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Amalgamated Bank Reports Third Quarter 2018 Financial Results

NEW YORK, Oct. 29, 2018 (GLOBE NEWSWIRE) -- Amalgamated Bank (AMAL) (the “Company”) today announced financial results for the third quarter ended September 30, 2018.

Third Quarter 2018 Highlights

  • Net income of $9.4 million, or $0.29 per diluted share, as compared to $4.6 million, or $0.16 per diluted share, for the third quarter of 2017

  • Core earnings (non-GAAP) of $12.1 million, or $0.38 per diluted share, as compared to $4.9 million, or $0.17 per diluted share, for the third quarter of 2017

  • Deposit growth of $70.4 million, or 7.1% annualized, compared to June 30, 2018

  • Loan growth of $78.8 million, or 10.1% annualized, compared to June 30, 2018

  • Cost of deposits was 0.25%, as compared to 0.24% for the second quarter of 2018 and 0.25% for the third quarter of 2017

  • Net Interest Margin was 3.65%, as compared to 3.56% for the second quarter of 2018 and 3.30% for the third quarter of 2017

  • Tier 1 Leverage, Common Equity Tier 1, and Total Risk-Based capital ratios were 8.94%, 12.95%, and 14.20%, respectively, at September 30, 2018

Keith Mestrich, President and Chief Executive Officer of Amalgamated Bank, commented, “I am pleased with our third quarter financial results as they visibly demonstrate the value that we provide to our customers as we execute our mission of building America’s socially responsible bank. Our sustained deposit growth and stable cost of funds, and our position as the go-to financial partner for clients who share our values, are strong proof-points of our continued success. Our strategy is to invest our low-cost deposits into conservative assets to generate attractive returns for all our stakeholders which can be seen in our margin expansion. This quarter, we again experienced success reducing our indirect C&I portfolio as the total C&I balances declined $41.8 million, which was more than offset by growth in residential and multifamily lending as total loan balances were modestly higher at quarter end.”

Results of Operations, Quarter Ended September 30, 2018

Net income for the third quarter of 2018 was $9.4 million, or $0.29 per diluted share, as compared to $11.6 million, or $0.39 per diluted share, for the second quarter of 2018 and net income of $4.6 million, or $0.16 per diluted share, for the third quarter of 2017. The $4.8 million increase in net income for the third quarter of 2018, compared to the comparable prior year period, was primarily due to an $8.1 million increase in net interest income, partially offset by a $3.1 million increase in non-interest expense, primarily due to costs associated with the initial public offering, and an $0.8 million increase in the provision for income taxes.

Core earnings (non-GAAP) for the third quarter of 2018 were $12.1 million, or $0.38 per diluted share, compared to $11.8 million or $0.40 per diluted share, for the second quarter of 2018 and $4.9 million, or $0.17 per diluted share, for the third quarter of 2017. Core earnings for the third quarter of 2018 excluded $3.4 million of expense related to our initial public offering and $148,000 in integration expense related to our acquisition of New Resource Bank.

Net interest income was $40.0 million for the third quarter of 2018, compared to $36.7 million for the second quarter of 2018 and $32.0 million for the third quarter of 2017. The year over year increase was primarily attributable to a $400.1 million increase in average net loans, a six basis point increase in the yield on average loans, a 58 basis point increase in the yield on average securities and FHLB stock, and a decrease in funding costs due to a decrease in average borrowings of $504.0 million, partially offset by a $399.9 million increase in average interest bearing deposits. The company recorded loans acquired in our acquisition of New Resource at fair value, including a credit discount, which is accreted into interest income over the life of the related loans.

*Please refer to the reconciliation of GAAP to non-GAAP financial measures at the end of this document

Net interest margin was 3.65% for the third quarter of 2018, an increase of nine basis points as compared to 3.56% in the second quarter of 2018 and an increase of 35 basis points from 3.30% in the third quarter of 2017. The accretion of the loan mark from the loans acquired in the New Resource Bank acquisition was six basis points on net interest margin in the third quarter of 2018 compared to three basis points in the second quarter of 2018.

Provisions for loan losses totaled an expense of $0.8 million in the third quarter of 2018 compared to a release of $2.8 million in the second quarter of 2018 and an expense of $1.2 million for the third quarter of 2017. The provision expense in the third quarter of 2018 was primarily driven by portfolio balance increases, particularly in Residential 1-4 Family (1st lien) and Multifamily loans, tempered by general improvement in loss rates. The provision includes an increase in specific reserves related to a previously impaired indirect C&I loan, offset by an overall net reduction in C&I portfolio.

Non-interest income increased $1.3 million, or 21.7%, to $7.5 million in the third quarter of 2018 from $6.2 million in the second quarter of 2018, and increased $0.2 million, or 3.4%, from $7.3 million in the third quarter of 2017. The linked quarter increase was primarily due to higher service charges on deposit accounts and the absence of losses on the sale of loans and other real estate owned compared to the second quarter.

