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Amalgamated Bank Reports Third Quarter 2019 Financial Results

October 28, 2019 6:26 AM

NEW YORK, Oct. 28, 2019 (GLOBE NEWSWIRE) -- Amalgamated Bank (Nasdaq: AMAL) (“Amalgamated”) today announced financial results for the period ended September 30, 2019.

Third Quarter 2019 Highlights

Keith Mestrich, President and Chief Executive Officer of Amalgamated Bank, commented, “Our third quarter results demonstrate the continued growth of our franchise as we surpassed $5.0 billion in assets, a significant milestone for Amalgamated. This growth was driven by continued strength in our average deposits which increased at an 11.3% annualized rate in the quarter, including $91.5 million growth in political deposits at period end as we continue to bank a majority of the candidates running for President. We also delivered 21.4% annualized loan growth as our expansion into ‘sustainable’ lending continues to gain traction and the headwind from our decision to run off our indirect C&I portfolio abates. Looking to the balance of the year, we are well positioned as our pipelines in alternative energy, C&I, CRE, and Multifamily are healthy. Lastly, we have remained disciplined on costs, having reduced our forward looking expense base by approximately $2.4 million annually through the renegotiation of a major vendor contract and the closure of our Chelsea bank branch. Expense control remains a priority of our management team as we strive to improve the Bank’s profitability.”

Results of Operations, Quarter Ended September 30, 2019

Net income for the third quarter of 2019 was $13.2 million, or $0.41 per diluted share, compared to $11.2 million, or $0.35 per diluted share, for the second quarter of 2019 and $9.4 million, or $0.29 per diluted share, for the third quarter of 2018. The $3.8 million increase in net income for the third quarter of 2019, compared to the third quarter of 2018, was primarily due to a $2.2 million decrease in non-interest expense due to the initial public offering of our stock in the third quarter of 2018, a $1.7 million increase in net interest income, and a $1.3 million decrease in provision expense due to a $1.7 million recovery in the quarter, partially offset by a $1.6 million increase in income tax expense.

Core net income (non-GAAP) for the third quarter of 2019 was $13.3 million, or $0.41 per diluted share, compared to $11.6 million, or $0.36 per diluted share, for the second quarter of 2019 and $12.1 million, or $0.38 per diluted share, for the third quarter of 2018. Core net income for the third quarter of 2019 exclude branch closure expenses, loss on the sale of securities, severance, and the tax effect of such adjustments.

Net interest income was $41.8 million for the third quarter of 2019, compared to $41.9 million for the second quarter of 2019 and $40.0 million for the third quarter of 2018. The year-over-year increase of $1.7 million, or 4.3%, was primarily attributable to an increase in average loans of $266.5 million, an increase in average securities of $164.2 million, and an increase in the yield on average securities of 17 basis points. These increases were partially offset by an increase in average interest bearing deposits of $48.4 million, an increase in average FHLB borrowings of $60.2 million, an increase in the average rate paid on interest bearing deposits of 24 basis points, and an increase in the rate paid on FHLB borrowings of 49 basis points. We also recognized $0.8 million of accretion income on acquired loans, adding seven basis points to our net interest margin in the third quarter of 2019.

Net interest margin was 3.50% for the third quarter of 2019, compared to 3.66% in the second quarter of 2019, and 3.65% in the third quarter of 2018. The 16 basis point decrease in the third quarter compared to the linked quarter, was primarily due to a 20 basis point decrease in the yield on loans as the result of the indirect C&I portfolio run-off and lower market rates and due to higher rates on interest bearing deposits.

Provisions for loan losses totaled a release of $0.6 million in the third quarter of 2019, compared to an expense of $2.1 million in the second quarter of 2019 and an expense of $0.8 million for the third quarter of 2018. The provision release in the third quarter of 2019 was primarily driven by the recovery of $1.7 million related to one indirect C&I loan that had previously been charged-off, partially offset by $0.8 million in net charge-offs in C&I and by other factors. The provision for the third quarter of 2018 was primarily due to an increase in loan balances, partially offset by a reduction in loss factors.

