EX-99.1 2 tm2130667d1_ex99-1.htm EXHIBIT 99.1

 

Exhibit 99.1 

 

 

BERKSHIRE HILLS REPORTS EARNINGS PER SHARE GROWTH

 

BOSTON, October 21, 2021 - Berkshire Hills Bancorp, Inc. (NYSE: BHLB) today reported that third quarter 2021 earnings per share increased year-over-year by 212% to $1.31 compared to $0.42 in 2020, and compared to $0.43 in the prior quarter. Results in the most recent quarter included $0.78 per share in net non-operating income, consisting primarily of net gains on the sales of the assets and operations of the Company’s insurance subsidiary and Berkshire Bank’s Mid-Atlantic branches. Excluding these amounts, Berkshire’s non-GAAP measure of third quarter adjusted net income totaled $0.53 per share, which was unchanged from the prior year and up 20% from $0.44 in the prior quarter. Results in the most recent quarter included a $4 million benefit ($0.06 per share after-tax) to the provision for credit losses. Per share earnings also benefited in the most recent quarter from the completion of the 2.5 million share repurchase program that was approved by the Board in April 2021.

 

THIRD QUARTER FINANCIAL HIGHLIGHTS (Comparisons are to the prior year unless otherwise stated; non-GAAP measures are reconciled on pages F-9 and F-10).

 

·$52 million net gain on the sale of insurance and Mid-Atlantic branch operations
·4% increase in total non-interest income excluding gains/(losses)
·66% decrease in net loan charge-offs to $2 million
·$4 million benefit to credit loss provision expense due to a release of credit loss allowance
·72% reduction in wholesale funding to 4% of assets, including prepayment of most Federal Home Loan Bank borrowings (period-end balance)
·Deposit costs down year-over-year to 0.22% from 0.61%
·Stock repurchases of 1,755,058 shares (3.5% of outstanding stock)
·Returned $54 million of capital to shareholders through buybacks and dividends amounting to 211% of adjusted net income

 

CEO Nitin Mhatre stated, “These solid results reflect the growing momentum associated with the second-quarter rollout of Berkshire’s Exciting Strategic Transformation (BEST). This comprehensive transformation plan, designed to enhance value for all our stakeholders, has already led to improved focus on our long-term efficiency, our customers, and our communities.”

 

“Exiting our Mid-Atlantic and insurance operations was a step in optimizing our operations and produced $52 million in net sale gains which bolstered third-quarter income. We completed our 2.5 million share repurchase program far ahead of the authorized time, returning a total of nearly $75 million in excess capital to shareholders through the repurchase of approximately 5% of our shares. We’re well positioned to support other BEST initiatives in development including our recently announced consumer lending partnership with the fin-tech Upstart. We also announced our BEST Community Comeback initiative that will lend and invest to strengthen the economic health of our communities, an industry-leading commitment given the relative size of the program and our organization. We continued to record strong deposit growth during the quarter and our expanded banking teams are focused on building loan origination volumes.”

 

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Mr. Mhatre concluded: “Key measures of asset quality improved as our markets continue to recover from pandemic conditions and we are prepared to profitably serve that recovery. We announced further refreshment of our board of directors, welcoming David Brunelle into the position of Board Chair and Jeffrey Kip as a new director. And we’re experiencing continued strong interest from customers and added several experienced, market-facing professionals to our team, demonstrating the value of our focus on social responsibility and strategy as other institutions focus on mergers.”

 

RESULTS OF OPERATIONS

 

Earnings: Third quarter GAAP earnings per share (EPS) increased in 2021 to $1.31 from $0.42 in 2020, and from $0.43 in the second quarter of 2021. The increase in EPS was primarily due to the gains recorded on the sale in the most recent quarter of insurance operations and the Mid-Atlantic branches. Adjusted EPS, a non-GAAP measure which excludes these gains, totaled $0.53 in the third quarter of 2021, which was stable year-over-year and a 20% increase quarter-over-quarter from $0.44. This included a $4 million benefit ($0.06 per share after-tax) to the provision for credit losses on loans in the most recent quarter. For the most recent quarter, GAAP return on equity measured 22.2% and the GAAP return on assets was 2.14%. The non-GAAP measure of adjusted return on equity measured 8.9% and the adjusted return on assets measured 0.86%.

 

Revenue: Third quarter net interest income decreased year-over-year by $6 million, or 7%, and by $4 million, or 5%, compared to the linked quarter. The year-over-year change reflected lower loan balances. The quarter-over-quarter change was primarily due to a $3 million decrease in deferred fee income recognized on Paycheck Protection Program (“PPP”) loans due to the completion of most loan forgiveness under the SBA guarantee program. It also reflected the 4% quarter-over-quarter decrease in average earning assets, including the impact of the branch sale.

 

The net interest margin decreased to 2.56% from 2.61% in the third quarter of 2020 and from 2.62% in the linked quarter. The Company further reduced deposits costs, which declined to 0.22% from 0.61% and 0.25% for the above respective periods. For these periods, the cost of funds decreased to 0.31% from 0.73% and 0.36%.

 

Total third quarter non-interest income excluding gains/(losses) on sales of securities and business operations increased year-over-year by $936 thousand, or 4%, and decreased quarter-over-quarter by $579 thousand, or 3%. In the most recent quarter, Berkshire’s SBA lending revenue of $5 million exceeded the record result in the prior quarter due to continued strong volume and margins, and increased from $3 million in the third quarter of 2020. Wealth management fees increased by 15% year-over-year, and 5% quarter-over-quarter. The Company has recently announced the recruitment of seasoned bankers to support ongoing growth in both of these business lines. Insurance revenue decreased by $711 thousand quarter-over-quarter following the sale of insurance operations.

 

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Other non-interest revenue declined due to $1.6 million in higher amortization expense related to new tax credit investment projects initiated during the most recent quarter. This was more than offset by the $2.2 million increase in investment tax credit benefits included as a component of income tax expense.

 

Credit Loss Provision: Berkshire recorded a $4 million benefit to the third quarter provision, compared to a charge of $1 million in the third quarter of 2020 and no provision in the linked quarter. This resulted from a $4 million release of the credit loss allowance due to stronger expected economic conditions and a reduction in loans and net charge-offs.

 

Expense: Third quarter non-interest expense decreased by $3.4 million, or 5%, year-over-year and increased quarter-over-quarter by $588 thousand, or 1%, to $69.5 million. These changes were primarily due to changes in merger, restructuring and other non-operating expenses which totaled $1.4 million in the most recent quarter. These charges are excluded from the Company’s non-GAAP measure of adjusted non-interest expense. In the third quarter, these charges included $0.9 million related to the prepayment of Federal Home Loan Bank borrowings and $0.5 million of restructuring charges including reclassifying certain real estate premises to held for sale as part of the Company’s consolidation of its operations. These initiatives are components of Berkshire’s BEST strategic plan for optimizing profitability.

