Community Bank System Reports Record First Quarter 2018 Results

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Community Bank System, Inc. CBU reported record first quarter 2018 net income of $40.1 million, or $0.78 per fully diluted share, compared with $26.3 million, or $0.57 per share reported for the first quarter of 2017. First quarter 2017's results included $1.7 million, or $0.03 per share of acquisition expenses. Excluding acquisition expenses and the one-time tax benefit from the revaluation of net deferred tax liabilities related to the Tax Cuts and Jobs Act enacted in December 2017, the linked fourth quarter of 2017's earnings per share were $0.67 per share.

First Quarter 2018 Performance Highlights:

First quarter EPS of $0.78, up 37% over the first quarter of 2017.
Noninterest income was up 30% over the first quarter of 2017, representing 40% of operating revenues.
Deposit funding costs of 0.10%. Beta remains at zero.
Return on assets of 1.52%.
Return on tangible equity of 19%.

"We're very pleased with this quarter's results and the continuation of our earnings acceleration, due principally to the strategic deployment of capital last year with the NRS and Merchants Bancshares transactions," said President and Chief Executive Officer Mark E. Tryniski. "In addition, our fee-based businesses continue to grow both revenue and margin, contributing significantly to earnings and cash flow. EPS growth of 30% over last year, excluding acquisition expenses, was also supported by a lower effective tax rate that contributed approximately one-fifth of that improvement. We are very well positioned for the remainder of the year."

Total revenues for the first quarter of 2018 were $142.1 million, an increase of $30.5 million, or 27.4%, over the prior year quarter, and included the results from both the Merchants and NRS transactions completed in the first half of last year. Higher revenues were generated as a result of a 21.5% increase in average earning assets and continued growth in noninterest income, as well as a six basis-point increase in the net interest margin from the prior year quarter. A combination of acquired and organic growth resulted in an $8.6 million, or 30.3% increase in wealth management, insurance, and employee benefit services revenues compared to the prior year quarter. Deposit service fees increased 30.4% year-over-year, primarily the result of the addition of Merchants, as well as increased debit card-related revenues. Other banking services were up marginally, year-over-year. The quarterly provision for loan losses of $3.7 million was $1.9 million higher than the first quarter of 2017, reflective of higher quarterly net charge-off levels, including an incremental $1.1 million partial charge-off related to a single commercial relationship that incurred a $3.1 million charge in the fourth quarter of 2017. Non-performing asset and delinquent loan ratios were up slightly in comparison to the end of the first quarter of 2017, and included the impact of the previously mentioned commercial relationship which also adds over $4.1 million to non-performing assets. Total operating expenses for the first quarter of 2018 were $86.3 million. This compares to $71.9 million (excluding acquisition expenses) in the first quarter of 2017. Included in the first quarter 2018 results are the operating expenses from Merchants and NRS, as well as an additional $2.0 million of intangible amortization, primarily a result of those two transactions.

First quarter 2018 net interest income was $84.6 million, an increase of $17.3 million, or 25.8%, compared to the first quarter of 2017, and included the impact of the Merchants acquisition. In comparison to first quarter 2017, funding costs increased two basis points, and earning asset yields increased seven basis points, resulting in a six basis-point improvement in the net interest margin. The increase in the earning asset yield was driven by an incremental $1.6 million in non-impaired purchased loan accretion, as well as $0.8 million of accretion on a purchased impaired relationship. On a year-over-year basis, average loan balances grew $1.3 billion, or 26.3%, principally related to the Merchants transaction, while average loan yields increased 22 basis points, including the incremental purchased loan accretion. Investment interest income was $1.4 million higher than the first quarter of 2017, as average investment securities balances (including cash equivalents) increased by $358.7 million, due to the portfolio acquired from Merchants, while the yield on investments declined 30 basis points. Interest expense was $1.1 million higher than the previous year's first quarter, driven by a $275.5 million increase in average borrowings (primarily customer repurchase agreements) and a $1.32 billion increase in average deposit balances, principally related to the Merchants transaction, and a net two basis point increase in the overall cost of funds.