Non-interest income was $7.7 million in the third quarter of 2019 compared to $6.3 million in the second quarter of 2019, and $7.5 million in the third quarter of 2018. The $1.3 million increase in the third quarter of 2019 compared to the linked quarter was primarily due to an increase in Trust Department and service charge fees as well as a lower losses on investment securities and no losses in the sale of other real estate owned in the third quarter of 2019. The $0.1 million, or 1.5%, increase in the third quarter of 2019, compared to the same period in 2018, was primarily due to a $0.2 million increase in Trust Department fees, partially offset by other factors.

Non-interest expense for the third quarter of 2019 was $31.9 million, an increase of $0.9 million from $31.0 million in the second quarter of 2019, and a decrease of $2.2 million from $34.1 million in the third quarter of 2018. The $0.9 million increase in the third quarter compared to the linked quarter was due to higher expenses related to projects, such as SOX readiness and an increase in bonus pool for employees, partially offset by a reduction in the off balance sheet provision and FDIC assessment expense.

The third quarter of 2019 included a provision for income tax expense of $4.9 million, compared to a provision of $3.9 million for second quarter of 2019, and provision of $3.3 million for the third quarter of 2018. Our effective tax rate was 27.1% for the three months ended September 30, 2019, compared to 26.1% and 25.8% for the same period in 2018 and the linked quarter respectively.

Total loans at September 30, 2019 were $3.5 billion, an increase of $176.3 million, or 21.4% annualized, compared to June 30, 2019, and an increase of $302.8 million, or 9.6%, as compared to $3.2 billion as of September 30, 2018. Loan growth in the third quarter of 2019 was primarily driven by a $83.3 million increase in residential first lien and PACE loans, a $56.9 million increase in multifamily loans, and a $45.6 million increase in C&I loans.

Deposits at September 30, 2019 were $4.3 billion, an increase of $185.9 million, or 17.8% annualized, as compared to $4.1 billion as of June 30, 2019, and an increase of $289.6 million, or 7.2%, compared to $4.0 billion as of September 30, 2018. Deposits held by politically-active customers, such as campaigns, PACs and state and national party committees were $510.9 million as of September 30, 2019, an increase of $91.5 million, compared to $419.4 million as of June 30, 2019, and an increase of $113.1 million compared to $397.8 million, as of September 30, 2018. Noninterest-bearing deposits represented 45.9% of average deposits and 45.4% of ending deposits for the three months ended September 30, 2019.

Results of Operations, Nine Months Ended September 30, 2019

Net income for the nine months ended September 30, 2019 was $35.2 million, or $1.09 per diluted share, compared to $28.7 million, or $0.96 per diluted share, for same period in 2018. The $6.5 million increase in net income for the nine months ended September 30, 2019, compared to the same period in 2018, was primarily due to a $14.8 million increase in net interest income, partially offset by a $4.9 million increase in the provision for loan losses, a $2.7 million increase in income tax expense, and $1.4 million increase in non-interest expense.

Core net income (non-GAAP) for the nine months ended September 30, 2019 were $35.6 million, or $1.10 per diluted share, compared to $31.9 million or $0.97 per diluted share, for the same period last year. Core net income for the first nine months of 2019 exclude branch closures, severance, loss on the sale of securities, and the tax effect of such adjustments.

Net interest income was $124.4 million for the nine months ended September 30, 2019, an increase of $14.8 million, or 13.6%, from the same period in 2018. This increase was primarily attributable to an increase in average loans of $292.8 million, an increase in average securities of $227.0 million, and an increase in the yield on average securities and FHLB stock of 36 basis points. These increases were partially offset by an increase in average interest bearing deposits of $280.6 million, an increase in the rate paid on interest bearing deposits of 15 basis points, and an increase in the rate paid on FHLB borrowings of 81 basis points.

We had income tax expense of $12.5 million for the nine months ended September 30, 2019, compared to $9.8 million for the same period in 2018. The $2.7 million increase in income tax expense was primarily due to an increase in pre-tax earnings of $9.3 million in the nine months ended September 30, 2019, compared to the same period in 2018. Our effective tax rate was 26.3% for the nine months ended September 30, 2019, compared to 25.4% for the same period in 2018.

