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Section 1: 8-K (FORM 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 23, 2019

 

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.)

 

60 State Street, Boston, Massachusetts   01209
(Address of Principal Executive Offices)   (Zip Code)

 

Registrant’s telephone number, including area code: (800) 773-5601, ext. 133773

 

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 23, 2019, Berkshire Hills Bancorp, Inc. (the “Company”), the holding company for Berkshire Bank (the “Bank”), announced its financial results for the quarter ended December 31, 2018. 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 24, 2019 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 January 31, 2019. The webcast will be available on the Company’s website for an extended period of time.

 

Item 8.01Other Events

 

On January 23, 2019, the Company’s Board of Directors announced the declaration of a cash dividend of $0.23 per share of Company common stock and $0.46 per share of Company Series B preferred stock to shareholders of record at the close of business on February 14, 2019 and payable on February 28, 2019.

 

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 23, 2019

 

 

 

 

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 24, 2019 By: /s/ Richard M. Marotta  
   

Richard M. Marotta

President and Chief Executive Officer

 

 

 

 

(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit 99.1

 

 

Berkshire Hills Reports Fourth Quarter Results;

 

Increases Dividend 5%

 

BOSTON, January 23, 2019 - Berkshire Hills Bancorp, Inc. (NYSE: BHLB) reported GAAP net income of $14 million, or $0.31 per common share in the fourth quarter of 2018. The non-GAAP measure of core earnings totaled $29 million, or $0.63 per share, during this period. Both GAAP and core EPS totaled $0.70 in the prior quarter. The benefit of higher net interest income in the fourth quarter was offset by lower fee income and higher expense. Core EPS is net of non-core charges which totaled $0.32 per share after tax in the fourth quarter and included merger related expenses and other items, including costs related to the restructuring of the Company’s banking systems provider relationships.

 

FOURTH QUARTER FINANCIAL HIGHLIGHTS (balance sheet growth is compared to prior quarter-end):

 

·2% loan and deposit growth
·3.41% net interest margin
·60.3% efficiency ratio
·0.17% net loan charge-offs/average loans
·0.28% non-performing assets/assets

 

CEO Richard Marotta stated, “Core earnings for the year were in line with our original plan, and fourth quarter core earnings also met our expectations before the impact of the government shutdown on SBA related fee revenue. During 2018, our teams made great strides integrating our Eastern-Massachusetts acquisition and developing organic business across our footprint. Loan growth was consistent throughout the year, and deposit balances increased with the benefit of higher activity in the fourth quarter. Our internal capital generation supported our balance sheet growth, and our credit performance and asset quality remain strong.”

 

Mr. Marotta added, “In December, we announced an agreement to acquire SI Financial, which adds a solid deposit franchise in southeastern New England, and complements our operations in Springfield, Worcester, and Hartford. We’re working expeditiously to complete this merger by mid-year 2019 with a goal of completing the integration later in the year to achieve future targeted accretive benefits of increased scale and a combined pro forma asset base of nearly $14 billion. We completed a technology project in the fourth quarter, and restructured our banking systems provider relationships which will benefit our long term competitive profile. In recognition of the year’s progress, our Board approved a 5% dividend increase effective with our next dividend.”

 

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Mr. Marotta concluded “Our Berkshire teams are moving forward together, supported by a strong culture. Our corporate responsibility initiatives in 2018 included increasing our minimum wage to $15 per hour, formalization of equal pay standards, naming a Corporate Social Responsibility Officer, and initiating a diversity and inclusion program which is augmented by our Boston headquarters location. We’re committed to a long-term focus and judicious business management to deliver on our franchise investment and the expectations of our constituents.”

 

DIVIDEND INCREASED

 

The Board of Directors voted to increase the quarterly cash dividend by $0.01, or 5%, to $0.23 per common share to shareholders of record at the close of business on February 14, 2019, payable on February 28, 2019. The dividend equates to a 3.4% annualized yield based on the $26.97 closing price of Berkshire Hills Bancorp at year-end 2018. Effective on the same dates, the Board also increased the quarterly cash dividend on preferred stock by 5% to $0.46 per share.

 

FINANCIAL CONDITION

 

Total assets increased to $12.2 billion in the fourth quarter, resulting from 2% growth in commercial loans and residential mortgages. Commercial loan growth was concentrated in Central and Eastern Massachusetts, together with higher specialty lending and asset based lending balances. Mortgage growth was based on originations in Eastern Massachusetts in support of the Bank’s expansion. Deposits increased by 2% including seasonally higher year-end activity. Payroll service related balances increased by $108 million, and accounted for most of the shift between NOW and money market accounts. The average cost of deposits was 1.07% in the fourth quarter, increasing by 0.11% quarter-over-quarter, in line with the Company’s expectations. Liquidity and capital metrics were little changed in the fourth quarter. The year-end ratio of loans/deposits was 101%. The year-end 2018 equity/assets ratio measured 12.7% and tangible equity/tangible assets measured 8.6%. Book value per common share increased in 2018 by 4% to $33.30, while the non-GAAP measure of tangible book value per common share improved by 7% to $21.15.

