EX-99.1 2 tm234453d1_ex99-1.htm EXHIBIT 99.1

 

Exhibit 99.1

 

 

BERKSHIRE HILLS REPORTS RECORD FOURTH QUARTER RESULTS

 

BOSTON, January 26, 2023 - Berkshire Hills Bancorp, Inc. (NYSE: BHLB) today reported that fourth quarter 2022 earnings per share (“EPS”) increased year-over-year by 64% to a fourth quarter record $0.69. For these periods, the non-GAAP measure of adjusted EPS increased by 52% to $0.64.

 

For the full year 2022, EPS decreased year-over-year by 15% to $2.02, and adjusted EPS increased by 30% to $2.19. GAAP results included gains in 2021 on the sale of business operations and charges in both years for branch consolidations. These are the primary items excluded from the measure of adjusted results.

 

Improvements in adjusted results for the fourth quarter and full year 2022 demonstrate positive operating leverage and progress from Berkshire’s BEST strategic initiatives. Compared to the prior quarter, results included an 11% increase in net interest income, in conjunction with an increase in the net interest margin to 3.84%.

 

FOURTH QUARTER FINANCIAL HIGHLIGHTS (Changes are quarter-over-quarter unless otherwise stated. Non-GAAP measures are reconciled on pages F-9 and F-10).

 

·10.1% return on equity; 10.6% return on tangible common equity (non-GAAP)
·1.08% return on assets; 1.00% adjusted return on assets (non-GAAP)
·9% increase quarter-over-quarter in total net revenue
·3.84% net interest margin, increased from 3.48% in 3Q22 and 2.60% in 4Q21
·58% efficiency ratio, improved from 62% in 3Q22 and 72% in 4Q21
·1% increase in full year non-interest expense; flat adjusted non-interest expense (non-GAAP)
·5% broad-based loan growth (end of period)
·1% increase in average deposits
·0.60% delinquent and non-accruing loans/total loans – lowest in more than a decade
·9% reduction in period-end shares outstanding year-over-year reflecting stock buybacks
·50% increase in quarterly shareholder dividend in the fourth quarter of 2022

 

CEO Nitin Mhatre stated “Berkshire finished the year with strong loan growth momentum, resulting in record fourth quarter revenue and earnings per share. The balance sheet remains strong and positively positioned to benefit from potential future interest rate increases. With these solid underpinnings, Berkshire increased its quarterly shareholder dividend by 50% in the fourth quarter, as well as repurchasing 2% of shares. We’re pleased that our results have contributed to strong outperformance by our stock compared to the broad market and our industry. BHLB provided a 2022 calendar year total shareholder return exceeding 7% against a backdrop of market declines, with the S&P 500 index posting a negative 18% total return for the year.”

 

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“We have separately announced our CFO hire, and this follows recently announced executive hires for Commercial Banking and Credit. I’m pleased with the exceptional caliber of executives who are attracted by our strong team, promising business prospects, and purpose-focused vision. We also announced a $50 million share repurchase program for 2023, continuing our focus on balanced capital management and shareholder distributions.”

 

“Berkshire’s return on assets and return on tangible common equity improved to within its target range at the halfway point of its three year strategic plan. Berkshire also achieved the highest ESG ranking in our history, with a top 17% composite performance ranking in leading ESG indexes in the U.S. for its Environmental, Social and Governance ratings. We also recorded our highest employee engagement through our survey platform with Mercer. We rolled-out promotion of our new brand campaign theme of “Where You Bank Matters”, which captures the spirit of our vision to serve as a high-performing leading socially responsible community bank for all of our stakeholders.  I thank the entire Berkshire team for our success in 2022 and all they do to maintain our forward momentum in delivering on our vision.”

 

RESULTS OF OPERATIONS

 

Earnings: Fourth quarter 2022 EPS of $0.69 increased from $0.42 in the prior quarter, while adjusted EPS increased by 2% from $0.62 to $0.64. Adjusted results benefited from higher net interest income and lending related fee revenue. The increase in GAAP EPS also reflected a reduction in accrued branch consolidation expenses based on a reduction in total estimated costs.

 

On a year-over-year basis, fourth quarter results also increased from $0.42 reported for both GAAP EPS and adjusted EPS in 2021. This improvement was primarily due to higher net interest income, which has reflected growth in loans and in the interest margin in each of the last several quarters. Fourth quarter revenue increased by 30% year-over-year, while expense growth was held to 1%. The resulting positive operating leverage led to an improvement in the efficiency ratio to 58% in the most recent quarter, compared to 62% in the linked quarter and to 72% in the fourth quarter of 2021.

 

The fourth quarter 2022 return on equity measured 10.1% and the non-GAAP measure of adjusted return on tangible common equity measured 9.8%. The return on assets measured 1.08% and the non-GAAP measure of adjusted return on assets measured 1.00%.

 

Pre-tax Pre-Provision Net Revenue (“PPNR”) increased quarter-over-quarter by 79% to $48 million and the non-GAAP measure of adjusted PPNR increased by 16% to $45 million. Adjusted PPNR more than doubled from $21 million on a year-over-year basis and moved within the Company’s target range at the halfway point of its three year strategic plan.