Financial Condition

Total assets were $5.0 billion at September 30, 2019, compared to $4.7 billion at December 31, 2018. The increase of $344.3 million was driven primarily by a $256.4 million increase in loans, net, a $67.1 million increase in investment securities and the addition of a $53.3 million “Rights to use” asset as the result of adopting ASC 842 - leases in the first quarter of 2019.

Nonperforming assets totaled $71.6 million, or 1.42% of total assets at September 30, 2019, a decrease of $2.4 million, compared with $73.9 million, or 1.50% of period end total assets at June 30, 2019. The decrease in nonperforming assets at September 30, 2019 compared to June 30, 2019 was primarily driven by a $13.9 million reduction in loans 90 days past due and accruing, partially offset by the addition of a $9.3 million accruing restructured loan due to the restructuring of one indirect C&I loan and the addition of a $3.7 million non-accruing restructured construction loan.

The allowance for loan losses increased $0.1 million to $33.7 million at September 30, 2019 from $33.6 million at June 30, 2019. At September 30, 2019, the Bank had $71.0 million of impaired loans for which a specific allowance of $6.2 million was made, compared to $59.3 million of impaired loans at June 30, 2019 for which a specific allowance of $3.9 million was made. The ratio of allowance to total loans was 0.96% at September 30, 2019, 1.01% at June 30, 2019 and 1.14% at September 30, 2018.

Capital

As of September 30, 2019, our Tier 1 Leverage Capital Ratio was 9.03%, Common Equity Tier 1 Capital Ratio was 13.49%, and Total Risk-Based Capital Ratio was 14.55%, compared to 9.04%, 13.57%, and 14.67%, respectively, as of June 30, 2019. As of September 30, 2018, our Tier 1 Leverage, Common Equity Tier 1, and Total Risk-Based capital ratios were 8.94%, 12.95%, and 14.20%, respectively. Stockholders’ equity at September 30, 2019 was $486.3 million, compared to $474.9 million at June 30, 2019.

Tangible book value (or tangible common equity) per share was $14.74 as of September 30, 2019 compared to $14.25 as of June 30, 2019 and $12.57 as of September 30, 2018.

Conference Call

As previously announced, Amalgamated Bank will host a conference call to discuss its third quarter 2019 results today, October 28, 2019 at 10:00am (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 2019 Earnings Call. A telephonic replay will be available approximately two hours after the conclusion of 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 13695040. The telephonic replay will be available until 11:59 pm (Eastern Time) on November 4, 2019.

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

The presentation materials for the call can be accessed on the investor relations section of our website at http://ir.amalgamatedbank.com/.

About Amalgamated Bank

Amalgamated Bank is a New York-based full-service commercial bank and a chartered trust company with a combined network of 13 branches in New York City, Washington D.C., and San Francisco. 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, 2019, our total assets were $5.0 billion, total net loans were $3.5 billion, and total deposits were $4.3 billion. Additionally, as of September 30, 2019, the trust business held $32.0 billion in assets under custody and $12.6 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 net income,” “Tangible common equity,” “Tangible book value,” “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 2019 versus certain periods in 2018 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 what we believe to be the most directly comparable GAAP measures are set forth in the final pages of this release and also may be viewed on our website, amalgamatedbank.com.