 

The non-GAAP measure of adjusted non-interest expense increased by 1% year-over-year and decreased by 1% quarter-over-quarter, measuring $68 million in the most recent quarter. These changes were primarily due to changes in professional services during these periods. Total branches have been reduced to 107 offices from 130 at the start of the year. Full time equivalent staff totaled 1,333 positions at period-end, compared to 1,507 positions at the start of the year. The effective income tax rate decreased quarter-over-quarter to 20% from 24% due to the increase in tax credit investments during the quarter. Tax credit investments provided $0.01 in EPS benefit in the most recent quarter, net of the related amortization recorded to non-interest income.

 

BALANCE SHEET (references are to period-end balances unless otherwise stated)

 

Assets: Total assets decreased during the third quarter by $0.4 billion, or 3%, to $11.8 billion due primarily to the sale of the Mid-Atlantic branch operations. The balances for these operations which were reported as held for sale at midyear 2021 included $253 million in loan balances and $633 million in deposit balances. At the third quarter-end, higher period-end payroll deposit balances were invested in short-term investments. Proceeds from third quarter loan runoff helped fund payoffs of borrowings, including prepayments of Federal Home Loan Bank borrowings. The ratio of loans/deposits decreased to 66% from 73% at the start of the quarter. Reflecting the sale gains recorded in the quarter, the ratio of equity/assets increased to 9.9% from 9.6% at the start of the quarter. Common stock repurchases distributed excess capital released by the reduction in assets. Per share measures of book value and the non-GAAP measure of tangible book value both increased by 4% compared to the start of the quarter.

 

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Loans: Total period-end loans decreased in the third quarter by $396 million, or 5%, to $6.84 billion. The $246 million decrease in commercial loans was primarily due to a $127 million reduction in PPP loans and an $88 million reduction in loans outstanding to COVID sensitive commercial borrowers. The PPP loan balance decreased to $46 million from $173 million at the start of the quarter due to payoffs through forgiveness under the SBA guarantee program. Berkshire announced the recruitment of experienced bankers during the quarter as it positions to gain share based on its strong positioning to attract customers as current markets are impacted by merger activities of competitors. Consumer loans decreased by $35 million due primarily to ongoing targeted runoff of indirect auto loans. Residential mortgages decreased by $116 million. The Company is expanding its mortgage lending team and developing correspondent bank sources.

 

Asset Quality: Asset quality metrics continued to improve toward pre-pandemic levels during the third quarter. Total delinquent and non-accruing loans decreased year-over-year by 33% to $59 million, measuring 0.87% of total loans. Non-accruing loans decreased year-over-year by 22% to $37 million, measuring 0.54% of total loans, due primarily to $10 million in resolutions in the most recent quarter. Total COVID-19 related loan modifications decreased by 34% during the quarter to $65 million, measuring under 1% of period-end loans. The allowance for credit losses on loans decreased by $6 million during the quarter to $113 million, measuring 1.65% of total loans, which was unchanged from midyear.

 

Deposits and Borrowings: Total deposits increased in the third quarter by $452 million, or 5%, to $10.4 billion due primarily to a $369 million increase in period-end payroll deposit balances. Non-interest bearing demand deposit account balances increased by 7%, while higher cost time deposit balances decreased by 6%. Higher cost senior borrowings decreased by $204 million to $13 million, as most Federal Home Loan Bank borrowings were prepaid near the end of the quarter. Total higher cost wholesale funds decreased year-over-year to 4% of total assets from 12%. Quarter-over-quarter, the cost of deposits decreased to 0.22% from 0.25%, and the cost of funds decreased to 0.31% from 0.36%.

 

Equity: During the third quarter, Berkshire repurchased 1.755 million shares, completing the 2.5 million repurchase authorization approved by the Board in April, which totaled approximately 5% of outstanding shares for the full authorization. The third quarter repurchases were made at an average price of $27.33, totaling $48 million. The common equity tier 1 capital ratio increased to an estimated 15.3% from 14.3% in the prior quarter. During the most recent quarter, book value per share increased by 4% to $24.21 and the non-GAAP measure of tangible book value per share increased by 4% to $23.58.

 

ESG & CORPORATE RESPONSIBILITY UPDATE

 

Berkshire Bank is committed to purpose-driven, community-centered banking that enhances value for all stakeholders as it pursues its vision of being the leading socially responsible community bank. Learn more about the steps Berkshire is taking at berkshirebank.com/csr and in its most recent Corporate Responsibility Report.

 

Key developments in the quarter include:

 

·Launch of the BEST Community Comeback: Berkshire announced its "BEST Community Comeback" a $5 billion multi-year ESG and community commitment to fuel resilience and strengthen local communities. The multi-year plan focuses on four key areas: fueling small businesses, community financing and philanthropy, financial access and empowerment, and funding environmental sustainability. Additional information can be found at berkshirebank.com/comeback.

 

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·Xtraordinary Day: As a kickoff to the Bank's "BEST Community Comeback," Berkshire Bank hosted its 5th annual "Xtraordinary Day of Service." Berkshire Bank employees were deployed in a virtual setting, volunteering for causes that support the small business ecosystem, equity and inclusion and basic community needs. More than 75% of Berkshire’s workforce participated in the day.

 

·Current ESG Performance: The Company continued to improve its Environmental, Social and Governance (ESG) ratings, generally outperforming peers. As of September 30, 2021 the Company received ratings of: MSCI ESG- BBB; ISS ESG Quality Score - Environment: 2, Social: 1, Governance: 2; and Bloomberg ESG Disclosure- 47.81. The Company is also rated by Sustainalytics.

 

INVESTOR CONFERENCE CALL AND INVESTOR PRESENTATION

 

Berkshire will post an investor presentation at its website at ir.berkshirebank.com with additional financial information and other information about the quarter.

 

Berkshire will conduct a conference call/webcast at 10:00 a.m. Eastern Time on Thursday, October 21, 2021 to discuss 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:

 

https://www.incommglobalevents.com/registration/q4inc/8879/berkshire-hills-bancorp-q3-earnings-release-conference-call/

 

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 relations section of Berkshire’s website at ir.berkshirebank.com.

 

Those parties who do not have Internet access or are otherwise unable to pre-register for this event, may still participate at the above time by dialing 844-200-6205 and using participant access code: 066744. Participants are requested to dial-in a few minutes before the scheduled start of the call. A telephone replay of the call will be available for one week by dialing 866-813-9403 and using access code: 331614. The webcast will be available on Berkshire's website for an extended period of time.