 

RESULTS OF OPERATIONS

 

GAAP earnings per share decreased to $0.31 in the fourth quarter, compared to $0.70 in the prior quarter. Net non-core charges totaled $19 million, or $0.32 per share after-tax, in the fourth quarter. This included $8 million in expense related to the restructuring of the Company’s banking systems vendor relationships to improve the breadth, flexibility, and scalability of these systems. This charge is expected to be earned back in less than three years, including benefits related to merger integration costs. Non-core charges in the fourth quarter included $3 million in merger related expenses, a $3 million accrued expense related to a legal settlement, and a $3 million charge to non-interest income due to a reduction in the carrying value of equity securities which are marked-to-market quarterly. Other non-core charges included a $1.5 million expense related to the CEO transition, consisting of a payout pursuant to a resignation and separation agreement, net of the reversal of accrued conditional benefits which were forfeited as part of this agreement.

 

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Core earnings per share decreased to $0.63 in the fourth quarter from $0.70 in the prior quarter, reflecting a $1 million decrease in revenue and a $3 million increase in core expense. Net interest income increased by $4 million quarter-over-quarter, including the benefit of a 2% increase in average earning assets and an increase in the net interest margin to 3.41% from 3.32%. The net interest margin includes purchased loan accretion, which varies each quarter primarily due to the impact of recoveries of purchased credit impaired loans. This accretion contributed 0.30% to the fourth quarter 2018 margin, compared to 0.17% in the prior quarter. Rising funding costs resulted in a 0.04% reduction in the margin before the impact of purchased loan accretion. The cost of funds increased by 0.15% due to Federal Reserve Bank interest rate hikes and increased average utilization of higher cost borrowings.

 

Fourth quarter fee income decreased by $6 million quarter-over-quarter, with the decrease split between mortgage banking revenue and SBA loan sale gains included in loan related income. These reductions reflected market conditions, including lower volumes and tighter margins, as well as seasonal factors. The SBA decrease included $1 million in gains related to loans that could not be processed for sale due to the partial federal government shutdown.

 

The fourth quarter loan loss provision increased quarter-over-quarter, adding to the loan loss allowance concurrent with loan growth during the quarter. The provision exceeded net loan charge-offs, which measured 0.17% of average loans, and the allowance increased to 0.68% of total loans. Charge-offs, delinquencies, and non-accruals all decreased compared to the prior quarter, and remain at favorable levels.

 

GAAP non-interest expense increased by $19 million quarter-over-quarter, including the above mentioned non-core expenses. Core non-interest expense increased by $3 million quarter-over-quarter, including higher compensation expense and professional fees in support of current initiatives. Total full-time equivalent staff decreased to 1,916 positions at year-end, from 1,992 positions at the start of the year, primarily due to volume related reductions in mortgage banking staff. The GAAP effective income tax rate was 19% for the fourth quarter and 21% for the year 2018. The core effective tax rate for the year was also 21%.

 

INVESTOR CONFERENCE CALL

 

Berkshire will conduct a conference call/webcast at 10:00 a.m. eastern time on Thursday, January 24, 2019 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/10127662. 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 http://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. A telephone replay of the call will be available through Thursday, January 31, 2019 by dialing 877-344-7529 and entering access number 10127662.  The webcast will be available on Berkshire's website for an extended period of time.

 

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BACKGROUND

 

Berkshire Hills Bancorp is the parent of Berkshire Bank, which is recognized for its entrepreneurial approach, relationship customer experience and distinctive culture. The Company has approximately $12.2 billion in assets and 115 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. Berkshire has a pending agreement to acquire SI Financial Group, Inc., the parent of Savings Institute Bank & Trust Company, a $1.6 billion bank with 23 branches in eastern Connecticut and southern Rhode Island.

 

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.

 

ADDITIONAL INFORMATION AND WHERE TO FIND IT

 

In connection with the proposed merger, Berkshire will file with the Securities and Exchange Commission ("SEC") a Registration Statement on Form S-4 that will include a Proxy Statement of SI Financial Group (“SIFI”) and a Prospectus of Berkshire, as well as other relevant documents concerning the proposed merger. Before making any voting or investment decision, investors and security holders of SIFI and Berkshire are urged to carefully read the entire registration statement and Proxy Statement/Prospectus, when they become available, as well as any amendments or supplements to these documents, because they will contain important information about the proposed transaction. A free copy of the Registration Statement and Proxy Statement/Prospectus, as well as other filings containing information about Berkshire and SIFI, when they become available, may be obtained at the SEC's Internet site (www.sec.gov). Copies of documents filed by Berkshire with the SEC may also be obtained, free of charge, from Berkshire's website at ir.berkshirebank.com or by contacting Erin Duggan at 413-236-3773.  Copies of the documents filed by SIFI with the SEC may also be obtained, free of charge, from SIFI's website at www.mysifi.com or by contacting Rheo Brouillard at 860-456-6540.

 

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PARTICIPANTS IN SOLICITATION

 

Berkshire and SIFI and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the stockholders of SIFI in connection with the proposed merger. Information about the directors and executive officers of Berkshire is set forth in the proxy statement for Berkshire's 2018 annual meeting of stockholders, as filed with the SEC on a Schedule 14A on April 6, 2018. Information about the directors and executive officers of SIFI is set forth in the proxy statement for SIFI's 2018 annual meeting of stockholders, as filed with the SEC on a Schedule 14A on March 29, 2018.   Additional information regarding the interests of those participants and other persons who may be deemed participants in the transaction and a description of their direct and indirect interests, by security holdings or otherwise, may be obtained by reading the Proxy Statement/Prospectus and other relevant documents regarding the proposed merger to be filed with the SEC (when they become available). Free copies of these documents may be obtained as described in the preceding paragraph.