 

Revenue: Revenue increased by 9% quarter-over-quarter and 30% year-over-year. Net interest income has been the primary driver of revenue growth in recent periods. Fourth quarter net interest income increased by $10 million, or 11%, compared to the linked quarter and by $33 million, or 47%, compared to the fourth quarter of 2021. The net interest margin has increased in successive quarters over the last year, reaching 3.84% in the fourth quarter of 2022, compared to 3.48% in the prior quarter and 2.60% in the fourth quarter of 2021.

 

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This improvement was primarily due to the benefit of loan growth and positive sensitivity to increased market interest rates. The yield on average earning assets improved quarter-over-quarter to 4.56% from 3.91%. The cost of funds increased to 0.77% from 0.46%, while the cost of deposits increased to 0.69% from 0.33%. The Company’s interest rate sensitivity remained positive at period-end and was positioned to benefit from further interest rate increases anticipated by the market.

 

Fee income benefited quarter-over-quarter from a $1 million increase in loan related fees, which partially offset the impact of higher charges for tax credit investment amortization. Fourth quarter fee income decreased year-over-year primarily due to the impact of lower SBA related fees in 2022 resulting from changes in the SBA program and in market demand.

 

Provision for Credit Losses on Loans: Berkshire recorded a $12 million provision for credit losses in the fourth quarter of 2022, bringing the full year provision to $11 million. The full year 2021 provision was a benefit of $0.5 million. Both years benefited from releases of pandemic related reserves, and the increase in 2022 also reflected a resumption of loan growth and changes in the loan mix. The fourth-quarter provision primarily reflected the impact of one commercial and industrial credit which filed for bankruptcy in the fourth quarter.

 

Non-Interest Expense and Tax Expense: Full year non-interest expense increased by 1% in 2022, while adjusted non-interest expense was flat.

 

Fourth quarter non-interest expense totaled $70 million in 2022, decreasing by 14% quarter-over-quarter and increasing by 1% on a year-over-year basis due primarily to branch consolidation expense. Fourth quarter adjusted non-interest expense totaled $73 million which was a 3% increase quarter-over-quarter and a 6% increase year-over-year. Technology costs reflect continued investment in digitization and the category of all other expenses increased primarily due to loan related costs. Full time equivalent staff totaled 1,310 positions at period-end, compared to 1,319 positions at the start of the year.

 

The effective GAAP tax rate was 15% in the final quarter and 19% for the year 2022, compared to 20% for the year 2021. Due to the timing of tax credit investments, both tax expense and non-interest income were reduced in the fourth quarter. These investments contributed $0.03 to EPS in the year 2022, compared to $0.02 in the year 2021.

 

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

 

Summary: Total loans grew by 5% quarter-over-quarter and by 22% year-over-year. Total deposits increased by 3% quarter-over-quarter and year-over-year. Period-end liquidity and capital remained strong, with the ratio of loans/deposits measuring 81% and the non-GAAP measure of tangible common equity/tangible assets measuring 8.0%.

 

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Loans: Fourth quarter loan growth was concentrated in a $231 million increase in commercial loans and a $183 million increase in residential mortgages. For the full year, commercial loans increased by $640 million and residential mortgages increased by $824 million. Berkshire has expanded its lending teams over the last year, and business volumes and credit usage have benefited in some segments from improved market demand. Loan growth has also benefited from a decline in prepayments in the prevailing rising rate environment. All major loan categories increased by double digits in 2022 except for home equity loans. Reflecting higher interest rates, the fourth quarter loan yield increased year-over-year to 5.28% from 3.76%.

 

Asset Quality: Total delinquent and non-accruing loans measured 0.60% of total loans at year-end, the lowest in more than a decade. Reflecting the improved quality of the loan portfolio, the allowance for expected credit losses on loans declined to 1.15% of total loans from 1.21% at the start of the quarter. Net loan charge-offs totaled $12 million in the fourth quarter and $21 million for the year, or 0.27% of full year average loans. Charge-offs were concentrated in the second half of the year in one commercial and industrial credit which filed for bankruptcy in the fourth quarter.

 

Deposits: Total deposits increased by 3% year-over-year and quarter-over-quarter including higher period-end payroll deposit balances. Average deposits increased by 1% quarter-over-quarter and decreased by 2% year-over-year, including the impact of lower brokered time deposits. The fourth quarter cost of deposits increased year-over-year to 0.69% from 0.19%, including a 0.36% increase over the third quarter of 2022.

 

Equity: Total fourth quarter shareholders’ equity increased quarter-over-quarter by 1% to $954 million. Stock buybacks in the most recent quarter totaled approximately $20 million consisting of approximately 661,000 shares. For the year 2022, stock repurchases totaled $125 million, consisting of 4.5 million shares. At period-end, book value per share totaled $21.51 and the non-GAAP measure of tangible book value per share totaled $20.95; both measures increased by 3% quarter-over-quarter.

 

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 a high-performing, leading socially responsible community bank in New England and beyond. 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:

 

·BEST Community Comeback: Berkshire continues to accelerate progress towards the achievement of its “BEST Community Comeback” goals as it tracks inline or slightly ahead of program targets at year-end. 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 and recent results can be found at berkshirebank.com/comeback.

 

·Current ESG Performance: The Company improved on its BEST ESG goal with a top 17% composite performance in leading ESG indexes in the U.S. for its Environmental, Social and Governance (ESG) ratings. This included an upgraded rating from MSCI to “A”. As of December 31, 2022 the Company has ratings of: MSCI ESG- A; ISS ESG Quality Score - Environment: 3, Social: 1, Governance: 2; and Bloomberg ESG Disclosure- 62.81. The Company is also rated by Sustainalytics. Berkshire continues to rank among the top 1% of all U.S. Banks for ESG in Bloomberg.

