8-K
Beacon Financial Corp (BBT)
UNITED STATES
SECURITIES AND EXCHANGECOMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 25, 2024
BERKSHIRE
HILLS BANCORP, INC.
(Exact Name of Registrant as Specified in its Charter)
| Delaware | 001-15781 | 04-3510455 |
|---|---|---|
| (State or Other Jurisdiction)<br><br> <br>of Incorporation) | (Commission File No.) | (I.R.S. Employer<br><br> <br>Identification No.) |
| 60<br> State Street, Boston,<br> Massachusetts | 02109 | |
| --- | --- | |
| (Address of Principal Executive<br> 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<br> pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ¨ | Soliciting<br> material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ¨ | Pre-commencement<br> communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ¨ | Pre-commencement<br> communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common<br> stock, par value $0.01 per share | BHLB | New<br> York Stock Exchange |
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 2.02 | Results of Operations and Financial Condition |
|---|
On January 25, 2024, Berkshire Hills Bancorp, Inc. (the “Company”), the holding company for Berkshire Bank, announced its financial results for the fourth quarter and year ended December 31, 2023. The news release containing the financial results is included as Exhibit 99.1 and shall not be deemed “filed” for any purpose.
The Company conducted a conference call/webcast on January 25, 2024, 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 February 1, 2024. The webcast will be available on the Company’s website at ir.berkshirebank.com for an extended period of time.
| Item 7.01 | Regulation FD Disclosure |
|---|
The Company made available slides for a presentation that the Company utilized in connection with its conference call. A copy of the presentation can be found on the Company’s website at ir.berkshirebank.com.
| Item 8.01 | Other Events |
|---|
The Company also announced that its Board of Directors has approved a stock repurchase program pursuant to which the Company may repurchase shares of Company common stock at a total cost of up to $40 million through December 31, 2024. The Company may conduct the repurchases through open market purchases, block trades, unsolicited negotiated transactions, pursuant to a trading plan that may be adopted in accordance with Securities and Exchange Commission Rule 10b5-1, or in any other manner that complies with the provisions of the Securities Exchange Act of 1934, as amended. The news release containing information about the stock repurchase program is included as Exhibit 99.1 and shall not be deemed "filed" for any purpose.
| Item 9.01 | Financial Statements and Exhibits |
|---|
| (a) | Financial Statements of Businesses Acquired. Not applicable. | |
|---|---|---|
| (b) | Pro Forma Financial Information. Not applicable. | |
| (c) | Shell Company Transactions. Not applicable. | |
| (d) | Exhibits. | |
| Exhibit No. | Description | |
| 99.1 | News Release dated January 25, 2024 | |
| 104.1 | Cover Page for this Current Report on Form 8-K, formatted in Inline XBRL |
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 25, 2024 | By: | /s/ Nitin J. Mhatre |
| Nitin J. Mhatre **** | ||
| President and Chief Executive Officer |
Exhibit 99.1
Berkshire Hills Reports Fourth Quarter 2023Results
Announces $40 Million Share Repurchase Authorization
| · | Fourth quarter loss of $1 million, ($0.03) per share; operating income of<br>$20 million, $0.47 per share |
|---|---|
| · | $267 million securities sale resulting in $25.1 million pre-tax non-operating<br>loss |
| --- | --- |
| · | Net loan charge-offs and non-performing assets decreased 18% linked quarter |
| --- | --- |
| · | TCE ratio of 8.0% and CET1 ratio of 12.0% |
| --- | --- |
| · | Tangible book value per share of $22.82, up $1.57, or 7%, in the quarter |
| --- | --- |
BOSTON, January 25, 2024 - Berkshire Hills Bancorp, Inc. (NYSE: BHLB) today reported results for the fourth quarter of 2023. These results along with comparison periods are summarized below:
| Three Months Ended | Twelve Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ($ in millions, except per share data) | Dec.31, 2023 | Sep. 30, 2023 | Dec. 31, 2022 | Dec.31, 2023 | Dec. 31, 2022 | ||||||||||
| Net (loss) income | $ | (1.4 | ) | $ | 19.5 | $ | 30.5 | $ | 69.6 | $ | 92.5 | ||||
| Per share | (0.03 | ) | 0.45 | 0.69 | 1.60 | 2.02 | |||||||||
| Operating earnings^1^ | 20.2 | 21.5 | 28.3 | 93.2 | 100.5 | ||||||||||
| Per share | 0.47 | 0.50 | 0.64 | 2.14 | 2.19 | ||||||||||
| Net interest income, non FTE | $ | 88.4 | $ | 90.3 | $ | 102.1 | $ | 369.0 | $ | 344.6 | |||||
| Net interest income, FTE | 90.4 | 92.3 | 103.9 | 376.9 | 351.3 | ||||||||||
| Net interest margin, FTE | 3.11 | % | 3.18 | % | 3.84 | % | 3.27 | % | 3.26 | % | |||||
| Non-interest income | (8.4 | ) | 17.5 | 15.7 | 42.8 | 68.9 | |||||||||
| Operating non-interest income^1^ | 16.7 | 17.5 | 15.5 | 67.8 | 71.0 | ||||||||||
| Non-interest expense | $ | 79.0 | $ | 76.5 | $ | 70.0 | $ | 301.5 | $ | 288.7 | |||||
| Operating non-interest expense^1^ | 75.3 | 73.9 | 72.6 | 295.2 | 279.8 | ||||||||||
| Efficiency ratio^1^ | 67.8 | % | 65.1 | % | 58.3 | % | 63.9 | % | 64.3 | % | |||||
| Average balances | |||||||||||||||
| Loans | $ | 8,990 | $ | 8,952 | $ | 8,082 | $ | 8,814 | $ | 7,612 | |||||
| Deposits | 9,936 | 9,630 | 9,731 | 9,704 | 9,797 | ||||||||||
| Period-end balances | |||||||||||||||
| Loans | 9,040 | 8,984 | 8,335 | 9,040 | 8,335 | ||||||||||
| Deposits | 10,633 | 9,981 | 10,327 | 10,633 | 10,327 |
See non-GAAP financial measures and reconciliation to GAAP measures beginning on page 12.
1
Berkshire CEO Nitin Mhatre stated, “Through the final quarter of the year, we continued to strengthen our balance sheet while maintaining strong credit performance, cost discipline and capital. Despite industry turbulence earlier in the year, full year operating EPS was relatively unchanged from 2022. Our year-end securities sale reduced wholesale borrowings, improving our funding profile as we move into 2024. We continue to benefit from disruption in the competitive landscape and have recruited experienced bankers to further support deposit gathering activities. Our Board has authorized additional share repurchases in 2024 to balance return of capital while supporting franchise growth. I’m confident that Berkshire is well positioned to deliver the benefits of our strategic initiatives to our shareholders and communities.”
CFO David Rosato added, “Fourth quarter operating earnings were $20.2 million, decreasing $1.3 million linked quarter. Net interest margin of 3.11 percent decreased 7 basis points as funding cost increases outpaced loan yield expansion. However, our full year margin was steady at 3.27%. Operating non-interest income decreased by 5 percent linked quarter and increased 8 percent year-over-year. Non-interest expense increased 3 percent linked quarter on a GAAP basis and 2 percent on an operating basis. We continue to improve oversight of our operating costs and are pursuing further efficiency improvements in 2024 while reinvesting in front-line revenue generating teams. Non-operating expenses of $3.7 million were primarily severance charges related to a workforce reduction. We sold lower-yielding securities with a market value of $267 million near period-end and proceeds were used to reduce borrowings by a similar amount. The securities sale resulted in a $25.1 million ($19.0 million after-tax) non-operating loss. Total shareholders’ equity was not impacted by the securities sale and our common equity Tier 1 ratio remained a healthy 12.0% percent at year-end.”