 

ABOUT BERKSHIRE HILLS BANCORP

 

Berkshire Hills Bancorp is the parent of Berkshire Bank, which is transforming what it means to bank its neighbors socially, humanly, and digitally to empower the financial potential of people, families, and businesses in its communities as it pursues its vision of being the leading socially responsible omni-channel community bank in the markets it serves. Berkshire Bank provides business and consumer banking, mortgage, wealth management, and investment services. Headquartered in Boston, Berkshire has approximately $11.8 billion in assets and operates 107 branch offices in New England and New York, and is a member of the Bloomberg Gender-Equality Index. To learn more, call 800-773-5601 or follow us on Facebook, Twitter, Instagram, and LinkedIn.

 

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FORWARD-LOOKING STATEMENTS

 

This document contains “forward-looking statements” within the meaning of section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as amended. You can identify these statements from the use of the words “may,” “will,” “should,” “could,” “would,” “plan,” “potential,” “estimate,” “project,” “believe,” “intend,” “anticipate,” “expect,” “target” and similar expressions. There are many factors that could cause actual results to differ significantly from expectations described in the forward-looking statements. For a discussion of such factors, please see Berkshire’s most recent reports on Forms 10-K and 10-Q filed with the Securities and Exchange Commission and available on the SEC’s website at www.sec.gov.

 

You should not place undue reliance on forward-looking statements, which reflect our expectations only as of the date of this document. Berkshire does not undertake any obligation to update forward-looking statements.

 

NON-GAAP FINANCIAL MEASURES

 

This document contains certain non-GAAP financial measures in addition to results presented in accordance with Generally Accepted Accounting Principles (“GAAP”). These non-GAAP measures provide supplemental perspectives on operating results, performance trends, and financial condition. They are not a substitute for GAAP measures; they should be read and used in conjunction with the Company’s GAAP financial information. A reconciliation of non-GAAP financial measures to GAAP measures is included on pages F-9 and F-10 in the accompanying financial tables. In all cases, it should be understood that non-GAAP per share measures do not depict amounts that accrue directly to the benefit of shareholders.

 

The Company utilizes the non-GAAP measure of adjusted earnings in evaluating operating trends, including components for adjusted revenue and expense. These measures exclude items which the Company does not view as related to its normalized operations. These items primarily include securities gains/losses, other gains/losses, merger costs, restructuring costs, goodwill impairment, and discontinued operations. In 2020, the Company recorded a full impairment of its goodwill and exited its discontinued national mortgage banking operations. Other adjusted expense in 2020 was primarily related to costs of the separation with the former CEO, as well as consulting for the CEO succession process. A 2020 adjusted gain was recognized on the sale of a specialty commercial insurance business line. In 2021, the Company recorded a net gain of $52 million on the sale of the insurance subsidiary and the Mid-Atlantic branch operations. Expense adjustments in the first quarter were primarily related to branch consolidations. Adjustments of $1.4 million in the third quarter Federal Home Loan Bank borrowings prepayment costs. They also included other restructuring charges for efficiency initiatives in operations areas including writedowns on real estate moved to held for sale and severance related to staff reductions.

 

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The Company utilizes Adjusted Pre-Provision Net Revenue (“Adjusted PPNR”) which measures adjusted income before credit loss provision and tax expense. PPNR is used by the investment community due to the volatility and variability across banks related to credit loss provision expense under the Current Expected Credit Loss accounting standard. The Company also calculates Adjusted PPNR/assets in order to utilize the PPNR measure in assessing its comparative operating profitability.

 

Non-GAAP adjustments are presented net of an adjustment for income tax expense. This adjustment is determined as the difference between the GAAP tax rate and the effective tax rate applicable to adjusted income. The efficiency ratio is adjusted for adjusted revenue and expense items and for tax preference items. The Company also calculates measures related to tangible equity, which adjust equity (and assets where applicable) to exclude intangible assets due to the importance of these measures to the investment community.

 

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CONTACTS

 

Investor Relations Contacts

 

Kevin Conn, SVP, Investor Relations & Corporate Development
Email: KAConn@berkshirebank.com
Tel: (617) 641-9206

 

David Gonci, Capital Markets Director
Email: dgonci@berkshirebank.com
Tel: (413) 281-1973

 

Media Contact:

 

Gary Levante, SVP, Corporate Responsibility & Culture
Email: glevante@berkshirebank.com
Tel: (413) 447-1737

 

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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 Balances and Average Yields and Costs
F-7 Asset Quality Analysis
F-8 Asset Quality Analysis (continued)
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)

 

   Sept. 30,   Dec. 31,   March 31,   June 30,   Sept. 30, 
   2020   2020   2021   2021   2021 
NOMINAL AND PER SHARE DATA                         
Net earnings per common share, diluted  $0.42   $0.30   $0.26   $0.43   $1.31 
Adjusted earnings per common share, diluted (2)   0.53    0.28    0.32    0.44    0.53 
Net income, (thousands)   21,225    15,009    13,031    21,636    63,749 
Adjusted net income, (thousands) (2)   26,424    14,062    16,015    22,104    25,695 
Total common shares outstanding, period-end (thousands)   50,306    50,833    50,988    50,453    48,657 
Average diluted shares, (thousands)   50,329    50,355    50,565    50,608    48,744 
Total book value per common share, (end of period)   23.03    23.37    23.05    23.30    24.21 
Tangible book value per common share, (end of period) (2)   22.22    22.68    22.39    22.66    23.58 
Dividends per common share   0.12    0.12    0.12    0.12    0.12 
Full-time equivalent staff, continuing operations   1,507    1,505    1,467    1,417    1,333 
                          
PERFORMANCE RATIOS (3)                         
Return on equity   7.50%   5.22%   4.50%   7.37%   22.18%
Adjusted return on equity (2)   9.33    4.89    5.53    7.53    8.94 
Return on tangible common equity (2)   8.32    5.85    4.98    7.92    23.14 
Adjusted return on tangible common equity (2)   10.27    5.50    6.04    8.08    9.53 
Return on assets   0.67    0.48    0.42    0.70    2.14 
Adjusted return on assets (2)   0.84    0.45    0.51    0.71    0.86 
Net interest margin, fully taxable equivalent (FTE) (4)(5)   2.61    2.61    2.62    2.62    2.56 
Efficiency ratio (2)   65.39    71.03    71.32    67.82    68.76 
                          
FINANCIAL DATA (in millions, end of period)                         
Total assets  $12,614   $12,838   $12,757   $12,273   $11,846 
Total earning assets   11,832    12,090    12,071    11,571    11,145 
Total loans   8,982    8,082    7,659    7,233    6,836 
Total deposits   10,467    10,216    10,244    9,914    10,365 
Loans/deposits (%)   86%   79%   75%   73%   66%
Total shareholders' equity  $1,179   $1,188   $1,175   $1,175   $1,178 
                          