 

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·Sustainable Business Award: The Sustainable Business Network named the Company Massachusetts Sustainable Business of the Year in the bank category in recognition of its collective efforts to build a more equitable economy and sustainable communities. This includes Berkshire’s initial impact from the BEST Community Comeback, its sustainable financing activities along with work to create a more diverse, equitable and inclusive workplace.

 

·Sustainability Bond: Berkshire has begun to allocate proceeds from its June 2022 Sustainability Bond issuance to eligible activities. The Company became the first public community bank with assets under $150 billion to issue a bond whose proceeds would be dedicated to social and environmental projects. Projects supported to date have created affordable housing, reduced greenhouse gas emissions and constructed green buildings.

 

INVESTOR CONFERENCE CALL AND INVESTOR PRESENTATION

 

Berkshire will conduct a conference call/webcast at 10:00 a.m. eastern time on Thursday, January 26, 2023 to discuss results for the quarter and provide guidance about expected future results. The Company will also place an investor presentation at its website at ir.berkshirebank.com.

 

Participants are encouraged to pre-register for the conference call using the following link:

 

https://www.netroadshow.com/events/login?show=5437e05c&confId=45736

 

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: 522984. 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: 971852. The webcast will be available on Berkshire's website for an extended period of time.

 

ABOUT BERKSHIRE HILLS BANCORP

 

Headquartered in Boston, Berkshire Hills Bancorp (NYSE:BHLB) is the parent of Berkshire Bank. Founded in 1846, the Bank's vision is to serve as a high-performing leading socially responsible community bank. It empowers the financial potential of its stakeholders by making banking available where, when and how it's needed through an uncompromising focus on exceptional customer service, digital banking, and positive community impact. Providing a wide range of financial solutions through its consumer banking, commercial banking and wealth management divisions, the Bank has approximately $11.7 billion in assets and a community-based footprint of 100 financial centers in Massachusetts, New York, Vermont, Connecticut and Rhode Island. Named one of America’s Most Trusted Companies 2022 by Newsweek, Berkshire is also listed in the Bloomberg Gender-Equality Index and a Best Place to Work for LGBTQ+ Equality. To learn more, 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,” “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.

 

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 2021, the Company recorded a third quarter net gain of $52 million on the sale of the Company’s insurance subsidiary and the Mid-Atlantic branch operations. Expense adjustments in the first quarter 2021 were primarily related to branch consolidations. Third quarter 2021 adjustments included Federal Home Loan Bank borrowings prepayment costs. They also included other restructuring charges for efficiency initiatives in operations areas including write-downs on real estate moved to held for sale and severance related to staff reductions. The fourth quarter 2021 revenue adjustment was primarily related to trailing revenue on a previously reported sale, and the expense adjustment was due primarily to branch restructuring costs. The revenue adjustments in 2022 were related to fair market value changes in equity and trading investments. The restructuring expense adjustment in third and fourth quarters of 2022 primarily related to the termination of leasehold interests and the write-down of related right of use assets and leasehold improvements in conjunction with branch consolidations and real estate 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 & Communications
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 Income
F-5 Statements of Income (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)  

 

    Dec. 31,     March 31,     June 30,     Sept. 30,     Dec. 31,  
    2021     2022     2022     2022     2022  
NOMINAL AND PER SHARE DATA                                        
Net earnings per common share, diluted   $ 0.42     $ 0.42     $ 0.50     $ 0.42     $ 0.69  
Adjusted earnings per common share, diluted (2)     0.42       0.43       0.51       0.62       0.64  
Net income, (thousands)     20,248       20,196       23,115       18,717       30,505  
Adjusted net income, (thousands) (2)     20,172       20,789       23,562       27,928       28,254  
Total common shares outstanding, end of period (thousands)     48,667       47,792       45,788       45,040       44,361  
Average diluted shares, (thousands)     48,340       48,067       46,102       45,034       44,484  
Total book value per common share, (end of period)     24.30       22.89       22.15       20.93       21.51  
Tangible book value per common share, (end of period) (2)     23.69       22.30       21.56       20.36       20.95  
Dividends per common share     0.12       0.12       0.12       0.12       0.18  
Full-time equivalent staff     1,319       1,333       1,322       1,300       1,310  
                                         
PERFORMANCE RATIOS (3)                                        
Return on equity     6.86 %     6.79 %     7.82 %     6.30 %     10.06 %
Adjusted return on equity (2)     6.83       6.99       7.97       9.40       9.32  
Return on tangible common equity (2)     7.37       7.29       8.33       6.76       10.59  
Adjusted return on tangible common equity (2)     7.34       7.49       8.48       9.92       9.83  
Return on assets     0.71       0.70       0.82       0.66       1.08  
Adjusted return on assets (2)     0.71       0.72       0.84       0.99       1.00  
Net interest margin, fully taxable equivalent (FTE) (4)(5)     2.60       2.61       3.11       3.48       3.84  
Efficiency ratio (2)     71.98       72.61       66.60       62.01       58.25  
                                         