Wealth management and insurance services revenues increased to $14.1 million, an increase of $2.8 million, or 24.9%, compared to the first quarter of 2017, driven by both acquired and organic growth. Employee benefit services revenues of $23.0 million, increased $5.8 million from the first quarter of 2017 and were primarily attributable to the NRS acquisition.

Excluding acquisition expenses, first quarter 2018 operating expenses of $86.3 million, which included a full quarter of operating activities from both Merchants and NRS, increased $14.5 million over the first quarter of 2017. Salaries and employee benefits increased $9.0 million, or 20.9%, and included the personnel added from the two transactions, as well as annual merit and performance-based increases. All other operating expenses increased 19.1% year-over-year, and reflected the occupancy, equipment and other operating costs of both Merchants and NRS, including significantly higher intangible asset amortization, compared to the first quarter of 2017.

The effective tax rate for the first quarter of 2018 was 23.0%, down from 27.4% in the first quarter of last year benefitting earnings by $0.04 per share, and reflected the lower federal tax rate that resulted from the Tax Cut and Jobs Act passed in the fourth quarter of 2017. During the first quarter of 2017, the Company adopted new accounting guidance for share-based transactions. That guidance requires that all excess tax benefits and tax deficiencies associated with share-based compensation be recognized as income tax expense or benefit in the income statement. Previously, tax effects resulting from changes in the Company's share price subsequent to the grant date of equity instruments were recorded through shareholders' equity at the time of vesting or exercise. The adoption of the amended accounting guidance resulted in a $2.2 million reduction of income tax expense in the first quarter of 2017, or $0.04 of diluted earnings per common share, and a $0.3 million reduction of income tax expense in the second, third and fourth quarters of 2017, or less than $0.01 per share each quarter. In the first quarter of 2018, the new guidance resulted in a $0.7 million reduction of income tax expense, or $0.01 per share.

The Company also provides supplemental reporting of its results on a "net adjusted" or "tangible" basis, from which it excludes the after-tax effect of amortization of core deposit and other intangible assets (and the related goodwill, core deposit intangible and other intangible asset balances, net of applicable deferred tax amounts), accretion on non-impaired purchased loans, expenses associated with acquisitions, and the one-time benefit from the revaluation of net deferred tax liabilities. The amounts for such items are presented in the tables that accompany this release. Although "adjusted net income" as defined by the Company is a non-GAAP measure, the Company's management believes this information helps investors understand the effect of acquisition activity in its reported results. Adjusted net earnings per share were $0.82 in the first quarter of 2018, compared to $0.63 in the first quarter of 2017, or a 30.2% increase.

Financial Position

Average earning assets of $9.38 billion for the first quarter of 2018 were up modestly from the fourth quarter of 2017. Average deposit balances were down slightly from fourth quarter levels, but ending deposits were seasonally up $326.7 million, or 3.9%. Average borrowings (including customer repurchase agreements) in the first quarter of 2018 of $453.1 million, were also consistent with fourth quarter 2017 levels.

Ending loans at March 31, 2018 declined $29.7 million from year-end 2017, principally attributable to lower residential real estate balances, consistent with expectations. Investment securities totaled $3.03 billion at March 31, 2018, down slightly from the end of the fourth quarter, and up from the end of the first quarter of 2017 due to investments added from Merchants, and partially offset by limited reinvestment of securities cash flows over the last several quarters.

Shareholders' equity of $1.63 billion at first quarter-end was $335.4 million, or 25.9%, higher than the prior year period, a result of strong earnings generation and capital retention over the last four quarters, as well as incremental shares issued in conjunction with the Merchants acquisition. The Company's net tangible equity to net tangible assets ratio was 8.42% at March 31, 2018, down from 8.91% a year earlier, primarily a result of the Merchants acquisitions completed in the second quarter of 2017. The Company's Tier 1 leverage ratio was 10.19% at the end of the first quarter, down marginally from 10.35% a year earlier due mostly to the impact of the Merchants transaction.