The Board of Directors has authorized the repurchase of $40 million of common stock through December 31, 2024. This would result in the repurchase of approximately 4% of outstanding shares based on the current share price.
| As of and For the Three Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Dec. 31, 2023 | Sep. 30, 2023 | Dec. 31, 2022 | |||||||
| Asset Quality | |||||||||
| Net loan charge-offs to average loans | 0.20 | % | 0.24 | % | 0.58 | % | |||
| Non-performing loans to total loans | 0.24 | % | 0.30 | % | 0.37 | % | |||
| Returns | |||||||||
| Return on average assets | (0.05 | )% | 0.66 | % | 1.10 | % | |||
| Return<br>on tangible common equity, including unrealized losses on AFS securities ^1^ | (0.24 | )% | 8.45 | % | 13.36 | % | |||
| Return<br>on tangible common equity, excluding unrealized losses on AFS securities ^1^ | (0.18 | )% | 6.76 | % | 10.59 | % | |||
| Capital Ratios^2^ | |||||||||
| Tangible common equity/tangible assets^1^ | 8.0 | % | 7.7 | % | 8.0 | % | |||
| Tier 1 leverage | 9.6 | % | 9.8 | % | 10.2 | % | |||
| Common equity Tier 1 | 12.0 | % | 12.1 | % | 12.4 | % | |||
| Tier 1 risk-based | 12.3 | % | 12.3 | % | 12.6 | % | |||
| Total risk-based | 14.4 | % | 14.4 | % | 14.6 | % | |||
| 1. | See non-GAAP measures and reconciliation to GAAP beginning on<br>beginning on page 12. All performance ratios are annualized and are based on average balance sheet amounts, where applicable. 2. Presented<br>as estimated for December 31, 2023 and actual for the remaining periods. | ||||||||
| --- | --- |
2
Berkshire Hills Bancorp, Inc. (NYSE: BHLB) is the parent company of Berkshire Bank, a relationship-driven, community-focused bank with $12.4 billion in assets and 96 financial centers in New England and New York. Berkshire is headquartered in Boston and offers commercial, retail, wealth, and private banking solutions.
4Q 2023 Financial Highlights
Income Statement
| · | GAAP loss of $1.4 million, or $(0.03) per share. |
|---|---|
| o | Operating earnings totaled $20.2 million, or $0.47 per share. |
| --- | --- |
| · | Net interest income totaled $88.4 million in 4Q23 compared<br>to $90.3 million in 3Q23. |
| --- | --- |
| · | Net interest margin decreased 7 basis points from 3Q23 to<br>3.11% reflecting: |
| --- | --- |
| o | Higher cost of funds (increase of 17 basis points). |
| --- | --- |
| · | Includes higher deposit costs (increase of 30 basis points). |
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| o | Higher yields on the loan portfolio (increase of 9 basis points). |
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| · | Provision for credit losses on loans totaled $7.0 million. |
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| o | Allowance for credit losses on loans increased $2.6 million. |
| --- | --- |
| o | Net loan charge-offs totaled $4.4 million. |
| --- | --- |
| o | Net annualized loan charge-off ratio of 0.20%. |
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| · | Non-interest income excluding the $25.1 million loss on<br>sale of AFS securities totaled $16.7 million in 4Q23 compared to $17.5 million in 3Q23. |
| --- | --- |
| o | Deposit related fee revenue decreased $311 thousand. |
| --- | --- |
| o | Loan related fees decreased $821 thousand primarily due to lower swap revenue. |
| --- | --- |
| o | Gain on SBA loan sales decreased $166 thousand. |
| --- | --- |
| o | Wealth management revenue decreased $87 thousand. At December 31, 2023, wealth assets under management were $1.4 billion. |
| --- | --- |
| o | Other non-interest income decreased $641 thousand due to higher tax credit amortization. |
| --- | --- |
| · | Non-interest expense in 4Q23 totaled $79.0 million on<br>a GAAP basis and $75.3 million on an operating basis. These measures were $76.5 million and $73.9 million in 3Q23. |
| --- | --- |
| o | Non-operating expense totaled $3.7 million in 4Q23, and was primarily severance charges related to a workforce reduction. |
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| o | Compensation and benefits expense decreased $60 thousand. |
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| o | Occupancy and equipment expense decreased $263 thousand. |
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| o | Technology and communications expense increased $710 thousand. |
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| o | Professional services expense increased $994 thousand. |
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| o | The efficiency ratio was 67.8% for 4Q23 compared to 65.1% for 3Q23. |
| --- | --- |
| · | Income tax expense was a benefit of $4.5 million in 4Q23,<br>including a $7.1 million credit related to net non-operating items. The effective tax rate was 11.1% for the year 2023 compared to 18.7%<br>for the year 2022. |
| --- | --- |
Loans
| · | Commercial real estate loans totaled $4.5 billion<br>at December 31, 2023, a $73 million increase from September 30, 2023. |
|---|
3
| o | Average commercial real estate loans totaled $4.5 billion in 4Q23, an $84 million increase from 3Q23. |
|---|---|
| · | Commercial and industrial loans totaled $1.4 billion at<br>December 31, 2023, a $31 million decrease from September 30, 2023. |
| --- | --- |
| o | Average commercial and industrial loans totaled $1.4 billion in 4Q23, a $69 million decrease from 3Q23. |
| --- | --- |
| · | Residential mortgage loans totaled $2.7 billion at December 31,<br>2023, a $32 million increase from September 30, 2023. |
| --- | --- |
| o | Average residential mortgage loans totaled $2.7 billion in 4Q23, a $38 million increase from 3Q23. |
| --- | --- |
| · | Consumer loans totaled $487 million at December 31,<br>2023, a $19 million decrease from September 30, 2023. |
| --- | --- |
| o | Average consumer loans totaled $498 million in 4Q23, a $15 million decrease from 3Q23. |
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| · | Non-performing loans to total loans was 0.24% at December 31,<br>2023 compared to 0.30% at September 30, 2023. |
| --- | --- |
| · | The allowance for credit losses to total loans was 1.17%<br>at December 31, 2023, compared to 1.14% at September 30, 2023. |
| --- | --- |
Deposits
| · | Non-interest bearing deposits totaled $2.5 billion at December 31,<br>2023, a $61 million decrease from September 30, 2023. |
|---|---|
| o | Average non-interest bearing deposits totaled $2.5 billion in 4Q23, a $65 million decrease from 3Q23. |
| --- | --- |
| · | Time deposits totaled $2.7 billion at December 31,<br>2023, a $241 million increase from September 30, 2023. |
| --- | --- |
| o | Average time deposits totaled $2.6 billion in 4Q23, a $118 million increase from 3Q23. |
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4Q 2023 Corporate Responsibility Highlights
| · | Berkshire<br> was named one of America’s Best Regional Banks by Newsweek and listed in the<br> Human Rights Campaign’s Corporate Equality Index. |
|---|---|
| · | Berkshire<br> maintained its top quartile ESG rating performance and announced an innovative new partnership<br> between Berkshire Bank’s Center for Women, Wellness & Wealth and the Massachusetts<br> General Hospital’s Dementia Care Collaborative. |
| --- | --- |
| · | Berkshire implemented a climate risk management program<br>to strengthen governance of climate matters and achieved 100% renewable electricity use at its premises as of year-end. |
| --- | --- |
Conference Call and Investor Presentation. Berkshire will conduct a conference call/webcast at 9:00 a.m. eastern time on Thursday, January 25, 2024 to discuss results for the quarter and provide guidance about expected future results. Instructions for listening to the call may be found at the Company’s website at ir.berkshirebank.com. Additional materials relating to the call may also be accessed at this website. The call will be archived at the website and will be available for an extended period of time.