Media Contact:
Kaye Verville
The Levinson Group
[email protected]
202-244-1785

Investor Contact:
Jamie Lillis
Solebury Trout
[email protected]
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,
2019 2019 2018 2019 2018
INTEREST AND DIVIDEND INCOME
Loans$35,768 $35,559 $33,788 $106,623 $95,284
Securities 10,542 10,524 8,707 30,941 22,325
Federal Home Loan Bank of New York stock 178 191 161 679 801
Interest-bearing deposits in banks 209 254 443 756 1,094
Total interest and dividend income 46,697 46,528 43,099 138,999 119,504
INTEREST EXPENSE
Deposits 3,952 3,499 2,559 10,396 6,860
Borrowed funds 988 1,173 498 4,216 3,104
Total interest expense 4,940 4,672 3,057 14,612 9,964
NET INTEREST INCOME 41,757 41,856 40,042 124,387 109,540
Provision for (recovery of) loan losses (558) 2,127 791 3,755 (1,124)
Net interest income after provision for loan losses 42,315 39,729 39,251 120,632 110,664
NON-INTEREST INCOME
Trust Department fees 4,888 4,508 4,698 14,117 13,983
Service charges on deposit accounts 2,222 2,068 2,225 6,161 5,995
Bank-owned life insurance 415 408 434 1,243 1,237
Gain (loss) on sale of investment securities available for sale, net (50) (377) - (135) (110)
Gain (loss) on other real estate owned, net - (315) - (564) (494)
Other 184 57 190 603 153
Total non-interest income 7,659 6,349 7,547 21,425 20,764
NON-INTEREST EXPENSE
Compensation and employee benefits, net 17,765 16,992 17,044 52,187 49,259
Occupancy and depreciation 4,298 4,145 4,172 12,714 12,234
Professional fees 3,120 2,401 5,243 8,686 10,863
Data processing 2,856 2,729 2,787 8,334 7,585
Office maintenance and depreciation 934 830 796 2,651 2,669
Amortization of intangible assets 344 298 406 1,031 580
Advertising and promotion 684 692 1,075 1,998 2,583
Other 1,885 2,915 2,530 6,735 7,206
Total non-interest expense 31,886 31,002 34,053 94,336 92,979
Income before income taxes 18,088 15,076 12,745 47,721 38,449
Income tax expense (benefit) 4,893 3,891 3,328 12,527 9,779
Net income 13,195 11,185 9,417 35,194 28,670
Net income attributable to noncontrolling interests - - - - -
Net income attributable to Amalgamated Bank and subsidiaries$13,195 $11,185 $9,417 $35,194 $28,670
Earnings per common share - basic (1)$0.41 $0.35 $0.30 $1.11 $0.96
Earnings per common share - diluted (1)$0.41 $0.35 $0.29 $1.09 $0.96
(1) effected for stock split that occurred on July 27, 2018

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

September 30, December 31,
2019 2018
Assets(Unaudited)
Cash and due from banks$7,016 $10,510
Interest-bearing deposits in banks 64,223 70,335
Total cash and cash equivalents 71,239 80,845
Securities:
Available for sale, at fair value (amortized cost of $1,212,456 and $1,188,710, respectively) 1,225,106 1,175,170
Held-to-maturity (fair value of $22,396 and $4,105, respectively) 21,259 4,081
Loans receivable, net of deferred loan origination costs (fees) 3,500,724 3,247,831
Allowance for loan losses (33,697) (37,195)
Loans receivable, net 3,467,027 3,210,636
Accrued interest and dividends receivable 15,932 14,387
Premises and equipment, net 18,912 21,654
Bank-owned life insurance 80,309 79,149
Right-of-use lease asset 49,848 -
Deferred tax asset 32,482 39,697
Goodwill and other intangible assets 20,008 21,039
Other assets 27,647 38,831
Total assets$5,029,769 $4,685,489
Liabilities
Deposits$4,322,379 $4,105,306
Borrowed funds 127,775 92,875
Operating leases 64,512 -
Other liabilities 28,791 47,937
Total liabilities 4,543,457 4,246,118
Commitments and contingencies - -
Stockholders’ equity
Common stock, par value $.01 per share (70,000,000 shares authorized; 31,633,691 and
31,771,585 shares issued and outstanding, respectively) 315 318
Additional paid-in capital 307,157 308,678
Retained earnings 171,684 142,231
Accumulated other comprehensive income (loss), net of income taxes 7,022 (11,990)
Total Amalgamated Bank stockholders' equity 486,178 439,237
Noncontrolling interests 134 134
Total stockholders' equity 486,312 439,371
Total liabilities and stockholders’ equity$5,029,769 $4,685,489