As previously announced in December 2017, the Company's Board of Directors approved a stock repurchase program authorizing the repurchase of up to 2.5 million shares of the Company's common stock during a twelve-month period starting January 1, 2018. Such repurchases may be made at the discretion of the Company's senior management based on market conditions and other relevant factors and will be acquired through open market or privately negotiated transactions as permitted under Rule 10b-18 of the Securities Exchange Act of 1934 and other applicable legal requirements. There were no shares repurchased in the first quarter of 2018.

Asset Quality

Despite the previously mentioned partial charge-off of $4.2 million on a specific acquired commercial relationship in the fourth quarter of 2017 and the first quarter of 2018, the Company's asset quality metrics continue to illustrate the long-term effectiveness of the Company's disciplined risk management and underwriting standards. Total net charge-offs were $3.2 million for the first quarter, compared to $2.0 million for the first quarter of 2017 and $5.8 million for the fourth quarter of 2017. Net charge-offs as an annualized percentage of average loans measured 0.21% in the first quarter of 2018, compared to 0.16% in the prior year's first quarter and 0.37% in the fourth quarter of 2017. Nonperforming loans as a percentage of total loans at March 31, 2018 were 0.48%, compared to 0.44% at December 31, 2017 and 0.46% at March 31, 2017. The total loan delinquency ratio of 1.01% at the end of the first quarter was nine basis points lower than the level at December 31, 2017, and seven basis points higher than last year's first quarter-end. The first quarter provision for loan losses of $3.7 million was $1.9 million higher than the first quarter of 2017, and $1.7 million lower than the fourth quarter of 2017. The allowance for loan losses to nonperforming loans was 162% at March 31, 2018, compared with 173% and 206% at the end of the fourth quarter of 2017 and first quarter of 2017, respectively.

Dividend Increase

During the first quarter of 2018 the Company declared a quarterly cash dividend of $0.34 per share on its common stock, compared to a $0.32 dividend declared in the first quarter of 2017, or 6.3% higher, which represents an annualized yield of 2.5% based upon the $54.61 closing price of the Company's stock on April 23, 2018. The two cent increase declared in the third quarter of 2017 marked the 25th consecutive year of dividend increases for the Company. "The acceleration of our earnings and cash flow results will provide further strength to capital accumulation and dividend capacity into the future," said Mark E. Tryniski, President and Chief Executive Officer.

Merchants Bancshares, Inc.

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The Company completed the acquisition of Merchants Bancshares, Inc. ("Merchants"), parent company of Merchants Bank headquartered in South Burlington, Vermont, on May 12, 2017, for $345.2 million in Company stock and cash. The transaction extended the Company's footprint into the Vermont and Western Massachusetts markets. The transaction added 31 branch locations in Vermont and one office in Western Massachusetts in addition to approximately $2.0 billion of assets and $1.5 billion in deposits.

Northeast Retirement Services, Inc.

The Company acquired Northeast Retirement Services, Inc. ("NRS"), a leading provider of plan accounting, transfer agency, fund administration, trust and retirement plan services for $148.6 million in Company stock and cash on February 3, 2017.

Conference Call Scheduled

Company management will conduct an investor call at 11:00 a.m. (ET) tomorrow, April 25, 2018, to discuss first quarter 2018 results. The conference call can be accessed at 866-548-2692 (719-325-2430 if outside United States and Canada) using the conference ID code 7507810. Investors may also listen live via the Internet at: http://www.webcaster4.com/Webcast/Page/995/25249.

This earnings release, including supporting financial tables, is available within the press releases section of the Company's investor relations website at: http://ir.communitybanksystem.com. An archived webcast of the earnings call will be available on this site for one full year.

Community Bank System, Inc. operates more than 230 customer facilities across Upstate New York, Northeastern Pennsylvania, Vermont, and Western Massachusetts through its banking subsidiary, Community Bank, N.A. With assets of over $10.7 billion, the DeWitt, N.Y. headquartered company is among the country's 150 largest financial institutions. In addition to a full range of retail, business, and municipal banking services, the Company offers comprehensive financial planning, insurance and wealth management services through its' Community Bank Wealth Management Group and OneGroup NY, Inc. operating subsidiaries. The Company's Benefit Plans Administrative Services, Inc. subsidiary (which includes the recently acquired NRS) is a leading provider of employee benefits administration, trust services, fund administration and actuarial consulting services to customers on a national scale. Community Bank System, Inc. is listed on the New York Stock Exchange and the Company's stock trades under the symbol CBU. For more information about Community Bank visit www.communitybankna.com or http://ir.communitybanksystem.com.