 

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. Securities gains/losses include unrealized gains/losses on equity securities beginning in the first quarter of 2018. 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. The merger related charges in 2017 and 2018 are primarily related to the business combinations with First Choice Bank and Commerce Bancshares Corp., and the pending combination with SI Financial. 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. In 2018, the Company recorded $8 million in charges related to the restructuring of banking systems vendor relationships in conjunction with contractual arrangements extending to 2026. The Company recorded a $3 million cost for the pending settlement of an existing legal proceeding with a plaintiff claiming to be representing a class of depositors. Non-core charges in 2018 also included a $1.5 million net charge related to the CEO transition, consisting of a $7.5 million payout pursuant to a resignation and separation agreement, net of the reversal of accrued conditional benefits which were forfeited in this agreement.

 

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. 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.

 

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CONTACTS

 

Investor Relations Contact

 

Erin E. Duggan; Investor Relations Manager; 413-236-3773

 

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 Income
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 and Supplementary Data (Five Quarter Trend)
F-10 Reconciliation of Non-GAAP Financial Measures and Supplementary Data (Year-to-Date)

 

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SELECTED FINANCIAL HIGHLIGHTS - UNAUDITED - (F-1)

 

   At or for the Quarters Ended (2) 
   Dec. 31,   Sept. 30,   June 30,   March 31,   Dec. 31, 
   2018   2018   2018   2018   2017 (3) 
                     
PER SHARE DATA                         
Net earnings/(loss) per common share, diluted  $0.31   $0.70   $0.74   $0.55   $(0.06)
Core earnings per common share, diluted (1)   0.63    0.70    0.74    0.65    0.58 
Total book value per common share   33.30    32.84    32.49    32.12    32.14 
Tangible book value per common share (1)   21.15    20.68    20.28    19.86    19.83 
Market price at period end   26.97    40.70    40.60    37.95    36.60 
Dividends per common share   0.22    0.22    0.22    0.22    0.21 
Dividends per preferred share   0.44    0.44    0.44    0.44    0.42 
                          
PERFORMANCE RATIOS (4)                         
Return on assets   0.47%   1.08%   1.17%   0.88%   (0.10)%
Core return on assets (1)   0.97    1.08    1.17    1.04    0.94 
Return on equity   3.61    8.27    8.88    6.69    (0.77)
Core return on equity (1)   7.38    8.28    8.89    7.92    7.16 
Core return on tangible common equity (1)   12.07    13.67    14.82    13.43    11.90 
Net interest margin, fully taxable equivalent (FTE) (5)   3.41    3.32    3.50    3.36    3.50 
Fee income/Net interest and fee income   19.36    24.33    24.25    25.51    25.91 
Efficiency ratio (1)   60.30    57.15    56.37    59.54    57.43 
                          
GROWTH (Year-to-date)                         
Total commercial loans (annualized)   6%   5%   5%   1%   38%
Total loans (annualized)   9    10    10    4    27 
Total deposits (annualized)   3    0    2    (3)   32 
Total net revenues (compared to prior year)   12    16    16    13    41 
Earnings per common share (compared to prior year)   65    28    33    25    (25)
Core earnings per common share (compared to prior year)(1)   18    22    24    18    4 
                          
FINANCIAL DATA (in millions)                         
Total assets  $12,212   $12,030   $11,902   $11,519   $11,571 
Total earning assets   11,140    10,957    10,827    10,442    10,509 
Total securities   1,919    1,918    1,920    1,932    1,899 
Total loans   9,043    8,905    8,710    8,376    8,299 
Allowance for loan losses   61    58    56    54    52 
Total intangible assets   552    553    555    556    558 
Total deposits   8,982    8,766    8,839    8,683    8,750 
Total shareholders' equity   1,553    1,532    1,516    1,498    1,496 
Net income/(loss)   14.3    32.2    34.0    25.2    (2.8)
Core income (1)   29.2    32.2    34.1    29.9    26.3 
                          
ASSET QUALITY AND CONDITION RATIOS                         
Net charge-offs (current quarter annualized)/average loans   0.17%   0.19%   0.21%   0.17%   0.17%
Total non-performing assets/total assets   0.28    0.30    0.20    0.27    0.21 
Allowance for loan losses/total loans   0.68    0.66    0.64    0.64    0.62 
Loans/deposits   101    102    99    96    95 
Shareholders' equity to total assets   12.72    12.74    12.74    13.00    12.93 
Tangible shareholders' equity to tangible assets (1)   8.59    8.53    8.47    8.59    8.52 

 

(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)All performance ratios are annualized and are based on average balance sheet amounts, where applicable.
(5)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)  2018   2018   2017 
Assets               
Cash and due from banks  $100,972   $93,038   $91,122 
Short-term investments   82,217    42,696    157,641 
Total cash and short-term investments   183,189    135,734    248,763 
                
