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Category: Taxation

  • MIL-OSI: Gibson Energy Announces 2024 Third Quarter Results and 2024 Record Crude Volumes at Edmonton Terminal

    Source: GlobeNewswire (MIL-OSI)

    All financial figures are in Canadian dollars unless otherwise noted

    CALGARY, Alberta, Oct. 29, 2024 (GLOBE NEWSWIRE) — Gibson Energy Inc. (TSX:GEI) (“Gibson” or the “Company”) announced today its financial and operating results for the three and nine months ended September 30, 2024.

    “Gibson delivered strong results in the third quarter, driven by the continued strength and stability of our Infrastructure segment, which now represents over 85% of our business, and saw 2024 record third party crude volumes at our Edmonton Terminal in the third quarter, driven by deliveries onto the Trans Mountain Expansion pipeline,” said Curtis Philippon, President and Chief Executive Officer. “Since joining Gibson in August, I have had the opportunity to visit all of our operations. Gibson’s critical energy infrastructure spans from touching one in four barrels produced in Western Canada to exporting Permian & Eagle Ford barrels through one of the largest crude export terminals in the United States. It is impressive to see firsthand our asset base and meet the passionate talented teams that support it.”

    Financial Highlights:

    • Revenue of $2,900 million in the third quarter, a $325 million or 10% decrease relative to the third quarter of 2023, due to lower revenues within the Marketing segment driven by Crude Marketing sales volume
    • Infrastructure adjusted EBITDA(1) of $150 million in the third quarter, a $10 million or 7% increase from the third quarter of 2023, primarily driven by a full quarter of contribution from the Gateway Terminal
    • Marketing adjusted EBITDA(1) of $14 million in the third quarter, a $10 million or 41% decrease from the third quarter of 2023, due to lower contributions from the Refined Products business resulting from compressed refining margins and the Crude Marketing business due to fewer opportunities
    • Adjusted EBITDA(1) on a consolidated basis of $151 million in the third quarter, a $2 million or 1% increase over the third quarter of 2023, as higher Infrastructure adjusted EBITDA(1) offset lower Marketing results
    • Net income of $54 million in the third quarter, a $33 million or 161% increase over the third quarter of 2023, primarily due to one-time transaction and finance costs incurred in relation to the acquisition of the Gateway Terminal in the comparative period, and the factors noted above, partially offset by higher depreciation, amortization, income tax expense and foreign exchange losses
    • Distributable cash flow(1) of $88 million in the third quarter, a $5 million or 5% decrease from the third quarter of 2023, primarily due to higher current income tax expense
    • Dividend payout ratio(2) on a trailing twelve-month basis of 65%, below the Company’s 70% – 80% target
    • Net debt to adjusted EBITDA ratio(2) at September 30, 2024 of 3.2x, within the Company’s 3.0x – 3.5x target

    Strategic Developments and Highlights:

    • On July 15, 2024, Gibson announced the extension of a long-term contract with an investment grade global E&P company at its Gateway Terminal which further enhanced the quality of the Company’s cash flows, as well as the sanction of a connection to the Cactus II Pipeline, providing customers with access to up to approximately 700,000 barrels per day of incremental supply

    (1) Adjusted EBITDA and distributable cash flow are non-GAAP financial measures. See the “Specified Financial Measures” section of this release.
    (2) Net debt to adjusted EBITDA ratio and dividend payout ratio are non-GAAP financial ratios. See the “Specified Financial Measures” section of this release.

    Management’s Discussion and Analysis and Financial Statements
    The 2024 third quarter Management’s Discussion and Analysis and unaudited Condensed Consolidated Financial Statements provide a detailed explanation of Gibson’s financial and operating results for the three months and nine months ended September 30, 2024, as compared to the three months and nine months ended September 30, 2023. These documents are available at www.gibsonenergy.com and on SEDAR+ at www.sedarplus.ca.

    Earnings Conference Call & Webcast Details
    A conference call and webcast will be held to discuss the 2024 third quarter financial and operating results at 7:00am Mountain Time (9:00am Eastern Time) on Wednesday, October 30, 2024.

    To register for the call, view dial-in numbers, and obtain a dial-in PIN, please access the following URL:

    Registration at least five minutes prior to the conference call is recommended. 

    This call will also be broadcast live on the Internet and may be accessed directly at the following URL:

    The webcast will remain accessible for a 12-month period at the above URL.

    Supplementary Information
    Gibson has also made available certain supplementary information regarding the 2024 third quarter financial and operating results, available at www.gibsonenergy.com.

    About Gibson
    Gibson is a leading liquids infrastructure company with its principal businesses consisting of the storage, optimization, processing, and gathering of liquids and refined products. Headquartered in Calgary, Alberta, the Company’s operations are located across North America, with core terminal assets in Hardisty and Edmonton, Alberta, Ingleside, Texas, and a facility in Moose Jaw, Saskatchewan.

    Gibson shares trade under the symbol GEI and are listed on the Toronto Stock Exchange. For more information, visit www.gibsonenergy.com.

    Forward-Looking Statements
    Certain statements contained in this press release constitute forward-looking information and statements (collectively, forward-looking statements). All statements other than statements of historical fact are forward-looking statements. The use of any of the words ‘‘anticipate’’, ‘‘plan’’, ‘‘contemplate’’, ‘‘continue’’, ‘‘estimate’’, ‘‘expect’’, ‘‘intend’’, ‘‘propose’’, ‘‘might’’, ‘‘may’’, ‘‘will’’, ‘‘shall’’, ‘‘project’’, ‘‘should’’, ‘‘could’’, ‘‘would’’, ‘‘believe’’, ‘‘predict’’, ‘‘forecast’’, ‘‘pursue’’, ‘‘potential’’ and ‘‘capable’’ and similar expressions are intended to identify forward looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this press release should not be unduly relied upon. These statements speak only as of the date of this press release. The Company does not undertake any obligations to publicly update or revise any forward-looking statements except as required by securities law. Actual results could differ materially from those anticipated in these forward-looking statements as a result of numerous risks and uncertainties including, but not limited to, the risks and uncertainties described in “Forward-Looking Information” and “Risk Factors” included in the Company’s Annual Information Form and Management’s Discussion and Analysis, each dated February 20, 2024, as filed on SEDAR+ and available on the Gibson website at www.gibsonenergy.com.

    For further information, please contact:

    Investor Relations:
    (403) 776-3077
    investor.relations@gibsonenergy.com

    Media Relations:
    (403) 476-6334
    communications@gibsonenergy.com

    Specified Financial Measures

    This press release refers to certain financial measures that are not determined in accordance with GAAP, including non-GAAP financial measures and non-GAAP financial ratios. Readers are cautioned that non-GAAP financial measures and non-GAAP financial ratios do not have standardized meanings prescribed by GAAP and, therefore, may not be comparable to similar measures presented by other entities. Management considers these to be important supplemental measures of the Company’s performance and believes these measures are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in industries with similar capital structures.

    For further details on these specified financial measures, including relevant reconciliations, see the “Specified Financial Measures” section of the Company’s MD&A for the three and nine months ended September 30, 2024 and 2023, which is incorporated by reference herein and is available on Gibson’s SEDAR+ profile at www.sedarplus.ca and Gibson’s website at www.gibsonenergy.com.

    a) Adjusted EBITDA

    Noted below is the reconciliation to the most directly comparable GAAP measures of the Company’s segmented and consolidated adjusted EBITDA for the three and nine months ended September 30, 2024, and 2023:

    Three months ended September 30, Infrastructure Marketing Corporate and Adjustments Total
    ($ thousands) 2024   2023   2024   2023   2024   2023   2024   2023  
                           
    Segment profit 150,271   137,727   14,183   17,900   —   —   164,454   155,627  
    Unrealized (gain) loss on derivative financial instruments (1,553 ) 740   25   6,059   —   —   (1,528 ) 6,799  
    General and administrative —   —   —   —   (13,004 ) (14,258 ) (13,004 ) (14,258 )
    Adjustments to share of profit from equity accounted investees 1,166   1,432   —   —   —   —   1,166   1,432  
    Executive transition costs —       —       251     251   —  
    Renewable power purchase agreement —   —   —   —   (175 ) —   (175 ) —  
    Other —   —   —   —   —   —   —   —  
    Adjusted EBITDA 149,884   139,899   14,208   23,959   (12,928 ) (14,258 ) 151,164   149,600  
                           
    Nine months ended September 30, Infrastructure Marketing Corporate and Adjustments Total
    ($ thousands) 2024   2023   2024   2023   2024   2023   2024   2023  
                         
    Segment profit 446,566   336,483   69,391   123,962   —   —   515,957   460,445  
    Unrealized loss (gain) on derivative financial instruments 3,746   740   (1,884 ) (6,872 ) —   —   1,862   (6,132 )
    General and administrative —   —   —   —   (51,920 ) (38,677 ) (51,920 ) (38,677 )
    Adjustments to share of profit from equity accounted investees 4,071   4,293   —   —   —   —   4,071   4,293  
    Executive transition costs —   —   —   —   10,665   —   10,665   —  
    Renewable power purchase agreement —   —   —   —   (175 ) —   (175 ) —  
    Other —   —   —   —   —   218   —   218  
    Adjusted EBITDA 454,383   341,516   67,507   117,090   (41,430 ) (38,459 ) 480,460   420,147  
                                     
      Three months ended September 30,
    		  
    ($ thousands) 2024   2023  
         
    Net Income 53,916   20,633  
         
    Income tax expense 14,573   7,678  
    Depreciation, amortization, and impairment charges 44,289   38,542  
    Finance costs, net 32,545   50,222  
    Unrealized (gain) loss on derivative financial instruments (1,528 ) 6,799  
    Corporate unrealized (gain) loss on derivative financial instruments (1) (1,934 ) 430  
    Stock based compensation 4,747   6,455  
    Acquisition and integration costs —   19,959  
    Adjustments to share of profit from equity accounted investees 1,166   1,432  
    Corporate foreign exchange loss (gain) and other 3,139   (2,550 )
    Executive transition costs 251   —  
    Adjusted EBITDA 151,164   149,600  
             
      Nine months ended September 30,
    		  
    ($ thousands) 2024   2023  
           
    Net Income 157,737   160,910  
           
    Income tax expense 46,205   50,864  
    Depreciation, amortization, and impairment charges 131,452   94,788  
    Finance costs, net 104,285   80,357  
    Unrealized loss (gain) on derivative financial instruments 1,862   (6,132 )
    Corporate unrealized loss (gain) on derivative financial instruments (1) 6,707   430  
    Stock based compensation 15,158   15,344  
    Acquisition and integration costs 1,371   19,959  
    Adjustments to share of profit from equity accounted investees 4,071   4,293  
    Corporate foreign exchange loss (gain) and other 947   (666 )
    Executive transition costs 10,665   —  
    Adjusted EBITDA 480,460   420,147  
             

    b) Distributable Cash Flow

    The following is a reconciliation of distributable cash flow from operations to its most directly comparable GAAP measure, cash flow from operating activities:

      Three months ended September 30,
    		   Nine months ended September 30,
    		  
    ($ thousands) 2024   2023   2024   2023  
             
    Cash flow from operating activities 404,794   190,015   531,178   419,254  
    Adjustments:        
    Changes in non-cash working capital and taxes paid (258,264 ) (61,420 ) (64,620 ) (14,921 )
    Replacement capital (13,023 ) (12,876 ) (24,260 ) (25,702 )
    Cash interest expense, including capitalized interest (34,045 ) (32,290 ) (102,405 ) (65,677 )
    Acquisition and integration costs (1) —   19,959   1,371   19,959  
    Executive transition costs 7,433   —   10,665   —  
    Lease payments (8,144 ) (8,575 ) (24,178 ) (26,268 )
    Current income tax (10,582 ) (1,860 ) (23,633 ) (23,800 )
    Distributable cash flow 88,169   92,953   304,118   282,845  
                     
    Twelve months ended September 30,
    		  
    ($ thousands) 2024   2023  
         
    Cash flow from operating activities 686,780   489,312  
    Adjustments:    
    Changes in non-cash working capital and taxes paid (57,133 ) 47,812  
    Replacement capital (34,486 ) (32,559 )
    Cash interest expense, including capitalized interest (136,861 ) (81,966 )
    Acquisition and integration costs (1) 3,454   19,959  
    Executive transition costs 10,665   —  
    Lease payments (33,806 ) (34,035 )
    Current income tax (31,550 ) (37,218 )
    Distributable cash flow 407,063   371,305  
             

    c) Dividend Payout Ratio

    Twelve months ended September 30,
    		  
      2024   2023  
    Distributable cash flow 407,063   371,305  
    Dividends declared 263,050   226,755  
    Dividend payout ratio 65 % 61 %
             

    d) Net Debt To Adjusted EBITDA Ratio

      Twelve months ended September 30,
    		  
      2024   2023  
         
    Current and long-term debt 2,528,454   2,645,904  
    Lease  liabilities 50,246   67,862  
    Less: unsecured hybrid debt (450,000 ) (450,000 )
    Less: cash and cash equivalents (55,584 ) (54,464 )
         
    Net debt 2,073,116   2,209,302  
    Adjusted EBITDA 650,141   557,481  
    Net debt to adjusted EBITDA ratio 3.2   4.0  
             

    The MIL Network –

  • MIL-OSI Security: Federal Court Permanently Shuts Down Indiana Tax Preparer and Company

    Source: United States Attorneys General 1

    The U.S. District Court for the Southern District of Indiana permanently enjoined an Indianapolis-area tax return preparer and his company yesterday from preparing federal tax returns for others and from owning or operating any tax return preparation businesses in the future.

    According to the civil complaint filed in the case, Juan Santiago resides in Lakeland, Florida, but travels to Indianapolis for tax preparation season to operate his tax preparation business, Madison Solutions LLC. Santiago failed to respond to the civil complaint filed against him, so the court entered the permanent injunction against him by default.

    The civil complaint alleges that Santiago and Madison Solutions used a variety of schemes to improperly reduce their customers’ tax liabilities or to obtain tax refunds to which the customers were not entitled. The complaint alleges that Santiago repeatedly placed false or incorrect items, deductions, exemptions or statuses on customers’ tax returns without their knowledge. For example, the complaint alleges that Santiago routinely elected head of household filing status and child tax credits for customers when they were otherwise not qualified for such status or credits. The complaint also alleges that Santiago reported fictitious businesses on customers’ returns and fabricated business expenses and income to fraudulently reduce taxable income.

    Deputy Assistant Attorney General David A. Hubbert of the Justice Department’s Tax Division made the announcement.

    Taxpayers seeking a return preparer should remain vigilant against unscrupulous tax preparers. The IRS has information on its website for choosing a tax return preparer and has launched a free directory of federal tax preparers. The IRS also offers 10 tips to avoid tax season fraud and ways to safeguard their personal information.

    In the past decade, the Justice Department’s Tax Division has obtained injunctions against hundreds of unscrupulous tax preparers. Information about these cases is available on the Justice Department’s website. An alphabetical listing of persons enjoined from preparing returns and promoting tax schemes can be found on this page. If you believe that one of the enjoined persons or businesses may be violating an injunction, please contact the Tax Division with details.

    MIL Security OSI –

  • MIL-OSI USA: Federal Court Permanently Shuts Down Indiana Tax Preparer and Company

    Source: US State of North Dakota

    The U.S. District Court for the Southern District of Indiana permanently enjoined an Indianapolis-area tax return preparer and his company yesterday from preparing federal tax returns for others and from owning or operating any tax return preparation businesses in the future.

    According to the civil complaint filed in the case, Juan Santiago resides in Lakeland, Florida, but travels to Indianapolis for tax preparation season to operate his tax preparation business, Madison Solutions LLC. Santiago failed to respond to the civil complaint filed against him, so the court entered the permanent injunction against him by default.

    The civil complaint alleges that Santiago and Madison Solutions used a variety of schemes to improperly reduce their customers’ tax liabilities or to obtain tax refunds to which the customers were not entitled. The complaint alleges that Santiago repeatedly placed false or incorrect items, deductions, exemptions or statuses on customers’ tax returns without their knowledge. For example, the complaint alleges that Santiago routinely elected head of household filing status and child tax credits for customers when they were otherwise not qualified for such status or credits. The complaint also alleges that Santiago reported fictitious businesses on customers’ returns and fabricated business expenses and income to fraudulently reduce taxable income.

    Deputy Assistant Attorney General David A. Hubbert of the Justice Department’s Tax Division made the announcement.

    Taxpayers seeking a return preparer should remain vigilant against unscrupulous tax preparers. The IRS has information on its website for choosing a tax return preparer and has launched a free directory of federal tax preparers. The IRS also offers 10 tips to avoid tax season fraud and ways to safeguard their personal information.

    In the past decade, the Justice Department’s Tax Division has obtained injunctions against hundreds of unscrupulous tax preparers. Information about these cases is available on the Justice Department’s website. An alphabetical listing of persons enjoined from preparing returns and promoting tax schemes can be found on this page. If you believe that one of the enjoined persons or businesses may be violating an injunction, please contact the Tax Division with details.

    MIL OSI USA News –

  • MIL-OSI Security: Pembroke Township Man Sentenced to 6 ½ Years in Prison for Filing False Tax Returns

    Source: Office of United States Attorneys

    URBANA, Ill. – Larry Dean Gibbs, 63, of Pembroke Township in Kankakee County, Illinois, was sentenced on October 28, 2024, to 6 ½ years of imprisonment for filing false tax returns.

    Gibbs was convicted of filing three false federal tax returns following a jury trial held at the U.S. Courthouse in Urbana in March of this year. During the trial, the government presented evidence to establish that, in January 2017, Gibbs filed three federal income tax returns for the tax years 2012, 2013, and 2014, each falsely claiming that he had earned $10 million in annual income from the “Larry Dean Gibbs Estate.” Gibbs further falsely claimed that the IRS withheld over $3 million per year from his earnings each year and that he was entitled to refunds totaling over $6.8 million. In contemporaneous filings, Gibbs claimed that he had changed his name to Mulumbua Humraukn El Taikem Bey and that he was the Ambassador for the Al Moroccan Empire National Republic, which is not officially recognized by the U.S. State Department. At the time Gibbs filed the three false tax returns, he had just been released from federal prison for a prior conviction for filing a false federal tax return in 2005, when he had obtained a $66,282 refund to which he was not entitled.

    At the sentencing hearing, U.S. District Judge Colin S. Bruce found that Gibbs had obstructed justice during the trial by falsely claiming that he was a member of the Maipuri Arauan Nation and that a treaty between that tribe and the United States required tribal members to be seated on his jury. Judge Bruce found that Gibbs “continues to file nonsensical sovereign citizen documents with the court, despite the court’s clear warnings against such frivolous, docket-clogging activity.”

    The statutory penalties for filing a false tax return are up to three years of imprisonment and up to a $100,000 fine on each of the three counts of conviction. In addition to imprisonment, Judge Bruce sentenced Gibbs to serve one year of supervised release following his release from the federal Bureau of Prisons.

    Judge Bruce directed Gibbs to report to the Bureau of Prisons to begin serving his sentence of imprisonment on January 7, 2025. In the meantime, Gibbs remains released on conditions of bond, which include home detention.

    “Fraud upon the government ultimately harms honest taxpayers,” said U.S. Attorney Gregory K. Harris. “Our office will vigorously prosecute these important cases, including those involving repeat offenders such as the defendant. We are grateful to our federal law enforcement partners for their dedicated work on this case.”

    “Tax fraud undermines the trust between taxpayers and their government,” said Ramsey E. Covington, Acting Special Agent in Charge, IRS Criminal Investigation, Chicago Field Office. “By filing false tax returns, Larry Gibbs not only cheated the system but also imposed an unjust burden on honest taxpayers. His frivolous court filings further clogged our legal system, wasting valuable resources that could be better used to serve the community. IRS Criminal Investigation and its fellow law enforcement partners remain committed to holding accountable those who seek to exploit our tax laws for personal gain.”

    “The FBI is proud to work with its law enforcement and prosecutorial partners to ensure that taxpayer dollars aren’t used to line the pockets of repeat offenders,” said Douglas S. DePodesta, Special Agent-in-Charge of the Chicago Field Office of the FBI. “Our tax system is predicated on the principal that every American pays their fair share, and this sentencing reflects the government’s commitment to ensuring equity for hardworking Americans.”

    The IRS Criminal Investigation, Chicago Field Office, and FBI, Chicago Field Office, investigated the case. Supervisory Assistant United States Attorney Eugene L. Miller represented the government in the prosecution.

    MIL Security OSI –

  • MIL-OSI Security: Paving Contractor Pleads Guilty to Tax Evasion

    Source: Office of United States Attorneys

    BOSTON – The owner of a paving company doing business north of Boston pleaded guilty yesterday to a multi-year income tax evasion scheme.

    Richard Cooper, 71, of Billerica, pleaded guilty to four counts of tax evasion. U.S. District Court Judge Denise J. Casper scheduled Cooper’s sentencing for Jan. 30, 2024. Cooper was charged in September 2024.

    From 2017 to 2020, in addition to depositing customer payments to his company, Rick Cooper Paving, Cooper also cashed over $4.3 million in customer checks. When Cooper had his taxes prepared, he did not tell his preparer about the checks he was cashing, resulting in his tax returns underreporting the gross receipts of the business by millions. As a result, Cooper kept over $1 million that he should have paid in federal and state income taxes.

    Acting United States Attorney Joshua S. Levy and Harry Chavis, Jr., Special Agent in Charge of the Internal Revenue Service Criminal Investigation, Boston Field Office made the announcement today. Assistant U.S. Attorney Kriss Basil of the Securities, Financial & Cyber Fraud Unit prosecuted the case.

    MIL Security OSI –

  • MIL-OSI: Skyward Specialty Insurance Group Reports Third Quarter 2024 Results

    Source: GlobeNewswire (MIL-OSI)

    HOUSTON, Oct. 29, 2024 (GLOBE NEWSWIRE) — Skyward Specialty Insurance Group, Inc. (Nasdaq: SKWD) (“Skyward Specialty” or the “Company”) today reported third quarter 2024 net income of $36.7 million, or $0.89 per diluted share, compared to $21.7 million, or $0.57 per diluted share, for the same 2023 period. Net income for the first nine months of 2024 was $104.4 million, or $2.53 per diluted share, compared to $56.7 million, or $1.50 per diluted share, for the same 2023 period.

    Adjusted operating income(1) for the third quarter of 2024 was $29.4 million, or $0.71 per diluted share, compared to $25.0 million, or $0.65 per diluted share, for the same 2023 period. Adjusted operating income(1) for the first nine months of 2024 was $93.4 million, or $2.26 per diluted share, compared to $56.5 million, or $1.49 per diluted share, for the same 2023 period.

    Highlights for the third quarter included:

    • Gross written premiums of $400.0 million an increase of 12.4% compared to the third quarter of 2023.
    • Combined ratio of 92.2% and ex-Cat combined ratio of 89.4% compared to 90.2% and 89.8%, respectively, for the third quarter of 2023.
    • Annualized return on equity of 19.1% through the first nine months of 2024 compared to 15.8% for the same 2023 period.
    • Book value per share of $19.89, an increase of 19% compared to December 31, 2023.
    (1)See “Reconciliation of Non-GAAP Financial Measures”

    Skyward Specialty Chairman and CEO Andrew Robinson commented, “These past weeks have proven to be a very difficult time and our thoughts continue to be with those impacted by Hurricanes Helene and Milton; I am proud of the extraordinary efforts of our claims team and partners who continue to deliver exceptional service to our customers affected by these catastrophes.”

    “As for our third quarter, our results reflect our continued excellent execution of our “Rule our Niche” strategy, and our disciplined underwriting and our strategic risk management. Our adjusted operating income was up nearly 18% over the prior year quarter, continuing the trend of strong earnings growth we have delivered every quarter as a public company, and our 19.1% annualized return on equity year to date is outstanding. We delivered gross written premiums growth of 12.4% over the prior year quarter while continuing to increase our mix of business to areas that are less exposed to the P&C cycles. Given investments into our business, the momentum building in certain divisions, and with full consideration for the market backdrop, I am confident that we are well positioned to deliver strong growth as we look forward to the coming quarters.”

    Results of Operations

    Underwriting Results

    Premiums                        
    ($ in thousands)   Three months ended September 30,   Nine months ended September 30,
    unaudited     2024       2023     % Change     2024       2023     % Change
    Gross written premiums   $ 400,014     $ 355,732     12.4 %   $ 1,354,877     $ 1,138,224     19.0 %
    Ceded written premiums   $ (131,692 )   $ (75,036 )   75.5 %   $ (502,326 )   $ (441,650 )   13.7 %
    Net retention     67.1 %     78.9 %   NM (1)       62.9 %     61.2 %   NM (1)  
    Net written premiums   $ 268,322     $ 280,696     (4.4 )%   $ 852,551     $ 696,574     22.4 %
    Net earned premiums   $ 269,557     $ 227,033     18.7 %   $ 763,482     $ 604,211     26.4 %
    (1)Not meaningful                        
                             

    The increase in gross written premiums for the third quarter and first nine months of 2024, when compared to the same 2023 periods, was driven by double-digit premium growth primarily from our transactional E&S, programs, captives, surety and global property & agriculture underwriting divisions.

    During the third quarter and first nine months of 2023, the Company cancelled a quota share reinsurance contract. Excluding the impact of the cancellation, net written premiums for the third quarter and first nine months of 2024 increased 16.5%(2) and 32.0%(2), respectively, when compared to the same 2023 periods.

    Combined Ratio   Three months ended September 30,   Nine months ended September 30,
    (unaudited)   2024   2023   2024   2023
    Non-cat loss and LAE(1)   60.6 %   60.7 %   60.6 %   60.9 %
    Cat loss and LAE(1)   2.8 %   0.4 %   1.5 %   1.8 %
    Prior accident year development – LPT(2)   (0.1 )%   (0.1 )%   (0.1 )%   (0.2 )%
    Loss Ratio   63.3 %   61.0 %   62.0 %   62.5 %
    Net policy acquisition costs   13.9 %   15.0 %   13.9 %   13.0 %
    Other operating and general expenses   15.7 %   15.1 %   15.8 %   16.3 %
    Commission and fee income   (0.7 )%   (0.9 )%   (0.8 )%   (1.0 )%
    Expense ratio   28.9 %   29.2 %   28.9 %   28.3 %
    Combined ratio   92.2 %   90.2 %   90.9 %   90.8 %
    Ex-Cat Combined Ratio(3)   89.4 %   89.8 %   89.4 %   89.0 %
                     
    Adjusted Underwriting Ratios                
    Adjusted loss ratio(2)   63.4 %   61.1 %   62.1 %   62.7 %
    Expense ratio   28.9 %   29.2 %   28.9 %   28.3 %
    Adjusted combined ratio(2)   92.3 %   90.3 %   91.0 %   91.0 %
    (1)Current accident year
    (2)See “Reconciliation of Non-GAAP Financial Measures”
    (3)Defined as the combined ratio excluding cat loss and LAE(1)            
                     

    The loss ratios for the third quarter and first nine months of 2024 increased 2.3 points and improved 0.5 points, respectively, when compared to the same 2023 periods. The third quarter of 2024 was impacted by higher catastrophe losses, primarily from Hurricanes Helene and Beryl.

    The expense ratios for the third quarter and first nine months of 2024 were comparable to the same 2023 periods.

    The expense ratios for all periods presented exclude the impact of IPO related stock compensation and secondary offering expenses, which are reported in other expenses in our condensed consolidated statements of operations and comprehensive income.

    Investment Results

    Net Investment Income                
    $ in thousands   Three months ended September 30,   Nine months ended September 30,
    (unaudited)     2024       2023       2024     2023  
    Short-term investments & cash and cash equivalents   $ 4,537     $ 3,022     $ 13,645   $ 8,007  
    Fixed income     15,458       9,488       41,722     24,867  
    Equities     596       650       1,974     1,332  
    Alternative & strategic investments     (1,070 )     (71 )     2,615     (7,888 )
    Net investment income   $ 19,521     $ 13,089     $ 59,956   $ 26,318  
    Net unrealized gains (losses) on securities still held   $ 8,378     $ (6,391 )   $ 15,609   $ 2,394  
    Net realized gains     1,809       3,407       1,056     934  
    Net investment gains (losses)   $ 10,187     $ (2,984 )   $ 16,665   $ 3,328  
     

    Beginning January 1, 2024 we simplified the investment portfolio classifications to align with our strategy and the underlying risk characteristics of the portfolio. The prior period has been reclassified to conform to the current period presentation.

    Net investment income for the third quarter and first nine months of 2024 increased $6.4 million and $33.6 million, respectively when compared to the same 2023 periods, primarily driven by increased income from our fixed income portfolio and short-term investments due to higher yields and larger asset bases.

    Stockholders’ Equity

    Stockholders’ equity was $797.5 million at September 30, 2024 which represents an increase of 10.2% when compared to stockholders’ equity of $723.6 million at June 30, 2024. The increase in stockholders’ equity was primarily due to net income and an increase in the market value of our investment portfolio.

    Share Repurchase Authorization

    In October 2024, the Company’s Board of Directors authorized a share repurchase program authorizing the repurchase of up to $50.0 million of the Company’s common stock.

    Skyward Specialty Chairman and CEO Andrew Robinson commented, “The share repurchase program allows Skyward to opportunistically deploy our capital in an accretive fashion and ultimately drive long-term value creation for our shareholders. Given our strong cash position and financing flexibility, the repurchase program will not limit our ability to support our near-term growth or our flexibility to support ongoing investment in the key growth areas of our business, or to capture additional value creating opportunities.”

    The shares may be repurchased from time to time in open market purchases, privately-negotiated transactions, block purchases, accelerated share repurchase agreements or a combination of methods and pursuant to safe harbors provided by Rule 10b-18 and Rule 10b5-1 under the Securities Exchange Act of 1934. The timing, manner, price and amount of any repurchases under the share repurchase program will be determined by the Company in its discretion. The stock repurchase program does not require the Company to repurchase any specific number of shares, and may be modified, suspended or terminated at any time.

    Conference Call

    At 9:30 a.m. eastern time tomorrow, October 30, 2024, Skyward Specialty management will hold a conference call to discuss quarterly results with insurance industry analysts. Interested parties may listen to the discussion at investors.skywardinsurance.com under Events & Presentations. Additionally, investors can access the earnings call via conference call by registering via the conference link. Users will receive dial-in information and a unique PIN to join the call upon registering.

    Non-GAAP Financial Measures

    This release contains certain financial measures and ratios that are not required by, or presented in accordance with, generally accepted accounting principles in the United States (“GAAP”). We refer to these measures as “non-GAAP financial measures.” We use these non-GAAP financial measures when planning, monitoring, and evaluating our performance.

    We have chosen to exclude the net impact of the Loss Portfolio Transfer (“LPT”), all development on reserves fully or partially covered by the LPT and amortization of deferred gains associated with recoveries of prior LPT reserve strengthening in certain non-GAAP metrics, where noted, as the business subject to the LPT is not representative of our continuing business strategy. The business subject to the LPT is primarily related to policy years 2017 and prior, was generated and managed under prior leadership, and has either been exited or substantially repositioned during the reevaluation of our portfolio. We consider these non-GAAP financial measures to be useful metrics for our management and investors to facilitate operating performance comparisons from period to period. While we believe that these non-GAAP financial measures are useful in evaluating our business, this information should be considered supplemental in nature and is not meant to be a substitute for revenue or net income, in each case as recognized in accordance with GAAP. In addition, other companies, including companies in our industry, may calculate such measures differently, which reduces their usefulness as comparative measures. For more information regarding these non-GAAP financial measures and a reconciliation of such measures to comparable GAAP financial measures, see the section entitled “Reconciliation of Non-GAAP Financial Measures.”

    About Skyward Specialty Insurance Group, Inc.

    Skyward Specialty is a rapidly growing and innovative specialty insurance company, delivering commercial property and casualty products and solutions on a non-admitted and admitted basis. The Company operates through eight underwriting divisions – Accident & Health, Captives, Global Property & Agriculture, Industry Solutions, Professional Lines, Programs, Surety and Transactional E&S. SKWD stock is traded on the Nasdaq Global Select Market, which represents the top fourth of all Nasdaq listed companies.

    Skyward Specialty’s subsidiary insurance companies consist of Houston Specialty Insurance Company, Imperium Insurance Company, Great Midwest Insurance Company, and Oklahoma Specialty Insurance Company. These insurance companies are rated A (Excellent) with stable outlook by A.M. Best Company. Additional information about Skyward Specialty can be found on our website at www.skywardinsurance.com.

    Forward-Looking Statements

    Except for historical information, all other information in this news release consists of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements are typically, but not always, identified through use of the words “believe,” “expect,” “enable,” “may,” “will,” “could,” “intends,” “estimate,” “anticipate,” “plan,” “predict,” “probable,” “potential,” “possible,” “should,” “continue,” and other words of similar meaning. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected, anticipated or implied. The most significant of these uncertainties are described in Skyward Specialty’s Form 10-K, and include (but are not limited to) legislative changes at both the state and federal level, state and federal regulatory rule making promulgations and adjudications, class action litigation involving the insurance industry and judicial decisions affecting claims, policy coverages and the general costs of doing business, the potential loss of key members of our management team or key employees and our ability to attract and retain personnel, the impact of competition on products and pricing, inflation in the costs of the products and services insurance pays for, product development, geographic spread of risk, weather and weather-related events, other types of catastrophic events, our ability to obtain reinsurance coverage at prices and on terms that allow us to transfer risk and adequately protect our company against financial loss, and losses resulting from reinsurance counterparties failing to pay us on reinsurance claims. These forward-looking statements speak only as of the date of this release and the Company does not undertake any obligation to update or revise any forward-looking information to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.

    Skyward Specialty Insurance Group, Inc.

    Investor contact:
    Natalie Schoolcraft,
    nschoolcraft@skywardinsurance.com
    614-494-4988

    or

    Media contact:
    Haley Doughty
    hdoughty@skywardinsurance.com
    713-935-4944

    Skyward Specialty Insurance Group, Inc.
    Consolidated Balance Sheets        
    ($ in thousands, except share and per share amounts)        
    (unaudited)   September 30, 2024   December 31, 2023
    Assets        
    Investments:        
    Fixed maturity securities, available-for-sale, at fair value (amortized cost of $1,359,700 and $1,047,713, respectively)   $ 1,357,500     $ 1,017,651  
    Fixed maturity securities, held-to-maturity, at amortized cost (net of allowance for credit losses of $239 and $329, respectively)     39,321       42,986  
    Equity securities, at fair value     124,719       118,249  
    Mortgage loans, at fair value     36,267       50,070  
    Equity method investments     102,111       110,653  
    Other long-term investments     23,802       3,852  
    Short-term investments, at fair value     206,358       270,226  
    Total investments     1,890,078       1,613,687  
    Cash and cash equivalents     105,573       65,891  
    Restricted cash     45,783       34,445  
    Premiums receivable, net     327,176       179,235  
    Reinsurance recoverables, net     686,725       596,334  
    Ceded unearned premium     236,962       186,121  
    Deferred policy acquisition costs     119,910       91,955  
    Deferred income taxes     18,502       21,991  
    Goodwill and intangible assets, net     87,607       88,435  
    Other assets     80,547       75,341  
    Total assets   $ 3,598,863     $ 2,953,435  
    Liabilities and stockholders’ equity        
    Liabilities:        
    Reserves for losses and loss adjustment expenses   $ 1,568,777     $ 1,314,501  
    Unearned premiums     692,452       552,532  
    Deferred ceding commission     44,984       37,057  
    Reinsurance and premium payables     200,967       150,156  
    Funds held for others     102,219       58,588  
    Accounts payable and accrued liabilities     73,001       50,880  
    Notes payable     100,000       50,000  
    Subordinated debt, net of debt issuance costs     18,956       78,690  
    Total liabilities     2,801,356       2,292,404  
    Stockholders’ equity        
    Common stock, $0.01 par value, 500,000,000 shares authorized, 40,099,931 and 39,863,756 shares issued and outstanding, respectively     401       399  
    Additional paid-in capital     716,095       710,855  
    Stock notes receivable     —       (5,562 )
    Accumulated other comprehensive loss     (1,703 )     (22,953 )
    Retained earnings (accumulated deficit)     82,714       (21,708 )
    Total stockholders’ equity     797,507       661,031  
    Total liabilities and stockholders’ equity   $ 3,598,863     $ 2,953,435  
             
    Skyward Specialty Insurance Group, Inc.
    Condensed Consolidated Statements of Operations and Comprehensive Income
    ($ in thousands)   Three months ended September 30,   Nine months ended September 30,
    (unaudited)     2024       2023       2024       2023  
                     
    Revenues:                
    Net earned premiums   $ 269,557     $ 227,033     $ 763,482     $ 604,211  
    Commission and fee income     1,818       2,085       5,897       5,817  
    Net investment income     19,521       13,089       59,956       26,318  
    Net investment gains (losses)     10,187       (2,984 )     16,665       3,328  
    Other loss     (195 )     —       (202 )     —  
    Total revenues     300,888       239,223       845,798       639,674  
    Expenses:                
    Losses and loss adjustment expenses     170,521       138,536       473,489       377,841  
    Underwriting, acquisition and insurance expenses     79,817       68,315       226,270       176,653  
    Interest expense     2,229       2,632       7,405       7,250  
    Amortization expense     351       463       1,099       1,336  
    Other expenses     1,117       1,482       3,350       4,061  
    Total expenses     254,035       211,428       711,613       567,141  
    Income before income taxes     46,853       27,795       134,185       72,533  
    Income tax expense     10,185       6,084       29,763       15,814  
    Net income     36,668       21,711       104,422       56,719  
    Net income attributable to participating securities     —       —       —       1,492  
    Net income attributable to common stockholders   $ 36,668     $ 21,711     $ 104,422     $ 55,227  
    Comprehensive income:                
    Net income   $ 36,668     $ 21,711     $ 104,422     $ 56,719  
    Other comprehensive income:                
    Unrealized gains and losses on investments:                
    Net change in unrealized gains (losses) on investments, net of tax     31,396       (8,722 )     24,527       (5,309 )
    Reclassification adjustment for losses on securities no longer held, net of tax     (1,963 )     (3,667 )     (3,277 )     (4,879 )
    Total other comprehensive income (loss)     29,433       (12,389 )     21,250       (10,188 )
    Comprehensive income   $ 66,101     $ 9,322     $ 125,672     $ 46,531  
                     
    Skyward Specialty Insurance Group, Inc.
    Share and Per Share Data                
    ($ in thousands, except share and per share amounts)   Three months ended September 30,   Nine months ended September 30,
    (unaudited)     2024       2023       2024       2023  
                     
    Weighted average basic shares     40,098,345       36,743,393       40,039,269       35,502,843  
    Weighted average diluted shares     41,428,557       38,403,843       41,302,108       37,830,431  
                     
    Basic earnings per share   $ 0.91     $ 0.59     $ 2.61     $ 1.56  
    Diluted earnings per share   $ 0.89     $ 0.57     $ 2.53     $ 1.50  
    Basic adjusted operating earnings per share   $ 0.73     $ 0.68     $ 2.33     $ 1.55  
    Diluted adjusted operating earnings per share   $ 0.71     $ 0.65     $ 2.26     $ 1.49  
                     
    Annualized ROE (1)     19.3 %     16.4 %     19.1 %     15.8 %
    Annualized adjusted ROE (2)     15.5 %     18.9 %     17.1 %     15.8 %
    Annualized ROTE (3)     21.8 %     19.7 %     21.7 %     19.4 %
    Annualized adjusted ROTE (4)     17.5 %     22.8 %     19.4 %     19.4 %
                     
                September 30   December 31
                  2024       2023  
                     
    Shares outstanding             40,099,931       39,863,756  
    Fully diluted shares outstanding             41,986,881       41,771,854  
                     
    Book value per share           $ 19.89     $ 16.72  
    Fully diluted book value per share           $ 18.99     $ 15.96  
    Fully diluted tangible book value per share           $ 16.91     $ 13.84  
                     
    (1)Annualized ROE is net income expressed on an annualized basis as a percentage of average beginning and ending stockholders’ equity during the period
    (2)Annualized adjusted ROE is adjusted operating income expressed on an annualized basis as a percentage of average beginning and ending stockholders’ equity during the period
    (3)Annualized ROTE is net income expressed on an annualized basis as a percentage of average beginning and ending tangible stockholders’ equity during the period
    (4)Annualized adjusted ROTE is adjusted operating income expressed on an annualized basis as a percentage of average beginning and ending tangible stockholders’ equity during the period

    Skyward Specialty Insurance Group, Inc.
    Reconciliation of Non-GAAP Financial Measures

    Adjusted operating income – We define adjusted operating income as net income excluding the impact of certain items that may not be indicative of underlying business trends, operating results, or future outlook, net of tax impact. We use adjusted operating income as an internal performance measure in the management of our operations because we believe it gives our management and other users of our financial information useful insight into our results of operations and our underlying business performance. Adjusted operating income should not be viewed as a substitute for net income calculated in accordance with GAAP, and other companies may define adjusted operating income differently.        

    ($ in thousands) Three months ended September 30,   Nine months ended September 30,
    (unaudited)   2024       2023       2024       2023  
      Pre-tax   After-tax   Pre-tax   After-tax   Pre-tax   After-tax   Pre-tax   After-tax
    Income as reported $ 46,853     $ 36,668     $ 27,795     $ 21,711     $ 134,185     $ 104,422     $ 72,533     $ 56,719  
    Less (add):                              
    Net investment gains (losses)   10,187       8,048       (2,984 )     (2,357 )     16,665       13,165       3,328       2,629  
    Net impact of loss portfolio transfer   318       251       266       210       800       632       970       766  
    Other loss   (195 )     (154 )     —       —       (202 )     (160 )     —       —  
    Other expenses   (1,117 )     (882 )     (1,482 )     (1,171 )     (3,350 )     (2,647 )     (4,061 )     (3,208 )
    Adjusted operating income $ 37,660     $ 29,405     $ 31,995     $ 25,029     $ 120,272     $ 93,432     $ 72,296     $ 56,532  
                                   


    Quota Share Reinsurance Cancellation     Reconciliation – to exclude the impact of the cancellation of a quota share reinsurance contract on ceded written premiums, net retention, net written premiums and net earned premiums for the three and nine months ended September 30, 2023:

      Three months ended September 30,
        2024       2023     %
    (unaudited) As Reported   As Reported   Adjustment   Adjusted   Change
    Ceded written premiums $ (131,692 )   $ (75,036 )   $ (50,462 )   $ (125,498 )   4.9 %
    Net retention   67.1 %     78.9 %         64.7 %   NM (1)
    Net written premiums $ 268,322     $ 280,696     $ (50,462 )   $ 230,234     16.5 %
    Net earned premiums $ 269,557     $ 227,033     $ (13,145 )   $ 213,888     26.0 %
                       
      Nine months ended September 30,
        2024       2023     %
      As Reported   As Reported   Adjustment   Adjusted   Change
    Ceded written premiums $ (502,326 )   $ (441,650 )   $ (50,462 )   $ (492,112 )   2.1 %
    Net retention   62.9 %             56.8 %   NM (1)
    Net written premiums $ 852,551     $ 696,574     $ (50,462 )   $ 646,112     32.0 %
    Net earned premiums $ 763,482     $ 604,211     $ (13,145 )   $ 591,066     29.2 %
                       
    (1)Not meaningful                  
                       


    Underwriting income     – We define underwriting income as net income before income taxes excluding net investment income, net realized and unrealized gains and losses on investments, impairment charges, interest expense, amortization expense and other income and expenses. Underwriting income represents the pre-tax profitability of our underwriting operations and allows us to evaluate our underwriting performance without regard to investment income. We use this metric as we believe it gives our management and other users of our financial information useful insight into our underlying business performance. Underwriting income should not be viewed as a substitute for pre-tax income calculated in accordance with GAAP, and other companies may define underwriting income differently.

    ($ in thousands)   Three months ended September 30,   Nine months ended September 30,
    (unaudited)     2024       2023       2024     2023
    Income before federal income tax expense   $ 46,853     $ 27,795     $ 134,185     $ 72,533
    Add:                
    Interest expense     2,229       2,632       7,405       7,250
    Amortization expense     351       463       1,099       1,336
    Other expenses     1,117       1,482       3,350       4,061
    Less:                
    Net investment income     19,521       13,089       59,956       26,318
    Net investment gains (losses)     10,187       (2,984 )     16,665       3,328
    Other loss     (195 )     —       (202 )     —
    Underwriting income   $ 21,037     $ 22,267     $ 69,620     $ 55,534
                     


    Adjusted Loss Ratio / Adjusted Combined Ratio     – We define adjusted loss ratio and adjusted combined ratio as the corresponding ratio (calculated in accordance with GAAP), excluding losses and LAE related to the LPT and all development on reserves fully or partially covered by the LPT and amortization of deferred gains associated with recoveries of prior LPT reserve strengthening. We use these adjusted ratios as internal performance measures in the management of our operations because we believe they give our management and other users of our financial information useful insight into our results of operations and our underlying business performance. Our adjusted loss ratio and adjusted combined ratio should not be viewed as substitutes for our loss ratio and combined ratio, respectively.

    ($ in thousands)   Three months ended September 30,   Nine months ended September 30,
    (unaudited)     2024       2023       2024       2023  
    Net earned premiums   $ 269,557     $ 227,033     $ 763,482     $ 604,211  
                     
    Losses and LAE     170,521       138,536       473,489       377,841  
    Less: Pre-tax net impact of LPT     (318 )     (266 )     (800 )     (970 )
    Adjusted losses and LAE   $ 170,839     $ 138,802     $ 474,289     $ 378,811  
                     
    Loss ratio     63.3 %     61.0 %     62.0 %     62.5 %
    Less: net impact of LPT   (0.1 )%   (0.1 )%   (0.1 )%   (0.2 )%
    Adjusted loss ratio     63.4 %     61.1 %     62.1 %     62.7 %
                     
    Combined ratio     92.2 %     90.2 %     90.9 %     90.8 %
    Less: net impact of LPT   (0.1 )%   (0.1 )%   (0.1 )%   (0.2 )%
    Adjusted combined ratio     92.3 %     90.3 %     91.0 %     91.0 %
                     

    Tangible Stockholders’ Equity – We define tangible stockholders’ equity as stockholders’ equity less goodwill and intangible assets. Our definition of tangible stockholders’ equity may not be comparable to that of other companies and should not be viewed as a substitute for stockholders’ equity calculated in accordance with GAAP. We use tangible stockholders’ equity internally to evaluate the strength of our balance sheet and to compare returns relative to this measure.

    ($ in thousands)   September 30,   December 31,
    (unaudited)   2024   2023   2023
    Stockholders’ equity   $ 797,507   $ 535,397   $ 661,031
    Less: Goodwill and intangible assets     87,607     88,808     88,435
    Tangible stockholders’ equity   $ 709,900   $ 446,589   $ 572,596
                 

    Skyward Specialty Insurance Group, Inc.
    Gross Written Premiums by Underwriting Division (Unaudited)

        Three months ended September 30,   Nine months ended September 30,
    ($ in thousands)   2024   2023   % Change   2024   2023   % Change
    Global Property & Agriculture   $ 54,360   $ 48,775   11.5 %   $ 279,721   $ 247,195   13.2 %
    Industry Solutions     74,089     79,798   (7.2 )%     236,460     226,680   4.3 %
    Captives     53,630     41,886   28.0 %     184,137     127,249   44.7 %
    Programs     54,434     41,735   30.4 %     166,256     143,032   16.2 %
    Transactional E&S     44,885     30,699   46.2 %     132,791     90,948   46.0 %
    Accident & Health     43,490     39,554   10.0 %     128,479     112,819   13.9 %
    Professional Lines     40,310     48,259   (16.5 )%     120,655     114,420   5.4 %
    Surety     34,816     24,977   39.4 %     106,395     75,899   40.2 %
    Total gross written premiums(1)   $ 400,014   $ 355,683   12.5 %   $ 1,354,894   $ 1,138,242   19.0 %
    (1)Excludes exited business                        

    The MIL Network –

  • MIL-OSI: Enovix Announces Third Quarter 2024 Financial Results

    Source: GlobeNewswire (MIL-OSI)

    FREMONT, Calif., Oct. 29, 2024 (GLOBE NEWSWIRE) — Enovix Corporation (“Enovix”) (Nasdaq: ENVX), a global high-performance battery company, announced today financial results for third quarter 2024, which included the summary below from its President and CEO, Dr. Raj Talluri.

    Fellow Shareholders,

    In the third quarter of 2024, we made significant progress on our journey to scale. The unveiling of Fab2 was a major boost in confidence with multiple customers now indicating a desire to launch products with us starting from late 2025.

    Other recent highlights include:

    • Revenue growth: Revenues were $4.3 million in the third quarter, above our guidance midpoint and up from $3.8 million in the second quarter.
    • Manufacturing: The Company formally opened Fab2 in Malaysia and within weeks commenced shipping battery cells to customers.
    • Commercialization: A leading smartphone OEM signed a development agreement for qualification of our battery product and mass production launch in late 2025.
    • Cost reduction: We are on track to further reduce cash consumption by leveraging our new Malaysia operations which will provide runway into 2026.

    We are laser-focused on execution as we see increasing demand across our target markets. The strategy we established early last year prioritized large, high-value segments, such as smartphones and AR/VR headsets, where the need for higher energy density commands a premium. This approach has proven to be visionary, with the recent surge in AI-enabled smartphones further validating our strategy and driving significant pull for our products. We are confident that our go-to-market strategy positions Enovix on an expedient path to profitability while maintaining a competitive edge in innovation.

    Our analysis of recent smartphone launches highlights a critical shortfall in conventional batteries. Energy density improvements in flagship devices released in 2024 have stagnated, with a mere 1% year-over-year increase. We believe this trajectory is insufficient to meet escalating demands of modern devices, especially those powered by AI.

    In contrast, our battery technology roadmap offers a generational leap in energy density. With our Malaysia Fab now gearing up for production, we are in a full sprint to commercialize this transformative technology and meet the pressing needs of the industry. Our focus on rapid execution will enable us to offer substantial benefits to our customers and consumers alike, positioning us as a leader in next-generation battery solutions.

    Business Update

    Manufacturing. We formally opened Fab2 in Malaysia with various stakeholders including several leading smartphone OEMs that provided decidedly positive feedback on ramp quality and speed, as well as the level of automation. A total of 11 customers have now inspected our new facility. The Agility Line is fully operational with initial yields comparable to final levels we achieved with our first manufacturing line in California, with expected improvements on the horizon. Consistent with our plans, we commenced shipping EX-1M cells to customers in the third quarter, supporting their qualification and mass production timelines. We are on track to complete Site Acceptance Testing (SAT) of the High-Volume Line in Q4 2024.

    Commercialization. Our business team has made significant progress toward profitability by securing demand across multiple high-growth markets. We are excited to announce that we have formalized a strategic partnership with a second leading smartphone OEM. This agreement outlines key milestones, and upon meeting them, we are poised to enter the smartphone market in late 2025 with high-volume production from our Fab2 facility. This marks a major step forward in our journey to scale.

    In parallel, we have aligned on a production schedule with a leading IoT customer, which includes a mass production purchase order also slated for 2025. This partnership underscores our ability to diversify into high-value sectors beyond smartphones. Further, we are aggressively expanding our pipeline by engaging with strategic IoT customers to unlock high-growth opportunities and accelerate top-of-the-funnel momentum.

    In the EV space, we are advancing our targeted strategy of developing customized products with two of the world’s largest automotive OEMs. In Q4, we expect to complete our first milestone pursuant to the agreement with one of the major automakers in the EV market, which is a major milestone in our efforts to enter and grow within the EV market. Looking ahead, we are focused on expanding these relationships in 2025, leveraging a capital-efficient, licensing-based business model in the EV space that aligns with the long-term scalability of our technology.

    Products: Our product development team is advancing toward the 2025 mass production of EX-1M, which will highlight the capabilities of our breakthrough active silicon technology. In Q3, we successfully achieved UN38.3 certification, marking a critical milestone for market entry and a strong validation of our products’ safety.

    In addition, we are on track to sample EX-2M to select customers in Q4. We’re now making samples and have identified the product’s advanced electrochemistry. These early samples will be instrumental in accelerating the timeline to full-scale production. Finally, we have made progress on the comprehensive product definition of EX-3M, reaffirming our commitment to pushing the boundaries of innovation and delivering industry-leading solutions to customers across a range of industries.

    Financials: Revenue was $4.3 million in the third quarter of 2024, near the high end of our guidance range and up from $3.8 million in the second quarter of 2024.

    Our GAAP cost of revenue was $5.0 million in the third quarter of 2024 representing a slight reduction sequentially as a percentage of sales and leading to a similar gross income level.

    Our GAAP operating expenses of $48.6 million in the third quarter of 2024 were down from $88.1 million in the second quarter, due largely to lower restructuring costs which were concentrated in the previous quarter as the Company shifted our manufacturing operations from the U.S. to Malaysia. Our non-GAAP operating expenses were $27.2 million in the third quarter of 2024, down 12% from $30.9 million in the second quarter of 2024.

    Our GAAP net loss attributable to Enovix of $22.5 million in the third quarter of 2024 was down from $115.9 million in the second quarter of 2024 due to lower restructuring costs. Our GAAP net loss attributable to Enovix for the third quarter of 2024 also included $29.9 million of income due to a decrease in the fair value of our common stock warrants during the quarter.

    Adjusted EBITDA in the third quarter of 2024 was a loss of $21.6 million compared to an adjusted EBITDA loss of $23.1 million in the second quarter of 2024.

    Earnings per share loss in the third quarter of 2024 was $0.30 on a GAAP basis and $0.17 on a non-GAAP basis compared to second quarter earnings per share loss of $0.67 on a GAAP basis and $0.14 on a non-GAAP basis.

    We exited the third quarter of 2024 with $200.9 million of cash, cash equivalents, and short-term investments due to cash used in operating activities of $30.7 million and capital expenditures of $19.5 million during the quarter.

    A full reconciliation of our GAAP to non-GAAP results is available later in this report.

    Outlook

    For the fourth quarter of 2024, we expect revenue between $8.0 million and $10.0 million, a GAAP EPS loss of $0.23 to $0.29, an adjusted EBITDA loss of $19.0 million to $25.0 million, and a non-GAAP EPS loss of $0.15 to $0.21.

    Summary

    We are very pleased with our accomplishments in the third quarter. Fab2 is now operational and shipping samples to customers. We secured a 2025 launch commitment from a major smartphone OEM. And we made progress on our product roadmap for EX-2M and beyond. For the remaining months of 2024, the key objectives are completing SAT for the High-Volume Line and shipping EX-2M samples.

    Conference Call Information

    Enovix will hold a video conference call at 2:00 PM PT / 5:00 PM ET today, October 29, 2024, to discuss the company’s business updates and financial results. To join the call, participants must use the following link to register: https://enovix-q3-2024.open-exchange.net/registration. This link will also be available via the Investor Relations section of the Enovix’s website at https://ir.enovix.com. An archived version of the call will be available on the Enovix website for one year at https://ir.enovix.com.

    About Enovix

    Enovix is on a mission to deliver high-performance batteries that unlock the full potential of technology products. Everything from IoT, mobile, and computing devices, to the vehicle you drive, needs a better battery. Enovix partners with OEMs worldwide to usher in a new era of user experiences. Our innovative, materials-agnostic approach to building a higher performing battery without compromising safety keeps us flexible and on the cutting-edge of battery technology innovation.

    Enovix is headquartered in Silicon Valley with facilities in India, Korea and Malaysia. For more information visit www.enovix.com and follow us on LinkedIn.

    Non-GAAP Financial Measures

    EBITDA, Adjusted EBITDA, and other non-GAAP measures are intended as supplemental financial measures of our performance that provide an additional tool for investors to use in evaluating ongoing operating results, trends, and in comparing our financial measures with those of comparable companies.

    However, you should be aware that other companies may calculate similar non-GAAP measures differently. Non-GAAP financial measures have limitations, including that they exclude certain expenses that are required under GAAP, which adjustments reflect the exercise of judgment by management. Reconciliations of each non-GAAP financial measure to the most directly comparable GAAP financial measure can be found in the tables at the end of this shareholder letter.

    While Enovix provides fourth quarter 2024 guidance for adjusted EBITDA loss and non-GAAP EPS loss, we are unable to provide without unreasonable effort a GAAP to non-GAAP reconciliation of these projected non-GAAP measures. Such qualitative reconciliation to the corresponding GAAP financial measure cannot be provided without unreasonable effort because of the inherent difficulty in accurately forecasting the occurrence and financial impact of the various adjustments that have not yet occurred, are out of our control, or cannot be reasonably predicted, including but not limited to warrant liabilities and stock-based compensation. For the same reasons, we are unable to assess the probable significance of the unavailable information, which could have a material impact on our future GAAP financial results.

    Forward-Looking Statements

    This letter to shareholders contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements generally relate to future events or our future financial or operating performance and can be identified by words such as anticipate, believe, continue, could, estimate, expect, intend, may, might, plan, possible, potential, predict, project, should, would and similar expressions that convey uncertainty about future events or outcomes. Forward-looking statements in this letter to shareholders include, without limitation, our expectations regarding, and our ability to respond to, market and customer demand; our expectations regarding the level of customers’ interest in our batteries, the demand for more energy dense batteries and the suitability of our products to address this demand, and the impact of artificial intelligence (“AI”) features on the foregoing; our financial and business performance; projected improvements in our manufacturing and commercialization and R&D activities at Fab2, including the ability of the sales team to support the path to profitability by attracting demand across high-growth markets ; our achievement of the milestones under our strategic partnership with a second leading smartphone OEM and our ability to enter into the smartphone market in 2025 with high-volume production from our Fab2 facility; our expectations regarding EX-1M production and mass production purchase order with a leading IoT customer in 2025, completion of site acceptance testing for our High-Volume Line, and the shipment of EX-2M samples in Q4; our ability to meet goals for yield and throughput; our expectations regarding Fab2 in and its capacity to support multiple customer qualifications; the anticipated contributions of our R&D teams to support product innovation; our revenue funnel; our efforts in the portable electronics and EV markets, including the IoT, smartphone and virtual reality categories; our ability to meet milestones and deliver on our objectives and expectations, including achieving certain safety certifications for our products and our ability sample batteries from our Agility Line to customers; the implementation and expected success of our business model and growth strategy, including our focus on the addressable market categories in which we believe an improved battery drives a high value to the product and premium pricing for our solutions; our ability to manage our expenses and realize our annual cost savings goals; our ability to manage and achieve the benefits of our restructuring efforts; and forecasts of our financial and performance metrics.

    Actual results could differ materially from these forward-looking statements as a result of certain risks and uncertainties, including, without limitation, our ability to improve energy density among our products, establish sufficient manufacturing operations and optimize manufacturing processes to meet demand, source materials and establish supply relationships, and secure adequate funds to execute on our operational and strategic goals; the safety hazards associated with our batteries and the manufacturing process; a concentration of customers in the military market; certain unfavorable terms in our commercial agreements that may limit our ability to market our products; market acceptance of our products; changes in consumer preferences or demands; changes in industry standards; the impact of technological development and competition; and global economic conditions, including inflationary and supply chain pressures, and political, social, and economic instability, including as a result of armed conflict, war or threat of war, or trade and other international disputes that could disrupt supply or delivery of, or demand for, our products.

    For additional information on these risks and uncertainties and other potential factors that could cause actual results to differ from the results predicted, please refer to our filings with the Securities and Exchange Commission (“SEC”), including in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of our annual report on Form 10-K and quarterly reports on Form 10-Q and other documents that we have filed, or will file, with the SEC. Any forward-looking statements in this letter to shareholders speak only as of the date on which they are made. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

    For media and investor inquiries, please contact:

    Enovix Corporation
    Robert Lahey
    Email: ir@enovix.com

    Enovix Corporation
    Condensed Consolidated Balance Sheets
    (Unaudited)
    (In Thousands, Except Share and per Share Amounts)
     
      September 29,
    2024    		   December 31,
    2023
    Assets      
    Current assets:      
    Cash and cash equivalents $ 200,912     $ 233,121  
    Short-term investments   —       73,694  
    Accounts receivable, net   1,911       909  
    Notes receivable, net   —       1,514  
    Inventory   9,564       8,737  
    Prepaid expenses and other current assets   11,598       5,202  
    Total current assets   223,985       323,177  
    Property and equipment, net   157,680       166,471  
    Customer relationship intangibles and other intangibles, net   37,583       42,168  
    Operating lease, right-of-use assets   13,810       15,290  
    Goodwill   12,217       12,098  
    Other assets, non-current   2,746       5,100  
    Total assets $ 448,021     $ 564,304  
    Liabilities and Stockholders’ Equity      
    Current liabilities:      
    Accounts payable $ 15,046     $ 21,251  
    Accrued expenses   13,855       13,976  
    Accrued compensation   8,038       10,731  
    Short-term debt   11,555       5,917  
    Deferred revenue   6,206       6,708  
    Other liabilities   4,760       2,435  
    Total current liabilities   59,460       61,018  
    Long-term debt, net   168,744       169,099  
    Warrant liability   23,265       42,900  
    Operating lease liabilities, non-current   14,346       15,594  
    Deferred revenue, non-current   3,774       3,774  
    Deferred tax liability   8,178       10,803  
    Other liabilities, non-current   12       13  
    Total liabilities   277,779       303,201  
    Commitments and Contingencies      
    Stockholders’ equity:      
    Common stock, $0.0001 par value; authorized shares of 1,000,000,000; issued and outstanding shares of $177,591,877 and $167,392,315 as of September 29, 2024 and December 31, 2023, respectively   18       17  
    Additional paid-in-capital   951,237       857,037  
    Accumulated other comprehensive loss   (42 )     (62 )
    Accumulated deficit   (783,621 )     (598,845 )
    Total Enovix’s stockholders’ equity   167,592       258,147  
    Non-controlling interest   2,650       2,956  
    Total equity   170,242       261,103  
    Total liabilities and equity $ 448,021     $ 564,304  
     
    Enovix Corporation
    Condensed Consolidated Statements of Operations
    (Unaudited)
    (In Thousands, Except Share and per Share Amounts)
     
      Quarters Ended   Fiscal Years-to-Date Ended
      September 29,
    2024    		   October 1,
    2023    		   September 29,
    2024    		   October 1,
    2023
    Revenue $ 4,317     $ 200     $ 13,357     $ 263  
    Cost of revenue   4,959       16,809       16,454       43,292  
    Gross margin   (642 )     (16,609 )     (3,097 )     (43,029 )
    Operating expenses:              
    Research and development   24,220       13,508       102,073       53,810  
    Selling, general and administrative   20,744       17,245       61,176       61,207  
    Impairment of equipment   —       —       —       4,411  
    Restructuring cost   3,661       3,021       41,807       3,021  
    Total operating expenses   48,625       33,774       205,056       122,449  
    Loss from operations   (49,267 )     (50,383 )     (208,153 )     (165,478 )
    Other income (expense):              
    Change in fair value of common stock warrants   29,899       31,320       17,359       4,140  
    Interest income   2,859       4,326       9,745       9,942  
    Interest expense   (1,718 )     (1,557 )     (5,068 )     (2,827 )
    Other income (loss), net   (2,217 )     109       (1,509 )     129  
    Total other income, net   28,823       34,198       20,527       11,384  
    Loss before income tax benefit   (20,444 )     (16,185 )     (187,626 )     (154,094 )
    Income tax expense (benefit)   2,194       —       (2,544 )     —  
    Net loss   (22,638 )     (16,185 )     (185,082 )     (154,094 )
    Net loss attributable to non-controlling interests   (102 )     —       (306 )     —  
    Net loss attributable to Enovix $ (22,536 )   $ (16,185 )   $ (184,776 )   $ (154,094 )
                   
    Net loss per share attributable to Enovix shareholders, basic $ (0.13 )   $ (0.10 )   $ (1.07 )   $ (0.98 )
    Weighted average number of common shares outstanding, basic   176,680,578       159,829,716       172,393,869       157,559,138  
    Net loss per share attributable to Enovix shareholders, diluted $ (0.30 )   $ (0.29 )   $ (1.07 )   $ (1.00 )
    Weighted average number of common shares outstanding, diluted   176,872,382       161,371,417       172,393,869       158,260,393  
                                   
    Enovix Corporation
    Condensed Consolidated Statements of Cash Flows
    (Unaudited)
    (In Thousands)
     
      Fiscal Years-to-Date Ended
      September 29, 2024   October 1, 2023
    Cash flows used in operating activities:      
    Net loss $ (185,082 )   $ (154,094 )
    Adjustments to reconcile net loss to net cash used in operating activities      
    Depreciation, accretion and amortization   37,417       10,000  
    Stock-based compensation   48,630       57,832  
    Changes in fair value of common stock warrants   (17,359 )     (4,140 )
    Impairment and loss on disposals of long-lived assets   38,249       4,411  
    Others   174       —  
    Changes in operating assets and liabilities:      
    Accounts and notes receivables   494       169  
    Inventory   (827 )     418  
    Prepaid expenses and other assets   (3,913 )     546  
    Accounts payable   (10,018 )     4,338  
    Accrued expenses and compensation   3,175       3,113  
    Deferred revenue   (502 )     —  
    Deferred tax liability   (3,303 )     —  
    Other liabilities   190       (1 )
    Net cash used in operating activities   (92,675 )     (77,408 )
    Cash flows from investing activities:      
    Purchase of property and equipment   (59,830 )     (32,979 )
    Purchases of investments   (31,812 )     (115,736 )
    Maturities of investments   106,621       16,700  
    Net cash provided by (used in) investing activities   14,979       (132,015 )
    Cash flows from financing activities:      
    Proceeds from issuance of Convertible Senior Notes and loans   4,572       172,500  
    Repayment of debt   (180 )     —  
    Payments of debt issuance costs   —       (5,251 )
    Purchase of Capped Calls   —       (17,250 )
    Payroll tax payments for shares withheld upon vesting of RSUs   (5,601 )     (2,988 )
    Proceeds from the exercise of stock options and issuance of common stock, net of issuance costs   44,285       9,232  
    Proceeds from issuance of common stock under employee stock purchase plan   1,145       1,169  
    Repurchase of unvested restricted common stock   (4 )     (23 )
    Net cash provided by financing activities   44,217       157,389  
    Effect of exchange rate changes on cash, cash equivalents and restricted cash   1,303       —  
    Change in cash, cash equivalents, and restricted cash   (32,176 )     (52,034 )
    Cash and cash equivalents and restricted cash, beginning of period   235,123       322,976  
    Cash and cash equivalents, and restricted cash, end of period $ 202,947     $ 270,942  
           

    Net Loss Attributable to Enovix to Adjusted EBITDA Reconciliation

    While we prepare our consolidated financial statements in accordance with GAAP, we also utilize and present certain financial measures that are not based on GAAP. We refer to these financial measures as “non-GAAP” financial measures. In addition to our financial results determined in accordance with GAAP, we believe that EBITDA and Adjusted EBITDA are useful measures in evaluating its financial and operational performance distinct and apart from financing costs, certain non-cash expenses and non-operational expenses.