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The following factors, among others, could cause the actual results of CBU's operations to differ materially from CBU's expectations: the successful integration of operations of its acquisitions; competition; changes in economic conditions, interest rates and financial markets; changes in legislation or regulatory requirements; and the timing for receiving regulatory approvals and completing pending transactions. These statements are based on the current beliefs and expectations of CBU's management and CBU does not assume any duty to update forward-looking statements.

             

Summary of Financial Data

(Dollars in thousands, except per share data)

                 
2018   2017
        1st Qtr   4th Qtr   3rd Qtr   2nd Qtr   1st Qtr
Earnings                        
Loan income $69,441 $69,716 $69,498 $62,351 $52,384
Investment income 18,963 19,872 18,989 19,071 17,574
Total interest income 88,404 89,588 88,487 81,422 69,958
Interest expense 3,780 3,611 4,092 3,393 2,684
Net interest income 84,624 85,977 84,395 78,029 67,274
Provision for loan losses 3,679 5,381 2,314 1,461 1,828
Net interest income after provision for loan losses 80,945 80,596 82,081 76,568 65,446
Deposit service fees 19,177 18,115 18,419 16,655 14,707
Revenues from mortgage banking and other banking services 1,243 1,196 1,704 1,407 1,159
Wealth management and insurance services 14,065 12,415 12,051 12,502 11,261
Employee benefit services 23,006 22,212 20,767 20,662 17,189
Gain on sale of investments 0 0 0 0 2
Total noninterest revenues 57,491 53,938 52,941 51,226 44,318
Salaries and employee benefits 51,859 49,006 48,426 46,564 42,907
Occupancy and equipment 10,531 9,622 9,106 8,637 8,196
Amortization of intangible assets 4,798 4,961 4,949 4,263 2,768
Acquisition expenses (8) 794 580 22,896 1,716
Other 19,151 22,536 20,715 20,519 17,988
Total operating expenses 86,331 86,919 83,776 102,879 73,575
Income before income taxes 52,105 47,615 51,246 24,915 36,189
Income taxes 11,999 (24,411) 16,003 7,724 9,932
Net income $40,106 $72,026 $35,243 $17,191 $26,257
Basic earnings per share $0.78 $1.41 $0.69 $0.35 $0.58
Diluted earnings per share       $0.78   $1.40   $0.68   $0.35   $0.57
Profitability                        
Return on assets 1.52% 2.66% 1.29% 0.69% 1.22%
Return on equity 10.00% 17.88% 8.81% 4.74% 8.47%
Return on tangible equity(2) 19.11% 34.11% 16.74% 7.72% 13.57%
Noninterest income/operating income (FTE) (1) 40.1% 37.9% 38.4% 39.4% 39.1%
Efficiency ratio       57.8%   57.8%   56.8%   58.3%   60.9%
Components of Net Interest Margin (FTE)                        
Loan yield 4.53% 4.43% 4.37% 4.41% 4.31%
Cash equivalents yield 1.54% 1.19% 1.09% 0.99% 0.79%
Investment yield 2.60% 2.81% 2.69% 2.87% 2.90%
Earning asset yield 3.87% 3.89% 3.81% 3.87% 3.80%
Interest-bearing deposit rate 0.14% 0.14% 0.14% 0.14% 0.13%
Borrowing rate 1.48% 1.32% 1.44% 1.54% 2.18%
Cost of all interest-bearing funds 0.23% 0.22% 0.24% 0.21% 0.19%
Cost of funds (includes DDA) 0.17% 0.16% 0.18% 0.16% 0.15%
Net interest margin (FTE) 3.71% 3.74% 3.64% 3.72% 3.65%
Fully tax-equivalent adjustment       $1,118   $2,375   $2,381   $2,374   $2,285
 