Non-interest expense for the third quarter of 2018 was $34.1 million, an increase of $4.0 million from $30.1 million in the second quarter of 2018, and an increase of $3.1 million from $31.0 million in the third quarter of 2017. The linked quarter increase was primarily due to $3.4 million of initial public offering costs expensed during the third quarter.

Total loans, net of deferred origination fees, at September 30, 2018 were $3.2 billion, an increase of $78.8 million, or 2.5%, as compared to $3.1 billion as of June 30, 2018, and an increase of $493.0 million, or 18.2%, as compared to $2.7 billion as of September 30, 2017. Loan growth was primarily driven by the $335.2 million of loans we acquired, net of fair value adjustments, in our acquisition of New Resource, growth in residential lending and multifamily lending portfolios, and the purchase of loans, partially offset by run-off in our indirect C&I portfolio.

Deposits at September 30, 2018 were $4.0 billion, an increase of $70.4 million, or 1.8%, as compared to $4.0 billion as of June 30, 2018, and an increase of $1.0 billion, or 31.2%, as compared to $3.0 billion as of September 30, 2017; $361.9 million of deposit growth was attributed to our acquisition of New Resource. Our deposits held by politically-active customers, such as campaigns, PACs and state and national party committees were $397.8 million as of September 30, 2018, a decrease of $18.6 million compared to $416.3 million as of June 30, 2018, and an increase of $241.3 million compared to $156.5 million as of September 30, 2017. Noninterest-bearing deposits represented 44.2% of average deposits for the three months ended September 30, 2018, contributing to an average cost of deposits of 0.25% in the third quarter of 2018, a one basis point increase from the linked quarter.

Results of Operations, Nine Months Ended September 30, 2018

Net income for the nine months ended September 30, 2018 was $28.7 million, or $0.96 per diluted share, as compared to $9.7 million, or $0.34 per diluted share, for the nine months ended September 30, 2017. The $19.0 million increase in net income for the period was primarily due to a $19.5 million increase in net interest income and a $7.4 million improvement in provision for loan losses, partially offset by a $2.4 million increase in non-interest expense and a $5.2 million increase in the provision for income taxes.

Core earnings (non-GAAP) for the nine months ended September 30, 2018 were $31.9 million, or $1.06 per diluted share, as compared to $9.4 million, or $0.33 per diluted share, for the nine months ended September 30, 2017. Core earnings for the nine months ended September 30, 2018 excluded $3.4 million of expenses related to the initial public offering and $730,000 in expense related to our acquisition of New Resource Bank.

Net interest income was $109.5 million for the nine months ended September 30, 2018, as compared to $90.0 million for the nine months ended September 30, 2017. Net interest margin was 3.55% for the nine months ended September 30, 2018, compared to 3.13% for the same period in 2017, an increase of 42 basis points.

Non-interest income decreased 1.6% to $20.8 million for the nine months ended September 30, 2018, as compared to $21.1 million for the nine months ended September 30, 2017. The decrease was primarily due to the loss on the sale of one C&I loan, loss on the sales of foreclosed 1-4 family residential properties, and loss on the sale of investment securities, partially offset by increased fee income from service charges on deposit accounts.

Non-interest expense for the nine months ended September 30, 2018 was $93.0 million, an increase of $2.4 million or 2.6%, from $90.6 million for the nine months ended September 30, 2017. The increase was primarily due to the absence of the retirement plan cancellation credit of $9.8 million which occurred in the second quarter of 2017 and $3.4 million in expense related to the initial public offering of the stock in the third quarter of 2018, partially offset by the absence of prepayment penalties on borrowings which occurred in the first nine months of 2017.

Financial Condition

Total assets were $4.6 billion at September 30, 2018, compared to $4.0 billion at December 31, 2017. The increase of $589.2 million was primarily driven by the addition of $412.1 million in total assets acquired, net of fair value adjustments, in our acquisition of New Resource, and by an increase in investment securities of $201.1 million.

Nonperforming assets totaled $58.0 million, or 1.25% of period end total assets at September 30, 2018, an increase of $6 million, compared with $52.0 million, or 1.13% of period end total assets at June 30, 2018.

The allowance for loan losses increased $1.0 million to $36.4 million at September 30, 2018 from $35.4 million at June 30, 2018, primarily driven by an increase in reserves on multifamily and retail loans. At September 30, 2018, the Company had $57.0 million of impaired loans for which a specific allowance of $9.8 million was made, compared to $51.1 million of impaired loans at June 30, 2018 for which a specific allowance of $9.2 million was made. The ratio of allowance to total loans was 1.14% at September 30, 2018 and 1.13% at June 30, 2018.

Capital

As of September 30, 2018, the Company’s Tier 1 Leverage Capital Ratio was 8.94%, Common Equity Tier 1 Capital Ratio was 12.95%, and Total Risk-Based Capital Ratio was 14.20%, compared to 8.59%, 12.46%, and 13.71%, respectively, as of June 30, 2018. As of September 30, 2017, the Company’s Tier 1 Leverage, Common Equity Tier 1, and Total Risk-Based capital ratios were 8.46%, 11.84%, and 13.10%, respectively. Stockholders’ equity at September 30, 2018 was $420.9 million, compared to $406.2 million at June 30, 2018.