4
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,” “remain,” “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.
INVESTOR CONTACT
Kevin Conn
Investor Relations
617.641.9206
kaconn@berkshirebank.com
MEDIA CONTACT
Gary Levante
Corporate Communications
413.447.1737
glevante@berkshirebank.com
5
SELECTED FINANCIAL HIGHLIGHTS (1)
| At or for the Quarters Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Dec. 31, | Sept. 30, | June 30, | March 31, | Dec. 31, | |||||||||||
| 2023 | 2023 | 2023 | 2023 | 2022 | |||||||||||
| NOMINAL AND PER SHARE DATA | |||||||||||||||
| Net (loss)/earnings per common share, diluted | $ | (0.03 | ) | $ | 0.45 | $ | 0.55 | $ | 0.63 | $ | 0.69 | ||||
| Operating earnings per common share, diluted (2)(3) | 0.47 | 0.50 | 0.55 | 0.63 | 0.64 | ||||||||||
| Net (loss)/income, (thousands) | (1,445 | ) | 19,545 | 23,861 | 27,637 | 30,505 | |||||||||
| Operating net income, (thousands) (2)(3) | 20,190 | 21,516 | 23,878 | 27,608 | 28,254 | ||||||||||
| Net interest income, (thousands) non FTE | 88,421 | 90,334 | 92,759 | 97,533 | 102,092 | ||||||||||
| Net interest income, FTE (5) | 90,442 | 92,314 | 94,721 | 99,441 | 103,937 | ||||||||||
| Total common shares outstanding, end of period (thousands) | 43,501 | 43,822 | 44,033 | 44,411 | 44,361 | ||||||||||
| Average diluted shares, (thousands) | 43,101 | 43,347 | 43,532 | 44,036 | 44,484 | ||||||||||
| Total book value per common share, end of period | 23.27 | 21.70 | 22.11 | 22.42 | 21.51 | ||||||||||
| Tangible book value per common share, end of period (2)(3) | 22.82 | 21.23 | 21.60 | 21.89 | 20.95 | ||||||||||
| Dividends per common share | 0.18 | 0.18 | 0.18 | 0.18 | 0.18 | ||||||||||
| Dividend payout ratio | (543.94 | )% | 40.56 | % | 33.47 | % | 28.98 | % | 26.59 | % | |||||
| PERFORMANCE RATIOS (4) | |||||||||||||||
| Return on equity, including unrealized losses on AFS securities | (0.60 | )% | 7.91 | % | 9.51 | % | 11.31 | % | 12.63 | % | |||||
| Return on equity, excluding unrealized losses on AFS securities | (0.47 | ) | 6.35 | 7.82 | 9.11 | 10.06 | |||||||||
| Operating return on equity, including unrealized losses on AFS securities (2)(3) | 8.36 | 8.71 | 9.51 | 11.30 | 11.70 | ||||||||||
| Operating return on equity, excluding unrealized losses on AFS securities (2)(3) | 6.51 | 6.99 | 7.82 | 9.10 | 9.32 | ||||||||||
| Return on tangible common equity, including unrealized losses on AFS securities (2)(3) | (0.24 | ) | 8.45 | 10.09 | 11.96 | 13.36 | |||||||||
| Return on tangible common equity, excluding unrealized losses on AFS securities (2)(3) | (0.18 | ) | 6.76 | 8.26 | 9.59 | 10.59 | |||||||||
| Operating return on tangible common equity, including unrealized losses on AFS securities (2)(3) | 8.90 | 9.27 | 10.09 | 11.96 | 12.40 | ||||||||||
| Operating return on tangible common equity, excluding unrealized losses on AFS securities (2)(3) | 6.91 | 7.41 | 8.27 | 9.59 | 9.83 | ||||||||||
| Return on assets | (0.05 | ) | 0.66 | 0.79 | 0.96 | 1.10 | |||||||||
| Operating return on assets (2)(3) | 0.68 | 0.73 | 0.79 | 0.95 | 1.02 | ||||||||||
| Net interest margin, FTE (5) | 3.11 | 3.18 | 3.24 | 3.58 | 3.84 | ||||||||||
| Efficiency ratio (3) | 67.77 | 65.05 | 63.57 | 59.51 | 58.25 | ||||||||||
| FINANCIAL DATA (in millions, end of period) | |||||||||||||||
| Total assets | $ | 12,431 | $ | 12,140 | $ | 12,090 | $ | 12,320 | $ | 11,663 | |||||
| Total earning assets | 11,705 | 11,400 | 11,370 | 11,615 | 10,913 | ||||||||||
| Total loans | 9,040 | 8,984 | 8,882 | 8,682 | 8,335 | ||||||||||
| Total deposits | 10,633 | 9,981 | 10,068 | 10,068 | 10,327 | ||||||||||
| Loans/deposits (%) | 85 | % | 90 | % | 88 | % | 86 | % | 81 | % | |||||
| Total accumulated other comprehensive (loss) net of tax, end of period | $ | (143 | ) | $ | (218 | ) | $ | (186 | ) | $ | (159 | ) | $ | (181 | ) |
| Total shareholders' equity | 1,012 | 951 | 973 | 995 | 954 | ||||||||||
| ASSET QUALITY | |||||||||||||||
| Allowance for credit losses, (millions) | $ | 105 | $ | 103 | $ | 100 | $ | 98 | $ | 96 | |||||
| Net charge-offs, (millions) | (4 | ) | (5 | ) | (6 | ) | (7 | ) | (12 | ) | |||||
| Net charge-offs (QTD annualized)/average loans | 0.20 | % | 0.24 | % | 0.26 | % | 0.32 | % | 0.58 | % | |||||
| Provision (benefit)/expense, (millions) | $ | 7 | $ | 8 | $ | 8 | $ | 9 | $ | 12 | |||||
| Non-performing assets, (millions) | 24 | 29 | 31 | 29 | 33 | ||||||||||
| Non-performing loans/total loans | 0.24 | % | 0.30 | % | 0.32 | % | 0.31 | % | 0.37 | % | |||||
| Allowance for credit losses/non-performing loans | 492 | 386 | 353 | 363 | 309 | ||||||||||
| Allowance for credit losses/total loans | 1.17 | 1.14 | 1.13 | 1.13 | 1.15 | ||||||||||
| CAPITAL RATIOS | |||||||||||||||
| Risk weighted assets, (millions)(6) | $ | 9,549 | $ | 9,594 | $ | 9,523 | $ | 9,454 | $ | 9,151 | |||||
| Common equity Tier 1 capital to risk weighted assets (6) | 12.0 | % | 12.1 | % | 12.1 | % | 12.1 | % | 12.4 | % | |||||
| Tier 1 capital leverage ratio (6) | 9.6 | 9.8 | 9.6 | 9.9 | 10.2 | ||||||||||
| Tangible common shareholders' equity/tangible assets (3) | 8.0 | 7.7 | 7.9 | 7.9 | 8.0 | ||||||||||
| (1) | All<br>financial tables presented are unaudited. | ||||||||||||||
| --- | --- | ||||||||||||||
| (2) | Reconciliations<br>of non-GAAP financial measures, including all references to operating and tangible amounts, appear on pages 13 and 14. | ||||||||||||||
| (3) | Non-GAAP<br>financial measure. Operating measurements are non-GAAP financial measures that are adjusted to exclude net non-operating charges primarily<br>related to acquisitions and restructuring activities. See pages 13 and 14 for reconciliations of non-GAAP financial measures. | ||||||||||||||
| (4) | All<br>performance ratios are annualized and are based on average balance sheet amounts, where applicable. | ||||||||||||||