Trading security   11,212    11,179    12,277 
Marketable equity securities, at fair value   56,638    59,734    45,185 
Securities available for sale, at fair value   1,399,647    1,391,373    1,380,914 
Securities held to maturity, at amortized cost   373,763    379,404    397,103 
Federal Home Loan Bank stock and other restricted securities   77,344    76,184    63,085 
Total securities   1,918,604    1,917,874    1,898,564 
                
Loans held for sale, at fair value   96,233    91,639    153,620 
                
Commercial real estate loans   3,400,221    3,371,773    3,264,742 
Commercial and industrial loans   1,980,046    1,902,228    1,803,939 
Residential mortgages   2,566,424    2,509,324    2,102,807 
Consumer loans   1,096,562    1,121,188    1,127,850 
Total loans   9,043,253    8,904,513    8,299,338 
Less: Allowance for loan losses   (61,469)   (58,457)   (51,834)
Net loans   8,981,784    8,846,056    8,247,504 
                
Premises and equipment, net   108,367    111,130    109,352 
Other real estate owned   -    -    - 
Goodwill   518,325    518,325    519,287 
Other intangible assets   33,418    34,620    38,296 
Cash surrender value of bank-owned life insurance   190,609    194,369    191,221 
Deferred tax asset, net   39,164    56,708    47,061 
Other assets   142,538    123,604    117,083 
Total assets  $12,212,231   $12,030,059   $11,570,751 
                
Liabilities and shareholders' equity               
Demand deposits  $1,603,019   $1,563,845   $1,606,656 
NOW and other deposits   1,122,321    844,210    734,558 
Money market deposits   2,245,195    2,447,184    2,776,157 
Savings deposits   724,129    737,682    741,954 
Time deposits   3,287,717    3,173,180    2,890,205 
Total deposits   8,982,381    8,766,101    8,749,530 
                
Senior borrowings   1,428,298    1,450,653    1,047,736 
Subordinated borrowings   89,518    89,473    89,339 
Total borrowings   1,517,816    1,540,126    1,137,075 
                
Other liabilities   159,116    191,517    187,882 
Total liabilities   10,659,313    10,497,744    10,074,487 
                
Preferred shareholders' equity   40,633    40,633    40,633 
Common shareholders' equity   1,512,285    1,491,682    1,455,631 
Total shareholders' equity   1,552,918    1,532,315    1,496,264 
Total liabilities and shareholders' equity  $12,212,231   $12,030,059   $11,570,751 
                
Net common shares outstanding   45,417    45,420    45,290 

 

 F-2 

 

 

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

LOAN ANALYSIS

 

               Annualized Growth % 
(in millions)  December 31, 2018   September 30, 2018   December 31, 2017   Quarter ended
December 31, 2018
   Year to Date 
                     
Total commercial real estate  $3,400   $3,372   $3,264    3%   4%
Commercial and industrial loans   1,980    1,902    1,804    16    10 
Total commercial loans   5,380    5,274    5,068    8    6 
                          
Total residential mortgages   2,566    2,510    2,103    9    22 
                          
Home equity   377    389    410    (12)   (8)
Auto and other   720    732    718    (7)   0 
Total consumer loans   1,097    1,121    1,128    (9)   (3)
Total loans  $9,043   $8,905   $8,299    6%   9%

 

DEPOSIT ANALYSIS

 

               Annualized Growth % 
(in millions)  December 31, 2018   September 30, 2018   December 31, 2017   Quarter ended
December 31, 2018
   Year to Date 
Demand  $1,603   $1,564   $1,606    10%   0%
NOW and other   1,122    844    735    132    53 
Money market   2,245    2,447    2,776    (33)   (19)
Savings   724    738    742    (8)   (2)
Time deposits   3,288    3,173    2,890    14    14 
Total deposits  $8,982   $8,766   $8,749    10%   3%

 

 F-3 

 

 

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

 

   Three Months Ended   Years Ended 
   December 31,   December 31, 
(in thousands, except per share data)  2018   2017   2018   2017 
Interest and dividend income                    
Loans  $112,732   $91,149   $411,489   $308,099 
Securities and other   15,119    14,674    59,672    52,159 
Total interest and dividend income   127,851    105,823    471,161    360,258 
Interest expense                    
Deposits   23,811    13,802    78,364    43,855 
Borrowings   10,636    5,655    33,461    21,608 
Total interest expense   34,447    19,457    111,825    65,463 
Net interest income   93,404    86,366    359,336    294,795 
Non-interest income                    
Mortgage banking originations   5,884    11,918    35,197    54,251 
Loan related income   4,644    5,866    24,168    21,401 
Deposit related fees   7,131    7,871    29,806    27,165 
Insurance commissions and fees   2,479    2,284    10,983    10,589 
Wealth management fees   2,287    2,268    9,447    9,395 
Total fee income   22,425    30,207    109,601    122,801 
Other   1,666    (939)   3,557    (3,377)
Securities (losses)/gains, net   (3,023)   30    (3,719)   12,598 
Gain on sale of business operations and assets, net   -    -    460    296 
(Loss) on termination of hedges   -    -    -    (6,629)
Total non-interest income   21,068    29,298    109,899    125,689 
Total net revenue   114,472    115,664    469,235    420,484 
Provision for loan losses   6,716    6,141    25,451    21,025 
Non-interest expense                    
Compensation and benefits   41,944    42,220    165,185    152,979 
Occupancy and equipment   10,385    9,451    40,841    35,422 
Technology and communications   6,462    6,286    28,600    25,900 
Marketing and promotion   1,515    4,573    7,980    11,877 
Professional services   3,634    2,277    8,693    9,165 
FDIC premiums and assessments   1,488    1,920    5,734    6,457 
Other real estate owned and foreclosures   1    9    68    44 
Amortization of intangible assets   1,202    1,183    4,934    3,493 
Merger, restructuring and other expense   16,006    15,553    22,144    31,558 
Other   7,551    6,569    26,192    22,815 
Total non-interest expense   90,188    90,041    310,371    299,710 
                     