The Company’s tangible book value per share was $12.57 as of September 30, 2018 compared to $12.06 as of June 30, 2018 and $12.19 as of September 30, 2017.

Conference Call

As previously announced, Amalgamated Bank will host a conference call today, October 29, 2018, to discuss its third quarter 2018 results at 5:00pm (Eastern Time). The conference call can be accessed by dialing 1-877-407-9716 (domestic) or 1-201-493-6779 (international) and asking for the Amalgamated Bank Third Quarter 2018 Earnings Call. A telephonic replay will be available approximately three hours after the call and can be accessed by dialing 1-844-512-2921, or for international callers 1-412-317-6671 and providing the access code 13683598. The telephonic replay will be available until 11:59 pm (Eastern Time) on November 12, 2018.

Interested investors and other parties may also listen to a simultaneous webcast of the conference call by logging onto the investor relations section of the Company’s website at http://ir.amalgamatedbank.com/. The online replay will remain available for a limited time beginning immediately following the call.

About Amalgamated Bank

Amalgamated Bank is a New York-based full-service commercial bank and a chartered trust company with a combined network of 14 branches in New York City, Washington D.C., and San Francisco, and a presence in Pasadena, CA and Boulder, CO. Amalgamated was formed in 1923 as Amalgamated Bank of New York by the Amalgamated Clothing Workers of America, one of the country's oldest labor unions. Amalgamated provides commercial banking and trust services nationally and offers a full range of products and services to both commercial and retail customers. Amalgamated is a proud member of the Global Alliance for Banking on Values and is a certified B Corporation®. As of September 30, 2018, total assets were $4.6 billion, total net loans were $3.2 billion, and total deposits were $4.0 billion. Additionally, as of September 30, 2018, the trust business held $30.2 billion in assets under custody and $12.3 billion in assets under management.

Non-GAAP Financial Measures

This release contains certain non-GAAP financial measures including, without limitation, “Core operating revenue,” “Core non-interest expense,” “Core earnings,” “Tangible common equity,” “Core return on average assets,” “Core return on average tangible common equity,” and “Core efficiency ratio.”

Our management utilizes this information to compare our operating performance for 2018 versus certain periods in 2017 and to internally prepared projections. We believe these non-GAAP financial measures facilitate making period-to-period comparisons and are meaningful indications of our operating performance. In addition, because intangible assets such as goodwill and other discrete items unrelated to our core business that are excluded vary extensively from company to company, we believe that the presentation of this information allows investors to more easily compare our results to those of other companies.

The presentation of non-GAAP financial information, however, is not intended to be considered in isolation or as a substitute for GAAP financial measures. We strongly encourage readers to review the GAAP financial measures included in this release and not to place undue reliance upon any single financial measure. In addition, because non-GAAP financial measures are not standardized, it may not be possible to compare the non-GAAP financial measures presented in this release with other companies’ non-GAAP financial measures having the same or similar names. Reconciliations of non-GAAP financial disclosures to comparable GAAP measures found in this release are set forth in the final pages of this release and also may be viewed on the Company’s website, amalgamatedbank.com.

Terminology

Certain terms used in this release are defined as follows:

“Core operating revenue” is defined as total net interest income plus non-interest income excluding gains and losses on sales of securities and excluding other than temporary impairment charges (“OTTI”). We believe the most directly comparable GAAP financial measure is the total of net interest income and non-interest income.

“Core non-interest expense” is defined as total non-interest expense excluding any prepayment of long-term borrowings, branch closures, costs related to bank acquisitions, restructuring/severance or post-retirement benefit cancellation impacts. We believe the most directly comparable GAAP financial measure is total non-interest expense.

“Core earnings" is defined as net income after tax excluding gains and losses on sales of securities and excluding OTTI, prepayment of long-term borrowings, branch closures, costs related to bank acquisitions, restructuring/severance, post-retirement benefit cancellation, taxes on notable pre-tax items, pension recycling taxes and valuation allowance release. We believe the most directly comparable GAAP financial measure is net income.

“Tangible common equity” and “Tangible book value” and are defined as stockholders’ equity excluding, as applicable, minority interests, preferred stock, goodwill and core deposit intangibles. We believe that the most directly comparable GAAP financial measure is total stockholders’ equity.

“Core return on average assets” is defined as “Core earnings” divided by average total assets. We believe the most directly comparable performance ratio derived from GAAP financial measures is return on average assets calculated by dividing net income by average total assets.

“Core return on average tangible common equity” is defined as “Core earnings” divided by “Average tangible common equity.” We believe the most directly comparable performance ratio derived from GAAP financial measures is return on average equity calculated by dividing net income by average total stockholders’ equity.

“Core efficiency ratio” is defined as “Core non-interest expense” divided by “Core operating revenue.” We believe the most directly comparable performance ratio derived from GAAP financial measures is an efficiency ratio calculated by dividing total non-interest expense by the sum of net interest income and total non-interest income.