| (5) | Fully<br>taxable equivalent considers the impact of tax advantaged investment securities and loans. | ||||||||||||||
| (6) | Presented<br>as projected for December 31, 2023 and actual for the remaining periods. |
6
CONSOLIDATED BALANCESHEETS
| December 31, | September 30, | December 31, | |||||||
|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | 2023 | 2023 | 2022 | ||||||
| Assets | |||||||||
| Cash and due from banks | $ | 148,148 | $ | 120,634 | $ | 145,342 | |||
| Short-term investments | 1,055,096 | 542,836 | 540,013 | ||||||
| Total cash and cash equivalents | 1,203,244 | 663,470 | 685,355 | ||||||
| Trading securities, at fair value | 6,142 | 6,171 | 6,708 | ||||||
| Equity securities, at fair value | 13,029 | 12,325 | 12,856 | ||||||
| Securities available for sale, at fair value | 1,022,285 | 1,260,391 | 1,423,200 | ||||||
| Securities held to maturity, at amortized cost | 543,351 | 552,981 | 583,453 | ||||||
| Federal Home Loan Bank stock | 22,689 | 38,912 | 7,219 | ||||||
| Total securities | 1,607,496 | 1,870,780 | 2,033,436 | ||||||
| Less: Allowance for credit losses on investment securities | (68 | ) | (69 | ) | (91 | ) | |||
| Net securities | 1,607,428 | 1,870,711 | 2,033,345 | ||||||
| Loans held for sale | 2,237 | 2,342 | 4,311 | ||||||
| Commercial real estate loans | 4,527,012 | 4,453,573 | 4,095,079 | ||||||
| Commercial and industrial loans | 1,352,834 | 1,384,038 | 1,473,316 | ||||||
| Residential mortgages | 2,672,677 | 2,640,210 | 2,216,410 | ||||||
| Consumer loans | 487,163 | 506,556 | 550,504 | ||||||
| Total loans | 9,039,686 | 8,984,377 | 8,335,309 | ||||||
| Less: Allowance for credit losses on loans | (105,357 | ) | (102,792 | ) | (96,270 | ) | |||
| Net loans | 8,934,329 | 8,881,585 | 8,239,039 | ||||||
| Premises and equipment, net | 68,915 | 70,042 | 85,217 | ||||||
| Other intangible assets | 19,664 | 20,869 | 24,483 | ||||||
| Other assets | 584,066 | 619,777 | 587,854 | ||||||
| Assets held for sale | 10,938 | 11,157 | 3,260 | ||||||
| Total assets | $ | 12,430,821 | $ | 12,139,953 | $ | 11,662,864 | |||
| Liabilities and shareholders' equity | |||||||||
| Non-interest bearing deposits | $ | 2,469,164 | $ | 2,530,441 | $ | 2,852,127 | |||
| NOW and other deposits | 858,644 | 843,032 | 1,054,596 | ||||||
| Money market deposits | 3,565,516 | 3,075,307 | 3,723,570 | ||||||
| Savings deposits | 1,053,810 | 1,086,329 | 1,063,269 | ||||||
| Time deposits | 2,686,250 | 2,445,435 | 1,633,707 | ||||||
| Total deposits | 10,633,384 | 9,980,544 | 10,327,269 | ||||||
| Federal Home Loan Bank advances | 385,223 | 804,295 | 4,445 | ||||||
| Subordinated borrowings | 121,363 | 121,300 | 121,064 | ||||||
| Total borrowings | 506,586 | 925,595 | 125,509 | ||||||
| Other liabilities | 278,630 | 282,805 | 256,024 | ||||||
| Total liabilities | 11,418,600 | 11,188,944 | 10,708,802 | ||||||
| Common shareholders' equity | 1,012,221 | 951,009 | 954,062 | ||||||
| Total shareholders' equity | 1,012,221 | 951,009 | 954,062 | ||||||
| Total liabilities and shareholders' equity | $ | 12,430,821 | $ | 12,139,953 | $ | 11,662,864 |
7
CONSOLIDATED STATEMENTSOF OPERATIONS
| Three Months Ended | Years Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31, | December 31, | |||||||||||
| (in thousands, except per share data) | 2023 | 2022 | 2023 | 2022 | ||||||||
| Interest income | $ | 150,537 | $ | 121,384 | $ | 576,299 | $ | 387,257 | ||||
| Interest expense | 62,116 | 19,292 | 207,252 | 42,660 | ||||||||
| Net interest income, non FTE | 88,421 | 102,092 | 369,047 | 344,597 | ||||||||
| Non-interest income | ||||||||||||
| Deposit related fees | 8,481 | 8,293 | 34,155 | 32,026 | ||||||||
| Loan related fees | 2,058 | 2,123 | 10,595 | 9,467 | ||||||||
| Gain on SBA loan sales | 2,382 | 2,979 | 10,334 | 12,494 | ||||||||
| Wealth management fees | 2,394 | 2,255 | 10,197 | 10,008 | ||||||||
| Other | 591 | (159 | ) | 2,045 | 6,973 | |||||||
| Total non-interest income excluding (losses)/gains | 15,906 | 15,491 | 67,326 | 70,968 | ||||||||
| Fair value adjustments on securities | 768 | 163 | 513 | (2,037 | ) | |||||||
| (Loss)/gain on sale of AFS securities | (25,057 | ) | - | (25,057 | ) | 6 | ||||||
| Total non-interest income | (8,383 | ) | 15,654 | 42,782 | 68,937 | |||||||
| Total net revenue | 80,038 | 117,746 | 411,829 | 413,534 | ||||||||
| Provision expense for credit losses | 7,000 | 12,000 | 31,999 | 11,000 | ||||||||
| Non-interest expense | ||||||||||||
| Compensation and benefits | 40,095 | 37,968 | 159,281 | 152,741 | ||||||||
| Occupancy and equipment | 8,553 | 9,431 | 35,718 | 37,638 | ||||||||
| Technology and communications | 11,326 | 9,729 | 41,878 | 35,586 | ||||||||
| Professional services | 3,417 | 3,153 | 11,643 | 12,043 | ||||||||
| Other expenses | 11,932 | 12,350 | 46,727 | 41,799 | ||||||||
| Merger, restructuring and other non-operating expenses | 3,669 | (2,617 | ) | 6,261 | 8,909 | |||||||
| Total non-interest expense | 78,992 | 70,014 | 301,508 | 288,716 | ||||||||
| Total non-interest expense excluding merger, restructuring and other | 75,323 | 72,631 | 295,247 | 279,807 | ||||||||
| Income before income taxes | $ | (5,954 | ) | $ | 35,732 | $ | 78,322 | $ | 113,818 | |||
| Income tax (benefit)/expense | (4,509 | ) | 5,227 | 8,724 | 21,285 | |||||||
| Net (loss)/income | $ | (1,445 | ) | $ | 30,505 | $ | 69,598 | $ | 92,533 | |||
| Basic (loss)/earnings per common share | $ | (0.03 | ) | $ | 0.69 | $ | 1.61 | $ | 2.03 | |||
| Diluted (loss)/earnings per common share | $ | (0.03 | ) | $ | 0.69 | $ | 1.60 | $ | 2.02 | |||
| Weighted average shares outstanding: | ||||||||||||
| Basic | 42,852 | 44,105 | 43,288 | 45,564 | ||||||||
| Diluted | 43,101 | 44,484 | 43,504 | 45,914 |
8
CONSOLIDATED STATEMENTSOF OPERATIONS (5 Quarter Trend)