ASSET QUALITY                         
Allowance for credit losses, (millions)  $134   $127   $124   $119   $113 
Net charge-offs, (millions)   (6)   (17)   (10)   (5)   (2)
Net charge-offs (QTD annualized)/average loans   0.27%   0.80%   0.51%   0.26%   0.12%
Provision expense/(income), (millions)  $1   $10   $7   $-   $(4)
Non-performing assets, (millions)   49    67    58    49    39 
Non-performing loans/total loans   0.53%   0.80%   0.73%   0.66%   0.54%
Allowance for credit losses/non-performing loans   284    196    222    250    304 
Allowance for credit losses/total loans   1.50    1.58    1.62    1.65    1.65 
                          
CAPITAL RATIOS                         
Common equity tier 1 capital to risk weighted assets(6)   13.2%   13.8%   14.2%   14.3%   15.3%
Tier 1 capital leverage ratio(6)   9.2    9.4    9.5    9.5    9.9 
Tangible common shareholders' equity/tangible assets(2)   8.9    9.0    9.0    9.3    9.7 

 

 

(1) Reconciliations of non-GAAP financial measures, including all references to adjusted and tangible amounts, appear on pages F-9 and F-10.
(2) Non-GAAP financial measure. adjusted measurements are non-GAAP financial measures that are adjusted to exclude net non-adjusted charges primarily related to acquisitions and restructuring activities. See pages F-9 and F-10 for reconciliations of non-GAAP financial measures.
(3) All performance ratios are annualized and are based on average balance sheet amounts, where applicable.
(4) Fully taxable equivalent considers the impact of tax advantaged investment securities and loans.
(5) The effect of purchase accounting accretion for loans, time deposits, and borrowings on the quarterly net interest margin was an increase in all quarters, which is shown sequentially as follows beginning with the earliest quarter and ending with the most recent quarter: 0.08%, 0.07%, 0.05%, 0.08%, 0.06%. 
(6) Presented as projected for September 30, 2021 and actual for the remaining periods.

 

F-1

 

 

 

CONSOLIDATED BALANCE SHEETS - UNAUDITED - (F-2)

 

   September 30,   December 31,   June 30,   September 30, 
(in thousands)  2020   2020   2021   2021 
Assets                    
Cash and due from banks  $90,537   $91,219   $98,262   $153,185 
Short-term investments   844,755    1,466,656    1,728,419    1,971,345 
Total cash and short-term investments   935,292    1,557,875    1,826,681    2,124,530 
                     
Trading security   9,525    9,708    8,853    8,574 
Marketable equity securities, at fair value   31,993    18,513    15,709    15,601 
Securities available for sale, at fair value   1,575,289    1,695,232    1,640,512    1,643,965 
Securities held to maturity, at amortized cost   330,197    465,091    665,786    651,863 
Federal Home Loan Bank stock and other restricted securities   40,520    34,873    19,638    12,041 
Total securities   1,987,524    2,223,417    2,350,498    2,332,044 
Less: Allowance for credit losses on investment securities   (96)   (104)   (130)   (125)
Net securities   1,987,428    2,223,313    2,350,368    2,331,919 
                     
Loans held for sale   15,854    17,748    6,494    5,176 
                     
Total loans   8,982,336    8,081,519    7,232,591    6,836,235 
Less: Allowance for credit losses on loans   (134,414)   (127,302)   (119,044)   (112,916)
Net loans   8,847,922    7,954,217    7,113,547    6,723,319 
                     
Premises and equipment, net   117,116    112,663    104,680    99,233 
Other real estate owned   40    149    85    - 
Goodwill and other intangible assets   40,947    34,819    32,203    30,907 
Other assets   656,892    619,925    562,691    527,049 
Assets held for sale (1)   -    317,304    276,576    3,743 
Assets from discontinued operations   12,966    -    -    - 
Total assets  $12,614,457   $12,838,013   $12,273,325   $11,845,876 
                     
Liabilities and shareholders' equity                    
Demand deposits  $2,585,173   $2,484,249   $2,819,012   $3,022,821 
NOW and other deposits   1,522,289    1,003,005    1,696,762    1,982,089 
Money market deposits   2,516,168    3,371,353    2,398,256    2,438,832 
Savings deposits   952,836    972,116    1,065,428    1,095,959 
Time deposits   2,890,093    2,385,085    1,934,442    1,825,714 
Total deposits   10,466,559    10,215,808    9,913,900    10,365,415 
                     
Senior borrowings   605,483    474,357    217,847    13,369 
Subordinated borrowings   97,223    97,280    97,396    97,454 
Total borrowings   702,706    571,637    315,243    110,823 
                     
Other liabilities   251,220    232,730    222,105    191,563 
Liabilities held for sale (1)   -    630,065    646,688    - 
Liabilities from discontinued operations   14,947    -    -    - 
Total liabilities   11,435,432    11,650,240    11,097,936    10,667,801 
                     
Preferred shareholders' equity   20,325    -    -    - 
Common shareholders' equity   1,158,700    1,187,773    1,175,389    1,178,075 
Total shareholders' equity   1,179,025    1,187,773    1,175,389    1,178,075 
Total liabilities and shareholders' equity  $12,614,457   $12,838,013   $12,273,325   $11,845,876 

 

 

(1) For June 30, 2021 and December 31, 2020, balance includes loans and deposits from branch sales in the Mid-Atlantic region.   

 

F-2

 

 

 

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

 

LOAN ANALYSIS

 

               Growth % 
(in millions)  December 31, 2020
Balance		   June 30, 2021
Balance		   September 30, 2021
Balance		   Quarter ended
September 30, 2021		   Year to Date 
Total commercial real estate  $3,647   $3,652   $3,565    (2)%   (2)%
Commercial and industrial loans   1,326    1,286    1,254    (2)   (5)
Paycheck Protection Program (PPP) Loans   633    173    46    (73)   (93)
Total commercial loans   5,606    5,111    4,865    (5)   (13)
                          
Total residential mortgages   1,813    1,559    1,443    (7)   (20)
                          
Home equity   295    270    264    (2)   (11)
Auto and other   368    293    264    (10)   (28)
Total consumer loans   663    563    528    (6)   (20)
Total loans  $8,082   $7,233   $6,836    (5)%   (15)%

 

DEPOSIT ANALYSIS

 

               Growth % 
(in millions)  December 31, 2020
Balance		   June 30, 2021
Balance		   September 30, 2021
Balance		   Quarter ended
September 30, 2021		   Year to Date 
Non-interest bearing  $2,484   $2,819   $3,023    7%   22%
NOW and other   1,003    1,697    1,982    17    98 
Money market   3,372    2,398    2,439    2    (28)
Savings   972    1,065    1,096    3    13 
Time deposits   2,385    1,935    1,825    (6)   (23)
Total deposits (1)  $10,216   $9,914   $10,365    5%   1%

 

 

(1)Included in total deposits are brokered deposits of $317.1 million, $358.4 million and $610.6 million at September 30, 2021, June 30, 2021, and December 31, 2020, respectively.