FINANCIAL DATA (in millions, end of period)                                        
Total assets   $ 11,555     $ 12,097     $ 11,579     $ 11,317     $ 11,663  
Total earning assets     10,899       11,401       10,849       10,604       10,913  
Total loans     6,826       7,267       7,803       7,943       8,335  
Total deposits     10,069       10,699       10,115       9,988       10,327  
Loans/deposits (%)     68 %     68 %     77 %     80 %     81 %
Total shareholders' equity   $ 1,182     $ 1,094     $ 1,014     $ 943     $ 954  
                                         
ASSET QUALITY                                        
Allowance for credit losses, (millions)   $ 106     $ 99     $ 99     $ 96     $ 96  
Net charge-offs, (millions)     (4 )     (3 )     (0 )     (6 )     (12 )
Net charge-offs (QTD annualized)/average loans     0.23 %     0.15 %     0.02 %     0.30 %     0.58 %
Provision (benefit)/expense, (millions)   $ (3 )   $ (4 )   $ -     $ 3     $ 12  
Non-performing assets, (millions)     37       32       29       40       33  
Non-performing loans/total loans     0.52 %     0.41 %     0.34 %     0.48 %     0.37 %
Allowance for credit losses/non-performing loans     300       335       368       254       309  
Allowance for credit losses/total loans     1.55       1.37       1.27       1.21       1.15  
                                         
CAPITAL RATIOS                                        
Common equity tier 1 capital to risk weighted assets(6)     15.0 %     13.9 %     12.9 %     12.7 %     12.4 %
Tier 1 capital leverage ratio(6)     10.5       10.3       10.2       10.1       10.2  
Tangible common shareholders' equity/tangible assets(2)     10.0       8.8       8.5       8.1       8.0  

 

 

(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: 0.06%, 0.03%, 0.03%, 0.01%, 0.00%
(6)Presented as projected for December 31, 2022 and actual for the remaining periods.

F-1

 

 

CONSOLIDATED BALANCE SHEETS - UNAUDITED - (F-2)

 

   December 31,   September 30,   December 31, 
(in thousands)  2021   2022   2022 
Assets               
Cash and due from banks  $109,350   $128,509   $145,342 
Short-term investments   1,518,457    566,404    540,013 
Total cash and cash equivalents   1,627,807    694,913    685,355 
                
Trading security   8,354    6,812    6,708 
Marketable equity securities, at fair value   15,453    12,790    12,856 
Securities available for sale, at fair value   1,877,585    1,470,949    1,423,200 
Securities held to maturity, at amortized cost   636,503    592,503    583,453 
Federal Home Loan Bank stock and other restricted securities   10,800    7,264    7,219 
Total securities   2,548,695    2,090,318    2,033,436 
Less: Allowance for credit losses on investment securities   (105)        (91)
Net securities   2,548,590    2,090,223    2,033,345 
                
Loans held for sale   6,110    4,124    4,311 
                
Total loans   6,825,847    7,943,481    8,335,309 
Less: Allowance for credit losses on loans   (106,094)   (96,013)   (96,270)
Net loans   6,719,753    7,847,468    8,239,039 
                
Premises and equipment, net   94,383    86,809    85,217 
Goodwill and other intangible assets   29,619    25,761    24,483 
Other assets   524,074    563,946    587,854 
Assets held for sale   4,577    3,830    3,260 
Total assets  $11,554,913   $11,317,074   $11,662,864 
                
Liabilities and shareholders' equity               
Demand deposits  $3,008,461   $2,896,659   $2,852,127 
NOW and other deposits   976,401    1,045,970    1,054,596 
Money market deposits   3,293,526    3,388,932    3,723,570 
Savings deposits   1,111,625    1,111,304    1,063,269 
Time deposits   1,678,940    1,545,256    1,633,707 
Total deposits   10,068,953    9,988,121    10,327,269 
                
Senior borrowings   13,331    4,494    4,445 
Subordinated borrowings   97,513    121,001    121,064 
Total borrowings   110,844    125,495    125,509 
                
Other liabilities   192,681    260,896    256,024 
Total liabilities   10,372,478    10,374,512    10,708,802 
                
Common shareholders' equity   1,182,435    942,562    954,062 
Total shareholders' equity   1,182,435    942,562    954,062 
Total liabilities and shareholders' equity  $11,554,913   $11,317,074   $11,662,864 

 

F-2

 

 

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

 

LOAN ANALYSIS  

 

               Growth % 
(in millions)  December 31, 2021
Balance		   September 30, 2022
Balance		   December 31, 2022
Balance		   Quarter ended
December 31, 2022		   Year to Date 
Total commercial real estate  $3,598   $3,902   $4,095    5%   14%
Commercial and industrial loans   1,330    1,435    1,473    3    11 
Total commercial loans   4,928    5,337    5,568    4    13 
                          
Total residential mortgages   1,392    2,033    2,216    9    59 
                          
Home equity   253    234    227    (3)   (10)
Auto and other   253    339    324    (4)   28 
Total consumer loans   506    573    551    (4)   9 
Total loans  $6,826   $7,943   $8,335    5%   22%

 

DEPOSIT ANALYSIS

 

               Growth % 
(in millions)  December 31, 2021
Balance		   September 30, 2022
Balance		   December 31, 2022
Balance		   Quarter ended
December 31, 2022		   Year to Date 
Non-interest bearing  $3,008   $2,897   $2,852    (2)%   (5)%
NOW and other   976    1,046    1,054    1    8 
Money market   3,294    3,389    3,724    10    13 
Savings   1,112    1,111    1,063    (4)   (4)
Time deposits   1,679    1,545    1,634    6    (3)
Total deposits (1)  $10,069   $9,988   $10,327    3%   3%

 

 

(1) Included in total deposits are brokered deposits of $120.9 million, $163.5 million, and $228.1 million at December 31, 2022, September 30, 2022, and December 31, 2021, respectively.