| Dec. 31, | Sept. 30, | June 30, | March 31, | Dec. 31, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands, except per share data) | 2023 | 2023 | 2023 | 2023 | 2022 | ||||||||||
| Interest income | $ | 150,537 | $ | 148,021 | $ | 145,425 | $ | 132,316 | $ | 121,384 | |||||
| Interest expense | 62,116 | 57,687 | 52,666 | 34,783 | 19,292 | ||||||||||
| Net interest income, non FTE | 88,421 | 90,334 | 92,759 | 97,533 | 102,092 | ||||||||||
| Non-interest income | |||||||||||||||
| Deposit related fees | 8,481 | 8,792 | 8,571 | 8,311 | 8,293 | ||||||||||
| Loan related fees | 2,058 | 2,879 | 3,189 | 2,469 | 2,123 | ||||||||||
| Gain on SBA loan sales | 2,382 | 2,548 | 2,910 | 2,494 | 2,979 | ||||||||||
| Wealth management fees | 2,394 | 2,481 | 2,583 | 2,739 | 2,255 | ||||||||||
| Other | 591 | 1,232 | (137 | ) | 359 | (159 | ) | ||||||||
| Total non-interest income excluding (losses)/gains | 15,906 | 17,932 | 17,116 | 16,372 | 15,491 | ||||||||||
| Fair value adjustments on securities | 768 | (467 | ) | (22 | ) | 234 | 163 | ||||||||
| Loss on sale of AFS securities | (25,057 | ) | - | - | - | - | |||||||||
| Total non-interest income | (8,383 | ) | 17,465 | 17,094 | 16,606 | 15,654 | |||||||||
| Total net revenue | 80,038 | 107,799 | 109,853 | 114,139 | 117,746 | ||||||||||
| Provision expense for credit losses | 7,000 | 8,000 | 8,000 | 8,999 | 12,000 | ||||||||||
| Non-interest expense | |||||||||||||||
| Compensation and benefits | 40,095 | 40,155 | 39,960 | 39,071 | 37,968 | ||||||||||
| Occupancy and equipment | 8,553 | 8,816 | 8,970 | 9,379 | 9,431 | ||||||||||
| Technology and communications | 11,326 | 10,616 | 10,465 | 9,471 | 9,729 | ||||||||||
| Professional services | 3,417 | 2,423 | 2,526 | 3,277 | 3,153 | ||||||||||
| Other expenses | 11,932 | 11,896 | 12,106 | 10,793 | 12,350 | ||||||||||
| Merger, restructuring and other non-operating expenses | 3,669 | 2,607 | 21 | (36 | ) | (2,617 | ) | ||||||||
| Total non-interest expense | 78,992 | 76,513 | 74,048 | 71,955 | 70,014 | ||||||||||
| Total non-interest expense excluding merger, restructuring and other | 75,323 | 73,906 | 74,027 | 71,991 | 72,631 | ||||||||||
| Income before income taxes | $ | (5,954 | ) | $ | 23,286 | $ | 27,805 | $ | 33,185 | $ | 35,732 | ||||
| Income tax (benefit)/expense | (4,509 | ) | 3,741 | 3,944 | 5,548 | 5,227 | |||||||||
| Net (loss)/income | $ | (1,445 | ) | $ | 19,545 | $ | 23,861 | $ | 27,637 | $ | 30,505 | ||||
| Diluted (loss)/earnings per common share | $ | (0.03 | ) | $ | 0.45 | $ | 0.55 | $ | 0.63 | $ | 0.69 | ||||
| Weighted average shares outstanding: | |||||||||||||||
| Basic | 42,852 | 43,164 | 43,443 | 43,693 | 44,105 | ||||||||||
| Diluted | 43,101 | 43,347 | 43,532 | 44,036 | 44,484 |
9
AVERAGE BALANCES ANDAVERAGE YIELDS AND COSTS
| Quarters<br> Ended | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31,<br> 2023 | September 30,<br> 2023 | December 31,<br> 2022 | |||||||||||||||||||
| (in<br> millions) | Average<br><br> Balance | Interest<br> (1) | Average<br><br> Yield/Rate | Average<br><br> Balance | Interest<br> (1) | Average<br><br> Yield/Rate | Average<br><br> Balance | Interest<br> (1) | Average<br><br> Yield/Rate | ||||||||||||
| Assets | |||||||||||||||||||||
| Commercial real<br> estate | $ | 4,469 | $ | 74 | 6.45 | % | $ | 4,385 | $ | 71 | 6.32 | % | $ | 3,934 | $ | 55 | 5.46 | % | |||
| Commercial and industrial loans | 1,367 | 26 | 7.60 | 1,436 | 27 | 7.48 | 1,471 | 25 | 6.62 | ||||||||||||
| Residential mortgages | 2,656 | 27 | 4.06 | 2,618 | 26 | 3.97 | 2,114 | 19 | 3.56 | ||||||||||||
| Consumer<br> loans | 498 | 9 | 7.31 | 513 | 9 | 7.33 | 563 | 10 | 7.00 | ||||||||||||
| Total loans | 8,990 | 136 | 5.97 | 8,952 | 133 | 5.88 | 8,082 | 109 | 5.28 | ||||||||||||
| Securities (2) | 2,080 | 12 | 2.40 | 2,171 | 13 | 2.40 | 2,294 | 13 | 2.20 | ||||||||||||
| Short-term<br> investments and loans HFS | 350 | 4 | 4.22 | 267 | 3 | 4.76 | 267 | 2 | 3.05 | ||||||||||||
| Total earning assets | 11,420 | 152 | 5.26 | 11,390 | 149 | 5.19 | 10,643 | 123 | 4.56 | ||||||||||||
| Goodwill and other intangible<br> assets | 20 | 21 | 25 | ||||||||||||||||||
| Other assets | 422 | 449 | 406 | ||||||||||||||||||
| Total<br> assets | $ | 11,862 | $ | 11,860 | 11,074 | ||||||||||||||||
| Liabilities and shareholders'<br> equity | |||||||||||||||||||||
| Non-interest-bearing demand<br> deposits | $ | 2,488 | $ | 0 | - | % | $ | 2,553 | $ | 0 | - | % | $ | 2,876 | $ | 0 | - | % | |||
| NOW and other | 833 | 3 | 1.38 | 858 | 2 | 1.15 | 1,395 | 4 | 1.11 | ||||||||||||
| Money market | 2,995 | 23 | 3.08 | 2,697 | 18 | 2.69 | 2,819 | 8 | 1.16 | ||||||||||||
| Savings | 1,062 | 2 | 0.90 | 1,082 | 2 | 0.77 | 1,086 | - | 0.03 | ||||||||||||
| Time | 2,558 | 25 | 3.77 | 2,440 | 22 | 3.43 | 1,555 | 5 | 1.21 | ||||||||||||
| Total deposits | 9,936 | 53 | 2.11 | 9,630 | 44 | 1.81 | 9,731 | 17 | 0.69 | ||||||||||||
| Borrowings (3) | 668 | 9 | 5.45 | 1,010 | 14 | 5.32 | 169 | 2 | 5.56 | ||||||||||||
| Total funding liabilities | 10,604 | 62 | 2.32 | 10,640 | 58 | 2.15 | 9,900 | 19 | 0.77 | ||||||||||||
| Other liabilities | 292 | 232 | 208 | ||||||||||||||||||
| Total liabilities | 10,896 | 10,872 | 10,108 | ||||||||||||||||||
| Common<br> shareholders' equity (4) | 966 | 988 | 966 | ||||||||||||||||||
| Total<br> shareholders' equity | 966 | 988 | 966 | ||||||||||||||||||
| Total liabilities and shareholders'<br> equity | $ | 11,862 | $ | 11,860 | 11,074 | ||||||||||||||||
| Net<br> interest margin, FTE | 3.11 | 3.18 | 3.84 | ||||||||||||||||||
| Supplementary data | |||||||||||||||||||||
| Net Interest Income, non FTE | 88.421 | 90.334 | 102.092 | ||||||||||||||||||
| FTE income<br> adjustment | 2.021 | 1.980 | 1.845 | ||||||||||||||||||
| Net Interest Income, FTE | 90.442 | 92.314 | 103.937 |
(1) Interest income and expense presented on a fully taxable equivalent basis.