Forward Looking Statements

Statements included in this release that are not historical in nature are intended to be, and are hereby identified as, forward-looking statements within the meaning of the Private Securities Litigation Reform Act, Section 21E of the Securities Exchange Act of 1934, as amended. The words “may,” “will,” “anticipate,” “should,” “would,” “believe,” “contemplate,” “expect,” “estimate,” “continue,” “may” and “intend,” as well as other similar words and expressions of the future, are intended to identify forward-looking statements, but other statements not based on historical information may also be considered forward-looking statements. These forward-looking statements include statements related to our business strategy, deposit growth, projected cost of funds, decline in the amount of deposits by certain of our customers and margin expansion. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors, any or all of which could cause actual results to differ materially from the results expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to: (i) deterioration in the financial condition of borrowers resulting in significant increases in loan losses and provisions for those losses; (ii) continuation of the historically low short-term interest rate environment; (iii) the inability of Amalgamated Bank to maintain the historical growth rate of its loan portfolio; (iv) changes in loan underwriting, credit review or loss reserve policies associated with economic conditions, examination conclusions, or regulatory developments; (v) effectiveness of Amalgamated Bank’s asset management activities in improving, resolving or liquidating lower-quality assets; (vi) the impact of competition with other financial institutions, including pricing pressures (including those resulting from the Tax Cuts and Jobs Act) and the resulting impact on Amalgamated Bank’s results, including as a result of compression to net interest margin; (vii) greater than anticipated adverse conditions in the national or local economies including in Amalgamated Bank’s core markets (viii) fluctuations or unanticipated changes in interest rates on loans or deposits or that affect the yield curve; (ix) the results of regulatory examinations; (x) the ability to grow and retain low-cost core deposits and retain large, uninsured deposits; (xi) a merger or acquisition; (xii) risks of expansion into new geographic or product markets; (xiii) any matter that would cause Amalgamated Bank to conclude that there was impairment of any asset, including intangible assets; (xiv) inability to comply with regulatory capital requirements, including those resulting from changes to capital calculation methodologies, required capital maintenance levels or regulatory requests or directives; (xv) risks associated with litigation, including the applicability of insurance coverage; (xvi) the risk of successful integration of the businesses Amalgamated Bank has recently acquired with its business; (xvii) the vulnerability of Amalgamated Bank's network and online banking portals, and the systems of parties with whom Amalgamated Bank contracts, to unauthorized access, computer viruses, phishing schemes, spam attacks, human error, natural disasters, power loss and other security breaches; (xviii) the possibility of increased compliance costs resulting from increased regulatory oversight as a result of Amalgamated Bank becoming a publicly traded company; (xix) volatile credit and financial markets both domestic and foreign; (xx) potential deterioration in real estate values (xxi) the risk that the cost savings and any synergies expected from Amalgamated’s merger with New Resource Bank (“NRB”) may not be realized or take longer than anticipated to be realized; (xx) disruption from Amalgamated’s merger with NRB with customers, suppliers, employee or other business partners relationships; (xxi) the risk of successful integration of Amalgamated's and NRB's businesses; (xxii) reputational risk and the reaction of the parties' customers, suppliers, employees or other business partners to Amalgamated's merger with NRB; (xxiii) the risk that the integration of Amalgamated’s and NRB's operations will be more costly or difficult than expected; and (xxiii) the availability and access to capital. Additional factors which could affect the forward looking statements can be found in Amalgamated’s Registration Statement on Form 10, Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K filed with the FDIC and available on the FDIC's website at https://efr.fdic.gov/fcxweb/efr/index.html. Amalgamated Bank disclaims any obligation to update or revise any forward-looking statements contained in this release, which speak only as of the date hereof, whether as a result of new information, future events or otherwise, except as required by law.

Media Contact:
Kaye Verville
The Levinson Group
kaye@mollylevinson.com
202-244-1785

Investor Contact:
Jamie Lillis
Solebury Trout
shareholderrelations@amalgamatedbank.com
800-895-4172


Consolidated Statements of Income (Unaudited)
(Dollars in thousands, except for per share amount)

Three months ended

Nine months ended

September 30,

June 30,

September 30,

September 30,

September 30,

2018

2018

2017

2018

2017

INTEREST AND DIVIDEND INCOME

Loans

$

33,788

$

32,322

$

29,048

$

95,284

$

82,889

Securities

8,707

7,374

6,388

22,325

19,407

Federal Home Loan Bank of New York stock

161

248

449

801

1,230

Interest-bearing deposits in banks

443

216

150

1,094

438

Total interest and dividend income

43,099

40,160

36,035

119,504

103,964

INTEREST EXPENSE

Deposits

2,559

2,212

1,910

6,860

5,339

Borrowed funds

498

1,253

2,172

3,104

8,582

Total interest expense

3,057

3,465

4,082

9,964

13,921

NET INTEREST INCOME

40,042

36,695

31,953

109,540

90,043

Provision (release) for loan losses

791

(2,766

)

1,167

(1,124

)