 
 
Summary of Financial Data
(Dollars in thousands, except per share data)                  
2018   2017
        1st Qtr   4th Qtr   3rd Qtr   2nd Qtr   1st Qtr
Average Balances                        
Loans $6,237,824 $6,274,679 $6,343,468 $5,695,781 $4,939,092
Cash equivalents 90,406 34,223 26,986 52,956 40,209
Taxable investment securities 2,583,446 2,572,703 2,571,459 2,408,020 2,203,175
Nontaxable investment securities 468,772 491,578 511,182 526,962 540,518
Total interest-earning assets 9,380,448 9,373,183 9,453,095 8,683,719 7,722,994
Total assets 10,715,529 10,757,836 10,862,613 9,958,553 8,747,266
Interest-bearing deposits 6,219,052 6,206,663 6,230,591 6,021,696 5,543,046
Borrowings 453,114 449,377 541,036 346,975 177,587
Total interest-bearing liabilities 6,672,166 6,656,040 6,771,627 6,368,671 5,720,633
Noninterest-bearing deposits 2,268,778 2,307,155 2,307,205 1,948,434 1,620,473
Shareholders' equity       1,625,951   1,598,056   1,587,279   1,455,847   1,256,888
Balance Sheet Data                        
Cash and cash equivalents $543,899 $221,038 $241,480 $219,695 $291,186
Investment securities 3,032,642 3,081,379 3,125,218 3,145,013 2,788,718
Loans:
Business lending 2,426,086 2,424,223 2,458,981 2,479,152 1,468,465
Consumer mortgage 2,211,882 2,220,298 2,206,527 2,211,412 1,830,800
Consumer indirect 1,008,198 1,011,978 1,034,716 1,057,664 1,055,112
Home equity 407,832 420,329 424,598 427,483 393,769
Consumer direct 173,032 179,929 183,898 185,589 184,067
Total loans 6,227,030 6,256,757 6,308,720 6,361,300 4,932,213
Allowance for loan losses 48,103 47,583 47,983 47,451 47,096
Intangible assets, net 820,584 825,088 824,355 831,403 618,977
Other assets 390,503 409,519 398,428 374,086 329,862
Total assets 10,966,555 10,746,198 10,850,218 10,884,046 8,913,860
Deposits:
Noninterest-bearing 2,372,824 2,293,057 2,310,954 2,283,138 1,642,158
Non-maturity interest-bearing 5,642,109 5,377,059 5,495,377 5,508,504 5,010,516
Time 756,159 774,304 799,659 833,963 684,203
Total deposits 8,771,092 8,444,420 8,605,990 8,625,605 7,336,877
Borrowings 281,744 363,082 314,289 373,053 0
Subordinated debt held by unconsolidated subsidiary trusts 122,820 122,814 122,808 122,802 102,177
Accrued interest and other liabilities 159,433 180,567 213,886 189,686 178,776
Total liabilities 9,335,089 9,110,883 9,256,973 9,311,146 7,617,830
Shareholders' equity 1,631,466 1,635,315 1,593,245 1,572,900 1,296,030
Total liabilities and shareholders' equity       10,966,555   10,746,198   10,850,218   10,884,046   8,913,860
Capital                        
Tier 1 leverage ratio 10.19% 10.00% 9.54% 10.19% 10.35%
Tangible equity/net tangible assets (2) 8.42% 8.61% 8.36% 8.08% 8.91%
Diluted weighted average common shares O/S 51,677 51,569 51,526 49,386 46,227
Period end common shares outstanding 50,884 50,696 50,587 50,512 45,956
Cash dividends declared per common share $0.34 $0.34 $0.34 $0.32 $0.32
Book value $32.06 $32.26 $31.50 $31.14 $28.20
Tangible book value(2) $16.88 $16.94 $16.70 $16.21 $16.22
Common stock price (end of period)       $53.56   $53.75   $55.25   $55.77   $54.98
 