    These non-GAAP financial measures should be considered in addition to results prepared in accordance with GAAP but should not be considered a substitute for or superior to GAAP. We endeavor to compensate for the limitation of the non-GAAP financial measures presented by also providing the most directly comparable GAAP measures.

    We use non-GAAP financial information to evaluate our ongoing operations and for internal planning, budgeting and forecasting purposes. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors in assessing its operating performance and comparing its performance with competitors and other comparable companies. You should review the reconciliations below but not rely on any single financial measure to evaluate our business.

    “EBITDA” is defined as earnings (net loss) attributable to Enovix adjusted for interest expense, income tax benefit, depreciation and amortization expense. “Adjusted EBITDA” includes additional adjustments to EBITDA such as stock-based compensation expense, change in fair value of common stock warrants, inventory step-up, impairment of equipment and other special items as determined by management which it does not believe to be indicative of its underlying business trends.

    Below is a reconciliation of net loss attributable to Enovix on a GAAP basis to the non-GAAP EBITDA and Adjusted EBITDA financial measures for the periods presented below (in thousands):

      Quarters Ended   Fiscal Years-to-Date Ended
      September 29,
    2024    		   October 1,
    2023    		   September 29,
    2024    		   October 1,
    2023
    Net loss attributable to Enovix $ (22,536 )   $ (16,185 )   $ (184,776 )   $ (154,094 )
    Interest expense   1,718       1,557       5,068       2,827  
    Income tax expense (benefit)   2,194       —       (2,544 )     —  
    Depreciation and amortization   6,500       2,900       37,417       10,000  
    EBITDA   (12,124 )     (11,728 )     (144,835 )     (141,267 )
    Stock-based compensation expense (1)   16,722       13,274       47,414       57,473  
    Change in fair value of common stock warrants   (29,899 )     (31,320 )     (17,359 )     (4,140 )
    Inventory step-up   —       —       1,907       —  
    Impairment of equipment   —       —       —       4,411  
    Restructuring cost (1)   3,661       3,021       41,807       3,021  
    Acquisition cost   —       1,115       —       1,115  
    Adjusted EBITDA $ (21,640 )   $ (25,638 )   $ (71,066 )   $ (79,387 )
       
       
       
    (1) $0.1 million and $1.2 million of stock-based compensation expense are included in the restructuring cost line of the table above for the quarter and fiscal year-to-date ended September 29, 2024, respectively. $0.4 million of stock-based compensation expense is included in the restructuring cost line of the table above for the quarter and fiscal year-to-date ended October 1, 2023.
     

    Free Cash Flow Reconciliation

    We define “Free Cash Flow” as (i) net cash from operating activities less (ii) capital expenditures, net of proceeds from disposals of property and equipment, all of which are derived from our Consolidated Statements of Cash Flow. The presentation of non-GAAP Free Cash Flow is not intended as an alternative measure of cash flows from operations, as determined in accordance with GAAP. We believe that this financial measure is useful to investors because it provides investors to view our performance using the same tool that we use to gauge our progress in achieving our goals and it is an indication of cash flow that may be available to fund investments in future growth initiatives. Below is a reconciliation of net cash used in operating activities to the Free Cash Flow financial measures for the periods presented below (in thousands):

      Fiscal Years-to-Date Ended
      September 29,
    2024    		   October 1,
    2023
    Net cash used in operating activities $ (92,675 )   $ (77,408 )
    Capital expenditures   (59,830 )     (32,979 )
    Free Cash Flow $ (152,505 )   $ (110,387 )
     

    Other Non-GAAP Financial Measures Reconciliation
    (In Thousands, Except Share and per Share Amounts)

        Quarters Ended   Fiscal Years-to-Date Ended
        September 29,
    2024    		   October 1,
    2023    		   September 29,
    2024    		   October 1,
    2023
    Revenue   $ 4,317     $ 200     $ 13,357     $ 263  
                     
    GAAP cost of revenue   $ 4,959     $ 16,809     $ 16,454     $ 43,292  
    Stock-based compensation expense     (101 )     (2,396 )     (196 )     (5,001 )
    Inventory step-up     —       —       (1,907 )     —  
    Non-GAAP cost of revenue   $ 4,858     $ 14,413     $ 14,351     $ 38,291  
                     
    GAAP gross margin   $ (642 )   $ (16,609 )   $ (3,097 )   $ (43,029 )
    Stock-based compensation expense     101       2,396       196       5,001  
    Inventory step-up     —       —       1,907       —  
    Non-GAAP gross margin   $ (541 )   $ (14,213 )   $ (994 )   $ (38,028 )
                     
    GAAP research and development (R&D) expense   $ 24,220     $ 13,508     $ 102,073     $ 53,810  
    Stock-based compensation expense     (5,914 )     (4,949 )     (19,771 )     (22,072 )
    Amortization of intangible assets     (417 )     —       (1,248 )     —  
    Non-GAAP R&D expense   $ 17,889     $ 8,559     $ 81,054     $ 31,738  
                     
    GAAP selling, general and administrative (SG&A) expense   $ 20,744     $ 17,245     $ 61,176     $ 61,207  
    Stock-based compensation expense     (10,707 )     (5,929 )     (27,447 )     (30,400 )
    Amortization of intangible assets     (774 )     —       (2,304 )     —  
    Acquisition cost     —       (1,115 )     —       (1,115 )
    Non-GAAP SG&A expense   $ 9,263     $ 10,201     $ 31,425     $ 29,692  
                     
    GAAP operating expenses   $ 48,625     $ 33,774     $ 205,056     $ 122,449  
    Stock-based compensation expense included in R&D expense     (5,914 )     (4,949 )     (19,771 )     (22,072 )
    Stock-based compensation expense included in SG&A expense     (10,707 )     (5,929 )     (27,447 )     (30,400 )
    Amortization of intangible assets     (1,191 )     —       (3,552 )     —  
    Impairment of equipment     —       —       —       (4,411 )
    Restructuring cost (1)     (3,661 )     (3,021 )     (41,807 )     (3,021 )
    Acquisition cost     —       (1,115 )     —       (1,115 )
    Non-GAAP operating expenses   $ 27,152     $ 18,760     $ 112,479     $ 61,430  
                     
       
       
    (1) $0.1 million and $1.2 million of stock-based compensation expense is included in the restructuring cost line of the table above for the quarter and fiscal year-to-date ended September 29, 2024, respectively. $0.4 million of stock-based compensation expense is included in the restructuring cost line of the table above for the quarter and fiscal year-to-date ended October 1, 2023.
       
        Quarters Ended   Fiscal Years-to-Date Ended
        September 29,
    2024    		   October 1,
    2023    		   September 29,
    2024    		   October 1,
    2023
    GAAP loss from operations   $ (49,267 )   $ (50,383 )   $ (208,153 )   $ (165,478 )
    Stock-based compensation expense (1)     16,722       13,274       47,414       57,473  
    Amortization of intangible assets     1,191       —       3,552       —  
    Inventory step-up     —       —       1,907       —  
    Impairment of equipment     —       —       —       4,411  
    Restructuring cost (1)     3,661       3,021       41,807       3,021  
    Acquisition cost     —       1,115       —       1,115  
    Non-GAAP loss from operations   $ (27,693 )   $ (32,973 )   $ (113,473 )   $ (99,458 )
                     
    GAAP net loss attributable to Enovix   $ (22,536 )   $ (16,185 )   $ (184,776 )   $ (154,094 )
    Stock-based compensation expense (1)     16,722       13,274       47,414       57,473  
    Change in fair value of common stock warrants     (29,899 )     (31,320 )     (17,359 )     (4,140 )
    Inventory step-up     —       —       1,907       —  
    Amortization of intangible assets     1,191       —       3,552       —  
    Impairment of equipment     —       —       —       4,411  
    Restructuring cost (1)     3,661       3,021       41,807       3,021  
    Acquisition cost     —       1,115       —       1,115  
    Non-GAAP net loss attributable to Enovix shareholders   $ (30,861 )   $ (30,095 )   $ (107,455 )   $ (92,214 )
                     
    GAAP net loss per share attributable to Enovix, basic   $ (0.13 )   $ (0.10 )   $ (1.07 )   $ (0.98 )
    GAAP weighted average number of common shares outstanding, basic     176,680,578       159,829,716       172,393,869       157,559,138  
                     
    GAAP net loss per share attributable to Enovix, diluted   $ (0.30 )   $ (0.29 )   $ (1.07 )   $ (1.00 )
    GAAP weighted average number of common shares outstanding, diluted     176,872,382       161,371,417       172,393,869       158,260,393  
                     
    Non-GAAP net loss per share attributable to Enovix, basic   $ (0.17 )   $ (0.19 )   $ (0.62 )   $ (0.59 )
    GAAP weighted average number of common shares outstanding, basic     176,680,578       159,829,716       172,393,869       157,559,138  
                     
    Non-GAAP net loss per share attributable to Enovix, diluted   $ (0.17 )   $ (0.19 )   $ (0.62 )   $ (0.58 )
    GAAP weighted average number of common shares outstanding, diluted     176,872,382       161,371,417       172,393,869       158,260,393  
                                     
       
       
    (1) $0.1 million and $1.2 million of stock-based compensation expense is included in the restructuring cost line of the table above for the quarter and fiscal year-to-date ended September 29, 2024, respectively. $0.4 million of stock-based compensation expense is included in the restructuring cost line of the table above for the quarter and fiscal year-to-date ended October 1, 2023.
       

    The MIL Network –

  • MIL-OSI: Varonis Announces Third Quarter 2024 Financial Results

    Source: GlobeNewswire (MIL-OSI)

    Annual recurring revenues grew 18% year-over-year
    SaaS ARR as a percentage of total ARR was approximately 43%
    Year-to-date cash from operations generated $90.9 million vs. $49.0 million last year
    Year-to-date free cash flow generated $88.6 million vs. $46.0 million last year

    NEW YORK, Oct. 29, 2024 (GLOBE NEWSWIRE) — Varonis Systems, Inc. (Nasdaq: VRNS), a leader in data security, today announced financial results for the third quarter ended September 30, 2024.

    Yaki Faitelson, Varonis CEO, said, “We are encouraged by the many tailwinds that are contributing to the strong growth in our business, and our third quarter results reflect the continued strong adoption of our SaaS platform and positive momentum from our Managed Data Detection and Response offering.”

    Guy Melamed, Varonis CFO & COO, added, “The robust demand for Varonis SaaS from both new and existing customers is evident with 43% of total company ARR coming from SaaS. This demand is benefiting our ARR growth and cash flow generation and gives us confidence as we enter the fourth quarter.”

    Financial Summary for the Third Quarter Ended September 30, 2024

    • Total revenues were $148.1 million, compared with $122.3 million in the third quarter of 2023.
    • SaaS revenues were $57.8 million, compared with $13.7 million in the third quarter of 2023.
    • Term license subscription revenues were $68.8 million, compared with $84.0 million in the third quarter of 2023.
    • Maintenance and services revenues were $21.5 million, compared with $24.6 million in the third quarter of 2023.
    • GAAP operating loss was ($23.6) million, compared to GAAP operating loss of ($29.1) million in the third quarter of 2023.
    • Non-GAAP operating income was $9.1 million, compared to non-GAAP operating income of $4.9 million in the third quarter of 2023.

    The tables at the end of this press release include a reconciliation of GAAP operating income (loss) to non-GAAP operating income (loss) and GAAP net income (loss) to non-GAAP net income (loss) for the three and nine months ended September 30, 2024 and 2023. An explanation of these measures is included below under the heading “Non-GAAP Financial Measures and Key Performance Indicators.”

    Key Performance Indicators and Recent Business Highlights

    • Annual recurring revenues, or ARR, was $610.0 million as of the end of the third quarter, up 18% year-over-year.
    • As of September 30, 2024, the Company had $1.2 billion in cash and cash equivalents, short-term deposits and short-term and long-term marketable securities.
    • During the nine months ended September 30, 2024, the Company generated $90.9 million of cash from operations, compared to $49.0 million generated in the prior year period.
    • During the nine months ended September 30, 2024, the Company generated $88.6 million of free cash flow, compared to $46.0 million generated in the prior year period.
    • Raised net proceeds of $394.1 million through an offering of 1.00% Convertible Senior Notes due 2029.
    • Announced new AI-powered data discovery and classification capabilities that enhance our industry-leading data classification technology.
    • Integrated the Varonis platform with SentinelOne and Microsoft Defender for Endpoint, expanding visibility to customers’ endpoints and enabling end-to-end threat detection and response.
    • Expanded Salesforce security offering with new automated remediation capabilities.

    An explanation of ARR is included below under the heading “Non-GAAP Financial Measures and Key Performance Indicators.” In addition, the tables at the end of this press release include a reconciliation of net cash provided by operating activities to non-GAAP free cash flow. An explanation of this measure is also included below under the heading “Non-GAAP Financial Measures and Key Performance Indicators.”

    Financial Outlook

    For the fourth quarter of 2024, the Company expects:

    • Revenues of $162.0 million to $167.0 million, or year-over-year growth of 5% to 8%.
    • Non-GAAP operating income of $20.0 million to $22.0 million.
    • Non-GAAP net income per diluted share in the range of $0.13 to $0.14, based on 135.0 million diluted shares outstanding.

    For full year 2024, the Company now expects:

    • ARR of $635.0 million to $639.0 million, or year-over-year growth of 17% to 18%.
    • Free cash flow of $95.0 million to $100.0 million.
    • Revenues of $554.4 million to $559.4 million, or year-over-year growth of 11% to 12%.
    • Non-GAAP operating income of $20.6 million to $22.6 million.
    • Non-GAAP net income per diluted share in the range of $0.26 to $0.27, based on 134.9 million diluted shares outstanding.

    Actual results may differ materially from the Company’s Financial Outlook as a result of, among other things, the factors described below under “Forward-Looking Statements”.

    Conference Call and Webcast
    Varonis will host a conference call today, Tuesday, October 29, 2024, at 4:30 p.m. Eastern Time, to discuss the Company’s third quarter 2024 financial results. To access this call, dial 877-425-9470 (domestic) or 201-389-0878 (international). The passcode is 13749435. A replay of this conference call will be available through November 5, 2024 at 844-512-2921 (domestic) or 412-317-6671 (international). The replay passcode is 13749435. A live webcast of this conference call will be available on the “Investors” page of the Company’s website (www.varonis.com), and a replay will be archived on the website as well.

    Non-GAAP Financial Measures and Key Performance Indicators
    Varonis believes that the use of non-GAAP operating income (loss) and non-GAAP net income (loss) is helpful to our investors. These measures, which the Company refers to as our non-GAAP financial measures, are not prepared in accordance with GAAP.

    Non-GAAP operating income (loss) is calculated as operating income (loss) excluding (i) stock-based compensation expense, (ii) payroll tax expense related to stock-based compensation, and (iii) amortization of acquired intangible assets and acquisition-related expenses.

    Non-GAAP net income (loss) is calculated as net income (loss) excluding (i) stock-based compensation expense, (ii) payroll tax expense related to stock-based compensation, (iii) amortization of acquired intangible assets and acquisition-related expenses, (iv) foreign exchange gains (losses) which include exchange rate differences on lease contracts as a result of the implementation of ASC 842 and (v) amortization of debt issuance costs.

    The Company believes that the exclusion of these expenses provides a more meaningful comparison of our operational performance from period to period and offers investors and management greater visibility to the underlying performance of our business. Specifically:

    • Stock-based compensation expenses utilize varying available valuation methodologies, subjective assumptions and a variety of equity instruments that can impact a company’s non-cash expenses;
    • Payroll taxes are tied to the exercise or vesting of underlying equity awards and the price of our common stock at the time of vesting or exercise, factors which may vary from period to period;
    • Acquired intangible assets are valued at the time of acquisition and are amortized over an estimated useful life after the acquisition, and acquisition-related expenses are unrelated to current operations and neither are comparable to the prior period nor predictive of future results;
    • The Company incurs foreign exchange gains or losses from the revaluation of its significant operating lease liabilities in foreign currencies as well as other assets and liabilities denominated in non-U.S. dollars, which may vary from period to period; and
    • Amortization of debt issuance costs, which relate to the Company’s convertible senior notes issued in 2020 and 2024, are a non-cash item.

    Free cash flow is calculated as net cash provided by or used in operating activities less purchases of property and equipment. We believe that free cash flow is a useful indicator of liquidity that provides information to management and investors about the amount of cash provided by or used in our operations that, after the investments in property and equipment, can be used for strategic initiatives.

    Each of our non-GAAP financial measures is an important tool for financial and operational decision making and for evaluating our own operating results over different periods of time. The non-GAAP financial measures do not represent our financial performance under U.S. GAAP and should not be considered as alternatives to operating income (loss) or net income (loss) or any other performance measures derived in accordance with GAAP. Non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies in our industry, as other companies in our industry may calculate non-GAAP financial results differently, particularly related to non-recurring, unusual items. In addition, there are limitations in using non-GAAP financial measures because the non-GAAP financial measures are not prepared in accordance with GAAP, and exclude expenses that may have a material impact on our reported financial results. Further, stock-based compensation expense and payroll tax expense related to stock-based compensation have been, and will continue to be for the foreseeable future, significant recurring expenses in our business and an important part of the compensation provided to our employees. Also, the amortization of intangible assets are expected recurring expenses over the estimated useful life of the underlying intangible asset and acquisition-related expenses will be incurred to the extent acquisitions are made in the future. Additionally, foreign exchange rates may fluctuate from one period to another, and the Company does not estimate movements in foreign currencies. Finally, the amortization of debt issuance costs are expected recurring expenses until the maturity of the senior notes in 2029.

    The presentation of non-GAAP financial information is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP. Varonis urges investors to review the reconciliation of our non-GAAP financial measures to the comparable GAAP financial measures included below, and not to rely on any single financial measures to evaluate our business.

    A reconciliation for non-GAAP operating income (loss) and non-GAAP net income (loss) referred to in our “Financial Outlook” is not provided because, as forward-looking statements, such reconciliation is not available without unreasonable effort due to the high variability, complexity, and difficulty of estimating certain items such as charges to stock-based compensation expense and currency fluctuations which could have an impact on our consolidated results. The Company believes the information provided is useful to investors because it can be considered in the context of the Company’s historical disclosures of this measure.

    ARR is a key performance indicator defined as the annualized value of active term-based subscription license contracts, SaaS contracts, and maintenance contracts in effect at the end of that period. Subscription license contracts, SaaS contracts, and maintenance contracts are annualized by dividing the total contract value by the number of days in the term and multiplying the result by 365. The annualized value of contracts is a legal and contractual determination made by assessing the contractual terms with our customers. The annualized value of maintenance contracts is not determined by reference to historical revenues, deferred revenues or any other GAAP financial measure over any period. ARR is not a forecast of future revenues, which can be impacted by contract start and end dates and renewal rates.

    Forward-Looking Statements

    This press release contains, and statements made during the above referenced conference call will contain, “forward-looking” statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including regarding the Company’s growth rate and its expectations regarding future revenues, operating income or loss or earnings or loss per share. These statements are not guarantees of future performance but are based on management’s expectations as of the date of this press release and assumptions that are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements. Important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements include the following: the impact of potential information technology, cybersecurity or data security breaches; risks associated with anticipated growth in Varonis’ addressable market; general economic and industry conditions, such as foreign currency exchange rate fluctuations and expenditure trends for data and cybersecurity solutions; Varonis’ ability to predict the timing and rate of subscription renewals and their impact on the Company’s future revenues and operating results; risks associated with international operations; the impact of global conflicts on the budgets of our clients and on economic conditions generally; competitive factors, including increased sales cycle time, changes in the competitive environment, pricing changes and increased competition; the risk that Varonis may not be able to attract or retain employees, including sales personnel and engineers; Varonis’ ability to build and expand its direct sales efforts and reseller distribution channels; risks associated with the closing of large transactions, including Varonis’ ability to close large transactions consistently on a quarterly basis; new product introductions and Varonis’ ability to develop and deliver innovative products; Varonis’ ability to provide high-quality service and support offerings; the expansion of cloud-delivered services; and risks associated with our convertible notes and capped-call transactions. These and other important risk factors are described more fully in Varonis’ reports and other documents filed with the Securities and Exchange Commission and could cause actual results to vary from expectations. All information provided in this press release and in the conference call is as of the date hereof, and Varonis undertakes no duty to update or revise this information, whether as a result of new information, new developments or otherwise, except as required by law.

    About Varonis

    Varonis (Nasdaq: VRNS) is a leader in data security, fighting a different battle than conventional cybersecurity companies. Our cloud-native Data Security Platform continuously discovers and classifies critical data, removes exposures, and detects advanced threats with AI-powered automation.

    Thousands of organizations worldwide trust Varonis to defend their data wherever it lives — across SaaS, IaaS, and hybrid cloud environments. Customers use Varonis to automate a wide range of security outcomes, including data security posture management (DSPM), data classification, data access governance (DAG), data detection and response (DDR), data loss prevention (DLP), and insider risk management.

    Varonis protects data first, not last. Learn more at www.varonis.com.

    Investor Relations Contact:
    Tim Perz
    Varonis Systems, Inc.
    646-640-2112
    investors@varonis.com

    News Media Contact:
    Rachel Hunt
    Varonis Systems, Inc.
    877-292-8767 (ext. 1598)
    pr@varonis.com

    Varonis Systems, Inc.
    Condensed Consolidated Statements of Operations
    (in thousands, except for share and per share data)
      Three Months Ended
    September 30,    		   Nine Months Ended
    September 30,
        2024       2023       2024       2023  
      Unaudited   Unaudited
    Revenues:              
    Term license subscriptions $ 68,751     $ 83,963     $ 187,460     $ 250,306  
    SaaS   57,805       13,716       136,575       21,437  
    Maintenance and services   21,512       24,629       68,401       73,318  
    Total revenues   148,068       122,308       392,436       345,061  
                   
    Cost of revenues   24,007       17,381       67,792       52,404  
                   
    Gross profit   124,061       104,927       324,644       292,657  
                   
    Operating expenses:              
    Research and development   53,459       44,818       146,219       135,694  
    Sales and marketing   71,378       68,610       212,646       207,324  
    General and administrative   22,864       20,646       65,878       61,618  
    Total operating expenses   147,701       134,074       424,743       404,636  
                   
    Operating loss   (23,640 )     (29,147 )     (100,099 )     (111,979 )
    Financial income, net   10,245       8,634       27,039       24,872  
                   
    Loss before income taxes   (13,395 )     (20,513 )     (73,060 )     (87,107 )
    Income taxes   (4,938 )     (2,504 )     (9,711 )     (12,911 )
                   
    Net loss $ (18,333 )   $ (23,017 )   $ (82,771 )   $ (100,018 )
                   
    Net loss per share of common stock, basic and diluted $ (0.16 )   $ (0.21 )   $ (0.74 )   $ (0.92 )
                   
    Weighted average number of shares used in computing net loss per share of common stock, basic and diluted   112,268,210       109,429,722       111,382,582       109,187,063  
                   
    Stock-based compensation expense for the three and nine months ended September 30, 2024 and 2023 is included in the Condensed Consolidated Statements of Operations as follows (in thousands):
                   
      Three Months Ended
    September 30,    		   Nine Months Ended
    September 30,
      2024   2023   2024   2023
      Unaudited   Unaudited
    Cost of revenues $ 1,357   $ 1,416   $ 4,017   $ 5,946
    Research and development   10,442     11,323     31,057     37,480
    Sales and marketing   9,860     11,201     30,985     37,861
    General and administrative   10,272     9,040     28,054     26,889
      $ 31,931   $ 32,980   $ 94,113   $ 108,176
     
    Payroll tax expense related to stock-based compensation for the three and nine months ended September 30, 2024 and 2023 is included in the Condensed Consolidated Statements of Operations as follows (in thousands):
                   
      Three Months Ended
    September 30,    		   Nine Months Ended
    September 30,
      2024   2023   2024   2023
      Unaudited   Unaudited
    Cost of revenues $ 15   $ 24   $ 631   $ 385
    Research and development   187     75     566     232
    Sales and marketing   150     122     3,050     1,820
    General and administrative   49     18     1,165     486
      $ 401   $ 239   $ 5,412   $ 2,923
     
    Amortization of acquired intangibles and acquisition-related expenses for the three and nine months ended September 30, 2024 and 2023 is included in the Condensed Consolidated Statements of Operations as follows (in thousands):
                   
      Three Months Ended
    September 30,    		   Nine Months Ended
    September 30,
      2024   2023   2024   2023
      Unaudited   Unaudited
    Cost of revenues $ 381   $ 382   $ 1,143   $ 1,144
    Research and development   —     412     —     1,235
    Sales and marketing   —     —     —     —
    General and administrative   —     —     —     —
      $ 381   $ 794   $ 1,143   $ 2,379
     
    Varonis Systems, Inc.
    Condensed Consolidated Balance Sheets
    (in thousands)
      September 30, 2024   December 31, 2023
      Unaudited    
    Assets      
    Current assets:      
    Cash and cash equivalents $ 282,218     $ 230,740  
    Marketable securities   562,568       253,175  
    Short-term deposits   34,174       49,800  
    Trade receivables, net   119,203       169,116  
    Prepaid expenses and other short-term assets   76,206       64,326  
    Total current assets   1,074,369       767,157  
    Long-term assets:      
    Long-term marketable securities   332,329       211,063  
    Operating lease right-of-use assets   45,390       51,838  
    Property and equipment, net   28,908       33,964  
    Intangible assets, net   119       1,263  
    Goodwill   23,135       23,135  
    Other assets   16,904       15,490  
    Total long-term assets   446,785       336,753  
    Total assets $ 1,521,154     $ 1,103,910  
           
    Liabilities and stockholders’ equity      
    Current liabilities:      
    Trade payables $ 1,489     $ 672  
    Accrued expenses and other short-term liabilities   123,256       125,057  
    Convertible senior notes, net   251,625       —  
    Deferred revenues   217,605       181,049  
    Total current liabilities   593,975       306,778  
    Long-term liabilities:      
    Convertible senior notes, net   449,759       250,477  
    Operating lease liabilities   43,654       51,313  
    Deferred revenues   1,530       886  
    Other liabilities   3,676       4,808  
    Total long-term liabilities   498,619       307,484  
           
    Stockholders’ equity:      
    Share capital      
    Common stock   112       109  
    Accumulated other comprehensive loss   (4,381 )     (8,649 )
    Additional paid-in capital   1,159,990       1,142,578  
    Accumulated deficit   (727,161 )     (644,390 )
    Total stockholders’ equity   428,560       489,648  
    Total liabilities and stockholders’ equity $ 1,521,154     $ 1,103,910  
     
    Varonis Systems, Inc.
    Condensed Consolidated Statements of Cash Flows
    (in thousands)
      Nine Months Ended
    September 30,
        2024       2023  
      Unaudited
    Cash flows from operating activities:      
    Net loss $ (82,771 )   $ (100,018 )
    Adjustments to reconcile net loss to net cash provided by operating activities:      
    Depreciation and amortization   8,543       8,736  
    Stock-based compensation   94,113       108,176  
    Amortization of deferred commissions   19,906       17,547  
    Non-cash operating lease costs   7,050       7,087  
    Amortization of debt issuance costs   1,264       1,133  
    Amortization of premium and accretion of discount on marketable securities   (11,288 )     (5,557 )
    Acquired in-process research and development   6,653       —  
           
    Changes in assets and liabilities:      
    Trade receivables   49,913       24,895  
    Prepaid expenses and other short-term assets   (10,889 )     (11,118 )
    Deferred commissions   (23,846 )     (18,338 )
    Other long-term assets   (129 )     (963 )
    Trade payables   817       (1,634 )
    Accrued expenses and other short-term liabilities   (5,882 )     (17,652 )
    Deferred revenues   37,200       33,555  
    Other long-term liabilities   272       3,120  
    Net cash provided by operating activities   90,926       48,969  
           
    Cash flows from investing activities:      
    Proceeds from maturities of marketable securities   157,100       28,850  
    Investment in marketable securities   (576,753 )     (331,651 )
    Proceeds from short-term and long-term deposits   25,038       170,925  
    Investment in short-term and long-term deposits   (9,233 )     (118,605 )
    Purchase of in-process research and development   (6,653 )     —  
    Purchases of property and equipment   (2,342 )     (2,945 )
    Net cash used in investing activities   (412,843 )     (253,426 )
           
    Cash flows from financing activities:      
    Proceeds from issuance of convertible senior notes, net of issuance costs   450,099       —  
    Purchases of capped calls   (55,522 )     —  
    Proceeds from employee stock plans   16,082       11,346  
    Taxes paid related to net share settlement of equity awards   (37,264 )     (19,971 )
    Repurchase of common stock   —       (43,522 )
    Net cash provided by (used in) financing activities   373,395       (52,147 )
    Increase (decrease) in cash and cash equivalents   51,478       (256,604 )
    Cash and cash equivalents at beginning of period   230,740       367,800  
    Cash and cash equivalents at end of period $ 282,218     $ 111,196  
     
    Varonis Systems, Inc.
    Reconciliation of GAAP Measures to non-GAAP
    (in thousands, except share and per share data)
      Three Months Ended September 30,   Nine Months Ended
    September 30,
        2024       2023       2024       2023  
      Unaudited   Unaudited
    Reconciliation to non-GAAP operating income:              
                   
    GAAP operating loss $ (23,640 )   $ (29,147 )   $ (100,099 )   $ (111,979 )
                   
    Add back:              
    Stock-based compensation expense   31,931       32,980       94,113       108,176  
    Payroll tax expenses related to stock-based compensation   401       239       5,412       2,923  
    Amortization of acquired intangible assets and acquisition-related expenses   381       794       1,143       2,379  
    Non-GAAP operating income $ 9,073     $ 4,866     $ 569     $ 1,499  
                   
    Reconciliation to non-GAAP net income:              
                   
    GAAP net loss $ (18,333 )   $ (23,017 )   $ (82,771 )   $ (100,018 )
                   
    Add back:              
    Stock-based compensation expense   31,931       32,980       94,113       108,176  
    Payroll tax expenses related to stock-based compensation   401       239       5,412       2,923  
    Amortization of acquired intangible assets and acquisition-related expenses   381       794       1,143       2,379  
    Foreign exchange rate differences, net   (1,052 )     (1,002 )     (2,302 )     (3,206 )
    Amortization of debt issuance costs   496       379       1,264       1,133  
    Non-GAAP net income $ 13,824     $ 10,373     $ 16,859     $ 11,387  
                   
    GAAP weighted average number of shares used in computing net loss per share of common stock – basic and diluted   112,268,210       109,429,722       111,382,582       109,187,063  
    Non-GAAP weighted average number of shares used in computing net income per share of common stock – basic   112,268,210       109,429,722       111,382,582       109,187,063  
    Non-GAAP weighted average number of shares used in computing net income per share of common stock – diluted   134,713,048       126,748,606       134,821,002       126,777,843  
                   
    GAAP net loss per share of common stock – basic and diluted $ (0.16 )   $ (0.21 )   $ (0.74 )   $ (0.92 )
    Non-GAAP net income per share of common stock – basic $ 0.12     $ 0.09     $ 0.15     $ 0.10  
    Non-GAAP net income per share of common stock – diluted $ 0.10     $ 0.08     $ 0.13     $ 0.09  
     
    Varonis Systems, Inc.
    Reconciliation of GAAP Measures to non-GAAP
    (in millions)
           
      Nine Months Ended September 30,
        2024       2023  
      Unaudited
    Reconciliation to non-GAAP free cash flow:      
    Net cash provided by operating activities $ 90.9     $ 49.0  
    Purchases of property and equipment   (2.3 )     (3.0 )
    Free cash flow $ 88.6     $ 46.0  
     
    Varonis Systems, Inc.
    Reconciliation of GAAP Measures to non-GAAP
    (in millions)
           
      Twelve Months Ended December 31, 2024
      Low   High
    Reconciliation to non-GAAP free cash flow:      
    Net cash provided by operating activities $ 100.0     $ 107.0  
    Purchases of property and equipment   (5.0 )     (7.0 )
    Free cash flow $ 95.0     $ 100.0  

    The MIL Network –

  • MIL-OSI: Medallion Financial Corp. Reports 2024 Third Quarter Results

    Source: GlobeNewswire (MIL-OSI)

    NEW YORK, Oct. 29, 2024 (GLOBE NEWSWIRE) — Medallion Financial Corp. (NASDAQ: MFIN, “Medallion” or the “Company”), a specialty finance company that originates and services loans in various consumer and commercial industries, as well as offers loan products and services through fintech strategic partners, announced today its results for the quarter ended September 30, 2024.

    2024 Third Quarter Highlights

    • Net income was $8.6 million, or $0.37 per share, compared to $11.2 million, or $0.48 per share, in the prior year quarter.
    • Net interest income grew 8% to $52.7 million from $48.8 million in the prior year quarter.
    • Net interest margin on gross loans was 8.11%, compared to 8.35% in the prior year quarter, and on net loans it was 8.42%, compared to 8.64% in the prior year quarter.
    • Loan originations were $275.6 million, compared to $217.4 million in the prior year quarter.
    • Loans grew 13% to $2.5 billion as of September 30, 2024, compared to $2.2 billion a year ago.
    • The credit loss provision increased to $20.2 million from $14.5 million in the prior year quarter.
    • The Company repurchased 122,344 shares of common stock at an average cost of $7.89 per share.
    • Subsequent to September 30, 2024, the Board of Directors increased the quarterly cash dividend 10% to $0.11 per share.

    Executive Commentary – Andrew Murstein, President of Medallion

    “We continue to be pleased with our quarterly performance. The earnings were strong despite lower taxi medallion related recoveries and the absence of equity gains, both of which we experienced in the prior year quarter. At $0.37 per share, our earnings included approximately $0.07 per share of additional allowance tied to the growth of our consumer lending segments, which saw recreation and home improvement loans grow 4% and 5% from the previous quarter to a combined $2.4 billion, with over $235 million in originations this quarter. We continue to be comfortable with the overall credit performance of these two consumer segments, which carry weighted average coupons of 14.92% for recreation loans and 9.76% for home improvement loans. During the quarter we originated recreation loans at an average rate of 16.33% and home improvement loans at an average rate of 10.75%.

    Our net interest income reached $52.7 million during the quarter, up 6% from just a quarter ago. We remain cautiously optimistic that the solid performance of our loan portfolio will continue. Our net interest margin during the quarter was 8.11%, decreasing only 1 basis point from the prior quarter, as we continue to increase our yield to offset the rise in our average cost of borrowings.

    Our total interest income of $76.4 million, net interest income of $52.7 million, and total assets of $2.9 billion were all record highs. Our fintech strategic partnership program at Medallion Bank had its highest volume quarter ever with $40 million of new loans, up from $24 million in the second quarter of this year. As a result, we are optimistic about the quarters ahead and are hopeful to continue delivering meaningful growth in origination volumes in our newest business line.

    Lastly, we are pleased to announce that our board of directors has authorized an increase of our quarterly dividend to $0.11 per share beginning with the upcoming payment next month, reflecting our strong financial performance and ongoing commitment to delivering value to our shareholders. This increase underscores our confidence in the Company’s future growth and stability, as well as our focus on returning capital to investors.”

    Business Segment Highlights

    Recreation Lending Segment

    • Originations were $139.1 million during the quarter, compared to $92.6 million a year ago.
    • Recreation loans grew 15% to $1.6 billion as of September 30, 2024, compared to $1.3 billion a year ago.
    • Recreation loans were 63% of total loans as of September 30, 2024, compared to 61% a year ago.
    • Net interest income grew 9% to $38.9 million for the quarter, from $35.6 million in the prior year quarter.
    • The average interest rate was 14.92% at quarter-end, compared to 14.73% a year ago.
    • Recreation loans 90 days or more past due were $7.5 million, or 0.50% of gross recreation loans, as of September 30, 2024, compared to $5.9 million, or 0.45%, a year ago.
    • Allowance for credit loss rate was 4.53% as of September 30, 2024, compared to 4.24% a year ago.

    Home Improvement Lending Segment

    • Originations were $96.5 million during the quarter, compared to $79.3 million a year ago.
    • Home improvement loans grew 8% to $814.1 million as of September 30, 2024, compared to $750.5 million a year ago.
    • Home improvement loans were 33% of total loans as of September 30, 2024, compared to 34% a year ago.
    • Net interest income grew 5% to $12.0 million for the quarter, from $11.4 million in the prior year quarter.
    • The average interest rate was 9.76% at quarter-end, compared to 9.38% a year ago.
    • Home improvement loans 90 days or more past due were $1.6 million, or 0.19% of gross home improvement loans, as of September 30, 2024, compared to $1.0 million, or 0.13%, a year ago.
    • Allowance for credit loss rate was 2.42% as of September 30, 2024, compared to 2.31% a year ago.

    Commercial Lending Segment

    • Commercial loans were $110.1 million at September 30, 2024, compared to $100.3 million a year ago.
    • The average interest rate on the portfolio was 12.90%, compared to 12.91% a year ago.

    Taxi Medallion Lending Segment

    • The Company collected $4.1 million of cash on taxi medallion-related assets during the quarter.
    • Total net taxi medallion assets declined to $8.8 million (comprised of $1.9 million of loans net of allowance for credit losses and $6.9 million of loan collateral in process of foreclosure), a 46% reduction from a year ago, and represented less than half a percent of the Company’s total assets as of September 30, 2024.

    Capital Allocation

    Quarterly Dividend

    • The Board of Directors declared a quarterly dividend of $0.11 per share, payable on November 27, 2024 to shareholders of record at the close of business on November 15, 2024.

    Stock Repurchase Plan

    • During the third quarter, the Company repurchased 122,344 shares of its common stock at an average cost of $7.89 per share, for a total of $1.0 million.
    • As of September 30, 2024, the Company had $15.4 million remaining under its $40 million share repurchase program.

    Conference Call Information

    The Company will host a conference call to discuss its third quarter financial results tomorrow, Wednesday, October 30, 2024 at 9:00 a.m. Eastern time.

    In connection with its earnings release, the Company has updated its quarterly supplement presentation, which is now available at www.medallion.com.

    How to Participate

    • Date: Wednesday, October 30, 2024
    • Time: 9:00 a.m. Eastern time
    • U.S. dial-in number: (833) 816-1412
    • International dial-in number: (412) 317-0504
    • Live webcast: Link to Webcast of 3Q24 Earnings Call

    A link to the live audio webcast of the conference call will also be available at the Company’s IR website.

    Replay Information

    The webcast replay will be available at the Company’s IR website until the next quarter’s results are announced.

    The conference call replay will be available following the end of the call through Wednesday, November 6.

    • U.S. dial-in number: (844) 512-2921
    • International dial-in number: (412) 317-6671
    • Access ID: 1019 3247

    About Medallion Financial Corp.

    Medallion Financial Corp. (NASDAQ:MFIN) and its subsidiaries originate and service a growing portfolio of consumer loans and mezzanine loans in various industries. Key industries served include recreation (towable RVs and marine) and home improvement (replacement roofs, swimming pools, and windows). Medallion Financial Corp. is headquartered in New York City, NY, and its largest subsidiary, Medallion Bank, is headquartered in Salt Lake City, Utah. For more information, please visit www.medallion.com.

    Forward-Looking Statements
    Please note that this press release contains forward-looking statements that involve risks and uncertainties relating to business performance, cash flow, net interest income and expenses, other expenses, earnings, growth, and our growth strategy. These statements are often, but not always, made using words or phrases such as “will” and “continue” or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These statements relate to future public announcements of our earnings, the impact of the pending SEC litigation, expectations regarding our loan portfolio, including collections on our medallion loans, the potential for future asset growth, and market share opportunities. Medallion’s actual results may differ significantly from the results discussed in such forward-looking statements. For example, statements about the effects of the current economy, whether inflation or the risk of recession, operations, financial performance and prospects constitute forward-looking statements and are subject to the risk that the actual impacts may differ, possibly materially, from what is reflected in those forward-looking statements due to factors and future developments that are uncertain, unpredictable and in many cases beyond Medallion’s control. In addition to risks relating to the current economy, a description of certain risks to which Medallion is or may be subject, including risks related to the pending SEC litigation, please refer to the factors discussed under the heading “Risk Factors” in Medallion’s 2023 Annual Report on Form 10-K.

    Company Contact:
    Investor Relations
    212-328-2176
    InvestorRelations@medallion.com

    MEDALLION FINANCIAL CORP.
    CONSOLIDATED BALANCE SHEETS
    (UNAUDITED)
     
    (Dollars in thousands, except share and per share data)   September 30, 2024     December 31, 2023     September 30, 2023  
    Assets                  
    Cash, cash equivalents, and federal funds sold   $ 187,929     $ 149,845     $ 127,642  
    Investment and equity securities     66,651       65,712       63,717  
    Loans     2,485,279       2,215,886       2,203,038  
    Allowance for credit losses     (96,518 )     (84,235 )     (79,133 )
    Net loans receivable     2,388,761       2,131,651       2,123,905  
    Goodwill and intangible assets, net     170,311       171,394       171,755  
    Property, equipment, and right-of-use lease asset, net     14,172       14,076       13,278  
    Accrued interest receivable     14,108       13,538       13,593  
    Loan collateral in process of foreclosure     8,818       11,772       15,923  
    Other assets     29,302       29,839       28,814  
    Total assets   $ 2,880,052     $ 2,587,827     $ 2,558,627  
    Liabilities                  
    Deposits   $ 2,108,132     $ 1,866,657     $ 1,855,096  
    Long-term debt     232,037       235,544       218,137  
    Short-term borrowings     49,000       8,000       18,489  
    Deferred tax liabilities, net     20,598       21,207       23,131  
    Operating lease liabilities     5,534       7,019       7,075  
    Accrued interest payable     6,888       6,822       4,624  
    Accounts payable and accrued expenses     26,687       30,804       34,813  
    Total liabilities     2,448,876       2,176,053       2,161,365  
    Total stockholders’ equity     362,388       342,986       328,474  
    Non-controlling interest in consolidated subsidiaries     68,788       68,788       68,788  
    Total equity     431,176       411,774       397,262  
    Total liabilities and equity   $ 2,880,052     $ 2,587,827     $ 2,558,627  
    Number of shares outstanding     23,084,277       23,449,646       23,363,731  
    Book value per share   $ 15.70     $ 14.63     $ 14.06  
                             
    MEDALLION FINANCIAL CORP.‌
    CONSOLIDATED STATEMENTS OF OPERATIONS
    (UNAUDITED)‌
     
        Three Months Ended September 30,     Nine Months Ended September 30,  
    (Dollars in thousands, except share and per share data)   2024     2023     2024     2023  
    Total interest income   $ 76,409     $ 65,886     $ 214,183     $ 183,455  
    Total interest expense     23,672       17,102       63,661       44,379  
    Net interest income     52,737       48,784       150,522       139,076  
    Provision for credit losses     20,151       14,532       55,929       27,045  
    Net interest income after provision for credit losses     32,586       34,252       94,593       112,031  
    Other income (loss)                        
    (Loss) gain on equity investments     (519 )     2,180       3,136       2,189  
    Gain on sale of loans and taxi medallions     340       1,417       1,170       4,578  
    Write-down of loan collateral in process of foreclosure     (19 )     (30 )     (19 )     (303 )
    Other income     785       739       2,802       1,868  
    Total other income, net     587       4,306       7,089       8,332  
    Other expenses                        
    Salaries and employee benefits     9,456       9,630       28,347       27,805  
    Loan servicing fees     2,790       2,501       7,951       7,084  
    Collection costs     1,673       1,583       4,799       4,729  
    Regulatory fees     961       1,021       2,826       2,484  
    Professional fees     818       1,148       3,434       4,223  
    Rent expense     664       629       2,019       1,855  
    Amortization of intangible assets     361       361       1,084       1,084  
    Other expenses     2,272       2,216       6,755       7,220  
    Total other expenses     18,995       19,089       57,215       56,484  
    Income before income taxes     14,178       19,469       44,467       63,879  
    Income tax provision     4,055       6,727       14,196       18,582  
    Net income after taxes     10,123       12,742       30,271       45,297  
    Less: income attributable to the non-controlling interest     1,512       1,512       4,535       4,536  
    Total net income attributable to Medallion Financial Corp.   $ 8,611     $ 11,230     $ 25,736     $ 40,761  
    Basic net income per share   $ 0.38     $ 0.50     $ 1.14     $ 1.81  
    Diluted net income per share   $ 0.37     $ 0.48     $ 1.09     $ 1.77  
    Weighted average common shares outstanding                        
    Basic     22,490,792       22,596,982       22,576,446       22,469,968  
    Diluted     23,447,929       23,392,901       23,555,065       23,067,944  
    Dividends declared per common share   $ 0.10     $ 0.08     $ 0.30     $ 0.24  

    The MIL Network –

  • MIL-OSI: Heartland Financial USA, Inc. (“HTLF”) Reports Quarterly Results as of September 30, 2024

    Source: GlobeNewswire (MIL-OSI)

    Third Quarter Highlights

    • Quarterly net income available to common stockholders of $62.1 million or $1.44 per common share
    • Adjusted earnings available to common stockholders of $50.6 million or $1.17 adjusted diluted earnings per common share (non-GAAP), which excludes:
      • Gain on sale, net, of $29.7 million due to the sale of Rocky Mountain Bank branches in Montana.
      • Loss on security sales of $9.5 million.
      • Loss on fixed assets of $2.9 million due to branch closures and write-downs on properties listed for sale.
    • Common equity to total assets increased to 11.11%; while the tangible common equity ratio (non-GAAP) improved 86 basis points to 8.14%.
    • Net interest margin, full tax-equivalent (non-GAAP) increased to 3.78% for the quarter ended September 30, 2024 up from 3.73% for the quarter ended June 30, 2024.
    • Nonperforming loans were $69.9 million or 0.61% of total loans, a decrease of $33.8 million or 33% from the quarter ended June 30, 2024.
      • Charge-offs of $32.1 million, of which the majority have been reserved for in prior periods, were recorded for the third quarter.
      For the Quarter Ended   For the Nine Months Ended
    September 30,
      9/30/2024   6/30/2024   9/30/2023   2024   2023
    Earnings Summary:                  
    Net income/(loss) available to common stockholders (in millions) $ 62.1     $ 37.7     $ 46.1     $ 149.6     $ 144.2  
    Diluted earnings/(loss) per common share   1.44       0.88       1.08       3.47       3.37  
    Annualized return on average assets   1.38 %     0.84 %     0.94 %     1.10 %     1.00 %
    Annualized return on average common equity   12.60       8.14       10.47       10.59       11.28  
    Annualized return on average tangible common equity (non-GAAP)(1)   18.32       12.28       16.32       15.77       17.82  
    Net interest margin   3.73       3.68       3.14       3.65       3.23  
    Net interest margin, fully tax-equivalent (non-GAAP)(1)   3.78       3.73       3.18       3.69       3.27  
    Efficiency ratio   48.58       65.69       63.77       58.94       61.86  
    Adjusted efficiency ratio, fully-tax equivalent (non-GAAP)(1)   57.98       57.73       59.95       58.16       58.98  
                       
    Adjusted Earnings Summary (1):                  
    Adjusted earnings available to common stockholders (in millions) $ 50.6     $ 49.6     $ 48.1     $ 152.7     $ 148.3  
    Adjusted diluted earnings per common share   1.17       1.15       1.12       3.54       3.47  
    Adjusted annualized return on average assets   1.14 %     1.09 %     0.98 %     1.12 %     1.02 %
    Adjusted annualized return on average common equity   10.27       10.71       10.92       10.81       11.60  
    Adjusted annualized return on average tangible common equity   14.98       16.05       17.02       16.09       18.31  
                       

    (1) Refer to “Non-GAAP Measures” in this earnings release for additional information on the usage and presentation of these non-GAAP measures, and refer to the financial tables for reconciliations to the most directly comparable GAAP measures.

    “HTLF delivered a solid third quarter. Net interest margin increased as we continue to pay down high cost wholesale deposits. Our tangible common equity ratio improved to 8.14%. In July we completed the strategic sale of Rocky Mountain Bank in Montana, resulting in a net gain of $29.7 million. We continue to work closely with our partners at UMB on integration planning for our two companies and we’re excited about closing the transaction, expected in Q1 2025.”
    Bruce K. Lee, President and Chief Executive Officer, HTLF

    DENVER, Oct. 29, 2024 (GLOBE NEWSWIRE) — Heartland Financial USA, Inc. (NASDAQ: HTLF) today reported the following results for the quarter ended September 30, 2024, compared to the quarter ended September 30, 2023:

    • Net income available to common stockholders of $62.1 million compared to $46.1 million, an increase of $16.1 million or 35%.
    • Earnings per diluted common share of $1.44 compared to $1.08, an increase of $0.36 or 33%.
    • Adjusted earnings available to common stockholders(1) of $50.6 million or $1.17 per diluted common share compared to $48.1 million or $1.12 per diluted common share, which excludes:
      • Gain on sale, net, of $29.7 million due to the sale of Rocky Mountain Bank branches in Montana.
      • Loss on security sales of $9.5 million.
      • Loss on fixed assets of $2.9 million due to branch closures and write-downs on properties listed for sale.
    • Net interest income of $157.9 million compared to $145.8 million, an increase of $12.1 million or 8%.
    • Annualized return on average assets of 1.38% compared to 0.94%. Adjusted annualized return on average assets(1) of 1.14% compared to 0.98%.
    • Annualized return on average common equity of 12.60% compared to 10.47%. Adjusted annualized return on average common equity(1) of 10.27% compared to 10.92%.
    • Annualized return on average tangible common equity(1) of 18.32% compared to 16.32%. Adjusted annualized return on average tangible common equity(1) of 14.98% compared to 17.02%.

    Rocky Mountain Bank Sale

    HTLF Bank closed on the sale of the Rocky Mountain Bank branches in Montana in mid-July to two purchasers, which included loans of $343.8 million, deposits of $531.9 million and fixed assets of $13.8 million. The gain on sale, net, of $29.7 million was realized in the third quarter of 2024.

    Net Interest Income and Net Interest Margin

    Net interest margin, expressed as a percentage of average earning assets, was 3.73% (3.78% on a fully tax-equivalent basis, non-GAAP) for the third quarter of 2024 compared to 3.68% (3.73% on a fully tax-equivalent basis, non-GAAP) for the second quarter of 2024, and 3.14% (3.18% on a fully tax-equivalent basis, non-GAAP) for the third quarter of 2023.

    Total interest income and average earning asset changes for the third quarter of 2024 compared to the third quarter of 2023 were:

    • Total interest income was $253.8 million compared to $245.4 million, an increase of $8.4 million or 3%, primarily attributable to an increase in yields on average earning assets. During the third quarter of 2024, HTLF recorded $5.3 million in additional interest income for a security that paid off.
    • Total interest income on a tax-equivalent basis (non-GAAP) was $255.8 million, an increase of $8.2 million or 3%, from $247.6 million. Subsequent to September 30, 2024, the fair value hedges were terminated in favorable market conditions in early October. HTLF recorded $10.3 million of interest income associated with the fair value hedges in the third quarter of 2024 in comparison to $5.6 million in the third quarter of 2023. As a result of the fair value hedge terminations, no additional interest income will be recorded.
    • Average earning assets decreased $1.60 billion or 9% to $16.84 billion compared to $18.44 billion, primarily due to the sale of $865.4 million of securities during the fourth quarter of 2023, $108.4 million of securities sold during the second quarter of 2024, and $40.3 million of securities sold during the third quarter of 2024. The proceeds were utilized to pay down high-cost wholesale deposits and borrowings.
    • The average rate on earning assets increased 71 basis points to 6.04% from 5.33%, primarily due to recent interest rate increases on earning assets.

    Total interest expense and average interest-bearing liability changes for the third quarter of 2024 compared to the third quarter of 2023 were:

    • Total interest expense was $95.9 million, a decrease of $3.8 million from $99.7 million, primarily due to a decrease in average interest-bearing liabilities.
    • The average interest rate paid on interest-bearing liabilities increased 17 basis points to 3.18% from 3.01%.
    • Average interest-bearing deposits decreased $1.65 billion or 13% to $11.03 billion from $12.68 billion.
    • The average interest rate paid on interest-bearing deposits decreased 4 basis points to 2.86% from 2.90%.
    • Average borrowings and term debt increased $478.2 million to $953.9 million from $475.7 million, and the average interest rate paid on borrowings decreased 40 basis points to 5.39% from 5.78%.

    Net interest income changes for the third quarter of 2024 compared to the third quarter of 2023 were:

    • Net interest income totaled $157.9 million compared to $145.8 million, an increase of $12.1 million or 8%.
    • Net interest income on a tax-equivalent basis (non-GAAP) totaled $159.9 million compared to $147.9 million, an increase of $12.0 million or 8%.

    Noninterest Income and Noninterest Expense

    Total noninterest income was $19.0 million during the third quarter of 2024 compared to $28.4 million during the third quarter of 2023, a decrease of $9.4 million or 33%. Significant changes within the noninterest income category for the third quarter of 2024 compared to the third quarter of 2023 were:

    • Service charges and fees decreased $1.5 million or 8% to $17.1 million from $18.6 million, primarily attributable to a decrease in consumer NSF and overdraft fees. In the fourth quarter of 2023, HTLF instituted a new fee policy across our single charter customer base in response to industry changes related to consumer overdraft fees.
    • Net security losses increased $9.4 million to $9.5 million compared to net security losses of $114,000.
    • Net gains on sales of loans held for sale decreased to $0 from $905,000, due to HTLF ceasing originations of residential mortgage loans to be sold to the secondary market.
    • Other noninterest income increased $957,000 to $1.6 million from $619,000, primarily due to an increase in deferred compensation income of $1.0 million to $1.5 million from $433,000.  

    Total noninterest expense was $85.9 million during the third quarter of 2024 compared to $111.1 million during the third quarter of 2023, a decrease of $25.1 million or 23%. Significant changes within the noninterest expense category for the third quarter of 2024 compared to the third quarter of 2023 were:

    • Salaries and employee benefits totaled $62.7 million compared to $62.3 million, an increase of $480,000 or 1%. The increase was attributable to higher benefit costs including incentive compensation and benefit expenses partially offset by a reduction of full-time equivalent employees. Full-time equivalent employees totaled 1,725 compared to 1,965, a decrease of 240 or 12%.
    • Professional fees totaled $17.4 million compared to $13.6 million, an increase of $3.8 million or 28%, primarily due to an increase legal expenses, including those associated with special asset loans.
    • Gain on sale of assets, net, totaled $26.4 million compared to a loss on sale of assets of $108,000. As discussed earlier, Rocky Mountain Bank, a division of HTLF Bank, was sold during the third quarter of 2024 which generated a gain on sale, net, of $29.7 million.

    The effective tax rate was 24.25% for the third quarter of 2024 compared to 21.89% for third quarter of 2023. The following items impacted the third quarter 2024 and 2023 tax calculations:

    • Various tax credits of $629,000 compared to $1.6 million.
    • Tax-exempt interest income as a percentage of pre-tax income of 8.92% compared to 13.14%.
    • Tax benefit of $140,000 compared to a tax expense of $41,000 resulting from the vesting of restricted stock units.
    • Tax expense of $1.1 million compared to $1.6 million resulting from the disallowed interest expense related to tax-exempt loans and securities.

    Total Assets, Total Loans and Total Deposits

    Total assets were $18.27 billion at September 30, 2024, compared to $18.81 billion at June 30, 2024, and $19.41 billion at December 31, 2023. Total assets decreased $540.1 million or 3% during the third quarter of 2024 and $1.14 billion or 6% since year-end 2023. Securities represented 27% and 29% of total assets at September 30, 2024, and December 31, 2023, respectively.

    Total loans held to maturity were $11.44 billion at September 30, 2024, compared to $11.61 billion at June 30, 2024, and $12.07 billion at December 31, 2023. Loans decreased $167.4 million or 1% during the third quarter of 2024 and $627.7 million or 5% since year-end 2023. Excluding the impact of Rocky Mountain Bank, loans held to maturity decreased $172.4 million or 1% during the third quarter of 2024 and decreased $284.0 million or 2% since year-end 2023.

    Significant changes by loan category at September 30, 2024 compared to June 30, 2024 included:

    • Commercial and business lending, which includes commercial and industrial, PPP and owner occupied commercial real estate loans, decreased $262.7 million or 4% to $5.99 billion compared to $6.26 billion. Excluding the impact of Rocky Mountain Bank, commercial and business lending decreased $119.4 million or 2%.
    • Commercial real estate lending, which includes non-owner occupied commercial real estate and construction loans, decreased $3.3 million, or less than 1%, to $3.58 billion compared to $3.58 billion. Excluding the impact of Rocky Mountain Bank, commercial real estate lending increased $67.0 million or 2%.
    • Agricultural and agricultural real estate loans decreased $167.2 million or 19% to $701.2 million compared to $868.4 million. Excluding the impact of Rocky Mountain Bank, agricultural and agricultural real estate loans decreased $99.9 million or 12%.
    • Residential mortgage loans decreased $56.7 million or 7% to $708.0 million compared to $764.7 million. Excluding the impact of Rocky Mountain Bank, residential mortgage loans decreased $25.7 million or 3%.

    Significant changes by loan category at September 30, 2024 compared to December 31, 2023 included:

    • Commercial and business lending, which includes commercial and industrial, PPP and owner occupied commercial real estate loans, decreased $298.6 million or 5% to $5.99 billion compared to $6.29 billion. Excluding the Rocky Mountain Bank loans sold of $143.3 million, commercial and business lending decreased $155.3 million or 2%.
    • Commercial real estate lending, which includes non-owner occupied commercial real estate and construction loans, increased $9.9 million or less than 1% to $3.58 billion compared to $3.57 billion. Excluding the Rocky Mountain Bank loans sold of $70.3 million, commercial real estate lending increased $80.2 million or 2%.
    • Agricultural and agricultural real estate loans decreased $218.0 million or 24% to $701.2 million compared to $919.2 million. Excluding the Rocky Mountain Bank loans sold of $67.3 million, agricultural and agricultural real estate loans decreased $150.7 million or 16%.
    • Residential mortgage loans decreased $89.8 million or 11% to $708.0 million compared to $797.8 million. Excluding the Rocky Mountain Bank loans sold of $31.0 million, residential mortgage loans decreased $58.9 million or 7%.

    Total deposits were $14.95 billion as of September 30, 2024, compared to $14.96 billion as of June 30, 2024, a decrease of $3.4 million or less than 1%. Total deposits were $14.95 billion as of September 30, 2024, compared to $16.20 billion at December 31, 2023, which was a decrease of $1.25 billion or 8%. Excluding the impact of Rocky Mountain Bank, deposits decreased $9.8 million or less than 1% during the third quarter of 2024 and decreased $716.6 million or 4% since year-end 2023.

    Total customer deposits were $14.35 billion as of September 30, 2024, compared to $14.13 billion at June 30, 2024, an increase of $217.6 million or 2%. Excluding the impact of Rocky Mountain Bank, customer deposits increased $211.2 million or 1%. Significant customer deposit changes by category at September 30, 2024, compared to June 30, 2024, included:

    • Customer demand deposits decreased $367.6 million or 8% to $4.01 billion compared to $4.38 billion. Excluding the impact of Rocky Mountain Bank, customer demand deposits decreased $235.9 million or 6%.
    • Customer savings deposits increased $270.0 million or 3% to $8.71 billion compared to $8.44 billion. Excluding the impact of Rocky Mountain Bank, customer savings deposits increased $554.4 million or 7%.
    • Customer time deposits decreased $223.1 million or 12% to $1.63 billion compared to $1.85 billion. Excluding the impact of Rocky Mountain Bank, customer time deposits decreased $107.3 million or 6%.

    Total customer deposits were $14.35 billion as of September 30, 2024, compared to $14.86 billion at December 31, 2023, a decrease of $505.1 million or 3%. Excluding the Rocky Mountain Bank customer deposits sold of $531.9 million, customer deposits increased $26.7 million. Significant customer deposit changes by category at September 30, 2024, compared to December 31, 2023, included:

    • Customer demand deposits decreased $491.1 million or 11% to $4.01 billion compared to $4.50 billion. Excluding the Rocky Mountain Bank customer demand deposits sold of $131.7 million, customer demand deposits decreased $359.3 million or 8%.
    • Customer savings deposits increased $302.0 million or 4% to $8.71 billion compared to $8.41 billion. Excluding the Rocky Mountain Bank customer savings deposits sold of $284.3 million, customer savings deposits increased $586.3 million or 7%.
    • Customer time deposits decreased $316.0 million or 16% to $1.63 billion compared to $1.94 billion. Excluding the Rocky Mountain Bank customer time deposits sold of $115.8 million, customer time deposits decreased $200.2 million or 10%.

    Total wholesale and institutional deposits were $601.9 million as of September 30, 2024, a decrease of $221.0 million or 27% from $822.9 million at June 30, 2024. Significant wholesale and institutional deposit changes by category at September 30, 2024 compared to June 30, 2024 included:

    • Wholesale and institutional savings deposits decreased $105.7 million or 33% to $213.0 million compared to $318.6 million.
    • Wholesale time deposits decreased $115.3 million or 23% to $389.0 million compared to $504.3 million.

    Total wholesale and institutional deposits were $601.9 million as of September 30, 2024, which was a decrease of $743.4 million or 55% from $1.35 billion at December 31, 2023. Significant wholesale and institutional deposit changes by category at September 30, 2024 compared to December 31, 2023 included:

    • Wholesale and institutional savings deposits decreased $181.4 million or 46% to $213.0 million compared to $394.4 million.
    • Wholesale time deposits decreased $562.0 million or 59% to $389.0 million compared to $950.9 million.

    Provision and Allowance

    Provision and Allowance for Credit Losses for Loans
    Provision for credit losses for loans for the third quarter of 2024 was $8.9 million, an increase of $6.2 million from $2.7 million recorded in the third quarter of 2023.

    The allowance for credit losses for loans totaled $106.8 million at September 30, 2024 and $122.6 million at December 31, 2023. The following items impacted the allowance for credit losses for loans at September 30, 2024:

    • Provision expense for the nine months ended September 30, 2024, totaled $22.3 million. Provision expense was primarily impacted in the third quarter of 2024 by a nonperforming food manufacturing syndication loan currently in bankruptcy proceedings. HTLF recorded a charge-off of $19.2 million for this credit during the third quarter of 2024, of which $10.0 million was reserved for in a prior period.
    • Net charge-offs of $38.0 million, of which the majority have been reserved for in prior periods, were recorded for the first nine months of 2024.

    Provision and Allowance for Credit Losses for Unfunded Commitments
    The allowance for unfunded commitments decreased $6.0 million or 36% to $10.5 million at September 30, 2024, from $16.5 million at December 31, 2023. The following impacted HTLF’s allowance for credit losses for unfunded commitments during 2024:

    • Provision benefit for the nine months ended September 30, 2024, totaled $6.0 million.
    • Reduction of $82.9 million in unfunded commitments for construction loans, which carry the highest loss rate.
    • Total unfunded commitments decreased $684.5 million or 15% to $3.94 billion at September 30, 2024 compared to $4.63 billion at December 31, 2023.

    Total Provision and Allowance for Lending Related Credit Losses
    The total provision expense for lending related credit losses was $6.3 million for the third quarter of 2024 compared to $1.5 million for the third quarter of 2023. The total allowance for lending related credit losses was $117.3 million or 1.02% of total loans at September 30, 2024, compared to $139.0 million or 1.15% of total loans as of December 31, 2023.

    Nonperforming Assets

    Nonperforming assets were $76.8 million or 0.42% of total assets at September 30, 2024, compared to $110.5 million or 0.57% of total assets at December 31, 2023. Nonperforming assets were reduced by charge-offs of $32.1 million and the return to performing status of a $10.4 million owner occupied commercial real estate loan relationship. The reduction was partially offset by the addition of a $10.1 million non-owner commercial real estate loan relationship. Nonperforming loans were $69.9 million or 0.61% of total loans at September 30, 2024, compared to $97.9 million or 0.81% of total loans at December 31, 2023. At September 30, 2024, loans delinquent 30-89 days were 0.26% of total loans compared to 0.09% of total loans at December 31, 2023. The increase in the 30-89 day delinquencies was due to a single $12.8 million real estate construction loan. Other real estate owned, net, decreased $5.7 million or 46% to $6.8 million at September 30, 2024 from $12.5 million at December 31, 2023.

    Non-GAAP Financial Measures

    This earnings release contains references to financial measures which are not defined by generally accepted accounting principles (“GAAP”). Management believes the non-GAAP measures are helpful for investors to analyze and evaluate the company’s financial condition and operating results. However, these non-GAAP measures have inherent limitations and should not be considered a substitute for operating results determined in accordance with GAAP. Additionally, because non-GAAP measures are not standardized, it may not be possible to compare the non-GAAP measures in this earnings release with other companies’ non-GAAP measures. Reconciliations of each non-GAAP measure to the most directly comparable GAAP measure may be found in the financial tables in this earnings release.