Income before income taxes   17,568    19,482    133,413    99,749 
Income tax expense   3,309    22,292    27,648    44,502 
Net income  $14,259   $(2,810)  $105,765   $55,247 
Preferred stock dividend   229    219    918    219 
Income available to common shareholders  $14,030   $(3,029)  $104,847   $55,028 
                     
Earnings/(loss) per common share:                    
Basic  $0.31   $(0.06)  $2.30   $1.40 
Diluted  $0.31   $(0.06)  $2.29   $1.39 
                     
Weighted average shares outstanding:                    
Basic   46,061    45,122    46,024    39,456 
Diluted   46,240    45,122    46,231    39,695 

 

 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)  2018   2018   2018   2018   2017 
Interest and dividend income                         
Loans  $112,732   $104,273   $101,649   $92,835   $91,149 
Securities and other   15,119    14,918    15,230    14,405    14,674 
Total interest and dividend income   127,851    119,191    116,879    107,240    105,823 
Interest expense                         
Deposits   23,811    21,460    17,768    15,325    13,802 
Borrowings   10,636    8,390    7,990    6,445    5,655 
Total interest expense   34,447    29,850    25,758    21,770    19,457 
Net interest income   93,404    89,341    91,121    85,470    86,366 
Non-interest income                         
Mortgage banking originations   5,884    8,971    10,195    10,147    11,918 
Loan related income   4,644    7,537    6,549    5,438    5,866 
Deposit related fees   7,131    7,004    7,605    8,066    7,871 
Insurance commissions and fees   2,479    2,930    2,549    3,025    2,284 
Wealth management fees   2,287    2,283    2,280    2,597    2,268 
Total fee income   22,425    28,725    29,178    29,273    30,207 
Other   1,666    468    155    1,268    (939)
Securities (losses)/gains, net   (3,023)   88    718    (1,502)   30 
(Loss)/gain on sale of business operations and assets, net   -    -    (21)   481    - 
(Loss) on termination of hedges   -    -    -    -    - 
Total non-interest income   21,068    29,281    30,030    29,520    29,298 
Total net revenue   114,472    118,622    121,151    114,990    115,664 
Provision for loan losses   6,716    6,628    6,532    5,575    6,141 
Non-interest expense                         
Compensation and benefits   41,944    39,923    41,134    42,184    42,220 
Occupancy and equipment   10,385    10,144    10,230    10,082    9,451 
Technology and communications   6,462    7,949    7,359    6,830    6,286 
Marketing and promotion   1,515    1,484    2,369    2,612    4,573 
Professional services   3,634    1,867    1,139    2,053    2,277 
FDIC premiums and assessments   1,488    1,640    1,411    1,195    1,920 
Other real estate owned and foreclosures   1    (1)   1    67    9 
Amortization of intangible assets   1,202    1,218    1,246    1,268    1,183 
Merger, restructuring and other expense   16,006    198    847    5,093    15,553 
Other   7,551    6,555    6,601    5,485    6,569 
Total non-interest expense   90,188    70,977    72,337    76,869    90,041 
                          
Income before income taxes   17,568    41,017    42,282    32,546    19,482 
Income tax expense   3,309    8,790    8,251    7,298    22,292 
Net income/(loss)  $14,259   $32,227   $34,031   $25,248   $(2,810)
Preferred stock dividend   229    230    229    230    219 
Income/(loss) available to common shareholders  $14,030   $31,997   $33,802   $25,018   $(3,029)
                          
                          
Earnings/(loss) per common share:                         
Basic  $0.31   $0.70   $0.74   $0.55   $(0.06)
Diluted  $0.31   $0.70   $0.74   $0.55   $(0.06)
                          
Weighted average shares outstanding:                         
Basic   46,061    46,030    46,032    45,966    45,122 
Diluted   46,240    46,263    46,215    46,200    45,122 

 

 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, 
   2018   2018   2018   2018   2017 
                     
Earning assets                         
Loans:                         
Commercial real estate   5.40%   4.67%   5.08%   4.76%   4.73%
Commercial and industrial loans   5.97    6.22    5.73    5.19    5.25 
Residential mortgages   3.72    3.66    3.72    3.56    3.76 
Consumer loans   4.52    4.27    4.13    4.01    3.94 
Total loans   4.94    4.66    4.73    4.45    4.47 
Securities   3.38    3.36    3.47    3.26    3.55 
Short-term investments and loans held for sale   3.74    3.82    3.86    3.43    2.90 
Total earning assets   4.64    4.41    4.48    4.21    4.27 
                          