6,240

Net interest income after provision for loan losses

39,251

39,461

30,786

110,664

83,803

NON-INTEREST INCOME

Trust department fees

4,698

4,636

4,618

13,983

13,890

Service charges on deposit accounts

2,225

1,991

1,717

5,995

5,184

Bank-owned life insurance

434

399

448

1,237

1,291

(Loss) gain on sale of investment securities available for sale, net

-

(9

)

183

(110

)

81

Other than temporary impairment (OTTI) of securities, net

-

-

(1

)

(2

)

10

Gain (loss) on sale of loans, net

13

(506

)

16

(464

)

40

(Loss) gain on other real estate owned, net

-

(486

)

87

(494

)

67

Other

177

179

233

619

547

Total non-interest income

7,547

6,204

7,301

20,764

21,110

NON-INTEREST EXPENSE

Compensation and employee benefits, net

17,044

16,839

17,340

49,259

39,885

Occupancy and depreciation

4,172

4,060

3,993

12,234

13,883

Professional fees

5,243

2,427

2,136

10,863

6,964

FDIC deposit insurance

443

576

632

1,574

1,870

Data processing

2,787

2,462

2,256

7,585

6,937

Office maintenance and depreciation

796

927

1,072

2,669

3,223

Amortization of intangible assets

406

174

-

580

-

Advertising and promotion

1,075

871

973

2,592

2,982

Borrowed funds prepayment fees

5

4

-

8

7,615

Other

2,082

1,798

2,580

5,615

7,258

Total non-interest expense

34,053

30,138

30,982

92,979

90,617

Income before provision for income taxes

12,745

15,527

7,105

38,449

14,296

Provision for income taxes

3,328

3,935

2,521

9,779

4,591

Net income

9,417

11,592

4,584

28,670

9,705

Net income attributable to noncontrolling interests

-

-

-

-

-

Net income attributable to Amalgamated Bank and subsidiaries

$

9,417

$

11,592

$

4,584

$

28,670

$

9,705

Earnings per common share - basic (1)

$

0.30

$

0.39

$

0.16

$

0.96

$

0.34

Earnings per common share - diluted (1)

$

0.29

$

0.39

$

0.16

$

0.96

$

0.34

(1) effected for stock split that occurred on July 27, 2018

Consolidated Statements of Financial Condition (Unaudited)
(Dollars in thousands)

As of

September 30,

December 31,

Assets

2018

2017

(Unaudited)

Cash and due from banks

$

16,811

$

7,130

Interest-bearing deposits in banks

83,518

109,329

Total cash and cash equivalents

100,329

116,459

Securities:

Available for sale, at fair value

1,149,939

943,359

Held-to-maturity (fair value of $4,103 and $9,718, respectively)

4,108

9,601

Loans receivable, net of deferred loan origination costs (fees)

3,200,865

2,815,878

Allowance for loan losses

(36,414

)

(35,965

)

Loans receivable, net

3,164,451

2,779,913

Accrued interest and dividends receivable

14,487

11,177

Premises and equipment, net

22,552

22,422

Bank-owned life insurance

78,718

72,960

Deferred tax asset, net

37,686

39,307

Goodwill and other intangible assets

21,428

-

Other real estate owned

844

1,907

Other assets

35,834

44,057

Total assets

$

4,630,376

$

4,041,162

Liabilities and Stockholders' Equity

Deposits

$

4,032,792

$

3,233,108

Borrowed funds

121,675

402,605

Accrued interest payable

1,025

1,434

Other liabilities

53,856

59,947

Total liabilities

4,209,348

3,697,094

Commitments and contingencies

Stockholders’ equity:

Preferred Stock:

Class B - par value $100,000 per share; 77 shares authorized; 67 shares

issued and outstanding as of December 31, 2017

-

6,700

Common Stock:

Class A - par value $.01 per share; 70,000,000 shares authorized; 31,771,585 and

28,060,980 shares issued and outstanding, respectively (1)

318

281

Additional paid-in capital (1)

308,144

243,771

Retained earnings

128,176

99,506

Total accumulated other comprehensive loss, net of taxes

(15,744

)

(6,324

)

Total Amalgamated Bank stockholders' equity

420,894

343,934

Noncontrolling interests

134

134

Total stockholders' equity

421,028

344,068

Total liabilities and stockholders’ equity

$

4,630,376

$

4,041,162

(1) December 31, 2017 balances effected for stock split that occurred on July 27, 2018

Select Financial Data

As of and for the Three

As of and for the Nine

Months Ended (1)

Months Ended (1)

September 30,

June 30,

September 30,

September 30,

2018

2018

2017

2018

2017

Selected Financial Ratios and Other Data:

Earnings

Basic

$

0.30

$

0.39

$

0.16

$

0.96

$

0.34

Diluted

0.29

0.39

0.16

0.96

0.34

Core Earnings

Basic

$

0.38

$

0.40

$

0.17

$

1.07

$

0.33

Diluted

0.38

0.40

0.17

1.06

0.33

Book value per common share

13.25

12.78

12.43

13.25

12.43

(excluding minority interest)