    Below are the non-GAAP measures included in this earnings release, management’s reason for including each measure and the method of calculating each measure:

    • Adjusted earnings available to common stockholders and adjusted diluted earnings per common share, adjust net income for the gain/loss from sale of securities, and other non-operating expenses as well as the tax effect of those transactions. Management believes these measures enhance the comparability net income available to common stockholders as it reflects adjustments commonly made by management, investors and analysts to evaluate the ongoing operations and enhance comparability with the results of prior periods.
    • Adjusted annualized return on average assets, adjusts net income for the gain/loss from sale of securities, and other non-operating expenses as well as the tax effect of those transactions. Management believes this measure enhances the comparability of annualized return on average assets as it reflects adjustments commonly made by management, investors and analysts to evaluate the ongoing operations and enhance comparability with the results of prior periods.
    • Annualized net interest margin, fully tax-equivalent, adjusts net interest income for the tax-favored status of certain loans and securities. Management believes this measure enhances the comparability of net interest income arising from taxable and tax-exempt sources.
    • Adjusted efficiency ratio, fully tax equivalent, expresses noninterest expenses as a percentage of fully tax-equivalent net interest income and noninterest income. This efficiency ratio is presented on a tax-equivalent basis which adjusts net interest income and noninterest expenses for the tax favored status of certain loans, securities, and tax credit projects. Management believes the presentation of this non-GAAP measure provides supplemental useful information for proper understanding of the financial results as it enhances the comparability of income and expenses arising from taxable and nontaxable sources and excludes specific items as noted in reconciliation contained in this earnings release.
    • Net interest income, fully tax equivalent, is net income adjusted for the tax-favored status of certain loans and securities. Management believes this measure enhances the comparability of net interest income arising from taxable and tax-exempt sources. Net interest margin, fully tax equivalent, is net interest income adjusted for the tax-favored status of certain loans and securities divided by average earning assets.
    • Tangible book value per common share is total common equity less goodwill and core deposit and customer relationship intangibles, net, divided by common shares outstanding, net of treasury. This measure is included as it is considered to be a critical metric to analyze and evaluate use of equity, financial condition and capital strength.
    • Tangible common equity ratio is total common equity less goodwill and core deposit and customer relationship intangibles, net, divided by total assets less goodwill and core deposit and customer relationship intangibles, net. This measure is included as it is considered to be a critical metric to analyze and evaluate financial condition and capital strength.
    • Adjusted annualized return on average common equity, adjusts net income for the loss from sale of securities, and other non-operating expenses as well as the tax effect of those transactions. Management believes this measure enhances the comparability of annualized return on average assets as it reflects adjustments commonly made by management, investors and analysts to evaluate the ongoing operations and enhance comparability with the results of prior periods.
    • Annualized return on average tangible common equity is net income excluding intangible amortization calculated as (1) net income excluding tax-effected core deposit and customer relationship intangibles amortization, divided by (2) average common equity less goodwill and core deposit and customer relationship intangibles, net. This measure is included as it is considered to be a critical metric to analyze and evaluate use of equity, financial condition and capital strength.
    • Adjusted annualized return on average tangible common equity, adjusts net income available to common stockholders for the loss from sale of securities, and other non-operating expenses as well as the tax effect of those transactions. Management believes this measure enhances the comparability of annualized return on average assets as it reflects adjustments commonly made by management, investors and analysts to evaluate the ongoing operations and enhance comparability with the results of prior periods.
    • Annualized ratio of core expenses to average assets adjusts noninterest expenses to exclude specific items noted in the reconciliation. Management includes this measure as it is considered to be a critical metric to analyze and evaluate controllable expenses related to primary business operations.

    About HTLF

    Heartland Financial USA, Inc., is a Denver, Colorado-based bank holding company operating under the brand name HTLF, with assets of $18.27 billion as of September 30, 2024. HTLF’s banks serve customers in the West, Southwest and Midwest regions. HTLF is committed to serving the banking needs of privately owned businesses, their owners, executives and employees. Our core commercial business is supported by a strong retail banking operation, in addition to a diversified line of financial services including treasury management, wealth management and investments. Additional information is available at www.htlf.com.

    Safe Harbor Statement

    This release (including any information incorporated herein by reference), and future oral and written statements of the company and its management, may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, with respect to the business, financial condition, results of operations, plans, objectives and future performance of HTLF.

    Any statements about the company’s expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. Forward-looking statements may include information about possible or assumed future results of the company’s operations or performance. These forward-looking statements are generally identified by the use of the words such as “believe”, “expect”, “intent”, “anticipate”, “plan”, “intend”, “estimate”, “project”, “may”, “will”, “would”, “could”, “should”, “may”, “view”, “opportunity”, “potential”, or similar or negative expressions of these words or phrases that are used in this release, and future oral and written statements of the company and its management. Although the company may make these statements based on management’s experience, beliefs, expectations, assumptions and best estimate of future events, the ability of the company to predict results or the actual effect or outcomes of plans or strategies is inherently uncertain, and there may be events or factors that management has not anticipated. Therefore, the accuracy and achievement of such forward-looking statements and estimates are subject to a number of risks, many of which are beyond the ability of management to control or predict, that could cause actual results to differ materially from those in its forward-looking statements. These factors, which the company currently believes could have a material effect on its operations and future prospects, are detailed below and in the risk factors in HTLF’s reports filed with the Securities and Exchange Commission (“SEC”), including the “Risk Factors” section under Item 1A of Part I of the company’s Annual Report on Form 10-K for the year ended December 31, 2023 and updates in HTLF’s Forms 10-Q filed thereafter, and include, among others:

    • Economic and Market Conditions Risks, including risks related to the deterioration of the U.S. economy in general and in the local economies in which HTLF conducts its operations and future civil unrest, natural disasters, pandemics and governmental measures addressing them, climate change and climate-related regulations, persistent inflation, higher interest rates, supply chain issues, labor shortages, terrorist threats or acts of war;
    • Credit Risks, including risks of increasing credit losses due to deterioration in the financial condition of HTLF’s borrowers, changes in asset and collateral values due to climate and other borrower industry risks, which may impact the provision for credit losses and net charge-offs;
    • Liquidity and Interest Rate Risks, including the impact of capital market conditions, rising interest rates and changes in monetary policy on our borrowings and net interest income;
    • Risks related to the planned merger with UMB Financial Corporation (the “Merger”), the fluctuation of the market value of the merger consideration, risks related to combining our businesses, including expenses related to the Merger and integration of the combined entity, risks that the Merger may not occur, and the risk of litigation related to the Merger;
    • Operational Risks, including processing, information systems, cybersecurity, vendor, business interruption, and fraud risks;
    • Strategic and External Risks, including economic, political, and competitive forces impacting our business;
    • Legal, Compliance and Reputational Risks, including regulatory and litigation risks; and
    • Risks of Owning Stock in HTLF, including stock price volatility and dilution as a result of future equity offerings and acquisitions.

    There can be no assurance that other factors not currently anticipated by HTLF will not materially and adversely affect HTLF’s business, financial condition and results of operations. Additionally, all statements in this release, including forward-looking statements speak only as of the date they are made. HTLF does not undertake and specifically disclaims any obligation to publicly release the results of any revisions which may be made to or correct or update any forward-looking statement to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events or to otherwise update any statement in light of new information or future events. Further information concerning HTLF and its business, including additional factors that could materially affect HTLF’s financial results, is included in HTLF’s filings with the SEC.

    -FINANCIAL TABLES FOLLOW-

    CONTACT:
    Kevin L. Thompson
    Executive Vice President
    Chief Financial Officer
    (563) 589-1994
    kthompson@htlf.com 
    HEARTLAND FINANCIAL USA, INC.
    CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
    DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
      For the Quarter Ended
    September 30,    		   For the Nine Months Ended
    September 30,
        2024       2023       2024       2023  
    Interest Income              
    Interest and fees on loans $ 192,506     $ 182,394     $ 587,328     $ 505,136  
    Interest on securities:              
    Taxable   51,116       54,800       145,511       168,948  
    Nontaxable   5,979       6,584       18,062       18,990  
    Interest on federal funds sold   —       3       —       3  
    Interest on deposits with other banks and short-term investments   4,193       1,651       10,244       4,833  
    Total Interest Income   253,794       245,432       761,145       697,910  
    Interest Expense              
    Interest on deposits   82,976       92,744       247,609       231,617  
    Interest on borrowings   7,378       1,167       25,727       4,437  
    Interest on term debt   5,543       5,765       16,956       16,756  
    Total Interest Expense   95,897       99,676       290,292       252,810  
    Net Interest Income   157,897       145,756       470,853       445,100  
    Provision for credit losses   6,276       1,516       16,270       9,969  
    Net Interest Income After Provision for Credit Losses   151,621       144,240       454,583       435,131  
    Noninterest Income              
    Service charges and fees   17,100       18,553       51,127       55,316  
    Loan servicing income   111       278       349       1,403  
    Trust fees   5,272       4,734       15,847       15,810  
    Brokerage and insurance commissions   853       692       2,501       2,065  
    Capital markets fees   2,116       1,845       5,003       8,331  
    Securities gains (losses), net   (9,520 )     (114 )     (19,573 )     (1,532 )
    Unrealized gain on equity securities, net   377       13       605       165  
    Net gains on sale of loans held for sale   —       905       104       3,786  
    Income on bank owned life insurance   1,107       858       3,610       3,042  
    Other noninterest income   1,576       619       5,289       2,489  
    Total Noninterest Income   18,992       28,383       64,862       90,875  
    Noninterest Expense              
    Salaries and employee benefits   62,742       62,262       191,817       186,510  
    Occupancy   6,318       6,438       19,843       20,338  
    Furniture and equipment   2,062       2,720       6,554       8,698  
    Professional fees   17,448       13,616       48,351       41,607  
    FDIC insurance assessments   3,035       3,313       11,344       9,627  
    Advertising   1,937       1,633       4,663       6,670  
    Core deposit intangibles amortization   1,345       1,625       4,258       5,128  
    Other real estate and loan collection expenses, net   395       481       1,422       984  
    (Gain) loss on sales/valuations of assets, net   (26,419 )     108       (26,012 )     (2,149 )
    Acquisition, integration and restructuring costs   2,026       2,429       9,374       5,994  
    Partnership investment in tax credit projects   222       1,136       938       1,828  
    Other noninterest expense   14,816       15,292       43,214       46,307  
    Total Noninterest Expense   85,927       111,053       315,766       331,542  
    Income Before Income Taxes   84,686       61,570       203,679       194,464  
    Income taxes   20,533       13,479       48,077       44,181  
    Net Income/(Loss)   64,153       48,091       155,602       150,283  
    Preferred dividends   (2,013 )     (2,013 )     (6,038 )     (6,038 )
    Net Income/(Loss) Available to Common Stockholders $ 62,140     $ 46,078     $ 149,564     $ 144,245  
    Earnings/(loss) per common share-diluted $ 1.44     $ 1.08     $ 3.47     $ 3.37  
    Weighted average shares outstanding-diluted   43,195,257       42,812,563       43,080,422       42,769,872  
    HEARTLAND FINANCIAL USA, INC.
    CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
    DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
      For the Quarter Ended
      9/30/2024   6/30/2024   3/31/2024   12/31/2023   9/30/2023
    Interest Income                  
    Interest and fees on loans $ 192,506     $ 199,161     $ 195,661     $ 192,861     $ 182,394  
    Interest on securities:                  
    Taxable   51,116       47,381       47,014       54,573       54,800  
    Nontaxable   5,979       6,042       6,041       6,278       6,584  
    Interest on federal funds sold   —       —       —       —       3  
    Interest on deposits with other banks and short-term investments   4,193       3,045       3,006       2,174       1,651  
    Total Interest Income   253,794       255,629       251,722       255,886       245,432  
    Interest Expense                  
    Interest on deposits   82,976       80,499       84,134       88,071       92,744  
    Interest on borrowings   7,378       10,825       7,524       5,874       1,167  
    Interest on term debt   5,543       5,564       5,849       5,804       5,765  
    Total Interest Expense   95,897       96,888       97,507       99,749       99,676  
    Net Interest Income   157,897       158,741       154,215       156,137       145,756  
    Provision for credit losses   6,276       9,008       986       11,738       1,516  
    Net Interest Income After Provision for Credit Losses   151,621       149,733       153,229       144,399       144,240  
    Noninterest Income                  
    Service charges and fees   17,100       16,964       17,063       18,708       18,553  
    Loan servicing income   111       107       131       158       278  
    Trust fees   5,272       5,532       5,043       4,905       4,734  
    Brokerage and insurance commissions   853       894       754       729       692  
    Capital markets fees   2,116       1,996       891       1,676       1,845  
    Securities gains (losses), net   (9,520 )     (10,111 )     58       (140,007 )     (114 )
    Unrealized gain on equity securities, net   377       133       95       75       13  
    Net gains on sale of loans held for sale   —       —       104       94       905  
    Income on bank owned life insurance   1,107       1,326       1,177       729       858  
    Other noninterest income   1,576       1,366       2,347       1,132       619  
    Total Noninterest Income   18,992       18,207       27,663       (111,801 )     28,383  
    Noninterest Expense                  
    Salaries and employee benefits   62,742       65,120       63,955       64,766       62,262  
    Occupancy   6,318       6,262       7,263       6,509       6,438  
    Furniture and equipment   2,062       2,155       2,337       2,901       2,720  
    Professional fees   17,448       15,372       15,531       17,060       13,616  
    FDIC insurance assessments   3,035       3,340       4,969       10,313       3,313  
    Advertising   1,937       1,368       1,358       1,677       1,633  
    Core deposit intangibles amortization   1,345       1,421       1,492       1,611       1,625  
    Other real estate and loan collection expenses, net   395       515       512       505       481  
    (Gain) loss on sales/valuations of assets, net   (26,419 )     193       214       2,072       108  
    Acquisition, integration and restructuring costs   2,026       5,973       1,375       4,365       2,429  
    Partnership investment in tax credit projects   222       222       494       3,573       1,136  
    Other noninterest expense   14,816       14,303       14,095       14,933       15,292  
    Total Noninterest Expense   85,927       116,244       113,595       130,285       111,053  
    Income Before Income Taxes   84,686       51,696       67,297       (97,687 )     61,570  
    Income taxes   20,533       11,954       15,590       (27,324 )     13,479  
    Net Income/(Loss)   64,153       39,742       51,707       (70,363 )     48,091  
    Preferred dividends   (2,013 )     (2,012 )     (2,013 )     (2,012 )     (2,013 )
    Net Income/(Loss) Available to Common Stockholders $ 62,140     $ 37,730     $ 49,694     $ (72,375 )   $ 46,078  
    Earnings/(loss) per common share-diluted $ 1.44     $ 0.88     $ 1.16     $ (1.69 )   $ 1.08  
    Weighted average shares outstanding-diluted   43,195,257       43,060,354       42,915,768       42,838,405       42,812,563  
    HEARTLAND FINANCIAL USA, INC.
    CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
    DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
      As of
      9/30/2024   6/30/2024   3/31/2024   12/31/2023   9/30/2023
    Assets                  
    Cash and due from banks $ 228,719     $ 226,735     $ 208,176     $ 275,554     $ 248,756  
    Interest-bearing deposits with other banks and short-term investments   359,675       147,211       236,190       47,459       99,239  
    Cash and cash equivalents   588,394       373,946       444,366       323,013       347,995  
    Time deposits in other financial institutions   1,050       1,340       1,240       1,240       1,490  
    Securities:                  
    Carried at fair value   4,057,335       4,185,054       4,418,222       4,646,891       5,482,687  
    Held to maturity, at cost   839,623       842,980       841,055       838,241       835,468  
    Other investments, at cost   69,511       70,684       68,524       91,277       90,001  
    Loans held for sale   —       348,761       352,744       5,071       6,262  
    Loans:                  
    Held to maturity   11,440,917       11,608,309       11,644,641       12,068,645       11,872,436  
    Allowance for credit losses   (106,797 )     (126,861 )     (123,934 )     (122,566 )     (110,208 )
    Loans, net   11,334,120       11,481,448       11,520,707       11,946,079       11,762,228  
    Premises, furniture and equipment, net   155,140       175,953       176,582       181,070       187,436  
    Goodwill   576,005       576,005       576,005       576,005       576,005  
    Core deposit intangibles, net   14,157       15,501       16,923       18,415       20,026  
    Cash surrender value on life insurance   199,998       199,036       197,671       197,085       196,694  
    Other real estate, net   6,805       7,533       2,590       12,548       14,362  
    Other assets   430,155       534,429       516,198       574,772       609,139  
    Total Assets $ 18,272,293     $ 18,812,670     $ 19,132,827     $ 19,411,707     $ 20,129,793  
    Liabilities and Equity                  
    Liabilities                  
    Deposits:                  
    Demand $ 4,009,218     $ 4,244,169     $ 4,264,390     $ 4,500,304     $ 4,792,813  
    Savings   8,926,192       8,470,416       8,669,221       8,805,597       8,754,911  
    Time   2,017,806       2,242,005       2,368,555       2,895,813       3,553,269  
    Total deposits   14,953,216       14,956,590       15,302,166       16,201,714       17,100,993  
    Deposits held for sale   —       538,308       596,328       —       —  
    Borrowings   546,219       694,909       650,033       622,255       392,634  
    Term debt   373,324       372,988       372,652       372,396       372,059  
    Accrued expenses and other liabilities   259,161       222,025       232,815       282,225       438,577  
    Total Liabilities   16,131,920       16,784,820       17,153,994       17,478,590       18,304,263  
    Stockholders’ Equity                  
    Preferred equity   110,705       110,705       110,705       110,705       110,705  
    Common stock   42,884       42,852       42,784       42,688       42,656  
    Capital surplus   1,098,837       1,096,619       1,093,207       1,090,740       1,088,267  
    Retained earnings   1,252,247       1,203,092       1,178,330       1,141,501       1,226,740  
    Accumulated other comprehensive income/(loss)   (364,300 )     (425,418 )     (446,193 )     (452,517 )     (642,838 )
    Total Equity   2,140,373       2,027,850       1,978,833       1,933,117       1,825,530  
    Total Liabilities and Equity $ 18,272,293     $ 18,812,670     $ 19,132,827     $ 19,411,707     $ 20,129,793  
    HEARTLAND FINANCIAL USA, INC.
    CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
    DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
      For the Quarter Ended
      9/30/2024   6/30/2024   3/31/2024   12/31/2023   9/30/2023
    Average Balances                  
    Assets $ 18,439,910     $ 19,043,362     $ 19,296,638     $ 19,667,825     $ 20,207,920  
    Loans, net of unearned   11,584,999       12,010,289       12,021,930       11,938,272       11,800,064  
    Total deposits   15,148,944       15,562,920       16,042,402       16,709,394       17,507,813  
    Customer deposits   14,347,965       14,768,407       14,816,652       14,969,948       14,699,235  
    Earning assets   16,838,131       17,331,435       17,597,068       17,853,957       18,439,010  
    Interest-bearing liabilities   11,986,220       12,461,957       12,607,745       12,721,680       13,158,631  
    Common equity   1,962,334       1,863,236       1,832,959       1,729,086       1,746,818  
    Total stockholders’ equity   2,073,039       1,973,941       1,943,664       1,839,791       1,857,523  
    Tangible common equity (non-GAAP)(1)   1,371,515       1,271,046       1,239,313       1,133,888       1,149,992  
                       
    Key Performance Ratios                  
    Annualized return on average assets   1.38 %     0.84 %     1.08 %   (1.42 )%     0.94 %
    Adjusted annualized return on average assets (non-GAAP)(1)   1.14       1.09       1.13       0.96       0.98  
    Annualized return on average common equity (GAAP)   12.60       8.14       10.90       (16.61 )     10.47  
    Adjusted annualized return on average common equity (non-GAAP)(1)   10.27       10.71       11.50       10.46       10.92  
    Annualized return on average tangible common equity (non-GAAP)(1)   18.32       12.28       16.49       (24.89 )     16.32  
    Adjusted annualized return on average tangible common equity (non-GAAP)(1)   14.98       16.05       17.38       16.38       17.02  
    Annualized ratio of net charge-offs/(recoveries) to average loans   0.99       0.23       0.08       0.01       0.12  
    Annualized net interest margin (GAAP)   3.73       3.68       3.52       3.47       3.14  
    Annualized net interest margin, fully tax-equivalent (non-GAAP)(1)   3.78       3.73       3.57       3.52       3.18  
    Annualized cost of deposits   2.18       2.08       2.11       2.09       2.10  
    Efficiency ratio (GAAP)   48.58       65.69       62.46       293.86       63.77  
    Adjusted efficiency ratio, fully tax-equivalent (non-GAAP)(1)   57.98       57.73       58.77       59.31       59.95  
    Annualized ratio of total noninterest expenses to average assets (GAAP)   1.85       2.46       2.37       2.63       2.18  
    Annualized ratio of core expenses to average assets (non-GAAP)(1)   2.35       2.30       2.25       2.23       2.08  
                       
      For the Quarter Ended
    September 30,    		   For the Nine Months Ended
    September 30,
        2024       2023       2024       2023  
    Average Balances              
    Assets $ 18,439,910     $ 20,207,920     $ 18,924,862     $ 20,182,808  
    Loans, net of unearned   11,584,999       11,800,064       11,871,358       11,602,741  
    Total deposits   15,148,944       17,507,813       15,583,165       17,567,614  
    Customer deposits   14,347,965       14,699,235       14,642,347       14,778,030  
    Earning assets   16,838,131       18,439,010       17,254,023       18,451,907  
    Interest-bearing liabilities   11,986,220       13,158,631       12,350,640       12,985,665  
    Common equity   1,962,334       1,746,818       1,886,454       1,710,230  
    Total stockholders’ equity   2,073,039       1,857,523       1,997,159       1,820,935  
    Tangible common equity (non-GAAP)(1)   1,371,515       1,149,992       1,294,241       1,111,724  
                   
    Key Performance Ratios              
    Annualized return on average assets   1.38 %     0.94 %     1.10 %     1.00 %
    Adjusted annualized return on average assets (non-GAAP)(1)   1.14       0.98       1.12       1.02  
    Annualized return on average common equity (GAAP)   12.60       10.47       10.59       11.28  
    Adjusted annualized return on average common equity (non-GAAP)(1)   10.27       10.92       10.81       11.60  
    Annualized return on average tangible common equity (non-GAAP)(1)   18.32       16.32       15.77       17.82  
    Adjusted annualized return on average tangible common equity (non-GAAP)(1)   14.98       17.02       16.09       18.31  
    Annualized ratio of net charge-offs/(recoveries) to average loans   0.99       0.12       0.43       0.14  
    Annualized net interest margin (GAAP)   3.73       3.14       3.65       3.23  
    Annualized net interest margin, fully tax-equivalent (non-GAAP)(1)   3.78       3.18       3.69       3.27  
    Annualized cost of deposits   2.18       2.10       2.12       1.76  
    Efficiency ratio (GAAP)   48.58       63.77       58.94       61.86  
    Adjusted efficiency ratio, fully tax-equivalent (non-GAAP)(1)   57.98       59.95       58.16       58.98  
    Annualized ratio of total noninterest expenses to average assets (GAAP)   1.85       2.18       2.23       2.20  
    Annualized ratio of core expenses to average assets (non-GAAP)(1)   2.35       2.08       2.30       2.12  
                   
    (1) Refer to “Non-GAAP Measures” in this earnings release for additional information on the usage and presentation of these non-GAAP measures, and refer to these financial tables for the reconciliations to the most directly comparable GAAP measures.
    HEARTLAND FINANCIAL USA, INC.
    CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
    DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND FULL TIME EQUIVALENT EMPLOYEE DATA
      As of and for the Quarter Ended
      9/30/2024   6/30/2024   3/31/2024   12/31/2023   9/30/2023
    Common Share Data                  
    Book value per common share $ 47.33     $ 44.74     $ 43.66     $ 42.69     $ 40.20  
    Tangible book value per common share (non-GAAP)(1)   33.57       30.94       29.81       28.77       26.23  
    ASC 320 effect on book value per common share   (8.78 )     (10.82 )     (11.18 )     (11.00 )     (16.27 )
                       
    Common shares outstanding, net of treasury stock   42,883,865       42,852,180       42,783,670       42,688,008       42,656,303  
                       
    Capital Ratios                  
    Common equity to total assets   11.11 %     10.19 %     9.76 %     9.39 %     8.52 %
    Tangible common equity ratio (non-GAAP)(1)   8.14       7.28       6.88       6.53       5.73  
    Tier 1 leverage ratio   10.77       10.13       9.84       9.44       9.59  
    Common equity tier 1 ratio(2)   12.66       11.68       11.40       10.97       11.37  
    Total risk based capital ratio(2)   16.34       15.32       14.99       14.53       14.90  
                       
    Other Selected Trend Information                  
    Effective tax rate   24.25 %     23.12 %     23.17 %     27.97 %     21.89 %
    Full time equivalent employees   1,725       1,843       1,888       1,970       1,965  
                       
    Loans Held to Maturity                  
    Commercial and industrial $ 3,503,093     $ 3,541,239     $ 3,545,051     $ 3,652,047     $ 3,591,809  
    Paycheck Protection Program (“PPP”)   1,582       1,864       2,172       2,777       3,750  
    Owner occupied commercial real estate   2,489,697       2,555,964       2,545,033       2,638,175       2,429,659  
    Commercial and business lending   5,994,372       6,099,067       6,092,256       6,292,999       6,025,218  
    Non-owner occupied commercial real estate   2,455,396       2,434,258       2,495,068       2,553,711       2,656,358  
    Real estate construction   1,119,922       1,082,726       1,041,583       1,011,716       1,029,554  
    Commercial real estate lending   3,575,318       3,516,984       3,536,651       3,565,427       3,685,912  
    Total commercial lending   9,569,690       9,616,051       9,628,907       9,858,426       9,711,130  
    Agricultural and agricultural real estate   701,211       802,958       809,876       919,184       842,116  
    Residential mortgage   707,984       733,401       756,021       797,829       813,803  
    Consumer   462,032       455,899       449,837       493,206       505,387  
    Total loans held to maturity $ 11,440,917     $ 11,608,309     $ 11,644,641     $ 12,068,645     $ 11,872,436  
                       
    Total unfunded loan commitments $ 3,941,268     $ 4,381,565     $ 4,537,718     $ 4,625,768     $ 4,813,798  
                       
    Deposits                  
    Demand-customer $ 4,009,218     $ 4,244,169     $ 4,264,390     $ 4,500,304     $ 4,792,813  
    Savings-customer   8,713,228       8,151,794       8,269,956       8,411,240       8,190,430  
    Savings-wholesale and institutional   212,964       318,622       399,265       394,357       564,481  
    Total savings   8,926,192       8,470,416       8,669,221       8,805,597       8,754,911  
    Time-customer   1,628,856       1,737,723       1,734,971       1,944,884       1,814,335  
    Time-wholesale   388,950       504,282       633,584       950,929       1,738,934  
    Total time   2,017,806       2,242,005       2,368,555       2,895,813       3,553,269  
    Total deposits $ 14,953,216     $ 14,956,590     $ 15,302,166     $ 16,201,714     $ 17,100,993  
                       
    Total customer deposits $ 14,351,302     $ 14,133,686     $ 14,269,317     $ 14,856,428     $ 14,797,578  
    Total wholesale and institutional deposits   601,914       822,904       1,032,849       1,345,286       2,303,415  
    Total deposits $ 14,953,216     $ 14,956,590     $ 15,302,166     $ 16,201,714     $ 17,100,993  
                       
    (1) Refer to “Non-GAAP Measures” in this earnings release for additional information on the usage and presentation of these non-GAAP measures, and refer to these financial tables for the reconciliations to the most directly comparable GAAP measures.
    (2) September 30, 2024 calculation is preliminary.
    HEARTLAND FINANCIAL USA, INC.
    CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
    DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
      As of and for the Quarter Ended
      9/30/2024   6/30/2024   3/31/2024   12/31/2023   9/30/2023
    Allowance for Credit Losses-Loans                  
    Balance, beginning of period $ 126,861     $ 123,934     $ 122,566     $ 110,208     $ 111,198  
    Provision for credit losses   8,871       9,737       3,668       12,750       2,672  
    Charge-offs   (32,137 )     (7,388 )     (4,093 )     (3,886 )     (3,964 )
    Recoveries   3,202       578       1,793       3,494       302  
    Balance, end of period $ 106,797     $ 126,861     $ 123,934     $ 122,566     $ 110,208  
                       
    Allowance for Unfunded Commitments                  
    Balance, beginning of period $ 13,057     $ 13,786     $ 16,468     $ 17,480     $ 18,636  
    Provision for credit losses   (2,595 )     (729 )     (2,682 )     (1,012 )     (1,156 )
    Balance, end of period $ 10,462     $ 13,057     $ 13,786     $ 16,468     $ 17,480  
                       
    Allowance for lending related credit losses $ 117,259     $ 139,918     $ 137,720     $ 139,034     $ 127,688  
                       
    Provision for Credit Losses                  
    Provision for credit losses-loans $ 8,871     $ 9,737     $ 3,668     $ 12,750     $ 2,672  
    Provision for credit losses-unfunded commitments   (2,595 )     (729 )     (2,682 )     (1,012 )     (1,156 )
    Total provision (benefit) for credit losses $ 6,276     $ 9,008     $ 986     $ 11,738     $ 1,516  
                       
    Asset Quality                  
    Nonaccrual loans $ 69,115     $ 103,123     $ 94,800     $ 95,426     $ 51,304  
    Loans past due ninety days or more   832       663       611       2,507       511  
    Other real estate owned   6,805       7,533       2,590       12,548       14,362  
    Other repossessed assets   —       —       —       —       1  
    Total nonperforming assets $ 76,752     $ 111,319     $ 98,001     $ 110,481     $ 66,178  
                       
    Nonperforming Assets Activity                  
    Balance, beginning of period $ 111,319     $ 98,001     $ 110,481     $ 66,178     $ 66,097  
    Net loan (charge-offs) recoveries   (28,935 )     (6,810 )     (2,300 )     (392 )     (3,662 )
    New nonperforming loans   25,441       48,346       5,470       61,193       19,295  
    Reduction of nonperforming loans(1)   (30,240 )     (28,050 )     (5,692 )     (14,278 )     (14,691 )
    OREO/Repossessed assets sales proceeds   (833 )     (168 )     (9,958 )     (2,220 )     (861 )
    Balance, end of period $ 76,752     $ 111,319     $ 98,001     $ 110,481     $ 66,178  
                       
    Asset Quality Ratios                  
    Ratio of nonperforming loans to total loans   0.61 %     0.89 %     0.82 %     0.81 %     0.44 %
    Ratio of nonperforming assets to total assets   0.42       0.59       0.51       0.57       0.33  
    Annualized ratio of net loan charge-offs (recoveries) to average loans   0.99       0.23       0.08       0.01       0.12  
    Allowance for loan credit losses as a percent of loans   0.93       1.09       1.06       1.02       0.93  
    Allowance for lending related credit losses as a percent of loans   1.02       1.21       1.18       1.15       1.08  
    Allowance for loan credit losses as a percent of nonperforming loans   152.68       122.23       129.89       125.15       212.70  
    Loans delinquent 30-89 days as a percent of total loans   0.26       0.25       0.31       0.09       0.12  
                       
    (1) Includes principal reductions, transfers to performing status and transfers to OREO.
    HEARTLAND FINANCIAL USA, INC.    
    CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
    DOLLARS IN THOUSANDS
      For the Quarter Ended
      September 30, 2024   June 30, 2024   September 30, 2023
      Average
    Balance    		   Interest   Rate   Average
    Balance    		   Interest   Rate   Average
    Balance    		   Interest   Rate
    Earning Assets                                  
    Securities:                                  
    Taxable $ 4,254,529     $ 51,116   4.78 %   $ 4,490,407     $ 47,381   4.24 %   $ 5,726,057     $ 54,800   3.80 %
    Nontaxable(1)   768,483       7,313   3.79       759,234       7,383   3.91       881,162       8,085   3.64  
    Total securities   5,023,012       58,429   4.63       5,249,641       54,764   4.20       6,607,219       62,885   3.78  
    Interest on deposits with other banks and
    short-term investments    		   355,394       4,193   4.69       194,824       3,045   6.29       142,301       1,651   4.60  
    Federal funds sold   —       —   —       —       —   —       152       3   7.83  
    Loans:(2)                                  
    Commercial and industrial(1)   3,531,206       65,972   7.43       3,638,004       69,469   7.68       3,610,677       63,001   6.92  
    PPP loans   1,759       5   1.13       2,242       7   1.26       3,948       11   1.11  
    Owner occupied commercial real estate   2,527,006       35,189   5.54       2,615,504       37,028   5.69       2,412,501       30,127   4.95  
    Non-owner occupied commercial real estate   2,474,036       39,536   6.36       2,519,346       39,272   6.27       2,586,011       38,779   5.95  
    Real estate construction   1,106,387       22,878   8.23       1,093,399       21,770   8.01       1,027,544       19,448   7.51  
    Agricultural and agricultural real estate   757,745       11,536   6.06       879,707       13,390   6.12       822,957       12,582   6.07  
    Residential real estate   725,901       9,110   4.99       776,821       9,454   4.89       827,402       9,482   4.55  
    Consumer   460,959       8,956   7.73       485,266       9,421   7.81       509,024       9,615   7.49  
    Less: allowance for credit losses   (125,274 )     —   —       (123,319 )     —   —       (110,726 )     —   —  
    Net loans   11,459,725       193,182   6.71       11,886,970       199,811   6.76       11,689,338       183,045   6.21  
    Total earning assets   16,838,131       255,804   6.04 %     17,331,435       257,620   5.98 %     18,439,010       247,584   5.33 %
    Nonearning Assets   1,601,779               1,711,927               1,768,910          
    Total Assets $ 18,439,910             $ 19,043,362             $ 20,207,920          
    Interest-bearing Liabilities                                  
    Savings $ 8,842,494     $ 59,307   2.67 %   $ 8,834,746     $ 55,440   2.52 %   $ 8,737,581     $ 49,195   2.23 %
    Time deposits   2,189,861       23,669   4.30       2,372,653       25,059   4.25       3,945,371       43,549   4.38  
    Borrowings   580,707       7,378   5.05       881,738       10,825   4.94       103,567       1,167   4.47  
    Term debt   373,158       5,543   5.91       372,820       5,564   6.00       372,112       5,765   6.15  
    Total interest-bearing liabilities   11,986,220       95,897   3.18 %     12,461,957       96,888   3.13 %     13,158,631       99,676   3.01 %
    Noninterest-bearing Liabilities                                  
    Noninterest-bearing deposits   4,116,589               4,355,521               4,824,861          
    Accrued interest and other liabilities   264,062               251,943               366,905          
    Total noninterest-bearing liabilities   4,380,651               4,607,464               5,191,766          
    Stockholders’ Equity   2,073,039               1,973,941               1,857,523          
    Total Liabilities and Stockholders’ Equity $ 18,439,910             $ 19,043,362             $ 20,207,920          
    Net interest income, fully tax-equivalent
    (non-GAAP)    (1)(3)    		     $ 159,907           $ 160,732           $ 147,908    
    Net interest spread(1)         2.86 %           2.85 %           2.32 %
    Net interest income, fully tax-equivalent
    (non-GAAP    )(1)(3)to total earning assets    		         3.78 %           3.73 %           3.18 %
    Interest-bearing liabilities to earning assets   71.18 %             71.90 %             71.36 %        
                                       
    (1) Computed on a tax-equivalent basis using an effective tax rate of 21%.    
    (2) Nonaccrual loans and loans held for sale are included in the average loans outstanding.
    (3) Refer to “Non-GAAP Measures” in this earnings release for additional information on the usage and presentation of these non-GAAP measures, and refer to these financial tables for the reconciliations to the most directly comparable GAAP measures.
    HEARTLAND FINANCIAL USA, INC.
    CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
    DOLLARS IN THOUSANDS
      For the Nine Months Ended
      September 30, 2024   September 30, 2023
      Average
    Balance    		   Interest   Rate   Average
    Balance    		   Interest   Rate
    Earning Assets                      
    Securities:                      
    Taxable $ 4,469,258     $ 145,511   4.35 %   $ 5,927,026     $ 168,948   3.81 %
    Nontaxable(1)   768,782       22,079   3.84       899,613       23,611   3.51  
    Total securities   5,238,040       167,590   4.27       6,826,639       192,559   3.77  
    Interest on deposits with other banks and other short-term investments   268,122       10,244   5.10       133,910       4,833   4.83  
    Federal funds sold   —       —   —       51       3   7.86  
    Loans:(2)                      
    Commercial and industrial(1)   3,603,668       202,426   7.50       3,547,256       169,552   6.39  
    PPP loans   2,195       19   1.16       6,718       61   1.21  
    Owner occupied commercial real estate   2,583,886       107,734   5.57       2,355,545       84,927   4.82  
    Non-owner occupied commercial real estate   2,514,452       118,657   6.30       2,459,965       105,111   5.71  
    Real estate construction   1,087,280       65,497   8.05       1,051,298       56,107   7.14  
    Agricultural and agricultural real estate   838,395       38,682   6.16       835,673       36,191   5.79  
    Residential mortgage   764,515       28,699   5.01       840,143       28,138   4.48  
    Consumer   476,967       27,578   7.72       506,143       26,925   7.11  
    Less: allowance for credit losses-loans   (123,497 )     —   —       (111,434 )     —   —  
    Net loans   11,747,861       589,292   6.70       11,491,307       507,012   5.90  
    Total earning assets   17,254,023       767,126   5.94 %     18,451,907       704,407   5.10 %
    Nonearning Assets   1,670,839               1,730,901          
    Total Assets $ 18,924,862             $ 20,182,808          
    Interest-bearing Liabilities                      
    Savings $ 8,828,973     $ 169,414   2.56 %   $ 9,130,980     $ 128,372   1.88 %
    Time deposits   2,447,293       78,195   4.27       3,344,434       103,245   4.13  
    Borrowings   701,548       25,727   4.90       138,157       4,437   4.29  
    Term debt   372,826       16,956   6.08       372,094       16,756   6.02  
    Total interest-bearing liabilities   12,350,640       290,292   3.14 %     12,985,665       252,810   2.60 %
    Noninterest-bearing Liabilities                      
    Noninterest-bearing deposits   4,306,899               5,092,200          
    Accrued interest and other liabilities   270,164               284,008          
    Total noninterest-bearing liabilities   4,577,063               5,376,208          
    Stockholders’ Equity   1,997,159               1,820,935          
    Total Liabilities and Stockholders’ Equity $ 18,924,862             $ 20,182,808          
    Net interest income, fully tax-equivalent (non-GAAP)(1)(3)     $ 476,834           $ 451,597    
    Net interest spread(1)         2.80 %           2.50 %
    Net interest income, fully tax-equivalent (non-GAAP)(1)(3)to total earning assets         3.69 %           3.27 %
    Interest-bearing liabilities to earning assets   71.58 %             70.38 %        
                           
    (1) Computed on a tax-equivalent basis using an effective tax rate of 21%.    
    (2) Nonaccrual loans and loans held for sale are included in the average loans outstanding.
    (3) Refer to “Non-GAAP Measures” in this earnings release for additional information on the usage and presentation of these non-GAAP measures, and refer to these financial tables for the reconciliations to the most directly comparable GAAP measures.
    HEARTLAND FINANCIAL USA, INC.
    CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
    DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA AND FULL TIME EQUIVALENT EMPLOYEE DATA
      For the Quarter Ended
      9/30/2024   6/30/2024   3/31/2024   12/31/2023   9/30/2023
    Reconciliation of Annualized Return on Average Tangible Common Equity (non-GAAP)                  
    Earnings available to common stockholders (GAAP) $ 62,140     $ 37,730     $ 49,694     $ (72,375 )   $ 46,078  
    Plus core deposit intangibles amortization, net of tax(2)   1,022       1,081       1,131       1,229       1,240  
    Earnings available to common stockholders excluding intangible amortization (non-GAAP) $ 63,162     $ 38,811     $ 50,825     $ (71,146 )   $ 47,318  
                       
    Average common equity (GAAP) $ 1,962,334     $ 1,863,236     $ 1,832,959     $ 1,729,086     $ 1,746,818  
    Less average goodwill   576,005       576,005       576,005       576,005       576,005  
    Less average core deposit intangibles, net   14,814       16,185       17,641       19,193       20,821  
    Average tangible common equity (non-GAAP) $ 1,371,515     $ 1,271,046     $ 1,239,313     $ 1,133,888     $ 1,149,992  
    Annualized return on average common equity (GAAP)   12.60 %     8.14 %     10.90 %   (16.61 )%     10.47 %
    Annualized return on average tangible common equity (non-GAAP)   18.32 %     12.28 %     16.49 %   (24.89 )%     16.32 %
                       
    Reconciliation of Annualized Net Interest Margin, Fully Tax-Equivalent (non-GAAP)                  
    Net Interest Income (GAAP) $ 157,897     $ 158,741     $ 154,215     $ 156,137     $ 145,756  
    Plus tax-equivalent adjustment(1)   2,010       1,991       1,981       2,058       2,152  
    Net interest income, fully tax-equivalent (non-GAAP) $ 159,907     $ 160,732     $ 156,196     $ 158,195     $ 147,908  
                       
    Average earning assets $ 16,838,131     $ 17,331,435     $ 17,597,068     $ 17,853,957     $ 18,439,010  
                       
    Annualized net interest margin (GAAP)   3.73 %     3.68 %     3.52 %     3.47 %     3.14 %
    Annualized net interest margin, fully tax-equivalent (non-GAAP)   3.78       3.73       3.57       3.52       3.18  
    Net purchase accounting discount amortization on loans included in annualized net interest margin   0.02       0.01       0.02       0.02       0.01  
    Reconciliation of Tangible Book Value Per Common Share (non-GAAP)                  
    Common equity (GAAP) $ 2,029,668     $ 1,917,145     $ 1,868,128     $ 1,822,412     $ 1,714,825  
    Less goodwill   576,005       576,005       576,005       576,005       576,005  
    Less core deposit intangibles, net   14,157       15,501       16,923       18,415       20,026  
    Tangible common equity (non-GAAP) $ 1,439,506     $ 1,325,639     $ 1,275,200     $ 1,227,992     $ 1,118,794  
                       
    Common shares outstanding, net of treasury stock   42,883,865       42,852,180       42,783,670       42,688,008       42,656,303  
    Common equity (book value) per share (GAAP) $ 47.33     $ 44.74     $ 43.66     $ 42.69     $ 40.20  
    Tangible book value per common share (non-GAAP) $ 33.57     $ 30.94     $ 29.81     $ 28.77     $ 26.23  
                       
    Reconciliation of Tangible Common Equity Ratio (non-GAAP)                  
    Tangible common equity (non-GAAP) $ 1,439,506     $ 1,325,639     $ 1,275,200     $ 1,227,992     $ 1,118,794  
                       
    Total assets (GAAP) $ 18,272,293     $ 18,812,670     $ 19,132,827     $ 19,411,707     $ 20,129,793  
    Less goodwill   576,005       576,005       576,005       576,005       576,005  
    Less core deposit intangibles, net   14,157       15,501       16,923       18,415       20,026  
    Total tangible assets (non-GAAP) $ 17,682,131     $ 18,221,164     $ 18,539,899     $ 18,817,287     $ 19,533,762  
    Tangible common equity ratio (non-GAAP)   8.14 %     7.28 %     6.88 %     6.53 %     5.73 %
                       
    (1) Computed on a tax-equivalent basis using an effective tax rate of 21%.
    (2) Tax effect is calculated based on the respective periods’ year-to-date effective tax rate excluding the impact of discrete items.
    HEARTLAND FINANCIAL USA, INC.
    CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
    DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
      For the Quarter Ended
    9/30/2024   6/30/2024   3/31/2024   12/31/2023   9/30/2023
    Reconciliation of Adjusted Efficiency Ratio, fully tax-equivalent (non-GAAP)  
    Net interest income (GAAP) $ 157,897     $ 158,741     $ 154,215     $ 156,137     $ 145,756  
    Tax-equivalent adjustment(1)   2,010       1,991       1,981       2,058       2,152  
    Fully tax-equivalent net interest income   159,907       160,732       156,196       158,195       147,908  
    Noninterest income   18,992       18,207       27,663       (111,801 )     28,383  
    Securities (gains)/losses, net   9,520       10,111       (58 )     140,007       114  
    Unrealized gain on equity securities, net   (377 )     (133 )     (95 )     (75 )     (13 )
    Adjusted revenue (non-GAAP) $ 188,042     $ 188,917     $ 183,706     $ 186,326     $ 176,392  
                       
    Total noninterest expenses (GAAP) $ 85,927     $ 116,244     $ 113,595     $ 130,285     $ 111,053  
    Less:                  
    Core deposit intangibles amortization   1,345       1,421       1,492       1,611       1,625  
    Partnership investment in tax credit projects   222       222       494       3,573       1,136  
    (Gain) loss on sales/valuation of assets, net   (26,419 )     193       214       2,072       108  
    Acquisition, integration and restructuring costs   2,026       5,973       1,375       4,365       2,429  
    FDIC special assessment   (267 )     (631 )     2,049       8,145       —  
    Core expenses (non-GAAP) $ 109,020     $ 109,066     $ 107,971     $ 110,519     $ 105,755  
                       
    Efficiency ratio (GAAP)   48.58 %     65.69 %     62.46 %     293.86 %     63.77 %
    Adjusted efficiency ratio, fully tax-equivalent (non-GAAP)   57.98 %     57.73 %     58.77 %     59.31 %     59.95 %
                       
    Reconciliation of Annualized Ratio of Core Expenses to Average Assets (non-GAAP)                  
    Total noninterest expenses (GAAP) $ 85,927     $ 116,244     $ 113,595     $ 130,285     $ 111,053  
    Core expenses (non-GAAP)   109,020       109,066       107,971       110,519       105,755  
                       
    Average assets $ 18,439,910     $ 19,043,362     $ 19,296,638     $ 19,667,825     $ 20,207,920  
    Total noninterest expenses to average assets (GAAP)   1.85 %     2.46 %     2.37 %     2.63 %     2.18 %
    Core expenses to average assets (non-GAAP)   2.35 %     2.30 %     2.25 %     2.23 %     2.08 %
                       
    Acquisition, integration and restructuring costs                  
    Salaries and employee benefits $ 58     $ 462     $ 168     $ 1,425     $ 94  
    Occupancy   —       —       —       1,092       —  
    Furniture and equipment   52       53       —       19       —  
    Professional fees   1,674       5,385       931       793       1,617  
    Advertising   —       —       —       28       178  
    Other noninterest expenses   242       73       276       1,008       540  
    Total acquisition, integration and restructuring costs $ 2,026     $ 5,973     $ 1,375     $ 4,365     $ 2,429  
                       
    (1) Computed on a tax-equivalent basis using an effective tax rate of 21%.
     
    HEARTLAND FINANCIAL USA, INC.
    CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
    DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
      For the Quarter Ended
      9/30/2024   6/30/2024   3/31/2024   12/31/2023   9/30/2023
    Reconciliation of Adjusted Earnings                  
    Net income/(loss) $ 64,153     $ 39,742     $ 51,707     $ (70,363 )   $ 48,091  
    (Gain)/loss from sale of securities   9,520       10,111       (58 )     140,007       114  
    (Gain)/loss on sales/valuation of assets, net   (26,419 )     193       214       2,072       108  
    Acquisition, integration and restructuring costs   2,026       5,973       1,375       4,365       2,429  
    FDIC special assessment   (267 )     (631 )     2,049       8,145       —  
    Total adjustments   (15,140 )     15,646       3,580       154,589       2,651  
    Tax effect of adjustments(2)   3,634       (3,739 )     (866 )     (36,638 )     (628 )
    Adjusted earnings $ 52,647     $ 51,649     $ 54,421     $ 47,588     $ 50,114  
                       
    Preferred dividends   (2,013 )     (2,012 )     (2,013 )     (2,012 )     (2,013 )
    Adjusted earnings available to common stockholders $ 50,634     $ 49,637     $ 52,408     $ 45,576     $ 48,101  
                       
    Plus core deposit intangibles amortization, net of tax(2)   1,022       1,081       1,131       1,229       1,240  
    Earnings available to common stockholders excluding intangible amortization (non-GAAP) $ 51,656     $ 50,718     $ 53,539     $ 46,805     $ 49,341  
                       
    Reconciliation of Adjusted Annualized Return on Average Assets                  
    Average assets $ 18,439,910     $ 19,043,362     $ 19,296,638     $ 19,667,825     $ 20,207,920  
    Adjusted annualized return on average assets (non-GAAP)   1.14 %     1.09 %     1.13 %     0.96 %     0.98 %
                       
    Reconciliation of Adjusted Annualized Return on Average Common Equity                  
    Average common stockholders’ equity (GAAP) $ 1,962,334     $ 1,863,236     $ 1,832,959     $ 1,729,086     $ 1,746,818  
    Adjusted annualized average common equity (non-GAAP)   10.27 %     10.71 %     11.50 %     10.46 %     10.92 %
                       
    Reconciliation of Adjusted Annualized Return on Average Tangible Common Equity                  
    Average tangible common equity (non-GAAP) $ 1,371,515     $ 1,271,046     $ 1,239,313     $ 1,133,888     $ 1,149,992  
    Adjusted annualized average tangible common equity (non-GAAP)   14.98 %     16.05 %     17.38 %     16.38 %     17.02 %
                       
    Reconciliation of Adjusted Diluted Earnings Per Common Share                  
    Weighted average shares outstanding-diluted   43,195,257       43,060,354       42,915,768       42,838,405       42,812,563  
    Adjusted diluted earnings per common share $ 1.17     $ 1.15     $ 1.22     $ 1.06     $ 1.12  
                       
    (2) Tax effect is calculated based on the respective periods’ year-to-date effective tax rate excluding the impact of discrete items.
    HEARTLAND FINANCIAL USA, INC.
    CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
    DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
      For the Quarter Ended
    September 30,    		   For the Nine Months Ended
    September 30,
        2024       2023       2024       2023  
    Reconciliation of Annualized Return on Average Tangible Common Equity (non-GAAP)              
    Earnings available to common stockholders (GAAP) $ 62,140     $ 46,078     $ 149,564     $ 144,245  
    Plus core deposit intangibles amortization, net of tax(2)   1,022       1,240       3,236       3,908  
    Earnings available to common stockholders excluding intangible amortization (non-GAAP) $ 63,162     $ 47,318     $ 152,800     $ 148,153  
                   
    Average common equity (GAAP) $ 1,962,334     $ 1,746,818     $ 1,886,454     $ 1,710,230  
    Less average goodwill   576,005       576,005       576,005       576,005  
    Less average core deposit intangibles, net   14,814       20,821       16,208       22,501  
    Average tangible common equity (non-GAAP) $ 1,371,515     $ 1,149,992     $ 1,294,241     $ 1,111,724  
    Annualized return on average common equity (GAAP)   12.60 %     10.47 %     10.59 %     11.28 %
    Annualized return on average tangible common equity (non-GAAP)   18.32 %     16.32 %     15.77 %     17.82 %
                   
    Reconciliation of Annualized Net Interest Margin, Fully Tax-Equivalent (non-GAAP)              
    Net Interest Income (GAAP) $ 157,897     $ 145,756     $ 470,853     $ 445,100  
    Plus tax-equivalent adjustment(1)   2,010       2,152       5,981       6,497  
    Net interest income, fully tax-equivalent (non-GAAP) $ 159,907     $ 147,908     $ 476,834     $ 451,597  
                   
    Average earning assets $ 16,838,131     $ 18,439,010     $ 17,254,023     $ 18,451,907  
                   
    Annualized net interest margin (GAAP)   3.73 %     3.14 %     3.65 %     3.23 %
    Annualized net interest margin, fully tax-equivalent (non-GAAP)   3.78       3.18       3.69       3.27  
    Net purchase accounting discount amortization on loans included in annualized net interest margin   0.02       0.01       0.02       0.02  
                   
    (1) Computed on a tax-equivalent basis using an effective tax rate of 21%.
    (2) Tax effect is calculated based on the respective periods’ year-to-date effective tax rate excluding the impact of discrete items.
    HEARTLAND FINANCIAL USA, INC.
    CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
    DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
      For the Quarter Ended
    September 30,    		   For the Nine Months Ended
    September 30,
      2024       2023       2024       2023  
    Reconciliation of Adjusted Efficiency Ratio, Fully Tax-Equivalent (non-GAAP)              
    Net interest income (GAAP) $ 157,897     $ 145,756     $ 470,853     $ 445,100  
    Tax-equivalent adjustment(1)   2,010       2,152       5,981       6,497  
    Fully tax-equivalent net interest income   159,907       147,908       476,834       451,597  
    Noninterest income (GAAP)   18,992       28,383       64,862       90,875  
    Securities (gains)/losses, net   9,520       114       19,573       1,532  
    Unrealized gain on equity securities, net   (377 )     (13 )     (605 )     (165 )
    Adjusted revenue (non-GAAP) $ 188,042     $ 176,392     $ 560,664     $ 543,839  
                   
    Total noninterest expenses (GAAP) $ 85,927     $ 111,053     $ 315,766     $ 331,542  
    Less:              
    Core deposit intangibles amortization   1,345       1,625       4,258       5,128  
    Partnership investment in tax credit projects   222       1,136       938       1,828  
    (Gain)/loss on sales/valuation of assets, net   (26,419 )     108       (26,012 )     (2,149 )
    Acquisition, integration and restructuring costs   2,026       2,429       9,374       5,994  
    FDIC special assessment   (267 )     —       1,151       —  
    Core expenses (non-GAAP) $ 109,020     $ 105,755     $ 326,057     $ 320,741  
                   
    Efficiency ratio (GAAP)   48.58 %     63.77 %     58.94 %     61.86 %
    Adjusted efficiency ratio, fully tax-equivalent (non-GAAP)   57.98 %     59.95 %     58.16 %     58.98 %
                   
    Reconciliation of Annualized Ratio of Core Expenses to Average Assets (non-GAAP)              
    Total noninterest expenses (GAAP) $ 85,927     $ 111,053     $ 315,766     $ 331,542  
    Core expenses (non-GAAP)   109,020       105,755       326,057       320,741  
                   
    Average assets $ 18,439,910     $ 20,207,920     $ 18,924,862     $ 20,182,808  
    Total noninterest expenses to average assets (GAAP)   1.85 %     2.18 %     2.23 %     2.20 %
    Core expenses to average assets (non-GAAP)   2.35 %     2.08 %     2.30 %     2.12 %
                   
    Acquisition, integration and restructuring costs              
    Salaries and employee benefits $ 58     $ 94     $ 689     $ 261  
    Occupancy   —       —       —       —  
    Furniture and equipment   52       —       105       —  
    Professional fees   1,674       1,617       7,990       3,619  
    Advertising   —       178       —       522  
    Other noninterest expenses   242       540       590       1,592  
    Total acquisition, integration and restructuring costs $ 2,026     $ 2,429     $ 9,374     $ 5,994  
                   
    (1) Computed on a tax-equivalent basis using an effective tax rate of 21%.              
    HEARTLAND FINANCIAL USA, INC.
    CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
    DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
      For the Quarter Ended
    September 30,    		   For the Nine Months Ended
    September 30,
        2024       2023       2024       2023  
    Reconciliation of Adjusted Earnings (non-GAAP)              
    Net income/(loss) $ 64,153     $ 48,091     $ 155,602     $ 150,283  
    (Gain)/loss from sale of securities   9,520       114       19,573       1,532  
    (Gain)/loss on sales/valuation of assets, net   (26,419 )     108       (26,012 )     (2,149 )
    Acquisition, integration and restructuring costs   2,026       2,429       9,374       5,994  
    FDIC special assessment   (267 )     —       1,151       —  
    Total adjustments   (15,140 )     2,651       4,086       5,377  
    Tax effect of adjustments(2)   3,634       (628 )     (981 )     (1,280 )
    Adjusted earnings $ 52,647     $ 50,114     $ 158,707     $ 154,380  
                   
    Preferred dividends   (2,013 )     (2,013 )     (6,038 )     (6,038 )
    Adjusted earnings available to common stockholders $ 50,634     $ 48,101     $ 152,669     $ 148,342  
                   
    Plus core deposit intangibles amortization, net of tax(2)   1,022       1,240       3,236       3,908  
    Earnings available to common stockholders excluding intangible amortization (non-GAAP) $ 51,656     $ 49,341     $ 155,905     $ 152,250  
                   
    Reconciliation of Adjusted Annualized Return on Average Assets              
    Average assets $ 18,439,910     $ 20,207,920     $ 18,924,862     $ 20,182,808  
    Adjusted annualized return on average assets (non-GAAP)   1.14 %     0.98 %     1.12 %     1.02 %
                   
    Reconciliation of Adjusted Annualized Return on Average Common Equity              
    Average common stockholders’ equity (GAAP) $ 1,962,334     $ 1,746,818     $ 1,886,454     $ 1,710,230  
    Adjusted annualized return on average common equity (non-GAAP)   10.27 %     10.92 %     10.81 %     11.60 %
                   
    Reconciliation of Adjusted Annualized Return on Average Tangible Common Equity              
    Average tangible common equity (non-GAAP) $ 1,371,515     $ 1,149,992     $ 1,294,241     $ 1,111,724  
    Adjusted annualized return on average tangible common equity (non-GAAP)   14.98 %     17.02 %     16.09 %     18.31 %
                   
    Reconciliation of Adjusted Diluted Earnings Per Common Share              
    Weighted average shares outstanding-diluted   43,195,257       42,812,563       43,080,422       42,769,872  
    Adjusted diluted earnings per common share $ 1.17     $ 1.12     $ 3.54     $ 3.47  
                   
    (2) Tax effect is calculated based on the respective periods’ year-to-date effective tax rate excluding the impact of discrete items.

    The MIL Network –

  • MIL-OSI: AMD Reports Third Quarter 2024 Financial Results

    Source: GlobeNewswire (MIL-OSI)

    SANTA CLARA, Calif., Oct. 29, 2024 (GLOBE NEWSWIRE) — AMD (NASDAQ:AMD) today announced revenue for the third quarter of 2024 of $6.8 billion, gross margin of 50%, operating income of $724 million, net income of $771 million and diluted earnings per share of $0.47. On a non-GAAP(*) basis, gross margin was 54%, operating income was $1.7 billion, net income was $1.5 billion and diluted earnings per share was $0.92.

    “We delivered strong third quarter financial results with record revenue led by higher sales of EPYC and Instinct data center products and robust demand for our Ryzen PC processors,” said AMD Chair and CEO Dr. Lisa Su. “Looking forward, we see significant growth opportunities across our data center, client and embedded businesses driven by the insatiable demand for more compute.”

    “We are pleased with our execution in the third quarter, delivering strong year-over-year expansion in gross margin and earnings per share,” said AMD EVP, CFO and Treasurer Jean Hu. “We are on-track to deliver record annual revenue for 2024 based on significant growth in our Data Center and Client segments.”

    GAAP Quarterly Financial Results
     
      Q3 2024 Q3 2023 Y/Y Q2 2024 Q/Q
    Revenue ($M) $6,819 $5,800  Up 18% $5,835  Up 17%
    Gross profit ($M) $3,419 $2,747  Up 24% $2,864  Up 19%
    Gross margin 50% 47%  Up 3 ppts 49%  Up 1 ppt
    Operating expenses ($M) $2,709 $2,533  Up 7% $2,605  Up 4%
    Operating income ($M) $724 $224  Up 223% $269  Up 169%
    Operating margin 11% 4%  Up 7 ppts 5%  Up 6 ppts
    Net income ($M) $771 $299  Up 158% $265  Up 191%
    Diluted earnings per share $0.47 $0.18  Up 161% $0.16  Up 194%
     
    Non-GAAP(*) Quarterly Financial Results
     
      Q3 2024 Q3 2023 Y/Y Q2 2024 Q/Q
    Revenue ($M) $6,819 $5,800  Up 18% $5,835  Up 17%
    Gross profit ($M) $3,657 $2,963  Up 23% $3,101  Up 18%
    Gross margin 54% 51%  Up 3 ppts 53%  Up 1 ppt
    Operating expenses ($M) $1,956 $1,697  Up 15% $1,847  Up 6%
    Operating income ($M) $1,715 $1,276  Up 34% $1,264  Up 36%
    Operating margin 25% 22%  Up 3 ppts 22%  Up 3 ppts
    Net income ($M) $1,504 $1,135  Up 33% $1,126  Up 34%
    Diluted earnings per share $0.92 $0.70  Up 31% $0.69  Up 33%
     

    Segment Summary

    • Record Data Center segment revenue of $3.5 billion was up 122% year-over-year and 25% sequentially primarily driven by the strong ramp of AMD Instinct™ GPU shipments and growth in AMD EPYC™ CPU sales.
    • Client segment revenue was $1.9 billion, up 29% year-over-year and 26% sequentially primarily driven by strong demand for “Zen 5” AMD Ryzen™ processors. 
    • Gaming segment revenue was $462 million, down 69% year-over-year and 29% sequentially primarily due to a decrease in semi-custom revenue.
    • Embedded segment revenue was $927 million, down 25% year-over-year as customers normalized their inventory levels. On a sequential basis, revenue increased 8% as demand improved in several end markets.

    Recent PR Highlights

    • At the Advancing AI 2024 event this month, AMD and strategic partners including Dell, Google Cloud, HPE, Lenovo, Meta, Microsoft, Oracle Cloud Infrastructure, Supermicro and AI leaders Databricks, Essential AI, Fireworks AI, Luma AI and Reka AI unveiled a broad portfolio of solutions delivering enterprise AI at scale based on the latest AMD Instinct accelerators, EPYC CPUs, AMD networking solutions and Ryzen PRO CPUs:
      • New AMD EPYC 9005 Series processors, with record-breaking performance and energy efficiency for diverse data center needs, available in a wide range of platforms from leading OEMs and ODMs.
      • AMD Instinct MI325X accelerators, delivering leadership performance and memory capabilities for the most demanding AI workloads. AMD also shared new details on next-gen AMD Instinct accelerators planned to launch in 2025 and 2026.
      • An expanded high performance networking portfolio to maximize performance, scalability and efficiency for AI systems, with the new AMD Pensando™ Salina DPU and AMD Pensando Pollara 400 NIC.
      • New Ryzen AI PRO 300 Series mobile processors, powering next-gen AI PCs for the enterprise with 50+ AI TOPS and leadership performance, battery life, security and manageability features.
    • AMD continues to extend leadership AI performance, optimizations and customer adoption for AMD Instinct accelerators and AMD ROCm™ open software:
      • Oracle Cloud Infrastructure selected AMD Instinct MI300X accelerators with AMD ROCm open software to power its latest OCI Compute Supercluster designed for demanding AI workloads.
      • AMD unveiled its first results on leading AI benchmark MLPerf, revealing excellent performance for AMD Instinct MI300X accelerators advanced by the AMD ROCm software platform, on-par with NVIDIA H100.
      • AMD highlighted support for the latest Llama 3.2 release from Meta, enabling developers to build new agentic applications and personalized AI experiences on AMD accelerators and processors from cloud to edge and AI PCs.
    • AMD and ecosystem partners are enabling new AI PC platforms and capabilities:
      • In partnership with Microsoft, AMD announced that Copilot+ will be enabled on AMD CPU-powered AI PCs via a free upgrade planned to be available starting in November 2024.
      • OEM partners including Acer, HP, Lenovo and Asus announced new systems powered by AMD Ryzen AI 300 Series mobile processors, leveraging the leadership gaming, content creation and everyday performance of the new “Zen 5” architecture.
    • AMD expanded its embedded portfolio for a range of applications, including:
    • AMD announced an agreement to acquire ZT Systems, a leading provider of AI and general purpose compute infrastructure for the world’s largest hyperscale providers, to expand the company’s data center AI systems capabilities and accelerate deployment of AMD AI rack scale systems with cloud and enterprise customers. The acquisition is subject to regulatory clearance and other customary closing conditions and is expected to close in the first half of 2025.
    • AMD completed the acquisition of Silo AI to accelerate development and deployment of AI models on AMD hardware.
    • AMD and Intel announced the creation of an x86 ecosystem advisory group with Broadcom, Dell, Google, HPE, HP, Lenovo, Meta, Microsoft, Oracle, Red Hat and industry luminaries Linus Torvalds and Tim Sweeney to collaborate on architectural interoperability and simplify software development.

    Current Outlook

    AMD’s outlook statements are based on current expectations. The following statements are forward-looking and actual results could differ materially depending on market conditions and the factors set forth under “Cautionary Statement” below.

    For the fourth quarter of 2024, AMD expects revenue to be approximately $7.5 billion, plus or minus $300 million. At the mid-point of the revenue range, this represents year-over-year growth of approximately 22% and sequential growth of approximately 10%. Non-GAAP gross margin is expected to be approximately 54%.

    AMD Teleconference

    AMD will hold a conference call for the financial community at 2:00 p.m. PT (5:00 p.m. ET) today to discuss its third quarter 2024 financial results. AMD will provide a real-time audio broadcast of the teleconference on the Investor Relations page of its website at www.amd.com.

    Media Contact:
    Drew Prairie
    AMD Communications
    512-602-4425
    drew.prairie@amd.com

    Investor Contact:
    Mitch Haws
    AMD Investor Relations
    408-749-3124
    mitch.haws@amd.com

    RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
    (in millions, except per share data) (Unaudited)

      Three Months Ended
      September 28,
    2024    		   June 29,
    2024    		   September 30,
    2023
    GAAP gross profit $ 3,419     $ 2,864     $ 2,747  
    GAAP gross margin   50 %     49 %     47 %
    Stock-based compensation   5       5       6  
    Amortization of acquisition-related intangibles   233       231       210  
    Acquisition-related and other costs(1)   —       1       —  
    Non-GAAP gross profit $ 3,657     $ 3,101     $ 2,963  
    Non-GAAP gross margin   54 %     53 %     51 %
               
    GAAP operating expenses $ 2,709     $ 2,605     $ 2,533  
    GAAP operating expenses/revenue %   40 %     45 %     44 %
    Stock-based compensation   346       341       347  
    Amortization of acquisition-related intangibles   352       372       450  
    Acquisition-related and other costs(1)   55       45       39  
    Non-GAAP operating expenses $ 1,956     $ 1,847     $ 1,697  
    Non-GAAP operating expenses/revenue %   29 %     32 %     29 %
               
    GAAP operating income $ 724     $ 269     $ 224  
    GAAP operating margin   11 %     5 %     4 %
    Stock-based compensation   351       346       353  
    Amortization of acquisition-related intangibles   585       603       660  
    Acquisition-related and other costs(1)   55       46       39  
    Non-GAAP operating income $ 1,715     $ 1,264     $ 1,276  
    Non-GAAP operating margin   25 %     22 %     22 %
      Three Months Ended
      September 28,
    2024    		   June 29,
    2024    		   September 30,
    2023
    GAAP net income / earnings per share $ 771     $ 0.47     $ 265     $ 0.16     $ 299     $ 0.18  
    (Gains) losses on equity investments, net   (1 )     —       —       —       (4 )     —  
    Stock-based compensation   351       0.21       346       0.21       353       0.22  
    Equity income in investee   (7 )     —       (7 )     —       (3 )     —  
    Amortization of acquisition-related intangibles   585       0.36       603       0.37       660       0.41  
    Acquisition-related and other costs(1)   56       0.03       46       0.03       39       0.02  
    Income tax provision   (251 )     (0.15 )     (127 )     (0.08 )     (209 )     (0.13 )
    Non-GAAP net income / earnings per share $ 1,504     $ 0.92     $ 1,126     $ 0.69     $ 1,135     $ 0.70  
    (1)   Acquisition-related and other costs primarily comprised of transaction costs, purchase price adjustments for inventory, certain compensation charges, contract termination and workforce rebalancing charges.

