EX-99.2 4 d344102dex992.htm EX-99.2 EX-99.2

Exhibit 99.2

Bank Leumi Le Israel Corporation and Subsidiaries

Consolidated Statements of Financial Condition

(Dollars in thousands)

(Unaudited)

 

     March 31 December 31  

(Dollars in thousands)

   2022     2021  

Assets

    

Cash and due from banks

   $ 443,588     $ 601,052  

Securities:

    

Held-to-maturity

     534,317       538,645  

Available-for-sale

     844,538       1,095,961  

Loans, net of allowance for loan losses of $60,365 as of March 31, 2022 and $70,104 as of December 31, 2021

     5,940,687       5,738,703  

Fixed assets

     117,429       41,525  

Bank owned life insurance

     126,861       126,299  

Accrued interest receivable

     25,717       27,811  

Deferred tax assets, net

     65,952       38,896  

Other assets

     103,255       99,433  
  

 

 

   

 

 

 

Total assets

     8,202,344       8,308,325  
  

 

 

   

 

 

 

Liabilities and shareholders’ equity

    

Liabilities:

    

Deposits:

    

Non interest-bearing deposits

     4,498,838       4,516,316  

Interest-bearing deposits

     2,530,892       2,575,578  
  

 

 

   

 

 

 

Total deposits

     7,029,730       7,091,894  

Borrowings from the Federal Home Loan Bank

     103,794       103,794  

Other liabilities

     202,206       200,994  
  

 

 

   

 

 

 

Total liabilities

     7,335,730       7,396,682  
  

 

 

   

 

 

 

Shareholders’ equity:

    

Capital stock–$0.10 par value; authorized–24,000,000 shares; issued and outstanding–22,317,655 shares

     2,231       2,231  

Additional paid-in capital

     446,803       446,557  

Retained earnings

     501,440       480,464  

Accumulated other comprehensive loss

     (83,860     (18,185
  

 

 

   

 

 

 

Total shareholders’ equity

     866,614       911,067  
  

 

 

   

 

 

 

Non-controlling interest

     —         576  
  

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 8,202,344     $ 8,308,325  
  

 

 

   

 

 

 

 

1


Bank Leumi Le Israel Corporation and Subsidiaries

Consolidated Statements of Net Income

(Dollars in thousands)

 

     Three-Month Periods
Ended March 31
 

(Dollars in thousands)

   2022      2021  

Interest income:

     

Interest on loans

   $ 56,040      $ 51,679  

Interest on securities

     8,516        8,433  

Interest–other

     185        67  
  

 

 

    

 

 

 

Total interest income

     64,741        60,179  
  

 

 

    

 

 

 

Interest expense:

     

Interest on deposits

     1,374        2,018  

Interest–other

     359        570  
  

 

 

    

 

 

 

Total interest expense

     1,733        2,588  
  

 

 

    

 

 

 

Net interest income

     63,008        57,591  

Less: provision for loan losses

     2,824        1,053  
  

 

 

    

 

 

 

Net interest income after provision for loan losses

     60,184        56,538  
  

 

 

    

 

 

 

Non-interest income:

     

Commissions and fees

     15,308        13,492  

Gain (Loss) on sale of available-for-sale securities, net

     3,307        (258

Gain on foreign exchange transactions, net

     1,311        1,154  

Other income, net

     1,564        1,838  
  

 

 

    

 

 

 

Total non-interest income

     21,490        16,226  
  

 

 

    

 

 

 

Non-interest expense:

     

Compensation and employee benefits

     29,308        28,249  

Equipment and data processing

     8,871        8,453  

Professional services

     6,249        4,118  

Occupancy

     2,850        2,932  

Other

     3,867        2,324  
  

 

 

    

 

 

 

Total non-interest expense

     51,145        46,076  
  

 

 

    

 

 

 

Income before taxes

     30,529        26,688  

Income tax expense

     9,546        6,405  
  

 

 

    

 

 

 

Net income

   $ 20,983      $ 20,283  
  

 

 

    

 

 

 

Less: net income attributable to non-controlling interest

     7        10  
  

 

 

    

 

 

 

Net income attributable to the controlling interest

   $ 20,976      $ 20,273  
  

 

 

    

 

 

 

 

2


Bank Leumi Le Israel Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

(Dollars in thousands)

 