Tangible book value per share

12.57

12.06

12.19

12.57

12.19

Common shares outstanding

31,771,585

31,771,585

28,060,985

31,771,585

28,060,985

Weighted average common shares

31,771,585

29,814,345

28,060,985

29,895,897

28,060,985

outstanding, basic

Weighted average common shares

32,099,668

29,814,345

28,060,985

30,006,460

28,060,985

outstanding, diluted

(1) Effected for stock split that occurred on July 27, 2018

Select Financial Data

As of and for the Three

As of and for the Nine

Months Ended

Months Ended

September 30,

June 30,

September 30,

September 30,

2018

2018

2017

2018

2017

Selected Performance Metrics:

Return on average assets

0.82

%

1.07

%

0.45

%

0.89

%

0.32

%

Core return on average assets (non-GAAP)

1.05

%

1.10

%

0.48

%

0.98

%

0.31

%

Return on average equity

8.96

%

12.31

%

5.19

%

10.07

%

3.72

%

Core return on average tangible common equity (non-GAAP)

12.17

%

13.08

%

5.71

%

11.64

%

3.68

%

Loan yield

4.33

%

4.33

%

4.27

%

4.28

%

4.21

%

Securities yield

3.11

%

2.93

%

2.53

%

2.97

%

2.46

%

Deposit cost

0.25

%

0.24

%

0.25

%

0.25

%

0.23

%

Net interest margin

3.65

%

3.56

%

3.30

%

3.55

%

3.13

%

Efficiency ratio

71.56

%

70.25

%

78.93

%

71.36

%

81.53

%

Core efficiency ratio (non-GAAP)

64.02

%

69.51

%

77.59

%

68.11

%

81.83

%

Asset Quality Ratios:

Nonperforming loans to total loans

0.63

%

0.63

%

1.11

%

0.63

%

1.11

%

Nonperforming assets to total assets

1.25

%

1.13

%

2.14

%

1.25

%

2.14

%

Allowance for loan losses to

180

%

179

%

123

%

180

%

123

%

nonperforming loans

Allowance for loan losses to total loans

1.14

%

1.13

%

1.36

%

1.14

%

1.36

%

Net (recoveries) charge-offs to average loans

(0.01

%)

(0.02

%)

0.15

%

(0.05

%)

0.18

%

Capital Ratios:

Tier 1 leverage capital ratio

8.94

%

8.59

%

8.46

%

8.94

%

8.46

%

Tier 1 risk-based capital ratio

12.95

%

12.46

%

11.84

%

12.95

%

11.84

%

Total risk-based capital ratio

14.20

%

13.71

%

13.10

%

14.20

%

13.10

%

Common equity tier 1 capital ratio

12.95

%

12.46

%

11.63

%

12.95

%

11.63

%

Portfolio Composition

(in thousands)

At September 30, 2018

At June 30, 2018

At September 30, 2017

Amount

% of total loans

Amount

% of total loans

Amount

% of total loans

Commercial portfolio:

Commercial and industrial

$

585,279

18.3

%

$

627,113

20.1

%

$

702,678

25.9

%

Multifamily mortgages

956,307

29.9

%

925,483

29.7

%

859,039

31.7

%

Commercial real estate mortgages

429,616

13.4

%

436,669

14.0

%

361,026

13.3

%

Construction and land development mortgages

36,704

1.1

%

32,727

1.05

%

10,317

0.40

%

Total commercial portfolio

2,007,906

62.8

%

2,021,992

64.8

%

1,933,060

71.4

%

Retail portfolio:

Residential 1-4 family (1st mortgage)

1,017,362

31.8

%

958,145

30.7

%

711,703

26.3

%

Residential 1-4 family (2nd mortgage)

28,588

0.9

%

29,278

0.9

%

31,208

1.2

%

Consumer and other

141,660

4.4

%

110,008

3.60

%

32,678

1.20

%

Total retail

1,187,610

37.2

%

1,097,431

35.2

%

775,589

28.6

%

Total loans

3,195,516

100.0

%

3,119,423

100.0

%

2,708,649

100.0

%

Net deferred loan origination costs (fees )

5,349

2,641

(833

)

Allowance for loan losses

(36,414

)

(35,353

)

(37,132

)

Total loans, net

$

3,164,451

$

3,086,711

$

2,670,684

Portfolio Composition

For the Three months ended

For the Three months ended

For the Three months ended

September 30, 2018

June 30, 2018

September 30, 2017

(in thousands)

Average
Balance

Income /
Expense

Yield /
Rate

Average
Balance

Income /
Expense

Yield /
Rate

Average
Balance

Income /
Expense

Yield /
Rate

Interest earning assets:

Interest-bearing deposits in banks

$

114,464

$

443

1.54

%

$

74,668

$

216

1.16

%

$

73,227

$

150

0.81

%

Securities and FHLB stock

1,130,719

8,867

3.11

%

1,045,196

7,622

2.93

%

1,071,577

6,837

2.53

%

Loans held for sale (1)

11,445

-

-

28,042

-

-

-

-

-

Total loans, net (2)

3,097,318

33,789

4.33

%

2,991,273

32,322

4.33

%

2,697,254

29,048

4.27

%

Total interest earning assets

4,353,946

43,099

3.93

%

4,139,179

40,160

3.89

%

3,842,058

36,035

3.72

%

Non-interest earning assets:

Cash and due from banks

19,623

13,825

6,484

Other assets (3)

202,593

180,417

197,716

Total assets

$

4,576,162

$

4,333,422

$

4,046,258

Interest bearing liabilities:

Savings, NOW and money market deposits

1,804,535

$

1,416

0.31

%

1,587,825

$

1,225

0.31

%

1,433,667

$

1,042

0.29

%

Time deposits

434,352

1,143

1.04

%

400,778

987

0.99

%

405,282

868

0.85

%

Total interest bearing deposits

2,238,887

2,559

0.45

%

1,988,603

2,212

0.45

%

1,838,949

1,910

0.41

%

Federal Home Loan Bank advances

106,131

498

1.86

%

291,023

1,253

1.73

%

610,173

2,172

1.41

%

Total interest bearing liabilities

2,345,018

3,057

0.52

%

2,279,626

3,465

0.61

%

2,449,122

4,082

0.66

%

Non interest bearing liabilities:

Demand and transaction deposits

1,771,774

1,636,294

1,202,207

Other liabilities

42,563

39,647

44,345

Total liabilities

4,159,355

3,955,567

3,695,674

Stockholders' equity

416,807

377,855

350,584

Total liabilities and stockholders' equity

$

4,576,162

$

4,333,422

$

4,046,258

Net interest income / interest rate spread

$

40,042

3.41

%

$

36,695

3.28

%

$

31,953

3.06

%

Net interest earning assets / net interest margin

$

2,008,928

3.65

%

$

1,859,553

3.56

%

$

1,392,936

3.30

%

(1) Indirect C&I loans that have been traded, but not settled

(2) Average balances are net of deferred origination costs / (fees) and the allowance for loan losses

(3) Includes non performing residential 1-4 family loans $0.2 million and $22.8 million for the three months ended September 30, 2018 and 2017 respectively and $93,190 for the three months ended June 30, 2018

Portfolio Composition

For the Nine Months Ended

For the Nine Months Ended

September 30, 2018

September 30, 2017

(in thousands)

Average
Balance

Income /
Expense

Yield /
Rate

Average
Balance

Income /
Expense

Yield /
Rate

Interest earning assets:

Interest-bearing deposits in banks

$

88,215

$

1,094

1.66

%

$

88,362

$

438

0.66

%

Securities and FHLB stock

1,042,680

23,125

2.97

%

1,122,322

20,637

2.46

%

Loans held for sale (1)

13,541

-

-

474

-

-

Total loans, net (2)

2,978,911

95,284

4.28

%

2,629,914

82,889

4.21

%

Total interest earning assets

4,123,347

119,503

3.87

%

3,841,072

103,964

3.62

%

Non-interest earning assets:

Cash and due from banks

13,498

6,617

Other assets (3)

186,518

185,006

Total assets

$

4,323,363

$

4,032,695

Interest bearing liabilities:

Savings, NOW and money market deposits

1,628,503

$

3,774

0.31

%

1,476,918

$

2,805

0.25

%

Time deposits

407,305

3,086

1.01

%

438,584

2,534

0.77

%

Total interest bearing deposits

2,035,808

6,860

0.45

%

1,915,502

5,339

0.37

%

Federal Home Loan Bank advances

251,488

3,104

1.65

%

595,794

8,549

1.92

%

Other Borrowings

-

-

-

2,023

33

2.16

%

Total borrowings

251,488

3,104

1.65

%

597,817

8,582

1.92

%

Total interest bearing liabilities

2,287,296

9,964

0.58

%

2,513,319

13,921

0.74

%

Non interest bearing liabilities:

Demand and transaction deposits

1,611,782

1,125,027

Other liabilities

43,499

45,085

Total liabilities

3,942,577

3,683,432

Stockholders' equity

380,786

349,263

Total liabiliites and stockholders' equity

$

4,323,363

$

4,032,695

Net interest income / interest rate spread

$

109,539

3.29

%

$

90,043

2.88

%

Net interest earning assets / net interest margin

$

1,836,051

3.55

%

$

1,327,753

3.13

%

(1) Indirect C&I loans that have been traded, but not settled

(2) Average balances are net of deferred origination costs / (fees) and the allowance for loan losses

(3) Includes non performing residential 1-4 family loans $1.1 million and $7.9 million for the nine months ended 2018 and 2017 respectively.