    About AMD

    For more than 50 years AMD has driven innovation in high-performance computing, graphics and visualization technologies. AMD employees are focused on building leadership high-performance and adaptive products that push the boundaries of what is possible. Billions of people, leading Fortune 500 businesses and cutting-edge scientific research institutions around the world rely on AMD technology daily to improve how they live, work and play. For more information about how AMD is enabling today and inspiring tomorrow, visit the AMD (NASDAQ: AMD) website, blog, LinkedIn and X pages.

    Cautionary Statement

    This press release contains forward-looking statements concerning Advanced Micro Devices, Inc. (AMD) such as AMD’s expectations for future growth in data center, client and embedded businesses; AMD being on track to deliver record annual revenue growth for 2024 based on significant growth in AMD’s Data Center and Client segments; AMD’s expectations about the demand for more compute; the features, functionality, performance, availability, timing and expected benefits of future AMD products; AMD’s anticipated acquisition of ZT Systems and the expected timing of the transaction; and AMD’s expected fourth quarter 2024 financial outlook, including revenue and non-GAAP gross margin, which are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are commonly identified by words such as “would,” “may,” “expects,” “believes,” “plans,” “intends,” “projects” and other terms with similar meaning. Investors are cautioned that the forward-looking statements in this press release are based on current beliefs, assumptions and expectations, speak only as of the date of this press release and involve risks and uncertainties that could cause actual results to differ materially from current expectations. Such statements are subject to certain known and unknown risks and uncertainties, many of which are difficult to predict and generally beyond AMD’s control, that could cause actual results and other future events to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements. Material factors that could cause actual results to differ materially from current expectations include, without limitation, the following: Intel Corporation’s dominance of the microprocessor market and its aggressive business practices; Nvidia’s dominance in the graphics processing unit market and its aggressive business practices; the cyclical nature of the semiconductor industry; market conditions of the industries in which AMD products are sold; loss of a significant customer; competitive markets in which AMD’s products are sold; economic and market uncertainty; quarterly and seasonal sales patterns; AMD’s ability to adequately protect its technology or other intellectual property; unfavorable currency exchange rate fluctuations; ability of third party manufacturers to manufacture AMD’s products on a timely basis in sufficient quantities and using competitive technologies; availability of essential equipment, materials, substrates or manufacturing processes; ability to achieve expected manufacturing yields for AMD’s products; AMD’s ability to introduce products on a timely basis with expected features and performance levels; AMD’s ability to generate revenue from its semi-custom SoC products; potential security vulnerabilities; potential security incidents including IT outages, data loss, data breaches and cyberattacks; uncertainties involving the ordering and shipment of AMD’s products; AMD’s reliance on third-party intellectual property to design and introduce new products; AMD’s reliance on third-party companies for design, manufacture and supply of motherboards, software, memory and other computer platform components; AMD’s reliance on Microsoft and other software vendors’ support to design and develop software to run on AMD’s products; AMD’s reliance on third-party distributors and add-in-board partners; impact of modification or interruption of AMD’s internal business processes and information systems; compatibility of AMD’s products with some or all industry-standard software and hardware; costs related to defective products; efficiency of AMD’s supply chain; AMD’s ability to rely on third party supply-chain logistics functions; AMD’s ability to effectively control sales of its products on the gray market; long-term impact of climate change on AMD’s business; impact of government actions and regulations such as export regulations, tariffs and trade protection measures; AMD’s ability to realize its deferred tax assets; potential tax liabilities; current and future claims and litigation; impact of environmental laws, conflict minerals related provisions and other laws or regulations; evolving expectations from governments, investors, customers and other stakeholders regarding corporate responsibility matters; issues related to the responsible use of AI; restrictions imposed by agreements governing AMD’s notes, the guarantees of Xilinx’s notes and the revolving credit agreement; the ability to obtain applicable regulatory approvals for the acquisition of ZT Systems in a timely manner or otherwise and to satisfy other closing conditions to the transaction; impact of acquisitions, joint ventures and/or investments on AMD’s business and AMD’s ability to integrate acquired businesses;  impact of any impairment of the combined company’s assets; political, legal and economic risks and natural disasters; future impairments of technology license purchases; AMD’s ability to attract and retain qualified personnel; and AMD’s stock price volatility. Investors are urged to review in detail the risks and uncertainties in AMD’s Securities and Exchange Commission filings, including but not limited to AMD’s most recent reports on Forms 10-K and 10-Q. 

    (*)   In this earnings press release, in addition to GAAP financial results, AMD has provided non-GAAP financial measures including non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating expenses/revenue%, non-GAAP operating income, non-GAAP operating margin, non-GAAP net income and non-GAAP diluted earnings per share. AMD uses a normalized tax rate in its computation of the non-GAAP income tax provision to provide better consistency across the reporting periods. For fiscal 2024, AMD uses a projected non-GAAP tax rate of 13%, which excludes the tax impact of pre-tax non-GAAP adjustments, reflecting currently available information. AMD also provided adjusted EBITDA, free cash flow and free cash flow margin as supplemental non-GAAP measures of its performance. These items are defined in the footnotes to the selected corporate data tables provided at the end of this earnings press release. AMD is providing these financial measures because it believes this non-GAAP presentation makes it easier for investors to compare its operating results for current and historical periods and also because AMD believes it assists investors in comparing AMD’s performance across reporting periods on a consistent basis by excluding items that it does not believe are indicative of its core operating performance and for the other reasons described in the footnotes to the selected data tables. The non-GAAP financial measures disclosed in this earnings press release should be viewed in addition to and not as a substitute for or superior to AMD’s reported results prepared in accordance with GAAP and should be read only in conjunction with AMD’s Consolidated Financial Statements prepared in accordance with GAAP. These non-GAAP financial measures referenced are reconciled to their most directly comparable GAAP financial measures in the data tables in this earnings press release. This earnings press release also contains forward-looking non-GAAP gross margin concerning AMD’s financial outlook, which is based on current expectations as of October 29, 2024 and assumptions and beliefs that involve numerous risks and uncertainties. Adjustments to arrive at the GAAP gross margin outlook typically include stock-based compensation, amortization of acquired intangible assets and acquisition-related and other costs. The timing and impact of such adjustments are dependent on future events that are typically uncertain or outside of AMD’s control, therefore, a reconciliation to equivalent GAAP measures is not practicable at this time. AMD undertakes no intent or obligation to publicly update or revise its outlook statements as a result of new information, future events or otherwise, except as may be required by law.
         

    ©2024 Advanced Micro Devices, Inc. All rights reserved. AMD, the AMD Arrow logo, 3D V-Cache, Alveo,  EPYC, FidelityFX, Instinct, Kria, Radeon, Ryzen, Threadripper, Ultrascale+, Versal, Zynq, and combinations thereof, are trademarks of Advanced Micro Devices, Inc.

    ADVANCED MICRO DEVICES, INC.
    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
    (Millions except per share amounts and percentages) (Unaudited)

      Three Months Ended   Nine Months Ended
      September 28,
    2024    		   June 29,
    2024    		   September 30,
    2023    		   September 28,
    2024    		   September 30,
    2023
    Net revenue $ 6,819     $ 5,835     $ 5,800     $ 18,127     $ 16,512  
    Cost of sales   3,167       2,740       2,843       8,590       8,236  
    Amortization of acquisition-related intangibles   233       231       210       694       727  
    Total cost of sales   3,400       2,971       3,053       9,284       8,963  
    Gross profit   3,419       2,864       2,747       8,843       7,549  
    Gross margin   50 %     49 %     47 %     49 %     46 %
    Research and development   1,636       1,583       1,507       4,744       4,361  
    Marketing, general and administrative   721       650       576       1,991       1,708  
    Amortization of acquisition-related intangibles   352       372       450       1,116       1,449  
    Licensing gain   (14 )     (10 )     (10 )     (37 )     (28 )
    Operating income   724       269       224       1,029       59  
    Interest expense   (23 )     (25 )     (26 )     (73 )     (79 )
    Other income (expense), net   36       55       59       144       148  
    Income before income taxes and equity income   737       299       257       1,100       128  
    Income tax provision (benefit)   (27 )     41       (39 )     (38 )     (49 )
    Equity income in investee   7       7       3       21       10  
    Net income $ 771     $ 265     $ 299     $ 1,159     $ 187  
    Earnings per share                  
    Basic $ 0.48     $ 0.16     $ 0.18     $ 0.72     $ 0.12  
    Diluted $ 0.47     $ 0.16     $ 0.18     $ 0.71     $ 0.11  
    Shares used in per share calculation                  
    Basic   1,620       1,618       1,616       1,619       1,613  
    Diluted   1,636       1,637       1,629       1,638       1,625  

    ADVANCED MICRO DEVICES, INC.
    CONDENSED CONSOLIDATED BALANCE SHEETS
    (Millions)

      September 28,
    2024    		   December 30,
    2023
      (Unaudited)    
    ASSETS      
    Current assets:      
    Cash and cash equivalents $ 3,897     $ 3,933  
    Short-term investments   647       1,840  
    Accounts receivable, net   7,241       5,376  
    Inventories   5,374       4,351  
    Receivables from related parties   29       9  
    Prepaid expenses and other current assets   1,547       1,259  
    Total current assets   18,735       16,768  
    Property and equipment, net   1,669       1,589  
    Operating lease right-of-use assets   647       633  
    Goodwill   24,839       24,262  
    Acquisition-related intangibles, net   19,572       21,363  
    Investment: equity method   137       99  
    Deferred tax assets   1,183       366  
    Other non-current assets   2,854       2,805  
    Total Assets $ 69,636     $ 67,885  
           
    LIABILITIES AND STOCKHOLDERS’ EQUITY      
    Current liabilities:      
    Accounts payable $ 2,530     $ 2,055  
    Payables to related parties   461       363  
    Accrued liabilities   4,120       3,082  
    Current portion of long-term debt, net   —       751  
    Other current liabilities   389       438  
    Total current liabilities   7,500       6,689  
    Long-term debt, net of current portion   1,720       1,717  
    Long-term operating lease liabilities   518       535  
    Deferred tax liabilities   1,162       1,202  
    Other long-term liabilities   1,751       1,850  
           
    Stockholders’ equity:      
    Capital stock:      
    Common stock, par value   17       17  
    Additional paid-in capital   60,896       59,676  
    Treasury stock, at cost   (5,812 )     (4,514 )
    Retained earnings   1,882       723  
    Accumulated other comprehensive income (loss)   2       (10 )
    Total stockholders’ equity $ 56,985     $ 55,892  
    Total Liabilities and Stockholders’ Equity $ 69,636     $ 67,885  

    ADVANCED MICRO DEVICES, INC.
    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
    (Millions) (Unaudited)

      Three Months Ended   Nine Months Ended
      September 28,
    2024    		   September 30,
    2023    		   September 28,
    2024    		   September 30,
    2023
    Cash flows from operating activities:              
    Net income $ 771     $ 299     $ 1,159     $ 187  
    Adjustments to reconcile net income to net cash provided by operating activities:              
    Depreciation and amortization   756       823       2,309       2,654  
    Stock-based compensation   351       353       1,068       1,010  
    Amortization of operating lease right-of-use assets   30       25       82       73  
    Deferred income taxes   (607 )     (218 )     (863 )     (800 )
    Inventory loss at contract manufacturer   —       —       65       —  
    Other   (13 )     (23 )     (50 )     (31 )
    Changes in operating assets and liabilities              
    Accounts receivable, net   (1,489 )     (743 )     (1,862 )     (929 )
    Inventories   (386 )     122       (1,096 )     (674 )
    Prepaid expenses and other assets   (16 )     (143 )     (250 )     (380 )
    Receivables from and payables to related parties, net   36       14       78       (136 )
    Accounts payable   832       (547 )     476       (238 )
    Accrued and other liabilities   363       459       626       550  
    Net cash provided by operating activities   628       421       1,742       1,286  
    Cash flows from investing activities:              
    Purchases of property and equipment   (132 )     (124 )     (428 )     (407 )
    Purchases of short-term investments   (142 )     (496 )     (707 )     (3,312 )
    Proceeds from maturity of short-term investments   149       746       1,351       1,917  
    Proceeds from sale of short-term investments   589       —       591       248  
    Acquisitions, net of cash acquired   (548 )     (14 )     (548 )     (14 )
    Related party equity method investment   (17 )     —       (17 )     —  
    Other   (37 )     (10 )     (129 )     (5 )
    Net cash provided by (used in) investing activities   (138 )     102       113       (1,573 )
    Cash flows from financing activities:              
    Repayment of debt   —       —       (750 )     —  
    Proceeds from sales of common stock through employee equity plans   4       4       152       148  
    Repurchases of common stock   (250 )     (511 )     (606 )     (752 )
    Common stock repurchases for tax withholding on employee equity plans   (460 )     (295 )     (686 )     (382 )
    Other   —       (1 )     (1 )     1  
    Net cash used in financing activities   (706 )     (803 )     (1,891 )     (987 )
    Net decrease in cash and cash equivalents $ (216 )   $ (280 )   $ (36 )   $ (1,274 )
    Cash and cash equivalents at beginning of period   4,113       3,841       3,933       4,835  
    Cash and cash equivalents at end of period $ 3,897     $ 3,561     $ 3,897     $ 3,561  

    ADVANCED MICRO DEVICES, INC.
    SELECTED CORPORATE DATA
    (Millions) (Unaudited)

      Three Months Ended   Nine Months Ended
      September 28,
    2024    		   June 29,
    2024    		   September 30,
    2023    		   September 28,
    2024    		   September 30,
    2023
    Segment and Category Information(1)                  
    Data Center                  
    Net revenue $ 3,549     $ 2,834     $ 1,598     $ 8,720     $ 4,214  
    Operating income $ 1,041     $ 743     $ 306     $ 2,325     $ 601  
    Client                  
    Net revenue $ 1,881     $ 1,492     $ 1,453     $ 4,741     $ 3,190  
    Operating income (loss) $ 276     $ 89     $ 140     $ 451     $ (101 )
    Gaming                  
    Net revenue $ 462     $ 648     $ 1,506     $ 2,032     $ 4,844  
    Operating income $ 12     $ 77     $ 208     $ 240     $ 747  
    Embedded                  
    Net revenue $ 927     $ 861     $ 1,243     $ 2,634     $ 4,264  
    Operating income $ 372     $ 345     $ 612     $ 1,059     $ 2,167  
    All Other                  
    Net revenue $ —     $ —     $ —     $ —     $ —  
    Operating loss $ (977 )   $ (985 )   $ (1,042 )   $ (3,046 )   $ (3,355 )
    Total                  
    Net revenue $ 6,819     $ 5,835     $ 5,800     $ 18,127     $ 16,512  
    Operating income $ 724     $ 269     $ 224     $ 1,029     $ 59  
                       
    Other Data                  
    Capital expenditures $ 132     $ 154     $ 124     $ 428     $ 407  
    Adjusted EBITDA(2) $ 1,887     $ 1,430     $ 1,439     $ 4,612     $ 3,920  
    Cash, cash equivalents and short-term investments $ 4,544     $ 5,340     $ 5,785     $ 4,544     $ 5,785  
    Free cash flow(3) $ 496     $ 439     $ 297     $ 1,314     $ 879  
    Total assets $ 69,636     $ 67,886     $ 67,626     $ 69,636     $ 67,626  
    Total debt $ 1,720     $ 1,719     $ 2,467     $ 1,720     $ 2,467  
    (1)   The Data Center segment primarily includes server microprocessors (CPUs), graphics processing units (GPUs), accelerated processing units (APUs), data processing units (DPUs), Field Programmable Gate Arrays (FPGAs), Smart Network Interface Cards (SmartNICs), Artificial Intelligence (AI) accelerators and Adaptive System-on-Chip (SoC) products for data centers.
        The Client segment primarily includes CPUs, APUs, and chipsets for desktop, notebook and handheld personal computers.
        The Gaming segment primarily includes discrete GPUs, and semi-custom SoC products and development services.
        The Embedded segment primarily includes embedded CPUs, GPUs, APUs, FPGAs, System on Modules (SOMs), and Adaptive SoC products.
        From time to time, the Company may also sell or license portions of its IP portfolio.
        All Other category primarily includes certain expenses and credits that are not allocated to any of the operating segments, such as amortization of acquisition-related intangible asset, employee stock-based compensation expense, acquisition-related and other costs, inventory loss at contract manufacturer, and licensing gain.
    (2)   Reconciliation of GAAP Net Income to Adjusted EBITDA
      Three Months Ended   Nine Months Ended
    (Millions) (Unaudited) September 28,
    2024    		   June 29,
    2024    		   September 30,
    2023    		   September 28,
    2024    		   September 30,
    2023
    GAAP net income $ 771     $ 265     $ 299     $ 1,159     $ 187  
    Interest expense   23       25       26       73       79  
    Other (income) expense, net   (36 )     (55 )     (59 )     (144 )     (148 )
    Income tax provision (benefit)   (27 )     41       (39 )     (38 )     (49 )
    Equity income in investee   (7 )     (7 )     (3 )     (21 )     (10 )
    Stock-based compensation   351       346       353       1,068       1,006  
    Depreciation and amortization   171       166       163       499       478  
    Amortization of acquisition-related intangibles   585       603       660       1,810       2,176  
    Inventory loss at contract manufacturer   —       —       —       65       —  
    Acquisition-related and other costs   56       46       39       141       201  
    Adjusted EBITDA $ 1,887     $ 1,430     $ 1,439     $ 4,612     $ 3,920  
     

    The Company presents “Adjusted EBITDA” as a supplemental measure of its performance. Adjusted EBITDA for the Company is determined by adjusting GAAP net income for interest expense, other (income) expense, net, income tax provision (benefit), equity income in investee, stock-based compensation, depreciation and amortization expense, amortization of acquisition-related intangibles, inventory loss at contract manufacturer, and acquisition-related and other costs. The Company calculates and presents Adjusted EBITDA because management believes it is of importance to investors and lenders in relation to its overall capital structure and its ability to borrow additional funds. In addition, the Company presents Adjusted EBITDA because it believes this measure assists investors in comparing its performance across reporting periods on a consistent basis by excluding items that the Company does not believe are indicative of its core operating performance. The Company’s calculation of Adjusted EBITDA may or may not be consistent with the calculation of this measure by other companies in the same industry. Investors should not view Adjusted EBITDA as an alternative to the GAAP operating measure of income or GAAP liquidity measures of cash flows from operating, investing and financing activities. In addition, Adjusted EBITDA does not take into account changes in certain assets and liabilities that can affect cash flows.

    (3)   Reconciliation of GAAP Net Cash Provided by Operating Activities to Free Cash Flow
      Three Months Ended   Nine Months Ended
    (Millions except percentages) (Unaudited) September 28,
    2024    		   June 29,
    2024    		   September 30,
    2023    		   September 28,
    2024    		   September 30,
    2023
    GAAP net cash provided by operating activities $ 628     $ 593     $ 421     $ 1,742     $ 1,286  
    Operating cash flow margin %   9 %     10 %     7 %     10 %     8 %
    Purchases of property and equipment   (132 )     (154 )     (124 )     (428 )     (407 )
    Free cash flow $ 496     $ 439     $ 297     $ 1,314     $ 879  
    Free cash flow margin %   7 %     8 %     5 %     7 %     5 %
     

    The Company also presents free cash flow as a supplemental Non-GAAP measure of its performance. Free cash flow is determined by adjusting GAAP net cash provided by operating activities for capital expenditures, and free cash flow margin % is free cash flow expressed as a percentage of the Company’s net revenue. The Company calculates and communicates free cash flow in the financial earnings press release because management believes it is of importance to investors to understand the nature of these cash flows. The Company’s calculation of free cash flow may or may not be consistent with the calculation of this measure by other companies in the same industry. Investors should not view free cash flow as an alternative to GAAP liquidity measures of cash flows from operating activities.

    The MIL Network –

  • MIL-OSI: Home Federal Bancorp, Inc. of Louisiana Reports Results of Operations for the Three Months Ended September 30, 2024

    Source: GlobeNewswire (MIL-OSI)

    Shreveport, Oct. 29, 2024 (GLOBE NEWSWIRE) — Home Federal Bancorp, Inc. of Louisiana (the “Company”) (Nasdaq: HFBL), the holding company of Home Federal Bank, reported net income for the three months ended September 30, 2024, of $941,000 compared to net income of $1.2 million reported for the three months ended September 30, 2023. The Company’s basic and diluted earnings per share were $0.31 for the three months ended September 30, 2024, compared to basic and diluted earnings per share of $0.40 and $0.39, respectively, for the three months ended September 30, 2023.

    The decrease in net income for the three months ended September 30, 2024, compared to the same period in 2023, resulted from a decrease in net interest income of $857,000, or 16.2%, and a decrease in non-interest income of $134,000, or 30.9%, partially offset by a decrease in non-interest expense of $177,000, or 4.2%, a decrease in provision for income taxes of $312,000, or 100.6%, a decrease in the provision of credit losses of $223,000. The decrease in net interest income for the three months ended September 30, 2024, compared to the same period in 2023, resulted from an increase in total interest expense of $524,000, or 18.8%, and a decrease in total interest income of $333,000, or 4.1%.  The Company’s average interest rate spread was 2.23% for the three months ended September 30, 2024, compared to 2.68% for the three months ended September 30, 2023. The Company’s net interest margin was 2.98% for the three months ended September 30, 2024, compared to 3.37% for the three months ended September 30, 2023.

    The following table sets forth the Company’s average balances and average yields earned and rates paid on its interest-earning assets and interest-bearing liabilities for the periods indicated.

        For the Three Months Ended September 30,  
        2024     2023  
        Average
    Balance    		     Average
    Yield/Rate    		     Average
    Balance    		     Average
    Yield/Rate    		  
        (Dollars in thousands)  
    Interest-earning assets:                                
    Loans receivable   $ 466,170       5.87 %   $ 498,242       5.79 %
    Investment securities     96,749       2.09       113,584       2.18  
    Interest-earning deposits     25,617       5.20       10,066       6.98  
    Total interest-earning assets   $ 588,536       5.22 %   $ 621,892       5.15 %
                                     
    Interest-bearing liabilities:                                
    Savings accounts   $ 82,556       1.61 %   $ 78,572       0.38 %
    NOW accounts     72,787       1.10       55,900       0.48  
    Money market accounts     75,216       2.29       108,891       2.26  
    Certificates of deposit     204,019       4.30       194,785       3.73  
    Total interest-bearing deposits      434,578       2.92       438,148       2.47  
    Other bank borrowings     5,989       7.75       8,654       8.39  
    FHLB advances     —       —       1,138       5.23  
    Total interest-bearing liabilities   $ 440,567       2.98 %   $ 447,940       2.47 %

    The $134,000 decrease in non-interest income for the three months ended September 30, 2024, compared to the same period in 2023, resulted from an increase in loss on sale of real estate of $220,000, partially offset by an increase in gain on sale of loans of $58,000, an increase in other non-interest income of $26,000, and an increase in income on bank owned life insurance of $2,000.

    The $177,000 decrease in non-interest expense for the three months ended September 30, 2024, compared to the same period in 2023, resulted from decreases in advertising expense of $86,000, compensation and benefits expense of $54,000, professional fees of $43,000, loan and collection expense of $32,000, data processing expense of $26,000, amortization of core deposit intangible expense of $20,000, and deposit insurance premium expense of $1,000, partially offset by increases in audit and examination fees of $30,000, other non-interest expense of $28,000, occupancy and equipment expense of $15,000, and franchise and bank shares tax expense of $12,000.

    Total assets decreased $9.1 million, or 1.4%, from $637.5 million at June 30, 2024 to $628.4 million at September 30, 2024. The decrease in assets was comprised of decreases in net loans receivable of $16.9 million, or 3.6%, from $470.9 million at June 30, 2024 to $454.0 million at September 30, 2024, real estate owned of $296,000, or 70.8% from $418,000 at June 30, 2024 to $122,000 at September 30, 2024, premises and equipment of $238,000, or 1.3%, from $18.3 million at June 30, 2024 to $18.1 million at September 30, 2024, core deposit intangible of $74,000, or 6.2%, from $1.2 million at June 30, 2024 to $1.1 million at September 30, 2024, and accrued interest receivable of $14,000, or 0.8%, from $1.78 million at June 30, 2024 to $1.76 million at September 30, 2024, partially offset by increases in cash and cash equivalents of $6.1 million, or 17.4%, from $34.9 million at June 30, 2024 to $41.0 million at September 30, 2024, investment securities of $1.4 million, or 1.5%, from $96.0 million at June 30, 2024 to $97.4 million at September 30, 2024, loans-held-for-sale of $535,000, or 30.9%, from $1.7 million at June 30, 2024 to $2.3 million at September 30, 2024, other assets of $224,000, or 16.6%, from $1.3 million at June 30, 2024 to $1.6 million at September 30, 2024, deferred tax asset of $29,000, or 2.5%, from $1.18 million at June 30, 2024 to $1.21 million at September 30, 2024, and bank owned life insurance of $29,000, or 0.4%, from $6.81 million at June 30, 2024 to $6.84 million at September 30, 2024. The increase in investment securities was primarily due to $4.0 million in security purchases and a $1.3 million reduction in unrealized losses on available for sale securities, partially offset by $3.5 million in principal payments. The increase in cash and cash equivalents from $34.9 million at June 30, 2024 to $41.0 million at September 30, 2024 was mainly due to decreases in loans receivable.

    Total liabilities decreased $10.6 million, or 1.8%, from $584.7 million at June 30, 2024 to $574.1 million at September 30, 2024. The decrease in liabilities was comprised of decreases in total deposits of $9.4 million, or 1.6%, from $574.0 million at June 30, 2024 to $564.6 million at September 30, 2024, and other borrowings of $1.5 million, or 21.4%, from $7.0 million at June 30, 2024 to $5.5 million at September 30, 2024, partially offset by increases in other accrued expenses and liabilities of $252,000, or 7.9%, from $3.2 million at June 30, 2024 to $3.4 million at September 30, 2024, and advances from borrowers for taxes and insurance of $123,000, or 23.6%, from $521,000 at June 30, 2024 to $644,000 at September 30, 2024,. The decrease in deposits resulted from decreases in certificates of deposit of $17.5 million, or 8.2%, from $214.9 million at June 30, 2024 to $197.3 million at September 30, 2024, and money market deposits of $5.9 million, or 6.9%, from $85.5 million at June 30, 2024 to $79.6 million at September 30, 2024, partially offset by increases in savings deposits of $9.2 million, or 12.0%, from $76.6 million at June 30, 2024 to $85.8 million at September 30, 2024, non-interest deposits of $3.0 million, or 2.3%, from $130.3 million at June 30, 2024 to $133.3 million at September 30, 2024, and NOW accounts of $1.9 million, or 2.8%, from $66.6 million at June 30, 2024 to $68.5 million at September 30, 2024. The Company had no balances in brokered deposits at September 30, 2024 or June 30, 2024.

    At September 30, 2024, the Company had $1.9 million of non-performing assets (defined as non-accruing loans, accruing loans 90 days or more past due, and other real estate owned) compared to $2.0 million on non-performing assets at June 30, 2024, consisting of two commercial non-real estate loans, five single-family residential loans, four home equity line-of-credit loans, and one single-family residence in other real estate owned at September 30, 2024, compared to five single-family residential loans, three commercial non-real estate loans, four home equity line-of-credit loans and three single-family residences in other real estate owned at June 30, 2024.  At September 30, 2024 the Company had five commercial non-real-estate loans, one commercial real-estate loan, six single family residential loans, four home-equity line-of-credit loans, and one auto loan classified as substandard, compared to six single family residential loans, five commercial non-real-estate loans, four home equity line-of-credit loans and one auto loan classified as substandard at June 30, 2024.  There were no loans classified as doubtful at September 30, 2024 or June 30, 2024.

    Shareholders’ equity increased $1.5 million, or 2.8%, from $52.8 million at June 30, 2024 to $54.3 million at September 30, 2024. The increase in shareholders’ equity was comprised of net income for the three month period of $941,000, the vesting of restricted stock awards, stock options, and the release of employee stock ownership plan shares totaling $94,000, proceeds from the issuance of common stock from the exercise of stock options of $19,000, and a decrease in the Company’s accumulated other comprehensive loss of $1.0 million, partially offset by dividends paid totaling $409,000, and stock repurchases of $182,000.

    Home Federal Bancorp, Inc. of Louisiana is the holding company for Home Federal Bank which conducts business from its ten full-service banking offices and home office in northwest Louisiana.

    Statements contained in this news release which are not historical facts may be forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995.  Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts.  They often include words like “believe”, “expect”, “anticipate”, “estimate”, and “intend”, or future or conditional verbs such as “will”, “would”, “should”, “could”, or “may”.  We undertake no obligation to update any forward-looking statements.

    In addition to factors previously disclosed in the reports filed by the Company with the Securities and Exchange Commission and those identified elsewhere in this press release, the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance: the strength of the United States economy in general and the strength of the local economies in which the Company conducts its operations; general economic conditions; legislative and regulatory changes; monetary and fiscal policies of the federal government; changes in tax policies, rates and regulations of federal, state and local tax authorities including the effects of the Tax Reform Act; changes in interest rates, deposit flows, the cost of funds, demand for loan products and the demand for financial services, competition, changes in the quality or composition of the Company’s loans, investment and mortgage-backed securities portfolios; geographic concentration of the Company’s business; fluctuations in real estate values; the adequacy of loan loss reserves; the risk that goodwill and intangibles recorded in the Company’s financial statements will become impaired; changes in accounting principles, policies or guidelines and other economic, competitive, governmental and technological factors affecting the Company’s operations, markets, products, services and fees.

    HOME FEDERAL BANCORP, INC. OF LOUISIANA
    CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
    (In thousands except share and per share data)
        September 30, 2024     June 30, 2024  
        (Unaudited)          
    ASSETS                
                     
    Cash and Cash Equivalents (Includes Interest-Bearing Deposits with Other Banks of $32,743 and $25,505 at September 30, 2024 and June 30, 2024, Respectively)   $ 41,044     $ 34,948  
    Securities Available-for-Sale (amortized cost September 30, 2024: $31,977; June 30, 2024: $30,348, Respectively)     29,934       27,037  
    Securities Held-to-Maturity (fair value September 30, 2024: $56,584; June 30, 2024: $54,450, Respectively)     65,800       67,302  
    Other Securities     1,633       1,614  
    Loans Held-for-Sale     2,268       1,733  
    Loans Receivable, Net of Allowance for Credit Losses (September 30, 2024: $4,703; June 30, 2024: $4,574, Respectively)     454,039       470,852  
    Accrued Interest Receivable     1,761       1,775  
    Premises and Equipment, Net     18,065       18,303  
    Bank Owned Life Insurance     6,839       6,810  
    Goodwill     2,990       2,990  
    Core Deposit Intangible     1,125       1,199  
    Deferred Tax Asset     1,210       1,181  
    Real Estate Owned     122       418  
    Other Assets     1,574       1,350  
                     
    Total Assets   $ 628,404     $ 637,512  
                     
    LIABILITIES AND SHAREHOLDERS’ EQUITY                
                     
    LIABILITIES                
                     
    Deposits:                
    Non-interest bearing   $ 133,293     $ 130,334  
    Interest-bearing     431,267       443,673  
    Total Deposits     564,560       574,007  
    Advances from Borrowers for Taxes and Insurance     644       521  
    Other Borrowings     5,500       7,000  
    Other Accrued Expenses and Liabilities     3,433       3,181  
                     
    Total Liabilities     574,137       584,709  
                     
    SHAREHOLDERS’ EQUITY                
                     
    Preferred Stock – $0.01 Par Value; 10,000,000 Shares Authorized: None Issued and Outstanding     –       –  
    Common Stock – $0.01 Par Value; 40,000,000 Shares Authorized: 3,129,668 and 3,144,168 Shares Issued and Outstanding at September 30, 2024 and June 30, 2024, Respectively     32       32  
    Additional Paid-in Capital     41,822       41,739  
    Unearned ESOP Stock     (379 )     (408 )
    Retained Earnings     14,406       14,055  
    Accumulated Other Comprehensive Loss     (1,614 )     (2,615 )
                     
    Total Shareholders’ Equity     54,267       52,803  
                     
    TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY   $ 628,404     $ 637,512  
    HOME FEDERAL BANCORP, INC. OF LOUISIANA
    CONSOLIDATED STATEMENTS OF INCOME
    (Unaudited) (In thousands except share and per share data)
        Three Months Ended  
        September 30,  
        2024     2023  
    INTEREST INCOME                
    Loans, including fees   $ 6,895     $ 7,274  
    Investment securities     67       150  
    Mortgage-backed securities     443       473  
    Other interest-earning assets     336       177  
    Total interest income     7,741       8,074  
                     
    INTEREST EXPENSE                
    Deposits     3,197       2,592  
    Federal Home Loan Bank borrowings     —       15  
    Other bank borrowings     117       183  
    Total interest expense     3,314       2,790  
    Net interest income     4,427       5,284  
                     
    RECOVERY OF CREDIT LOSSES     (223 )     —  
    Net interest income after recovery of credit losses     4,650       5,284  
                     
    NON-INTEREST INCOME                
    Gain on sale of loans     96       38  
    Loss on sale of real estate     (254 )     (34 )
    Income on bank owned life insurance     28       26  
    Service charges on deposit accounts     391       391  
    Other income     39       13  
                     
    Total non-interest income     300       434  
                     
    NON-INTEREST EXPENSE                
    Compensation and benefits     2,302       2,356  
    Occupancy and equipment     564       549  
    Data processing     219       245  
    Audit and examination fees     132       102  
    Franchise and bank shares tax     168       156  
    Advertising     57       143  
    Professional fees     117       160  
    Loan and collection     28       60  
    Amortization core deposit intangible     74       94  
    Deposit insurance premium     90       91  
    Other expenses     260       232  
    Total non-interest expense     4,011       4,188  
                     
    Income before income taxes     939       1,530  
    PROVISION FOR INCOME TAX EXPENSE     (2 )     310  
                     
    NET INCOME   $ 941     $ 1,220  
                     
    EARNINGS PER SHARE                
    Basic   $ 0.31     $ 0.40  
    Diluted   $ 0.31     $ 0.39  
        Three Months Ended
    September 30,    		  
        2024     2023  
                     
    Selected Operating Ratios(1):                
    Average interest rate spread     2.23 %     2.68 %
    Net interest margin     2.98 %     3.37 %
    Return on average assets     0.59 %     0.73 %
    Return on average equity     7.23 %     9.46 %
                     
    Asset Quality Ratios(2):                
    Non-performing assets as a percent of total assets     0.31 %     0.28 %
    Allowance for credit losses as a percent of non-performing loans     258.46 %     403.96 %
    Allowance for credit losses as a percent of total loans receivable     1.03 %     1.00 %
                     
    Per Share Data:                
    Shares outstanding at period end     3,129,668       3,133,351  
    Weighted average shares outstanding:                
    Basic     3,058,286       3,028,597  
    Diluted     3,071,716       3,107,834  
    (1)     Ratios for the three-month period are annualized.
    (2)     Asset quality ratios are end of period ratios.

    The MIL Network –

  • MIL-OSI Submissions: ENERGY SECTOR – OPINION: There’s not a second to lose if the UK is to build a world-class battery industry

    Source and Opinion by Richard Moore, Battery Expert at Greenpower Park

    The Faraday Institution’s latest report on UK Gigafactories finds that they could support 35,000 jobs by 2040, along with a further 65,000 in the supply chain, but warns that the UK is not moving quickly enough. It’s time to put words into action and build the manufacturing capacity that we need to ensure that the UK not only catches up but becomes a world leader, says Richard Moore, Greenpower Park’s Battery Expert

    A question that used to be asked in every job interview was ‘where do you see yourself in five years? The interviewee almost certainly had a detailed list of aspirations to reel off in response If the same question was asked of the UK PLC in relation to the number of gigafactories it will have after that same period of time, the answer would be much shorter and to the point: ‘not enough.’

    That’s a massive problem, because as the Faraday Institution’s ‘UK electric vehicle and battery production potential to 2040’ report makes very clear, the UK is rapidly falling far behind in the global race to build these strategically important assets that are vital to making transport more sustainable, reducing emissions, improving air quality, and delivering net-zero commitments.

    With each gigafactory taking some five years to build1, there’s no time to waste, and in determining the way forward we learn a hard lesson learnt from the past: the lithium-ion battery was invented in the UK but the strategic importance of manufacturing them in the UK was overlooked. This is why today we have just one operational gigafactory which has a capacity of less than 2GWh. And by 2030 – the date that the new Labour government has pledged to ban sales of combustion engine vehicles, the UK is expected to have only three1 up and running.

    That’s around half of what’s needed because the UK’s demand is expected to reach almost 110GWh a year in 2030 – the equivalent of six large gigafactories running at 90% capacity1. That also compares very unfavourably to the 40 expected to be operational in Europe by that time1, and more than 400 worldwide2.

    Even if we broke ground today, the additional sites we need in the UK would only just be ramping up production volumes by the time the last petrol and diesel vehicles will be driven out of the showrooms. Which means that many of the EVs manufactured in the UK will use imported cells, while at the same time the UK will not be in a position to export these highly valuable items to other countries. Compounding the problem are the requirements of Rules of Origin regulations that from 2027 will require EVs made here to use cells manufactured in the UK or Europe to avoid new tariffs when sold in Europe.

    And of course, as well as road transport, there will be huge demand for the cells needed to electrify other industries such as the aviation and marine sectors. It is absolutely vital to our future that we have a world-class battery industry here in the UK, together with a robust, transparent and sustainable supply chain to serve it. And we must be cognizant of the fact that while the UK is forecast to make only 53 per cent of the capacity it will need in 20301, the gulf is expected to grow, with only 29% capacity by 2040, by which time we’ll need some 200GWh of supply1.

    A true centre of excellence in electrification

    The transition from internal combustion engines running on fossil fuels to e-mobility powered by renewables represents nothing less than a paradigm shift, and we simply cannot afford to squander the opportunity to place the UK as the driving force behind it. Greenpower Park, the UK’s Centre of Electrification and Clean Energy, is a trailblazing centre of excellence for electrification, battery technology and manufacturing. With the West Midlands Gigafactory as its anchor tenant, it has unrivalled access to the most highly skilled workforce in the country.

    This ground-breaking location is the first of its kind, offering an all-in-one solution for battery research, industrialisation, manufacturing, testing, recycling and electrified logistics designed to foster the UK’s growing battery ecosystem. Based in the country’s automotive skills heartland, it is at the epicentre of the country’s shift to electrification and is synonymous with both electric vehicle and battery manufacturing.

    The automotive and manufacturing industries run through the blood of generations of the workforce in the West Midlands and will continue to do so in the future with the creation of Greenpower Park. Located closer to almost every vehicle manufacturer’s plant than any other proposed gigafactory in the UK, it is also adjacent to the world-renowned UK Battery Industrialisation Centre as well as nine universities and their 220,000 students. Greenpower Park represents a unique collaboration between academia, industry, government and international partners to create a complete ecosystem purpose-designed to boost accelerated development, growth and innovation across the e-mobility sector.

    Tempus fugit: action this day

    We believe that we can play a pivotal role in helping overcome the battery cell demand issue that’s coming in the next decade and beyond. But to do that we need to act now, and that involves laying out incentive packages to accelerate conversations with potential investors, and to enable us to achieve our goals within the battery manufacturers’ demanding investment timescales – and the vehicle manufacturers’ product development cycles.

    We’ve put all the pieces in place to enable that to happen, and we are the UK’s only proposed Gigafactory site with Investment Zone Status. This offers a compelling package of incentives for investors, including Stamp Duty Land Tax Relief, 100 per cent Business Rate Relief on newly occupied premises, 100 per cent first year Capital Allowances for expenditure on new plant and machinery, zero rate employer national insurance contributions for 36 months for each new job created, enhanced structures and buildings allowance, and additional support for supply chain and skills development, innovation, and R&D. We strongly believe that with inward investment of £2.5bn we can build our state-of-the-art Gigafactory and create 6,000 highly skilled jobs.

    We’re also highly encouraged by the new UK government’s pledge to directly invest in industry via the National Wealth Fund, reward firms that build their manufacturing supply chains in the UK via the British Jobs Bonus, and, in short, ‘secure the future of Britain’s automotive industry.’3 We urge the Prime Minister to deliver on those promises and help us to play our part in full.

    The UK has always been a leader in designing and developing cutting-edge technologies, but hasn’t always fulfilled its potential in successfully mass-producing them. With battery cells and Gigafactories we have an unprecedented opportunity to change this. But we must act now if we are to seize it. Five years from now, we want the UK to be a globally competitive supplier of battery cells and securing the clean energy supply chain for the future, not asking why we allowed ourselves to fall further behind.

    1 https://www.faraday.ac.uk/wp-content/uploads/2024/09/Gigafactory-Report_2024_final_17Sept2024.pdf

    2 https://source.benchmarkminerals.com/article/over-400-gigafactories-in-2030-pipeline-but-overcapacity-fears-loom

    3 https://labour.org.uk/change/make-britain-a-clean-energy-superpower/

    MIL OSI – Submitted News –

  • MIL-OSI Security: Mansfield Tax Preparer Sentenced to More Than 15 Years After Touting False Credentials

    Source: Office of United States Attorneys

    A would-be lawyer who falsely inflated dozens of client tax returns was sentenced Tuesday to more than 15 years in federal prison for tax fraud, announced U.S. Attorney for the Northern District of Texas Leigha Simonton.

    John Anthony Castro, 40, owner of the virtual tax preparation business Castro & Company, was indicted in January. Following a five-day bench trial before Senior U.S. District Judge Terry R Means, he was convicted on all 33 counts of assisting in the preparation of a fraudulent return and was immediately taken into custody. Judge Means sentenced him Thursday to 188 months in prison and ordered him to pay $277,243 in restitution.

    “Far from an ‘international tax expert,’ this defendant was an international fraudster, plain and simple,” said U.S. Attorney Leigha Simonton. “Not only did he defraud the U.S. government, he bullied and berated clients who dared question his methods. Today’s sentencing should send a message to tax preparers nationwide: Lie on clients’ returns at your own peril.”

    “Mr. Castro prepared and filed completely fraudulent and fabricated tax returns for one reason: greed,” stated Special Agent in Charge Jenifer L. Piovesan, IRS Criminal Investigation, Newark Field Office.  “Today’s sentence highlights IRS-CI’s diligence in rooting out dishonest tax return preparers whose only motive is to cheat the system and make themselves richer in the process.”

    According to evidence presented in court, Mr. Castro – who had graduated law school but repeatedly failed the bar exam – held himself out as an “international tax expert” and “federal practitioner.” (He also falsely claimed to be a graduate of West Point.)

    He was successful at marketing to clients around the world, claiming to be an expert on certain tax issues related to Australian ex-pats, among other things.  Between 2017 and 2019, he filed more than 1,900 tax returns on behalf of individuals from all over the world.

    As part of his pitch, Mr. Castro promised his clients a significantly higher refund than they would receive from other preparers, claiming he knew how to identify and claim deductions that others did not.  He added there was no risk, as he would simply split the additional refund amount with them to account for his fee.  He would not share the tax return with clients before filing, but would instead simply inform them of the amount of the anticipated refund.

    On many occasions, he filed tax returns on behalf of clients without their permission or knowledge.  In other instances, he claimed deductions that had no basis in fact.  For example, for one client, who made approximately $103,000 in income, Mr. Castro claimed over $90,000 in deductions related to unreimbursed employee expenses.

    Mr. Castro claimed deductions based on extreme and unsupported legal theories, including deductions such as (1) those for any expense related to preventing an illness qualified as an “impairment related work expense,” (2) those for expenses related to commuting to and from work, (3) the full value of one’s mortgage and utilities as long as the taxpayer had some type of Schedule C business to claim, (4) those related to dry-cleaning for work clothes, and (5) the full value of one’s cell phone bill even when their employer provided them with a work phone.  For example, with respect to one client, Mr. Castro deducted over $26,000 in expenses that he claimed related to a nascent cupcake business that had generated only $250 in revenue.

    According to trial testimony, in February 2018, an undercover IRS – CI agent contacted Mr. Castro for assistance. The agent asked to meet with Mr. Castro in person, but Mr. Castro’s office told him that in-person meetings required a $5,000 retainer. They spoke via email instead.

    On February 13, 2018, the undercover agent submitted a W2 and a Form 1098-T showing wages of $142,217. About two weeks later, one of Mr. Castro’s employees called the agent to discuss deductions, noting that Mr. Castro would make any decisions regarding what items would be included on the tax filing.

    The agent denied having any unreimbursed employee expenses, charitable contributions, or other items that could lead to deductions.

    On March 12, 2018, Mr. Castro sent the undercover agent his tax analysis. He said that if the agent used another preparer, he would receive a refund of $373, but that if he used Mr. Castro, he would receive a refund of $6,007. Mr. Castro would take half, netting him $3,008. The analysis said the return would include $29,339 in deductions but did not specify which deductions would be used.

    Two days later, Mr. Castro filed the agent’s return, which claimed $29,339 in fraudulent deductions, including $2,400 in employee expenses, and 28,600 in other expenses that the undercover agent had never discussed with Mr. Castro or his employees.

    According to evidence presented at trial, Mr. Castro engaged in a similar pattern with his other clients. When the victim-taxpayers learned what Mr. Castro had done, many of them demanded copies of their tax returns. Mr. Castro refused to engage in conversation and even delayed providing returns for months at a time.  Mr. Castro often acted in a highly vindictive manner when questioned or challenged by clients or others, often berating individuals in emails, threatening legal actions, or by filing amended tax returns, without clients’ permission or knowledge, that removed all deductions, causing the taxpayer-victim to then owe the IRS tens of thousands of dollars. 

    During the trial, Mr. Castro took the stand in his own defense, and upon cross-examination, admitted that his positions were extreme, outlandish, and not supported by the law.  He also admitted to a bevy of prior falsifications and vindictive actions.

    Many of the victim-taxpayers have since been audited and/or filed amended returns, causing them significant financial hardship.

    IRS Criminal Investigation conducted the investigation.  Assistant U.S. Attorneys P.J. Meitl and Nancy Larson are prosecuting the case. 

    MIL Security OSI –

  • MIL-OSI: Provident Financial Services, Inc. Reports Third Quarter Earnings and Declares Quarterly Cash Dividend

    Source: GlobeNewswire (MIL-OSI)

    ISELIN, N.J., Oct. 29, 2024 (GLOBE NEWSWIRE) — Provident Financial Services, Inc. (NYSE:PFS) (the “Company”) reported net income of $46.4 million, or $0.36 per basic and diluted share for the three months ended September 30, 2024, compared to a net loss of $11.5 million, or $0.11 per basic and diluted share, for the three months ended June 30, 2024 and net income of $28.5 million, or $0.38 per basic and diluted share, for the three months ended September 30, 2023. For the nine months ended September 30, 2024, net income totaled $67.0 million, or $0.65 per basic and diluted share, compared to $101.1 million, or $1.35 per basic and diluted share, for the nine months ended September 30, 2023.

    The Company’s earnings for the three and nine months ended September 30, 2024 reflected the impact of the May 16, 2024 merger with Lakeland Bancorp, Inc. (“Lakeland”), which added $10.91 billion to total assets, $7.91 billion to loans, and $8.62 billion to deposits, net of purchase accounting adjustments.  The merger with Lakeland significantly impacted provisions for credit losses in the trailing quarter due to the initial CECL provisions recorded on acquired loans.  The results of operations for the three and nine months ended September 30, 2024 also included other transaction costs related to the merger with Lakeland, totaling $15.6 million and $36.7 million, respectively, compared with transaction costs totaling $2.3 million and $5.3 million for the respective 2023 periods. Additionally, the Company realized a $2.8 million loss related to the sale of subordinated debt issued by Lakeland from the Provident investment portfolio, during the nine months ended September 30, 2024.

    Anthony J. Labozzetta, President and Chief Executive Officer commented, “We achieved solid performance this quarter, and we are optimistic that our results will continue to improve as we further realize the synergies of the merger.  Provident generated strong earnings and core metrics, aided by robust performance in our fee-based businesses. We continue to expand our operations prudently and believe we are well-positioned for even greater success as market conditions improve.”

    Regarding the Company’s merger with Lakeland, Mr. Labozzetta added, “We are proud to announce that, with the conversion of our core system in early September, our merger is complete and we are a unified organization. Our cultures are combining well and we are already experiencing the benefits of cost savings and enhanced revenue opportunities. We are grateful to the many team members whose hard work allowed for a smooth conversion and the retention of almost all legacy Lakeland customers.”

    Performance Highlights for the Third Quarter of 2024

    • Net interest income increased $42.2 million to $183.7 million for the three months ended September 30, 2024, from $141.5 million for the trailing quarter primarily due to the full quarter impact of net assets acquired from Lakeland, including the accretion of purchase accounting adjustments and four basis points of core margin expansion.  
    • The net interest margin increased ten basis points to 3.31% for the quarter ended September 30, 2024, from 3.21% for the trailing quarter. The weighted average yield on interest-earning assets for the quarter ended September 30, 2024 increased 17 basis points to 5.84%, compared to the trailing quarter, while the weighted average cost of interest-bearing liabilities for the quarter ended September 30, 2024 increased ten basis points to 3.19%, compared to the trailing quarter. The increases in the yields and costs on interest-earning assets and interest-bearing liabilities were primarily due to a full quarter of accretion of purchase accounting adjustments related to the Lakeland merger, which contributed approximately 53 basis points to the net interest margin in the current quarter.
    • Non-interest income increased $4.6 million to $26.9 million for the three months ended September 30, 2024, from $22.3 million for the trailing quarter, while non-interest expense increased $20.6 million to $136.0 million for the three months ended September 30, 2024, compared to $115.4 million for the trailing quarter.   The increases in both non-interest income and non-interest expense were reflective of a full quarter of combined operations with Lakeland.
    • Wealth management and insurance agency income increased 9.0% and 12.6%, respectively, versus the same period in 2023. The increase in wealth management income was primarily due to an increase in the average market value of assets under management during the period, while the increase in insurance agency income was largely due to an increase in business activity.
    • Adjusting for transaction costs related to the merger with Lakeland, net of tax, the Company’s annualized adjusted returns on average assets, average equity and average tangible equity(1) were 0.95%, 8.62% and 14.53% for the quarter ended September 30, 2024, compared to 0.06%, 0.53% and 2.01% for the quarter ended June 30, 2024. A reconciliation between GAAP and the above non-GAAP ratios are shown on page 13 of the earnings release.
    • The Company’s annualized adjusted pre-tax, pre-provision returns on average assets, average equity and average tangible equity(2) were 1.48%, 13.48% and 19.77% for the quarter ended September 30, 2024, compared to 1.47%, 13.26% and 19.21% for the quarter ended June 30, 2024. A reconciliation between GAAP and the above non-GAAP ratios are shown on page 14 of the earnings release.
    • As of September 30, 2024, the Company’s loan pipeline, consisting of work-in-process and loans approved pending closing, totaled $1.98 billion, with a weighted average interest rate of 7.18%, compared to $1.67 billion, with a weighted average interest rate of 7.53%, as of June 30, 2024.
    • The Company recorded a $9.6 million provision for credit losses on loans for the quarter ended September 30, 2024, compared to a $66.1 million provision for the trailing quarter. The provision for credit losses on loans in the quarter was primarily attributable to specific reserves required on individually analyzed loans, combined with some economic forecast deterioration. The allowance for credit losses as a percentage of loans increased to 1.02% as of September 30, 2024, from 1.00% as of June 30, 2024.
    • As of September 30, 2024, CRE loans related to office properties totaled $921.1 million, compared to $953.5 million as of June 30, 2024. CRE loans secured by office properties constitutes only 4.9% of total loans and have an average loan size of $1.9 million, with just seven relationships greater than $10.0 million. There were four loans totaling $9.2 million on non-accrual as of September 30, 2024, however we do not expect to incur losses on any of these loans.
    • As of September 30, 2024, multi-family CRE loans secured by New York City properties totaled $226.6 million, compared to $227.7 million as of June 30, 2024. This portfolio constitutes only 1.2% of total loans and has an average loan size of $2.6 million. Loans that are collateralized by rent stabilized apartments comprise less than 0.80% of the total loan portfolio and are all performing.
    • Non-performing loans to total loans as of September 30, 2024 increased to 0.47%, compared to 0.36% as of June 30, 2024, while non-performing assets to total assets as of September 30, 2024 increased to 0.41%, compared to 0.33% as of June 30, 2024. The increase in non-performing loans, compared to the prior quarter was primarily attributable to one commercial real estate credit secured by an industrial property which has a loan-to-value ratio of approximately 39%. We anticipate a near-term resolution of this credit with no expected loss.   For the three months ended September 30, 2024, net charge-offs totaled $6.8 million, or an annualized 14 basis points of average loans. Of this total, $6.4 million was attributable to one previously identified commercial relationship that had a $4.4 million specific reserve as of June 30, 2024. This credit is expected to be fully resolved in the fourth quarter of 2024.

    Declaration of Quarterly Dividend

    The Company’s Board of Directors declared a quarterly cash dividend of $0.24 per common share payable on November 29, 2024 to stockholders of record as of the close of business on November 15, 2024.

    Results of Operations

    Three months ended September 30, 2024 compared to the three months ended June 30, 2024

    For the three months ended September 30, 2024, the Company reported net income of $46.4 million, or $0.36 per basic and diluted share, compared to a net loss of $11.5 million, or $0.11 per basic and diluted share, for the three months ended June 30, 2024. The Company’s earnings for the prior quarter were impacted by an initial CECL provision for credit losses on loans and commitments to extend credit of $65.2 million recorded as part of the Lakeland merger in accordance with GAAP requirements for accounting for business combinations. The results of operations for the three months ended September 30, 2024 included transaction costs related to the merger with Lakeland totaling $15.6 million, compared with transaction costs totaling $18.9 million in the trailing quarter. Additionally, the Company realized a $2.8 million loss in the trailing quarter related to the sale from the Provident investment portfolio of subordinated debt issued by Lakeland.

    Net Interest Income and Net Interest Margin

    Net interest income increased $42.2 million to $183.7 million for the three months ended September 30, 2024, from $141.5 million for the trailing quarter. Net interest income for the three months ended September 30, 2024 was favorably impacted by a full quarter of combined operations with Lakeland and accretion of purchase accounting adjustments, compared to a 45 days impact in the prior quarter.

    The Company’s net interest margin increased ten basis points to 3.31% for the quarter ended September 30, 2024, from 3.21% for the trailing quarter. Accretion of purchase accounting adjustments related to the Lakeland merger contributed 53 basis points to the net interest margin in the current quarter. The current net interest margin reflects a full quarter of the acquisition of Lakeland’s interest-bearing assets and liabilities, the prior quarter sale of $554.2 million of securities acquired from Lakeland and the repayment of overnight borrowings as well as the prior quarter issuance of subordinated debt.

    The weighted average yield on interest-earning assets for the quarter ended September 30, 2024 increased 17 basis points to 5.84%, compared to the trailing quarter. The weighted average cost of interest-bearing liabilities for the quarter ended September 30, 2024 increased ten basis points from the trailing quarter, to 3.19%. The average cost of interest-bearing deposits for the quarter ended September 30, 2024 increased 12 basis points to 2.96%, compared to 2.84% for the trailing quarter. The average cost of total deposits, including non-interest-bearing deposits, was 2.36% for the quarter ended September 30, 2024, compared to 2.27% for the trailing quarter. The average cost of borrowed funds for the quarter ended September 30, 2024 was 3.73%, compared to 3.83% for the quarter ended June 30, 2024. All yields and costs reflect a full quarter of combined operations with Lakeland.

    Provision for Credit Losses on Loans

    For the quarter ended September 30, 2024, the Company recorded a $9.6 million provision for credit losses on loans, compared with a provision for credit losses on loans of $66.1 million for the quarter ended June 30, 2024. The provision for credit losses on loans in the quarter was primarily attributable to specific reserves required on individually analyzed loans, combined with some economic forecast deterioration, while the provision for credit losses on loans in the prior quarter was primarily attributable to an initial CECL provision for credit losses of $60.1 million, recorded as part of the Lakeland merger in accordance with GAAP requirements for accounting for business combinations. For the three months ended September 30, 2024, net charge-offs totaled $6.8 million, or an annualized 14 basis points of average loans.

    Non-Interest Income and Expense

    For the three months ended September 30, 2024, non-interest income totaled $26.9 million, an increase of $4.6 million, compared to the trailing quarter. Net gain on securities transactions increased $3.0 million for the three months ended September 30, 2024, compared to the trailing quarter, primarily due to a $2.8 million loss realized on the sale from the Provident investment portfolio of subordinated debt issued by Lakeland in the prior quarter.   Fee income increased $1.1 million to $9.8 million for the three months ended September 30, 2024, compared to the trailing quarter, primarily due to increases in deposit and debit card related fee income. The increases in fee income are primarily attributable to the addition of the Lakeland customer base. BOLI income increased $1.0 million for the three months ended September 30, 2024, compared to the trailing quarter, primarily due to an increase in benefit claims recognized. Partially offsetting these increases in non-interest income, insurance agency income decreased $857,000 to $3.6 million for the three months ended September 30, 2024, compared to the trailing quarter, due to a seasonal decrease in business activity in the current quarter, while wealth management income decreased $149,000 to $7.6 million for the three months ended September 30, 2024, compared to the trailing quarter, mainly due to a seasonal decrease in tax preparation fees, partially offset by an increase in the average market value of assets under management during the period.

    Non-interest expense totaled $136.0 million for the three months ended September 30, 2024, an increase of $20.6 million, compared to $115.4 million for the trailing quarter. Compensation and benefits expense increased $8.6 million to $63.5 million for the three months ended September 30, 2024, compared to $54.9 million for the trailing quarter. The increase in compensation and benefits expense was primarily attributable to a full quarter of combined operations with Lakeland, compared to 45 days in the prior quarter.   Amortization of intangibles increased $5.7 million to $12.2 million for the three months ended September 30, 2024, compared to $6.5 million for the trailing quarter, largely due to a full quarter of core deposit intangible amortization related to Lakeland.   Other operating expenses increased $4.5 million to $15.8 million for the three months ended September 30, 2024, compared to $11.3 million for the trailing quarter, primarily due to increases in professional service expenses. Data processing expense increased $2.0 million to $10.5 million for the three months ended September 30, 2024, compared to $8.4 million for the trailing quarter, primarily due a full quarter of combined operations with Lakeland, while net occupancy expense increased $1.6 million to $12.8 million for the three months ended September 30, 2024, compared to $11.1 million for the trailing quarter, primarily due to increases in maintenance and depreciation expenses from the addition of Lakeland.   Additionally, FDIC insurance increased $1.1 million to $4.2 million for the three months ended September 30, 2024, primarily resulting from the impact of the Lakeland merger. Partially offsetting these increases, merger-related expenses decreased $3.3 million to $15.6 million for the three months ended September 30, 2024, compared to the trailing quarter.

    The Company’s annualized adjusted non-interest expense as a percentage of average assets(5) declined to 1.98% for the quarter ended September 30, 2024, compared to 2.02% for the trailing quarter. The efficiency ratio (adjusted non-interest expense divided by the sum of net interest income and non-interest income)(6) improved to 57.20% for the three months ended September 30, 2024, compared to 57.86% for the trailing quarter.

    Income Tax Expense/Benefit

    For the three months ended September 30, 2024, the Company’s income tax expense was $18.9 million, compared to an income tax benefit of $9.8 million for the trailing quarter. The increase in tax expense for the three months ended September 30, 2024 compared with the trailing quarter was largely due to an increase in taxable income in the current quarter as a result of the Lakeland merger and a $5.3 million tax benefit realized in the trailing quarter related to the revaluation of deferred tax assets to reflect the imposition by the State of New Jersey of a 2.5% Corporate Transit Fee, effective January 1, 2024.  

    Three months ended September 30, 2024 compared to the three months ended September 30, 2023

    For the three months ended September 30, 2024, the Company reported net income of $46.4 million, or $0.36 per basic and diluted share, compared to net income of $28.5 million, or $0.38 per basic and diluted share, for the three months ended September 30, 2023. The Company’s earnings for the quarter ended September 30, 2024 reflected the impact of the May 16, 2024 merger with Lakeland. The results of operations included transaction costs related to the merger with Lakeland totaling $15.6 million and $2.3 million for the three months ended September 30, 2024 and 2023, respectively.

    Net Interest Income and Net Interest Margin

    Net interest income increased $87.5 million to $183.7 million for the three months ended September 30, 2024, from $96.2 million for same period in 2023. Net interest income for the three months ended September 30, 2024 was favorably impacted by the net assets acquired from Lakeland, combined with favorable repricing of adjustable rate loans, higher market rates on new loan originations and the originations of higher-yielding loans, partially offset by unfavorable repricing of both deposits and borrowings.

    The Company’s net interest margin increased 35 basis points to 3.31% for the quarter ended September 30, 2024, from 2.96% for the same period last year. Accretion of purchase accounting adjustments related to the Lakeland merger contributed 53 basis points to the net interest margin in the current quarter.   The current quarter net interest margin reflects the acquisition of Lakeland’s interest bearing assets and liabilities, the prior quarter sale of $554.2 million of securities acquired from Lakeland and the repayment of overnight borrowings as well as the prior quarter issuance of subordinated debt.

    The weighted average yield on interest-earning assets for the quarter ended September 30, 2024 increased 95 basis points to 5.84%, compared to 4.89% for the quarter ended September 30, 2023. The weighted average cost of interest-bearing liabilities increased 69 basis points for the quarter ended September 30, 2024 to 3.19%, compared to 2.50% for the third quarter of 2023. The average cost of interest-bearing deposits for the quarter ended September 30, 2024 was 2.96%, compared to 2.22% for the same period last year. Average non-interest-bearing demand deposits increased $1.51 billion to $3.74 billion for the quarter ended September 30, 2024, compared to $2.23 billion for the quarter ended September 30, 2023. The average cost of total deposits, including non-interest-bearing deposits, was 2.36% for the quarter ended September 30, 2024, compared with 1.74% for the quarter ended September 30, 2023. The average cost of borrowed funds for the quarter ended September 30, 2024 was 3.73%, compared to 3.74% for the same period last year.

    Provision for Credit Losses on Loans

    For the quarter ended September 30, 2024, the Company recorded a $9.6 million provision for credit losses on loans, compared with an $11.0 million provision for credit losses on loans for the quarter ended September 30, 2023.   The provision for credit losses on loans in the current quarter was primarily attributable to specific reserves required on individually analyzed loans, combined with some economic forecast deterioration.   For the three months ended September 30, 2024, net charge-offs totaled $6.8 million, or an annualized 14 basis points of average loans.

    Non-Interest Income and Expense

    Non-interest income totaled $26.9 million for the quarter ended September 30, 2024, an increase of $7.5 million, compared to the same period in 2023. Fee income increased $3.7 million to $9.8 million for the three months ended September 30, 2024, compared to the prior year quarter, primarily due to increases in deposit fee income, debit card related fee income and loan related fee income, resulting from the Lakeland merger.   BOLI income increased $2.5 million to $4.3 million for the three months ended September 30, 2024, compared to the prior year quarter, primarily due to an increase in benefit claims recognized, combined with an increase in income related to the addition of Lakeland’s BOLI. Wealth management fees increased $628,000 to $7.6 million for the three months ended September 30, 2024, compared to the quarter ended September 30, 2023, mainly due to an increase in the average market value of assets under management during the period, while insurance agency income increased $407,000 to $3.6 million for the three months ended September 30, 2024, compared to the quarter ended September 30, 2023, largely due to an increase in business activity. Additionally, other income increased $339,000 to $1.5 million for the three months ended September 30, 2024, compared to the quarter ended September 30, 2023, primarily due to increases in gains on the sale of SBA and mortgage loans.

    For the three months ended September 30, 2024, non-interest expense totaled $136.0 million, an increase of $70.4 million, compared to the three months ended September 30, 2023. Compensation and benefits expense increased $27.8 million to $63.5 million for the three months ended September 30, 2024, compared to $35.7 million for the same period in 2023. The increase in compensation and benefits expense was primarily attributable to the addition of Lakeland. Additionally, merger-related expenses increased $13.3 million to $15.6 million for the three months ended September 30, 2024, compared to the same period in 2023. Amortization of intangibles increased $11.5 million to $12.2 million for the three months ended September 30, 2024, compared to $720,000 for the same period in 2023, largely due to core deposit intangible amortization related to Lakeland in the current quarter. Data processing expenses increased $5.2 million to $10.5 million for three months ended September 30, 2024, compared to $5.3 million for the same period in 2023, primarily due to additional software and hardware expenses needed for the addition of Lakeland. Net occupancy expense increased $4.7 million to $12.8 million for three months ended September 30, 2024, compared to $8.1 million for the same period in 2023, primarily due to an increase in depreciation and maintenance expenses due to the addition of Lakeland.   Other operating expenses increased $5.0 million to $15.8 million for the three months ended September 30, 2024, compared to $10.7 million for the same period in 2023, primarily due to increases in professional service expenses, while FDIC insurance increased $2.6 million to $4.2 million for the three months ended September 30, 2024, primarily due to the addition of Lakeland.