 

F-3

 

 

 

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

 

   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
(in thousands, except per share data)  2021   2020   2021   2020 
Interest income   79,688    97,768    253,205    317,651 
Interest expense   8,320    20,713    31,351    76,578 
Net interest income from continuing operations, not FTE   71,368    77,055    221,854    241,073 
Non-interest income from continuing operations                    
Deposit related fees   7,657    7,062    22,291    20,382 
Loan fees and revenue   8,285    4,988    25,962    12,007 
Insurance commissions and fees   1,581    2,660    7,003    8,451 
Wealth management fees   2,653    2,299    7,944    6,926 
Mortgage banking originations   461    2,044    1,797    4,647 
Other   1,279    1,927    5,638    492 
Total non-interest income excluding gains/(losses)   21,916    20,980    70,635    52,905 
Securities (losses)/gains, net   (166)   (1,017)   (681)   (9,925)
Gain on sale of business operations and assets, net   51,885    -    51,885    - 
Total non-interest income   73,635    19,963    121,839    42,980 
Total net revenue from continuing operations   145,003    97,018    343,693    284,053 
Total net revenue from continuing operations excluding (losses)/gains   93,284    98,035    292,489    293,978 
                     
Provision for credit losses   (4,000)   1,200    2,500    65,878 
Non-interest expense from continuing operations                    
Compensation and benefits   37,068    34,809    112,773    111,121 
Occupancy and equipment   10,421    11,084    32,044    32,411 
Technology and communications   8,397    8,540    25,204    24,376 
Professional services   3,180    2,567    13,495    7,852 
Other expenses   8,969    10,527    28,053    33,605 
Merger, restructuring and other non-operating expenses   1,425    5,316    4,917    559,078 
Total non-interest expense   69,460    72,843    216,486    768,443 
Total non-interest expense excluding merger, restructuring and other   68,035    67,527    211,569    209,365 
                     
Income/(loss) from continuing operations before income taxes  $79,543   $22,975   $124,707   $(550,268)
Income tax expense/(benefit)   15,794    (68)   26,291    (18,194)
Net income/(loss) from continuing operations  $63,749   $23,043   $98,416   $(532,074)
                     
(Loss) from discontinued operations before income taxes  $-   $(2,477)  $-   $(21,741)
Income tax (benefit)   -    (659)   -    (5,789)
Net (loss) from discontinued operations  $-   $(1,818)  $-   $(15,952)
                     
Net income/(loss)  $63,749   $21,225   $98,416   $(548,026)
Preferred stock dividend   -    58    -    313 
Income/(loss) available to common shareholders  $63,749   $21,167   $98,416   $(548,339)
                     
Basic earnings/(loss) per common share:                    
Continuing Operations  $1.32   $0.46   $1.98   $(10.58)
Discontinued Operations   -    (0.04)   -    (0.32)
Total  $1.32   $0.42   $1.98   $(10.90)
                     
Diluted earnings/(loss) per common share:                    
Continuing Operations  $1.31   $0.46   $1.97   $(10.58)
Discontinued Operations   -    (0.04)   -    (0.32)
Total  $1.31   $0.42   $1.97   $(10.90)
                     
Weighted average shares outstanding:                    
Basic   48,395    50,329    49,672    50,256 
Diluted   48,744    50,329    49,963    50,256 

 

F-4

 

 

 

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

 

   Sept. 30,   Dec. 31,   March 31,   June 30,   Sept. 30, 
(in thousands, except per share data)  2020   2020   2021   2021   2021 
Interest income   97,768    92,131    88,153    85,364    79,688 
Interest expense   20,713    16,422    13,060    9,971    8,320 
Net interest income from continuing operations, not FTE   77,055    75,709    75,093    75,393    71,368 
Non-interest income from continuing operations                         
Deposit related fees   7,062    7,523    7,126    7,508    7,657 
Loan fees and revenue   4,988    4,833    10,246    7,431    8,285 
Insurance commissions and fees   2,660    2,319    3,130    2,292    1,581 
Wealth management fees   2,299    2,359    2,772    2,519    2,653 
Mortgage banking originations   2,044    543    802    534    461 
Other   1,927    2,105    2,148    2,211    1,279 
Total non-interest income excluding (losses)/gains   20,980    19,682    26,224    22,495    21,916 
Securities (losses)/gains, net   (1,017)   2,405    (31)   (484)   (166)
Gain on sale of business operations and assets, net   -    1,240    -    -    51,885 
Total non-interest income   19,963    23,327    26,193    22,011    73,635 
Total net revenue from continuing operations   97,018    99,036    101,286    97,404    145,003 
Total net revenue from continuing operations excluding (losses)/gains   98,035    95,391    101,317    97,888    93,284 
                          
Provision for credit losses   1,200    10,000    6,500    -    (4,000)
Non-interest expense from continuing operations                         
Compensation and benefits   34,809    36,719    38,735    36,970    37,068 
Occupancy and equipment   11,084    10,948    11,024    10,599    10,421 
Technology and communications   8,540    7,988    8,593    8,214    8,397 
Professional services   2,567    4,055    6,614    3,701    3,180 
Other expenses   10,527    11,563    9,702    9,382    8,969 
Merger, restructuring and other non-operating expenses   5,316    523    3,486    6    1,425 
Total non-interest expense   72,843    71,796    78,154    68,872    69,460 
Total non-interest expense excluding merger, restructuring and other   67,527    71,273    74,668    68,866    68,035 
                          
                          
Income from continuing operations before income taxes  $22,975   $17,240   $16,632   $28,532   $79,543 
Income tax expense/(benefit)   (68)   (1,659)   3,601    6,896    15,794 
Net income from continuing operations  $23,043   $18,899   $13,031   $21,636   $63,749 
                          
(Loss) from discontinued operations before income taxes  $(2,477)  $(5,114)  $-   $-   $- 
Income tax (benefit)   (659)   (1,224)   -    -    - 
Net (loss) from discontinued operations  $(1,818)  $(3,890)  $-   $-   $- 
                          
Net income  $21,225   $15,009   $13,031   $21,636   $63,749 
Preferred stock dividend   58    -    -    -    - 
Income available to common shareholders  $21,167   $15,009   $13,031   $21,636   $63,749 
                          
                          
Diluted earnings/(loss) per common share:                         
Continuing Operations  $0.46   $0.38   $0.26   $0.43   $1.31 
Discontinued Operations   (0.04)   (0.08)   -    -    - 
Total  $0.42   $0.30   $0.26   $0.43   $1.31 
                          
Weighted average shares outstanding:                         
Basic   50,329    50,308    50,330    50,321    48,395 
Diluted   50,329    50,355    50,565    50,608    48,744 

 

F-5

 

 

 

AVERAGE BALANCES AND AVERAGE YIELDS AND COSTS - UNAUDITED - (F-6)