Portfolio Composition

Three Months Ended

(in thousands)

September 30, 2018

June 30, 2018

September 30, 2017

Average
Amount

Weighted
Average Rate

Average
Amount

Weighted
Average Rate

Average
Amount

Weighted
Average Rate

Non-interest bearing demand deposit accounts

$

1,771,774

0.00

%

$

1,636,294

0.00

%

$

1,202,207

x

0.00

%

Savings accounts

327,098

0.17

%

313,694

0.15

%

304,087

0.14

%

Money market deposit accounts

1,286,940

0.32

%

1,071,822

0.33

%

930,830

0.34

%

NOW accounts

190,497

0.46

%

202,309

0.45

%

198,750

0.27

%

Time deposits

434,352

1.04

%

400,778

0.99

%

405,283

0.85

%

$

4,010,661

0.25

%

$

3,624,897

0.24

%

$

3,041,157

0.25

%


Nine Months Ended September 30,

(in thousands)

2018

2017

Average Amount

Weighted
Average Rate

Average Amount

Weighted
Average Rate

Non-interest bearing demand deposit accounts

$

1,611,782

0.00

%

$

1,125,028

0.00

%

Savings accounts

315,408

0.15

%

303,744

0.13

%

Money market deposit accounts

1,113,344

0.34

%

978,949

0.30

%

NOW accounts

199,751

0.38

%

194,225

0.21

%

Time deposits

407,305

1.01

%

438,584

0.77

%

$

3,647,590

0.25

%

$

3,040,530

0.23

%

Reconciliation of GAAP to Non-GAAP Financial Measures
The information provided below presents a reconciliation of each of our non-GAAP financial measures to the most directly comparable GAAP financial measure.

For the Three

For the Nine

Months Ended

Months Ended

(in thousands)

September 30,

June 30,

September 30,

September 30,

2018

2018

2017

2018

2017

Core operating revenue

Net interest income (GAAP)

$

40,042

$

36,695

$

31,953

$

109,540

$

90,043

Non interest income (GAAP)

7,547

$

6,204

7,301

20,764

21,110

Less: Securities loss, net and OTTI

-

$

9

(182

)

112

(91

)

Core operating revenue (non-GAAP)

$

47,589

$

42,908

$

39,072

$

130,416

$

111,062

Core non-interest expenses

Non-interest expense (GAAP)

$

34,053

$

30,138

$

30,982

$

92,979

$

90,617

Less: Prepayment fees on borrowings

(5

)

(4

)

-

(8

)

(7,615

)

Less: Branch closure expense(1)

-

-

-

-

(1,289

)

Less: Acquisition cost(2)

(148

)

(307

)

(730

)

-

Less: Initial public offering cost (3)

(3,436

)

-

(3,436

)

Less: Severance

-

-

(665

)

23

(665

)

Add: Post-retirement benefit cancellation(4)

-

-

-

-

9,838

Core non-interest expense (non-GAAP)

$

30,464

$

29,827

$

30,317

$

88,828

$

90,886

Core Earnings

Net Income (GAAP)

$

9,417

$

11,592

$

4,584

$

28,670

$

9,705

Add: Securities loss, net and OTTI

-

9

(182

)

112

(91

)

Add: Prepayment fees on borrowings

5

4

-

8

7,615

Add: Branch closure expense(1)

-

-

-

-

1,289

Add: Acquisition cost(2)

148

307

-

730

-

Add: Initial public offering cost (3)

3,436

-

-

3,436

-

Add: Severance

-

-

665

(23

)

665

Less: Post-retirement benefit cancellation(4)

-

-

-

-

(9,838

)

Less: Tax on notable items

(911

)

(81

)

(123

)

(1,083

)

91

Core earnings (non-GAAP)

$

12,095

$

11,831

$

4,944

$

31,850

$

9,436

Tangible common equity

Stockholders Equity (GAAP)

$

421,028

406,311

$

349,031

$

421,028

$

349,031

Less: Minority Interest (GAAP)

(134

)

(134

)

(134

)

(134

)

(134

)

Less: Preferred Stock (GAAP)

-

-

(6,700

)

-

(6,700

)

Less: Goodwill (GAAP)

(12,936

)

(14,124

)

-

(12,936

)

-

Less: Core deposit intangible (GAAP)

(8,491

)

(8,897

)

-

(8,491

)

-

Tangible common equity (non-GAAP)

$

399,467

$

383,156

$

342,197

$

399,467

$

342,197

Core return on average assets

Core earnings (numerator) (non-GAAP)

12,095

11,831

4,944

31,850

9,436

Divided: Total average assets (denominator) (GAAP)

4,576,162

4,333,422

4,046,258

4,323,363

4,032,695

Core return on average assets (non-GAAP)

1.05

%

1.10

%

0.48

%

0.98

%

0.31

%

Core return on average tangible common equity

Core earnings (numerator) (non-GAAP)

12,095

11,831

4,944

31,850

9,436

Divided: Total average tangible common equity (denominator) (non-GAAP)

394,338

362,765

343,750

365,931

342,429

Core return on average tangible common equity (non-GAAP)

12.17

%

13.08

%

5.71

%

11.64

%

3.68

%

Core efficiency ratio

Core non-interest expense (numerator) (non-GAAP)

30,464

29,827

30,317

88,828

90,886

Core operating revenue (denominator) (non-GAAP)

47,589

42,908

39,072

130,416

111,062

Core efficiency ratio (non-GAAP)

64.02

%

69.51

%

77.59

%

68.11

%

81.83

%

(1) Occupany and severance expense related to closure of branches during our branch rationalization

(2) Expense expense related to New Resource acquisition

(3) Costs related to initial public offering in August 2018

(4) "One time" credit due to plan cancellation in Q2 2017