    The Company’s annualized adjusted non-interest expense as a percentage of average assets(5) was 1.98% for the quarter ended September 30, 2024, compared to 1.80% for the same period in 2023. The efficiency ratio (adjusted non-interest expense divided by the sum of net interest income and non-interest income)(6) was 57.20% for the three months ended September 30, 2024 compared to 54.81% for the same respective period in 2023.

    Income Tax Expense

    For the three months ended September 30, 2024, the Company’s income tax expense was $18.9 million with an effective tax rate of 28.9%, compared with an income tax expense of $8.8 million with an effective tax rate of 23.7% for the three months ended September 30, 2023. The increase in tax expense for the three months ended September 30, 2024, compared with the same period last year was largely due to an increase in taxable income in the quarter, as a result of the Lakeland merger and the imposition by the State of New Jersey of a 2.5% Corporate Transit Fee in the prior quarter.

    Nine months ended September 30, 2024 compared to the nine months ended September 30, 2023

    For the nine months ended September 30, 2024, net income totaled $67.0 million, or $0.65 per basic and diluted share, compared to net income of $101.1 million, or $1.35 per basic and diluted share, for the nine months ended September 30, 2023. The Company’s earnings for the nine months ended September 30, 2024 were impacted by an initial CECL provision for credit losses on loans and commitments to extend credit of $60.1 million recorded as part of the Lakeland merger in accordance with GAAP requirements for accounting for business combinations. Transaction costs related to our merger with Lakeland totaled $36.7 million and $5.3 million for the nine months ended September 30, 2024 and 2023, respectively. Additionally, the Company realized a $2.8 million loss related to the sale from the Provident investment portfolio of subordinated debt issued by Lakeland, during the nine months ended September 30, 2024.

    Net Interest Income and Net Interest Margin

    Net interest income increased $115.2 million to $418.9 million for the nine months ended September 30, 2024, from $303.7 million for same period in 2023. Net interest income for the nine months ended September 30, 2024 was favorably impacted by the net assets acquired from Lakeland, combined with the favorable repricing of adjustable rate loans, higher market rates on new loan originations and the originations of higher-yielding loans, partially offset by the unfavorable repricing of both deposits and borrowings.

    For the nine months ended September 30, 2024, our net interest margin decreased one basis point to 3.18%, compared to 3.19% for the nine months ended September 30, 2023. The weighted average yield on interest earning assets increased 85 basis points to 5.61% for the nine months ended September 30, 2024, compared to 4.76% for the nine months ended September 30, 2023, while the weighted average cost of interest-bearing liabilities increased 99 basis points to 3.06% for the nine months ended September 30, 2024, compared to 2.07% for the same period last year. The average cost of interest-bearing deposits increased 102 basis points to 2.84% for the nine months ended September 30, 2024, compared to 1.82% for the same period last year. Average non-interest-bearing demand deposits increased $514.3 million to $2.90 billion for the nine months ended September 30, 2024, compared with $2.38 billion for the nine months ended September 30, 2023. The average cost of total deposits, including non-interest-bearing deposits, was 2.27% for the nine months ended September 30, 2024, compared with 1.40% for the nine months ended September 30, 2023. The average cost of borrowings for the nine months ended September 30, 2024 was 3.73%, compared to 3.29% for the same period last year.

    Provision for Credit Losses on Loans

    For the nine months ended September 30, 2024, the Company recorded a $75.9 million provision for credit losses on loans, compared with a provision for credit losses on loans of $27.4 million for the nine months ended September 30, 2023. The increased provision for credit losses on loans for the nine months ended September 30, 2024 was primarily attributable to an initial CECL provision for credit losses on loans of $60.1 million recorded as part of the Lakeland merger in accordance with GAAP requirements for accounting for business combinations, partially offset by an improved economic forecast for the current nine-month period within our CECL model, compared to the same period last year. For the nine months ended September 30, 2024, net charge-offs totaled $9.1 million or an annualized eight basis points of average loans.

    Non-Interest Income and Expense

    For the nine months ended September 30, 2024, non-interest income totaled $69.9 million, an increase of $9.1 million compared to the same period in 2023. Fee income increased $6.1 million to $24.4 million for the nine months ended September 30, 2024, compared to the same period in 2023, primarily due to increases in deposit fee income, debit and credit card related fee income and loan related fee income resulting from the Lakeland merger. BOLI income increased $4.6 million to $9.4 million for the nine months ended September 30, 2024, compared to the same period in 2023, primarily due to an increase in benefit claims recognized, combined with an increase in income related to the addition of Lakeland’s BOLI, while wealth management income increased $2.1 million to $22.9 million for the nine months ended September 30, 2024, compared to the same period in 2023, mainly due to an increase in the average market value of assets under management during the period. Additionally, insurance agency income increased $1.7 million to $12.9 million for the nine months ended September 30, 2024, compared to $11.2 million for the same period in 2023, largely due to increases in contingent commissions, retention revenue and new business activity. Partially offsetting these increases in non-interest income, net gains on securities transactions decreased $3.0 million for the nine months ended September 30, 2024, primarily due to a $2.8 million loss related to the sale from the Provident investment portfolio of subordinated debt issued by Lakeland. Other income decreased $2.4 million to $3.2 million for the nine months ended September 30, 2024, compared to $5.7 million for the same period in 2023, primarily due to a $2.0 million gain from the sale of a foreclosed commercial property recorded in the prior year, combined with a decrease in gains on sales of SBA loans.

    Non-interest expense totaled $323.2 million for the nine months ended September 30, 2024, an increase of $123.7 million, compared to $199.5 million for the nine months ended September 30, 2023. Compensation and benefits expense increased $48.7 million to $158.4 million for the nine months ended September 30, 2024, compared to $109.7 million for the nine months ended September 30, 2023. The increase in compensation and benefits expense was primarily attributable to the addition of Lakeland.   Merger-related expenses increased $31.3 million to $36.7 million for the nine months ended September 30, 2024, compared to $5.3 million for the nine months ended September 30, 2023. Amortization of intangibles increased $17.2 million to $19.4 million for the nine months ended September 30, 2024, compared to $2.2 million for the nine months ended September 30, 2023, largely due to core deposit intangible amortization related to Lakeland. Data processing expense increased $9.2 million to $25.7 million for the nine months ended September 30, 2024, compared to $16.5 million for the nine months ended September 30, 2023, primarily due to additional software and hardware expenses needed for the addition of Lakeland, while net occupancy expense increased $8.0 million to $32.5 million for the nine months ended September 30, 2024, compared to the same period in 2023, primarily due to increases in depreciation and maintenance expense related to the addition of Lakeland. Other operating expenses increased $5.6 million to $37.4 million for the three months ended September 30, 2024, compared to $31.8 million for the same period in 2023, primarily due to increases in professional service expenses, while FDIC insurance increased $3.9 million to $9.6 million for the three months ended September 30, 2024, primarily due to the addition of Lakeland.

    Income Tax Expense
    For the nine months ended September 30, 2024, the Company’s income tax expense was $19.9 million with an effective tax rate of 22.9%, compared with $34.9 million with an effective tax rate of 25.7% for the nine months ended September 30, 2023. The decrease in tax expense for the nine months ended September 30, 2024 compared with the same period last year was largely due to a $5.8 million tax benefit related to the revaluation of deferred tax assets to reflect the imposition by the State of New Jersey of a 2.5% Corporate Transit Fee, effective January 1, 2024, combined with a decrease in taxable income as a result of the initial CECL provision for credit losses on loans of $60.1 million recorded in accordance with GAAP requirements for accounting for business combinations and additional expenses from the Lakeland merger.

    Asset Quality

    The Company’s total non-performing loans as of September 30, 2024 were $89.9 million, or 0.47% of total loans, compared to $67.9 million, or 0.36% of total loans as of June 30, 2024 and $49.6 million, or 0.46% of total loans as of December 31, 2023. The $22.1 million increase in non-performing loans as of September 30, 2024, compared to the trailing quarter, consisted of a $10.4 million increase in non-performing commercial mortgage loans, an $8.9 million increase in non-performing commercial loans, a $1.5 million increase in non-performing construction loans, a $764,000 increase in non-performing residential mortgage loans, a $302,000 increase in non-performing multi-family loans and a $289,000 increase in non-performing consumer loans. As of September 30, 2024, impaired loans totaled $74.0 million with related specific reserves of $7.2 million, compared with impaired loans totaling $54.6 million with related specific reserves of $7.7 million as of June 30, 2024. As of December 31, 2023, impaired loans totaled $42.8 million with related specific reserves of $2.4 million.

    As of September 30, 2024, the Company’s allowance for credit losses related to the loan portfolio was 1.02% of total loans, compared to 1.00% and 0.99% as of June 30, 2024 and December 31, 2023, respectively. The allowance for credit losses increased $84.0 million to $191.2 million as of September 30, 2024, from $107.2 million as of December 31, 2023. The increase in the allowance for credit losses on loans as of September 30, 2024 compared to December 31, 2023 was due to a $75.9 million provision for credit losses, which included an initial CECL provision of $60.1 million on loans acquired from Lakeland, and a $17.2 million allowance recorded through goodwill related to Purchased Credit Deteriorated loans acquired from Lakeland, partially offset by net charge-offs of $9.1 million.

    The following table sets forth accruing past due loans and non-accrual loans on the dates indicated, as well as delinquency statistics and certain asset quality ratios.

        September 30, 2024   June 30, 2024   December 31, 2023
        Number
    of
    Loans    		   Principal
    Balance
    of Loans    		   Number
    of
    Loans    		   Principal
    Balance
    of Loans    		   Number
    of
    Loans    		   Principal
    Balance
    of Loans
        (Dollars in thousands)
    Accruing past due loans:                        
    30 to 59 days past due:                        
    Commercial mortgage loans   2   $ 430     3   $ 1,707     1   $ 825  
    Multi-family mortgage loans   —     —     —     —     1     3,815  
    Construction loans   —     —     —     —     —     —  
    Residential mortgage loans   23     5,020     9     1,714     13     3,429  
    Total mortgage loans   25     5,450     12     3,421     15     8,069  
    Commercial loans   14     1,952     20     3,444     6     998  
    Consumer loans   53     4,073     38     2,891     31     875  
    Total 30 to 59 days past due   92   $ 11,475     70   $ 9,756     52   $ 9,942  
                             
    60 to 89 days past due:                        
    Commercial mortgage loans   1   $ 641     3   $ 1,231     —   $ —  
    Multi-family mortgage loans   —     —     —     —     1     1,635  
    Construction loans   —     —     —     —     —     —  
    Residential mortgage loans   11     1,991     10     2,193     8     1,208  
    Total mortgage loans   12     2,632     13     3,424     9     2,843  
    Commercial loans   9     1,240     6     1,146     3     198  
    Consumer loans   10     606     9     648     5     275  
    Total 60 to 89 days past due   31     4,478     28     5,218     17     3,316  
    Total accruing past due loans   123   $ 15,953     98   $ 14,974     69   $ 13,258  
                             
    Non-accrual:                        
    Commercial mortgage loans   17   $ 13,969     10   $ 3,588     7   $ 5,151  
    Multi-family mortgage loans   6     7,578     5     7,276     1     744  
    Construction loans   2     13,151     1     11,698     1     771  
    Residential mortgage loans   24     5,211     20     4,447     7     853  
    Total mortgage loans   49     39,909     36     27,009     16     7,519  
    Commercial loans   69     48,592     58     39,715     26     41,487  
    Consumer loans   32     1,433     24     1,144     10     633  
    Total non-accrual loans   150   $ 89,934     118   $ 67,868     52   $ 49,639  
                             
    Non-performing loans to total loans         0.47 %         0.36 %         0.46 %
    Allowance for loan losses to total non-performing loans         217.09 %         277.50 %         215.96 %
    Allowance for loan losses to total loans         1.02 %         1.00 %         0.99 %
                                         

    As of September 30, 2024 and December 31, 2023, the Company held foreclosed assets of $9.8 million and $11.7 million, respectively. During the nine months ended September 30, 2024, there were three properties sold with an aggregate carrying value of $532,000 and one write-down of a foreclosed commercial property of $1.3 million. Foreclosed assets as of September 30, 2024 consisted primarily of commercial real estate. Total non-performing assets as of September 30, 2024 increased $36.6 million to $97.9 million, or 0.41% of total assets, from $61.3 million, or 0.43% of total assets as of December 31, 2023.

    Balance Sheet Summary

    Total assets as of September 30, 2024 were $24.04 billion, a $9.83 billion increase from December 31, 2023. The increase in total assets was primarily due to the addition of Lakeland.

    The Company’s loans held for investment portfolio totaled $18.79 billion as of September 30, 2024 and $10.87 billion as of December 31, 2023. The loan portfolio consisted of the following:

      September 30, 2024   June 30, 2024   December 31, 2023
      (Dollars in thousands)
    Mortgage loans:          
    Commercial $ 7,342,456     $ 7,337,742     $ 4,512,411  
    Multi-family   3,226,918       3,189,808       1,812,500  
    Construction   873,509       970,244       653,246  
    Residential   2,032,671       2,024,027       1,164,956  
    Total mortgage loans   13,475,554       13,521,821       8,143,113  
    Commercial loans   4,710,601       4,617,232       2,440,621  
    Consumer loans   623,709       626,016       299,164  
    Total gross loans   18,809,864       18,765,069       10,882,898  
    Premiums on purchased loans   1,362       1,410       1,474  
    Net deferred fees and unearned discounts   (16,617 )     (7,149 )     (12,456 )
    Total loans $ 18,794,609     $ 18,759,330     $ 10,871,916  
                           

    As part of the merger with Lakeland, we acquired $7.91 billion in loans, net of purchase accounting adjustments.   Compared to the prior quarter, during the three months ended September 30, 2024, the loan portfolio had net increases of $93.4 million of commercial loans, $37.1 million of multi-family loans, $8.6 million of residential mortgage loans, and $4.7 million of commercial mortgage loans, partially offset by net decreases of $96.7 million of construction loans and $2.3 million of consumer loans.   Commercial loans, consisting of commercial real estate, multi-family, commercial and construction loans, represented 85.9% of the loan portfolio as of September 30, 2024, compared to 86.5% as of December 31, 2023.

    For the nine months ended September 30, 2024, loan funding, including advances on lines of credit, totaled $2.78 billion, compared with $2.53 billion for the same period in 2023.

    As of September 30, 2024, the Company’s unfunded loan commitments totaled $2.97 billion, including commitments of $1.84 billion in commercial loans, $231.0 million in construction loans and $225.7 million in commercial mortgage loans. Unfunded loan commitments as of December 31, 2023 and September 30, 2023 were $2.09 billion and $2.18 billion, respectively.

    The loan pipeline, consisting of work-in-process and loans approved pending closing, totaled $1.98 billion as of September 30, 2024, compared to $1.09 billion and $1.70 billion as of December 31, 2023 and September 30, 2023, respectively.

    Total investment securities were $3.17 billion as of September 30, 2024, a $1.04 billion increase from December 31, 2023. This increase was primarily due to the addition of Lakeland.

    Total deposits increased $8.08 billion during the nine months ended September 30, 2024, to $18.38 billion, due primarily to the addition of Lakeland. Total savings and demand deposit accounts increased $6.02 billion to $15.22 billion as of September 30, 2024, while total time deposits increased $2.06 billion to $3.16 billion as of September 30, 2024. The increase in savings and demand deposits was largely attributable to a $2.92 billion increase in interest bearing demand deposits, a $1.58 billion increase in non-interest bearing demand deposits, a $1.03 billion increase in money market deposits and a $495.5 million increase in savings deposits. The increase in time deposits consisted of a $2.01 billion increase in retail time deposits and a $46.5 million increase in brokered time deposits.

    Borrowed funds increased $244.5 million during the nine months ended September 30, 2024, to $2.21 billion. The increase in deposits and borrowings was largely due to the addition of Lakeland. Borrowed funds represented 9.2% of total assets as of September 30, 2024, a decrease from 13.9% as of December 31, 2023.

    Stockholders’ equity increased $930.5 million during the nine months ended September 30, 2024, to $2.62 billion, primarily due to common stock issued for the purchase of Lakeland, net income earned for the period and an improvement in unrealized losses on available for sale debt securities, partially offset by cash dividends paid to stockholders. For the three and nine months ended September 30, 2024, common stock repurchases totaled 1,969 shares at an average cost of $16.36 per share and 88,821 shares at an average cost of $14.87 per share, respectively, all of which were made in connection with withholding to cover income taxes on the vesting of stock-based compensation. As of September 30, 2024, approximately 1.0 million shares remained eligible for repurchase under the current stock repurchase authorization. Book value per share and tangible book value per share(1) as of September 30, 2024 were $20.09 and $13.66, respectively, compared with $22.38 and $16.32, respectively, as of December 31, 2023.

    About the Company

    Provident Financial Services, Inc. is the holding company for Provident Bank, a community-oriented bank offering “commitment you can count on” since 1839. Provident Bank provides a comprehensive array of financial products and services through its network of branches throughout New Jersey, Bucks, Lehigh and Northampton counties in Pennsylvania, as well as Orange, Queens and Nassau Counties in New York. Provident Bank also provides fiduciary and wealth management services through its wholly owned subsidiary, Beacon Trust Company and insurance services through its wholly owned subsidiary, Provident Protection Plus, Inc.

    Post Earnings Conference Call

    Representatives of the Company will hold a conference call for investors on Wednesday, October 30, 2024 at 10:00 a.m. Eastern Time to discuss the Company’s financial results for the quarter ended September 30, 2024. The call may be accessed by dialing 1-888-412-4131 (United States Toll Free) and 1-646-960-0134 (United States Local). Speakers will need to enter conference ID code (3610756) before being met by a live operator. Internet access to the call is also available (listen only) at provident.bank by going to Investor Relations and clicking on “Webcast.”

    Forward Looking Statements

    Certain statements contained herein are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements may be identified by reference to a future period or periods, or by the use of forward-looking terminology, such as “may,” “will,” “believe,” “expect,” “estimate,” “project,” “intend,” “anticipate,” “continue,” or similar terms or variations on those terms, or the negative of those terms. Forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, those set forth in Item 1A of the Company’s Annual Report on Form 10-K, as supplemented by its Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and those related to the economic environment, particularly in the market areas in which the Company operates, inflation and unemployment, competitive products and pricing, real estate values, fiscal and monetary policies of the U.S. Government, the effects of any turmoil or negative news in the banking industry, changes in accounting policies and practices that may be adopted by the regulatory agencies and the accounting standards setters, changes in government regulations affecting financial institutions, including regulatory fees and capital requirements, changes in prevailing interest rates, potential goodwill impairment, acquisitions and the integration of acquired businesses, credit risk management, asset-liability management, the financial and securities markets, the availability of and costs associated with sources of liquidity, any failure to realize the anticipated benefits of the merger transaction when expected or at all; the possibility that the transaction may be more expensive to complete than anticipated, including as a result of unexpected conditions, factors or events, potential adverse reactions or changes to business, employee, customer and/or counterparty relationships, including those resulting from the completion of the merger and integration of the companies; and the impact of a potential shutdown of the federal government.

    The Company cautions readers not to place undue reliance on any such forward-looking statements which speak only as of the date they are made. The Company advises readers that the factors listed above could affect the Company’s financial performance and could cause the Company’s actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements. The Company does not assume any duty, and does not undertake, to update any forward-looking statements to reflect events or circumstances after the date of this statement.

    Footnotes

    (1) Annualized adjusted return on average assets, average equity and average tangible equity, annualized adjusted pre-tax pre-provision return on average assets, average equity and average tangible equity, tangible book value per share, annualized adjusted non-interest expense as a percentage of average assets and the efficiency ratio are non-GAAP financial measures. Please refer to the Notes following the Consolidated Financial Highlights which contain the reconciliation of GAAP to non-GAAP financial measures and the associated calculations.

                       
    PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
    Consolidated Financial Highlights
    (Dollars in Thousands, except share data) (Unaudited)
           
      At or for the
    Three Months Ended    		   At or for the
    Nine Months Ended
      September 30,   June 30,   September 30,   September 30,   September 30,
        2024       2024       2023       2024       2023  
    Statement of Income                  
    Net interest income $ 183,701     $ 141,506     $ 96,236     $ 418,877     $ 303,666  
    Provision for credit losses   9,299       69,705       12,541       78,684       29,031  
    Non-interest income   26,855       22,275       19,320       69,937       60,861  
    Non-interest expense   136,002       115,394       65,625       323,224       199,485  
    Income (loss) before income tax expense   65,255       (21,318 )     37,390       86,906       136,011  
    Net income (loss)   46,405       (11,485 )     28,547       67,001       101,086  
    Diluted earnings per share $ 0.36     $ (0.11 )   $ 0.38     $ 0.65     $ 1.35  
    Interest rate spread   2.65 %     2.58 %     2.39 %     2.55 %     2.69 %
    Net interest margin   3.31 %     3.21 %     2.96 %     3.18 %     3.19 %
                       
    Profitability                  
    Annualized return on average assets   0.76 %   (0.24 )%     0.81 %     0.47 %     0.98 %
    Annualized adjusted return on average assets (1)   0.95 %   0.06 %     0.86 %     0.66 %     1.02 %
    Annualized return on average equity   6.94 %   (2.17 )%     6.84 %     4.14 %     8.22 %
    Annualized adjusted return on average equity (1)   8.62 %   0.53 %     7.30 %     5.83 %     8.59 %
    Annualized return on average tangible equity (4)   12.06 %   (3.15 )%     9.47 %     7.13 %     11.40 %
    Annualized adjusted return on average tangible equity (1)   14.53 %     2.01 %     10.24 %     9.56 %     12.07 %
    Annualized adjusted non-interest expense to average assets (4)   1.98 %     2.02 %     1.80 %     1.99 %     1.87 %
    Efficiency ratio (6)   57.20 %     57.86 %     54.81 %     58.27 %     53.26 %
                       
    Asset Quality                  
    Non-accrual loans     $ 67,868         $ 89,934     $ 39,529  
    90+ and still accruing       —           —       —  
    Non-performing loans       67,868           88,061       39,529  
    Foreclosed assets       11,119           9,801       16,487  
    Non-performing assets       78,987           97,862       56,016  
    Non-performing loans to total loans       0.36 %         0.47 %     0.37 %
    Non-performing assets to total assets       0.33 %         0.41 %     0.40 %
    Allowance for loan losses     $ 188,331         $ 191,175     $ 107,563  
    Allowance for loan losses to total non-performing loans       277.50 %         217.09 %     272.11 %
    Allowance for loan losses to total loans       1.00 %         1.02 %     1.01 %
    Net loan charge-offs $ 6,756     $ 1,340     $ 5,510     $ 9,067     $ 7,266  
    Annualized net loan charge-offs to average total loans   0.14 %     0.04 %     0.21 %     0.08 %     0.09 %
                       
    Average Balance Sheet Data                  
    Assets $ 24,248,038     $ 19,197,041     $ 13,976,610     $ 19,198,113     $ 13,848,351  
    Loans, net   18,531,939       14,649,413       10,470,843       14,631,071       10,269,022  
    Earning assets   21,809,226       17,385,819       12,735,938       17,305,446       12,574,437  
    Core deposits   15,394,715       12,257,244       9,212,202       12,271,839       9,408,156  
    Borrowings   2,125,149       2,158,193       1,780,655       2,074,958       1,556,619  
    Interest-bearing liabilities   17,304,569       13,856,039       9,826,064       13,757,895       9,554,204  
    Stockholders’ equity   2,660,470       2,127,469       1,654,920       2,163,856       1,645,093  
    Average yield on interest-earning assets   5.84 %     5.67 %     4.89 %     5.61 %     4.76 %
    Average cost of interest-bearing liabilities   3.19 %     3.09 %     2.50 %     3.06 %     2.07 %
                       

    Notes and Reconciliation of GAAP and Non-GAAP Financial Measures
    (Dollars in Thousands, except share data)

    The Company has presented the following non-GAAP (U.S. Generally Accepted Accounting Principles) financial measures because it believes that these measures provide useful and comparative information to assess trends in the Company’s results of operations and financial condition. Presentation of these non-GAAP financial measures is consistent with how the Company evaluates its performance internally and these non-GAAP financial measures are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in the Company’s industry. Investors should recognize that the Company’s presentation of these non-GAAP financial measures might not be comparable to similarly-titled measures of other companies. These non-GAAP financial measures should not be considered a substitute for GAAP basis measures and the Company strongly encourages a review of its condensed consolidated financial statements in their entirety.

                         
    (1) Annualized Adjusted Return on Average Assets, Equity and Tangible Equity                    
        Three Months Ended   Nine Months Ended
        September 30,   June 30,   September 30,   September 30,   September 30,
          2024       2024       2023       2024       2023  
    Net Income   $ 46,405     $ (11,485 )   $ 28,547     $ 67,001     $ 101,086  
    Merger-related transaction costs     15,567       18,915       2,289       36,684       5,349  
    Less: income tax expense     (4,306 )     (4,625 )     (486 )     (9,274 )     (1,015 )
    Annualized adjusted net income   $ 57,666     $ 2,805     $ 30,350     $ 94,411     $ 105,420  
    Less: Amortization of Intangibles (net of tax)   $ 8,551     $ 4,532     $ 503     $ 13,577     $ 1,560  
    Annualized adjusted net income for annualized adjusted return on average tangible equity   $ 66,217     $ 7,337     $ 30,853     $ 107,988     $ 106,980  
                         
    Annualized Adjusted Return on Average Assets     0.95 %     0.06 %     0.86 %     0.66 %     1.02 %
    Annualized Adjusted Return on Average Equity     8.62 %     0.53 %     7.30 %     5.83 %     8.59 %
    Annualized Adjusted Return on Average Tangible Equity     14.53 %     2.01 %     10.24 %     9.56 %     12.07 %
                         
    (2) Annualized adjusted pre-tax, pre-provision (“PTPP”) returns on average assets, average equity and average tangible equity                    
        Three Months Ended   Nine Months Ended
        September 30,   June 30,   September 30,   September 30,   September 30,
          2024       2024       2023       2024       2023  
    Net income (loss)   $ 46,405     $ (11,485 )   $ 28,547     $ 67,001     $ 101,086  
    Adjustments to net income (loss):                    
    Provision for credit losses     9,299       69,705       12,541       78,684       29,031  
    Net loss on Lakeland bond sale     —       2,839       —       —       —  
    Merger-related transaction costs     15,567       18,915       2,289       36,684       5,349  
    Income tax expense (benefit)     18,850       (9,833 )     8,843       19,905       34,925  
    PTPP income   $ 90,121     $ 70,141     $ 52,220     $ 202,274     $ 170,391  
                         
    Annualized PTPP income   $ 358,525     $ 282,106     $ 207,177     $ 270,191     $ 227,812  
    Average assets   $ 24,248,038     $ 19,197,041     $ 13,976,610     $ 19,198,113     $ 13,848,351  
    Average equity   $ 2,660,470     $ 2,127,469     $ 1,654,920     $ 2,163,856     $ 1,645,093  
    Average tangible equity   $ 1,813,327     $ 1,468,630     $ 1,195,787     $ 1,508,594     $ 1,185,222  
                         
    Annualized PTPP return on average assets     1.48 %     1.47 %     1.48 %     1.41 %     1.65 %
    Annualized PTPP return on average equity     13.48 %     13.26 %     12.52 %     12.49 %     13.85 %
    Annualized PTPP return on average tangible equity     19.77 %     19.21 %     17.33 %     17.91 %     19.22 %
                         
    (3) Book and Tangible Book Value per Share        
                September 30,   June 30,   December 31,
                  2024       2024       2023  
    Total stockholders’ equity           $ 2,621,058     $ 2,555,646     $ 1,690,596  
    Less: total intangible assets             839,223       851,507       457,942  
    Total tangible stockholders’ equity           $ 1,781,835     $ 1,704,139     $ 1,232,654  
                         
    Shares outstanding             130,448,599       130,380,393       75,537,186  
                         
    Book value per share (total stockholders’ equity/shares outstanding)           $ 20.09     $ 19.60     $ 22.38  
    Tangible book value per share (total tangible stockholders’ equity/shares outstanding)           $ 13.66     $ 13.07     $ 16.32  
                         
    (4) Annualized Return on Average Tangible Equity                    
        Three Months Ended   Nine Months Ended
        September 30,   June 30,   September 30,   September 30,   September 30,
          2024       2024       2023       2024       2023  
    Total average stockholders’ equity   $ 2,660,470     $ 2,127,469     $ 1,654,920     $ 2,163,856     $ 1,645,093  
    Less: total average intangible assets     847,143       658,839       459,133       655,262       459,871  
    Total average tangible stockholders’ equity   $ 1,813,327     $ 1,468,630     $ 1,195,787     $ 1,508,594     $ 1,185,222  
                         
    Net income (loss)   $ 46,405     $ (11,485 )   $ 28,547     $ 67,001     $ 101,086  
    Less: Amortization of Intangibles, net of tax     8,551       4,532       503       13,577       1,560  
    Total net income (loss)   $ 54,956     $ (6,953 )   $ 29,050     $ 80,578     $ 102,646  
                         
    Annualized return on average tangible equity (net income/total average tangible stockholders’ equity)     12.06 %   (1.90)        %     9.64 %     7.13 %     11.58 %
                         
    (5) Annualized Adjusted Non-Interest Expense to Average Assets                    
        Three Months Ended   Nine Months Ended
        September 30,   June 30,   September 30,   September 30,   September 30,
          2024       2024       2023       2024       2023  
    Reported non-interest expense   $ 136,002     $ 115,394     $ 65,625     $ 323,224     $ 199,485  
    Adjustments to non-interest expense:                    
    Merger-related transaction costs     15,567       18,915       2,289       36,684       5,349  
    Adjusted non-interest expense   $ 120,435     $ 96,479     $ 63,336     $ 286,540     $ 194,136  
                         
    Annualized adjusted non-interest expense   $ 479,122     $ 388,036     $ 251,279     $ 382,751     $ 259,559  
                         
    Average assets   $ 24,248,038     $ 19,197,041     $ 13,976,610     $ 19,198,113     $ 13,848,351  
                         
    Annualized adjusted non-interest expense/average assets     1.98 %     2.02 %     1.80 %     1.99 %     1.87 %
                         
    (6) Efficiency Ratio Calculation                    
        Three Months Ended   Nine Months Ended
        September 30,   June 30,   September 30,   September 30,   September 30,
          2024       2024       2023       2024       2023  
    Net interest income   $ 183,701     $ 141,506     $ 96,236     $ 418,877     $ 303,666  
    Reported non-interest income     26,855       22,275       19,320       69,937       60,861  
    Adjustments to non-interest income:                    
    Net (gain) loss on securities transactions     (2 )     2,973       13       2,972       (37 )
    Adjusted non-interest income     26,853       25,248       19,333       72,909       60,824  
    Total income   $ 210,554     $ 166,754     $ 115,569     $ 491,786     $ 364,490  
                         
    Adjusted non-interest expense   $ 120,435     $ 96,479     $ 63,336     $ 286,540     $ 194,136  
                         
    Efficiency ratio (adjusted non-interest expense/income)     57.20 %     57.86 %     54.80 %     58.27 %     53.26 %
                         
    PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
    Consolidated Statements of Financial Condition
    September 30, 2024 (Unaudited) and December 31, 2023
    (Dollars in Thousands)
           
    Assets September 30, 2024   December 31, 2023
    Cash and due from banks $ 244,064     $ 180,241  
    Short-term investments   25       14  
    Total cash and cash equivalents   244,089       180,255  
    Available for sale debt securities, at fair value   2,725,110       1,690,112  
    Held to maturity debt securities, net of allowance (fair value of $322,427 as of September 30, 2024 (unaudited) and $352,601 as of December 31, 2023)   332,021       363,080  
    Equity securities, at fair value   20,044       1,270  
    Federal Home Loan Bank stock   96,219       79,217  
    Loans held for sale   5,757       1,785  
    Loans held for investment   18,794,609       10,871,916  
    Less allowance for credit losses   191,175       107,200  
    Net loans   18,609,191       10,766,501  
    Foreclosed assets, net   9,801       11,651  
    Banking premises and equipment, net   124,955       70,998  
    Accrued interest receivable   89,866       58,966  
    Intangible assets   839,223       457,942  
    Bank-owned life insurance   403,648       243,050  
    Other assets   548,348       287,768  
    Total assets $ 24,042,515     $ 14,210,810  
           
    Liabilities and Stockholders’ Equity      
    Deposits:      
    Demand deposits $ 13,548,480     $ 8,020,889  
    Savings deposits   1,671,209       1,175,683  
    Certificates of deposit of $250,000 or more   800,005       218,549  
    Other time deposits   2,356,491       877,393  
    Total deposits   18,376,185       10,292,514  
    Mortgage escrow deposits   48,007       36,838  
    Borrowed funds   2,214,512       1,970,033  
    Subordinated debentures   414,184       10,695  
    Other liabilities   368,569       210,134  
    Total liabilities   21,421,457       12,520,214  
           
    Stockholders’ equity:      
    Preferred stock, $0.01 par value, 50,000,000 shares authorized, none issued   —       —  
    Common stock, $0.01 par value, 200,000,000 shares authorized, 137,565,966 shares issued and 130,448,599 shares outstanding as of September 30, 2024 and 75,537,186 outstanding as of December 31, 2023.   1,376       832  
    Additional paid-in capital   1,871,343       989,058  
    Retained earnings   972,997       974,542  
    Accumulated other comprehensive loss   (93,049 )     (141,115 )
    Treasury stock   (129,148 )     (127,825 )
    Unallocated common stock held by the Employee Stock Ownership Plan   (2,461 )     (4,896 )
    Common Stock acquired by the Directors’ Deferred Fee Plan   (2,247 )     (2,694 )
    Deferred Compensation – Directors’ Deferred Fee Plan   2,247       2,694  
    Total stockholders’ equity   2,621,058       1,690,596  
    Total liabilities and stockholders’ equity $ 24,042,515     $ 14,210,810  
                   
    PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
    Consolidated Statements of Income
    Three months ended September 30, 2024, June 30, 2024 and September 30, 2023, and nine months ended September 30, 2024 and 2023 (Unaudited)
    (Dollars in Thousands, except per share data)
                       
      Three Months Ended   Nine Months Ended
      September 30,   June 30,   September 30,   September 30,   September 30,
        2024     2024       2023     2024       2023
    Interest and dividend income:                  
    Real estate secured loans $ 197,857   $ 156,318     $ 104,540   $ 461,632     $ 299,830
    Commercial loans   81,183     58,532       33,806     175,815       93,915
    Consumer loans   12,947     8,351       4,746     25,820       13,419
    Available for sale debt securities, equity securities and Federal Home Loan Bank stock   25,974     20,394       11,886     58,698       34,748
    Held to maturity debt securities   2,136     2,357       2,334     6,761       7,059
    Deposits, federal funds sold and other short-term investments   2,425     1,859       885     5,466       2,678
    Total interest income   322,522     247,811       158,197     734,192       451,649
                       
    Interest expense:                  
    Deposits   110,009     81,058       44,923     243,602       108,880
    Borrowed funds   19,923     20,566       16,765     57,871       38,329
    Subordinated debt   8,889     4,681       273     13,842       774
    Total interest expense   138,821     106,305       61,961     315,315       147,983
    Net interest income   183,701     141,506       96,236     418,877       303,666
    Provision charge for credit losses   9,299     69,705       12,541     78,684       29,031
    Net interest income after provision for credit losses   174,402     71,801       83,695     340,193       274,635
                       
    Non-interest income:                  
    Fees   9,816     8,699       6,132     24,426       18,294
    Wealth management income   7,620     7,769       6,992     22,878       20,826
    Insurance agency income   3,631     4,488       3,224     12,912       11,175
    Bank-owned life insurance   4,308     3,323       1,820     9,448       4,838
    Net gain (loss) on securities transactions   2     (2,973 )     13     (2,972 )     37
    Other income   1,478     969       1,139     3,245       5,691
    Total non-interest income   26,855     22,275       19,320     69,937       60,861
                       
    Non-interest expense:                  
    Compensation and employee benefits   63,468     54,888       35,702     158,404       109,724
    Net occupancy expense   12,790     11,142       8,113     32,452       24,474
    Data processing expense   10,481     8,433       5,312     25,698       16,536
    FDIC Insurance   4,180     3,100       1,628     9,553       5,688
    Amortization of intangibles   12,231     6,483       720     19,420       2,231
    Advertising and promotion expense   1,524     1,171       1,133     3,661       3,722
    Merger-related expenses   15,567     18,915       2,289     36,684       5,349
    Other operating expenses   15,761     11,262       10,728     37,352       31,761
    Total non-interest expense   136,002     115,394       65,625     323,224       199,485
    Income (loss) before income tax expense   65,255     (21,318 )     37,390     86,906       136,011
    Income tax expense (benefit)   18,850     (9,833 )     8,843     19,905       34,925
    Net income (loss) $ 46,405   $ (11,485 )   $ 28,547   $ 67,001     $ 101,086
                       
    Basic earnings per share $ 0.36   $ (0.11 )   $ 0.38   $ 0.65     $ 1.35
    Average basic shares outstanding   129,941,845     102,957,521       74,909,083     102,819,042       74,793,530
                       
    Diluted earnings per share $ 0.36   $ (0.11 )   $ 0.38   $ 0.65     $ 1.35
    Average diluted shares outstanding   130,004,870     102,957,521       74,914,205     102,845,261       74,816,606
                                     
    PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
    Net Interest Margin Analysis
    Quarterly Average Balances
    (Dollars in Thousands) (Unaudited)
      September 30, 2024   June 30, 2024   September 30, 2023
      Average Balance   Interest   Average
    Yield/Cost    		   Average Balance   Interest   Average
    Yield/Cost    		   Average Balance   Interest   Average
    Yield/Cost
    Interest-Earning Assets:                                  
    Deposits $ 179,313   $ 2,425   5.38 %   $ 40,228   $ 1,859   5.38 %   $ 74,183   $ 884   4.73 %
    Federal funds sold and other short-term investments   —     —   — %     0     —   — %     57     1   4.00 %
    Available for sale debt securities   2,644,262     24,884   3.72 %     2,244,725     17,647   3.14 %     1,724,833     10,127   2.35 %
    Held to maturity debt securities, net (1)   342,217     2,136   2.50 %     352,216     2,357   2.68 %     373,681     2,334   2.50 %
    Equity securities, at fair value   19,654     —   — %     10,373     —   — %     1,068     —   — %
    Federal Home Loan Bank stock   91,841     1,090   4.75 %     88,864     2,747   12.36 %     91,273     1,759   7.71 %
    Net loans: (2)                                  
    Total mortgage loans   13,363,265     197,857   5.83 %     10,674,109     156,318   5.81 %     7,881,193     104,540   5.21 %
    Total commercial loans   4,546,088     81,183   7.05 %     3,514,602     58,532   6.62 %     2,289,267     33,806   5.81 %
    Total consumer loans   622,586     12,947   8.27 %     460,702     8,351   7.29 %     300,383     4,746   6.27 %
    Total net loans   18,531,939     291,987   6.21 %     14,649,413     223,201   6.05 %     10,470,843     143,092   5.37 %
    Total interest-earning assets $ 21,809,226   $ 322,522   5.84 %   $ 17,385,819   $ 247,811   5.67 %   $ 12,735,938   $ 158,197   4.89 %
                                       
    Non-Interest Earning Assets:                                  
    Cash and due from banks   341,505             37,621             82,522        
    Other assets   2,097,307             1,773,601             1,158,150        
    Total assets $ 24,248,038           $ 19,197,041           $ 13,976,610        
                                       
    Interest-Bearing Liabilities:                                  
    Demand deposits $ 9,942,053   $ 74,864   3.00 %   $ 7,935,543   $ 58,179   2.95 %   $ 5,741,052   $ 35,290   2.44 %
    Savings deposits   1,711,502     1,006   0.23 %     1,454,784     832   0.23 %     1,240,951     592   0.19 %
    Time deposits   3,112,598     34,139   4.36 %     2,086,433     22,047   4.25 %     1,052,793     9,041   3.41 %
    Total deposits   14,766,153     110,009   2.96 %     11,476,760     81,058   2.84 %     8,034,796     44,923   2.22 %
                                       
    Borrowed funds   2,125,149     19,923   3.73 %     2,158,193     20,566   3.83 %     1,780,655     16,765   3.74 %
    Subordinated debentures   413,267     8,889   8.56 %     221,086     4,681   8.52 %     10,613     273   10.24 %
    Total interest-bearing liabilities   17,304,569     138,821   3.19 %     13,856,039     106,305   3.09 %     9,826,064     61,961   2.50 %
                                       
    Non-Interest Bearing Liabilities:                                  
    Non-interest bearing deposits   3,741,160             2,866,917             2,230,199        
    Other non-interest bearing liabilities   541,839             346,616             265,427        
    Total non-interest bearing liabilities   4,282,999             3,213,533             2,495,626        
    Total liabilities   21,587,568             17,069,572             12,321,690        
    Stockholders’ equity   2,660,470             2,127,469             1,654,920        
    Total liabilities and stockholders’ equity $ 24,248,038           $ 19,197,041           $ 13,976,610        
                                       
    Net interest income     $ 183,701           $ 141,506           $ 96,236    
                                       
    Net interest rate spread         2.65 %           2.58 %           2.39 %
    Net interest-earning assets $ 4,504,657           $ 3,529,780           $ 2,909,874        
                                       
    Net interest margin (3)         3.31 %           3.21 %           2.96 %
                                       
    Ratio of interest-earning assets to total interest-bearing liabilities 1.26x           1.25x           1.30x        
       
    (1 ) Average outstanding balance amounts shown are amortized cost, net of allowance for credit losses.
    (2 ) Average outstanding balances are net of the allowance for loan losses, deferred loan fees and expenses, loan premiums and discounts and include non-accrual loans.
    (3 ) Annualized net interest income divided by average interest-earning assets.
         
    The following table summarizes the quarterly net interest margin for the previous five quarters.      
      9/30/24   6/30/24   3/31/24   12/31/23   9/30/23
      3rd Qtr.   2nd Qtr.   1st Qtr.   4th Qtr.   3rd Qtr.
    Interest-Earning Assets:                  
    Securities 3.69 %   3.40 %   2.87 %   2.79 %   2.67 %
    Net loans 6.21 %   6.05 %   5.51 %   5.50 %   5.37 %
    Total interest-earning assets 5.84 %   5.67 %   5.06 %   5.04 %   4.89 %
                       
    Interest-Bearing Liabilities:                  
    Total deposits 2.96 %   2.84 %   2.60 %   2.47 %   2.22 %
    Total borrowings 3.73 %   3.83 %   3.60 %   3.71 %   3.74 %
    Total interest-bearing liabilities 3.19 %   3.09 %   2.80 %   2.71 %   2.50 %
                       
    Interest rate spread 2.65 %   2.58 %   2.26 %   2.33 %   2.39 %
    Net interest margin 3.31 %   3.21 %   2.87 %   2.92 %   2.96 %
                       
    Ratio of interest-earning assets to interest-bearing liabilities 1.26x   1.25x   1.28x   1.28x   1.30x
                       
    PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
    Net Interest Margin Analysis
    Average Year to Date Balances
    (Dollars in Thousands) (Unaudited)
                           
      September 30, 2024   September 30, 2023
      Average       Average   Average       Average
      Balance   Interest   Yield/Cost   Balance   Interest   Yield/Cost
    Interest-Earning Assets:                      
    Deposits $ 39,280   $ 5,466   5.38 %   $ 69,696   $ 2,676   5.13 %
    Federal funds sold and other short term investments   —     —   — %     58     2   5.34 %
    Available for sale debt securities   2,189,671     52,553   3.19 %     1,777,861     30,819   2.31 %
    Held to maturity debt securities, net (1)   350,529     6,761   2.57 %     379,144     7,059   2.48 %
    Equity securities, at fair value   10,050     —   — %     1,022     —   — %
    Federal Home Loan Bank stock   84,845     6,145   9.66 %     77,634     3,929   6.75 %
    Net loans: (2)                      
    Total mortgage loans   10,682,974     461,632   5.70 %     7,740,591     299,830   5.12 %
    Total commercial loans   3,487,600     175,815   6.69 %     2,225,725     93,915   5.60 %
    Total consumer loans   460,497     25,820   7.49 %     302,706     13,419   5.93 %
    Total net loans   14,631,071     663,267   5.99 %     10,269,022     407,164   5.25 %
    Total interest-earning assets $ 17,305,446   $ 734,192   5.61 %   $ 12,574,437   $ 451,649   4.76 %
                           
    Non-Interest Earning Assets:                      
    Cash and due from banks   229,336             121,801        
    Other assets   1,663,331             1,152,113        
    Total assets $ 19,198,113           $ 13,848,351        
                           
    Interest-Bearing Liabilities:                      
    Demand deposits $ 7,931,251   $ 174,609   2.94 %   $ 5,710,855   $ 85,822   2.01 %
    Savings deposits   1,444,135     2,476   0.23 %     1,315,157     1,582   0.16 %
    Time deposits   2,091,806     66,517   4.25 %     961,010     21,476   2.99 %
    Total deposits   11,467,192     243,602   2.84 %     7,987,022     108,880   1.82 %
    Borrowed funds   2,074,958     57,871   3.73 %     1,556,619     38,329   3.29 %
    Subordinated debentures   215,745     13,842   8.57 %     10,563     774   9.80 %
    Total interest-bearing liabilities $ 13,757,895   $ 315,315   3.06 %   $ 9,554,204   $ 147,983   2.07 %
                           
    Non-Interest Bearing Liabilities:                      
    Non-interest bearing deposits   2,896,453             2,382,144        
    Other non-interest bearing liabilities   379,909             266,910        
    Total non-interest bearing liabilities   3,276,362             2,649,054        
    Total liabilities   17,034,257             12,203,258        
    Stockholders’ equity   2,163,856             1,645,093        
    Total liabilities and stockholders’ equity $ 19,198,113           $ 13,848,351        
                           
    Net interest income     $ 418,877           $ 303,666    
                           
    Net interest rate spread         2.55 %           2.69 %
    Net interest-earning assets $ 3,547,551           $ 3,020,233        
                           
    Net interest margin (3)         3.18 %           3.19 %
                           
    Ratio of interest-earning assets to total interest-bearing liabilities 1.26x           1.32x        
                           
                           
    (1) Average outstanding balance amounts shown are amortized cost, net of allowance for credit losses.
    (2) Average outstanding balance are net of the allowance for loan losses, deferred loan fees and expenses, loan premium and discounts and include non-accrual loans.
    (3) Annualized net interest income divided by average interest-earning assets.
     
    The following table summarizes the year-to-date net interest margin for the previous three years.
                 
      Nine Months Ended  
      September 30, 2024   September 30, 2023   September 23, 2022  
    Interest-Earning Assets:            
    Securities 3.33 %   2.57 %   1.72 %  
    Net loans 5.99 %   5.25 %   4.01 %  
    Total interest-earning assets 5.61 %   4.76 %   3.51 %  
                 
    Interest-Bearing Liabilities:            
    Total deposits 2.84 %   1.82 %   0.33 %  
    Total borrowings 3.73 %   3.29 %   0.97 %  
    Total interest-bearing liabilities 3.06 %   2.07 %   0.38 %  
                 
    Interest rate spread 2.55 %   2.69 %   3.13 %  
    Net interest margin 3.18 %   3.19 %   3.24 %  
                 
    Ratio of interest-earning assets to interest-bearing liabilities 1.26x   1.32x   1.38x  

    SOURCE: Provident Financial Services, Inc.

    CONTACT: Investor Relations, 1-732-590-9300 Web Site: http://www.Provident.Bank

    The MIL Network –

  • MIL-OSI USA: Labrador Letter – The Fight for Idaho’s Sovereignty Over Federal Lands

    Source: US State of Idaho

    Dear Friends,
    Last week, I filed a brief in support of our neighbor Utah in their lawsuit against the federal government regarding the widespread federal ownership of “unappropriated” land—that is, land owned by the federal government but not used for any federal purpose—across their state and throughout most of the West.  Utah’s suit asks the United States Supreme Court to release much of this land back to the ownership and management of the states.
    As many of you know, I spent 8 years in Washington, D.C. representing Idaho’s First Congressional District.  You can’t throw a rock in that town without hitting federal property of some sort  like the Capitol, the White House, the National Mall, military bases, monuments, parks, courts, museums, galleries, statues, and of course, the metastasizing federal bureaucracy with administrative offices on every corner.  Yet, with all that, the federal government owns only 25% of Washington, D.C.  Yes, you read that right.  The federal government owns only 25% of our nation’s capitol city and yet owns over 60% of our state.
    Idaho is over 83,000 square miles, and the federal government owns 61% of it.  That’s land the State of Idaho can’t use.   Instead, the federal government has the final say over what is allowed on this land. For example, the federal government has exclusive say over whether prescribed burns and other necessary maintenance will—or, in many cases, will not—take place in federally owned forests. Or if Idaho wants to cross federal lands with new roads, power lines, pipelines, or other items and activities essential for commerce and economic growth, it must obtain federal permission.
    This arrangement flips the division of power between the state and national governments that our Founders envisioned. The federal government is supposed to use its limited enumerated powers to address national issues, as it does by making treaties, regulating interstate commerce, or declaring war. States can then use their general authority to address local concerns, like land management. But on unappropriated federal lands—nearly a third of the federally owned land in Idaho—the federal government is involved in local issues without pursuing any constitutionally authorized aim. There are no courthouses or military installations on these lands, for example. Instead, the federal government simply acts as a self-interested landowner leasing out the land for timber, mining, and grazing—but without being subject to state law or state management practices.
    The problem of unappropriated federal land disproportionately affects western states, and places them on unequal footing with other states in which the federal government owns almost no land. Idaho, Utah, and other western states should have just as much say over how land within their borders is used and maintained as Iowa or Connecticut. But time after time, the sovereignty of western states is diminished by distant federal regulators overriding our will.
    A perfect example is the Lava Ridge Wind Project that the federal government is pulling out all the stops to ram through despite widespread opposition within Idaho. Because the federal government owns the unappropriated land on which the massive wind turbines for the project will be built, it doesn’t matter whether Idaho wants the project or not. Federal agencies can put their own priorities first—they can pursue the Biden-Harris “green agenda,” build wind turbines in Idaho that will send power to California and pocket the land-use fees for themselves.
    And that raises another concerning aspect of federal ownership of unappropriated lands in Idaho—it siphons what is likely tens of millions of dollars out of the state. If Idaho owned the land, it could conduct the same sort of activities that the federal government does—like leasing for timber, mining, and grazing—and reinvest the revenue within the state. Instead, Idaho’s land is used to generate money for the United States Treasury, where it can be used for federal projects in any part of the country.
    Congress knows this is unfair to western states and attempts to compensate them through a program called Payment in Lieu of Taxes (PILT). But western states receive pennies on the dollar compared to what they would receive if they managed the land themselves. Moreover, the whole arrangement just reinforces federal dominance over western states—as sovereigns, they should not be forced to come hat-in-hand to Congress to ask for money that the federal government has no constitutional authority to have in the first place.
    That’s why the Utah suit is so critical. It seeks to restore the proper balance of power between the western states and the federal government and place the western states on the same level as their eastern counterparts. This is yet another example in which Idaho has been oppressed by the federal government’s overreach.
    The sovereignty of states to manage their own lands was such an important topic that it was even brought up in the Constitutional Convention in 1787.  It was insisted, ironically by a Massachusetts delegate, that state legislatures should first consent to the federal purchase of land within their borders to keep the federal government from buying up all the territory and pressuring any state by strangling their commerce and ability to grow.  The idea of a powerful, unaccountable central government wasn’t particularly trusted some 200 years ago and not much has happened since to contradict the sentiment.
    It seems that the federal government consistently attempts to undermine the voice and opinions of the people of Idaho and regulate us into perpetual social and economic servitude.   I’ll continue to fight every day for our state sovereignty and our ability to manage our own land, resources, and affairs here in Idaho.

    Best regards,

    Not yet subscribed to the Labrador Letter?  Click HERE to get our weekly newsletter and updates.  Miss an issue?  Labrador Letters are archived on the Attorney General website.

    MIL OSI USA News –

  • MIL-OSI: Precision Drilling Announces 2024 Third Quarter Unaudited Financial Results

    Source: GlobeNewswire (MIL-OSI)

    CALGARY, Alberta, Oct. 29, 2024 (GLOBE NEWSWIRE) — This news release contains “forward-looking information and statements” within the meaning of applicable securities laws. For a full disclosure of the forward-looking information and statements and the risks to which they are subject, see the “Cautionary Statement Regarding Forward-Looking Information and Statements” later in this news release. This news release contains references to certain Financial Measures and Ratios, including Adjusted EBITDA (earnings before income taxes, loss (gain) on investments and other assets, gain on repurchase of unsecured senior notes, finance charges, foreign exchange, gain on asset disposals and depreciation and amortization), Funds Provided by (Used in) Operations, Net Capital Spending, Working Capital and Total Long-term Financial Liabilities. These terms do not have standardized meanings prescribed under International Financial Reporting Standards (IFRS) Accounting Standards and may not be comparable to similar measures used by other companies. See “Financial Measures and Ratios” later in this news release.

    Precision Drilling Corporation (“Precision” or the “Company”) (TSX:PD; NYSE:PDS) delivered strong third quarter financial results, demonstrating the resilience of the business and its robust cash flow potential. Year to date, Precision has already achieved the low end of its debt reduction target range and is well on track to allocate 25% to 35% of its free cash flow to share buybacks in 2024.

    Financial Highlights

    • Revenue was $477 million and exceeded the $447 million realized in the third quarter of 2023 as activity increased in Canada and internationally, which more than offset lower activity in the U.S.
    • Adjusted EBITDA(1) was $142 million, including a share-based compensation recovery of $0.2 million. In 2023, third quarter Adjusted EBITDA was $115 million and included share-based compensation charges of $31 million.
    • Net earnings was $39 million or $2.77 per share, nearly doubling the $20 million or $1.45 per share in 2023.
    • Completion and Production Services revenue increased 27% over the same period last year to $73 million, while Adjusted EBITDA rose 40% to $20 million, reflecting the successful integration of the CWC Energy Services (CWC) acquisition in late 2023.
    • Internationally, revenue increased 21% over the third quarter of last year as the Company realized US$35 million of contract drilling revenue versus US$29 million in 2023. Revenue for the third quarter of 2024 was negatively impacted by fewer rig moves and planned rig recertifications that accounted for 44 non-billable utilization days.
    • Debt reduction during the quarter was $49 million and total $152 million year to date. Share repurchases during the quarter were $17 million and total $50 million year to date.
    • Increased our 2024 planned capital expenditures from $195 million to $210 million to fund multiple contracted rig upgrades and the strategic purchase of drill pipe for use in 2025.

    Operational Highlights

    • Canada’s activity increased 25%, averaging 72 active drilling rigs versus 57 in the third quarter of 2023. Our Super Triple and Super Single rigs are in high demand and approaching full utilization.
    • Canadian revenue per utilization day was $32,325 and comparable to the $32,224 in the same period last year.
    • U.S. activity averaged 35 drilling rigs compared to 41 for the third quarter of 2023.
    • U.S. revenue per utilization day was US$32,949 versus US$35,135 in the same quarter last year.
    • International activity increased 33% compared to the third quarter of 2023, with eight drilling rigs fully contracted this year following rig reactivations in 2023. International revenue per utilization day was US$47,223 compared to US$51,570 in the third quarter of 2023 due to fewer rig moves and planned rig recertifications completed in 2024.
    • Service rig operating hours increased 34% over the same quarter last year totaling 62,835 hours driven by the CWC acquisition.
    • Formed a strategic Joint Partnership (Partnership) with Indigenous partners to provide well servicing operations in northeast British Columbia.

    (1) See “FINANCIAL MEASURES AND RATIOS.”

    MANAGEMENT COMMENTARY

    “Precision’s international and Canadian businesses led our third quarter results, with revenue, Adjusted EBITDA, and net income all improving over the same period last year, demonstrating the resilience of our High Performance, High Value strategy and geographic exposure. Our cash flow conversion this quarter enabled us to repay debt, buy back shares, and continue to invest in our Super Series fleet. We have already achieved the low end of our debt repayment target range for this year and expect to be less than a year away from meeting our long-term target of a Net Debt to Adjusted EBITDA ratio(1) of less than one time.

    “Canadian fundamentals for heavy oil, condensate, and LNG remain strong due to the additional takeaway capacity. The Trans Mountain oil pipeline expansion is driving higher and stable returns for producers, who are accelerating heavy oil and condensate targeted drilling plans, while Canada’s first LNG project is expected to stabilize natural gas pricing and further stimulate activity in the Montney in 2025. As the leading provider of high-quality and reliable services in Canada, demand for our Super Series fleet remains high. Today, we have 75 rigs operating, with our Super Triple and Super Single rigs nearly fully utilized. We expect strong customer demand and utilization to continue well beyond 2025.

    “In the U.S., our rig count has been range-bound for the last several months, with 35 rigs operating today. Volatile commodity prices, customer consolidation, and budget exhaustion are all headwinds that we expect will continue to suppress activity for the remainder of the year. We are encouraged by recent momentum in our contract book with seven new contracts secured for oil and natural gas drilling projects that are expected to begin late this year for 2025 drilling programs. Looking ahead, we anticipate that the next wave of additional Gulf Coast LNG export facilities, coal plant retirements, and a build-out of AI data centers should drive further natural gas drilling and support sustained natural gas demand.

    “Precision’s international operations provide a stable foundation for earnings and cash flow as our rigs are under long-term contracts that extend into 2028. Our well servicing business further complements our stability as we remain the premier well service provider in Canada where demand continues to outpace manned service rigs. In 2023, we repositioned these businesses with rig reactivations and our CWC acquisition and as a result, each business is on track to increase its 2024 Adjusted EBITDA by approximately 50% over the prior year.

    “I am proud of the discipline Precision continues to show throughout the organization and we remain focused on our strategic priorities, which include generating free cash flow, improving capital returns to shareholders, and delivering operational excellence. With robust Canadian market fundamentals, an improving long-term outlook for the U.S., and a focused strategy, I am confident we will continue to drive higher total shareholder returns. I would like to thank our team for executing at the highest operating levels and generating strong financial performance and value for our customers,” stated Kevin Neveu, Precision’s President and CEO.

    (1) See “FINANCIAL MEASURES AND RATIOS.”

    SELECT FINANCIAL AND OPERATING INFORMATION

    Financial Highlights

      For the three months ended September 30,     For the nine months ended September 30,  
    (Stated in thousands of Canadian dollars, except per share amounts)   2024       2023     % Change       2024       2023     % Change  
    Revenue   477,155       446,754       6.8       1,434,157       1,430,983       0.2  
    Adjusted EBITDA(1)   142,425       114,575       24.3       400,695       459,887       (12.9 )
    Net earnings   39,183       19,792       98.0       96,400       142,522       (32.4 )
    Cash provided by operations   79,674       88,500       (10.0 )     319,292       330,316       (3.3 )
    Funds provided by operations(1)   113,322       91,608       23.7       342,837       388,220       (11.7 )
                                       
    Cash used in investing activities   38,852       34,278       13.3       141,032       157,157       (10.3 )
    Capital spending by spend category(1)                                  
    Expansion and upgrade   7,709       13,479       (42.8 )     30,501       39,439       (22.7 )
    Maintenance and infrastructure   56,139       38,914       44.3       127,297       108,463       17.4  
    Proceeds on sale   (5,647 )     (6,698 )     (15.7 )     (21,825 )     (20,724 )     5.3  
    Net capital spending(1)   58,201       45,695       27.4       135,973       127,178       6.9  
                                       
    Net earnings per share:                                  
    Basic   2.77       1.45       91.0       6.74       10.45       (35.5 )
    Diluted   2.31       1.45       59.3       6.73       9.84       (31.6 )
    Weighted average shares outstanding:                                  
    Basic   14,142       13,607       3.9       14,312       13,643       4.9  
    Diluted   14,890       13,610       9.4       14,317       14,858       (3.6 )

    (1) See “FINANCIAL MEASURES AND RATIOS.”

    Operating Highlights

      For the three months ended September 30,     For the nine months ended September 30,  
      2024     2023     % Change     2024     2023     % Change  
    Contract drilling rig fleet   214       224       (4.5 )     214       224       (4.5 )
    Drilling rig utilization days:                                  
    U.S.   3,196       3,815       (16.2 )     9,885       13,823       (28.5 )
    Canada   6,586       5,284       24.6       17,667       15,247       15.9  
    International   736       554       32.9       2,192       1,439       52.3  
    Revenue per utilization day:                                  
    U.S. (US$)   32,949       35,135       (6.2 )     33,011       35,216       (6.3 )
    Canada (Cdn$)   32,325       32,224       0.3       34,497       32,583       5.9  
    International (US$)   47,223       51,570       (8.4 )     51,761       51,306       0.9  
    Operating costs per utilization day:                                  
    U.S. (US$)   22,207       21,655       2.5       22,113       20,217       9.4  
    Canada (Cdn$)   19,448       18,311       6.2       20,196       19,239       5.0  
                                       
    Service rig fleet   165       121       36.4       165       121       36.4  
    Service rig operating hours   62,835       46,894       34.0       194,390       144,944       34.1  


    Drilling Activity

      Average for the quarter ended 2023   Average for the quarter ended 2024  
      Mar. 31     June 30     Sept. 30     Dec. 31     Mar. 31     June 30     Sept. 30  
    Average Precision active rig count(1):                                        
    U.S.   60       51       41       45       38       36       35  
    Canada   69       42       57       64       73       49       72  
    International   5       5       6       8       8       8       8  
    Total   134       98       104       117       119       93       115  

    (1) Average number of drilling rigs working or moving.

    Financial Position

    (Stated in thousands of Canadian dollars, except ratios) September 30, 2024     December 31, 2023(2)  
    Working capital(1)   166,473       136,872  
    Cash   24,304       54,182  
    Long-term debt   787,008       914,830  
    Total long-term financial liabilities(1)   858,765       995,849  
    Total assets   2,887,996       3,019,035  
    Long-term debt to long-term debt plus equity ratio (1)   0.32       0.37  

    (1) See “FINANCIAL MEASURES AND RATIOS.”
    (2) Comparative period figures were restated due to a change in accounting policy. See “CHANGE IN ACCOUNTING POLICY.”

    Summary for the three months ended September 30, 2024:

    • Revenue increased to $477 million compared with $447 million in the third quarter of 2023 as a result of higher Canadian and international activity, partially offset by lower U.S. activity, day rates and lower idle but contract rig revenue.
    • Adjusted EBITDA was $142 million as compared with $115 million in 2023, primarily due to increased Canadian and international results and lower share-based compensation. Please refer to “Other Items” later in this news release for additional information on share-based compensation.
    • Adjusted EBITDA as a percentage of revenue was 30% as compared with 26% in 2023.
    • Generated cash from operations of $80 million, reduced debt by $49 million, repurchased $17 million of shares, and ended the quarter with $24 million of cash and more than $500 million of available liquidity.
    • Revenue per utilization day, excluding the impact of idle but contracted rigs was US$32,949 compared with US$33,543 in 2023, a decrease of 2%. Sequentially, revenue per utilization day, excluding idle but contracted rigs, was largely consistent with the second quarter of 2024. U.S. revenue per utilization day was US$32,949 compared with US$35,135 in 2023. The decrease was primarily the result of lower fleet average day rates and idle but contracted rig revenue, partially offset by higher recoverable costs. We did not recognize revenue from idle but contracted rigs in the quarter as compared with US$6 million in 2023.
    • U.S. operating costs per utilization day increased to US$22,207 compared with US$21,655 in 2023. The increase is mainly due to higher recoverable costs and fixed costs being spread over fewer activity days, partially offset by lower repairs and maintenance. Sequentially, operating costs per utilization day were largely consistent with the second quarter of 2024.
    • Canadian revenue per utilization day was $32,325, largely consistent with the $32,224 realized in 2023. Sequentially, revenue per utilization day decreased $3,750 due to our rig mix, partially offset by higher fleet-wide average day rates.
    • Canadian operating costs per utilization day increased to $19,448, compared with $18,311 in 2023, resulting from higher repairs and maintenance and rig reactivation costs. Sequentially, daily operating costs decreased $2,204 due to lower labour expenses due to rig mix, recoverable expenses and repairs and maintenance.
    • Internationally, third quarter revenue increased 21% over 2023 as we realized revenue of US$35 million versus US$29 million in the prior year. Our higher revenue was primarily the result of a 33% increase in activity, partially offset by lower average revenue per utilization day. International revenue per utilization day was US$47,223 compared with US$51,570 in 2023 due to fewer rig moves and planned rig recertifications that accounted for 44 non-billable utilization days.
    • Completion and Production Services revenue was $73 million, an increase of $16 million from 2023, as our third quarter service rig operating hours increased 34%.
    • General and administrative expenses were $23 million as compared with $44 million in 2023 primarily due to lower share-based compensation charges.
    • Net finance charges were $17 million, a decrease of $3 million compared with 2023 as a result of lower interest expense on our outstanding debt balance.
    • Capital expenditures were $64 million compared with $52 million in 2023 and by spend category included $8 million for expansion and upgrades and $56 million for the maintenance of existing assets, infrastructure, and intangible assets.
    • Increased expected capital spending in 2024 to $210 million, an increase of $15 million, due to the strategic purchase of drill pipe before new import tariffs take effect and additional customer-backed upgrades.
    • Income tax expense for the quarter was $14 million as compared with $8 million in 2023. During the third quarter, we continue to not recognize deferred tax assets on certain international operating losses.
    • Reduced debt by $49 million from the redemption of US$33 million of 2026 unsecured senior notes and US$3 million repayment of our U.S. Real Estate Credit Facility.
    • Renewed our Normal Course Issuer Bid (NCIB) and repurchased $17 million of common shares during the third quarter.