(2) Average balances for securities available-for-sale are based on amortized cost.
(3) Average balances for borrowings includes the financing lease obligation which is presented under other liabilities on the consolidated balance sheet.
(4) Unrealized gains and losses, net of tax, are included in average equity. Prior period balances and financial metrics have been updated to reflect the current presentation.
10
ASSET QUALITY ANALYSIS
| At or for the Quarters Ended | |||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Dec. 31, | Sept. 30, | June 30, | March 31, | Dec. 31, | |||||||||||||||||||||
| (in thousands) | 2023 | 2023 | 2023 | 2023 | 2022 | ||||||||||||||||||||
| NON-PERFORMING ASSETS | |||||||||||||||||||||||||
| Commercial real estate | $ | 4,453 | $ | 5,288 | $ | 1,509 | $ | 2,546 | $ | 2,434 | |||||||||||||||
| Commercial and industrial loans | 8,712 | 11,028 | 15,597 | 12,155 | 17,023 | ||||||||||||||||||||
| Residential mortgages | 6,404 | 8,060 | 8,722 | 9,442 | 8,612 | ||||||||||||||||||||
| Consumer loans | 1,838 | 2,260 | 2,560 | 2,848 | 3,045 | ||||||||||||||||||||
| Total non-performing loans | 21,407 | 26,636 | 28,388 | 26,991 | 31,114 | ||||||||||||||||||||
| Repossessed assets | 2,601 | 2,548 | 2,549 | 2,462 | 2,209 | ||||||||||||||||||||
| Total non-performing assets | $ | 24,008 | $ | 29,184 | $ | 30,937 | $ | 29,453 | $ | 33,323 | |||||||||||||||
| Total non-performing loans/total loans | 0.24 | % | 0.30 | % | 0.32 | % | 0.31 | % | 0.37 | % | |||||||||||||||
| Total non-performing assets/total assets | 0.19 | % | 0.24 | % | 0.26 | % | 0.24 | % | 0.29 | % | |||||||||||||||
| PROVISION AND ALLOWANCE FOR CREDIT LOSSES ON LOANS | |||||||||||||||||||||||||
| Balance at beginning of period | $ | 102,792 | $ | 100,219 | $ | 97,991 | $ | 96,270 | $ | 96,013 | |||||||||||||||
| Adoption of ASU No. 2022-02 | - | - | - | (401 | ) | - | |||||||||||||||||||
| Balance after adoption of ASU No. 2022-02 | 102,792 | 100,219 | 97,991 | 95,869 | 96,013 | ||||||||||||||||||||
| Charged-off loans | (6,891 | ) | (6,744 | ) | (7,686 | ) | (7,936 | ) | (12,995 | ) | |||||||||||||||
| Recoveries on charged-off loans | 2,456 | 1,317 | 1,914 | 1,059 | 1,252 | ||||||||||||||||||||
| Net loans charged-off | (4,435 | ) | (5,427 | ) | (5,772 | ) | (6,877 | ) | (11,743 | ) | |||||||||||||||
| Provision (benefit)/expense for loan credit losses | 7,000 | 8,000 | 8,000 | 8,999 | 12,000 | ||||||||||||||||||||
| Balance at end of period | $ | 105,357 | $ | 102,792 | $ | 100,219 | $ | 97,991 | $ | 96,270 | |||||||||||||||
| Allowance for credit losses/total loans | 1.17 | % | 1.14 | % | 1.13 | % | 1.13 | % | 1.15 | % | |||||||||||||||
| Allowance for credit losses/non-performing loans | 492 | % | 386 | % | 353 | % | 363 | % | 309 | % | |||||||||||||||
| NET LOAN CHARGE-OFFS | |||||||||||||||||||||||||
| Commercial real estate | $ | 316 | $ | 97 | $ | 664 | $ | 122 | $ | 187 | |||||||||||||||
| Commercial and industrial loans | (2,309 | ) | (3,345 | ) | (4,146 | ) | (5,695 | ) | (10,914 | ) | |||||||||||||||
| Residential mortgages | 55 | 23 | (143 | ) | 305 | 192 | |||||||||||||||||||
| Home equity | 83 | 208 | 126 | 16 | (128 | ) | |||||||||||||||||||
| Auto and other consumer | (2,580 | ) | (2,410 | ) | (2,273 | ) | (1,625 | ) | (1,080 | ) | |||||||||||||||
| Total, net | $ | (4,435 | ) | $ | (5,427 | ) | $ | (5,772 | ) | $ | (6,877 | ) | $ | (11,743 | ) | ||||||||||
| Net charge-offs (QTD annualized)/average loans | 0.20 | % | 0.24 | % | 0.26 | % | 0.32 | % | 0.58 | % | |||||||||||||||
| Net charge-offs (YTD annualized)/average loans | 0.26 | % | 0.28 | % | 0.29 | % | 0.32 | % | 0.27 | % | |||||||||||||||
| DELINQUENT<br> AND NON-PERFORMING LOANS | Balance | Percent<br><br> of Total<br><br> Loans | Balance | Percent<br> of <br><br> Total<br><br> Loans | Balance | Percent<br> of<br><br> Total<br><br> Loans | Balance | Percent<br> of <br><br> Total<br><br> Loans | Balance | Percent<br> of <br><br> Total<br><br> Loans | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 30-89 Days delinquent | $ | 22,140 | 0.24 | % | $ | 18,700 | 0.21 | % | $ | 15,147 | 0.17 | % | $ | 14,210 | 0.16 | % | $ | 12,162 | 0.15 | % | |||||
| 90+ Days<br> delinquent and still accruing | 5,537 | 0.06 | % | 5,744 | 0.06 | % | 7,812 | 0.09 | % | 6,937 | 0.08 | % | 7,038 | 0.08 | % | ||||||||||
| Total accruing delinquent loans | 27,677 | 0.30 | % | 24,444 | 0.27 | % | 22,959 | 0.26 | % | 21,147 | 0.24 | % | 19,200 | 0.23 | % | ||||||||||
| Non-performing<br> loans | 21,407 | 0.24 | % | 26,636 | 0.30 | % | 28,399 | 0.32 | % | 26,991 | 0.31 | % | 31,114 | 0.37 | % | ||||||||||
| Total delinquent<br> and non-performing loans | $ | 49,084 | 0.54 | % | $ | 51,080 | 0.57 | % | $ | 51,358 | 0.58 | % | $ | 48,138 | 0.55 | % | $ | 50,314 | 0.60 | % |
11
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 are intended to provide the reader with additional supplemental perspectives on operating results, performance trends, and financial condition. Non-GAAP financial measures 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 provided below. In all cases, it should be understood that non-GAAP measures do not depict amounts that accrue directly to the benefit of shareholders. An item which management excludes when computing non-GAAP operating earnings can be of substantial importance to the Company’s results for any particular quarter or year. The Company’s non-GAAP operating earnings information set forth is not necessarily comparable to non- GAAP information which may be presented by other companies. Each non-GAAP measure used by the Company in this report as supplemental financial data should be considered in conjunction with the Company’s GAAP financial information.