 

   Sept. 30, 2020   Dec. 31, 2020   March 31, 2021   June 30, 2021   Sept. 30, 2021 
(in millions)  Average
Balance		   Average
Yield/Rate		   Average
Balance		   Average
Yield/Rate		   Average
Balance		   Average
Yield/Rate		   Average
Balance		   Average
Yield/Rate		   Average
Balance		   Average
Yield/Rate		 
Assets                                                  
Commercial real estate   3,986    3.52%   3,843    3.34%   3,630    3.27%   3,625    3.46%   3,577    3.40%
Commercial and industrial loans   2,192    3.88    2,056    4.05    1,865    4.62    1,605    4.74    1,370    4.78 
Residential mortgages   2,224    3.78    1,971    3.78    1,740    3.71    1,604    3.79    1,499    3.65 
Consumer loans   801    3.59    726    3.41    634    3.79    582    3.80    545    3.95 
Total loans (1)    9,203    3.68    8,596    3.62    7,869    3.73    7,416    3.84    6,991    3.77 
Securities (2)   1,874    2.78    1,968    2.69    2,195    2.36    2,259    2.17    2,312    2.09 
Short-term investments and loans held for sale   766    0.21    977    0.14    1,351    0.13    1,750    0.10    1,762    0.17 
Mid-Atlantic region loans held for sale   -    -    101    4.27    295    4.09    269    3.96    155    3.82 
Total earning assets (3)   11,843    3.31    11,642    3.17    11,710    3.07    11,694    2.96    11,220    2.86 
Goodwill and other intangible assets   41         40         34         33         31      
Other assets   760         752         724         690         674      
Assets from discontinued operations   16         12         -         -         -      
Total assets   12,660         12,446         12,468         12,417         11,925      
                                                   
Liabilities and shareholders' equity                                                  
NOW and other   1,244    0.24%   1,279    0.17%   1,325    0.15%   1,389    0.07%   1,316    0.05%
Money market   2,674    0.38    2,756    0.32    2,802    0.27    2,751    0.18    2,716    0.16 
Savings   940    0.10    967    0.08    1,003    0.08    1,054    0.05    1,112    0.04 
Time   3,056    1.63    2,629    1.35    2,266    1.12    2,013    0.94    1,893    0.86 
Total interest-bearing deposits   7,914    0.81    7,631    0.62    7,396    0.48    7,207    0.35    7,037    0.31 
Borrowings   777    2.36    658    2.50    500    2.78    381    3.12    253    3.89 
Mid-Atlantic region interest-bearing deposits   -    -    180    0.80    518    0.60    517    0.51    306    0.51 
Total interest-bearing liabilities   8,691    0.95    8,469    0.77    8,414    0.63    8,105    0.49    7,596    0.43 
Non-interest-bearing demand deposits   2,559         2,542         2,537         2,787         2,901      
Other liabilities (4)   254         279         358         351         279      
Liabilities from discontinued operations   23         6         -         -         -      
Total liabilities   11,527         11,296         11,309         11,243         10,776      
                                                   
Preferred shareholders' equity   20         7         -         -         -      
Common shareholders' equity   1,113         1,143         1,159         1,174         1,149      
Total shareholders' equity   1,133         1,150         1,159         1,174         1,149      
Total liabilities and shareholders' equity   12,660         12,446         12,468         12,417         11,925      
                                                   
Net interest spread        2.36%        2.40%        2.44%        2.47%        2.43%
Net interest margin, FTE (5)        2.61         2.61         2.62         2.62         2.56 
Cost of funds        0.73         0.60         0.48         0.36         0.31 
Cost of deposits        0.61         0.47         0.36         0.25         0.22 
                                                   
Supplementary data                                                  
Net Interest Income, not FTE   77         76         75         75         71      
Fully taxable equivalent income adjustment   2         1         1         2         2      
Net Interest Income, FTE   79         77         77         77         73      
                                                   
Average PPP loans   707         685         546         321         90      
Average loans excluding PPP loans   8,496         7,911         7,323         7,095         6,901      
Total PPP loans, end of period   708         633         444         173         46      
Total loans excluding PPP loans, end of period   8,274         7,448         7,215         7,059         6,790      
PPP interest income   4         6         7         5         2      
                                                   
Total average non-maturity deposits   7,417         7,544         7,666         7,981         8,045      
Total average deposits   10,473         10,173         9,932         9,994         9,938      
                                                   
Purchased loan accretion   3         2         1         2         2      
Total average tangible equity (6)   1,091         1,110         1,125         1,141         1,118      

 

 

(1)Total loans include non-accruing loans.
(2)Average balances for securities available-for-sale are based on amortized cost.
(3)Excludes discontinued operations for presentation purposes. Performance ratios are calculated including the impact of discontinued operations.
(4)Includes the Mid-Atlantic region non-interesting bearing deposits. As of September 30, 2021 and December 31, 2020, the Mid-Atlantic region average non-interest bearing deposits were $78 million and $37 million, respectively.
(5)The effect of PPP loans on the quarterly net interest margin is shown sequentially as follows beginning with the earliest quarter and ending with the most recent quarter: (0.01%), 0.05%, 0.11%, 0.11%, 0.05%.
This calculation excludes gross interest income on PPP loans and average PPP loan balances.
(6)See page F-9 for details on the calculation of total average tangible equity.

 

F-6

 

 

 

ASSET QUALITY ANALYSIS - UNAUDITED - (F-7)

 

   Sept. 30,   Dec. 31,   March 31,   June 30,   Sept. 30, 
(in thousands)  2020   2020   2021   2021   2021 
NON-PERFORMING ASSETS                         
Non-accruing loans:                         
Commercial real estate  $14,777   $35,581   $28,325   $22,799   $14,845 
Commercial and industrial loans   15,035    12,921    9,371    9,427    7,140 
Residential mortgages   7,928    8,347    10,674    9,238    9,763 
Consumer loans   9,650    8,099    7,447    6,141    5,399 
Total non-accruing loans   47,390    64,948    55,817    47,605    37,147 
Other real estate owned   401    149    149    85    - 
Repossessed assets   1,646    1,932    1,701    1,666    1,664 
Total non-performing assets  $49,437   $67,029   $57,667   $49,356   $38,811 
                          
Total non-accruing loans/total loans   0.53%   0.80%   0.73%   0.66%   0.54%
Total non-accruing loans/total loans excluding PPP loans   0.57%   0.87%   0.77%   0.67%   0.55%
Total non-performing assets/total assets   0.39%   0.52%   0.45%   0.40%   0.33%
                          