    Summary for the nine months ended September 30, 2024:

    • Revenue for the first nine months of 2024 was $1,434 million, consistent 2023.
    • Adjusted EBITDA for the period was $401 million as compared with $460 million in 2023. Our lower Adjusted EBITDA was primarily attributed to decreased U.S. drilling results and higher share-based compensation, partially offset by the strengthening of Canadian and international results.
    • Cash provided by operations was $319 million as compared with $330 million in 2023. Funds provided by operations were $343 million, a decrease of $45 million from the comparative period.
    • General and administrative costs were $97 million, an increase of $14 million from 2023 primarily due to higher share-based compensation charges.
    • Net finance charges were $53 million, $10 million lower than 2023 due to our lower interest expense on our outstanding debt balance.
    • Capital expenditures were $158 million in 2024, an increase of $10 million from 2023. Capital spending by spend category included $31 million for expansion and upgrades and $127 million for the maintenance of existing assets, infrastructure, and intangible assets.
    • Reduced debt by $152 million from the redemption of US$89 million of 2026 unsecured senior notes and $31 million repayment of our Canadian and U.S. Real Estate Credit Facilities.
    • Repurchased $50 million of common shares under our NCIB.

    STRATEGY

    Precision’s vision is to be globally recognized as the High Performance, High Value provider of land drilling services. Our strategic priorities for 2024 are focused on increasing our capital returns to shareholders by delivering best-in-class service and generating free cash flow.

    Precision’s 2024 strategic priorities and the progress made during the third quarter are as follows:

    1. Concentrate organizational efforts on leveraging our scale and generating free cash flow.
      • Generated cash from operations of $80 million, bringing our year to date total to $319 million.
      • Increased utilization of our Super Single and Double rigs in the third quarter, driving Canadian drilling activity up 25% year over year.
      • Increased our third quarter Completion and Production Services operating hours and Adjusted EBITDA 34% and 40%, respectively, year over year. Achieved our $20 million annual synergies target from the CWC acquisition, which closed in November 2023.
      • Internationally, we realized US$35 million of contract drilling revenue versus US$29 million in 2023. Revenue for the third quarter of 2024 was negatively impacted by fewer rig moves and planned rig recertifications that accounted for 44 non-billable utilization days.
    2. Reduce debt by between $150 million and $200 million and allocate 25% to 35% of free cash flow before debt repayments for share repurchases.
      • Reduced debt by redeeming US$33 million of our 2026 unsecured senior notes and repaying US$3 million of our U.S. Real Estate Credit Facility. For the first nine months of the year, we have reduced debt by $152 million and already achieved the low end of our debt repayment target range.
      • Returned $17 million of capital to shareholders through share repurchases. Year to date we allocated $50 million of our free cash flow to share buybacks, which represents over 25% of free cash flow for the first nine months of the year and within our annual target range of 25% to 35%.
      • Remain firmly committed to our long-term debt reduction target of $600 million between 2022 and 2026 ($410 million achieved as of September 30, 2024), while moving direct shareholder capital returns towards 50% of free cash flow.
    3. Continue to deliver operational excellence in drilling and service rig operations to strengthen our competitive position and extend market penetration of our Alpha™ and EverGreen™ products.
      • Increased our Canadian drilling rig utilization days and well servicing rig operating hours over the third quarter of 2023, maintaining our position as the leading provider of high-quality and reliable services in Canada.
      • Nearly doubled our EverGreen™ revenue from the third quarter of 2023.
      • Continued to expand our EverGreen™ product offering on our Super Single rigs with hydrogen injection systems. EverGreenHydrogen™ reduces diesel consumption resulting in lower operating costs and greenhouse gas emissions for our customers.

    OUTLOOK

    The long-term outlook for global energy demand remains positive with rising demand for all types of energy including oil and natural gas driven by economic growth, increasing demand from third-world regions, and emerging energy sources of power demand. Oil prices are constructive, and producers remain disciplined with their production plans while geopolitical issues continue to threaten supply. In Canada, the recent commissioning of the Trans Mountain pipeline expansion and the startup of LNG Canada projected in 2025 are expected to provide significant tidewater access for Canadian crude oil and natural gas, supporting additional Canadian drilling activity. In the U.S., the next wave of LNG projects is expected to add approximately 11 bcf/d of export capacity from 2025 to 2028, supporting additional U.S. natural gas drilling activity. Coal retirements and a build-out of AI data centers could provide further support for natural gas drilling.

    In Canada, we currently have 75 rigs operating and expect this activity level to continue until spring breakup, except for the traditional slowdown over Christmas. Our Canadian drilling activity continues to outpace 2023 due to increased heavy oil drilling activity and strong Montney activity driven by robust condensate demand and pricing. Since the startup of the Trans Mountain pipeline expansion in May, customer activity in heavy oil targeted areas has exceeded expectations, resulting in near full utilization of our Super Single fleet. Customers are benefiting from improved commodity pricing and a weak Canadian dollar. Our Super Triple fleet, the preferred rig for Montney drilling, is also nearly fully utilized and with the expected startup of LNG Canada in mid-2025, demand could exceed supply.

    In recent years, the Canadian market has witnessed stronger second quarter drilling activity due to the higher percentage of wells drilled on pads in both the Montney and in heavy oil developments. Once a pad-equipped drilling rig is mobilized to site, it can walk from well to well and avoid spring break up road restrictions. We expect this higher activity trend to continue in the second quarter of 2025.

    In the U.S., we currently have 35 rigs operating as drilling activity remains constrained by volatile commodity prices, customer consolidation and budget exhaustion. We view these headwinds as short-term in nature, which will continue to suppress activity for the remainder of the year and into 2025. However, looking further ahead, we expect that a new budget cycle, the next wave of Gulf Coast LNG export facilities, and new sources of domestic power demand should begin to stimulate drilling.

    Internationally, we expect to have eight rigs running for the remainder of 2024, representing an approximate 40% increase in activity compared to 2023. All eight rigs are contracted through 2025 as well. We continue to bid our remaining idle rigs within the region and remain optimistic about our ability to secure additional rig activations.

    As the premier well service provider in Canada, the outlook for this business remains positive. We expect the Trans Mountain pipeline expansion and LNG Canada to drive more service-related activity, while increased regulatory spending requirements are expected to result in more abandonment work. Customer demand should remain strong, and with continued labor constraints, we expect firm pricing into the foreseeable future.

    We believe cost inflation is largely behind us and will continue to look for opportunities to lower costs.

    Contracts

    The following chart outlines the average number of drilling rigs under term contract by quarter as at October 29, 2024. For those quarters ending after September 30, 2024, this chart represents the minimum number of term contracts from which we will earn revenue. We expect the actual number of contracted rigs to vary in future periods as we sign additional term contracts.

    As at October 29, 2024   Average for the quarter ended 2023     Average     Average for the quarter ended 2024     Average  
        Mar. 31     June 30     Sept. 30     Dec. 31     2023     Mar. 31     June 30     Sept. 30     Dec. 31     2024  
    Average rigs under term contract:                                                            
    U.S.     40       37       32       28       34       20       17       17       16       18  
    Canada     19       23       23       23       22       24       22       23       24       23  
    International     4       5       7       7       6       8       8       8       8       8  
    Total     63       65       62       58       62       52       47       48       48       49  


    SEGMENTED FINANCIAL RESULTS

    Precision’s operations are reported in two segments: Contract Drilling Services, which includes our drilling rig, oilfield supply and manufacturing divisions; and Completion and Production Services, which includes our service rig, rental and camp and catering divisions.

      For the three months ended September 30,     For the nine months ended September 30,  
    (Stated in thousands of Canadian dollars)   2024     2023     % Change       2024     2023     % Change  
    Revenue:                                  
    Contract Drilling Services   406,155       390,728       3.9       1,215,125       1,257,762       (3.4 )
    Completion and Production Services   73,074       57,573       26.9       225,987       178,257       26.8  
    Inter-segment eliminations   (2,074 )     (1,547 )     34.1       (6,955 )     (5,036 )     38.1  
        477,155       446,754       6.8       1,434,157       1,430,983       0.2  
    Adjusted EBITDA:(1)                                  
    Contract Drilling Services   133,235       131,701       1.2       406,662       468,302       (13.2 )
    Completion and Production Services   19,741       14,118       39.8       50,786       39,031       30.1  
    Corporate and Other   (10,551 )     (31,244 )     (66.2 )     (56,753 )     (47,446 )     19.6  
        142,425       114,575       24.3       400,695       459,887       (12.9 )

    (1) See “FINANCIAL MEASURES AND RATIOS.”

    SEGMENT REVIEW OF CONTRACT DRILLING SERVICES

      For the three months ended September 30,     For the nine months ended September 30,  
    (Stated in thousands of Canadian dollars, except where noted)   2024       2023     % Change       2024       2023     % Change  
    Revenue   406,155       390,728       3.9       1,215,125       1,257,762       (3.4 )
    Expenses:                                  
    Operating   262,933       247,937       6.0       776,210       759,750       2.2  
    General and administrative   9,987       11,090       (9.9 )     32,253       29,710       8.6  
    Adjusted EBITDA(1)   133,235       131,701       1.2       406,662       468,302       (13.2 )
    Adjusted EBITDA as a percentage of revenue(1)   32.8 %     33.7 %           33.5 %     37.2 %      

    (1) See “FINANCIAL MEASURES AND RATIOS.”

    United States onshore drilling statistics:(1) 2024     2023  
      Precision     Industry(2)     Precision     Industry(2)  
    Average number of active land rigs for quarters ended:                      
    March 31   38       602       60       744  
    June 30   36       583       51       700  
    September 30   35       565       41       631  
    Year to date average   36       583       51       692  

    (1) United States lower 48 operations only.
    (2) Baker Hughes rig counts.

    Canadian onshore drilling statistics:(1) 2024     2023  
      Precision     Industry(2)     Precision     Industry(2)  
    Average number of active land rigs for quarters ended:                      
    March 31   73       208       69       221  
    June 30   49       134       42       117  
    September 30   72       207       57       188  
    Year to date average   65       183       56       175  

    (1) Canadian operations only.
    (2) Baker Hughes rig counts.

    SEGMENT REVIEW OF COMPLETION AND PRODUCTION SERVICES

      For the three months ended September 30,     For the nine months ended September 30,  
    (Stated in thousands of Canadian dollars, except where noted)   2024       2023     % Change       2024       2023        
    Revenue   73,074       57,573       26.9       225,987       178,257       26.8  
    Expenses:                                  
    Operating   50,608       41,612       21.6       167,128       133,325       25.4  
    General and administrative   2,725       1,843       47.9       8,073       5,901       36.8  
    Adjusted EBITDA(1)   19,741       14,118       39.8       50,786       39,031       30.1  
    Adjusted EBITDA as a percentage of revenue(1)   27.0 %     24.5 %           22.5 %     21.9 %      
    Well servicing statistics:                                  
    Number of service rigs (end of period)   165       121       36.4       165       121       36.4  
    Service rig operating hours   62,835       46,894       34.0       194,390       144,944       34.1  
    Service rig operating hour utilization   41 %     42 %           43 %     44 %      

    (1) See “FINANCIAL MEASURES AND RATIOS.”

    OTHER ITEMS

    Share-based Incentive Compensation Plans

    We have several cash and equity-settled share-based incentive plans for non-management directors, officers, and other eligible employees. Our accounting policies for each share-based incentive plan can be found in our 2023 Annual Report.

    A summary of expense amounts under these plans during the reporting periods are as follows:

      For the three months ended September 30,     For the nine months ended September 30,  
    (Stated in thousands of Canadian dollars) 2024     2023     2024     2023  
    Cash settled share-based incentive plans   (1,626 )     30,105       28,810       20,091  
    Equity settled share-based incentive plans   1,440       701       3,517       1,834  
    Total share-based incentive compensation plan expense   (186 )     30,806       32,327       21,925  
                           
    Allocated:                      
    Operating   221       7,692       8,159       6,732  
    General and Administrative   (407 )     23,114       24,168       15,193  
        (186 )     30,806       32,327       21,925  


    CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES

    Because of the nature of our business, we are required to make judgements and estimates in preparing our Condensed Consolidated Interim Financial Statements that could materially affect the amounts recognized. Our judgements and estimates are based on our past experiences and assumptions we believe are reasonable in the circumstances. The critical judgements and estimates used in preparing the Condensed Consolidated Interim Financial Statements are described in our 2023 Annual Report.

    EVALUATION OF CONTROLS AND PROCEDURES

    Based on their evaluation as at September 30, 2024, Precision’s Chief Executive Officer and Chief Financial Officer concluded that the Corporation’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the United States Securities Exchange Act of 1934, as amended (the Exchange Act)), are effective to ensure that information required to be disclosed by the Corporation in reports that are filed or submitted to Canadian and U.S. securities authorities is recorded, processed, summarized and reported within the time periods specified in Canadian and U.S. securities laws. In addition, as at September 30, 2024, there were no changes in the internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the three months ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting. Management will continue to periodically evaluate the Corporation’s disclosure controls and procedures and internal control over financial reporting and will make any modifications from time to time as deemed necessary.

    Based on their inherent limitations, disclosure controls and procedures and internal control over financial reporting may not prevent or detect misstatements, and even those controls determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

    FINANCIAL MEASURES AND RATIOS

    Non-GAAP Financial Measures
    We reference certain additional Non-Generally Accepted Accounting Principles (Non-GAAP) measures that are not defined terms under IFRS Accounting Standards to assess performance because we believe they provide useful supplemental information to investors.
    Adjusted EBITDA We believe Adjusted EBITDA (earnings before income taxes, loss (gain) on investments and other assets, gain on repurchase of unsecured senior notes, finance charges, foreign exchange, gain on asset disposals and depreciation and amortization), as reported in our Condensed Interim Consolidated Statements of Net Earnings and our reportable operating segment disclosures, is a useful measure because it gives an indication of the results from our principal business activities prior to consideration of how our activities are financed and the impact of foreign exchange, taxation and depreciation and amortization charges.

    The most directly comparable financial measure is net earnings.
      For the three months ended September 30,     For the nine months ended September 30,  
    (Stated in thousands of Canadian dollars)   2024       2023       2024       2023  
    Adjusted EBITDA by segment:                      
    Contract Drilling Services   133,235       131,701       406,662       468,302  
    Completion and Production Services   19,741       14,118       50,786       39,031  
    Corporate and Other   (10,551 )     (31,244 )     (56,753 )     (47,446 )
    Adjusted EBITDA   142,425       114,575       400,695       459,887  
    Depreciation and amortization   75,073       73,192       227,104       218,823  
    Gain on asset disposals   (3,323 )     (2,438 )     (14,235 )     (15,586 )
    Foreign exchange   849       363       772       (894 )
    Finance charges   16,914       19,618       53,472       63,946  
    Gain on repurchase of unsecured notes   —       (37 )     —       (137 )
    Loss (gain) on investments and other assets   (150 )     (3,813 )     (330 )     6,075  
    Incomes taxes   13,879       7,898       37,512       45,138  
    Net earnings   39,183       19,792       96,400       142,522  
    Funds Provided by (Used in) Operations We believe funds provided by (used in) operations, as reported in our Condensed Interim Consolidated Statements of Cash Flows, is a useful measure because it provides an indication of the funds our principal business activities generate prior to consideration of working capital changes, which is primarily made up of highly liquid balances.

    The most directly comparable financial measure is cash provided by (used in) operations.
    Net Capital Spending We believe net capital spending is a useful measure as it provides an indication of our primary investment activities.

    The most directly comparable financial measure is cash provided by (used in) investing activities.

    Net capital spending is calculated as follows:
        For the three months ended September 30,     For the nine months ended September 30,  
    (Stated in thousands of Canadian dollars)     2024       2023       2024       2023  
    Capital spending by spend category                        
    Expansion and upgrade     7,709       13,479       30,501       39,439  
    Maintenance, infrastructure and intangibles     56,139       38,914       127,297       108,463  
          63,848       52,393       157,798       147,902  
    Proceeds on sale of property, plant and equipment     (5,647 )     (6,698 )     (21,825 )     (20,724 )
    Net capital spending     58,201       45,695       135,973       127,178  
    Business acquisitions     —       —       —       28,000  
    Proceeds from sale of investments and other assets     —       (10,013 )     (3,623 )     (10,013 )
    Purchase of investments and other assets     7       3,211       7       5,282  
    Receipt of finance lease payments     (207 )     (64 )     (591 )     (64 )
    Changes in non-cash working capital balances     (19,149 )     (4,551 )     9,266       6,774  
    Cash used in investing activities     38,852       34,278       141,032       157,157  
    Working Capital We define working capital as current assets less current liabilities, as reported in our Condensed Interim Consolidated Statements of Financial Position.

    Working capital is calculated as follows:
      September 30,     December 31,  
    (Stated in thousands of Canadian dollars)   2024       2023  
    Current assets   472,557       510,881  
    Current liabilities   306,084       374,009  
    Working capital   166,473       136,872  
    Total Long-term Financial Liabilities We define total long-term financial liabilities as total non-current liabilities less deferred tax liabilities, as reported in our Condensed Interim Consolidated Statements of Financial Position.

    Total long-term financial liabilities is calculated as follows:
      September 30,     December 31,  
    (Stated in thousands of Canadian dollars)   2024       2023  
    Total non-current liabilities   920,812       1,069,364  
    Deferred tax liabilities   62,047       73,515  
    Total long-term financial liabilities   858,765       995,849  
    Non-GAAP Ratios
    We reference certain additional Non-GAAP ratios that are not defined terms under IFRS to assess performance because we believe they provide useful supplemental information to investors.
    Adjusted EBITDA % of Revenue We believe Adjusted EBITDA as a percentage of consolidated revenue, as reported in our Condensed Interim Consolidated Statements of Net Earnings, provides an indication of our profitability from our principal business activities prior to consideration of how our activities are financed and the impact of foreign exchange, taxation and depreciation and amortization charges.
    Long-term debt to long-term debt plus equity We believe that long-term debt (as reported in our Condensed Interim Consolidated Statements of Financial Position) to long-term debt plus equity (total shareholders’ equity as reported in our Condensed Interim Consolidated Statements of Financial Position) provides an indication of our debt leverage.
    Net Debt to Adjusted EBITDA We believe that the Net Debt (long-term debt less cash, as reported in our Condensed Interim Consolidated Statements of Financial Position) to Adjusted EBITDA ratio provides an indication of the number of years it would take for us to repay our debt obligations.
    Supplementary Financial Measures
    We reference certain supplementary financial measures that are not defined terms under IFRS to assess performance because we believe they provide useful supplemental information to investors.
    Capital Spending by Spend Category We provide additional disclosure to better depict the nature of our capital spending. Our capital spending is categorized as expansion and upgrade, maintenance and infrastructure, or intangibles.


    CHANGE IN ACCOUNTING POLICY

    Precision adopted Classification of Liabilities as Current or Non-current and Non-current Liabilities with Covenants – Amendments to IAS 1, as issued in 2020 and 2022. These amendments apply retrospectively for annual reporting periods beginning on or after January 1, 2024 and clarify requirements for determining whether a liability should be classified as current or non-current. Due to this change in accounting policy, there was a retrospective impact on the comparative Statement of Financial Position pertaining to the Corporation’s Deferred Share Unit (DSU) plan for non-management directors which are redeemable in cash or for an equal number of common shares upon the director’s retirement. In the case of a director retiring, the director’s respective DSU liability would become payable and the Corporation would not have the right to defer settlement of the liability for at least twelve months. As such, the liability is impacted by the revised policy. The following changes were made to the Statement of Financial Position:

    • As at January 1, 2023, accounts payable and accrued liabilities increased by $12 million and non-current share-based compensation liability decreased by $12 million.
    • As at December 31, 2023, accounts payable and accrued liabilities increased by $8 million and non-current share-based compensation liability decreased by $8 million.

    The Corporation’s other liabilities were not impacted by the amendments. The change in accounting policy will also be reflected in the Corporation’s consolidated financial statements as at and for the year ending December 31, 2024.

    JOINT PARTNERSHIP

    On September 26, 2024, Precision formed a strategic Partnership with two Indigenous partners to provide well servicing operations in northeast British Columbia. Precision contributed $4 million in assets to the Partnership. Precision holds a controlling interest in the Partnership and the portions of the net earnings and equity not attributable to Precision’s controlling interest are shown separately as Non-Controlling Interests (NCI) in the consolidated statements of net earnings and consolidated statements of financial position.

    CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION AND STATEMENTS

    Certain statements contained in this release, including statements that contain words such as “could”, “should”, “can”, “anticipate”, “estimate”, “intend”, “plan”, “expect”, “believe”, “will”, “may”, “continue”, “project”, “potential” and similar expressions and statements relating to matters that are not historical facts constitute “forward-looking information” within the meaning of applicable Canadian securities legislation and “forward-looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995 (collectively, “forward-looking information and statements”).

    In particular, forward-looking information and statements include, but are not limited to, the following:

    • our strategic priorities for 2024;
    • our capital expenditures, free cash flow allocation and debt reduction plans for 2024 through to 2026;
    • anticipated activity levels, demand for our drilling rigs, day rates and daily operating margins in 2024;
    • the average number of term contracts in place for 2024;
    • customer adoption of Alpha™ technologies and EverGreen™ suite of environmental solutions;
    • timing and amount of synergies realized from acquired drilling and well servicing assets;
    • potential commercial opportunities and rig contract renewals; and
    • our future debt reduction plans.

    These forward-looking information and statements are based on certain assumptions and analysis made by Precision in light of our experience and our perception of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. These include, among other things:

    • our ability to react to customer spending plans as a result of changes in oil and natural gas prices;
    • the status of current negotiations with our customers and vendors;
    • customer focus on safety performance;
    • existing term contracts are neither renewed nor terminated prematurely;
    • our ability to deliver rigs to customers on a timely basis;
    • the impact of an increase/decrease in capital spending; and
    • the general stability of the economic and political environments in the jurisdictions where we operate.

    Undue reliance should not be placed on forward-looking information and statements. Whether actual results, performance or achievements will conform to our expectations and predictions is subject to a number of known and unknown risks and uncertainties which could cause actual results to differ materially from our expectations. Such risks and uncertainties include, but are not limited to:

    • volatility in the price and demand for oil and natural gas;
    • fluctuations in the level of oil and natural gas exploration and development activities;
    • fluctuations in the demand for contract drilling, well servicing and ancillary oilfield services;
    • our customers’ inability to obtain adequate credit or financing to support their drilling and production activity;
    • changes in drilling and well servicing technology, which could reduce demand for certain rigs or put us at a competitive advantage;
    • shortages, delays and interruptions in the delivery of equipment supplies and other key inputs;
    • liquidity of the capital markets to fund customer drilling programs;
    • availability of cash flow, debt and equity sources to fund our capital and operating requirements, as needed;
    • the impact of weather and seasonal conditions on operations and facilities;
    • competitive operating risks inherent in contract drilling, well servicing and ancillary oilfield services;
    • ability to improve our rig technology to improve drilling efficiency;
    • general economic, market or business conditions;
    • the availability of qualified personnel and management;
    • a decline in our safety performance which could result in lower demand for our services;
    • changes in laws or regulations, including changes in environmental laws and regulations such as increased regulation of hydraulic fracturing or restrictions on the burning of fossil fuels and greenhouse gas emissions, which could have an adverse impact on the demand for oil and natural gas;
    • terrorism, social, civil and political unrest in the foreign jurisdictions where we operate;
    • fluctuations in foreign exchange, interest rates and tax rates; and
    • other unforeseen conditions which could impact the use of services supplied by Precision and Precision’s ability to respond to such conditions.

    Readers are cautioned that the forgoing list of risk factors is not exhaustive. Additional information on these and other factors that could affect our business, operations or financial results are included in reports on file with applicable securities regulatory authorities, including but not limited to Precision’s Annual Information Form for the year ended December 31, 2023, which may be accessed on Precision’s SEDAR+ profile at www.sedarplus.ca or under Precision’s EDGAR profile at www.sec.gov. The forward-looking information and statements contained in this release are made as of the date hereof and Precision undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, except as required by law.

    CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)

    (Stated in thousands of Canadian dollars)   September 30,
    2024    		     December 31,
    2023(1)    		     January 1,
    2023(1)    		  
    ASSETS            
    Current assets:                  
    Cash   $ 24,304     $ 54,182     $ 21,587  
    Accounts receivable     401,652       421,427       413,925  
    Inventory     41,398       35,272       35,158  
    Assets held for sale     5,203       —       —  
    Total current assets     472,557       510,881       470,670  
    Non-current assets:                  
    Income tax recoverable     696       682       1,602  
    Deferred tax assets     27,767       73,662       455  
    Property, plant and equipment     2,296,079       2,338,088       2,303,338  
    Intangibles     15,566       17,310       19,575  
    Right-of-use assets     63,708       63,438       60,032  
    Finance lease receivables     4,938       5,003       —  
    Investments and other assets     6,685       9,971       20,451  
    Total non-current assets     2,415,439       2,508,154       2,405,453  
    Total assets   $ 2,887,996     $ 3,019,035     $ 2,876,123  
                       
    LIABILITIES AND EQUITY                  
    Current liabilities:                  
    Accounts payable and accrued liabilities   $ 282,810     $ 350,749     $ 404,350  
    Income taxes payable     3,059       3,026       2,991  
    Current portion of lease obligations     19,263       17,386       12,698  
    Current portion of long-term debt     952       2,848       2,287  
    Total current liabilities     306,084       374,009       422,326  
                       
    Non-current liabilities:                  
    Share-based compensation     10,339       16,755       47,836  
    Provisions and other     7,408       7,140       7,538  
    Lease obligations     54,010       57,124       52,978  
    Long-term debt     787,008       914,830       1,085,970  
    Deferred tax liabilities     62,047       73,515       28,946  
    Total non-current liabilities     920,812       1,069,364       1,223,268  
    Equity:                  
    Shareholders’ capital     2,337,079       2,365,129       2,299,533  
    Contributed surplus     76,656       75,086       72,555  
    Deficit     (915,629 )     (1,012,029 )     (1,301,273 )
    Accumulated other comprehensive income     158,602       147,476       159,714  
    Total equity attributable to shareholders     1,656,708       1,575,662       1,230,529  
    Non-controlling interest     4,392       —       —  
    Total equity     1,661,100       1,575,662       1,230,529  
    Total liabilities and equity   $ 2,887,996     $ 3,019,035     $ 2,876,123  

    (1) Comparative period figures were restated due to a change in accounting policy. See “CHANGE IN ACCOUNTING POLICY.”

    (2) See “JOINT PARTNERSHIP” for additional information.

    CONDENSED     INTERIM CONSOLIDATED STATEMENTS OF NET EARNINGS (LOSS) (UNAUDITED)

        Three Months Ended September 30,     Nine Months Ended September 30,  
    (Stated in thousands of Canadian dollars, except per share amounts)   2024     2023     2024     2023  
                             
                             
    Revenue   $ 477,155     $ 446,754     $ 1,434,157     $ 1,430,983  
    Expenses:                        
    Operating     311,467       288,002       936,383       888,039  
    General and administrative     23,263       44,177       97,079       83,057  
    Earnings before income taxes, loss (gain) on investments and other assets, gain on repurchase of unsecured senior notes, finance charges, foreign exchange, gain on asset disposals, and depreciation and amortization     142,425       114,575       400,695       459,887  
    Depreciation and amortization     75,073       73,192       227,104       218,823  
    Gain on asset disposals     (3,323 )     (2,438 )     (14,235 )     (15,586 )
    Foreign exchange     849       363       772       (894 )
    Finance charges     16,914       19,618       53,472       63,946  
    Gain on repurchase of unsecured senior notes     —       (37 )     —       (137 )
    Loss (gain) on investments and other assets     (150 )     (3,813 )     (330 )     6,075  
    Earnings before income taxes     53,062       27,690       133,912       187,660  
    Income taxes:                        
    Current     2,297       2,047       4,659       4,008  
    Deferred     11,582       5,851       32,853       41,130  
          13,879       7,898       37,512       45,138  
    Net earnings   $ 39,183     $ 19,792     $ 96,400     $ 142,522  
    Net earnings per share attributable to shareholders:                        
    Basic   $ 2.77     $ 1.45     $ 6.74     $ 10.45  
    Diluted   $ 2.31     $ 1.45     $ 6.73     $ 9.84  


    CONDENSED     INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

        Three Months Ended September 30,     Nine Months Ended September 30,  
    (Stated in thousands of Canadian dollars)   2024     2023     2024     2023  
    Net earnings   $ 39,183     $ 19,792     $ 96,400     $ 142,522  
    Unrealized gain (loss) on translation of assets and liabilities of operations denominated in foreign currency     (16,104 )     39,180       30,409       3,322  
    Foreign exchange gain (loss) on net investment hedge with U.S. denominated debt     9,536       (24,616 )     (19,283 )     (1,484 )
    Comprehensive income   $ 32,615     $ 34,356     $ 107,526     $ 144,360  


    CONDENSED     INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

        Three Months Ended September 30,     Nine Months Ended September 30,  
    (Stated in thousands of Canadian dollars)   2024     2023     2024     2023  
    Cash provided by (used in):                        
    Operations:                        
    Net earnings   $ 39,183     $ 19,792     $ 96,400     $ 142,522  
    Adjustments for:                        
    Long-term compensation plans     2,620       11,577       14,490       9,200  
    Depreciation and amortization     75,073       73,192       227,104       218,823  
    Gain on asset disposals     (3,323 )     (2,438 )     (14,235 )     (15,586 )
    Foreign exchange     815       1,275       965       (13 )
    Finance charges     16,914       19,618       53,472       63,946  
    Income taxes     13,879       7,898       37,512       45,138  
    Other     27       —       120       (220 )
    Loss (gain) on investments and other assets     (150 )     (3,813 )     (330 )     6,075  
    Gain on repurchase of unsecured senior notes     —       (37 )     —       (137 )
    Income taxes paid     (508 )     (187 )     (4,842 )     (2,395 )
    Income taxes recovered     58       4       58       7  
    Interest paid     (31,692 )     (35,500 )     (69,435 )     (79,702 )
    Interest received     426       227       1,558       562  
    Funds provided by operations     113,322       91,608       342,837       388,220  
    Changes in non-cash working capital balances     (33,648 )     (3,108 )     (23,545 )     (57,904 )
    Cash provided by operations     79,674       88,500       319,292       330,316  
                             
    Investments:                        
    Purchase of property, plant and equipment     (63,797 )     (51,546 )     (157,747 )     (146,378 )
    Purchase of intangibles     (51 )     (847 )     (51 )     (1,524 )
    Proceeds on sale of property, plant and equipment     5,647       6,698       21,825       20,724  
    Proceeds from sale of investments and other assets     —       10,013       3,623       10,013  
    Business acquisitions     —       —       —       (28,000 )
    Purchase of investments and other assets     (7 )     (3,211 )     (7 )     (5,282 )
    Receipt of finance lease payments     207       64       591       64  
    Changes in non-cash working capital balances     19,149       4,551       (9,266 )     (6,774 )
    Cash used in investing activities     (38,852 )     (34,278 )     (141,032 )     (157,157 )
                             
    Financing:                        
    Issuance of long-term debt     10,900       23,600       10,900       162,649  
    Repayments of long-term debt     (59,658 )     (49,517 )     (162,506 )     (288,538 )
    Repurchase of share capital     (16,891 )     —       (50,465 )     (12,951 )
    Issuance of common shares from the exercise of options     495       —       686       —  
    Debt amendment fees     —       —       (1,317 )     —  
    Lease payments     (3,586 )     (2,410 )     (10,005 )     (6,413 )
    Funding from non-controlling interest     4,392       —       4,392       —  
    Cash used in financing activities     (64,348 )     (28,327 )     (208,315 )     (145,253 )
    Effect of exchange rate changes on cash     (403 )     251       177       (428 )
    Increase (decrease) in cash     (23,929 )     26,146       (29,878 )     27,478  
    Cash, beginning of period     48,233       22,919       54,182       21,587  
    Cash, end of period   $ 24,304     $ 49,065     $ 24,304     $ 49,065  


    CONDENSED     INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)

        Attributable to shareholders of the Corporation            
    (Stated in thousands of Canadian dollars)   Shareholders’
    Capital    		     Contributed
    Surplus    		     Accumulated
    Other
    Comprehensive
    Income    		     Deficit     Total     Non-
    controlling interest    		     Total
    Equity    		  
    Balance at January 1, 2024   $ 2,365,129     $ 75,086     $ 147,476     $ (1,012,029 )   $ 1,575,662     $ —     $ 1,575,662  
    Net earnings for the period     —       —       —       96,400       96,400       —       96,400  
    Other comprehensive income for the period     —       —       11,126       —       11,126       —       11,126  
    Share options exercised     978       (292 )     —       —       686       —       686  
    Settlement of Executive Performance and Restricted Share Units     21,846       (1,479 )     —       —       20,367       —       20,367  
    Share repurchases     (51,050 )     —       —       —       (51,050 )     —       (51,050 )
    Redemption of non-management directors share units     176       (176 )     —       —       —       —       –  
    Share-based compensation expense     —       3,517       —       —       3,517       —       3,517  
    Funding from non-controlling interest     —       —       —       —       —       4,392       4,392  
    Balance at September 30, 2024   $ 2,337,079     $ 76,656     $ 158,602     $ (915,629 )   $ 1,656,708     $ 4,392     $ 1,661,100  
        Attributable to shareholders of the Corporation            
    (Stated in thousands of Canadian dollars)   Shareholders’
    Capital    		     Contributed
    Surplus    		     Accumulated
    Other
    Comprehensive
    Income    		     Deficit     Total     Non-
    controlling interest    		     Total
    Equity    		  
    Balance at January 1, 2023   $ 2,299,533     $ 72,555     $ 159,714     $ (1,301,273 )   $ 1,230,529     $ —     $ 1,230,529  
    Net earnings for the period     —       —       —       142,522       142,522       —       142,522  
    Other comprehensive income for the period     —       —       1,838       —       1,838       —       1,838  
    Settlement of Executive Performance and Restricted Share Units     19,206       —       —       —       19,206       —       19,206  
    Share repurchases     (12,951 )     —       —       —       (12,951 )     —       (12,951 )
    Redemption of non-management directors share units     757       —       —       —       757       —       757  
    Share-based compensation expense     —       1,834       —       —       1,834       —       1,834  
    Balance at September 30, 2023   $ 2,306,545     $ 74,389     $ 161,552     $ (1,158,751 )   $ 1,383,735     $ —     $ 1,383,735  


    2024 THIRD QUARTER RESULTS CONFERENCE CALL AND WEBCAST

    Precision Drilling Corporation has scheduled a conference call and webcast to begin promptly at 11:00 a.m. MT (1:00 p.m. ET) on Wednesday, October 30, 2024.

    To participate in the conference call please register at the URL link below. Once registered, you will receive a dial-in number and a unique PIN, which will allow you to ask questions.

    https://register.vevent.com/register/BI4cb3a3db88084e66ad528ebb2bdb81e4

    The call will also be webcast and can be accessed through the link below. A replay of the webcast call will be available on Precision’s website for 12 months.

    https://edge.media-server.com/mmc/p/mov2xb4k

    About Precision

    Precision is a leading provider of safe and environmentally responsible High Performance, High Value services to the energy industry, offering customers access to an extensive fleet of Super Series drilling rigs. Precision has commercialized an industry-leading digital technology portfolio known as Alpha™ that utilizes advanced automation software and analytics to generate efficient, predictable, and repeatable results for energy customers. Our drilling services are enhanced by our EverGreen™ suite of environmental solutions, which bolsters our commitment to reducing the environmental impact of our operations. Additionally, Precision offers well service rigs, camps and rental equipment all backed by a comprehensive mix of technical support services and skilled, experienced personnel.

    Precision is headquartered in Calgary, Alberta, Canada and is listed on the Toronto Stock Exchange under the trading symbol “PD” and on the New York Stock Exchange under the trading symbol “PDS”.

    Additional Information

    For further information, please contact:

    Lavonne Zdunich, CPA, CA
    Vice President, Investor Relations
    403.716.4500

    800, 525 – 8th Avenue S.W.
    Calgary, Alberta, Canada T2P 1G1
    Website: www.precisiondrilling.com

    The MIL Network –

  • MIL-OSI: Finward Bancorp Announces Earnings for the Quarter and Nine Months Ended September 30, 2024

    Source: GlobeNewswire (MIL-OSI)

    MUNSTER, Ind., Oct. 29, 2024 (GLOBE NEWSWIRE) — Finward Bancorp (Nasdaq: FNWD) (the “Bancorp”), the holding company for Peoples Bank (the “Bank”), today announced that net income available to common stockholders was $10.0 million, or $2.35 per diluted share, for the nine months ended September 30, 2024, as compared to $6.9 million, or $1.60 per diluted share, for the corresponding prior year period. For the quarter ended September 30, 2024, the Bancorp’s net income totaled $606 thousand, or $0.14 per diluted share, as compared to $143 thousand, or $0.03 per diluted share, for the three months ended June 30, 2024, and as compared to $2.2 million, or $0.51 per diluted share, for the three months ended September 30, 2023. Selected performance metrics are as follows for the periods presented:

                                 
    Performance Ratios   Quarter ended,   Nine months ended,
        (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)
        September 30, June 30,   March 31,   December 31, September 30, September 30,   September 30,
          2024       2024       2024       2023       2023       2024       2023  
    Return on equity     1.60 %     0.39 %     24.97 %     4.92 %     6.55 %     4.50 %     6.68 %
    Return on assets     0.12 %     0.03 %     1.77 %     0.29 %     0.42 %     0.64 %     0.44 %
    Tax adjusted net interest margin     2.67 %     2.67 %     2.57 %     2.80 %     2.87 %     2.64 %     3.04 %
    Noninterest income / average assets     0.55 %     0.50 %     2.57 %     0.53 %     0.46 %     1.21 %     0.51 %
    Noninterest expense / average assets     2.80 %     2.79 %     2.86 %     2.60 %     2.59 %     2.82 %     2.67 %
    Efficiency ratio     97.32 %     98.56 %     59.41 %     87.49 %     86.88 %     80.16 %     83.68 %
                                                             

    “The Bank’s position continued to improve in the third quarter while we prepared for the Fed to begin their easing cycle. Margin and expenses were stable, with minimal benefit from the Fed’s late-quarter rate cut. We believe the Bank is poised to see margin expansion as lower rates work their way through the liability side of the balance sheet,” said Benjamin Bochnowski, chief executive officer. “We remain vigilant on credit, and we continued to build capital during the quarter. We also fully exited the Bank Term Funding Program well in advance of its March 2025 maturity.”

    Highlights of the current period include:

    • Net Interest Margin – The net interest margin was 2.53% for both the three months ended September 30, 2024 and the three months ended June 30, 2024. The tax-adjusted net interest margin (a non-GAAP measure) was 2.67% for both the three months ended September 30, 2024 and the three months ended June 30, 2024. The net interest margin for the nine months ended September 30, 2024, was 2.50%, compared to 2.89% for the nine months ended September 30, 2023. The tax-adjusted net interest margin (a non-GAAP measure) for the nine months ended September 30, 2024, was 2.64%, compared to 3.04% for the nine months ended September 30, 2023. See Table 1 at the end of this press release for a reconciliation of the tax-adjusted net interest margin to the GAAP net interest margin.
    • Funding – As of September 30, 2024, deposits totaled $1.7 billion, a decrease of $7.9 million or 0.5%, compared to June 30, 2024. Core deposits totaled $1.2 billion at both September 30, 2024 and June 30, 2024. Core deposits include checking, savings, and money market accounts and represented 67.9% of the Bancorp’s total deposits at September 30, 2024. As of September 30, 2024, balances for certificates of deposit totaled $562.2 million, compared to $541.2 million on June 30, 2024, an increase of $21.0 million or 3.9%. The decrease in total portfolio deposits is primarily related to cyclical flows and continued adjustments to deposit pricing. In addition, as of September 30, 2024, borrowings and repurchase agreements totaled $128.0 million, an increase of $65 thousand or 0.2%, compared to June 30, 2024. The increase in short-term borrowings was the result of cyclical inflows and outflows of interest-earning assets and interest-bearing liabilities. During the quarter, the Bancorp terminated its involvement in the Bank Term Funding Program (the “BTFP”) and paid off its outstanding balance of $60 million, in full, through a utilization of excess liquidity and FHLB advances. As of September 30, 2024, 72% of our deposits are fully FDIC insured, and another 7% are further backed by the Indiana Public Deposit Insurance Fund. The Bancorp’s liquidity position remains strong with solid core deposit customer relationships, excess cash, debt securities, and access to diversified borrowing sources. As of September 30, 2024, the Bancorp had available liquidity of $686 million including borrowing capacity from the FHLB and Federal Reserve facilities.
    • Securities Portfolio – Securities available for sale balances increased by $10.4 million to $350.0 million as of September 30, 2024, compared to $339.6 million as of June 30, 2024.  The increase in securities available for sale was due to a combination of portfolio runoff and a decrease of accumulated other comprehensive loss (“AOCL”). AOCL was $48.2 million as of September 30, 2024, compared to $58.9 million on June 30, 2024, an improvement of $10.7 million, or 18.2%. The yield on the securities portfolio decreased to 2.37% for the three months ended September 30, 2024, down from 2.43% for the three months ended June 30, 2024. Management did not execute any securities sale transactions during the quarter but will continue to monitor the securities portfolio for additional restructuring opportunities.
    • Lending – The Bank’s aggregate loan portfolio totaled $1.5 billion on both September 30, 2024 and June 30, 2024. During the three months ended September 30, 2024, the Bank originated $70.4 million in new commercial loans, compared to $48.7 million during the three months ended June 30, 2024 and $73.2 million during the three months ended September 30, 2023. The loan portfolio represents 78.7% of earning assets and is comprised of 62.6% commercial-related credits. At September 30, 2024, the Bancorp’s portfolio loan balances in commercial real estate owner occupied properties totaled $236.9 million or 15.7% of total loan balances and commercial real estate non-owner occupied properties totaled $302.8 million or 20.1% of total loan balances. Of the $302.8 million in commercial real estate non-owner occupied properties balances, loans collateralized by office buildings represented $42.4 million or 2.8% of total loan balances.
    • Gain on Sale of Loans – Gains from the sale of loans for the nine months ended September 30, 2024 totaled $810 thousand, an increase from $729 thousand for the nine months ended September 30, 2023. During the nine months ended September 30, 2024, the Bank originated $22.5 million in new fixed rate mortgage loans for sale, compared to $30.4 million during the nine months ended September 30, 2023. During the nine months ended September 30, 2024, the Bank originated $17.6 million in new 1-4 family loans retained in its portfolio, compared to $31.8 million during the nine months ended September 30, 2023. Total 1-4 family originations for the quarter ended September 30, 2024, totaled $20.1 million, an increase of $1.3 million compared to $18.8 million for the quarter ended June 30, 2024. These retained loans are primarily construction loans and adjustable-rate loans with a fixed-rate period of 7 years or less. The Bank continues to sell longer-duration fixed rate mortgages into the secondary market.
    • Asset Quality – At September 30, 2024, non-performing loans totaled $13.8 million, compared to $11.4 million at June 30, 2024, an increase of $2.4 million or 21.4%. The Bank’s ratio of non-performing loans to total loans was 0.92% at September 30, 2024, compared to 0.75% at June 30, 2024. The Bank’s ratio of non-performing assets to total assets increased from 0.61% at June 30, 2024 to 0.73% at September 30, 2024. Management maintains a vigilant oversight of nonperforming loans through proactive relationship management. The allowance for credit losses (ACL) totaled $18.5 million at September 30, 2024, compared to $18.3 million at June 30, 2024, an increase of $186 thousand or 1.0% and is considered adequate by management. For the quarter ended September 30, 2024, recoveries, net of charge-offs, totaled $186 thousand. The allowance for credit losses as a percentage of total loans was 1.23% at September 30, 2024, and the allowance for credit losses as a percentage of non-performing loans, or coverage ratio, was 134.1% at September 30, 2024.
    • Operating Expenses – Non-interest expense as a percentage of average assets was 2.80% for the quarter ended September 30, 2024, as compared to 2.79% for the quarter ended June 30, 2024. Increases in non-interest expenses quarter over quarter were primarily attributable to slightly higher federal deposit insurance premium and higher occupancy and equipment expenses. The Bank remains focused on identifying additional operating efficiencies and third-party expense reductions through the remainder of this year and beyond. Compensation and benefits expense is down 1.2% for the nine months ended September 30, 2024, compared to September 30, 2023.
    • Capital Adequacy – As of September 30, 2024, the Bank’s tier 1 capital to adjusted average assets ratio was 8.38%, an improvement of 0.06% compared to 8.32% at June 30, 2024. The Bank’s capital continues to exceed all applicable regulatory capital requirements as set forth in 12 C.F.R. § 324. The Bancorp’s tangible book value per share was $31.28 at September 30, 2024, up from $28.67 as of June 30, 2024 (a non-GAAP measure). Tangible common equity to total assets was 6.51% at September 30, 2024, up from 5.95% as of June 30, 2024 (a non-GAAP measure). Excluding accumulated other comprehensive losses, tangible book value per share increased to $42.47 as of September 30, 2024, from $42.33 as of June 30, 2024 (a non-GAAP measure). See Table 1 at the end of this press release for a reconciliation of the tangible book value per share, tangible book value per share adjusted for other accumulated comprehensive losses, tangible common equity as a percentage of total assets, and tangible common equity as a percentage of total assets adjusted for accumulated other comprehensive losses to the related GAAP ratios.

    Disclosures Regarding Non-GAAP Financial Measures
    Reported amounts are presented in accordance with GAAP. In this press release, the Bancorp also provides certain financial measures identified as non-GAAP. The Bancorp’s management believes that the non-GAAP information, which consists of tangible common equity, tangible common equity adjusted for accumulated other comprehensive losses, tangible book value per share, tangible book value per share adjusted for accumulated other comprehensive losses, tangible common equity/total assets, tax-adjusted net interest margin, and efficiency ratio, which can vary from period to period, provides a better comparison of period to period operating performance. The adjusted net interest income and tax-adjusted net interest margin measures recognize the income tax savings when comparing taxable and tax-exempt assets. Interest income and yields on tax-exempt securities and loans are presented using the current federal income tax rate of 21%. Management believes that it is standard practice in the banking industry to present net interest income and net interest margin on a fully tax-equivalent basis and that it may enhance comparability for peer comparison purposes. Additionally, the Bancorp believes this information is utilized by regulators and market analysts to evaluate a company’s financial condition and, therefore, such information is useful to investors. These disclosures should not be viewed as a substitute for financial results in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures which may be presented by other companies. Refer to Table 1 – Reconciliation of Non-GAAP Financial Measures at the end of this document for a reconciliation of the non-GAAP measures identified herein and their most comparable GAAP measures.

    About Finward Bancorp
    Finward Bancorp is a locally managed and independent financial holding company headquartered in Munster, Indiana, whose activities are primarily limited to holding the stock of Peoples Bank. Peoples Bank provides a wide range of personal, business, electronic and wealth management financial services from its 26 locations in Lake and Porter Counties in Northwest Indiana and Chicagoland. Finward Bancorp’s common stock is quoted on The NASDAQ Stock Market, LLC under the symbol FNWD. The website ibankpeoples.com provides information on Peoples Bank’s products and services, and Finward Bancorp’s investor relations.

    Forward Looking Statements
    This press release may contain forward-looking statements regarding the financial performance, business prospects, growth and operating strategies of the Bancorp. For these statements, the Bancorp claims the protections of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Statements in this communication should be considered in conjunction with the other information available about the Bancorp, including the information in the filings the Bancorp makes with the SEC. Forward-looking statements provide current expectations or forecasts of future events and are not guarantees of future performance. The forward-looking statements are based on management’s expectations and are subject to a number of risks and uncertainties. Forward-looking statements are typically identified by using words such as “anticipate,” “estimate,” “project,” “intend,” “plan,” “believe,” “will” and similar expressions in connection with any discussion of future operating or financial performance.

    Although management believes that the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially from those expressed or implied in such statements. Risks and uncertainties that could cause actual results to differ materially include: the Bank’s ability to demonstrate compliance with the terms of the previously disclosed consent order and memorandum of understanding entered into between the Bank and the Federal Deposit Insurance Corporation (“FDIC”) and Indiana Department of Financial Institutions (“DFI”), or to demonstrate compliance to the satisfaction of the FDIC and/or DFI within prescribed time frames; the Bank’s agreement under the memorandum of understanding to refrain from paying cash dividends without prior regulatory approval; changes in asset quality and credit risk; the inability to sustain revenue and earnings growth; changes in interest rates, market liquidity, and capital markets, as well as the magnitude of such changes, which may reduce net interest margins; inflation; further deterioration in the market value of securities held in the Bancorp’s investment securities portfolio, whether as a result of macroeconomic factors or otherwise; customer acceptance of the Bancorp’s products and services; customer borrowing, repayment, investment, and deposit practices; customer disintermediation; the introduction, withdrawal, success, and timing of business initiatives; competitive conditions; the inability to realize cost savings or revenues or to implement integration plans and other consequences associated with mergers, acquisitions, and divestitures; economic conditions; and the impact, extent, and timing of technological changes, capital management activities, regulatory actions by the Federal Deposit Insurance Corporation and Indiana Department of Financial Institutions, and other actions of the Federal Reserve Board and legislative and regulatory actions and reforms. Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in the Bancorp’s reports (such as the Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K) filed with the SEC and available at the SEC’s Internet website (www.sec.gov). All subsequent written and oral forward-looking statements concerning matters attributable to the Bancorp or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above. Except as required by law, The Bancorp does not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statement is made.

    In addition to the above factors, we also caution that the actual amounts and timing of any future common stock dividends or share repurchases will be subject to various factors, including our capital position, financial performance, capital impacts of strategic initiatives, market conditions, and regulatory and accounting considerations, as well as any other factors that our Board of Directors deems relevant in making such a determination. Therefore, there can be no assurance that we will repurchase shares or pay any dividends to holders of our common stock, or as to the amount of any such repurchases or dividends.

    Finward Bancorp
    Quarterly Financial Report
                                 
    Performance Ratios   Quarter ended,   Nine months ended,
        (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)
        September 30, June 30,   March 31,   December 31, September 30, September 30,   September 30,
          2024       2024       2024       2023       2023       2024       2023  
    Return on equity     1.60%       0.39%       24.97%       4.92%       6.55%       4.50%       6.68%  
    Return on assets     0.12%       0.03%       1.77%       0.29%       0.42%       0.64%       0.44%  
    Yield on loans     5.22%       5.11%       5.02%       5.09%       5.02%       5.12%       4.87%  
    Yield on security investments     2.37%       2.43%       2.37%       2.57%       2.41%       2.39%       2.39%  
    Total yield on earning assets     4.73%       4.64%       4.52%       4.64%       4.51%       4.64%       4.39%  
    Cost of interest-bearing deposits     2.47%       2.37%       2.36%       2.22%       1.95%       2.40%       1.58%  
    Cost of repurchase agreements     4.04%       3.86%       3.88%       3.78%       3.83%       3.93%       3.59%  
    Cost of borrowed funds     4.56%       4.95%       4.62%       4.41%       4.48%       4.70%       4.58%  
    Total cost of interest-bearing liabilities     2.63%       2.55%       2.53%       2.38%       2.16%       2.57%       1.82%  
    Tax adjusted net interest margin (1)     2.67%       2.67%       2.57%       2.80%       2.87%       2.64%       3.04%  
    Noninterest income / average assets     0.55%       0.50%       2.57%       0.53%       0.46%       1.21%       0.51%  
    Noninterest expense / average assets     2.80%       2.79%       2.86%       2.60%       2.59%       2.82%       2.67%  
    Net noninterest margin / average assets     -2.24%       -2.29%       -0.29%       -2.08%       -2.13%       -1.60%       -2.16%  
    Efficiency ratio     97.32%       98.56%       59.41%       87.49%       86.88%       80.16%       83.68%  
    Effective tax rate     -51.88%       -6.72%       9.48%       -30.85%       -22.20%       7.01%       0.30%  
                                 
    Non-performing assets to total assets     0.73%       0.61%       0.64%       0.61%       0.54%       0.73%       0.54%  
    Non-performing loans to total loans     0.92%       0.75%       0.78%       0.76%       0.66%       0.92%       0.66%  
    Allowance for credit losses to non-performing loans   134.12%       161.17%       159.12%       163.90%       192.89%       134.12%       192.89%  
    Allowance for credit losses to loans receivable     1.23%       1.22%       1.25%       1.24%       1.27%       1.23%       1.27%  
    Foreclosed real estate to total assets     0.00%       0.00%       0.00%       0.00%       0.00%       0.00%       0.00%  
                                 
    Basic earnings per share   $ 0.14     $ 0.03     $ 2.18     $ 0.36     $ 0.52     $ 2.35     $ 1.60  
    Diluted earnings per share   $ 0.14     $ 0.03     $ 2.17     $ 0.35     $ 0.51     $ 2.35     $ 1.60  
    Stockholders’ equity / total assets     7.69%       7.16%       7.32%       6.99%       5.70%       7.69%       5.70%  
    Book value per share   $ 36.99     $ 34.45     $ 35.17     $ 34.28     $ 27.68     $ 36.99     $ 27.68  
    Closing stock price   $ 31.98     $ 24.52     $ 24.60     $ 25.24     $ 22.00     $ 31.98     $ 22.00  
    Price to earnings per share ratio     56.21       182.60       2.82       17.77       10.67       10.19       10.28  
    Dividends declared per common share   $ 0.12     $ 0.12     $ 0.12     $ 0.12     $ 0.31     $ 0.36     $ 0.93  
                                 
    Common equity tier 1 capital to risk-weighted assets   11.10%       10.94%       10.89%       10.43%       10.17%       11.10%       10.17%  
    Tier 1 capital to risk-weighted assets     11.10%       10.94%       10.89%       10.43%       10.17%       11.10%       10.17%  
    Total capital to risk-weighted assets     12.14%       11.95%       11.92%       11.36%       11.12%       12.14%       11.12%  
    Tier 1 capital to adjusted average assets     8.38%       8.32%       8.24%       7.78%       7.81%       8.38%       7.81%  
                                 
                                 
    Non-GAAP Performance Ratios   Quarter ended,   Nine months ended,
        (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)
        September 30,   June 30,   March 31,   December 31, September 30, September 30,   September 30,
          2024       2024       2024       2023       2023       2024       2023  
    Net interest margin – tax equivalent     2.67%       2.67%       2.57%       2.80%       2.87%       2.64%       3.04%  
    Tangible book value per diluted share   $ 31.28     $ 28.67     $ 29.30     $ 28.31     $ 21.63     $ 31.28     $ 21.63  
    Tangible book value per diluted share adjusted for AOCL   $ 42.47     $ 42.33     $ 42.36     $ 40.31     $ 39.96     $ 42.47     $ 39.96  
    Tangible common equity to total assets     6.51%       5.95%       6.09%       5.77%       4.46%       6.51%       4.46%  
    Tangible common equity to total assets adjusted for AOCL     8.83%       8.79%       8.81%       8.22%       8.23%       8.83%       8.23%  
                                 
    (1) Tax adjusted net interest margin represents a non-GAAP financial measure. See the non-GAAP reconciliation table section captioned “Non-GAAP Financial Measures” for further disclosure regarding non-GAAP financial measures
    Quarter Ended                        
    (Dollars in thousands) Average Balances, Interest, and Rates  
    (unaudited) September 30, 2024   June 30, 2024  
      Average Balance   Interest   Rate (%)   Average Balance   Interest   Rate (%)  
    ASSETS                        
    Interest bearing deposits in other financial institutions $ 44,365     $ 665   6.00   $ 60,378     $ 800   5.30  
    Federal funds sold   682       9   5.28     1,263       10   3.17  
    Securities available-for-sale   342,451       2,031   2.37     337,226       2,047   2.43  
    Loans receivable   1,506,967       19,660   5.22     1,501,584       19,174   5.11  
    Federal Home Loan Bank stock   6,547       107   6.54     6,547       96   5.87  
    Total interest earning assets   1,901,012     $ 22,472   4.73     1,906,998     $ 22,127   4.64  
    Cash and non-interest bearing deposits in other financial institutions   32,198               18,054            
    Allowance for credit losses   (18,482 )             (18,788 )          
    Other noninterest bearing assets   155,996               158,358            
    Total assets $ 2,070,724             $ 2,064,622            
                             
    LIABILITIES AND STOCKHOLDERS’ EQUITY                        
    Interest-bearing deposits $ 1,451,414     $ 8,946   2.47   $ 1,455,007     $ 8,610   2.37  
    Repurchase agreements   43,074       435   4.04     41,388       399   3.86  
    Borrowed funds   95,224       1,085   4.56     85,940       1,064   4.95  
    Total interest bearing liabilities   1,589,712     $ 10,466   2.63     1,582,335     $ 10,073   2.55  
    Non-interest bearing deposits   287,507               291,618            
    Other noninterest bearing liabilities   41,696               45,029            
    Total liabilities   1,918,915               1,918,982            
    Total stockholders’ equity   151,809               145,640            
    Total liabilities and stockholders’ equity $ 2,070,724             $ 2,064,622            
                             
                             
    Return on average assets   0.12 %             0.03 %          
    Return on average equity   1.60 %             0.39 %          
    Net interest margin (average earning assets)   2.53 %             2.53 %          
    Net interest margin (average earning assets) – tax equivalent   2.67 %             2.67 %          
    Net interest spread   2.10 %             2.09 %          
    Ratio of interest-earning assets to interest-bearing liabilities   1.20x                 1.21x            
                             
    Year-to-Date                        
    (Dollars in thousands) Average Balances, Interest, and Rates
    (unaudited) September 30, 2024   September 30, 2023
      Average Balance   Interest   Rate (%)   Average Balance   Interest   Rate (%)  
    ASSETS     `                  
    Interest bearing deposits in other financial institutions $ 51,522     $ 2,317   6.00   $ 31,171     $ 1,112   4.76  
    Federal funds sold   919       29   4.21     1,158       38   4.38  
    Certificates of deposit in other financial institutions   –       –   –     1,169       44   5.02  
    Securities available-for-sale   348,269       6,239   2.39     369,897       6,631   2.39  
    Loans receivable   1,504,197       57,713   5.12     1,519,981       55,481   4.87  
    Federal Home Loan Bank stock   6,547       285   5.80     6,547       221   4.50  
    Total interest earning assets   1,911,454     $ 66,583   4.64     1,929,923     $ 63,527   4.39  
    Cash and non-interest bearing deposits in other financial institutions   29,183               18,723            
    Allowance for credit losses   (18,670 )             (17,619 )          
    Other noninterest bearing assets   155,433               154,227            
    Total assets $ 2,077,400             $ 2,085,254            
                             
    LIABILITIES AND STOCKHOLDERS’ EQUITY                        
    Interest-bearing deposits $ 1,464,682     $ 26,350   2.40   $ 1,455,410     $ 17,258   1.58  
    Repurchase agreements   40,879       1,204   3.93     33,170       892   3.59  
    Borrowed funds   90,423       3,189   4.70     102,864       3,537   4.58  
    Total interest bearing liabilities   1,595,984     $ 30,743   2.57     1,591,444     $ 21,687   1.82  
    Non-interest bearing deposits   291,161               326,431            
    Other noninterest bearing liabilities   41,540               30,178            
    Total liabilities   1,928,685               1,948,053            
    Total stockholders’ equity   148,715               137,201            
    Total liabilities and stockholders’ equity $ 2,077,400             $ 2,085,254            
                             
                             
    Return on average assets   0.64 %             0.44 %          
    Return on average equity   4.50 %             6.68 %          
    Net interest margin (average earning assets)   2.50 %             2.89 %          
    Net interest margin (average earning assets) – tax equivalent   2.64 %             3.04 %          
    Net interest spread   2.07 %             2.57 %          
    Ratio of interest-earning assets to interest-bearing liabilities   1.20x                 1.21x            
                             
    Finward Bancorp
    Quarterly Financial Report
                         
    Balance Sheet Data                    
    (Dollars in thousands)   (Unaudited)   (Unaudited)   (Unaudited)       (Unaudited)
        September 30, June 30,   March 31,   December 31, September 30,
          2024       2024       2024       2023       2023  
    ASSETS                    
                         
    Cash and non-interest bearing deposits in other financial institutions   $ 23,071     $ 19,061     $ 16,418     $ 17,942     $ 17,922  
    Interest bearing deposits in other financial institutions     48,025       63,439       54,755       67,647       52,875  
                         
    Total cash and cash equivalents     71,649       83,207       71,780       86,008       71,648  
                         
    Securities available-for-sale     350,027       339,585       346,233       371,374       339,280  
    Loans held-for-sale     2,567       1,185       667       340       2,057  
    Loans receivable, net of deferred fees and costs     1,508,242       1,506,398       1,508,251       1,512,595       1,525,660  
    Less: allowance for credit losses     (18,516 )     (18,330 )     (18,805 )     (18,768 )     (19,430 )
    Net loans receivable     1,489,726       1,488,068       1,489,446       1,493,827       1,506,230  
    Federal Home Loan Bank stock     6,547       6,547       6,547       6,547       6,547  
    Accrued interest receivable     7,442       7,695       7,583       8,045       7,864  
    Premises and equipment     47,912       48,696       47,795       38,436       38,810  
    Foreclosed real estate     –       –       71       71       71  
    Cash value of bank owned life insurance     33,312       33,107       32,895       32,702       32,509  
    Goodwill     22,395       22,395       22,395       22,395       22,395  
    Other intangible assets     2,203       2,555       2,911       3,272       3,636  
    Other assets     40,882       44,027       43,459       45,262       56,423  
                         
    Total assets   $ 2,074,662     $ 2,077,067     $ 2,071,782     $ 2,108,279     $ 2,087,470  
                         
    LIABILITIES AND STOCKHOLDERS’ EQUITY                    
                         
    Deposits:                    
    Non-interest bearing   $ 285,157     $ 286,784     $ 296,959     $ 295,594     $ 312,635  
    Interest bearing     1,463,653       1,469,970       1,450,519       1,517,827       1,471,402  
    Total     1,748,810       1,756,754       1,747,478       1,813,421       1,784,037  
    Repurchase agreements     43,038       42,973       41,137       38,124       48,310  
    Borrowed funds     85,000       85,000       90,000       80,000       100,000  
    Accrued expenses and other liabilities     38,259       43,709       41,586       29,389       36,080  
                         
    Total liabilities     1,915,107       1,928,436       1,920,201       1,960,934       1,968,427  
                         
    Commitments and contingencies                    
                         
    Stockholders’ Equity:                    
                         
    Preferred stock, no par or stated value;                    
    10,000,000 shares authorized, none outstanding     –       –       –       –       –  
    Common stock, no par or stated value; 10,000,000 shares authorized;     –       –       –       –       –  
    shares issued and outstanding: September 30, 2024 – 4,313,940                    
    December 31, 2023 – 4,298,773                    
    Additional paid-in capital     69,916       69,778       69,727       69,555       69,482  
    Accumulated other comprehensive loss     (48,241 )     (58,939 )     (56,313 )     (51,613 )     (78,848 )
    Retained earnings     137,880       137,792       138,167       129,403       128,409  
                         
    Total stockholders’ equity     159,555       148,631       151,581       147,345       119,043  
                         
    Total liabilities and stockholders’ equity   $ 2,074,662     $ 2,077,067     $ 2,071,782     $ 2,108,279     $ 2,087,470  
                         
    Finward Bancorp
    Quarterly Financial Report
                                   
    Consolidated Statements of Income   Quarter Ended,     Nine months ended,
    (Dollars in thousands)   (Unaudited)   (Unaudited)   (Unaudited)       (Unaudited)     (Unaudited)   (Unaudited)
        September 30,   June 30,   March 31,   December 31, September 30,   September 30,   September 30,
          2024       2024       2024       2023       2023         2024       2023  
    Interest income:                              
    Loans   $ 19,660     $ 19,174     $ 18,879     $ 19,281     $ 19,161       $ 57,713     $ 55,481  
    Securities & short-term investments     2,812       2,953       3,105       2,975       2,617         8,870       8,046  
    Total interest income     22,472       22,127       21,984       22,256       21,778         66,583       63,527  
    Interest expense:                              
    Deposits     8,946       8,610       8,794       8,180       7,066         26,350       17,258  
    Borrowings     1,520       1,463       1,410       1,361       1,579         4,393       4,429  
    Total interest expense     10,466       10,073       10,204       9,541       8,645         30,743       21,687  
    Net interest income     12,006       12,054       11,780       12,715       13,133         35,840       41,840  
    Provision for credit losses     –       76       –       779       244         76       1,246  
    Net interest income after provision for credit losses     12,006       11,978       11,780       11,936       12,889         35,764       40,594  
    Noninterest income:                              
    Fees and service charges     1,463       1,257       1,153       1,507       1,374         3,873       4,517  
    Wealth management operations     731       763       633       672       572         2,127       1,812  
    Gain on sale of loans held-for-sale, net     338       320       152       352       192         810       729  
    Increase in cash value of bank owned life insurance   205       212       193       193       193         610       573  
    Gain (loss) on sale of real estate     –       15       11,858       –       2         11,873       (13 )
    Loss on sale of securities, net     –       –       (531 )     –       –         (531 )     (48 )
    Other     130       6       17       11       64         154       441  
    Total noninterest income     2,867       2,573       13,475       2,735       2,397         18,916       8,011  
    Noninterest expense:                              
    Compensation and benefits     6,963       7,037       7,109       6,290       6,729         21,109       21,365  
    Occupancy and equipment     2,181       2,120       1,915       1,520       1,711         6,205       4,898  
    Data processing     1,165       1,135       1,170       1,269       1,085         3,470       3,465  
    Federal deposit insurance premiums     435       397       501       492       474         1,333       1,511  
    Marketing     209       212       158       191       235         579       649  
    Other     3,521       3,516       4,151       3,755       3,259         9,465       8,547  
    Total noninterest expense     14,474       14,417       15,004       13,517       13,493         43,895       41,715  
    Income before income taxes     399       134       10,251       1,154       1,793         10,785       6,890  
    Income tax expenses (benefit)     (207 )     (9 )     972       (356 )     (398 )       756       21  
    Net income   $ 606     $ 143     $ 9,279     $ 1,510     $ 2,191       $ 10,029     $ 6,869  
                                   
    Earnings per common share:                              
    Basic   $ 0.14     $ 0.03     $ 2.18     $ 0.36     $ 0.52       $ 2.35     $ 1.60  
    Diluted   $ 0.14     $ 0.03     $ 2.17     $ 0.35     $ 0.51       $ 2.35     $ 1.60  
                                   
    Finward Bancorp
    Quarterly Financial Report
                               
    Asset Quality   (Unaudited)   (Unaudited)   (Unaudited)       (Unaudited)
    (Dollars in thousands)   September 30,   June 30,   March 31,   December 31,   September 30,
                2024       2024       2024     2023     2023  
    Nonaccruing loans   $ 13,806     $ 11,079     $ 11,603   $ 9,608   $ 9,840  
    Accruing loans delinquent more than 90 days     –       294       215     1,843     233  
    Securities in non-accrual     1,440       1,371       1,442     1,357     1,155  
    Foreclosed real estate     –       –       71     71     71  
      Total nonperforming assets   $ 15,246     $ 12,744     $ 13,331   $ 12,879   $ 11,299  
                               
    Allowance for credit losses (ACL):                    
      ACL specific allowances for collateral dependent loans   $ 1,821     $ 1,327     $ 1,455   $ 906   $ 554  
      ACL general allowances for loan portfolio     16,695       17,003       17,351     17,862     18,876  
        Total ACL   $ 18,516     $ 18,330     $ 18,806   $ 18,768   $ 19,430  
                               
    (Dollars in millions)                   Minimum Required To Be
                Minimum Required For   Well Capitalized Under Prompt
        Actual   Capital Adequacy Purposes   Corrective Action Regulations
    September 30, 2024   Amount   Ratio   Amount   Ratio   Amount   Ratio
    Common equity tier 1 capital to risk-weighted assets   $ 176.3   11.10 %   $ 71.9   4.50 %   $ 103.9   6.50 %
    Tier 1 capital to risk-weighted assets   $ 176.3   11.10 %   $ 95.9   6.00 %   $ 127.9   8.00 %
    Total capital to risk-weighted assets   $ 194.0   12.14 %   $ 127.9   8.00 %   $ 159.8   10.00 %
    Tier 1 capital to adjusted average assets   $ 176.3   8.38 %   $ 84.7   4.00 %   $ 105.8   5.00 %
                             
    Table 1 – Reconciliation of the Non-GAAP Performance Measures                          
                               
    (Dollars in thousands) Quarter Ended,   Nine months ended,
    (unaudited) September 30, 2024   June 30, 2024   March 31, 2024   December 31, 2023   September 30, 2023   September 30, 2024   September 30, 2023
    Calculation of tangible common equity                          
    Total stockholder’s equity $ 159,555     $ 148,631     $ 151,581     $ 147,345     $ 119,043     $ 159,555     $ 119,043  
    Goodwill   (22,395 )     (22,395 )     (22,395 )     (22,395 )     (22,395 )     (22,395 )     (22,395 )
    Other intangibles   (2,203 )     (2,555 )     (2,911 )     (3,272 )     (3,636 )     (2,203 )     (3,636 )
    Tangible common equity $ 134,957     $ 123,681     $ 126,275     $ 121,678     $ 93,012     $ 134,957     $ 93,012  
                               
    Calculation of tangible common equity adjusted for accumulated other comprehensive loss                        
    Tangible common equity $ 134,957     $ 123,681     $ 126,275     $ 121,678     $ 93,012     $ 134,957     $ 93,012  
    Accumulated other comprehensive loss   48,241       58,939       56,313       51,613       78,848       48,241       78,848  
    Tangible common equity adjusted for accumulated other comprehensive loss $ 183,198       $ 182,620       $ 182,588       $ 173,291       $ 171,860     $ 183,198       $ 171,860  
                               
    Calculation of tangible book value per share                          
    Tangible common equity $ 134,957     $ 123,681     $ 126,275     $ 121,678     $ 93,012     $ 134,957     $ 93,012  
    Shares outstanding   4,313,940       4,313,940       4,310,251       4,298,773       4,300,881       4,313,940       4,300,881  
    Tangible book value per diluted share $ 31.28     $ 28.67     $ 29.30     $ 28.31     $ 21.63     $ 31.28     $ 21.63  
                               
    Calculation of tangible book value per diluted share adjusted for accumulated other comprehensive loss                        
    Tangible common equity adjusted for accumulated other comprehensive loss $ 183,198     $ 182,620     $ 182,588     $ 173,291     $ 171,860     $ 183,198     $ 171,860  
    Diluted average common shares outstanding   4,313,940       4,313,940       4,310,251       4,298,773       4,300,881       4,313,940       4,300,881  
    Tangible book value per diluted share adjusted for accumulated other comprehensive loss $ 42.47     $ 42.33     $ 42.36     $ 40.31     $ 39.96     $ 42.47     $ 39.96  
                               
    Calculation of tangible common equity to total assets                          
    Tangible common equity $ 134,957     $ 123,681     $ 126,275     $ 121,678     $ 93,012     $ 134,957     $ 93,012  
    Total assets   2,074,662       2,077,067       2,071,782       2,108,279       2,087,470       2,074,662       2,087,470  
    Tangible common equity to total assets   6.51 %     5.95 %     6.09 %     5.77 %     4.46 %     6.51 %     4.46 %
                               
    Calculation of tangible common equity to total assets adjusted for accumulated other comprehensive loss                        
    Tangible common equity adjusted for accumulated other comprehensive loss $ 183,198     $ 182,620     $ 182,588     $ 173,291     $ 171,860     $ 183,198     $ 171,860  
    Total assets   2,074,662       2,077,067       2,071,782       2,108,279       2,087,470       2,074,662       2,087,470  
    Tangible common equity to total assets adjusted for accumulated other comprehensive loss   8.83 %     8.79 %     8.81 %     8.22 %     8.23 %     8.83 %     8.23 %
                               
    Calculation of tax adjusted net interest margin                          
    Net interest income $ 12,006     $ 12,054     $ 11,780     $ 12,715     $ 13,133     $ 35,840     $ 41,840  
    Tax adjusted interest on securities and loans   678       677       699       722       730       2,054       2,234  
    Adjusted net interest income   12,684       12,731       12,749       13,437       13,863       37,894       44,074  
    Total average earning assets   1,901,012       1,906,998       1,945,501       1,920,127       1,930,118       1,911,454       1,929,923  
    Tax adjusted net interest margin   2.67 %     2.67 %     2.57 %     2.80 %     2.87 %     2.64 %     3.04 %
                               
    Efficiency ratio                          
    Total non-interest expense $ 14,474     $ 14,417     $ 15,004     $ 13,517     $ 13,493     $ 43,895     $ 13,493  
    Total revenue   14,873       14,627       25,255       15,450       15,530       54,756       15,530  
    Efficiency ratio   97.32 %     98.56 %     59.41 %     87.49 %     86.88 %     80.16 %     86.88 %
                               

    FOR FURTHER INFORMATION
    CONTACT SHAREHOLDER SERVICES
    (219) 853-7575

    The MIL Network –

  • MIL-OSI: Blackwells Capital Calls on Brancous to End its Alarmist Attacks on Braemar

    Source: GlobeNewswire (MIL-OSI)

    Brancous’ misleading accusations are not constructive and could negatively impact the Company’s business

    Blackwells encourages all Braemar shareholders to support the enhanced Board and management team

    NEW YORK, Oct. 29, 2024 (GLOBE NEWSWIRE) — Blackwells Capital LLC (“Blackwells”), a shareholder of Braemar Hotels & Resorts Inc. (“Braemar” or the “Company”) (NYSE: BHR), today released a letter to its fellow Braemar shareholders:

    The full text of the letter follows:

    Dear Fellow Braemar Shareholders,

    Over the past months, Blackwells Capital, in its capacity as an engaged shareholder of Braemar Hotels & Resorts (“Braemar” or the “Company”), exchanged views with the board of directors (the “Board”) and management of Braemar. Blackwells’ concerns were heard by Braemar, and Blackwells was pleased to enter into a constructive agreement with the Company, reflective of its confidence in the Board and management team to drive value for all shareholders.