 

F-3

 

 

 

 

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

 

   Three Months Ended   Years Ended 
   December 31,   December 31, 
(in thousands, except per share data)  2022   2021   2022   2021 
Interest income  $121,384   $75,860   $387,257   $329,065 
Interest expense   19,292    6,548    42,660    37,899 
Net interest income, not FTE   102,092    69,312    344,597    291,166 
Non-interest income                    
Deposit related fees   8,293    7,522    32,026    29,813 
Loan fees and revenue   5,058    9,098    21,731    35,060 
Insurance commissions and fees   -    -    -    7,003 
Wealth management fees   2,255    2,586    10,008    10,530 
Mortgage banking fees   44    259    230    2,056 
Other   (159)   993    6,973    6,631 
Total non-interest income excluding gains/(losses)   15,491    20,458    70,968    91,093 
Securities gains/(losses), net   163    (106)   (2,031)   (787)
Gain on sale of business operations and assets, net   -    1,057    -    52,942 
Total non-interest income   15,654    21,409    68,937    143,248 
Total net revenue   117,746    90,721    413,534    434,414 
Total net revenue excluding (losses)   117,583    89,770    415,565    382,259 
                     
Provision expense/(benefit) for credit losses   12,000    (3,000)   11,000    (500)
Non-interest expense                    
Compensation and benefits   37,968    37,816    152,741    150,589 
Occupancy and equipment   9,431    9,738    37,638    41,782 
Technology and communications   9,729    8,599    35,586    33,803 
Professional services   3,153    2,365    12,043    15,860 
Other expenses   12,350    10,025    41,799    38,078 
Merger, restructuring and other non-operating expenses   (2,617)   864    8,909    5,781 
Total non-interest expense   70,014    69,407    288,716    285,893 
Total non-interest expense excluding merger, restructuring and other   72,631    68,543    279,807    280,112 
                     
Income before income taxes  $35,732   $24,314   $113,818   $149,021 
Income tax expense   5,227    4,066    21,285    30,357 
Net income  $30,505   $20,248   $92,533   $118,664 
                     
                     
Basic earnings per common share  $0.69   $0.42   $2.03   $2.41 
Diluted earnings per common share  $0.69   $0.42   $2.02   $2.39 
                     
Weighted average shares outstanding:                    
Basic   44,105    47,958    45,564    49,240 
Diluted   44,484    48,340    45,914    49,554 

 

F-4

 

 

 

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

 

   Dec. 31,   March 31,   June 30,   Sept. 30,   Dec. 31, 
(in thousands, except per share data)  2021   2022   2022   2022   2022 
Interest income  $75,860   $74,823   $87,379   $103,671   $121,384 
Interest expense   6,548    5,760    6,021    11,587    19,292 
Net interest income, not FTE   69,312    69,063    81,358    92,084    102,092 
Non-interest income                         
Deposit related fees   7,522    7,351    8,005    8,377    8,293 
Loan fees and revenue   9,098    8,265    4,623    3,785    5,058 
Insurance commissions and fees   -    -    -    -    - 
Wealth management fees   2,586    2,625    2,775    2,353    2,255 
Mortgage banking fees   259    19    109    58    44 
Other   993    3,166    1,812    2,154    (159)
Total non-interest income excluding (losses)/gains   20,458    21,426    17,324    16,727    15,491 
Securities (losses)/gains, net   (106)   (745)   (973)   (476)   163 
Gain on sale of business operations and assets, net   1,057    -    -    -    - 
Total non-interest income   21,409    20,681    16,351    16,251    15,654 
Total net revenue   90,721    89,744    97,709    108,335    117,746 
Total net revenue excluding (losses)/gains   89,770    90,489    98,682    108,811    117,583 
                          
Provision (benefit)/expense for credit losses   (3,000)   (4,000)   -    3,000    12,000 
Non-interest expense                         
Compensation and benefits   37,816    37,521    37,830    39,422    37,968 
Occupancy and equipment    9,738    10,067    9,438    8,702    9,431 
Technology and communications   8,599    8,527    8,611    8,719    9,729 
Professional services   2,365    2,692    2,913    3,285    3,153 
Other expenses   10,025    9,725    9,648    10,076    12,350 
Merger, restructuring and other non-operating expenses   864    18    35    11,473    (2,617)
Total non-interest expense   69,407    68,550    68,475    81,677    70,014 
Total non-interest expense excluding merger, restructuring and other   68,543    68,532    68,440    70,204    72,631 
                          
                          
Income before income taxes  $24,314   $25,194   $29,234   $23,658   $35,732 
Income tax expense   4,066    4,998    6,119    4,941    5,227 
Net income  $20,248   $20,196   $23,115   $18,717   $30,505 
                          