Funding liabilities                         
Deposits:                         
NOW and other   0.59    0.58    0.44    0.28    0.25 
Money market   1.10    0.92    0.88    0.73    0.66 
Savings   0.16    0.15    0.14    0.14    0.14 
Time   1.93    1.76    1.54    1.40    1.25 
Total interest-bearing deposits   1.31    1.18    1.02    0.90    0.82 
Borrowings   2.67    2.42    2.29    2.02    1.81 
Total interest-bearing liabilities   1.55    1.38    1.23    1.08    0.97 
                          
Net interest spread   3.09    3.03    3.25    3.13    3.30 
Net interest margin (1)   3.41    3.32    3.50    3.36    3.50 
                          
Cost of funds (2)   1.31    1.16    1.03    0.90    0.81 
Cost of deposits   1.07    0.96    0.83    0.73    0.66 

 

(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: 0.30%, 0.17%, 0.25%, 0.13%, 0.21%. 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)  2018   2018   2018   2018   2017 
Assets                         
Loans                         
Commercial real estate  $3,373,936   $3,331,097   $3,316,482   $3,250,861   $3,161,902 
Commercial and industrial loans   1,921,361    1,824,369    1,773,722    1,811,433    1,645,719 
Residential mortgages   2,539,592    2,459,943    2,268,886    2,138,544    2,081,548 
Consumer loans   1,112,433    1,120,942    1,113,089    1,114,586    1,123,683 
Total loans (1)    8,947,322    8,736,351    8,472,179    8,315,424    8,012,852 
Securities (2)   1,933,891    1,928,851    1,931,104    1,933,002    1,921,724 
Short-term investments and loans held for sale   132,348    167,187    146,190    139,161    146,101 
Total earning assets   11,013,561    10,832,389    10,549,473    10,387,587    10,080,677 
Goodwill and other intangible assets   552,206    554,359    554,591    557,321    533,157 
Other assets   515,320    523,747    506,954    521,745    516,802 
Total assets  $12,081,087   $11,910,495   $11,611,018   $11,466,653   $11,130,636 
                          
Liabilities and shareholders' equity                         
Deposits                         
NOW and other  $920,225   $844,888   $819,166   $712,181   $702,353 
Money market   2,339,699    2,348,516    2,524,713    2,518,920    2,371,203 
Savings   728,853    740,765    749,995    743,944    733,157 
Time   3,229,521    3,274,518    2,878,846    2,913,512    2,906,423 
Total interest-bearing deposits   7,218,298    7,208,687    6,972,720    6,888,557    6,713,136 
Borrowings   1,566,478    1,363,914    1,382,794    1,275,173    1,229,781 
Total interest-bearing liabilities   8,784,776    8,572,601    8,355,514    8,163,730    7,942,917 
Non-interest-bearing demand deposits   1,579,013    1,635,564    1,619,470    1,656,260    1,591,431 
Other liabilities   136,224    144,401    102,583    137,976    127,562 
Total liabilities   10,500,013    10,352,566    10,077,567    9,957,966    9,661,910 
                          
Preferred shareholders' equity   40,633    40,633    40,633    40,633    34,892 
Common shareholders' equity   1,540,441   1,517,296    1,492,818    1,468,054    1,433,834 
Total shareholders' equity   1,581,074    1,557,929    1,533,451    1,508,687    1,468,726 
Total liabilities and shareholders' equity  $12,081,087   $11,910,495   $11,611,018   $11,466,653   $11,130,636 
                          
                          
Supplementary data                         
Total average non-maturity deposits  $5,567,790   $5,569,733   $5,713,344   $5,631,305   $5,398,144 
Total average deposits   8,797,311    8,844,251    8,592,190    8,544,817    8,304,567 
Fully taxable equivalent income adjustment   1,763    1,807    2,033    1,820    3,122 
Purchased loan accretion   8,247    4,548    6,881    3,433    5,507 
Total average tangible equity (3)   1,028,868    1,003,570    978,860    951,366    935,569 

  

(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)  2018   2018   2018   2018   2017 
NON-PERFORMING ASSETS                         
Non-accruing loans:                         
Commercial real estate  $20,372   $22,639   $10,338   $10,084   $7,266 
Commercial and industrial loans   6,003    4,914    4,029    7,430    7,311 
Residential mortgages   2,217    2,683    3,196    5,777    2,883 
Consumer loans   3,834    4,401    5,466    5,996    5,438 
Total non-accruing loans   32,426    34,637    23,029    29,287    22,898 
Other real estate owned   -    -    -    -    - 
Repossessed assets   1,209    1,069    1,241    1,241    1,147 
Total non-performing assets  $33,635   $35,706   $24,270   $30,528   $24,045 
                          
Total non-accruing loans/total loans   0.36%   0.39%   0.26%   0.35%   0.28%
Total non-performing assets/total assets   0.28%   0.30%   0.20%   0.27%   0.21%
                          