             
Summary of Financial Data
(Dollars in thousands, except per share data)                  
2018   2017
        1st Qtr   4th Qtr   3rd Qtr   2nd Qtr   1st Qtr
Asset Quality                        
Nonaccrual loans $23,239 $24,740 $21,510 $21,033 $20,066
Accruing loans 90+ days delinquent 6,425 2,706 1,861 1,882 2,809
Total nonperforming loans 29,664 27,446 23,371 22,915 22,875
Other real estate owned (OREO) 1,865 1,915 1,873 2,491 2,486
Total nonperforming assets 31,529 29,361 25,244 25,406 25,361
Net charge-offs 3,159 5,781 1,782 1,106 1,965
Allowance for loan losses/loans outstanding 0.77% 0.76% 0.76% 0.75% 0.95%
Nonperforming loans/loans outstanding 0.48% 0.44% 0.37% 0.36% 0.46%
Allowance for loan losses/nonperforming loans 162% 173% 205% 207% 206%
Net charge-offs/average loans 0.21% 0.37% 0.11% 0.08% 0.16%
Delinquent loans/ending loans 1.01% 1.10% 1.05% 0.99% 0.94%
Loan loss provision/net charge-offs 116% 93% 130% 132% 93%
Nonperforming assets/total assets       0.29%   0.27%   0.23%   0.23%   0.28%
Asset Quality (excluding loans acquired since 1/1/09)                        
Nonaccrual loans $15,161 $16,020 $15,069 $14,359 $15,268
Accruing loans 90+ days delinquent 5,894 2,502 1,589 1,640 1,707
Total nonperforming loans 21,055 18,522 16,658 15,999 16,975
Other real estate owned (OREO) 1,336 1,221 1,257 1,681 2,225
Total nonperforming assets 22,391 19,743 17,915 17,680 19,200
Net charge-offs 1,800 2,279 1,624 692 1,866
Allowance for loan losses/loans outstanding 0.97% 0.98% 1.00% 1.01% 1.01%
Nonperforming loans/loans outstanding 0.45% 0.40% 0.36% 0.35% 0.38%
Allowance for loan losses/nonperforming loans 216% 244% 276% 284% 266 %
Net charge-offs/average loans 0.16% 0.20% 0.14% 0.06% 0.17%
Delinquent loans/ending loans 1.01% 1.12% 1.16% 1.06% 0.86%
Loan loss provision/net charge-offs 122% 67% 125% 153% 85%
Nonperforming assets/total assets       0.24%   0.22%   0.20%   0.20%   0.23%
 
             
Summary of Financial Data
(Dollars in thousands, except per share data)                  
2018   2017
        1st Qtr   4th Qtr   3rd Qtr   2nd Qtr   1st Qtr
Quarterly GAAP to Non-GAAP Reconciliations                        
Income statement data
Net income
Net income (GAAP) $40,106 $72,026 $35,243 $17,191 $26,257
Acquisition expenses (8) 794 580 22,896 1,716
Tax effect of acquisition expenses 2 (227) (181) (7,098) (471)
Tax Cuts and Jobs Act deferred tax impact 0   (38,010)   0   0   0
Subtotal (non-GAAP) 40,100 34,583 35,642 32,989 27,502
Amortization of intangibles 4,798 4,961 4,949 4,263 2,768
Tax effect of amortization of intangibles (1,105)   (1,417)   (1,545)   (1,322)   (760)
Subtotal (non-GAAP) 43,793 38,127 39,046 35,930 29,510
Acquired non-impaired loan accretion (2,063) (1,930) (1,879) (1,642) (437)
Tax effect of acquired non-impaired loan accretion 475   551   587   509   120
Adjusted net income (non-GAAP) $42,205   $36,748   $37,754   $34,797   $29,193
 
Return on average assets
Adjusted net income (non-GAAP) $42,205 $36,748 $37,754 $34,797 $29,193
Average total assets 10,715,529   10,757,836   10,862,613   9,958,553   8,747,266
Adjusted return on average assets 1.60%   1.36%   1.38%   1.40%   1.35%
 