Diluted earnings per common share  $0.42   $0.42   $0.50   $0.42   $0.69 
                          
Weighted average shares outstanding:                         
Basic   47,958    47,668    45,818    44,700    44,105 
Diluted   48,340    48,067    46,102    45,034    44,484 

 

F-5

 

 

 

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

 

   Dec. 31, 2021   March 31, 2022   June 30, 2022   Sept. 30, 2022   Dec. 31, 2022 
(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   3,569    3.49%   3,651    3.35%   3,831    3.79%   3,926    4.53%   3,934    5.46%
Commercial and industrial loans   1,278    4.37    1,373    4.14    1,447    4.46    1,449    5.21    1,471    6.62 
Residential mortgages   1,403    3.82    1,436    3.56    1,652    3.57    1,926    3.53    2,114    3.56 
Consumer loans   516    3.96    514    4.24    562    5.41    587    6.24    563    7.00 
Total loans (1)   6,766    3.76    6,974    3.61    7,492    3.99    7,888    4.54    8,082    5.28 
Securities (2)   2,367    2.04    2,649    1.95    2,621    1.97    2,400    2.13    2,294    2.20 
Short-term investments and loans held for sale   1,609    0.17    1,202    0.17    476    0.57    342    1.96    267    3.05 
Total earning assets   10,742    2.84    10,825    2.82    10,589    3.34    10,630    3.91    10,643    4.56 
Goodwill and other intangible assets   30         29         27         26         25      
Other assets   655         639         644         659         653      
Total assets   11,427         11,493         11,260         11,315         11,321      
                                                   
Liabilities and shareholders' equity                                                  
NOW and other   1,331    0.05%   1,456    0.04%   1,454    0.12%   1,362    0.48%   1,395    1.11%
Money market   2,731    0.16    2,871    0.16    2,811    0.19    2,737    0.46    2,819    1.16 
Savings   1,100    0.04    1,117    0.03    1,127    0.03    1,129    0.03    1,086    0.03 
Time   1,750    0.80    1,624    0.71    1,460    0.64    1,528    0.85    1,555    1.21 
Total interest-bearing deposits   6,912    0.28    7,068    0.24    6,852    0.24    6,756    0.48    6,855    0.98 
Borrowings (3)   121    5.68    122    5.21    160    4.61    251    5.46    169    5.56 
Total interest-bearing liabilities   7,033    0.37    7,190    0.32    7,012    0.34    7,007    0.66    7,024    1.09 
Non-interest-bearing demand deposits   3,038         2,968         2,903         2,913         2,876      
Other liabilities   175         146         163         206         208      
Total liabilities   10,246         10,304         10,078         10,126         10,108      
                                                   
Common shareholders' equity   1,181         1,189         1,182         1,189         1,213      
Total shareholders' equity   1,181         1,189         1,182         1,189         1,213      
Total liabilities and shareholders' equity   11,427         11,493         11,260         11,315         11,321      
                                                   
Net interest spread        2.47%        2.50%        2.99%        3.25%        3.47%
Net interest margin, FTE (4)        2.60         2.61         3.11         3.48         3.84 
Cost of funds        0.26         0.23         0.24         0.46         0.77 
Cost of deposits        0.19         0.17         0.17         0.33         0.69 
                                                   
Supplementary data                                                  
Net Interest Income, not FTE   69.312         69.063         81.358         92.084         102.092      
Fully taxable equivalent income adjustment   1.604         1.524         1.560         1.715         1.845      
Net Interest Income, FTE   70.916         70.587         82.918         93.799         103.937      
                                                   
Total average non-maturity deposits   8,200         8,412         8,295         8,141         8,176      
Total average deposits   9,950         10,037         9,755         9,669         9,731      
                                                   
Purchase accounting accretion   1.548         0.717         0.773         0.280         0.182      
Total average tangible equity (5)   1,151         1,160         1,155         1,163         1,188      

 

 

(1) Total loans include non-accruing loans.

(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) There was no effect of PPP loans on the quarterly net interest margin for the quarters presented.

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

 

F-6

 

 

 

ASSET QUALITY ANALYSIS - UNAUDITED - (F-7)

 

   Dec. 31,   March 31,   June 30,   Sept. 30,   Dec. 31, 
(in thousands)  2021   2022   2022   2022   2022 
NON-PERFORMING ASSETS                         
Non-accruing loans:                         
Commercial real estate  $13,954   $8,984   $8,277   $2,976   $2,434 
Commercial and industrial loans   6,747    5,618    4,891    21,008    17,023 
Residential mortgages   9,825    11,079    10,331    10,407    8,612 
Consumer loans   4,800    4,000    3,385    3,463    3,045 
Total non-accruing loans   35,326    29,681    26,884    37,854    31,114 
Repossessed assets   1,736    2,004    2,004    2,175    2,209 
Total non-performing assets  $37,062   $31,685   $28,888   $40,029   $33,323 
                          
Total non-accruing loans/total loans   0.52%   0.41%   0.34%   0.48%   0.37%
Total non-performing assets/total assets   0.32%   0.26%   0.25%   0.35%   0.29%
                          
PROVISION AND ALLOWANCE FOR CREDIT LOSSES ON LOANS                         
Balance at beginning of period  $112,916   $106,094   $99,475   $99,021   $96,013 
Charged-off loans   (7,976)   (6,048)   (1,593)   (7,424)   (12,995)
Recoveries on charged-off loans   4,154    3,429    1,139    1,416    1,252 
Net loans charged-off   (3,822)   (2,619)   (454)   (6,008)   (11,743)
Provision (benefit)/expense for loan credit losses   (3,000)   (4,000)   -    3,000    12,000 
Balance at end of period  $106,094   $99,475   $99,021   $96,013   $96,270 
                          
