabilitation, low-income housing, new market projects, and renewable energy projects.
(7)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 Years Ended 
      December 31,   December 31, 
(Dollars in thousands)     2017   2016 
Net (loss)/income     $55,247   $58,670 
Adj: Net securities (gains)/losses      (12,598)   551 
Adj: Loss on termination of hedges      6,629    - 
Adj: Net (gains) on sale of business operations      (296)   (1,085)
Adj: Merger and acquisition expenses      24,876    13,501 
Adj: Restructuring expense and other      6,682    2,260 
Adj: Employee and community investment      3,400    - 
Adj: Deferred tax asset impairment      18,145    - 
Adj: Income taxes      (11,277)   (5,455)
Total core income (4)  (A)  $90,808   $68,442 
              
Total revenue     $420,484   $298,118 
Adj: Net securities (gains)      (12,598)   551 
Adj: Net (gains) on sale of business operations      (296)   (1,085)
Adj: Loss on termination of hedges      6,629    - 
Total core revenue (4)  (B)  $414,219   $297,584 
Total non-interest expense     $299,710   $203,302 
Less: Merger, restructuring and other expense (see above)      (31,558)   (15,761)
Less: Employee and community investment      (3,400)   - 
Core non-interest expense (4)  (C)  $264,752   $187,541 
              
(in millions, except per share data)             
Total average assets  (D)  $9,809   $7,958 
Total average shareholders' equity  (E)   1,243    911 
Total average tangible shareholders' equity (4)  (F)   793    563 
Total average tangible common shareholders' equity (4)  (G)   784    563 
Total tangible shareholders' equity, period-end (1)(4)  (H)   939    671 
Total tangible common shareholders' equity, period-end (1)(4)  (I)   898    671 
Total tangible assets, period-end (1)(4)  (J)   11,013    8,740 
Total common shares outstanding, period-end (thousands)   (K)   45,290    35,673 
Average diluted shares outstanding (thousands)  (L)   39,620    31,167 
Core earnings per common share, diluted (4)  (A/L)  $2.29   $2.20 
Tangible book value per common share, period-end (4)  (I/K)   19.83    18.81 
Total tangible shareholders' equity/total tangible assets (4)  (H)/(J)   8.53    7.68 
              
Performance ratios (2)             
GAAP return on assets      0.56%   0.74%
Core return on assets (4)  (A/D)   0.93    0.86 
GAAP return on equity      4.45    6.44 
Core return on equity (4)  (A/E)   7.31    7.51 
Core return on tangible common equity (3)(4)  (A+O)/(G)   11.82    12.47 
Efficiency ratio (4)(5)  (C-O)/(B+M+P)   59.97    58.71 
Net interest margin      3.40    3.28 
              
Supplementary data             
Tax benefit on tax-credit investments (6)  (M)  $10,182   $11,134 
Non-interest income charge on tax-credit investments (7)  (N)   (8,693)   (8,993)
Net income on tax-credit investments  (M+N)   1,489    2,143 
              
Intangible amortization  (O)   3,493    2,927 
Fully taxable equivalent income adjustment  (P)   11,227    5,742 

 

 

(1)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 total assets less the intangible assets at period-end.
(2)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.
(3)Core return on tangible equity is computed by dividing the total core income adjusted for the tax-effected amortization of intangible assets, assuming a 40% marginal rate, by tangible equity.
(4)Non-GAAP financial measure.
(5)Efficiency ratio is computed by dividing total core tangible non-interest expense by the sum of total net interest income on a fully taxable equivalent basis and total core 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.
(6)The tax benefit is the direct reduction to the income tax provision due to tax credits and deductions generated from investments in historic rehabilitation, low-income housing, new market projects, and renewable energy.
(7)The non-interest income charge is the reduction to the tax-advantaged investments, which are incurred as the tax credits are generated.

 

 F-10 

 

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