Select Financial Data

As of and for the Three
Months Ended		 As of and for the Nine
Months Ended
September 30, June 30, September 30, September 30,
2019 2019 2018 2019 2018
Selected Financial Ratios and Other Data (1)
Earnings per share
Basic $0.41 $0.35 $0.30 $1.11 $0.96
Diluted 0.41 0.35 0.29 1.09 0.96
Core Earnings per share (non-GAAP)
Basic $0.42 $0.36 $0.38 $1.12 $1.07
Diluted 0.41 0.36 0.38 1.10 1.06
Book value per common share 15.37 14.89 13.25 15.37 13.25
(excluding minority interest)
Tangible book value per share (non-GAAP) 14.74 14.25 12.57 14.74 12.57
Common shares outstanding 31,633,691 31,886,669 31,771,585 31,633,691 31,771,585
Weighted average common shares 31,809,083 31,824,930 31,771,585 31,802,004 29,895,897
outstanding, basic
Weighted average common shares 32,176,439 32,237,116 32,099,668 32,251,333 30,006,460
outstanding, diluted
(1) Effected for stock split that occurred on July 27, 2018

Select Financial Data – Select Performance Metrics

As of and for the Three As of and for the Nine
Months Ended Months Ended
September 30, June 30, September 30, September 30,
2019 2019 2018 2019 2018
Selected Performance Metrics:
Return on average assets 1.05% 0.92% 0.82% 0.97% 0.89%
Core return on average assets (non-GAAP) 1.06% 0.96% 1.05% 0.98% 0.98%
Return on average equity 10.86% 9.65% 8.96% 10.13% 10.07%
Core return on average tangible common equity (non-GAAP) 11.43% 10.45% 12.17% 10.71% 11.64%
Loan yield 4.22% 4.42% 4.33% 4.36% 4.28%
Securities yield 3.28% 3.34% 3.11% 3.33% 2.97%
Deposit cost 0.37% 0.34% 0.25% 0.34% 0.25%
Net interest margin 3.50% 3.66% 3.65% 3.60% 3.55%
Efficiency ratio 64.53% 64.31% 71.56% 64.70% 71.36%
Core efficiency ratio (non-GAAP) 64.26% 63.50% 64.02% 64.38% 68.11%
Asset Quality Ratios:
Nonaccrual loans to total loans 0.53% 0.49% 0.63% 0.53% 0.63%
Nonperforming assets to total assets 1.42% 1.50% 1.25% 1.42% 1.25%
Allowance for loan losses to nonaccrual loans 183% 209% 180% 183% 180%
Allowance for loan losses to total loans 0.96% 1.01% 1.14% 0.97% 1.14%
Net charge-offs (recoveries) to average loans -0.07% 0.01% -0.03% 0.29% -0.07%
Capital Ratios:
Tier 1 leverage capital ratio 9.03% 9.04% 8.94% 9.03% 8.94%
Tier 1 risk-based capital ratio 13.49% 13.57% 12.95% 13.49% 12.95%
Total risk-based capital ratio 14.55% 14.67% 14.20% 14.55% 14.20%
Common equity tier 1 capital ratio 13.49% 13.57% 12.95% 13.49% 12.95%

Loan Portfolio Composition

(In thousands) At September 30, 2019 At June 30, 2019 At September 30, 2018
Amount % of total loans Amount % of total loans Amount % of total loans
Commercial portfolio:
Commercial and industrial $469,882 13.5% $424,319 12.8% $585,279 18.3%
Multifamily mortgages 982,667 28.1% 925,747 27.9% 956,307 30.0%
Commercial real estate mortgages 441,612 12.6% 453,393 13.7% 429,616 13.4%
Construction and land development mortgages 59,309 1.7% 58,696 1.7% 36,704 1.1%
Total commercial portfolio 1,953,470 55.9% 1,862,155 56.1% 2,007,906 62.8%
Retail portfolio:
Residential 1-4 family (1st mortgage) 1,344,757 38.5% 1,261,488 38.0% 1,017,362 31.9%
Residential 1-4 family (2nd mortgage) 24,859 0.7% 25,174 0.8% 28,588 0.9%
Consumer and other 169,463 4.9% 168,201 5.1% 141,660 4.4%
Total retail 1,539,079 44.1% 1,454,863 43.9% 1,187,610 37.2%
Total loans 3,492,549 100.0% 3,317,018 100.0% 3,195,516 100.0%
Net deferred loan origination fees (costs) 8,175 7,562 5,349
Allowance for loan losses (33,697) (33,630) (36,414)
Total loans, net $3,467,027 $3,290,950 $3,164,451