PROVISION AND ALLOWANCE FOR CREDIT LOSSES ON LOANS                         
Balance at beginning of period  $139,394   $134,414   $127,302   $123,800   $119,044 
Charged-off loans   (7,776)   (18,314)   (11,460)   (7,248)   (4,334)
Recoveries on charged-off loans   1,580    1,209    1,465    2,492    2,206 
Net loans charged-off   (6,196)   (17,105)   (9,995)   (4,756)   (2,128)
Provision for loan credit losses   1,216    9,993    6,493    -    (4,000)
Balance at end of period  $134,414   $127,302   $123,800   $119,044   $112,916 
                          
Allowance for credit losses/total loans   1.50%   1.58%   1.62%   1.65%   1.65%
Allowance for credit losses/total loans excluding PPP loans   1.62%   1.71%   1.72%   1.69%   1.66%
Allowance for credit losses/non-accruing loans   284%   196%   222%   250%   304%
                          
NET LOAN CHARGE-OFFS                         
Commercial real estate  $(635)  $(11,862)  $(6,959)  $(2,325)  $(1,391)
Commercial and industrial loans   (5,551)   (5,089)   (2,662)   (2,331)   110 
Residential mortgages   517    250    80    176    (677)
Home equity   (57)   141    (42)   (136)   106 
Auto and other consumer   (470)   (545)   (412)   (140)   (276)
Total, net  $(6,196)  $(17,105)  $(9,995)  $(4,756)  $(2,128)
                          
Net charge-offs (QTD annualized)/average loans   0.27%   0.80%   0.51%   0.26%   0.12%
Net charge-offs (YTD annualized)/average loans   0.29%   0.41%   0.51%   0.39%   0.30%

 

F-7

 

 

 

ASSET QUALITY ANALYSIS - UNAUDITED (F-8)

 

   September 30, 2020   December 31, 2020   March 31, 2021   June 30, 2021   September 30, 2021 
(in thousands)  Balance   Percent of
Total Loans		   Balance   Percent of
Total Loans		   Balance   Percent of
Total Loans		   Balance   Percent of
Total Loans		   Balance   Percent of
Total Loans		 
30-89 Days delinquent  $27,626    0.31%  $16,310    0.20%  $28,565    0.37%  $15,483    0.22%  $18,365    0.27%
90+ Days delinquent and still accruing   12,876    0.14%   11,450    0.14%   6,124    0.08%   3,129    0.04%   3,803    0.06%
Total accruing delinquent loans   40,502    0.45%   27,760    0.34%   34,689    0.45%   18,612    0.26%   22,168    0.33%
Non-accruing loans   47,390    0.53%   64,948    0.80%   55,817    0.73%   47,605    0.66%   37,147    0.54%
Total delinquent and non-accruing loans  $87,892    0.98%  $92,708    1.14%  $90,506    1.18%  $66,217    0.92%  $59,315    0.87%

 

 

F-8

 

 

 

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

 

        Sept. 30,   Dec. 31,   March 31,   June 30,   Sept. 30, 
(in thousands)       2020   2020   2021   2021   2021 
Total revenue from continuing operations  (A)    $97,018   $99,036   $101,286   $97,404   $145,003 
Adj: Net securities losses/(gains) (1)        1,017    (2,405)   31    484    166 
Adj: Net (gains) on sale of business operations and assets        -    (1,240)   -    -    (51,885)
Total adjusted revenue (2)  (B)    $98,035   $95,391   $101,317   $97,888   $93,284 
                               
Total non-interest expense from continuing operations  (C)    $72,843   $71,796   $78,154   $68,872   $69,460 
Less: Merger, restructuring and other expense        (5,316)   (523)   (3,486)   (6)   (1,425)
Adjusted non-interest expense (2)  (D)    $67,527   $71,273   $74,668   $68,866   $68,035 
                               
Pre-tax, pre-provision net revenue (PPNR) from continuing operations  (A-C)    $24,175   $27,240   $23,132   $28,532   $75,543 
Adjusted pre-tax, pre-provision net revenue (PPNR)  (B-D)     30,508    24,118    26,649    29,022    25,249 
                               
Net income       $21,225   $15,009   $13,031   $21,636   $63,749 
Adj: Net securities losses/(gains) (1)        1,017    (2,405)   31    484    166 
Adj: Net (gains) on sale of business operations and assets        -    (1,240)   -    -    (51,885)
Adj: Restructuring expense and other expense        5,316    523    3,486    6    1,425 
Adj: Loss from discontinued operations before income taxes        2,477    5,114    -    -    - 
Adj: Income taxes benefit/(expense)        (3,611)   (2,939)   (533)   (22)   12,240 
Total adjusted income (2)  (E)    $26,424   $14,062   $16,015   $22,104   $25,695 
                               
(in millions, except per share data)                              
Total average assets  (F)    $12,660   $12,446   $12,468   $12,417   $11,925 
Total average shareholders' equity  (G)     1,133    1,150    1,159    1,174    1,149 
Total average tangible shareholders' equity (2)(3)  (H)     1,091    1,110    1,125    1,141    1,118 
Total average tangible common shareholders' equity (2)(3)  (I)     1,071    1,103    1,125    1,141    1,118 
Total tangible shareholders' equity, period-end (2)(3)  (J)     1,138    1,153    1,142    1,143    1,147 
Total tangible common shareholders' equity, period-end (2)(3)  (K)     1,118    1,153    1,142    1,143    1,147 
Total tangible assets, period-end (2)(3)  (L)     12,574    12,803    12,724    12,241    11,815 
                               
Total common shares outstanding, period-end (thousands)  (M)     50,306    50,833    50,988    50,453    48,657 
Average diluted shares outstanding (thousands)  (N)     50,329    50,355    50,565    50,608    48,744 
                               
GAAP earnings per common share, diluted (2)       $0.42   $0.30   $0.26   $0.43   $1.31 
Adjusted earnings per common share, diluted (2)  (E/N)     0.53    0.28    0.32    0.44    0.53 
Tangible book value per common share, period-end (2)  (K/M)     22.22    22.68    22.39    22.66    23.58 
Total tangible shareholders' equity/total tangible assets (2)  (J/L)     9.05    9.01    8.98    9.34    9.71 
                               
Performance ratios (4)                              
GAAP return on equity       7.50%   5.22%   4.50%   7.37    22.18%
Adjusted return on equity (2)  (E/G)     9.33    4.89    5.53    7.53    8.94 
Return on tangible common equity (2)(5)        8.32    5.85    4.98    7.92    23.14 
Adjusted return on tangible common equity (2)(5)  (E+Q)/(I)     10.27    5.50    6.04    8.08    9.53 
GAAP return on assets        0.67    0.48    0.42    0.70    2.14 
Adjusted return on assets (2)        0.84    0.45    0.51    0.71    0.86 
PPNR from continuing operations/assets (2)        0.76    0.88    0.74    0.92    2.53 
Adjusted PPNR/assets (2)        0.97    0.78    0.85    0.93    0.85 
Efficiency ratio (2)(6)  (D-Q)/(B+O+R)     65.39    71.03    71.32    67.82    68.76 
Net interest margin, FTE        2.61    2.61    2.62    2.62    2.56 
                               