The Company utilizes the non-GAAP measure of operating earnings in evaluating operating trends, including components for operating revenue and expense. These measures exclude amounts which the Company views as unrelated to its normalized operations. These items primarily include restructuring costs. Restructuring costs generally consist of costs and losses associated with the disposition of assets and liabilities and lease terminations, including costs related to branch consolidations.
The Company also calculates operating earnings per share based on its measure of operating earnings and diluted common shares. The Company views these amounts as important to understanding its operating trends, particularly due to the impact of accounting standards related to merger and acquisition activity. Analysts also rely on these measures in estimating and evaluating the Company’s performance. Adjustments in 2023 were primarily related to branch consolidations, severance charges related to a workforce reduction, and loss on sale of AFS securities. Expense adjustments in 2022 were primarily related to branch consolidations. For 2022, fair value adjustments on securities were primarily due to unrealized equity securities losses due to changes in market conditions. Starting March 31, 2023 fair value adjustments on securities are included in operating income.
Management believes that the computation of non-GAAP operating earnings and operating earnings per share may facilitate the comparison of the Company to other companies in the financial services industry. The Company also adjusts certain equity related measures to exclude intangible assets due to the importance of these measures to the investment community.
12
RECONCILIATION OF NON-GAAPFINANCIAL MEASURES AND SUPPLEMENTARY DATA
| At or for the Quarters Ended | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Dec. 31, | Sept. 30, | June 30, | March 31, | Dec. 31, | ||||||||||||
| (in thousands) | 2023 | 2023 | 2023 | 2023 | 2022 | |||||||||||
| Total non-interest income | $ | (8,383 | ) | $ | 17,465 | $ | 17,094 | $ | 16,606 | $ | 15,654 | |||||
| Adj: Fair value adjustments on securities (1) | - | - | - | - | (163 | ) | ||||||||||
| Adj: Loss on sale of AFS securities | 25,057 | - | - | - | - | |||||||||||
| Total operating non-interest income (2) | $ | 16,674 | $ | 17,465 | $ | 17,094 | $ | 16,606 | $ | 15,491 | ||||||
| Total revenue | (A) | $ | 80,038 | $ | 107,799 | $ | 109,853 | $ | 114,139 | $ | 117,746 | |||||
| Adj: Fair value adjustments on securities (1) | - | - | - | - | (163 | ) | ||||||||||
| Adj: Loss on sale of AFS securities | 25,057 | - | - | - | - | |||||||||||
| Total operating revenue (2) | (B) | $ | 105,095 | $ | 107,799 | $ | 109,853 | $ | 114,139 | $ | 117,583 | |||||
| Total non-interest expense | (C) | $ | 78,992 | $ | 76,513 | $ | 74,048 | $ | 71,955 | $ | 70,014 | |||||
| Adj: Merger, restructuring and other non-operating expenses | (3,669 | ) | (2,607 | ) | (21 | ) | 36 | 2,617 | ||||||||
| Operating non-interest expense (2) | (D) | $ | 75,323 | $ | 73,906 | $ | 74,027 | $ | 71,991 | $ | 72,631 | |||||
| Pre-tax, pre-provision net revenue (PPNR) | (A-C) | $ | 1,046 | $ | 31,286 | $ | 35,805 | $ | 42,184 | $ | 47,732 | |||||
| Operating pre-tax, pre-provision net revenue (PPNR) (2) | (B-D) | 29,772 | 33,893 | 35,826 | 42,148 | 44,952 | ||||||||||
| Net (loss)/income | $ | (1,445 | ) | $ | 19,545 | $ | 23,861 | $ | 27,637 | $ | 30,505 | |||||
| Adj: Fair value adjustments on securities (1) | - | - | - | - | (163 | ) | ||||||||||
| Adj: Loss on sale of AFS securities | 25,057 | - | - | - | - | |||||||||||
| Adj: Restructuring expense and other non-operating expenses | 3,669 | 2,607 | 21 | (36 | ) | (2,617 | ) | |||||||||
| Adj: Income taxes (expense)/benefit | (7,091 | ) | (636 | ) | (4 | ) | 7 | 529 | ||||||||
| Total operating income (2) | (E) | $ | 20,190 | $ | 21,516 | $ | 23,878 | $ | 27,608 | $ | 28,254 | |||||
| (in millions, except per share data) | ||||||||||||||||
| Total average assets | (F) | $ | 11,862 | $ | 11,860 | $ | 12,057 | $ | 11,569 | $ | 11,074 | |||||
| Total average shareholders' equity, including unrealized losses on AFS securities | (G) | 966 | 988 | 1,004 | 978 | 966 | ||||||||||
| Total average shareholders' equity, excluding unrealized losses on AFS securities | (H) | 1,240 | 1,231 | 1,221 | 1,214 | 1,213 | ||||||||||
| Total average tangible shareholders' equity, including unrealized losses on AFS securities (2) | (I) | 946 | 967 | 981 | 954 | 941 | ||||||||||
| Total average tangible shareholders' equity, excluding unrealized losses on AFS securities (2) | (J) | 1,220 | 1,210 | 1,198 | 1,190 | 1,188 | ||||||||||
| Total accumulated other comprehensive (loss) net of tax, end of period | (143 | ) | (218 | ) | (186 | ) | (159 | ) | (181 | ) | ||||||
| Total tangible shareholders' equity, end of period (2) | (K) | 993 | 930 | 951 | 972 | 930 | ||||||||||
| Total tangible assets, end of period (2) | (L) | 12,411 | 12,119 | 12,068 | 12,297 | 11,638 | ||||||||||
| Total common shares outstanding, end of period (thousands) | (M) | 43,501 | 43,822 | 44,033 | 44,411 | 44,361 | ||||||||||
| Average diluted shares outstanding (thousands) | (N) | 43,101 | 43,347 | 43,532 | 44,036 | 44,484 | ||||||||||
| Earnings per common share, diluted (2) | $ | (0.03 | ) | $ | 0.45 | $ | 0.55 | $ | 0.63 | $ | 0.69 | |||||
| Operating earnings per common share, diluted (2) | (E/N) | 0.47 | 0.50 | 0.55 | 0.63 | 0.64 | ||||||||||
| Tangible book value per common share, end of period (2) | (K/M) | 22.82 | 21.23 | 21.60 | 21.89 | 20.95 | ||||||||||
| Total tangible shareholders' equity/total tangible assets (2) | (K/L) | 8.00 | 7.68 | 7.88 | 7.91 | 7.99 | ||||||||||
| Performance ratios (3) | ||||||||||||||||
| Return on equity, including unrealized losses on AFS securities | (0.60 | )% | 7.91 | % | 9.51 | % | 11.31 | % | 12.63 | % | ||||||
| Return on equity, excluding unrealized losses on AFS securities | (0.47 | ) | 6.35 | 7.82 | 9.11 | 10.06 | ||||||||||
| Operating return on equity, including unrealized losses on AFS securities (2) | (E/G) | 8.36 | 8.71 | 9.51 | 11.30 | 11.70 | ||||||||||
| Operating return on equity, excluding unrealized losses on AFS securities | (E/H) | 6.51 | 6.99 | 7.82 | 9.10 | 9.32 | ||||||||||
| Return on tangible common equity, including unrealized losses on AFS securities (2)(4) | (0.24 | ) | 8.45 | 10.09 | 11.96 | 13.36 | ||||||||||
| Return on tangible common equity, excluding unrealized losses on AFS securities (2)(4) | (0.18 | ) | 6.76 | 8.26 | 9.59 | 10.59 | ||||||||||
| Operating return on tangible common equity, including unrealized losses on AFS securities (2)(4) | (E+Q)/(I) | 8.90 | 9.27 | 10.09 | 11.96 | 12.40 | ||||||||||
| Operating return on tangible common equity, excluding unrealized losses on AFS securities (2)(4) | (E+Q)/(J) | 6.91 | 7.41 | 8.27 | 9.59 | 9.83 | ||||||||||
| Return on assets | (0.05 | ) | 0.66 | 0.79 | 0.96 | 1.10 | ||||||||||
| Operating return on assets (2) | (E/F) | 0.68 | 0.73 | 0.79 | 0.95 | 1.02 | ||||||||||
| Efficiency ratio (2) | (D-Q)/(B+O+R) | 67.77 | 65.05 | 63.57 | 59.51 | 58.25 | ||||||||||
| Supplementary data (in thousands) | ||||||||||||||||
| Tax benefit on tax-credit investments (5) | (O) | $ | 2,252 | $ | 1,979 | $ | 2,735 | $ | 2,897 | $ | 3,068 | |||||
| Non-interest income tax-credit investments amortization (6) | (P) | (2,060 | ) | (1,463 | ) | (2,210 | ) | (2,285 | ) | (2,355 | ) | |||||
| Net income on tax-credit investments | (O+P) | 193 | 516 | 525 | 612 | 713 | ||||||||||
| Intangible amortization | (Q) | $ | 1,205 | $ | 1,205 | $ | 1,205 | $ | 1,205 | $ | 1,277 | |||||
| Fully taxable equivalent income adjustment | (R) | 2,021 | 1,980 | 1,962 | 1,908 | 1,845 |
(1) Starting March 31, 2023, fair value adjustments on securities are included in operating income.