    Recently, another shareholder, Brancous LP1 (“Brancous”) has issued several public letters to Braemar. While Brancous is free to have its say as a shareholder of the Company, we believe its accusations and inferences are increasingly alarmist in nature, and without merit. Left uncorrected, Blackwells is concerned these accusations could have a negative impact on Braemar’s business.

    Brancous’ latest letter dated October 22, 2024 appears to be a regurgitation of false claims made by a disgruntled hotel union. We believe it is irresponsible to peddle such misinformation, and, in particular, highlight the recklessness of stating that a lawsuit was filed against Braemar when no such thing happened.

    Contrary to Brancous’ misstatements, Ashford Inc has stated publicly that Braemar has received an official private letter ruling from the Internal Revenue Service regarding its structure and operating relationship with Remington Hospitality, providing assurance of its proper REIT compliance. We question Brancous’ claim that “No other REIT operates in this manner,” and believe that it demonstrates a lack of knowledge of the REIT space.

    Further, Brancous’ missives about the Braemar Board ignore the recent appointment of Jay Shah. Mr. Shah is a seasoned hospitality and real estate executive and joined the Board as an independent director. Blackwells believes that Mr. Shah brings an infusion of skills, experience and fresh expertise to Braemar. Blackwells strenuously objects to Brancous’ attacks which oddly single out Braemar independent director, Stefani Carter. Blackwells has had the opportunity to meet with Ms. Carter and believes she is an effective and independent fiduciary for shareholders, with an esteemed professional background.  

    Brancous closes its October 22, 2024 letter noting that “BHR has incredible potential…” Blackwells agrees with that assessment wholeheartedly. Brancous’ hyperbolic attacks, however, are not constructive, and could unjustly hurt the Company and its prospects.

    Blackwells calls on Brancous and all shareholders to join us in voting in favor of the enhanced Board and management team as they unlock value for all shareholders.

    Sincerely,

    Jason Aintabi
    Chief Investment Officer
    Blackwells Capital

    About Blackwells Capital

    Blackwells is a multi-strategy alternative asset management firm that invests in public and private markets globally. Our public markets portfolio focuses on currencies, equities, credit and commodities. When necessary, we engage with public company boards to drive value for all stakeholders. Our private markets portfolio includes investments in space, clean energy, infrastructure, real estate and technology. Further information is available at www.blackwellscap.com.

    Media
    Gagnier Communications
    Dan Gagnier & Riyaz Lalani
    646-569-5897
    blackwells@gagnierfc.com

    The MIL Network –

  • MIL-OSI Australia: Reforming transfer balance cap for Successor Fund Transfers

    Source: Australian Department of Revenue

    The Income Tax Assessment Amendment (Superannuation) Regulations 2024External Link commenced on 6 July 2024.

    We’re working with you to put these changes in place to ensure individuals with a capped defined benefit income stream (CDBIS) aren’t negatively impacted by an SFT.

    Funds should contact us if:

    • you’ve been part of an SFT since 1 July 2017,
    • CDBIS members have been negatively impacted and
    • you’ve not been contacted by us to discuss remediation.

    You can lodge an enquiry through our Super Enquiry Service.

    Looking for the latest news for Super funds? – You can stay up to date by visiting our Super funds newsroom and subscribingExternal Link to our monthly Super funds newsletter and CRT alerts.

    MIL OSI News –

  • MIL-OSI: Sunrun Announces Appointment of John Trinta to its Board of Directors

    Source: GlobeNewswire (MIL-OSI)

    SAN FRANCISCO, Oct. 29, 2024 (GLOBE NEWSWIRE) — Sunrun (Nasdaq: RUN), the nation’s leading provider of clean energy as a subscription service, today announced the appointment of John Trinta, former CEO of Deloitte Financial Advisory Services, as a member of the Company’s board of directors (the “Board”) and Audit Committee of the Board. Mr. Trinta brings nearly 40 years of expertise in tax and accounting, paired with a proven track record in driving strategic growth and leading organizations to new heights.

    “It is with great excitement that I introduce John as the newest member of our Board. Having spent nearly four decades at Deloitte, he brings exceptional expertise in finance, accounting, and tax—critical skills as we navigate today’s complexities and continue to position ourselves as a market leader in the clean energy sector,” said Sunrun CEO Mary Powell. “Beyond his technical strengths, John’s leadership, strategic mindset, and ability to inspire teams set him apart. I’m confident that his insights will be a value add as we continue to execute on our margin-focused and disciplined growth strategy.”

    Mr. Trinta is a seasoned finance professional with a distinguished career in finance, accounting, and tax. From June 1998 to May 2020, Mr. Trinta held several executive positions at Deloitte, including as the CEO of Deloitte Financial Advisory Services, Deputy CEO of Advisory Services, Partner in Charge of Americas Financial Advisory Services, and Deputy National Managing Partner in Tax Services. He also served on Deloitte’s U.S. and Functional Global Board of Directors from 2003 to 2005. During his time at Deloitte, Mr. Trinta spearheaded Deloitte’s merger of Financial Advisory and Risk practices and co-led Deloitte’s purchase and integration of various tax and advisory businesses.

    “I am excited to join Mary and the Sunrun Board as the Company continues to innovate and differentiate itself within the market by focusing on creating cleaner, reliable, and sustainable energy solutions for its customers,” said Mr.Trinta. “I look forward to sharing my financial, accounting, and tax expertise with the entire Sunrun team and contributing to the mission of connecting people to the cleanest energy on earth.”

    Mr. Trinta holds a Bachelor of Science degree in Business Administration with a concentration in accounting from California State University, Chico, and a Master of Science degree in Taxation from Golden Gate University.

    About Sunrun
    Sunrun Inc. (Nasdaq: RUN) revolutionized the solar industry in 2007 by removing financial barriers and democratizing access to locally-generated, renewable energy. Today, Sunrun is the nation’s leading provider of clean energy as a subscription service, offering residential solar and storage with no upfront costs. Sunrun’s innovative products and solutions can connect homes to the cleanest energy on earth, providing them with energy security, predictability, and peace of mind. Sunrun also manages energy services that benefit communities, utilities, and the electric grid while enhancing customer value. Discover more at www.sunrun.com.

    Media Contact
    Wyatt Semanek
    Director, Corporate Communications
    press@sunrun.com

    Investor & Analyst Contact
    Patrick Jobin
    SVP, Deputy CFO & Investor Relations Officer
    investors@sunrun.com

    The MIL Network –

  • MIL-OSI: Oportun Announces Next Step to Optimize Capital Structure and Drive Improved Profitability

    Source: GlobeNewswire (MIL-OSI)

    SAN CARLOS, Calif., Oct. 29, 2024 (GLOBE NEWSWIRE) — Oportun (Nasdaq: OPRT) (“Oportun”, or the “Company”), a mission-driven financial services company, announced today another important step in its plans to optimize the Company’s capital structure and drive improved profitability. Following an extensive review of a range of alternatives led by the Board of Directors, Oportun has entered into a Credit Agreement to refinance its existing corporate financing facility with a new $235 million Senior Secured Term Loan (“Term Loan”). The refinancing will improve Oportun’s operational and balance sheet flexibility with covenants that reflect the performance improvements made by the Company to date, including the agreement to sell the Company’s credit card portfolio, and reward accretive actions and cash flow generation. The Term Loan will be provided by two firms (the “Lenders”), funds managed by Castlelake L.P., a global alternative investment manager specializing in asset-based private credit that led the refinancing, and funds managed by Neuberger Berman, a private employee-owned investment manager. The Term Loan will carry a 15% fixed rate and mature in November 2028.

    “After a thorough and competitive process, where multiple strategic options were considered, the Board of Directors determined that this transaction, which was the least dilutive financing option available, would best position Oportun for the future by further strengthening the Company’s balance sheet and liquidity as well as enhancing the ability for Oportun to generate consistent cash flow and deliver increased stockholder value,” said Neil Williams, Lead Independent Director of Oportun’s Board of Directors.

    “With this refinancing and the operational and balance sheet flexibility the Term Loan will provide, we’re even better positioned to build on our progress. We expect to build on that momentum in 2025 through improving credit performance, identifying high-quality originations, and further enhancing our GAAP and adjusted profitability on a per-share basis” said Raul Vazquez, CEO of Oportun.

    “As we continue our longstanding relationship with Oportun, this refinancing illustrates the confidence we have in the Company’s ability to execute its long-term strategy, underpinned by focusing on its core products while identifying high-quality loan originations” said John Lundquist, Partner at Castlelake.

    “We’re pleased to remain a capital partner to Oportun alongside Castlelake, and the revised structure provides the Company with the funding and flexibility to responsibly grow the business and service the needs of its customers,” said Peter Sterling, Head of Specialty Finance at Neuberger Berman. “This transaction reflects the confidence we have in the quality of Oportun’s underwriting and the sustainability of its business model.”

    In connection with providing the Term Loan, the Lenders will receive warrants, at an exercise price of $0.01 per share, equal to 9.8% of the fully-diluted shares outstanding of the Company, excluding out-of-the-money options, on a pro-forma basis for the warrants, which as of September 30, 2024 was equal to 4,860,706 warrants, and the Lenders are entitled to Board observer rights. Even given the dilutionary impact from the newly issued warrants, the Company believes it will be able to drive increased profitability on a per share basis through focus on its core products, improving credit performance and maintaining cost discipline.

    The new Term Loan provides a lower interest rate than the existing senior secured term loan being refinanced and Oportun is committed to paying off at least $40 million of the principal by February 1, 2026, with the flexibility to make additional pre-payments of $10 million at any time without penalty, and an additional $10 million without penalty after the one-year anniversary of closing. Management expects the Term Loan to close during the week of November 11, 2024, following and subject to customary closing conditions, as well as the closing of the credit card portfolio sale transaction, which was previously announced on September 25, 2024.

    Preliminary Financial Results – Third Quarter 2024
    Based upon management’s current expectations, the Company will report Total Revenue, Annualized Net Charge-Off Rate, Net Loss, Adjusted EBITDA and Adjusted Net Income (Loss), for the third quarter as follows:

    Metric Preliminary Guidance
       3Q24  3Q24
     Total Revenue  $249-251 million  $248 – $252 million
     Annualized Net Charge-Off Rate  11.9%  12.3%  +/- 15 bps
     Net Loss  $(30) – $(32) million  N/A
     Adjusted EBITDA 1  $28 – 31 million  $23 – $26 million
     Adjusted Net Income (Loss) 1  $(2) – $1 million  N/A
     1 See About Non-GAAP Financial Measures for more detail.  
         

    The Company expects to deliver resilient third quarter top-line performance with Total Revenue in line with its guidance range. The Company’s tightened credit posture contributed to delivering annualized net charge-offs 25 bps better than the edge of its guidance range. On a GAAP basis, the Company expects a net loss of $30 to 32 million driven by non-cash fair value marks, including a $35 million mark-to-market adjustment on its ABS notes due to their weighted average price increasing from 96.0% to 97.8% as benchmark interest rates declined and credit spreads tightened significantly. Given strong Total Revenue, improved credit performance and continued expense discipline, the Company also expects to be near break-even to profitable on an Adjusted Net Income basis. The Company expects Adjusted EBITDA to be $28 to $31 million, which will be $2 to $5 million above the top end of its guidance range.

    Furthermore, management is providing the following preliminary set of expectations regarding Oportun’s full year 2025 operating performance:

    • GAAP EPS between $0.25 and $0.50
    • Adjusted EPS between $1.00 and $1.25
    • Annualized net charge-off rate between 11% and 12%

    “We are pleased with our expected quarterly results and are looking forward to an even better 2025,” said Jonathan Coblentz, CFO of Oportun. “As these results and our future expectations demonstrate, we continue to make significant progress towards driving sustainable, profitable earnings growth, and shareholder value.”

    Concurrent with this press release, Oportun has posted a business update presentation on its investor relations website, investor.oportun.com. The presentation further describes the Term Loan, the Company’s operating strategy, recent performance improvements, and preliminary performance expectations going into 2025.

    Evercore acted as financial advisor and Orrick, Herrington & Sutcliffe LLP and Wilson Sonsini Goodrich & Rosati served as legal advisors to the Company on the transaction.

    About Oportun
    Oportun (Nasdaq: OPRT) is a mission-driven financial services company that puts its members’ financial goals within reach. With intelligent borrowing, savings, and budgeting capabilities, Oportun empowers members with the confidence to build a better financial future. Since inception, Oportun has provided more than $18.7 billion in responsible and affordable credit, saved its members more than $2.4 billion in interest and fees, and helped its members save an average of more than $1,800 annually. For more information, visit Oportun.com.

    About Castlelake
    Castlelake, L.P. is a global alternative investment manager focused on asset-based investments. Founded in 2005, Castlelake manages approximately $24 billion of assets on behalf of a diversified global investor base. The Castlelake team comprises more than 220 experienced professionals, including 80 investment professionals, across seven offices in North America, Europe and Asia. For more information, please visit www.castlelake.com.

    About Neuberger Berman
    Neuberger Berman, founded in 1939, is a private, independent, employee-owned investment manager. The firm manages a range of strategies – including equity, fixed income, quantitative and multi-asset class, private equity, real estate and hedge funds – on behalf of institutions, advisors and individual investors globally. Neuberger Berman’s investment philosophy is founded on active management, engaged ownership and fundamental research, including industry-leading research into material environmental, social and governance factors. Neuberger Berman is a PRI Leader, a designation awarded to fewer than 1% of investment firms. With offices in 26 countries, the firm’s diverse team has over 2,750 professionals. For nine consecutive years, Neuberger Berman has been named first or second in Pensions & Investments Best Places to Work in Money Management survey (among those with 1,000 employees or more). The firm manages $443 billion in client assets as of June 30, 2023. For more information, please visit Neuberger Berman’s website at www.nb.com.

    Forward-Looking Statements
    This press release contains forward-looking statements. These forward-looking statements are subject to the safe harbor provisions under the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact contained in this press release, including statements as to future performance and financial position; the Company’s preliminary financial results for the third quarter of 2024; the Company’s full year 2025 outlook; expectations regarding the impact of the Term Loan, including expected timelines; the anticipated closing of the Company’s credit card portfolio sale transaction; our planned products and services; achievement of the Company’s strategic priorities and goals and the plans and objectives of management for our future operations, are forward-looking statements are forward-looking statements. These statements can be generally identified by terms such as “expect,” “plan,” “goal,” “target,” “anticipate,” “assume,” “predict,” “project,” “outlook,” “continue,” “due,” “may,” “believe,” “seek,” or “estimate” and similar expressions or the negative versions of these words or comparable words, as well as future or conditional verbs such as “will,” “should,” “would,” “likely” and “could.” These statements involve known and unknown risks, uncertainties, assumptions and other factors that may cause Oportun’s actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Oportun has based these forward-looking statements on its current expectations and projections about future events, financial trends and risks and uncertainties that it believes may affect its business, financial condition and results of operations. These risks and uncertainties include those risks described in Oportun’s filings with the Securities and Exchange Commission, including Oportun’s most recent annual report on Form 10-K and most recent quarterly report on Form 10-Q. These forward-looking statements speak only as of the date on which they are made and, except to the extent required by federal securities laws, Oportun disclaims any obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. In light of these risks and uncertainties, there is no assurance that the events or results suggested by the forward-looking statements will in fact occur, and you should not place undue reliance on these forward-looking statements.

    Preliminary Information
    Numbers are as of September 30, 2024, and are unaudited, preliminary and subject to change upon completion of the Company’s closing process and quarterly review procedures. As a result, the Company’s final results may vary materially from the preliminary results included in this press release. Oportun undertakes no obligation to update or supplement the information provided in this press release until the Company releases its financial statements for the three months ended September 30, 2024. The preliminary financial information included in this press release reflects the Company’s current estimates based on information available as of the date of this press release. This preliminary financial and operational information should not be viewed as a substitute for full financial statements prepared in accordance with GAAP and is not necessarily indicative of the results to be achieved for any future periods. This preliminary financial information could be impacted by the effects of financial closing procedures, final adjustments, and other developments.

    About Non-GAAP Financial Measures
    This press release presents information about the Company’s Adjusted EBITDA, Adjusted Net Income (Loss) and Adjusted EPS, which are non-GAAP financial measures provided as a supplement to the results provided in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The Company believes non-GAAP measures can be useful measures for period-to-period comparisons of its core business and provide useful information to investors and others in understanding and evaluating its operating results. Non-GAAP financial measures are provided in addition to, and not as a substitute for, and are not superior to, financial measures calculated in accordance with GAAP. In addition, the non-GAAP measures the Company uses, as presented, may not be comparable to similar measures used by other companies. Reconciliations of non-GAAP to GAAP measures can be found below.

    As previously announced on March 12, 2024, beginning with the quarter ended March 31, 2024, the Company has updated its calculation of Adjusted EBITDA and Adjusted Net Income for all periods. To align with these updated calculations, we also updated Adjusted EPS. Comparable prior period non-GAAP financial measures are included in addition to the previously reported metrics.

    Adjusted EBITDA
    The Company defines Adjusted EBITDA as net income, adjusted to eliminate the effect of certain items as described below. The Company believes that Adjusted EBITDA is an important measure because it allows management, investors and its board of directors to evaluate and compare operating results, including return on capital and operating efficiencies, from period to period by making the adjustments described below. In addition, it provides a useful measure for period-to-period comparisons of Oportun’s business, as it removes the effect of income taxes, certain non-cash items, variable charges and timing differences.

    The Company believes it is useful to exclude the impact of income tax expense, as reported, because historically it has included irregular income tax items that do not reflect ongoing business operations.
    The Company believes it is useful to exclude depreciation and amortization and stock-based compensation expense because they are non-cash charges.

    The Company believes it is useful to exclude the impact of interest expense associated with the Company’s corporate financing facilities, including the senior secured term loan and the residual financing facility, as it views this expense as related to its capital structure rather than its funding.

    The Company excludes the impact of certain non-recurring charges, such as expenses associated with our workforce optimization, and other non-recurring charges because it does not believe that these items reflect ongoing business operations. Other non-recurring charges include litigation reserve, impairment charges, debt amendment and warrant amortization costs related to our corporate financing facilities.

    The Company also excludes fair value mark-to-market adjustments on its loans receivable portfolio and asset-backed notes carried at fair value because these adjustments do not impact cash.

    Adjusted Net Income
    The Company defines Adjusted Net Income as net income adjusted to eliminate the effect of certain items as described below. The Company believes that Adjusted Net Income is an important measure of operating performance because it allows management, investors, and the Company’s board of directors to evaluate and compare its operating results, including return on capital and operating efficiencies, from period to period, excluding the after-tax impact of non-cash, stock-based compensation expense and certain non-recurring charges.

    The Company believes it is useful to exclude the impact of income tax expense (benefit), as reported, because historically it has included irregular income tax items that do not reflect ongoing business operations. The Company also includes the impact of normalized income tax expense by applying a normalized statutory tax rate.

    The Company believes it is useful to exclude the impact of certain non-recurring charges, such as expenses associated with our workforce optimization, and other non-recurring charges because it does not believe that these items reflect its ongoing business operations. Other non-recurring charges include litigation reserve, impairment charges, debt amendment and warrant amortization costs related to our corporate financing facilities.

    The Company believes it is useful to exclude stock-based compensation expense because it is a non-cash charge.

    The Company also excludes the fair value mark-to-market adjustment on its asset-backed notes carried at fair value to align with the 2023 accounting policy decision to account for new debt financings at amortized cost.

    Adjusted EPS
    The Company defines Adjusted EPS as Adjusted Net Income divided by weighted average diluted shares outstanding.

    Reconciliation of Non-GAAP Financial Measures

    Adjusted EBITDA    
      Three Months Ended September 30,
      2024   2023  
    (dollars in millions)    
      Net Income (loss) $(32) – (30) $(21.1 )
      Adjustments:    
    Income tax expense (benefit)  (10.2) – (9.5)   (16.2 )
    Corporate debt interest 12.6   15.0  
    Depreciation and amortization 13.5   13.9  
    Workforce optimization expenses –   0.5  
    Stock-based compensation expense 3.2   4.3  
    Other non-recurring charges 2.9   0.3  
    Fair value mark-to-market adjustment 38.0-38.3   16.5  
    Adjusted EBITDA $28.0-31.0 $13.2  
    Adjusted Net Income (Loss)    
      Three Months Ended September 30,
      2024     2023  
    (dollars in millions)    
      Net Income (loss) $(32) – (30) $(21.1 )
      Adjustments:    
        Income Tax Expense (benefit)  (10.2) – (9.5)     (16.2 )
        Stock-based compensation expense 3.2     4.3  
    Workforce optimization expense –     0.5  
    Impairment –     1.3  
    Other non-recurring charges 2.9     0.3  
    Fair value mark-to-market adjustment 33.3 – 34.7     14.9  
    Adjusted income before taxes $ (2.8) – 1.3     (16.1 )
    Normalized income tax expense (0.8) – 0.3     (4.3 )
    Adjusted income $ (2.0) – 1.0 $(11.8 )
    Forward-looking Adjusted Net Income and Adjusted EPS    
      FY 2025
      Low High
    (dollars in millions)    
      Net Income $12.6 $25.1
      Adjustments:    
        Income tax expense (benefit)   4.7   9.3
        Stock-based compensation expense   14.4   14.4
    Other non-recurring charges   6.4   6.4
    Fair value mark-to-market adjustment   30.8   30.8
    Adjusted income before taxes $68.9 $86.0
    Normalized income tax expense   18.7   23.2
    Adjusted Net Income $50.2 $62.8
    Diluted Weighted Average Shares Outstanding (millions)   50.2   50.2
    Diluted EPS $0.25 $0.50
    Adjusted EPS $1.00 $1.25
         

    Investor Contact

    Dorian Hare
    (650) 590-4323
    ir@oportun.com

    Media Contact for Oportun
    Michael Azzano
    Cosmo PR for Oportun
    (415) 596-1978
    michael@cosmo-pr.com

    Media Contact for Castlelake
    Remy Marin / Alex Hinson
    Prosek Partners for Castlelake
    (212) 279 3115
    Rmarin@prosek.com / ahinson@prosek.com

    The MIL Network –

  • MIL-OSI Security: Two Sacramento Residents Plead Guilty to False Income Tax Return Scheme

    Source: Office of United States Attorneys

    SACRAMENTO, Calif. — Dominic Davis, 38, and Sharitia Wright, 59, both of Sacramento, pleaded guilty today to conspiracy to file false claims with the IRS, U.S. Attorney Phillip A. Talbert announced.

    According to court documents, between March 2019 and April 2022, Davis and Wright caused at least nine fraudulent income-tax returns to be filed with the IRS claiming more than $2 million of income tax refunds.

    The returns were filed in the names of Davis, Wright, and family members. The returns listed wages that the taxpayers had not earned and often listed the taxpayers’ employer as one of the various LLCs created by Davis, Wright, and their family members. Many of the returns also falsely claimed charitable contributions that were not actually made. Davis prepared and filed the false tax returns. Wright provided him information and contacted the IRS to check on the status of the refunds claimed in the false tax returns.

    Davis and Wright agreed to pay restitution for the fraudulent income tax refunds that they received.

    This case is the product of an investigation by IRS Criminal Investigation. Assistant U.S. Attorney Nicholas M. Fogg is prosecuting the case.

    Davis and Wright are scheduled to be sentenced by U.S. District Judge Dale A. Drozd on Feb. 3, 2025. Each faces a maximum statutory penalty of 10 years in prison and a $250,000 fine. The actual sentences, however, will be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables.

    MIL Security OSI –

  • MIL-OSI Australia: Cowra Agricultural Research and Advisory Station celebrates successful ewe breeding season

    Source: New South Wales Department of Primary Industries

    30 Oct 2024

    The NSW Department of Primary Industries and Regional Development’s (DPIRD) Cowra Agricultural Research and Advisory Station has experienced one of its most successful breeding seasons to date.

    Building on six years of strong lamb marking and weaning results, this year’s success can be largely attributed to flock and pasture management despite the slow early winter pasture growth and the cold, wet and windy winter conditions experienced in late June and early July. It was also enhanced by tactical use of forage crops and optimal use of pregnancy scanning data.

    This year’s lamb marking results for the Merino flock at the research station have been nothing short of exceptional, with lamb marking rates between 130% and 140% per ewe joined.

    This impressive performance is well above the national lamb marking average of 90% for Merinos, which can vary significantly due to local conditions such as; cold temperatures, wet conditions, windy weather or drought.

    NSW DPIRD Livestock Systems Senior Research Scientist Dr Gordon Refshauge said the excellent results showcase the effectiveness of the ongoing research and management practices implemented by the Department’s research team.

    “The Cowra Agricultural Research and Advisory Station staff’s dedictation and expertise are driving performance well above the industry average, ” Dr Refshauge said.

    “Staff categorised pregnant ewes into groups based on litter size of singles, twins, and multiples and provided feed quality and quantity tailored to each group’s specific needs.

    “The combination of these strategic practices, alongside a healthy and well-managed flock, led to a successful lambing season, showcasing the Station’s commitment to maximising lambing potential.”

    This season, the Station’s flock exhibited lower pregnancy rates than normal but also an unusually high number of triplets and quadruplets.

    Dr Refshauge said this unusual occurence can be attributed to the ewes being in excellent condition prior to mating and continuing to gain weight during the mating period.

    “Due to limited pasture growth, and high feed demands, the ewes were placed in their lambing paddocks earlier than usual, after finishing grazing mixed species forage crops or dual-purpose canola,” Dr Refshauge said.

    “These pre-lambing management decisions were critical for lambing, as pastures had been rested from grazing for 4 – 6 weeks prior to the commencement of lambing and the ewes were in the right body condition for lambing.

    “By integrating these precision management strategies with optimal feeding practices, we’ve exceeded our lambing goals for 2024, showcasing the capability of our flock and team and hoping to continue this for years to come.”

    For more information on the NSW DPIRD Cowra Agricultural Institute, please visit our website

    Media contact:
    For more information, please contact: pi.media@dpird.nsw.gov.au

    MIL OSI News –

  • MIL-OSI Asia-Pac: SFST’s speech at Green Tech Summit 2024 (English only) (with photo)

    Source: Hong Kong Government special administrative region

    SFST’s speech at Green Tech Summit 2024 (English only) (with photo)
    SFST’s speech at Green Tech Summit 2024 (English only) (with photo)
    *******************************************************************

         Following is the speech by the Secretary for Financial Services and the Treasury, Mr Christopher Hui, at the Green Tech Summit 2024 today (October 30): Dr Hua Jindong (Vice-chairperson of the International Sustainability Standards Board), distinguished guests, ladies and gentlemen,      It is a profound honour to join you at the Green Tech Summit 2024. I extend my sincere gratitude to the Hong Kong University of Science and Technology and GoImpact for hosting this important event. Today, we gather to explore how green finance, technology, and innovation converge to create a sustainable future. A call to action for our planet      Our planet is currently facing unprecedented challenges due to climate change. These challenges encompass environmental, economic, and social dimensions, demanding our immediate attention. The statistics deserve attention: Global climate finance flows reached approximately US$1.3 trillion in 2021 and 2022. However, to meet our climate goals, we must significantly increase annual investments to around US$9 trillion by 2030 and US$10 trillion by 2050. This gap signals an immense demand for green finance and innovation – one that we must address with urgency and creativity.      At this Summit, we aim to showcase Hong Kong’s leadership in the green transition through five key strategies, and they altogether will significantly promote green transformation: the growth of green capital, recognition of sustainability standards, empowerment in carbon trading, encouragement of green financing, and nurturing green technology. Each of these strategies plays a critical role in shaping a sustainable future for our city and beyond. Growth of green capital      Hong Kong is uniquely positioned to lead the green transition. As Asia’s premier international financial centre, we have the infrastructure, expertise, and regulatory framework to channel international capital toward sustainable initiatives. As of June, over 230 ESG (environmental, social and governance) funds have been authorised by the Securities and Futures Commission, with assets under management exceeding HK$1.3 trillion. This represents a year-on-year increase of 19 per cent in the number of ESG funds and an 8 per cent increase in assets under management.      The Hong Kong SAR Government has been proactive in issuing government green bonds totalling HK$220 billion since 2019. These bonds have funded numerous local green projects and set benchmarks for potential issuers. In 2023 alone, the total green and sustainable debt issued in Hong Kong surpassed US$50 billion, with approximately US$30 billion being green and sustainable bonds – 37 per cent of the total market. This year, we expanded our Government Green Bond Programme to include sustainable projects and hence the programme is, renamed Government Sustainable Bond Programme, reinforcing our commitment to a greener future. Recognition of sustainability standards      Sustainability reporting is vital to our green finance ecosystem. In March, we published a vision statement outlining our approach to developing a comprehensive ecosystem for sustainability disclosure in Hong Kong. In the Chief Executive’s Policy Address, it was announced that our roadmap for adopting the International Financial Reporting Standards – Sustainability Disclosure Standards (ISSB Standards) will be published within this year. Our aim is to position Hong Kong among the first jurisdictions to adopt the global standard, enhancing our credibility as a green finance hub.      To support our green transition, the Hong Kong Monetary Authority (HKMA) published the Hong Kong Taxonomy for Sustainable Finance in May. This taxonomy raises awareness about green finance and promotes a common understanding of green activities. It aligns with the taxonomies of the Mainland and the European Union, currently encompassing 12 economic activities across four sectors. The HKMA is advancing to the next phase of developing the Hong Kong Taxonomy, which will broaden its scope to include more sectors and activities crucial for our sustainable future. Empowerment in carbon trading      We advocate for innovative approaches to enable decarbonisation and allocate green funding. A noteworthy initiative is the Core Climate platform, launched by the Hong Kong Exchanges and Clearing Limited in October 2022. This international carbon marketplace facilitates effective and transparent trading of carbon credits and supports transition towards net zero.      Core Climate is currently the only carbon marketplace that offers settlement in both Hong Kong dollar and Renminbi for international voluntary carbon credits. This platform enables participants to source, hold, trade, and retire voluntary carbon credits, ensuring robust and credible quality verified against international standards. Since its launch, the number of registered participants has tripled, reaching approximately 80 by the end of last year. Encouragement to green financing      To encourage even more green financing activities, we launched the Green and Sustainable Finance Grant Scheme back in 2021. This initiative provides funding support for eligible bond issuers and loan borrowers, covering expenses related to bond issuance and external review services. We have extended this scheme by three years, running until 2027, and expanded its scope to include transition bonds and loans.      As of early October, we have granted approximately HK$280 million to support 470 green and sustainable debt instruments issued in Hong Kong, involving a total underlying debt issuance of over HK$1 trillion. This financial backing is crucial in incentivising industries to utilise Hong Kong’s transition financing platform for decarbonisation. Nurturing green technology      A key focus of our green transition is our commitment to promoting green fintech. Integrating fintech with green finance is essential for accelerating our transformation. We are actively working to expand the green fintech ecosystem in Hong Kong, positioning our city as a green fintech hub.      In June, we launched the Green and Sustainable Fintech Proof-of-Concept Funding Support Scheme. This initiative provides early-stage funding to technology companies and research institutes engaged in green fintech activities. Collaborating with local enterprises allows these innovators to co-develop projects that address challenges for the industry.      This scheme is not solely about financial support. It facilitates the completion of commercialisation and the proof-of-concept stages, paving the way for wider adoption of green and sustainable fintech solutions. Innovative fintech solutions will enhance our ability to mobilise capital for green projects and increase transparency in fund flows.      Against the backdrop of digitisation and global warming, fintech plays a crucial role in driving innovation in the financial industry and catalysing the low-carbon transformation of economic activities. The application of new technology can also help mitigate climate risk by forecasting environmental changes, improving supply chain efficiency, and identifying opportunities for innovation in low-carbon solutions.      This year, we launched the Prototype Hong Kong Green Fintech Map. Developed with various stakeholders, this tool provides a comprehensive overview of green fintech companies in Hong Kong and the services they offer. This map symbolises the integration of green finance and fintech, fostering the development of a robust green fintech ecosystem and accelerating the transition toward a green economy.      Finally, I want to emphasise the importance of nurturing talent for sustainable development. The future of green finance relies on the skills and knowledge of our workforce. To support the development of a green finance talent pool, we launched a three-year Pilot Green and Sustainable Finance Capacity Building Support Scheme. This initiative encourages practitioners, professionals, and students to participate in relevant training programmes.      As of mid-September, we have approved over 4 100 reimbursement applications, amounting to approximately HK$23.3 million. This investment in human capital is essential for equipping our workforce with the skills needed to navigate and thrive in the evolving landscape of green finance. Closing remarks      In conclusion, the path to a sustainable future is not just a challenge; it is an opportunity for innovation and growth. Green fintech will play a pivotal role in this transition, enabling us to mobilise capital, enhance transparency, and support the development of sustainable solutions.      As we approach COP29 (29th Conference of the Parties to the United Nations Framework Convention on Climate Change) next month, let us intensify our efforts to forge a new chapter in sustainability. By collaborating across sectors and embracing innovative solutions, we can pave the way for impactful changes that resonate with green finance and technology. Together, we can turn our commitments into actionable strategies, ensuring a resilient and sustainable world for generations to come.      Thank you for your attention, and I look forward to seeing you in the next Summit here. 

     
    Ends/Wednesday, October 30, 2024Issued at HKT 11:29

    NNNN

    MIL OSI Asia Pacific News –

  • MIL-OSI Economics: Strong Portfolio and Strategic Priorities Support Phillips 66 Third-Quarter Results

    Source: Phillips

    Reported third-quarter earnings of $346 million or $0.82 per share; adjusted earnings of $859 million or $2.04 per share
    Returned $1.3 billion to shareholders through dividends and share repurchases
    Achieved business transformation $1.4 billion run-rate savings target, including $1 per barrel Refining cost reduction
    Progressed asset dispositions totaling $2.7 billion toward $3 billion target, including recently executed agreements

    HOUSTON–(BUSINESS WIRE)– Phillips 66 (NYSE: PSX), a leading integrated downstream energy provider, announced third-quarter earnings.
    “Our employees continue to execute our strategic priorities, deliver strong operating performance and leverage the benefits of our differentiated downstream portfolio,” said Mark Lashier, chairman and CEO of Phillips 66.
    “We have achieved our cost reduction and Midstream synergy targets,” said Lashier. “In addition, we have significantly advanced our asset disposition program with recently announced transactions. Our commitment to operational excellence and disciplined capital allocation continues to create long-term shareholder value.” 
    Financial Results Summary ( in millions of dollars, except as indicated)

     

     

     

    3Q 2024

    2Q 2024

    Earnings

    $

    346

     

    1,015

     

    Adjusted Earnings 1

     

    859

     

    984

     

    Adjusted EBITDA 1

     

    1,998

     

    2,183

     

    Earnings Per Share

     

     

    Earnings Per Share – Diluted

     

    0.82

     

    2.38

     

    Adjusted Earnings Per Share – Diluted 1

     

    2.04

     

    2.31

     

    Cash Flow From Operations

     

    1,132

     

    2,097

     

    Cash Flow From Operations, Excluding Working Capital 1

     

    1,513

     

    1,181

     

    Capital Expenditures & Investments 2

     

    358

     

    367

     

    Return of Capital to Shareholders

     

    1,277

     

    1,325

     

    Share repurchases

     

    800

     

    840

     

    Dividends paid

     

    477

     

    485

     

    Cash

     

    1,637

     

    2,444

     

    Debt

     

    19,998

     

    19,960

     

    Debt-to-capital ratio

     

    40

    %

    40

    %

    Net debt-to-capital ratio 1

     

    38

    %

    36

    %

    1Represents a non-GAAP financial measure. Reconciliations of these non-GAAP financial measures to the most comparable GAAP financial measure are included within this release.

    2Excludes acquisitions of $567 million in the third quarter of 2024, and purchases of government obligations of $1.1 billion in third-quarter of 2024.

    Segment Financial and Operating Highlights (in millions of dollars, except as indicated)

     

     

     

    3Q 2024

    2Q 2024

    Change

    Earnings 1

    $

    346

     

    1,015

     

    (669

    )

    Midstream

     

    644

     

    767

     

    (123

    )

    Chemicals

     

    342

     

    222

     

    120

     

    Refining

     

    (108

    )

    302

     

    (410

    )

    Marketing and Specialties

     

    (22

    )

    415

     

    (437

    )

    Renewable Fuels

     

    (116

    )

    (55

    )

    (61

    )

    Corporate and Other

     

    (327

    )

    (340

    )

    13

     

    Income tax expense

     

    (44

    )

    (291

    )

    247

     

    Noncontrolling interests

     

    (23

    )

    (5

    )

    (18

    )

     

     

     

     

    Adjusted Earnings 1,2

    $

    859

     

    984

     

    (125

    )

    Midstream

     

    672

     

    753

     

    (81

    )

    Chemicals

     

    342

     

    222

     

    120

     

    Refining

     

    (67

    )

    302

     

    (369

    )

    Marketing and Specialties

     

    583

     

    415

     

    168

     

    Renewable Fuels

     

    (116

    )

    (55

    )

    (61

    )

    Corporate and Other

     

    (327

    )

    (340

    )

    13

     

    Income tax expense

     

    (205

    )

    (278

    )

    73

     

    Noncontrolling interests

     

    (23

    )

    (35

    )

    12

     

     

     

     

     

    Adjusted EBITDA 2

    $

    1,998

     

    2,183

     

    (185

    )

    Midstream

     

    892

     

    971

     

    (79

    )

    Chemicals

     

    466

     

    348

     

    118

     

    Refining

     

    188

     

    531

     

    (343

    )

    Marketing and Specialties

     

    656

     

    484

     

    172

     

    Renewable Fuels

     

    (92

    )

    (43

    )

    (49

    )

    Corporate and Other

     

    (112

    )

    (108

    )

    (4

    )

     

     

     

     

    Operating Highlights

     

     

     

    Midstream NGL Fractionated Volumes (MBD)

     

    728

     

    744

     

    (16

    )

    Chemicals Global O&P Utilization

     

    98

    %

    98

    %

    —

    %

    Refining

     

     

     

    Turnaround Expense ($)

     

    137

     

    100

     

    37

     

    Realized Margin ($/BBL) 2

     

    8.31

     

    10.01

     

    (1.70

    )

    Crude Capacity Utilization

     

    94

    %

    98

    %

    (4

    %)

    Clean Product Yield

     

    87

    %

    86

    %

    1

    %

    Renewable Fuels Produced (MBD)

     

    44

     

    31

     

    13

     

    1Segment reporting is pre-tax.

     

     

     

    2Represents a non-GAAP financial measure. Reconciliations of these non-GAAP financial measures to the most comparable GAAP financial measure are included within this release.

    Third-Quarter 2024 Financial Results
    Reported earnings were $346 million for the third quarter of 2024 versus $1.0 billion in the second quarter. Third-quarter earnings included a legal accrual of $605 million in the Marketing and Specialties segment, costs related to the planned shutdown of the Los Angeles Refinery of $41 million in the Refining segment, and an impairment of $28 million in the Midstream segment. Second-quarter earnings included a gain on sale of investment of $238 million and an impairment of $224 million, both impacting the Midstream segment. Adjusted earnings for the third quarter were $859 million versus $984 million in the second quarter.
    Midstream third-quarter 2024 adjusted pre-tax income decreased compared with the second quarter mainly due to seasonal maintenance costs and lower equity earnings, partially offset by higher export margins.
    Chemicals reported pre-tax income increased mainly due to higher margins and lower costs.
    Refining adjusted pre-tax loss was a decrease compared to the second quarter, primarily due to a decline in realized margins largely driven by lower market crack spreads.
    Marketing and Specialties adjusted pre-tax income increased primarily due to higher margins.
    Renewable Fuels reported pre-tax loss increased primarily due to lower realized margins, partially offset by higher volumes.
    As of September 30, 2024, the company had $1.6 billion of cash and cash equivalents and $5.3 billion of committed capacity available under credit facilities.
    Business Highlights and Strategic Priorities Progress
    Distributed $12.5 billion through share repurchases and dividends since July 2022 and on pace to achieve the company’s $13 billion to $15 billion target by year-end.
    Achieved $1.4 billion in run-rate business transformation savings, delivering on the company’s target ahead of schedule.
    Expanded its Midstream NGL wellhead-to-market business with the acquisition of Pinnacle Midstream and approved a follow-on processing plant expansion in the Midland Basin expected to be completed in mid-year 2025.
    Achieved target of over $400 million of run-rate synergies from the successful integration of DCP Midstream.
    Received proceeds of $1.3 billion since 2022 toward the company’s $3 billion asset disposition target. In addition, the company recently agreed to sell its 49% interest in a Switzerland-based retail joint venture for $1.24 billion, and its interests in non-core Midstream assets in North Dakota.
    Investor Webcast
    Members of Phillips 66 executive management will host a webcast at noon ET to provide an update on the company’s strategic initiatives and discuss the company’s third-quarter performance. To access the webcast and view related presentation materials, go to phillips66.com/investors and click on “Events & Presentations.” For detailed supplemental information, go to phillips66.com/supplemental.
    About Phillips 66
    Phillips 66 (NYSE: PSX) is a leading integrated downstream energy provider that manufactures, transports and markets products that drive the global economy. The company’s portfolio includes Midstream, Chemicals, Refining, Marketing and Specialties, and Renewable Fuels businesses. Headquartered in Houston, Phillips 66 has employees around the globe who are committed to safely and reliably providing energy and improving lives while pursuing a lower-carbon future. For more information, visit phillips66.com or follow @Phillips66Co on LinkedIn.Use of Non-GAAP Financial Information —This news release includes the terms “adjusted earnings,” “adjusted pre-tax income (loss),” “adjusted EBITDA,” “adjusted earnings per share,” “refining realized margin per barrel,” “cash from operations, excluding working capital,” and “net debt-to-capital ratio.” These are non-GAAP financial measures that are included to help facilitate comparisons of operating performance across periods and to help facilitate comparisons with other companies in our industry. Where applicable, these measures exclude items that do not reflect the core operating results of our businesses in the current period or other adjustments to reflect how management analyzes results. Reconciliations of these non-GAAP financial measures to the most comparable GAAP financial measure are included within this release.
    References in the release to earnings refer to net income attributable to Phillips 66. References to run-rate business transformation savings include cost savings and other benefits that will be captured in the sales and other operating revenues impacting gross margin; purchased crude oil and products costs impacting gross margin; operating expenses; selling, general and administrative expenses; and equity in earnings of affiliates lines on our consolidated statement of income when realized. Run-rate savings include run-rate sustaining capital savings. Run-rate sustaining capital savings include savings that will be captured in the capital expenditures and investments on our consolidated statement of cash flows when realized.
    Basis of Presentation — Effective April 1, 2024, we changed the internal financial information reviewed by our chief executive officer to evaluate performance and allocate resources to our operating segments. This included changes in the composition of our operating segments, as well as measurement changes for certain activities between our operating segments. The primary effects of this realignment included establishment of a Renewable Fuels operating segment, which includes renewable fuels activities and assets historically reported in our Refining, Marketing and Specialties (M&S), and Midstream segments; change in method of allocating results for certain Gulf Coast distillate export activities from our M&S segment to our Refining segment; reclassification of certain crude oil and international clean products trading activities between our M&S segment and our Refining segment; and change in reporting of our 16% investment in NOVONIX from our Midstream segment to Corporate and Other. Accordingly, prior period results have been recast for comparability.
    In the third quarter of 2024, we began presenting the line item “Capital expenditures and investments” on our consolidated statement of cash flows exclusive of acquisitions, net of cash acquired. Accordingly, prior period information has been reclassified for comparability.
    Cautionary Statement for the Purposes of the “Safe Harbor” Provisions of the Private Securities Litigation Reform Act of 1995 —This news release contains forward-looking statements within the meaning of the federal securities laws relating to Phillips 66’s operations, strategy and performance. Words such as “anticipated,” “estimated,” “expected,” “planned,” “scheduled,” “targeted,” “believe,” “continue,” “intend,” “will,” “would,” “objective,” “goal,” “project,” “efforts,” “strategies” and similar expressions that convey the prospective nature of events or outcomes generally indicate forward-looking statements. However, the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements included in this news release are based on management’s expectations, estimates and projections as of the date they are made. These statements are not guarantees of future events or performance, and you should not unduly rely on them as they involve certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements. Factors that could cause actual results or events to differ materially from those described in the forward-looking statements include: changes in governmental policies or laws that relate to our operations, including regulations that seek to limit or restrict refining, marketing and midstream operations or regulate profits, pricing, or taxation of our products or feedstocks, or other regulations that restrict feedstock imports or product exports; our ability to timely obtain or maintain permits necessary for projects; fluctuations in NGL, crude oil, refined petroleum, renewable fuels and natural gas prices, and refining, marketing and petrochemical margins; the effects of any widespread public health crisis and its negative impact on commercial activity and demand for refined petroleum or renewable fuels products; changes to worldwide government policies relating to renewable fuels and greenhouse gas emissions that adversely affect programs including the renewable fuel standards program, low carbon fuel standards and tax credits for renewable fuels; potential liability from pending or future litigation; liability for remedial actions, including removal and reclamation obligations under existing or future environmental regulations; unexpected changes in costs for constructing, modifying or operating our facilities; our ability to successfully complete, or any material delay in the completion of, any asset disposition, acquisition, shutdown or conversion that we have announced or may pursue, including receipt of any necessary regulatory approvals or permits related thereto; unexpected difficulties in manufacturing, refining or transporting our products; the level and success of drilling and production volumes around our midstream assets; risks and uncertainties with respect to the actions of actual or potential competitive suppliers and transporters of refined petroleum products, renewable fuels or specialty products; lack of, or disruptions in, adequate and reliable transportation for our products; failure to complete construction of capital projects on time or within budget; our ability to comply with governmental regulations or make capital expenditures to maintain compliance with laws; limited access to capital or significantly higher cost of capital related to illiquidity or uncertainty in the domestic or international financial markets, which may also impact our ability to repurchase shares and declare and pay dividends; potential disruption of our operations due to accidents, weather events, including as a result of climate change, acts of terrorism or cyberattacks; general domestic and international economic and political developments, including armed hostilities (such as the Russia-Ukraine war), expropriation of assets, and other diplomatic developments; international monetary conditions and exchange controls; changes in estimates or projections used to assess fair value of intangible assets, goodwill and property and equipment and/or strategic decisions with respect to our asset portfolio that cause impairment charges; investments required, or reduced demand for products, as a result of environmental rules and regulations; changes in tax, environmental and other laws and regulations (including alternative energy mandates); political and societal concerns about climate change that could result in changes to our business or increase expenditures, including litigation-related expenses; the operation, financing and distribution decisions of equity affiliates we do not control; and other economic, business, competitive and/or regulatory factors affecting Phillips 66’s businesses generally as set forth in our filings with the Securities and Exchange Commission. Phillips 66 is under no obligation (and expressly disclaims any such obligation) to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise.

     

     

     

     
     
     

    Earnings

     

     

     

     

     

     

     

     

     

     

     

     

    Millions of Dollars

     

     

    2024

     

     

    2023

     

    3Q  

     

    2Q  

     

    Sep YTD

     

    3Q  

     

    Sep YTD

    Midstream

    $

    644

     

    767

     

    1,965

     

     

    724

     

    2,060

     

    Chemicals

     

    342

     

    222

     

    769

     

     

    104

     

    494

     

    Refining

     

    (108

    )

    302

     

    410

     

     

    1,712

     

    4,481

     

    Marketing and Specialties

     

    (22

    )

    415

     

    759

     

     

    605

     

    1,501

     

    Renewable Fuels

     

    (116

    )

    (55

    )

    (226

    )

     

    22

     

    164

     

    Corporate and Other

     

    (327

    )

    (340

    )

    (989

    )

     

    (354

    )

    (992

    )

    Pre-Tax Income

     

    413

     

    1,311

     

    2,688

     

     

    2,813

     

    7,708

     

    Less: Income tax expense

     

    44

     

    291

     

    538

     

     

    670

     

    1,754

     

    Less: Noncontrolling interests

     

    23

     

    5

     

    41

     

     

    46

     

    199

     

    Phillips 66

    $

    346

     

    1,015

     

    2,109

     

     

    2,097

     

    5,755

     

     

     

     

     

     

     

     

     

     

     

     

     

    Adjusted Earnings

     

     

     

     

     

     

     

     

     

     

     

     

    Millions of Dollars

     

    2024

     

     

    2023

     

    3Q

     

    2Q

     

    Sep YTD

     

    3Q

     

    Sep YTD

    Midstream

    $

    672

     

    753

     

    2,038

     

     

    581

     

    1,915

     

    Chemicals

     

    342

     

    222

     

    769

     

     

    104

     

    494

     

    Refining

     

    (67

    )

    302

     

    548

     

     

    1,742

     

    4,525

     

    Marketing and Specialties

     

    583

     

    415

     

    1,305

     

     

    605

     

    1,501

     

    Renewable Fuels

     

    (116

    )

    (55

    )

    (226

    )

     

    22

     

    164

     

    Corporate and Other

     

    (327

    )

    (340

    )

    (989

    )

     

    (303

    )

    (812

    )

    Pre-Tax Income

     

    1,087

     

    1,297

     

    3,445

     

     

    2,751

     

    7,787

     

    Less: Income tax expense

     

    205

     

    278

     

    709

     

     

    660

     

    1,768

     

    Less: Noncontrolling interests

     

    23

     

    35

     

    71

     

     

    21

     

    218

     

    Phillips 66

    $

    859

     

    984

     

    2,665

     

     

    2,070

     

    5,801

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Millions of Dollars

     

    Except as Indicated

     

    2024

     

     

    2023

     

    3Q

     

    2Q

     

    Sep YTD

     

    3Q

     

    Sep YTD

    Reconciliation of Consolidated Earnings to Adjusted Earnings

     

     

     

     

     

     

     

     

     

     

     

    Consolidated Earnings

    $

    346

     

    1,015

     

    2,109

     

     

    2,097

     

    5,755

     

    Pre-tax adjustments:

     

     

     

     

     

     

     

     

     

     

     

    Impairments 1

     

    28

     

    224

     

    415

     

     

    —

     

    —

     

    Net gain on asset dispositions

     

    —

     

    (238

    )

    (238

    )

     

    (101

    )

    (123

    )

    Change in inventory method for acquired business

     

    —

     

    —

     

    —

     

     

    (46

    )

    (46

    )

    Los Angeles Refinery shutdown-related costs 2

     

    41

     

    —

     

    41

     

     

    —

     

    —

     

    Legal accrual 3

     

    605

     

    —

     

    605

     

     

    30

     

    30

     

    Legal settlement

     

    —

     

    —

     

    (66

    )

     

    —

     

    —

     

    Business transformation restructuring costs

     

    —

     

    —

     

    —

     

     

    51

     

    127

     

    Loss on early redemption of DCP debt

     

    —

     

    —

     

    —

     

     

    —

     

    53

     

    DCP integration restructuring costs

     

    —

     

    —

     

    —

     

     

    4

     

    38

     

    Tax impact of adjustments 4

     

    (161

    )

    13

     

    (171

    )

     

    10

     

    (14

    )

    Noncontrolling interests

     

    —

     

    (30

    )

    (30

    )

     

    25

     

    (19

    )

    Adjusted earnings

    $

    859

     

    984

     

    2,665

     

     

    2,070

     

    5,801

     

    Earnings per share of common stock ( dollars )

    $

    0.82

     

    2.38

     

    4.94

     

     

    4.69

     

    12.61

     

    Adjusted earnings per share of common stock ( dollars ) 5

    $

    2.04

     

    2.31

     

    6.25

     

     

    4.63

     

    12.71

     

     

     

     

     

     

     

     

     

     

     

     

     

    Reconciliation of Segment Pre-Tax Income (Loss) to Adjusted Pre-Tax Income (Loss)

    Midstream Pre-Tax Income

    $

    644

     

    767

     

    1,965

     

     

    724

     

    2,060

     

    Pre-tax adjustments:

     

     

     

     

     

     

     

     

     

     

     

    Impairments 1

     

    28

     

    224

     

    311

     

     

    —

     

    —

     

    Net gain on asset disposition

     

    —

     

    (238

    )

    (238

    )

     

    (101

    )

    (137

    )

    Change in inventory method for acquired business

     

    —

     

    —

     

    —

     

     

    (46

    )

    (46

    )

    DCP integration restructuring costs

     

    —

     

    —

     

    —

     

     

    4

     

    38

     

    Adjusted pre-tax income

    $

    672

     

    753

     

    2,038

     

     

    581

     

    1,915

     

    Chemicals Pre-Tax Income

    $

    342

     

    222

     

    769

     

     

    104

     

    494

     

    Pre-tax adjustments:

     

     

     

     

     

     

     

     

     

     

     

    None

     

    —

     

    —

     

    —

     

     

    —

     

    —

     

    Adjusted pre-tax income

    $

    342

     

    222

     

    769

     

     

    104

     

    494

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Refining Pre-Tax Income (Loss)

    $

    (108

    )

    302

     

    410

     

     

    1,712

     

    4,481

     

    Pre-tax adjustments:

     

     

     

     

     

     

     

     

     

     

     

    Impairments 1

     

    —

     

    —

     

    104

     

     

    —

     

    —

     

    Los Angeles Refinery shutdown-related costs 2

     

    41

     

    —

     

    41

     

     

    —

     

    —

     

    Net loss on asset disposition

     

    —

     

    —

     

    —

     

     

    —

     

    14

     

    Legal accrual 3

     

    —

     

    —

     

    —

     

     

    30

     

    30

     

    Legal settlement

     

    —

     

    —

     

    (7

    )

     

    —

     

    —

     

    Adjusted pre-tax income (loss)

    $

    (67

    )

    302

     

    548

     

     

    1,742

     

    4,525

     

    Marketing and Specialties Pre-Tax Income (Loss)

    $

    (22

    )

    415

     

    759

     

     

    605

     

    1,501

     

    Pre-tax adjustments:

     

     

     

     

     

     

     

     

     

     

     

    Legal accrual 3

     

    605

     

    —

     

    605

     

     

    —

     

    —

     

    Legal settlement

     

    —

     

    —

     

    (59

    )

     

    —

     

    —

     

    Adjusted pre-tax income

    $

    583

     

    415

     

    1,305

     

     

    605

     

    1,501

     

    Renewable Fuels Pre-Tax Income (Loss)

    $

    (116

    )

    (55

    )

    (226

    )

     

    22

     

    164

     

    Pre-tax adjustments:

     

     

     

     

     

     

     

     

     

     

     

    None

     

    —

     

    —

     

    —

     

     

    —

     

    —

     

    Adjusted pre-tax income (loss)

    $

    (116

    )

    (55

    )

    (226

    )

     

    22

     

    164

     

    Corporate and Other Pre-Tax Loss

    $

    (327

    )

    (340

    )

    (989

    )

     

    (354

    )

    (992

    )

    Pre-tax adjustments:

     

     

     

     

     

     

     

     

     

     

     

    Business transformation restructuring costs

     

    —

     

    —

     

    —

     

     

    51

     

    127

     

    Loss on early redemption of DCP debt

     

    —

     

    —

     

    —

     

     

    —

     

    53

     

    Adjusted pre-tax loss

    $

    (327

    )

    (340

    )

    (989

    )

     

    (303

    )

    (812

    )

     

     

     

     

     

     

     

     

     

     

     

     

    1Impairments primarily related to certain gathering and processing assets in the Midstream segment, as well as certain crude oil processing and logistics assets in California, reported in the Refining segment.

    2Shutdown-related costs recorded in the Refining segment include pre-tax charges for severance costs.

    3Legal accrual primarily related to ongoing litigation.

    4We generally tax effect taxable U.S.-based special items using a combined federal and state statutory income tax rate of approximately 24%. Taxable special items attributable to foreign locations likewise use a local statutory income tax rate. Nontaxable events reflect zero income tax. These events include, but are not limited to, most goodwill impairments, transactions legislatively exempt from income tax, transactions related to entities for which we have made an assertion that the undistributed earnings are permanently reinvested, or transactions occurring in jurisdictions with a valuation allowance.

    5YTD 2024, Q3 2024, Q3 2023 are based on adjusted weighted-average diluted shares of 426,301 thousand, 419,827 thousand, and 447,255 thousand, respectively. Other periods are based on the same weighted-average diluted shares outstanding as that used in the GAAP diluted earnings per share calculation. Income allocated to participating securities, if applicable, in the adjusted earnings per share calculation is the same as that used in the GAAP diluted earnings per share calculation.