PROVISION AND ALLOWANCE FOR LOAN LOSSES                         
Balance at beginning of period  $58,457   $55,925   $53,859   $51,834   $49,004 
Charged-off loans   (4,029)   (4,471)   (5,714)   (3,791)   (3,734)
Recoveries on charged-off loans   325    375    1,248    241    423 
Net loans charged-off   (3,704)   (4,096)   (4,466)   (3,550)   (3,311)
Provision for loan losses   6,716    6,628    6,532    5,575    6,141 
Balance at end of period  $61,469   $58,457   $55,925   $53,859   $51,834 
                          
Allowance for loan losses/total loans   0.68%   0.66%   0.64%   0.64%   0.62%
Allowance for loan losses/non-accruing loans   190%   169%   243%   184%   226%
                          
NET LOAN CHARGE-OFFS                         
Commercial real estate  $(1,357)  $(3,074)  $(2,079)  $(817)  $(881)
Commercial and industrial loans   (1,538)   (189)   (1,193)   (972)   (960)
Residential mortgages   (108)   61    (632)   (406)   (759)
Home equity   (116)   (242)   108    (588)   (123)
Auto and other consumer   (585)   (652)   (670)   (767)   (588)
Total, net  $(3,704)  $(4,096)  $(4,466)  $(3,550)  $(3,311)
                          
Net charge-offs (QTD annualized)/average loans   0.17%   0.19%   0.21%   0.17%   0.17%
Net charge-offs (YTD annualized)/average loans   0.18%   0.19%   0.19%   0.17%   0.19%
                          
DELINQUENT AND NON-ACCRUING LOANS/TOTAL LOANS                         
30-89 Days delinquent   0.27%   0.38%   0.22%   0.39%   0.35%
90+ Days delinquent and still accruing   0.22%   0.22%   0.40%   0.23%   0.20%
Total accruing delinquent loans   0.49%   0.60%   0.62%   0.62%   0.55%
Non-accruing loans   0.36%   0.39%   0.26%   0.35%   0.28%
Total delinquent and non-accruing loans   0.85%   0.99%   0.88%   0.97%   0.83%

 

 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)      2018   2018   2018   2018   2017 
Net income/(loss)       $14,259   $32,227   $34,031   $25,248   $(2,810)
Adj: Net securities losses/(gains) (1)        3,023    (88)   (718)   1,502    (30)
Adj: Loss on termination of hedges        -    -    -    -    - 
Adj: Net losses/(gains) on sale of business operations and assets        -    -    21    (481)   - 
Adj: Merger and acquisition expense        2,792    198    847    5,093    15,553 
Adj: Restructuring expense and other expense        1,822    -    -    -    - 
Adj: Employee and community investment        -    -    -    -    3,400 
Adj: Legal settlements        3,000    -    -    -    - 
Adj: Systems vendor restructuring costs        8,379    -    -    -    - 
Adj: Deferred tax asset impairment        -    -    -    -    18,145 
Adj: Income taxes        (4,110)   (92)   (105)   (1,481)   (7,963)
Total core income (2)   (A)   $29,165   $32,245   $34,076   $29,881   $26,295 
                               
Total revenue       $114,472   $118,622   $121,151   $114,990   $115,664 
Adj: Net securities losses/(gains) (1)        3,023    (88)   (718)   1,502    (30)
Adj: Net losses/(gains) on sale of business operations and assets        -    -    21    (481)   - 
Total core revenue (2)   (B)   $117,495   $118,534   $120,454   $116,011   $115,634 
                               
Total non-interest expense       $90,188   $70,977   $72,337   $76,869   $90,041 
Less: Merger, restructuring and other expense (see above)        (4,614)   (198)   (847)   (5,093)   (15,553)
Less: Employee and community investment        -    -    -    -    (3,400)
Less: Legal settlements        (3,000)   -    -    -    - 
Less: Systems vendor restructuring costs        (8,379)   -    -    -    - 
Core non-interest expense (2)                                       (C)   $74,195   $70,779   $71,490   $71,776   $71,088 
                               
(in millions, except per share data)                              
Total average assets   (D)   $12,081   $11,910   $11,611   $11,467   $11,131 
Total average shareholders' equity   (E)    1,581    1,558    1,533    1,509    1,469 
Total average tangible shareholders' equity (2)                           (F)    1,029    1,004    979    951    936 
Total average tangible common shareholders' equity (2)                           (G)    988    963    938    911    901 
Total tangible shareholders' equity, period-end (2)(3)   (H)    1,001    979    961    941    939 
Total tangible common shareholders' equity, period-end (2)(3)   (I)    961    939    921    901    898 
Total tangible assets, period-end (2)(3)   (J)    11,660    11,477    11,347    10,963    11,013 
                               
Total common shares outstanding, period-end (thousands)                  (K)    45,417    45,420    45,420    45,360    45,290 
Average diluted shares outstanding (thousands)   (L)    46,240    46,263    46,215    46,200    45,383 
                               
Core earnings per common share, diluted (2)   (A/L)   $0.63   $0.70   $0.74   $0.65   $0.58 
Tangible book value per common share, period-end (2)   (I/K)    21.15    20.68    20.28    19.86    19.83 
Total tangible shareholders' equity/total tangible assets (2)   (H)/(J)    8.59    8.53    8.47    8.59    8.53 
                               