     Three-Months
Ended March 31
 

(Dollars in thousands)

   2022     2021  

Net income

   $ 20,976     $ 20,273  

Other comprehensive income (loss):

    

Unrealized actuarial gain on pension and other post-retirement benefits, net of tax

     1,116       —    

Unrealized loss on cash flow hedges, net of tax

     (13,576     (7,752

Unrealized loss on available-for-sale securities, net of tax

     (53,215     (33,662
  

 

 

   

 

 

 

Comprehensive loss

   $ (44,699   $ (21,141
  

 

 

   

 

 

 

 

3


Bank Leumi Le Israel Corporation and Subsidiaries

Consolidated Statements of Changes in Shareholders’ Equity

(Dollars in thousands)

For the Three Months Ended March 31, 2022

 

     Capital
stock
     Additional
paid-in
capital
     Retained
earnings
     Accumulated
other
comprehensive
income (loss)
    Total     Non-
controlling
interest
(“NCI”)
    Total with
NCI
 

Balances as of December 31, 2021

   $ 2,231      $ 446,557      $ 480,464      $ (18,185   $ 911,067     $ 576     $ 911,643  

Share-based compensation

     —           246        —          —         246       —         246  

Comprehensive income:

                 

Net income

     —          —          20,976        —         20,976       7       20,983  

Other comprehensive income (loss)

     —          —          —          (65,675     (65,675     —         (65,675

Effect of subsidiary reverse share split

     —          —          —          —         —         (583     (583
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Balances as of March 31, 2022

   $ 2,231      $ 446,803      $ 501,440      $ (83,860   $ 866,614     $ —       $ 866,614  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

For the Three Months Ended March 31, 2021

 

     Capital
stock
     Additional
paid-in
capital
     Retained
earnings
     Accumulated
other
comprehensive
income (loss)
    Total     Non-
controlling
interest
(“NCI”)
     Total with
NCI
 

Balances as of December 31, 2020

   $ 2,231      $ 445,567      $ 401,284      $ 17,805     $ 866,887     $ 539      $ 867,426  

Share-based compensation

     —          246        —          —         246       —          246  

Comprehensive income:

                  

Net income

     —          —          20,273        —         20,273       10        20,283  

Other comprehensive income (loss)

     —          —          —          (41,414     (41,414     —          (41,414
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Balances as of March 31, 2021

   $ 2,231      $ 445,813      $ 421,557      $ (23,609   $ 845,992     $ 549      $ 846,541  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

 

4


Bank Leumi Le Israel Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Dollars in thousands)

 

     Three-Month Periods
Ended March 31
 

(Dollars in thousands)

   2022     2021  

Operating activities

    

Net income

   $ 20,976     $ 20,273  

Adjustments to reconcile net income to net cash provided by operating activities:

    

Provision for loan losses

     2,824       1,053  

Net income attributable to non-controlling interest

     7       10  

Depreciation of fixed assets

     3,105       3,223  

Net (accretion) amortization on securities

     (1,443     171  

Net (gain) loss on sale of securities

     (3,307     258  

Increase in bank owned life insurance, net

     (562     (595

Decrease (increase) in accrued interest receivable

     2,094       (2,371

Increase in other assets

     (2,980     (23,617

Decrease in other liabilities

     (93,600     (16,421
  

 

 

   

 

 

 

Net cash used in operating activities

     (72,886     (18,016
  

 

 

   

 

 

 

Investing activities

    

Proceeds from sales, redemptions and paydowns of available-for-sale securities

     252,215       265,466  

Purchases of available-for-sale securities

     (74,999     (649,242

Proceeds from paydowns and redemptions of held-to-maturity securities

     5,798       46,128  

Purchases of held-to-maturity securities

     —         (92,746

Net (purchase) sales of Federal Home Loan Bank capital stock

     (234     2,385  

Net (increase) decrease in loans

     (204,808     16,630  

Purchases of equipment

     (407     (820
  

 

 

   

 

 

 

Net cash used in investing activities

     (22,435     (412,199
  

 

 

   

 

 

 

Financing activities

    

Net (decrease) increase in deposits

     (62,163     1,111,901  

Decrease in borrowings from Federal Home Loan Bank

     —         (53,000
  

 

 

   

 

 

 

Net cash provided by financing activities

     (62,163     1,058,901  
  

 

 

   

 

 

 