Supplementary data (in thousands)                              
Tax benefit on tax-credit investments (7)  (O)    $1,377   $1,334   $41   $79   $2,195 
Non-interest income charge on tax-credit investments (8)  (P)     (1,090)   (971)   (33)   (175)   (1,789)
Net income on tax-credit investments  (O+P)     287    363    9    (96)   406 
                               
Intangible amortization  (Q)    $1,530   $1,513   $1,319   $1,297   $1,296 
Fully taxable equivalent income adjustment  (R)     1,512    1,485    1,494    1,660    1,586 

 

 

(1)Net securities losses/(gains) include the change in fair value of the Company's equity securities in compliance with the Company's adoption of ASU 2016-01.
(2)Non-GAAP financial measure.
(3)Total tangible shareholders' equity is computed by taking total shareholders' equity less the intangible assets at period-end. Total tangible assets is computed by taking intangible assets at period-end.
(4)Ratios are annualized and based on average balance sheet amounts, where applicable. Quarterly data may not sum to year-to-date data due to rounding.
(5)Adjusted return on tangible equity is computed by dividing the total adjusted income/(loss) adjusted for the tax-effected amortization of intangible assets, assuming a 27% marginal rate, by tangible equity.
(6)Efficiency ratio is computed by dividing total adjusted tangible non-interest expense by the sum of total net interest income on a fully taxable equivalent basis and total adjusted non-interest income adjusted to include tax credit benefit of tax shelter investments. The Company uses this non-GAAP measure to provide important information regarding its operational efficiency.
(7)The tax benefit is the direct reduction to the income tax provision due to tax credits and deductions generated from investments in historic rehabilitation and low-income housing.
(8)The non-interest income charge is the reduction to the tax-advantaged investments, which are incurred as the tax credits are generated.

 

F-9

 

 

 

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND SUPPLEMENTARY DATA- UNAUDITED - (F-10)

 

      At or for the Nine Months Ended 
      Sept. 30,   Sept. 30, 
(in thousands)     2020   2021 
Total revenue from continuing operations  (A)  $284,053   $343,693 
Adj: Net securities losses (1)      9,925    681 
Adj: Net (gains) on sale of business operations and assets      -    (51,885)
Total adjusted revenue (2)  (B)  $293,978   $292,489 
              
Total non-interest expense from continuing operations  (C)  $768,443   $216,486 
Less: Merger, restructuring and other expense      (5,316)   (4,917)
Less: Goodwill impairment      (553,762)   - 
Adjusted non-interest expense (2)  (D)  $209,365   $211,569 
              
Pre-tax, pre-provision net revenue (PPNR) from continuing operations  (A-C)  $(484,390)  $127,207 
Adjusted pre-tax, pre-provision net revenue (PPNR)  (B-D)   84,613    80,920 
              
Net income/(loss)     $(548,026)  $98,416 
Adj: Net securities losses (1)      9,925    681 
Adj: Goodwill impairment      553,762    - 
Adj: Net (gains) on sale of business operations and assets      -    (51,885)
Adj: Restructuring expense and other expense      5,316    4,917 
Adj: Loss from discontinued operations before income taxes      21,741    - 
Adj: Income taxes benefit/(expense)      (26,403)   11,685 
Total adjusted income/(loss) (2)  (E)  $16,315   $63,814 
              
(in millions, except per share data)             
Total average assets  (F)  $13,001   $12,268 
Total average shareholders' equity  (G)   1,513    1,161 
Total average tangible shareholders' equity (2)(3)  (H)   1,104    1,128 
Total average tangible common shareholders' equity (2)(3)  (I)   1,083    1,128 
Total tangible shareholders' equity, period-end (2)(3)  (J)   1,138    1,147 
Total tangible common shareholders' equity, period-end (2)(3)  (K)   1,118    1,147 
Total tangible assets, period-end (2)(3)  (L)   12,574    11,815 
              
Total common shares outstanding, period-end (thousands)  (M)   50,306    48,657 
Average diluted shares outstanding (thousands)  (N)   50,290    49,963 
              
GAAP earnings/(loss) per common share, diluted (2)     $(10.90)  $1.97 
Adjusted earnings per common share, diluted (2)  (E/N)   0.32    1.28 
Tangible book value per common share, period-end (2)  (K/M)   22.22    23.58 
Total tangible shareholders' equity/total tangible assets (2)  (J/L)   9.05    9.71 
              
Performance ratios (4)             
GAAP return on equity      (48.26)%   11.30%
Adjusted return on equity (2)  (E/G)   1.44    7.33 
Return on tangible common equity (2)(5)      (67.09)   11.97 
Adjusted return on tangible common equity (2)(5)  (E+Q)/(I)   2.39    7.88 
GAAP return on assets      (5.63)   1.07 
Adjusted return on assets (2)      0.17    0.69 
PPNR from continuing operations/assets (2)      (4.97)   1.38 
Adjusted PPNR/assets (2)      0.87    0.88 
Efficiency ratio (2)(6)  (D-Q)/(B+O+R)   67.72    69.32 
Net interest margin, FTE      2.75    2.60 
              
Supplementary data (in thousands)             
Tax benefit on tax-credit investments (7)  (O)  $3,364   $2,315 
Non-interest income charge on tax-credit investments (8)  (P)   (2,673)   (1,996)
Net income on tax-credit investments  (O+P)   691    319 
              
Intangible amortization  (Q)  $4,668   $3,912 
Fully taxable equivalent income adjustment  (R)   4,917    4,739 

 

 

(1)Net securities (gains)/losses include the change in fair value of the Company's equity securities in compliance with the Company's adoption of ASU 2016-01.
(2)Non-GAAP financial measure.
(3)Total tangible shareholders' equity is computed by taking total shareholders' equity less the intangible assets at period-end. Total tangible assets is computed by taking intangible assets at period-end.
(4)Ratios are annualized and based on average balance sheet amounts, where applicable. Quarterly data may not sum to year-to-date data due to rounding.
(5)Adjusted return on tangible equity is computed by dividing the total adjusted income/(loss) adjusted for the tax-effected amortization of intangible assets, assuming a 27% marginal rate, by tangible equity.
(6)Efficiency ratio is computed by dividing total adjusted tangible non-interest expense by the sum of total net interest income on a fully taxable equivalent basis and total adjusted non-interest income adjusted to include tax credit benefit of tax shelter investments. The Company uses this non-GAAP measure to provide important information regarding its operational efficiency.
(7)The tax benefit is the direct reduction to the income tax provision due to tax credits and deductions generated from investments in historic rehabilitation and low-income housing.
(8)The non-interest income charge is the reduction to the tax-advantaged investments, which are incurred as the tax credits are generated.

 

F-10