Net Interest Income Analysis

Three Months Ended Three Months Ended Three Months Ended
September 30, 2019 June 30, 2019 September 30, 2018
(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 $72,143 $209 1.15% $70,442 $254 1.45% $114,464 $443 1.54%
Securities and FHLB stock 1,294,930 10,720 3.28% 1,287,520 10,715 3.34% 1,130,719 8,867 3.11%
Loans held for sale - - 0.00% - - 0.00% 11,445 - 0.00%
Total loans, net (1) 3,363,837 35,768 4.22% 3,225,129 35,559 4.42% 3,097,318 33,789 4.33%
Total interest earning assets 4,730,910 46,697 3.92% 4,583,091 46,528 4.07% 4,353,946 43,099 3.93%
Non-interest earning assets:
Cash and due from banks 6,985 6,838 19,623
Other assets 228,076 264,046 202,593
Total assets $4,965,971 $4,853,975 $4,576,162
Interest bearing liabilities:
Savings, NOW and money market deposits $1,869,675 $2,478 0.53% $1,857,715 $1,962 0.42% $1,804,535 $1,416 0.31%
Time deposits 417,591 1,474 1.40% 486,652 1,537 1.27% 434,352 1,143 1.04%
Total deposits 2,287,266 3,952 0.69% 2,344,367 3,499 0.60% 2,238,887 2,559 0.45%
Federal Home Loan Bank advances 166,363 987 2.35% 190,501 1,166 2.46% 106,131 498 1.86%
Other Borrowings 163 1 2.43% 1,099 7 2.56% - - 0.00%
Total interest bearing liabilities 2,453,792 4,940 0.80% 2,535,967 4,672 0.74% 2,345,018 3,057 0.52%
Non interest bearing liabilities:
Demand and transaction deposits 1,936,915 1,762,426 1,771,774
Other liabilities 93,056 90,680 42,563
Total liabilities 4,483,763 4,389,073 4,159,355
Stockholders' equity 482,208 464,902 416,807
Total liabilities and stockholders' equity $4,965,971 $4,853,975 $4,576,162
Net interest income / interest rate spread $41,757 3.12% $41,856 3.33% $40,042 3.41%
Net interest earning assets / net interest margin $2,277,118 3.50% $2,047,124 3.66% $2,008,928 3.65%
Total Cost of Deposits 0.37% 0.34% 0.25%
(1) Amounts are net of deferred origination costs / (fees) and the allowance for loan losses