Net (decrease) increase in cash and due from banks

     (157,464     628,692  

Cash and due from banks–beginning of year

     601,052       82,205  
  

 

 

   

 

 

 

Cash and due from banks and restricted cash–end of period

   $ 443,588     $ 710,897  
  

 

 

   

 

 

 

 

5


Bank Leumi Le Israel Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, Unaudited)

1. Organization and Summary of Significant Accounting Policies

Bank Leumi Le-Israel Corporation (“BLLC” or “the Company”), a corporation organized in the state of New York BLLC, through its subsidiary Bank Leumi USA (“BLUSA”) conducts its U.S. operations through branches located in New York, Illinois, California and Florida. BLUSA is a full service community bank focused on providing financial services to its customers in its geographical markets. The financial services provided to the customers and management of its investment portfolio are BLLC’s and BLUSA’s primary sources of revenue.

Included in the consolidation is Leumi Investment Services Inc. (“LISI”), a wholly owned subsidiary of BLUSA. LISI is a registered securities broker-dealer with the Securities and Exchange Commission and is a member of the Financial Industry Regulatory Authority (“FINRA”).

The accounting policies of BLLC and its subsidiaries conform to accounting principles generally accepted in the United States of America (“U.S. GAAP”). A summary of the accounting and reporting policies follows:

Basis of Presentation and Consolidation

The consolidated financial statements include the accounts of BLLC and its subsidiaries. All significant intercompany transactions are eliminated in consolidation. Certain reclassifications have been made to the prior period’s financial statements and notes to conform to the current period’s presentation.

Use of Estimates in the Preparation of the Consolidated Financial Statements

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

Actual results could differ from those estimates. Significant accounting estimates include estimates for the allowance for loan losses, derivatives, securities and evaluation of other-than-temporary impairment, the realization of deferred tax assets, calculation of pension and post-retirement obligations and litigation reserves.

Recent Accounting Pronouncements

In February 2016, the FASB issued No. ASU 2016-02, Leases (Topic 842), which amends the existing standards for lease accounting effectively bringing most leases onto the balance sheets of the related lessees. The ASU is effective for public business entities for interim and annual reporting periods beginning after December 15, 2018. In June 2020, the FASB deferred the effective date for private entities to interim and annual reporting periods beginning after December 15, 2021, with early adoption permitted. Effective January 1, 2022, BLLC adopted ASU 2016-02, Leases (Topic 842) and recorded a right of use asset of approximately $78.6 million and lease obligations of approximately $94.3 million. The right of use asset is recorded in Fixed Asset and the lease obligation is recorded in Other Liabilities.

 

6


2. Investment in Debt Securities

The amortized cost and fair value of investment in debt securities as of the applicable period end are as follows:

 

     March 31, 2022  

(Dollars in thousands)

   Amortized
cost
     Gross
unrealized
gains
     Gross
unrealized
losses
     Estimated
fair value
 

Available-for-sale securities:

           

Mortgage related:

           

Agency-backed

   $ 313,041      $ —        $ (21,175    $ 291,866  

Private label

     13,943        3        (323      13,623  

Other securities:

           

U.S. government treasuries

     341,280        —          (37,285      303,995  

U.S. federal agencies

     75,000        —          (11,242      63,758  

Foreign governments

     25,000        582        —          25,582  

State and municipal

     105,818        976        (8,615      98,179  

Corporate and bank debt securities

     52,188        —          (4,653      47,535  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total available-for-sale securities

   $ 926,270      $ 1,561      $ (83,293    $ 844,538  
  

 

 

    

 

 

    

 

 

    

 

 

 

Held-to-maturity securities:

           

Mortgage related

           

Agency-backed

     8,089        3        (1,338      6,754  

Other securities

           

U.S. federal agencies

     246,810        —          (43,989      202,821  

State and municipal

     279,418        4,034        (24,720      258,732  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total held-to-maturity securities

   $ 534,317      $ 4,037      $ (70,047    $ 468,307  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

7


     December 31, 2021  

(Dollars in thousands)

   Amortized
cost
     Gross
unrealized
gains
     Gross
unrealized
losses
     Estimated
fair value
 

Available-for-sale securities:

           

Mortgage related:

           

Agency-backed

   $ 408,721      $ 3,384      $ (2,708    $ 409,397  

Private label

     15,741        69        (37      15,773  

Other securities:

           

U.S. government treasuries

     341,223        —          (16,291      324,932  

U.S. federal agencies

     74,911        —          (2,801      72,110  

Foreign governments

     25,000        1,432        —          26,432  

Corporate and bank debt securities

     81,224        1,521        (780      81,965  

State and municipal securities

     156,471        8,909        (28      165,352  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total available-for-sale securities

   $ 1,103,291      $ 15,315      $ (22,645    $ 1,095,961  
  

 

 

    

 

 

    

 

 

    

 

 

 

Held-to-maturity securities:

           

Mortgage related

           

Agency-backed

     13,157        48        (1,226      11,979  

Other securities

           

U.S. federal agencies

     246,762        —          (13,722      233,040  

State and municipal

     278,726        18,827        (400      297,153  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total held-to-maturity securities

   $ 538,645      $ 18,875      $ (15,348    $ 542,172  
  

 

 

    

 

 

    

 

 

    

 

 

 

3. Loans

BLLC monitors credit quality by evaluating various attributes and utilizes similar information in the assessment of the adequacy of the allowance for credit losses. The following sections provide the credit quality indicators BLLC most closely monitors. All loans are subject to individual risk assessment using BLLC’s internal credit risk ratings. The internal credit risk ratings are aligned to Pass and Criticized categories. The Criticized category includes Special Mention, Substandard and Doubtful categories, which are defined by banking regulatory agencies. Criticized credits are analyzed on a quarterly basis.

Credit Quality

The summarized gross loan balance of Criticized loans by portfolio class as of the applicable period end is as follows:

 

     March 31, 2022      December 31, 2021  

(Dollars in thousands)

   Special
mention
     Substandard      Doubtful      Special
mention
     Substandard      Doubtful  

Healthcare

   $ 15,432      $ 12,705      $ —        $ 30,592      $ 12,704      $ —    

Real estate

     61,989        32,489        —          73,678        21,398        —    

Middle market and other

     26,195        13,209        —          10,071        36,154        —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total credit risk by segment

   $ 103,616      $ 58,403      $ —        $ 114,341      $ 70,256      $ —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

8


4. Allowance for Loan Losses

The following tables provide information on the activity in the allowance for loan losses by the respective loan portfolio class for the three months ended March 31.

 

     Three Months Ending March 31, 2022  

(in thousands)

   Healthcare      Real estate      Middle
market &
other
     Total  

Balance at beginning of year

   $ 14,487      $ 28,968      $ 26,649      $ 70,104  

Provision (credit)

     (1,012      (6,886      10,722        2,824  

Charge-offs

     —          (783      (11,995      (12,778

Recoveries

     192        6        17        215  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net (charge-offs)/recoveries

     192        (777      (11,978      (12,563
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance at end of period

     13,667        21,305        25,393        60,365  
  

 

 

    

 

 

    

 

 

    

 

 

 

Ending balance: individually and collectively evaluated for impairment

   $ 617,097      $ 3,079,647      $ 2,316,259      $ 6,013,003  
  

 

 

    

 

 

    

 

 

    

 

 

 

Less: deferred fees net

  

 

 

 

  

 

 

 

  

 

 

 

     (11,951
           

 

 

 

Total gross loans

  

 

 

 

  

 

 

 

  

 

 

 

   $ 6,001,052  
           

 

 

 

 

     Three Months Ending March 31, 2021  

(in thousands)

   Healthcare      Real estate      Middle
market &
other
     Total  

Balance at beginning of year

   $ 27,322      $ 30,362      $ 21,750      $ 79,434  

Provision (credit)

     (30      1,504        (421      1,053  

Charge-offs

     (4,569      (2,349      (3,333      (10,251

Recoveries

     150        6        1        157  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net (charge-offs)/recoveries

     (4,419      (2,343      (3,332      (10,094
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance at end of period

     22,873        29,523        17,997        70,393  
  

 

 

    

 

 

    

 

 

    

 

 

 

Ending balance: individually and collectively evaluated for impairment

   $ 765,706      $ 2,464,591      $ 2,175,039      $ 5,405,336  
  

 

 

    

 

 

    

 

 

    

 

 

 

Less: deferred fees, net

              (15,200
           

 

 

 

Total gross loans

            $ 5,390,136  
           

 

 

 

 

9