Allowance for credit losses/total loans   1.55%   1.37%   1.27%   1.21%   1.15%
Allowance for credit losses/non-accruing loans   300%   335%   368%   254%   309%
                          
NET LOAN CHARGE-OFFS                         
Commercial real estate  $(2,208)  $(3,280)  $(76)  $(854)  $187 
Commercial and industrial loans   (1,649)   653    (237)   (4,931)   (10,914)
Residential mortgages   (2)   (50)   (30)   122    192 
Home equity   106    135    33    1    (128)
Auto and other consumer   (69)   (77)   (144)   (346)   (1,080)
Total, net  $(3,822)  $(2,619)  $(454)  $(6,008)  $(11,743)
                          
Net charge-offs (QTD annualized)/average loans   0.23%   0.15%   0.02%   0.30%   0.58%
Net charge-offs (YTD annualized)/average loans   0.29%   0.15%   0.08%   0.16%   0.27%

 

F-7

 

 

 

 

ASSET QUALITY ANALYSIS - UNAUDITED (F-8)

 

   December 31, 2021   March 31, 2022   June 30, 2022   September 30, 2022   December 31, 2022 
(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  $39,863    0.58%  $13,517    0.19%  $36,184    0.46%  $14,662    0.18%  $12,162    0.15%
90+ Days delinquent and still accruing   3,270    0.05%   6,613    0.09%   6,760    0.09%   6,285    0.08%   7,038    0.08%
Total accruing delinquent loans   43,133    0.63%   20,130    0.28%   42,944    0.55%   20,947    0.26%   19,200    0.23%
Non-accruing loans   35,326    0.52%   29,681    0.41%   26,884    0.34%   37,854    0.48%   31,114    0.37%
Total delinquent and non-accruing loans  $78,459    1.15%  $49,811    0.69%  $69,828    0.89%  $58,801    0.74%  $50,314    0.60%

 

 

 

 

F-8

 

 

 

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

 

       Dec. 31,   March 31,   June 30,   Sept. 30,   Dec. 31, 
(in thousands)      2021   2022   2022   2022   2022 
Total revenue   (A)   $90,721   $89,744   $97,709   $108,335   $117,746 
Adj: Net securities losses/(gains) (1)        106    745    973    476    (163)
Adj: Net (gains) on sale of business operations and assets        (1,057)   -    -    -    - 
Total adjusted revenue (2)   (B)   $89,770   $90,489   $98,682   $108,811   $117,583 
                               
Total non-interest expense   (C)   $69,407   $68,550   $68,475   $81,677   $70,014 
Less: Merger, restructuring and other expense        (864)   (18)   (35)   (11,473)   2,617 
Adjusted non-interest expense (2)   (D)   $68,543   $68,532   $68,440   $70,204   $72,631 
                               
Pre-tax, pre-provision net revenue (PPNR)   (A-C)   $21,314   $21,194   $29,234   $26,658   $47,732 
Adjusted pre-tax, pre-provision net revenue (PPNR) (2)   (B-D)    21,227    21,957    30,242    38,607    44,952 
                               
Net income       $20,248   $20,196   $23,115   $18,717   $30,505 
Adj: Net securities losses/(gains) (1)        106    745    973    476    (163)
Adj: Net (gains) on sale of business operations and assets        (1,057)   -    -    -    - 
Adj: Restructuring expense and other expense        864    18    35    11,473    (2,617)
Adj: Income taxes (expense)/benefit        11    (170)   (561)   (2,738)   529 
Total adjusted income (2)   (E)   $20,172   $20,789   $23,562   $27,928   $28,254 
                               
(in millions, except per share data)                              
Total average assets   (F)   $11,427   $11,493   $11,260   $11,315   $11,321 
Total average shareholders' equity   (G)    1,181    1,189    1,182    1,189    1,213 
Total average tangible shareholders' equity (2)(3)   (H)    1,151    1,160    1,155    1,164    1,188 
Total average tangible common shareholders' equity (2)(3)   (I)    1,151    1,160    1,155    1,164    1,188 
Total accumulated other comprehensive (loss), period-end        (3)   (78)   (123)   (188)   (181)
Total tangible shareholders' equity, period-end (2)(3)   (J)    1,153    1,066    987    917    930 
Total tangible common shareholders' equity, period-end (2)(3)   (K)    1,153    1,066    987    917    930 
Total tangible assets, period-end (2)(3)   (L)    11,525    12,069    11,552    11,291    11,638 
                               
Total common shares outstanding, period-end (thousands)                  (M)    48,667    47,792    45,788    45,040    44,361 
Average diluted shares outstanding (thousands)   (N)    48,340    48,067    46,102    45,034    44,484 
                               
GAAP earnings per common share, diluted (2)       $0.42   $0.42   $0.50   $0.42   $0.69 
Adjusted earnings per common share, diluted (2)   (E/N)    0.42    0.43    0.51    0.62    0.64 
Tangible book value per common share, period-end (2)   (K/M)    23.69    22.30    21.56    20.36    20.95 
Total tangible shareholders' equity/total tangible assets (2)   (J/L)    10.00    8.83    8.54    8.12    7.99 
                               