Net Interest Income Analysis

Nine Months Ended Nine Months Ended
September 30, 2019 September 30, 2018
(In thousands) Average
Balance		 Income /
Expense		 Yield /
Rate		 Average
Balance		 Income /
Expense		 Yield /
Rate
Interest earning assets:
Interest-bearing deposits in banks $71,956 $756 1.40% $88,215 $1,095 1.66%
Securities and FHLB stock 1,269,637 31,620 3.33% 1,042,680 23,125 2.97%
Loans held for sale - - 0.00% 13,541 - 0.00%
Total loans, net (1) 3,271,700 106,623 4.36% 2,978,911 95,284 4.28%
Total interest earning assets 4,613,293 138,999 4.03% 4,123,347 119,504 3.87%
Non-interest earning assets:
Cash and due from banks 7,926 13,498
Other assets 248,707 186,518
Total assets $4,869,926 $4,323,363
Interest bearing liabilities:
Savings, NOW and money market deposits $1,868,218 $6,307 0.45% $1,628,503 $3,774 0.31%
Time deposits 448,140 4,089 1.22% 407,305 3,086 1.01%
Total deposits 2,316,358 10,396 0.60% 2,035,808 6,860 0.45%
Federal Home Loan Bank advances 227,853 4,199 2.46% 251,488 3,104 1.65%
Other Borrowings 861 17 2.64% - - 0.00%
Total interest bearing liabilities 2,545,072 14,612 0.77% 2,287,296 9,964 0.58%
Non interest bearing liabilities:
Demand and transaction deposits 1,767,232 1,611,783
Other liabilities 92,966 43,499
Total liabilities 4,405,270 3,942,578
Stockholders' equity 464,656 380,785
Total liabilities and stockholders' equity $4,869,926 $4,323,363
Net interest income / interest rate spread $124,387 3.26% $109,540 3.29%
Net interest earning assets / net interest margin $2,068,221 3.60% $1,836,051 3.55%
Total Cost of Deposits 0.34% 0.25%
(1) Amounts are net of deferred origination costs / (fees) and the allowance for loan losses

Deposit Portfolio Composition

Three Months Ended
(in thousands)September 30, 2019 June 30, 2019 September 30, 2018
Non-interest bearing demand deposit accounts$1,963,232 $1,908,741 $1,822,991
NOW accounts 235,933 216,834 184,503
Savings accounts 337,590 340,258 332,281
Money market deposit accounts 1,377,747 1,239,387 1,238,481
Time deposits 402,877 411,251 454,536
Brokered CD 5,000 19,991 -
$4,322,379 $4,136,463 $4,032,792


Three Months Ended
 Three Months Ended
 Three Months Ended
September 30, 2019
 June 30, 2019
 September 30, 2018
(In thousands) Average
Balance		 Average Rate
Paid		 Average
Balance		 Average Rate
Paid		 Average
Balance		 Average Rate
Paid
Demand and transaction deposits $1,936,915 0.00% $1,762,426 0.00% $1,771,774 0.00%
Savings accounts 338,383 0.23% 339,166 0.22% 327,098 0.17%
Money market deposit accounts 1,303,766 0.62% 1,298,033 0.47% 1,286,940 0.32%
NOW accounts 227,525 0.46% 220,516 0.47% 190,497 0.46%
Time deposits 410,310 1.38% 424,848 1.10% 434,352 1.04%
Brokered CD 7,281 2.76% 61,804 2.45% - 0.00%
Total deposits $4,224,180 0.37% $4,106,793 0.34% $4,010,661 0.25%

Asset Quality

September 30, June 30, December 31,
(In thousands) 2019 2019 2018
Loans 90 days past due and accruing$36 $13,939 $-
Nonaccrual loans excluding held for sale loans and restructured loans 8,874 9,893 8,379
Nonaccrual loans held for sale - - -
Restructured loans - nonaccrual 9,495 6,221 15,482
Restructured loans - accruing 52,555 43,277 34,457
Other real estate owned 526 526 844
Impaired securities 67 88 93
Total nonperforming assets$71,553 $73,944 $59,255
Nonaccrual loans:
Commercial and industrial$3,089 $4,180 $12,153
Multifamily - - -
Commercial real estate 3,693 3,832 4,112
Construction and land development 3,702 - -
Total commercial portfolio 10,484 8,012 16,265
Residential 1-4 family 1st mortgages 6,545 6,330 6,287
Residential 1-4 family 2nd mortgages 888 1,267 1,299
Consumer and other 452 505 10
Total retail portfolio 7,885 8,102 7,596
Total nonaccrual loans$18,369 $16,114 $23,861
Nonperforming assets to total assets 1.42% 1.50% 1.27%
Nonaccrual assets to total assets 0.38% 0.34% 0.53%
Nonaccrual loans to total loans 0.53% 0.49% 0.74%
Allowance for loan losses to nonaccrual loans 183% 209% 156%
Troubled debt restructurings:
TDRs included in nonaccrual loans$9,495 $6,221 $15,482
TDRs in compliance with modified terms$52,555 $43,277 $34,457