Performance ratios (4)                              
GAAP return on assets        0.47%   1.08%   1.17%   0.88%   (0.10)%
Core return on assets (2)   (A/D)    0.97    1.08    1.17    1.04    0.94 
GAAP return on equity        3.61    8.27    8.88    6.69    (0.77)
Core return on equity (2)   (A/E)    7.38    8.28    8.89    7.92    7.16 
Core return on tangible common equity (2)(5)   (A+O)/(G)    12.07    13.67    14.82    13.43    11.90 
Efficiency ratio (2)(6)                                                                                   (C-O)/(B+M+P)    60.30    57.15    56.37    59.54    57.43 
Net interest margin        3.41    3.32    3.50    3.36    3.50 
                               
Supplementary data (in thousands)                              
Tax benefit on tax-credit investments (7)   (M)   $1,787   $1,374   $2,119   $596   $2,957 
Non-interest income charge on tax-credit investments (8)   (N)    (1,610)   (1,112)   (1,594)   (506)   (2,564)
Net income on tax-credit investments   (M+N)    177    262    525    90    393 
                               
Intangible amortization   (O)   $1,202   $1,218   $1,246   $1,268   $1,183 
Fully taxable equivalent income adjustment   (P)    1,763    1,807    2,033    1,820    3,122 

 

(1)Net securities losses/(gains) for the periods ending in 2018 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 total assets less the 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)Core return on tangible equity is computed by dividing the total core income adjusted for the tax-effected amortization of intangible assets, assuming a 27% marginal rate for 2018 and a 40% marginal rate for 2017, by tangible equity.
(6)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.
(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 Years Ended 
       December 31,   December 31, 
(Dollars in thousands)      2018   2017 
Net (loss)/income       $105,765   $55,247 
Adj: Net securities losses/(gains) (1)        3,719    (12,598)
Adj: Loss on termination of hedges        -    6,629 
Adj: Net (gains) on sale of business operations        (460)   (296)
Adj: Merger and acquisition expenses        8,930    24,876 
Adj: Restructuring expense and other        1,822    6,682 
Adj: Employee and community investment        -    3,400 
Adj: Legal settlements        3,000    - 
Adj: Systems vendor restructuring costs        8,379    - 
Adj: Deferred tax asset impairment        -    18,145 
Adj: Income taxes        (5,788)   (11,277)
Total core income (2)   (A)   $125,367   $90,808 
                
Total revenue       $469,235   $420,484 
Adj: Net securities losses/(gains) (1)        3,719    (12,598)
Adj: Net (gains) on sale of business operations        (460)   (296)
Adj: Loss on termination of hedges        -    6,629 
Total core revenue (2)   (B)   $472,494   $414,219 
Total non-interest expense       $310,371   $299,710 
Less: Merger, restructuring and other expense (see above)        (10,752)   (31,558)
Less: Employee and community investment        -    (3,400)
Less: Legal settlements        (3,000)   - 
Less: Systems vendor restructuring costs        (8,379)   - 
Core non-interest expense (2)                                       (C)   $288,240   $264,752 
                
(in millions, except per share data)               
Total average assets   (D)   $11,769   $9,809 
Total average shareholders' equity   (E)    1,546    1,243 
Total average tangible shareholders' equity (2)                           (F)    991    793 
Total average tangible common shareholders' equity (2)                           (G)    950    784 
Total tangible shareholders' equity, period-end (2)(3)   (H)    1,001    939 
Total tangible common shareholders' equity, period-end (2)(3)   (I)    961    898 
Total tangible assets, period-end (2)(3)   (J)    11,660    11,013 
Total common shares outstanding, period-end (thousands)                  (K)    45,417    45,290 
Average diluted shares outstanding (thousands)   (L)    46,231    39,695 
Core earnings per common share, diluted (2)   (A/L)   $2.71   $2.29 
Tangible book value per common share, period-end (2)   (I/K)    21.15    19.83 
Total tangible shareholders' equity/total tangible assets (2)   (H)/(J)    8.59    8.53 
                
Performance ratios (4)               
GAAP return on assets        0.90%   0.56%
Core return on assets (2)   (A/D)    1.07    0.93 
GAAP return on equity        6.84    4.45 
Core return on equity (2)   (A/E)    8.11    7.31 
Core return on tangible common equity (2)(5)   (A+O)/(G)    13.48    11.82 
Efficiency ratio (2)(6)                                                                                  (C-O)/(B+M+P)    58.32    59.97 
Net interest margin        3.40    3.40 
                
Supplementary data               
Tax benefit on tax-credit investments (7)   (M)   $5,876   $10,182 
Non-interest income charge on tax-credit investments (8)   (N)    (4,822)   (8,693)
Net income on tax-credit investments   (M+N)    1,054    1,489 
                
Intangible amortization   (O)    4,934    3,493 
Fully taxable equivalent income adjustment   (P)    7,423    11,227 

 

(1)Net securities losses/(gains) for the period ending December 31, 2018 includes 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 total assets less the 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)Core return on tangible equity is computed by dividing the total core income adjusted for the tax-effected amortization of intangible assets, assuming a 27% marginal rate for 2018 and 40% marginal rate for 2017, by tangible equity.
(6)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.
(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 

 

 

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