Performance ratios (4)                              
GAAP return on equity        6.86%   6.79    7.82%   6.30%   10.06%
Adjusted return on equity (2)   (E/G)    6.83    6.99    7.97    9.40    9.32 
Return on tangible common equity (2)(5)        7.37    7.29    8.33    6.76    10.59 
Adjusted return on tangible common equity (2)(5)   (E+Q)/(I)    7.34    7.49    8.48    9.92    9.83 
GAAP return on assets        0.71    0.70    0.82    0.66    1.08 
Adjusted return on assets (2)        0.71    0.72    0.84    0.99    1.00 
PPNR from continuing operations/assets (2)        0.75    0.74    1.04    0.94    1.69 
Adjusted PPNR/assets (2)        0.74    0.76    1.07    1.36    1.59 
Efficiency ratio (2)(6)   (D-Q)/(B+O+R)    71.98    72.61    66.60    62.01    58.25 
Net interest margin, FTE        2.60    2.61    3.11    3.48    3.84 
                               
                               
Supplementary data (in thousands)                              
Tax benefit on tax-credit investments (7)   (O)   $2,057   $596   $595   $620   $3,068 
Non-interest income charge on tax-credit investments (8)   (P)    (1,448)   (357)   (351)   (445)   (2,355)
Net income on tax-credit investments   (O+P)    609    239    244    175    713 
                               
Intangible amortization   (Q)   $1,288   $1,286   $1,286   $1,285   $1,277 
Fully taxable equivalent income adjustment   (R)    1,604    1,524    1,560    1,715    1,845 

 

 

(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, new markets and solar.

(8) The non-interest income charge is the reduction to the tax-advantaged investments, which are incurred as the tax credits are generated.

 

F-9

 

 

 

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

 

       At or for the Years Ended 
       Dec. 31,   Dec. 31, 
(in thousands)      2021   2022 
Total revenue   (A)   $434,414   $413,534 
Adj: Net securities losses (1)        787    2,031 
Adj: Net (gains) on sale of business operations and assets        (52,942)   - 
Total adjusted revenue (2)   (B)   $382,259   $415,565 
                
Total non-interest expense   (C)   $285,893   $288,716 
Less: Merger, restructuring and other expense        (5,781)   (8,909)
Adjusted non-interest expense (2)   (D)   $280,112   $279,807 
                
Pre-tax, pre-provision net revenue (PPNR)   (A-C)   $148,521   $124,818 
Adjusted pre-tax, pre-provision net revenue (PPNR) (2)   (B-D)    102,147    135,758 
                
Net income       $118,664   $92,533 
Adj: Net securities losses (1)        787    2,031 
Adj: Net (gains) on sale of business operations and assets        (52,942)   - 
Adj: Restructuring expense and other expense        5,781    8,909 
Adj: Income taxes benefit/(expense)        11,696    (2,940)
Total adjusted income (2)   (E)   $83,986   $100,533 
                
(in millions, except per share data)               
Total average assets   (F)   $12,056   $11,347 
Total average shareholders' equity   (G)    1,166    1,193 
Total average tangible shareholders' equity (2)(3)   (H)    1,134    1,166 
Total average tangible common shareholders' equity (2)(3)   (I)    1,134    1,166 
Total accumulated other comprehensive (loss), period-end        (3)   (181)
Total tangible shareholders' equity, period-end (2)(3)   (J)    1,153    930 
Total tangible common shareholders' equity, period-end (2)(3)   (K)    1,153    930 
Total tangible assets, period-end (2)(3)   (L)    11,525    11,638 
                
Total common shares outstanding, period-end (thousands)                  (M)    48,667    44,361 
Average diluted shares outstanding (thousands)   (N)    49,554    45,914 
                
GAAP earnings/(loss) per common share, diluted (2)       $2.39   $2.02 
Adjusted earnings per common share, diluted (2)   (E/N)    1.69    2.19 
Tangible book value per common share, period-end (2)   (K/M)    23.69    20.95 
Total tangible shareholders' equity/total tangible assets (2)   (J/L)    10.00    7.99 
                
Performance ratios (4)               
GAAP return on equity        10.18%   7.76%
Adjusted return on equity (2)   (E/G)    7.20    8.43 
Return on tangible common equity (2)(5)        10.80    8.26 
Adjusted return on tangible common equity (2)(5)   (E+Q)/(I)    7.74    8.94 
GAAP return on assets        0.98    0.82 
Adjusted return on assets (2)        0.70    0.89 
PPNR from continuing operations/assets (2)        1.23    1.10 
Adjusted PPNR/assets (2)        0.85    1.20 
Efficiency ratio (2)(6)   (D-Q)/(B+O+R)    69.96    64.31 
Net interest margin, FTE        2.60    3.26 
                
Supplementary data (in thousands)               
Tax benefit on tax-credit investments (7)   (O)   $4,372   $4,880 
Non-interest income charge on tax-credit investments (8)   (P)    (3,445)   (3,508)
Net income on tax-credit investments   (O+P)    928    1,372 
                
Intangible amortization   (Q)   $5,200   $5,134 
Fully taxable equivalent income adjustment   (R)    6,344    6,644 

 

 

(1) Net securities 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, new markets,  and solar.

(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