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,
2019 2019 2018 2019 2018
Core operating revenue
Net interest income (GAAP) $41,758 $41,856 $40,042 $124,387 $109,540
Non interest income (GAAP) 7,659 6,349 7,547 21,425 20,764
Add: Securities loss (gain) 50 377 - 135 112
Core operating revenue (non-GAAP) $49,467 $48,582 $47,589 $145,947 $130,416
Core non-interest expenses
Non-interest expense (GAAP) $31,887 $31,002 $34,053 $94,337 $92,979
Less: Prepayment fees on borrowings - - (5) - (8)
Less: Branch closure expense(1) (51) - - (51) -
Less: Acquisition cost(2) - - (148) - (730)
Less: Initial public offering and follow on cost (3) - - (3,436) - (3,436)
Less: Severance (4) (47) (154) - (318) 23
Core non-interest expense (non-GAAP) $31,789 $30,848 $30,464 $93,967 $88,828
Core Earnings
Net Income (GAAP) $13,195 $11,185 $9,417 $35,194 $28,670
Add: Securities loss (gain) 50 377 - 135 112
Add: Prepayment fees on borrowings - - 5 - 8
Add: Branch closure expense(1) 51 - - 51 -
Add: Acquisition cost(2) - - 148 - 730
Add: Initial public offering and follow on cost (3) - - 3,436 - 3,436
Add: Severance (4) 47 154 - 318 (23)
Less: Tax on notable items (40) (137) (911) (132) (1,083)
Core earnings (non-GAAP) $13,303 $11,579 $12,095 $35,566 $31,850
Tangible common equity
Stockholders Equity (GAAP) $486,312 $474,944 $421,028 $486,312 $421,028
Less: Minority Interest (GAAP) (134) (134) (134) (134) (134)
Less: Goodwill (GAAP) (12,936) (12,936) (12,936) (12,936) (12,936)
Less: Core deposit intangible (GAAP) (7,072) (7,415) (8,491) (7,072) (8,491)
Tangible common equity (non-GAAP) $466,170 $454,459 $399,467 $466,170 $399,467
Average tangible common equity
Average Stockholders Equity (GAAP) $482,208 $464,902 $416,808 $464,656 $380,786
Less: Minority Interest (GAAP) (134) (134) (134) (134) (134)
Less: Preferred Stock (GAAP) - - - - (3,681)
Less: Goodwill (GAAP) (12,936) (12,936) (13,933) (12,936) (6,899)
Less: Core deposit intangible (GAAP) (7,240) (7,575) (8,402) (7,570) (4,140)
Average tangible common equity (non-GAAP) $461,898 $444,257 $394,338 $444,015 $365,931
Core return on average assets
Core earnings (numerator) (non-GAAP) 13,303 11,579 12,095 35,566 31,850
Divided: Total average assets (denominator) (GAAP) 4,965,971 4,853,975 4,576,162 4,869,926 4,323,363
Core return on average assets (non-GAAP) 1.06% 0.96% 1.05% 0.98% 0.98%
Core return on average tangible common equity
Core earnings (numerator) (non-GAAP) 13,303 11,579 12,095 35,566 31,850
Divided: Average tangible common equity (denominator) (non-GAAP) 461,898 444,257 394,338 444,015 365,931
Core return on average tangible common equity (non-GAAP) 11.43% 10.45% 12.17% 10.71% 11.64%
Core efficiency ratio
Core non-interest expense (numerator) (non-GAAP) 31,789 30,848 30,464 93,967 88,828
Core operating revenue (denominator) (non-GAAP) 49,467 48,582 47,589 145,947 130,416
Core efficiency ratio (non-GAAP) 64.26% 63.50% 64.02% 64.38% 68.11%
(1) Occupancy and severance expense related to closure of branches during our branch rationalization
(2) Expense related to New Resource Bank acquisition
(3) Costs related to initial public offering in August 2018
(4) Salary and COBRA reimbursement expense for positions eliminated

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