(2) Non-GAAP financial measure.
(3) 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.
(4) Amortization of intangible assets is adjusted assuming a 27% marginal tax rate.
(5) The tax benefit is the direct reduction to the income tax provision due to tax credit investments.
(6) The non-interest income amortization is the reduction to the tax-advantaged investments and are incurred as the tax credits are generated.
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RECONCILIATION OF NON-GAAPFINANCIAL MEASURES AND SUPPLEMENTARY DATA- UNAUDITED
| At or for the Years Ended | |||||||
|---|---|---|---|---|---|---|---|
| Dec. 31, | Dec. 31, | ||||||
| (in thousands) | 2023 | 2022 | |||||
| Total non-interest income | $ | 42,782 | $ | 68,937 | |||
| Adj: Fair value adjustments on securities (1) | - | 2,037 | |||||
| Adj: Loss on sale of AFS securities | 25,057 | (6 | ) | ||||
| Total operating non-interest income (2) | $ | 67,839 | $ | 70,968 | |||
| Total revenue | (A) | $ | 411,829 | $ | 413,534 | ||
| Adj: Fair value adjustments on securities (1) | - | 2,037 | |||||
| Adj: Loss/(gain) on sale of AFS securities | 25,057 | (6 | ) | ||||
| Total operating revenue (2) | (B) | $ | 436,886 | $ | 415,565 | ||
| Total non-interest expense | (C) | $ | 301,508 | $ | 288,716 | ||
| Less: Merger, restructuring and other non-operating expenses | (6,261 | ) | (8,909 | ) | |||
| Operating non-interest expense (2) | (D) | $ | 295,247 | $ | 279,807 | ||
| Pre-tax, pre-provision net revenue (PPNR) | (A-C) | $ | 110,321 | $ | 124,818 | ||
| Operating pre-tax, pre-provision net revenue (PPNR) (2) | (B-D) | 141,639 | 135,758 | ||||
| Net income | $ | 69,598 | $ | 92,533 | |||
| Adj: Fair value adjustments on securities (1) | - | 2,037 | |||||
| Adj: Loss/(gain) on sale of AFS securities | 25,057 | (6 | ) | ||||
| Adj: Restructuring expense and other non-operating expenses | 6,261 | 8,909 | |||||
| Adj: Income taxes (expense)/benefit | (7,723 | ) | (2,940 | ) | |||
| Total operating income (2) | (E) | $ | 93,193 | $ | 100,533 | ||
| (in millions, except per share data) | |||||||
| Total average assets | (F) | $ | 11,838 | $ | 11,216 | ||
| Total average shareholders' equity, including unrealized losses on AFS securities | (G) | 984 | 1,063 | ||||
| Total average shareholders' equity, excluding unrealized losses on AFS securities | (H) | 1,226 | 1,193 | ||||
| Total average tangible shareholders' equity, including unrealized losses on AFS securities (2) | (I) | 962 | 1,036 | ||||
| Total average tangible shareholders' equity, excluding unrealized losses on AFS securities (2) | (J) | 1,204 | 1,166 | ||||
| Total accumulated other comprehensive (loss) net of tax, end of period | (143 | ) | (181 | ) | |||
| Total tangible shareholders' equity, end of period (2) | (K) | 993 | 930 | ||||
| Total tangible assets, end of period (2) | (L) | 12,411 | 11,638 | ||||
| Total common shares outstanding, end of period (thousands) | (M) | 43,501 | 44,361 | ||||
| Average diluted shares outstanding (thousands) | (N) | 43,504 | 45,914 | ||||
| Earnings/(loss) per common share, diluted (2) | $ | 1.60 | $ | 2.02 | |||
| Operating earnings per common share, diluted (2) | (E/N) | 2.14 | 2.19 | ||||
| Tangible book value per common share, end of period (2) | (K/M) | 22.82 | 20.95 | ||||
| Total tangible shareholders' equity/total tangible assets (2) | (K/L) | 8.00 | 7.99 | ||||
| Performance ratios (3) | |||||||
| Return on equity, including unrealized losses on AFS securities | 7.07 | % | 8.70 | % | |||
| Return on equity, excluding unrealized losses on AFS securities | 5.68 | 7.76 | |||||
| Operating return on equity, including unrealized losses on AFS securities (2) | (E/G) | 9.47 | 9.46 | ||||
| Operating return on equity, excluding unrealized losses on AFS securities (2) | (E/H) | 7.60 | 8.43 | ||||
| Return on tangible common equity, including unrealized losses on AFS securities (2)(4) | 7.60 | 9.29 | |||||
| Return on tangible common equity, excluding unrealized losses on AFS securities (2)(4) | 6.07 | 8.26 | |||||
| Operating return on tangible common equity, including unrealized losses on AFS securities (2)(4) | (E+Q)/(I) | 10.05 | 10.07 | ||||
| Operating return on tangible common equity, excluding unrealized losses on AFS securities (2)(4) | (E+Q)/(J) | 8.03 | 8.94 | ||||
| Return on assets | 0.59 | 0.82 | |||||
| Operating return on assets (2) | (E/F) | 0.79 | 0.90 | ||||
| Efficiency ratio (2) | (D-Q)/(B+O+R) | 63.88 | 64.31 | ||||
| Net interest margin, FTE | 3.27 | 3.26 | |||||
| Supplementary data (in thousands) | |||||||
| Tax benefit on tax-credit investments (5) | (O) | $ | 9,863 | $ | 4,880 | ||
| Non-interest income charge on tax-credit investments (6) | (P) | (8,018 | ) | (3,508 | ) | ||
| Net income on tax-credit investments | (O+P) | 1,845 | 1,372 | ||||
| Intangible amortization | (Q) | $ | 4,820 | $ | 5,134 | ||
| Fully taxable equivalent income adjustment | (R) | 7,870 | 6,644 |
(1) Starting March 31, 2023, fair value adjustments on securities are included in operating income.
(2) Non-GAAP financial measure.
(3) 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.
(4) Amortization of intangible assets is adjusted assuming a 27% marginal tax rate.
(5) The tax benefit is the direct reduction to the income tax provision due to tax credit investments.
(6) The non-interest income amortization is the reduction to the tax-advantaged investments and are incurred as the tax credits are generated.
14