Return on average equity
Adjusted net income (non-GAAP) $42,205 $36,748 $37,754 $34,797 $29,193
Average total equity 1,625,951   1,598,056   1,587,279   1,455,847   1,256,888
Adjusted return on average equity 10.53%   9.12%   9.44%   9.59%   9.42%
 
Earnings per common share
Diluted earnings per share (GAAP) $0.78 $1.40 $0.68 $0.35 $0.57
Acquisition expenses 0.00 0.02 0.01 0.46 0.04
Tax effect of acquisition expenses 0.00 (0.01) 0.00 ( 0.14) (0.01)
Tax Cuts and Jobs Act deferred tax impact 0.00   (0.74)   0.00   0.00   0.00
Subtotal (non-GAAP) 0.78 0.67 0.69 0.67 0.60
Amortization of intangibles 0.09 0.10 0.09 0.09 0.06
Tax effect of amortization of intangibles (0.02)   (0.03)   (0.03)   (0.03)   (0.02)
Subtotal (non-GAAP) 0.85 0.74 0.75 0.73 0.64
Acquired non-impaired loan accretion (0.04) (0.04) (0.04) (0.03) (0.01)
Tax effect of acquired non-impaired loan accretion 0.01   0.01   0.01   0.01   0.00
Diluted adjusted net earnings per share (non-GAAP) 0.82   0.71   0.72   0.71   0.63
 
Noninterest operating expenses
Noninterest expenses (GAAP) $86,331 $86,919 $83,776 $102,879 $73,575
Amortization of intangibles (4,798) (4,961) (4,949) (4,263) (2,768)
Acquisition expenses 8   (794)   (580)   (22,896)   (1,716)
Total adjusted noninterest expenses (non-GAAP) 81,541   81,164   78,247   75,720   69,091
 
Efficiency ratio
Adjusted noninterest expenses (non-GAAP) - numerator $81,541   $81,164   $78,247   $75,720   $69,091
Tax-equivalent net interest income 85,742 88,352 86,776 80,403 69,559
Noninterest revenues 57,491 53,938 52,941 51,226 44,318
Acquired non-impaired loan accretion (2,063) (1,930) (1,879) (1,642) (437)
Gain on sales of investments 0   0   0   0   (2)
Operating revenues (non-GAAP) - denominator 141,170   140,360   137,838   129,987   113,438
Efficiency ratio (non-GAAP)       57.8%   57.8%   56.8%   58.3%   60.9%
 
             
Summary of Financial Data
(Dollars in thousands, except per share data)                
2018   2017
        1st Qtr   4th Qtr   3rd Qtr   2nd Qtr   1st Qtr
Quarterly GAAP to Non-GAAP Reconciliations                        
Balance sheet data  
Total assets
Total assets (GAAP) $10,966,555 $10,746,198 $10,850,218 $10,884,046 $8,913,860
Intangible assets (820,584) (825,088) (824,355) (831,403) (618,977)
Deferred taxes on intangible assets 47,904   48,419   75,820   77,097   68,236
Total tangible assets (non-GAAP) 10,193,875   9,969,529   10,101,683   10,129,740   8,363,119
 
Total common equity
Shareholders' Equity (GAAP) 1,631,466 1,635,315 1,593,245 1,572,900 1,296,030
Intangible assets (820,584) (825,088) (824,355) (831,403) (618,977)
Deferred taxes on intangible assets 47,904   48,419   75,820   77,097   68,236
Total tangible common equity (non-GAAP) 858,786   858,646   844,710   818,594   745,289
 
Net tangible equity-to-assets ratio at quarter end
Total tangible common equity (non-GAAP) - numerator $858,786   $858,646   $844,710   $818,594   $745,289
Total tangible assets (non-GAAP) - denominator 10,193,875   9,969,529   10,101,683   10,129,740   8,363,119
Net tangible equity-to-assets ratio at quarter end (non-GAAP) 8.42%   8.61%   8.36%   8.08%   8.91%
                         
 
(1) Excludes gains and losses on sales of investment securities.
(2) Includes deferred tax liabilities related to certain intangible assets.

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