     
     
     

     

    Millions of Dollars

     

    Except as Indicated

     

    2024

     

    3Q

     

    2Q

     

    Reconciliation of Consolidated Net Income to Adjusted EBITDA

     

     

     

     

    Net Income

    $

    369

     

    1,020

     

    Plus:

     

     

     

     

    Income tax expense

     

    44

     

    291

     

    Net interest expense

     

    191

     

    200

     

    Depreciation and amortization

     

    543

     

    497

     

    Phillips 66 EBITDA

    $

    1,147

     

    2,008

     

    Special Item Adjustments (pre-tax):

     

     

     

     

    Impairments

     

    28

     

    224

     

    Net gain on asset disposition

     

    —

     

    (238

    )

    Los Angeles Refinery shutdown-related costs

     

    41

     

    —

     

    Legal accrual

     

    605

     

    —

     

    Legal settlement

     

    —

     

    —

     

    Total Special Item Adjustments (pre-tax)

     

    674

     

    (14

    )

    Change in Fair Value of NOVONIX Investment

     

    —

     

    7

     

    Phillips 66 EBITDA, Adjusted for Special Items and Change in Fair Value of NOVONIX Investment

    $

    1,821

     

    2,001

     

    Other Adjustments (pre-tax):

     

     

     

     

    Proportional share of selected equity affiliates income taxes

     

    24

     

    26

     

    Proportional share of selected equity affiliates net interest

     

    12

     

    19

     

    Proportional share of selected equity affiliates depreciation and amortization

     

    188

     

    195

     

    Adjusted EBITDA attributable to noncontrolling interests

     

    (47

    )

    (58

    )

    Phillips 66 Adjusted EBITDA

    $

    1,998

     

    2,183

     

     

     

     

     

     

    Reconciliation of Segment Income before Income Taxes to Adjusted EBITDA

     

     

     

     

    Midstream Income before income taxes

    $

    644

     

    767

     

    Plus:

     

     

     

     

    Depreciation and amortization

     

    233

     

    224

     

    Midstream EBITDA

    $

    877

     

    991

     

    Special Item Adjustments (pre-tax):

     

     

     

     

    Net gain on asset disposition

     

    —

     

    (238

    )

    Impairments

     

    28

     

    224

     

    Midstream EBITDA, Adjusted for Special Items

    $

    905

     

    977

     

    Other Adjustments (pre-tax):

     

     

     

     

    Proportional share of selected equity affiliates income taxes

     

    5

     

    5

     

    Proportional share of selected equity affiliates net interest

     

    3

     

    10

     

    Proportional share of selected equity affiliates depreciation and amortization

     

    26

     

    37

     

    Adjusted EBITDA attributable to noncontrolling interests

     

    (47

    )

    (58

    )

    Midstream Adjusted EBITDA

    $

    892

     

    971

     

    Chemicals Income before income taxes

    $

    342

     

    222

     

    Plus:

     

     

     

     

    None

     

    —

     

    —

     

    Chemicals EBITDA

    $

    342

     

    222

     

    Special Item Adjustments (pre-tax):

     

     

     

     

    None

     

    —

     

    —

     

    Chemicals EBITDA, Adjusted for Special Items

    $

    342

     

    222

     

    Other Adjustments (pre-tax):

     

     

     

     

    Proportional share of selected equity affiliates income taxes

     

    13

     

    15

     

    Proportional share of selected equity affiliates net interest

     

    (2

    )

    —

     

    Proportional share of selected equity affiliates depreciation and amortization

     

    113

     

    111

     

    Chemicals Adjusted EBITDA

    $

    466

     

    348

     

    Refining Income (loss) before income taxes

    $

    (108

    )

    302

     

    Plus:

     

     

     

     

    Depreciation and amortization

     

    230

     

    204

     

    Refining EBITDA

    $

    122

     

    506

     

    Special Item Adjustments (pre-tax):

     

     

     

     

    Los Angeles Refinery shutdown-related costs

     

    41

     

    —

     

    Refining EBITDA, Adjusted for Special Items

    $

    163

     

    506

     

    Other Adjustments (pre-tax):

     

     

     

     

    Proportional share of selected equity affiliates income taxes

     

    (1

    )

    1

     

    Proportional share of selected equity affiliates net interest

     

    (1

    )

    (2

    )

    Proportional share of selected equity affiliates depreciation and amortization

     

    27

     

    26

     

    Refining Adjusted EBITDA

    $

    188

     

    531

     

    Marketing and Specialties Income (loss) before income taxes

    $

    (22

    )

    415

     

    Plus:

     

     

     

     

    Depreciation and amortization

     

    32

     

    32

     

    Marketing and Specialties EBITDA

    $

    10

     

    447

     

    Special Item Adjustments (pre-tax):

     

     

     

     

    Legal accrual

     

    605

     

    —

     

    Marketing and Specialties EBITDA, Adjusted for Special Items

    $

    615

     

    447

     

    Other Adjustments (pre-tax):

     

     

     

     

    Proportional share of selected equity affiliates income taxes

     

    7

     

    5

     

    Proportional share of selected equity affiliates net interest

     

    12

     

    11

     

    Proportional share of selected equity affiliates depreciation and amortization

     

    22

     

    21

     

    Marketing and Specialties Adjusted EBITDA

    $

    656

     

    484

     

    Renewable Fuels Loss before income taxes

    $

    (116

    )

    (55

    )

    Plus:

     

     

     

     

    Depreciation and amortization

     

    24

     

    12

     

    Renewable Fuels EBITDA

    $

    (92

    )

    (43

    )

    Special Item Adjustments (pre-tax):

     

     

     

     

    None

     

    —

     

    —

     

    Renewable Fuels EBITDA, Adjusted for Special Items

    $

    (92

    )

    (43

    )

    Corporate and Other Loss before income taxes

    $

    (327

    )

    (340

    )

    Plus:

     

     

     

     

    Net interest expense

     

    191

     

    200

     

    Depreciation and amortization

     

    24

     

    25

     

    Corporate and Other EBITDA

    $

    (112

    )

    (115

    )

    Special Item Adjustments (pre-tax):

     

     

     

     

    None

     

    —

     

    —

     

    Total Special Item Adjustments (pre-tax)

     

    —

     

    —

     

    Change in Fair Value of NOVONIX Investment

     

    —

     

    7

     

    Corporate EBITDA, Adjusted for Special Items and Change in Fair Value of NOVONIX Investment

    $

    (112

    )

    (108

    )

     

     

     

     

     

     

     

     

     

     

    Millions of Dollars

     

    Except as Indicated

     

    September 30, 2024

    Debt-to-Capital Ratio

     

    Total Debt

    $

    19,998

     

    Total Equity

     

    29,784

     

    Debt-to-Capital Ratio

     

    40

    %

    Total Cash

     

    1,637

     

    Net Debt-to-Capital Ratio

     

    38

    %

     

     

     

     

     

     

    Millions of Dollars

     

    September 30, 2024

    Reconciliation of Net Cash Used in Operating Activities to Operating Cash Flow, Excluding Working Capital

     

    Net Cash Used in Operating Activities

    $

    1,132

     

    Less: Net Working Capital Changes

     

    (381

    )

    Operating Cash Flow, Excluding Working Capital

    $

    1,513

     

     

     

     

    Millions of Dollars

     

    Except as Indicated

     

    2024

     

    3Q

     

    2Q

     

    Reconciliation of Refining Income (Loss) Before Income Taxes to Realized Refining Margins

     

     

     

     

    Income (loss) before income taxes

    $

    (108

    )

    302

     

    Plus:

     

     

     

     

    Taxes other than income taxes

     

    100

     

    74

     

    Depreciation, amortization and impairments

     

    230

     

    203

     

    Selling, general and administrative expenses

     

    60

     

    51

     

    Operating expenses

     

    922

     

    884

     

    Equity in earnings of affiliates

     

    12

     

    (33

    )

    Other segment expense, net

     

    (4

    )

    (1

    )

    Proportional share of refining gross margins contributed by equity affiliates

     

    193

     

    260

     

    Special items:

     

     

     

     

    None

     

    —

     

    —

     

    Realized refining margins

    $

    1,405

     

    1,740

     

    Total processed inputs ( thousands of barrels )

     

    145,440

     

    151,296

     

    Adjusted total processed inputs ( thousands of barrels )*

     

    168,951

     

    174,107

     

    Income (loss) before income taxes ( dollars per barrel )**

    $

    (0.74

    )

    2.00

     

    Realized refining margins ( dollars per barrel )***

    $

    8.31

     

    10.01

     

    *Adjusted total processed inputs include our proportional share of processed inputs of an equity affiliate.

     
     

    **Income before income taxes divided by total processed inputs.

    ***Realized refining margins per barrel, as presented, are calculated using the underlying realized refining margin amounts, in dollars, divided by adjusted total processed inputs, in barrels. As such, recalculated per barrel amounts using the rounded margins and barrels presented may differ from the presented per barrel amounts.

    Source: Phillips 66

    MIL OSI Economics –

  • MIL-OSI: SeekOut Announces CHRO Council Workshop Series to Empower Talent Leaders

    Source: GlobeNewswire (MIL-OSI)

    BELLEVUE, Wash., Oct. 29, 2024 (GLOBE NEWSWIRE) — SeekOut, the leading Talent Intelligence Platform, today shared details of its upcoming CHRO Council Workshop Series, a virtual event series designed to equip HR and talent leaders with practical strategies to succeed in today’s competitive business environment. The five-part webinar series, created in partnership with SeekOut’s recently established CHRO Council, will deliver expert guidance to help companies build and execute talent strategies that promote workforce agility and support organizational longevity.

    Drawing on the expertise of the CHRO Council members, the series will provide a hands-on learning experience, combining 30 minutes of guided instruction using a customized worksheet with a 30-minute interactive Q&A session in each session. Participants will have the opportunity to engage directly with industry experts who bring decades of experience from leadership roles in prominent companies. At the conclusion of the series, attendees will receive a comprehensive digital workbook compiling all five worksheets and key takeaways from each session, serving as a valuable resource for ongoing talent strategy development.

    The SeekOut CHRO Council Workshop Series schedule includes:

    “Given the rapid changes in the talent landscape, it’s crucial for HR professionals to adapt and evolve their strategies,” said Bryce Winkelman, Chief Business and Revenue Officer at SeekOut. “Our CHRO Council Workshop Series is designed to provide actionable advice and insights that HR and talent leaders can immediately apply to today’s challenges and help their organizations prepare for the future.”

    Registration for SeekOut’s CHRO Council Workshop Series is open now, with options to sign up for the full series or individual webinars. Each session is tailored to equip participants with the tools and knowledge needed to lead their organizations through transformation, elevate performance and thrive in a dynamic market.

    To learn more and register, visit https://info.seekout.com/CHRO-council-workshop-series.html.

    About SeekOut
    SeekOut’s Talent Intelligence Platform helps thousands of organizations of all sizes and industries hire, grow and retain great talent. Founded in 2017 by a team of enterprise software veterans, SeekOut is backed by leading investors at Tiger Global Management, Madrona Venture Group, Mayfield, and Founders Circle Capital. SeekOut has two primary product offerings – Recruit, for identifying new talent, and Grow, for maximizing a company’s existing internal talent. Leading companies, including Peraton, Experian and Northrup Grumman, rely on SeekOut to unify their talent acquisition, talent management, and talent analytics in a single people-first platform. Learn more at www.seekout.com.

    The MIL Network –

  • MIL-OSI: DT Midstream Reports Strong Third Quarter 2024 Results; Raises Adjusted EBITDA Guidance

    Source: GlobeNewswire (MIL-OSI)

    DETROIT, Oct. 29, 2024 (GLOBE NEWSWIRE) — DT Midstream, Inc. (NYSE: DTM) today announced third quarter 2024 reported net income of $88 million, or $0.90 per diluted share. For the third quarter of 2024, Operating Earnings were also $88 million, or $0.90 per diluted share. Adjusted EBITDA for the quarter was $241 million.

    Reconciliations of Operating Earnings and Adjusted EBITDA (non-GAAP measures) to reported net income are included at the end of this news release.

    The company also announced that the DT Midstream Board of Directors declared a $0.735 per share dividend on its common stock payable January 15, 2025 to stockholders of record at the close of business December 16, 2024.

    “We continue our strong performance in 2024,” said David Slater, President and CEO. “And we have made great progress advancing new opportunities which will support our future growth.”

    Slater noted the following significant business updates:

    • Reached final investment decision on the Phase 4 expansion of the LEAP system, which will expand the system to 2.1 Bcf/d by the first half of 2026
    • Upsized the future interconnect between our Stonewall System and Mountain Valley Pipeline
    • Upgraded to investment-grade by Fitch Ratings

    “Our year-to-date results are ahead of plan,” said Jeff Jewell, Executive Vice President and CFO. “Our strong performance is leading us to increase our Adjusted EBITDA guidance for 2024 to $950 – $980 million.”

    The company has scheduled a conference call to discuss results for 9:00 a.m. ET (8:00 a.m. CT) today. Investors, the news media and the public may listen to a live internet broadcast of the call at this link. The participant toll-free telephone dial-in number in the U.S. and Canada is 888.596.4144, and the toll number is 646.968.2525; the passcode is 4749988. International access numbers are available here. The webcast will be archived on the DT Midstream website at investor.dtmidstream.com.

    About DT Midstream

    DT Midstream (NYSE: DTM) is an owner, operator and developer of natural gas interstate and intrastate pipelines, storage and gathering systems, compression, treatment and surface facilities. The company transports clean natural gas for utilities, power plants, marketers, large industrial customers and energy producers across the Southern, Northeastern and Midwestern United States and Canada. The Detroit-based company offers a comprehensive, wellhead-to-market array of services, including natural gas transportation, storage and gathering. DT Midstream is transitioning towards net zero greenhouse gas emissions by 2050, including a goal of achieving 30% of its carbon emissions reduction by 2030. For more information, please visit the DT Midstream website at www.dtmidstream.com.

    Why DT Midstream Uses Operating Earnings, Adjusted EBITDA and Distributable Cash Flow

    Use of Operating Earnings Information – Operating Earnings exclude non-recurring items, certain mark-to-market adjustments and discontinued operations. DT Midstream management believes that Operating Earnings provide a more meaningful representation of the company’s earnings from ongoing operations and uses Operating Earnings as the primary performance measurement for external communications with analysts and investors. Internally, DT Midstream uses Operating Earnings to measure performance against budget and to report to the Board of Directors.

    Adjusted EBITDA is defined as GAAP net income attributable to DT Midstream before expenses for interest, taxes, depreciation and amortization, and loss from financing activities, further adjusted to include the proportional share of net income from equity method investees (excluding interest, taxes, depreciation and amortization), and to exclude certain items the company considers non-routine. DT Midstream believes Adjusted EBITDA is useful to the company and external users of DT Midstream’s financial statements in understanding operating results and the ongoing performance of the underlying business because it allows management and investors to have a better understanding of actual operating performance unaffected by the impact of interest, taxes, depreciation, amortization and non-routine charges noted in the table below. We believe the presentation of Adjusted EBITDA is meaningful to investors because it is frequently used by analysts, investors and other interested parties in the midstream industry to evaluate a company’s operating performance without regard to items excluded from the calculation of such measure, which can vary substantially from company to company depending on accounting methods, book value of assets, capital structure and the method by which assets were acquired, among other factors. DT Midstream uses Adjusted EBITDA to assess the company’s performance by reportable segment and as a basis for strategic planning and forecasting.

    Distributable Cash Flow (DCF) is calculated by deducting earnings from equity method investees, depreciation and amortization attributable to noncontrolling interests, cash interest expense, maintenance capital investment (as defined below), and cash taxes from, and adding interest expense, income tax expense, depreciation and amortization, certain items we consider non-routine and dividends and distributions from equity method investees to, Net Income Attributable to DT Midstream. Maintenance capital investment is defined as the total capital expenditures used to maintain or preserve assets or fulfill contractual obligations that do not generate incremental earnings. We believe DCF is a meaningful performance measurement because it is useful to us and external users of our financial statements in estimating the ability of our assets to generate cash earnings after servicing our debt, paying cash taxes and making maintenance capital investments, which could be used for discretionary purposes such as common stock dividends, retirement of debt or expansion capital expenditures.

    DT Midstream does not forecast net income as it cannot, without unreasonable efforts, estimate or predict with certainty the components of net income. These components, net of tax, may include, but are not limited to, impairments of assets and other charges, divestiture costs, acquisition costs, or changes in accounting principles. All of these components could significantly impact such financial measures. At this time, DT Midstream is not able to estimate the aggregate impact, if any, of these items on future period reported earnings. Accordingly, DT Midstream is not able to provide a corresponding GAAP equivalent for Adjusted EBITDA.

    Forward-looking Statements

    This release contains statements which, to the extent they are not statements of historical or present fact, constitute “forward-looking statements” under the securities laws. These forward-looking statements are intended to provide management’s current expectations or plans for our future operating and financial performance, business prospects, outcomes of regulatory proceedings, market conditions, and other matters, based on what we believe to be reasonable assumptions and on information currently available to us.

    Forward-looking statements can be identified by the use of words such as “believe,” “expect,” “expectations,” “plans,” “strategy,” “prospects,” “estimate,” “project,” “target,” “anticipate,” “will,” “should,” “see,” “guidance,” “outlook,” “confident” and other words of similar meaning. The absence of such words, expressions or statements, however, does not mean that the statements are not forward-looking. In particular, express or implied statements relating to future earnings, cash flow, results of operations, uses of cash, tax rates and other measures of financial performance, future actions, conditions or events, potential future plans, strategies or transactions of DT Midstream, and other statements that are not historical facts, are forward-looking statements.

    Forward-looking statements are not guarantees of future results and conditions, but rather are subject to numerous assumptions, risks, and uncertainties that may cause actual future results to be materially different from those contemplated, projected, estimated, or budgeted. Many factors may impact forward-looking statements of DT Midstream including, but not limited to, the following: changes in general economic conditions, including increases in interest rates and associated Federal Reserve policies, a potential economic recession, and the impact of inflation on our business; industry changes, including the impact of consolidations, alternative energy sources, technological advances, infrastructure constraints and changes in competition; global supply chain disruptions; actions taken by third-party operators, processors, transporters and gatherers; changes in expected production from Expand Energy and other third parties in our areas of operation; demand for natural gas gathering, transmission, storage, transportation and water services; the availability and price of natural gas to the consumer compared to the price of alternative and competing fuels; our ability to successfully and timely implement our business plan; our ability to complete organic growth projects on time and on budget; our ability to finance, complete, or successfully integrate acquisitions; the price and availability of debt and equity financing; restrictions in our existing and any future credit facilities and indentures; the effectiveness of our information technology and operational technology systems and practices to detect and defend against evolving cyber attacks on United States critical infrastructure; changing laws regarding cybersecurity and data privacy, and any cybersecurity threat or event; operating hazards, environmental risks, and other risks incidental to gathering, storing and transporting natural gas; geologic and reservoir risks and considerations; natural disasters, adverse weather conditions, casualty losses and other matters beyond our control; the impact of outbreaks of illnesses, epidemics and pandemics, and any related economic effects; the impacts of geopolitical events, including the conflicts in Ukraine and the Middle East; labor relations and markets, including the ability to attract, hire and retain key employee and contract personnel; large customer defaults; changes in tax status, as well as changes in tax rates and regulations; the effects and associated cost of compliance with existing and future laws and governmental regulations, such as the Inflation Reduction Act; changes in environmental laws, regulations or enforcement policies, including laws and regulations relating to climate change and greenhouse gas emissions; ability to develop low carbon business opportunities and deploy greenhouse gas reducing technologies; changes in insurance markets impacting costs and the level and types of coverage available; the timing and extent of changes in commodity prices; the success of our risk management strategies; the suspension, reduction or termination of our customers’ obligations under our commercial agreements; disruptions due to equipment interruption or failure at our facilities, or third-party facilities on which our business is dependent; the effects of future litigation; and the risks described in our Annual Report on Form 10-K for the year ended December 31, 2023 and our reports and registration statements filed from time to time with the SEC.

    The above list of factors is not exhaustive. New factors emerge from time to time. We cannot predict what factors may arise or how such factors may cause actual results to vary materially from those stated in forward-looking statements, see the discussion under the section entitled “Risk Factors” in our Annual Report for the year ended December 31, 2023, filed with the SEC on Form 10-K and any other reports filed with the SEC. Given the uncertainties and risk factors that could cause our actual results to differ materially from those contained in any forward-looking statement, you should not put undue reliance on any forward-looking statements.

    Any forward-looking statements speak only as of the date on which such statements are made. We are under no obligation to, and expressly disclaim any obligation to, update or alter our forward-looking statements, whether as a result of new information, subsequent events or otherwise.

                                         
    DT Midstream, Inc.
    Reconciliation of Reported to Operating Earnings (non-GAAP, unaudited)
              Three Months Ended
              September 30,   June 30,
              2024   2024
              Reported Earnings   Pre-tax Adjustments   Income Taxes(1)   Operating Earnings   Reported Earnings   Pre-tax Adjustments   Income Taxes(1)   Operating Earnings
              (millions)
      Adjustments
    		     $ —   $ —           $ —   $ —    
      Net Income Attributable to DT Midstream
    		 $ 88   $ —   $ —   $ 88   $ 96   $ —   $ —   $ 96
                                           
              Nine Months Ended
              September 30,   September 30,
               2024    2023
              Reported Earnings   Pre-tax Adjustments   Income Taxes(1)   Operating Earnings   Reported Earnings   Pre-tax Adjustments   Income Taxes(1)   Operating Earnings
              (millions)
      Adjustments
    		     $ —   $ —           $ —   $ —    
      Net Income Attributable to DT Midstream
    		 $ 281   $ —   $ —   $ 281   $ 263   $ —   $ —   $ 263
                                           
      (1) Excluding tax related adjustments, the amount of income taxes was calculated based on a combined federal and state income tax rate, considering the applicable jurisdictions of the respective segments and deductibility of specific operating adjustments
                                           
                                                           
    DT Midstream, Inc.
    Reconciliation of Reported to Operating Earnings per diluted share(2) (non-GAAP, unaudited)
                                         
            Three Months Ended
            September 30,   June 30,
            2024   2024
            Reported Earnings   Pre-tax Adjustments   Income Taxes(1)   Operating Earnings   Reported Earnings   Pre-tax Adjustments   Income Taxes(1)   Operating Earnings
            (per share)
      Adjustments
    		     $ —   $ —           $ —   $ —    
      Net Income Attributable to DT Midstream
    		 $ 0.90   $ —   $ —   $ 0.90   $ 0.98   $ —   $ —   $ 0.98
                                         
            Nine Months Ended
            September 30,   September 30,
            2024   2023
            Reported Earnings   Pre-tax Adjustments   Income Taxes(1)   Operating Earnings   Reported Earnings   Pre-tax Adjustments   Income Taxes(1)   Operating Earnings
            (per share)
      Adjustments
    		     $ —   $ —           $ —   $ —    
      Net Income Attributable to DT Midstream
    		 $ 2.87   $ —   $ —   $ 2.87   $ 2.70   $ —   $ —   $ 2.70
                                         
      (1) Excluding tax related adjustments, the amount of income taxes was calculated based on a combined federal and state income tax rate, considering the applicable jurisdictions of the respective segments and deductibility of specific operating adjustments  
      (2) Per share amounts are divided by Weighted Average Common Shares Outstanding — Diluted, as noted on the Consolidated Statements of Operations  
                                         
     
    DT Midstream, Inc.
    Reconciliation of Net Income Attributable to DT Midstream to Adjusted EBITDA (non-GAAP, unaudited)
                     
        Three Months Ended   Nine Months Ended
        September 30,   June 30,   September 30,   September 30,
          2024       2024       2024       2023  
    Consolidated (millions)
    Net Income Attributable to DT Midstream $ 88     $ 96     $ 281     $ 263  
    Plus: Interest expense   38       39       117       111  
    Plus: Income tax expense   30       33       94       102  
    Plus: Depreciation and amortization   53       53       156       133  
    Plus: Loss from financing activities   4       —       4       —  
    Plus: EBITDA from equity method investees(1)   70       67       212       212  
    Less: Interest income   (1 )     —       (2 )     (1 )
    Less: Earnings from equity method investees   (40 )     (39 )     (125 )     (132 )
    Less: Depreciation and amortization attributable to noncontrolling interests   (1 )     (1 )     (3 )     (3 )
    Adjusted EBITDA $ 241     $ 248     $ 734     $ 685  
                     
    (1) Includes share of our equity method investees’ earnings before interest, taxes, depreciation and amortization, which we refer to as “EBITDA.” A reconciliation of earnings from equity method investees to EBITDA from equity method investees follows:  
        
        Three Months Ended   Nine Months Ended
        September 30,   June 30,   September 30,   September 30,
          2024       2024       2024       2023  
        (millions)
      Earnings from equity methods investees $ 40     $ 39     $ 125     $ 132  
      Plus: Depreciation and amortization attributable to equity method investees   20       21       61       61  
      Plus: Interest expense attributable to equity method investees   10       7       26       19  
      EBITDA from equity method investees $ 70     $ 67     $ 212     $ 212  
                     
                     
     
    DT Midstream, Inc.
    Reconciliation of Net Income Attributable to DT Midstream to Adjusted EBITDA
    Pipeline Segment (non-GAAP, unaudited)
                     
        Three Months Ended   Nine Months Ended
        September 30,   June 30,   September 30,   September 30,
          2024       2024       2024       2023  
    Pipeline (millions)
    Net Income Attributable to DT Midstream $ 71     $ 71     $ 216     $ 185  
    Plus: Interest expense   12       12       37       42  
    Plus: Income tax expense   24       24       72       72  
    Plus: Depreciation and amortization   18       19       55       50  
    Plus: Loss from financing activities   2       —       2       —  
    Plus: EBITDA from equity method investees(1)   70       67       212       212  
    Less: Interest income   —       —       (1 )     (1 )
    Less: Earnings from equity method investees   (40 )     (39 )     (125 )     (132 )
    Less: Depreciation and amortization attributable to noncontrolling interests   (1 )     (1 )     (3 )     (3 )
    Adjusted EBITDA $ 156     $ 153     $ 465     $ 425  
                     
    (1) Includes share of our equity method investees’ earnings before interest, taxes, depreciation and amortization, which we refer to as “EBITDA.” A reconciliation of earnings from equity method investees to EBITDA from equity method investees follows:  
             
        Three Months Ended   Nine Months Ended
        September 30,   June 30,   September 30,   September 30,
          2024       2024       2024       2023  
        (millions)
      Earnings from equity methods investees $ 40     $ 39     $ 125     $ 132  
      Plus: Depreciation and amortization attributable to equity method investees   20       21       61       61  
      Plus: Interest expense attributable to equity method investees   10     $ 7       26       19  
      EBITDA from equity method investees $ 70     $ 67     $ 212     $ 212  
                     
     
    DT Midstream, Inc.
    Reconciliation of Net Income Attributable to DT Midstream to Adjusted EBITDA
    Gathering Segment (non-GAAP, unaudited)
                     
        Three Months Ended   Nine Months Ended
        September 30,   June 30,   September 30,   September 30,
          2024       2024     2024       2023
      Gathering (millions)
      Net Income Attributable to DT Midstream $ 17     $ 25   $ 65     $ 78
      Plus: Interest expense   26       27     80       69
      Plus: Income tax expense   6       9     22       30
      Plus: Depreciation and amortization   35       34     101       83
      Plus: Loss from financing activities   2       —     2       —
      Less: Interest income   (1 )     —     (1 )     —
      Adjusted EBITDA $ 85     $ 95   $ 269     $ 260
                     
     
    DT Midstream, Inc.
    Reconciliation of Net Income Attributable to DT Midstream to Distributable Cash Flow (non-GAAP, unaudited)
                         
            Three Months Ended   Nine Months Ended
            September 30,   June 30,   September 30,   September 30,
              2024       2024       2024       2023  
       Consolidated
    		 (millions)
       Net Income Attributable to DT Midstream $ 88     $ 96     $ 281     $ 263  
       Plus: Interest expense   38       39       117       111  
       Plus: Income tax expense   30       33       94       102  
       Plus: Depreciation and amortization   53       53       156       133  
       Plus: Loss from financing activities   4       —       4       —  
       Plus: Adjustments for non-routine items(1)   (416 )     —       (416 )     (371 )
       Less: Earnings from equity method investees   (40 )     (39 )     (125 )     (132 )
       Less: Depreciation and amortization attributable to noncontrolling interests   (1 )     (1 )     (3 )     (3 )
       Plus: Dividends and distributions from equity method investees   465       50       590       557  
       Less: Cash interest expense   (6 )     (64 )     (80 )     (76 )
       Less: Cash taxes   (4 )     (1 )     (7 )     (21 )
       Less: Maintenance capital investment(2)   (4 )     (6 )     (17 )     (22 )
       Distributable Cash Flow $ 207     $ 160     $ 594     $ 541  
                         
      (1) Distributable Cash Flow calculation excludes certain items we consider non-routine. For the three and nine months ended September 30, 2024, adjustments for non-routine items included the $416 million Millennium financing distribution. For the nine months ended September 30, 2023, adjustments for non-routine items included the $371 million NEXUS financing distribution.
      (2) Maintenance capital investment is defined as the total capital expenditures used to maintain or preserve assets or fulfill contractual obligations that do not generate incremental earnings.
                         

    The MIL Network –

  • MIL-OSI Security: U.S. Joins International Action Against RedLine and META Infostealers

    Source: Office of United States Attorneys

    RedLine and META Infostealers stole information from millions of victims around the world; U.S. complaint charges developer and administrator; U.S. law enforcement seizes infrastructure

    AUSTIN, Texas – The Department of Justice joined the Netherlands, Belgium, Eurojust and other partners in announcing an international disruption effort against the current version of RedLine Infostealer, one of the most prevalent infostealers in the world that has targeted millions of victim computers, and the closely-related META Infostealer.

    The Justice Department, FBI, Naval Criminal Investigative Service, IRS Criminal Investigation, Defense Criminal Investigative Service, and Army Criminal Investigation Division joined international partners in the Joint Cybercrime Action Taskforce (“JCAT”) Operation Magnus (supported by Europol) to seize domains, servers, and Telegram accounts used by the RedLine and META administrators to disrupt the operations of the infostealers.

    International authorities have created a website at www.operation-magnus.com with additional resources for the public and potential victims.

    Infostealers are a prevalent form of malware used to steal sensitive information from victim’s computers including usernames and passwords, financial information, system information, cookies, and cryptocurrency accounts. The stolen information—referred to as “logs”—is sold on cybercrime forums and used for further fraudulent activity and other hacks. RedLine has been used to conduct intrusions against major corporations. RedLine and META infostealers can also enable cyber criminals to bypass multi-factor authentication (MFA) through the theft of authentication cookies and other system information.

    RedLine and META are sold through a decentralized Malware as a Service (“MaaS”) model where affiliates purchase a license to use the malware, and then launch their own campaigns to infect their intended victims. The malware is distributed to victims using malvertising, e-mail phishing, fraudulent software downloads, and malicious software sideloading. Various schemes, including COVID-19 and Windows update related ruses have been used to trick victims into downloading the malware. The malware is advertised for sale on cybercrime forums and through Telegram channels that offer customer support and software updates. RedLine and META have infected millions of computers worldwide and, by some estimates, RedLine is one of the top malware variants in the world.

    Through various investigative steps, law enforcement has collected victim log data stolen from computers infected with RedLine and META. While an exact number has not been finalized, agents have identified millions of unique credentials (usernames and passwords), email addresses, bank accounts, cryptocurrency addresses, credit card numbers, etc. The United States does not believe it is in possession of all the stolen data and continues to investigate.

    The Department has unsealed a warrant issued in the Western District of Texas that authorized law enforcement to seize two domains used by RedLine and META for command and control.

    In conjunction with the disruption effort, the Justice Department unsealed charges against Maxim Rudometov, one of the developers and administrators of RedLine Infostealer. According to the complaint, Rudometov regularly accessed and managed the infrastructure of RedLine Infostealer, was associated with various cryptocurrency accounts used to receive and launder payments and was in possession of RedLine malware. For his actions, he has been charged with access device fraud, in violation of 18 U.S.C. § 1029, conspiracy to commit computer intrusion, in violation of 18 U.S.C. §§ 1030 and 371, and money laundering, in violation of 18 U.S.C. § 1956.

    If convicted, Rudometov faces a maximum penalty of 10 years in prison for access device fraud, five years in prison for conspiracy to commit computer intrusion, and 20 years in prison for money laundering. The complaint is merely an allegation, and the defendant is presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

    The FBI Austin Cyber Task Force is investigating the case. The Task Force participants include the Naval Criminal Investigative Service, IRS Criminal Investigation, Defense Criminal Investigative Service, and Army Criminal Investigation Division, among other agencies.

    Assistant U.S. Attorney G. Karthik Srinivasan is prosecuting the case. The Justice Department’s Cybercrime Liaison Prosecutor to Eurojust and Office of International Affairs also provided significant assistance.

    The disruption effort announced today was in conjunction with Operation Magnus, a JCAT law enforcement operation to investigate RedLine and META Infostealers. The participating agencies included the Dutch National Police, Belgian Federal Police, Belgian Federal Prosecutor’s Office, United Kingdom National Crime Agency, Australian Federal Police, Portuguese Federal Police, and Eurojust.

    ###

    MIL Security OSI –

  • MIL-OSI: CALIFORNIA BANCORP REPORTS FINANCIAL RESULTS FOR THE THIRD QUARTER OF 2024

    Source: GlobeNewswire (MIL-OSI)

    San Diego, Calif., Oct. 29, 2024 (GLOBE NEWSWIRE) — California BanCorp (“us,” “we,” “our,” or the “Company”) (NASDAQ: BCAL), the holding company for California Bank of Commerce, N.A. (the “Bank”) announces its consolidated financial results for the third quarter of 2024.

    The Company reported net loss of $16.5 million for the third quarter of 2024, or $0.59 diluted loss per share, compared to net income of $190 thousand, or $0.01 per diluted share in the second quarter of 2024, and $6.6 million, or $0.35 per diluted share in the third quarter of 2023.

    “As we previously reported, the merger of Southern California Bancorp and California BanCorp closed on July 31, 2024, and I am pleased to announce we executed a successful core conversion on September 20, 2024,” said David Rainer, Executive Chairman of the Company and the Bank. “We are excited to have created a commercial banking franchise with a footprint that covers the best banking markets in both Northern and Southern California and that is based on our trusted brands and reputations. Our scalable business model is expected to bring cost savings and greater efficiency to our operations, while allowing us to offer complementary products and services to all our clients. We will continue to build on our history of service to our communities and remain dedicated to increasing shareholder value.”

    “With the close of the merger and successful conversion behind us, we are now focused on the prudent growth of our franchise by offering the highest quality and level of customer service available to middle-market businesses in both Northern and Southern California,” said Steven Shelton, CEO of the Company and the Bank. “We are excited about our future and look forward to the traction we expect our combined banking franchise will realize in the coming quarters.”

    Third Quarter 2024 Highlights

      ● Merger closed on July 31, 2024, whereby California BanCorp (“CALB”) merged with and into Southern California Bancorp and California Bank of Commerce merged with and into Bank of Southern California, N.A. CALB had total loans of $1.43 billion, total assets of $1.91 billion, and total deposits of $1.64 billion. The combined holding company has assumed the California BanCorp name, and the combined bank has assumed the California Bank of Commerce, N.A. name. The merger created a bank holding company with approximately $4.25 billion in assets and 14 branches across California, with approximately 300 employees serving our communities.
      ● Total aggregate consideration paid was approximately $216.6 million and resulted in approximately $74.7 million of preliminary goodwill subject to adjustment in accordance with ASC 805.
      ● Net loss of $16.5 million or $0.59 diluted loss per share for the third quarter reflects the after-tax one-time initial provision for credit losses (“day one provision”) related to non-purchased credit deteriorated (“non-PCD”) loans and unfunded loan commitments of $15.0 million and merger related expenses of $10.6 million; adjusted net income (non-GAAP1) was $9.1 million or $0.33 per share for the third quarter.
      ● Net interest margin of 4.43%, compared with 3.94% in the prior quarter; average total loan yield of 6.79% compared with 6.21% in the prior quarter.
      ● Provision for credit losses of $23.0 million for the third quarter, of which $21.3 million was due to the day one provision for credit losses on non-PCD loans and unfunded loan commitments.

    1 Reconciliations of non–U.S. generally accepted accounting principles (“GAAP”) measures are set forth at the end of this press release.

      ● Return on average assets of (1.82)%, compared with 0.03% in the prior quarter.
      ● Return on average common equity of (15.28)%, compared with 0.26% in the prior quarter.
      ● Efficiency ratio (non-GAAP1) of 98.9% compared with 85.7% in the prior quarter; excluding merger related expenses the efficiency ratio was 60.5%, compared with 83.5% in the prior quarter.
      ● Tangible book value per common share (“TBV”) (non-GAAP1) of $11.28 at September 30, 2024, down $2.43 from $13.71 at June 30, 2024.
      ● Total assets of $4.36 billion at September 30, 2024, compared with $2.29 billion at June 30, 2024.
      ● Total loans, including loans held for sale of $3.23 billion at September 30, 2024, compared with $1.88 billion at June 30, 2024, largely due to the merger, with the fair value of the acquired loans totaling $1.36 billion.
      ● Nonperforming assets to total assets ratio of 0.68% at September 30, 2024, compared with 0.20% at June 30, 2024, which included the fair value of $13.9 million in nonaccrual PCD loans in connection with the merger.
      ● Allowance for credit losses (“ACL”) was 1.80% of total loans held for investment at September 30, 2024; allowance for loan losses (“ALL”) was 1.67% of total loans held for investment at September 30, 2024.
      ● Total deposits of $3.74 billion at September 30, 2024, increased $1.81 billion or 93.2% compared with $1.94 billion at June 30, 2024, largely due to the $1.64 billion of deposits acquired in the merger.
      ● Noninterest-bearing demand deposits of $1.37 billion at September 30, 2024, an increase of $701.7 million or 105.3%, of which $635.5 million was related to the merger; noninterest bearing deposits represented 36.6% of total deposits, compared with $666.6 million, or 34.4% of total deposits at June 30, 2024.
      ● Cost of deposits was 2.09%, compared with 2.12% in the prior quarter.
      ● Cost of funds was 2.19%, compared with 2.21% in the prior quarter.
      ● The Company’s capital exceeds minimums required to be “well-capitalized,” the highest regulatory capital category.

    Third Quarter Operating Results

    Net Loss

    Net loss for the third quarter of 2024 was $16.5 million, or $0.59 loss per diluted share, compared with net income of $190 thousand, or $0.01 per diluted share in the second quarter of 2024. Our third quarter results were negatively impacted by a day one $15.0 million after-tax CECL-related provision for credit losses on non-PCD loans and unfunded loan commitments related to the merger, or $0.54 loss per diluted share, and $10.6 million of after-tax merger expenses, or $0.38 loss per diluted share. Excluding one-time CECL-related provision for credit losses on acquired loans and unfunded loan commitments, and merger related expenses, the Company would have reported net income (non-GAAP1) of $9.1 million, or $0.33 per diluted share, for the third quarter of 2024. Pre-tax, pre-provision income (non-GAAP1) for the third quarter was $436 thousand, a decrease of $2.7 million or 86.3% from the prior quarter.

    Net Interest Income and Net Interest Margin

    Net interest income for the third quarter of 2024 was $36.9 million, compared with $21.0 million in the prior quarter. The increase in net interest income was primarily due to a $22.3 million increase in total interest and dividend income, partially offset by a $6.3 million increase in total interest expense in the third quarter of 2024, as compared to the prior quarter. During the third quarter of 2024, loan interest income increased $18.5 million, of which $4.1 million was related to accretion income from the net purchase accounting discounts on acquired loans, total debt securities income increased $458 thousand, and interest and dividend income from other financial institutions increased $3.3 million. The increase in interest income was primarily driven by the mix of interest-earning assets added by the merger and the impact of the accretion and amortization of fair value marks. Average total interest-earning assets increased $1.17 billion, the result of a $900.7 million increase in average total loans, a $114.2 million increase in average deposits in other financial institutions, a $25.1 million increase in average total debt securities, a $124.1 million increase in average Fed funds sold/resale agreements and a $7.5 million increase in average restricted stock investments and other bank stock. The increase in interest expense for the third quarter of 2024 was primarily due to a $6.0 million increase in interest expense on interest-bearing deposits, the result of a $763.7 million increase in average interest-bearing deposits, coupled with a $34.3 million increase in average subordinated debt, partially offset by a 6 basis point decrease in average interest-bearing deposit costs, and a $378 thousand decrease in interest expense on Federal Home Loan Bank (“FHLB”) borrowings, the result of a $26.8 million decrease in average FHLB borrowings in the third quarter of 2024.

    Net interest margin for the third quarter of 2024 was 4.43%, compared with 3.94% in the prior quarter. The increase was primarily related to a 52 basis point increase in the total interest-earning assets yield, coupled with a 2 basis point decrease in the cost of funds. The yield on total average earning assets in the third quarter of 2024 was 6.49%, compared with 5.97% in the prior quarter. The yield on average total loans in the third quarter of 2024 was 6.79%, an increase of 58 basis points from 6.21% in the prior quarter. Accretion income from the net purchase accounting discounts on acquired loans was $4.1 million and the amortization expense impact on interest expense was $283 thousand, which increased the net interest margin by 46 basis points in the third quarter of 2024. Accretion income from the net purchase accounting discounts on acquired loans was $4.1 million, which increased the yield on average total loans by 59 basis points in the third quarter of 2024.

    Cost of funds for the third quarter of 2024 was 2.19%, a decrease of 2 basis points from 2.21% in the prior quarter. The decrease was primarily driven by a 6 basis point decrease in the cost of average interest-bearing deposits, and an increase in average noninterest-bearing deposits, partially offset by an increase of 187 basis points in the cost of total borrowings, which was driven primarily by the amortization expense of $373 thousand, or 281 basis points from the purchase accounting discounts on acquired subordinated debts. Average noninterest-bearing demand deposits increased $373.8 million to $1.03 billion and represented 33.6% of total average deposits for the third quarter of 2024, compared with $658.0 million and 34.1%, respectively, in the prior quarter; average interest-bearing deposits increased $763.7 million to $2.04 billion during the third quarter of 2024. The total cost of deposits in the third quarter of 2024 was 2.09%, a decrease of 3 basis points from 2.12% in the prior quarter. The cost of total interest-bearing deposits decreased primarily due to the Company’s deposit repricing strategy and paying off high cost brokered deposits in the third quarter of 2024.

    Average total borrowings increased $7.6 million to $52.9 million for the third quarter of 2024, primarily due to an increase of $34.3 million in average subordinated debt from the $50.8 million in fair value of subordinated debt acquired in the merger, partially offset by a decrease of $26.8 million in average FHLB borrowings during the third quarter of 2024. The average cost of total borrowings was 7.71% for the third quarter of 2024, up from 5.84% in the prior quarter.

    Provision for Credit Losses

    The Company recorded a provision for credit losses of $23.0 million in the third quarter of 2024, compared to $2.9 million in the prior quarter. The increase was largely related to the merger, and the resulting one-time initial provision for credit losses on acquired non-PCD loans of $18.5 million and unfunded commitments of $2.7 million. Total net charge-offs were $1.2 million in the third quarter of 2024, which included $967 thousand from a construction loan and $135 thousand from an acquired consumer solar loan portfolio. The provision for credit losses in the third quarter of 2024 included a $3.3 million provision for unfunded loan commitments, of which $2.7 million was related to the one-time initial provision for credit losses on acquired unfunded loan commitments, and $511 thousand related to the increase in unfunded loan commitments during the third quarter of 2024, coupled with higher loss rates and average funding rates used to estimate the allowance for credit losses on unfunded commitments. Total unfunded loan commitments increased $662.4 million to $1.03 billion at September 30, 2024, including $574.3 million in unfunded loan commitment related to the merger, compared to $371.5 million in unfunded loan commitments at June 30, 2024. The provision for credit losses for loans held for investment in the third quarter of 2024 was $19.7 million, an increase of $16.7 million from $3.0 million in the prior quarter. The increase was driven primarily by the one-time initial provision for credit losses on acquired non-PCD loans and increases in legacy special mention loans and loans held for investment. Additionally, qualitative factors, coupled with changes in the portfolio mix and in net charge-offs, and in the reasonable and supportable forecast, primarily related to the economic outlook for California which were partially offset by decreases in legacy substandard accruing loans, were factors related to the increase in the provision for credit losses. The Company’s management continues to monitor macroeconomic variables related to increasing interest rates, inflation and the concerns of an economic downturn, and believes it has appropriately provisioned for the current environment.

    Noninterest Income

    The Company recorded noninterest income of $1.2 million in the third quarter of 2024, a decrease of $5 thousand compared to $1.2 million in the second quarter of 2024. There was no gain on SBA 7A loan sales in the second and third quarters of 2024. Noninterest income was impacted by the merger through increases in service charges and fees on deposit accounts, bank owned life insurance income, and servicing and related income on loans; offset by a $614 thousand valuation allowance on other real estate owned (“OREO”) due to a decline in the fair value of the underlying property in the third quarter of 2024.

    Noninterest Expense

    Total noninterest expense for the third quarter of 2024 was $37.7 million, an increase of $18.7 million from total noninterest expense of $19.0 million in the prior quarter, which was largely due to the increase in merger related expenses.

    Salaries and employee benefits increased $6.6 million during the quarter to $15.4 million. The increase in salaries and employee benefits was primarily the result of the merger and included $1.4 million related to one-time costs associated with non-continuing directors, executives and employees. Merger and related expenses in connection with the merger increased $14.1 million to $14.6 million. These costs primarily included retention bonus, severance and change in control costs of $6.2 million, financial advisory fees of $2.3 million, information technology expenses of $4.5 million, insurance costs of $919 thousand and legal and other professional costs of $305 thousand. The increase in core deposit intangible amortization was primarily driven by $622 thousand related to the additional amortization from the core deposit intangible of $22.7 million acquired in the merger.

    The Company sold other real estate owned and recognized a $4.8 million loss in the second quarter of 2024. There was no comparable transaction in the third quarter of 2024.

    Efficiency ratio (non-GAAP1) for the third quarter of 2024 was 98.9%, compared to 85.7% in the prior quarter. Excluding the merger and related expenses of $14.6 million, the efficiency ratio (non-GAAP1) for the third quarter of 2024 would have been 60.5%.

    Income Tax

    In the third quarter of 2024, the Company’s income tax benefit was $6.1 million, compared with an $88 thousand income tax expense in the second quarter of 2024. The effective rate was 26.9% for the third quarter of 2024 and 31.7% for the second quarter of 2024. The decrease in the effective tax rate for the third quarter of 2024 was primarily attributable to the impact of the vesting and exercise of equity awards combined with changes in the Company’s stock price over time, as well as non-deductible merger-related expenses.

    Balance Sheet

    Assets

    Total assets at September 30, 2024 were $4.36 billion, an increase of $2.07 billion or 90.2% from June 30, 2024. The increase in total assets from the prior quarter was primarily related to the $1.86 billion in fair value of total assets acquired in the merger, which included increases of $1.36 billion in loans held for investment, $42.6 million in debt securities, and $336.3 million in cash and cash equivalents. In addition, the Company recorded preliminary goodwill of $74.7 million related to the merger in the third quarter of 2024.

    Loans

    Total loans held for investment were $3.20 billion at September 30, 2024, an increase of $1.32 billion, compared to June 30, 2024, primarily the result of the $1.36 billion fair value of loans acquired in the merger. During the third quarter 2024, there were new originations of $70.0 million and net advances of $8.9 million, offset by payoffs of $64.9 million, and the transfer of a multifamily nonaccrual loan of $4.7 million to OREO and the partial charge-off of loans in the amount of $1.2 million. Total loans secured by real estate increased by $814.5 million, including $780.9 million acquired in the merger, construction and land development loans increased by $42.9 million, commercial real estate and other loans increased by $712.2 million, 1-4 family residential loans decreased by $4.8 million and multifamily loans increased by $64.2 million. Commercial and industrial loans increased by $482.3 million, and consumer loans increased by $25.3 million, largely due to a $25.2 million increase in consumer loans related to the merger. The Company had $33.7 million in loans held for sale at September 30, 2024, compared to $7.0 million at June 30, 2024.

    Deposits

    Total deposits at September 30, 2024 were $3.74 billion, an increase of $1.81 billion from June 30, 2024 due to the $1.64 billion in fair value of deposits related to the merger. Noninterest-bearing demand deposits at September 30, 2024, were $1.37 billion, including $635.5 million noninterest-bearing demand deposits related to the merger, or 36.6% of total deposits, compared with $666.6 million, or 34.4% of total deposits at June 30, 2024. At September 30, 2024, total interest-bearing deposits were $2.37 billion, compared to $1.27 billion at June 30, 2024. At September 30, 2024, total brokered time deposits were $222.6 million, including a $251.4 million increase of brokered time deposits related to the merger, compared to $103.4 million in brokered time deposits at June 30, 2024. The Company used excess cash acquired from the merger to pay off high cost callable and noncallable brokered time deposits totaling $131.9 million during the third quarter 2024. The Company also offers the Insured Cash Sweep (ICS) product, providing customers with FDIC insurance coverage at ICS network institutions. At September 30, 2024, ICS deposits were $699.6 million, or 18.7% of total deposits, compared to $239.8 million, or 12.4% of total deposits at June 30, 2024. Legacy CALB was also a participant in the Certificate of Deposit Account Registry Service (CDARS), and Reich & Tang Deposit Solutions (R&T) network, both of which provide reciprocal deposit placement services to fully qualified large customer deposits for FDIC insurance among other participating banks. At July 31, 2024, the Company acquired the fair value of $37.7 million in CDARS deposits and $306.6 million in R&T deposits.

    Federal Home Loan Bank (“FHLB”) and Liquidity

    The Company repaid all FHLB borrowings with liquidity primarily derived from the cash acquired in the merger during the third quarter of 2024. At September 30, 2024, the Company had no overnight FHLB borrowings, a $25.0 million decrease from June 30, 2024. There were no outstanding Federal Reserve Discount Window borrowings at September 30, 2024 or June 30, 2024.

    At September 30, 2024, the Company had available borrowing capacity from the FHLB secured line of credit of approximately $663.6 million and available borrowing capacity from the Federal Reserve Discount Window of approximately $446.4 million. The Company also had available borrowing capacity from eight unsecured credit lines from correspondent banks of approximately $121.0 million at September 30, 2024, with no outstanding borrowings. Total available borrowing capacity was $1.23 billion at September 30, 2024. Additionally, the Company had unpledged liquid securities at fair value of approximately $159.3 million and cash and cash equivalents of $614.4 million at September 30, 2024.

    In connection with the merger, the Company assumed subordinated borrowings of $55.0 million, with a fair value of $50.8 million. The subordinated borrowings include $20.0 million with a maturity date in September 2030 and $35.0 million with a maturity date in September 2031.

    Asset Quality

    Total non-performing assets increased to $29.8 million, or 0.68% of total assets at September 30, 2024, compared with $4.7 million, or 0.20% of total assets at June 30, 2024.

    The increase in non-performing assets in the third quarter of 2024 was primarily attributable to downgrades of a construction loan and 1-4 family residential loan from one relationship totaling $12.7 million and a $13.9 million of nonaccrual PCD loans acquired in the merger. This increase was net of total charge-offs of $1.2 million, which included a partial charge-off of $967 thousand for a substandard nonaccrual construction loan collateralized by a stalled construction project in Los Angeles, California. Based on the Company’s internal analysis, which included a review of an updated appraisal, the estimated net collateral value was $9.7 million, which was $967 thousand lower than the subject loan’s net carrying value resulting in a partial charge-off in the third quarter of 2024. The Company expects to pursue the resolution of this matter. Non-performing assets in the third quarter of 2024 included OREO, net of valuation allowance, of $4.1 million related to a multifamily nonaccrual loan of $4.7 million that was transferred to OREO and the Company recorded a $614 thousand valuation allowance on OREO due to a decline in the fair value of the underlying property in the third quarter of 2024.

    Total non-performing loans increased to $25.7 million, or 0.80% of total loans held for investment at September 30, 2024, compared with $4.7 million, or 0.25% of total loans at June 30, 2024. The increase from June 30, 2024 was due primarily to the aforementioned downgrades of a construction loan and 1-4 family residential loan from one relationship, nonaccrual PCD loans acquired in the merger and partial charge-offs of loans in the amount of $1.2 million in the third quarter of 2024.

    Special mention loans increased by $65.6 million, including $41.0 million non-PCD loans and $10.1 million PCD loans, during the third quarter of 2024 to $93.4 million at September 30, 2024. The $14.5 million increase in the legacy special mention loans was due mostly to a $2.2 million increase in special mention commercial real estate loans and a $12.3 million increase in special mention commercial and industrial loans. Substandard loans increased by $81.2 million, including $2.3 million non-PCD loans, $71.3 million PCD loans, and $13.5 million nonaccrual PCD loans, during the third quarter of 2024 to $104.3 million at September 30, 2024. The $5.8 million decrease in the legacy substandard loans was due primarily to the transfer of a multifamily nonaccrual loan of $4.7 million to OREO and the partial charge-off of $967 thousand for the nonaccrual construction loan, partially offset by a downgrade to substandard of a commercial and industrial loan of $118 thousand during the third quarter of 2024.

    The Company had $37 thousand in consumer solar loans that were over 90 days past due that were accruing interest at September 30, 2024, and no delinquencies at June 30, 2024.

    There were $19.1 million in loan delinquencies (30-89 days past due, excluding nonaccrual loans) at September 30, 2024 and no delinquencies at June 30, 2024.

    The allowance for credit losses, which is comprised of the allowance for loan losses (“ALL”) and reserve for unfunded loan commitments, totaled $57.6 million at September 30, 2024, compared to $24.6 million at June 30, 2024. The $33.0 million increase in the allowance included a $19.7 million provision for credit losses for the loan portfolio, of which $11.2 million related to the initial allowance for credit losses on acquired PCD loans, $21.3 million related to the initial provision for credit losses on acquired non-PCD loans and unfunded loan commitments, partially offset by total charge-offs of $1.2 million for the quarter ended September 30, 2024.

    The ALL was $53.6 million, or 1.67% of total loans held for investment at September 30, 2024, compared with $23.8 million, or 1.27% at June 30, 2024.

    Capital

    Tangible book value (non-GAAP1) per common share at September 30, 2024, was $11.28, compared with $13.71 at June 30, 2024. In the third quarter of 2024, tangible book value was primarily impacted by the net loss for the third quarter, the impact of equity issued in connection with the merger, stock-based compensation expense, and a decrease in net of unrealized tax losses on available-for-sale debt securities. Other comprehensive losses related to unrealized losses, net of taxes, on available-for-sale debt securities decreased by $3.6 million to $2.9 million at September 30, 2024, from $6.5 million at June 30, 2024. The decrease in the unrealized losses, net of taxes, on available-for-sale debt securities was primarily attributable to factors other than credit related, including decreases in market interest rates driven by the Federal Reserve’s 50 basis point rate cut in September 2024. Tangible common equity (non-GAAP1) as a percentage of total tangible assets (non-GAAP1) at September 30, 2024, decreased to 8.58% from 11.28% in the prior quarter, and unrealized losses, net of taxes, on available-for-sale debt securities as a percentage of tangible common equity (non-GAAP1) at September 30, 2024 decreased to 0.8% from 2.6% in the prior quarter.

    The Company’s preliminary capital exceeds minimums required to be “well-capitalized” at September 30, 2024.

    ABOUT CALIFORNIA BANCORP

    California BanCorp (NASDAQ: BCAL) is a registered bank holding company headquartered in San Diego, California. California Bank of Commerce, N.A., a national banking association chartered under the laws of the United States (the “Bank”) and regulated by the Office of Comptroller of the Currency, is a wholly owned subsidiary of California BanCorp. Established in 2001 and headquartered in San Diego, California, the Bank offers a range of financial products and services to individuals, professionals, and small to medium-sized businesses through its 14 branch offices and four loan production offices serving Northern and Southern California. The Bank’s solutions-driven, relationship-based approach to banking provides accessibility to decision makers and enhances value through strong partnerships with its clients. Additional information is available at www.bankcbc.com.

    CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

    In addition to historical information, this release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and other matters that are not historical facts. Examples of forward-looking statements include, among others, statements regarding expectations, plans or objectives for future operations, products or services, loan recoveries, projections, expectations regarding the adequacy of reserves for credit losses and statements about the benefits of the Company’s merger with CALB (the “Merger”), as well as forecasts relating to financial and operating results or other measures of economic performance. Forward-looking statements reflect management’s current view about future events and involve risks and uncertainties that may cause actual results to differ from those expressed in the forward-looking statement or historical results. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts and often include the words or phrases such as “aim,” “can,” “may,” “could,” “predict,” “should,” “will,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “hope,” “intend,” “plan,” “potential,” “project,” “will likely result,” “continue,” “seek,” “shall,” “possible,” “projection,” “optimistic,” and “outlook,” and variations of these words and similar expressions.

    Factors that could cause or contribute to results differing from those in or implied in the forward-looking statements include but are not limited to risk related to the Merger, including the risks that costs may be greater than anticipated, cost savings may be less than anticipated, and difficulties in retaining senior management, employees or customers, the impact of bank failures or other adverse developments at other banks on general investor sentiment regarding the stability and liquidity of banks, changes in real estate markets and valuations; the impact on financial markets from geopolitical conflicts; inflation, interest rate, market and monetary fluctuations and general economic conditions, either nationally or locally in the areas in which the Company conducts business; increases in competitive pressures among financial institutions and businesses offering similar products and services; general credit risks related to lending, including changes in the value of real estate or other collateral, the financial condition of borrowers, the effectiveness of our underwriting practices and the risk of fraud; higher than anticipated defaults in the Company’s loan portfolio; changes in management’s estimate of the adequacy of the allowance for credit losses or the factors the Company uses to determine the allowance for credit losses; changes in demand for loans and other products and services offered by the Company; the costs and outcomes of litigation; legislative or regulatory changes or changes in accounting principles, policies or guidelines and other risk factors discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission (“SEC”) and other documents the Company may file with the SEC from time to time.

    Additional information regarding these and other risks and uncertainties to which our business and future financial performance are subject is contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, and other documents the Company files with the SEC from time to time.

    Any forward-looking statement made in this release is based only on information currently available to management and speaks only as of the date on which it is made. The Company does not undertake, and specifically disclaims any obligation, to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements or to conform such forward-looking statements to actual results or to changes in its opinions or expectations, except as required by law.

    California BanCorp and Subsidiary
    Financial Highlights (Unaudited)

        At or for the
    Three Months Ended    		     At or for the
    Nine Months Ended    		  
        September 30,
    2024    		     June 30,
    2024    		     September 30,
    2023    		     September 30,
    2024    		     September 30,
    2023    		  
    EARNINGS   ($ in thousands except share and per share data)  
    Net interest income   $ 36,942     $ 21,007     $ 23,261     $ 78,443     $ 71,579  
    Provision for (reversal of) credit losses   $ 22,963     $ 2,893     $ (96 )   $ 25,525     $ 91  
    Noninterest income   $ 1,174     $ 1,169     $ 815     $ 3,756     $ 3,481  
    Noninterest expense   $ 37,680     $ 19,005     $ 14,781     $ 71,666     $ 44,407  
    Income tax (benefit) expense   $ (6,063 )   $ 88     $ 2,835     $ (3,653 )   $ 9,064  
    Net (loss) income   $ (16,464 )   $ 190     $ 6,556     $ (11,339 )   $ 21,498  
    Pre-tax pre-provision income (1)   $ 436     $ 3,171     $ 9,295     $ 10,533     $ 30,653  
    Adjusted pre-tax pre-provision income (1)   $ 15,041     $ 3,662     $ 9,295     $ 26,178     $ 30,653  
    Diluted (loss) earnings per share   $ (0.59 )   $ 0.01     $ 0.35     $ (0.53 )   $ 1.15  
    Shares outstanding at period end     32,142,427       18,547,352       18,309,282       32,142,427       18,309,282  
                                             
    PERFORMANCE RATIOS                                        
    Return on average assets     (1.82 )%     0.03 %     1.12 %     (0.55 )%     1.25 %
    Adjusted return on average assets (1)     1.01 %     0.11 %     1.12 %     0.74 %     1.25 %
    Return on average common equity     (15.28 )%     0.26 %     9.38 %     (4.48 )%     10.63 %
    Adjusted return on average common equity (1)     8.44 %     0.82 %     9.38 %     6.00 %     10.63 %
    Yield on total loans     6.79 %     6.21 %     5.97 %     6.40 %     5.89 %
    Yield on interest earning assets     6.49 %     5.97 %     5.72 %     6.15 %     5.63 %
    Cost of deposits     2.09 %     2.12 %     1.56 %     2.09 %     1.22 %
    Cost of funds     2.19 %     2.21 %     1.62 %     2.19 %     1.30 %
    Net interest margin     4.43 %     3.94 %     4.23 %     4.12 %     4.43 %
    Efficiency ratio (1)     98.86 %     85.70 %     61.39 %     87.19 %     59.16 %
    Adjusted efficiency ratio (1)     60.54 %     83.49 %     61.39 %     68.15 %     59.16 %
        As of  
        September 30,
    2024    		     June 30,
    2024    		     December 31,
    2023    		  
    CAPITAL   ($ in thousands except share and per share data)  
    Tangible equity to tangible assets (1)     8.58 %     11.28 %     10.73 %
    Book value (BV) per common share   $ 15.50     $ 15.81     $ 15.69  
    Tangible BV per common share (1)   $ 11.28     $ 13.71     $ 13.56  
                             
    ASSET QUALITY                        
    Allowance for loan losses (ALL)   $ 53,552     $ 23,788     $ 22,569  
    Reserve for unfunded loan commitments   $ 4,071     $ 819     $ 933  
    Allowance for credit losses (ACL)   $ 57,623     $ 24,607     $ 23,502  
    Allowance for loan losses to nonperforming loans     2.09 x     5.07 x     1.74 x
    ALL to total loans held for investment     1.67 %     1.27 %     1.15 %
    ACL to total loans held for investment     1.80 %     1.31 %     1.20 %
    30-89 days past due, excluding nonaccrual loans   $ 19,110     $ —     $ 19  
    Over 90 days past due, excluding nonaccrual loans   $ 37     $ —     $ —  
    Special mention loans   $ 93,448     $ 27,861     $ 2,996  
    Special mention loans to total loans held for investment     2.92 %     1.48 %     0.15 %
    Substandard loans   $ 104,298     $ 23,080     $ 19,502  
    Substandard loans to total loans held for investment     3.26 %     1.23 %     1.00 %
    Nonperforming loans   $ 25,698     $ 4,696     $ 13,004  
    Nonperforming loans total loans held for investment     0.80 %     0.25 %     0.66 %
    Other real estate owned, net   $ 4,083     $ —     $ —  
    Nonperforming assets   $ 29,781     $ 4,696     $ 13,004  
    Nonperforming assets to total assets     0.68 %     0.20 %     0.55 %
                             
    END OF PERIOD BALANCES                        
    Total loans, including loans held for sale   $ 3,233,418     $ 1,884,599     $ 1,964,791  
    Total assets   $ 4,362,767     $ 2,293,693     $ 2,360,252  
    Deposits   $ 3,740,915     $ 1,935,862     $ 1,943,556  
    Loans to deposits     86.4 %     97.4 %     101.1 %
    Shareholders’ equity   $ 498,064     $ 293,219     $ 288,152  

    (1) Non-GAAP measure. See – GAAP to Non-GAAP reconciliation.

        At or for the
    Three Months Ended    		     At or for the
    Nine Months Ended    		  
    ALLOWANCE for CREDIT LOSSES   September 30,
    2024    		     June 30,
    2024    		     September 30,
    2023    		     September 30,
    2024    		     September 30,
    2023    		  
        ($ in thousands)  
    Allowance for loan losses                                        
    Balance at beginning of period   $ 23,788     $ 22,254     $ 22,502     $ 22,569     $ 17,099  
    Adoption of ASU 2016-13 (1)     —       —       —       —       5,027  
    Initial Allowance for PCD loans     11,216       —       —       11,216       —  
    Provision for credit losses (2)     19,711       2,990       202       22,387       600  
    Charge-offs     (1,163 )     (1,456 )     —       (2,620 )     (36 )
    Recoveries     —       —       1       —       15  
    Net (charge-offs) recoveries     (1,163 )     (1,456 )     1       (2,620 )     (21 )
    Balance, end of period   $ 53,552     $ 23,788     $ 22,705     $ 53,552     $ 22,705  
    Reserve for unfunded loan commitments (3)                                        
    Balance, beginning of period   $ 819     $ 916     $ 1,538     $ 933     $ 1,310  
    Adoption of ASU 2016-13 (1)     —       —       —       —       439  
    Provision for (reversal of) credit losses (4)     3,252       (97 )     (298 )     3,138       (509 )
    Balance, end of period     4,071       819       1,240       4,071       1,240  
    Allowance for credit losses   $ 57,623     $ 24,607     $ 23,945     $ 57,623     $ 23,945  
                                             
    ALL to total loans held for investment     1.67 %     1.27 %     1.18 %     1.67 %     1.18 %
    ACL to total loans held for investment     1.80 %     1.31 %     1.24 %     1.80 %     1.24 %
    Net (charge-offs) recoveries to average total loans     (0.17 )%     (0.31 )%     0.00 %     (0.16 )%     0.00 %
    (1 ) Represents the impact of adopting ASU 2016-13, Financial Instruments – Credit Losses on January 1, 2023. As a result of adopting ASU 2016-13, our methodology to compute our allowance for credit losses is based on a current expected credit loss methodology, rather than the previously applied incurred loss methodology.
    (2 ) Includes $18.5 million for the three and nine months ended September 30, 2024 related to the initial provision for credit losses for non-PCD loans acquired in the merger with CALB.
    (3 ) Included in “Accrued interest and other liabilities” on the consolidated balance sheet.
    (4 ) Includes $2.7 million for the three and nine months ended September 30, 2024 related to the initial provision for credit losses on unfunded commitments acquired in the merger with CALB.

    California BanCorp and Subsidiary

    Balance Sheets (Unaudited)

        September 30,
    2024    		     June 30,
    2024    		     December 31,
    2023    		  
    ASSETS   ($ in thousands)  
    Cash and due from banks   $ 115,165     $ 29,153     $ 33,008  
    Federal funds sold & interest-bearing balances     499,258       75,580       53,785  
    Total cash and cash equivalents     614,423       104,733       86,793  
                             
    Debt securities available-for-sale, at fair value (amortized cost of $163,384, $132,862 and $136,366 at September 30, 2024, June 30, 2024 and December 31, 2023)     159,330       123,653       130,035  
    Debt securities held-to-maturity, at cost (fair value of $49,487, $48,476 and $50,432 at September 30, 2024, June 30, 2024 and December 31, 2023)     53,364       53,449       53,616  
    Loans held for sale     33,704       6,982       7,349  
    Loans held for investment:                        
    Construction & land development     247,934       205,072       243,521  
    1-4 family residential     152,540       157,323       143,903  
    Multifamily     252,134       187,960       221,247  
    Other commercial real estate     1,755,908       1,043,662       1,024,243  
    Commercial & industrial     765,472       283,203       320,142  
    Other consumer     25,726       397       4,386  
    Total loans held for investment     3,199,714       1,877,617       1,957,442  
    Allowance for credit losses – loans     (53,552 )     (23,788 )     (22,569 )
    Total loans held for investment, net     3,146,162       1,853,829       1,934,873  
                             
    Restricted stock at cost     27,394       16,898       16,055  
    Premises and equipment     13,996       12,741       13,270  
    Right of use asset     15,310       8,298       9,291  
    Other real estate owned, net     4,083       —       —  
    Goodwill     112,515       37,803       37,803  
    Core deposit intangible     23,031       1,065       1,195  
    Bank owned life insurance     66,180       39,445       38,918  
    Deferred taxes, net     45,644       11,080       11,137  
    Accrued interest and other assets     47,631       23,717       19,917  
    Total assets   $ 4,362,767     $ 2,293,693     $ 2,360,252  
                             
    LIABILITIES AND SHAREHOLDERS’ EQUITY                        
    Deposits:                        
    Noninterest-bearing demand   $ 1,368,303     $ 666,606     $ 675,098  
    Interest-bearing NOW accounts     781,125       355,994       381,943  
    Money market and savings accounts     1,149,268       660,808       636,685  
    Time deposits     442,219       252,454       249,830  
    Total deposits     3,740,915       1,935,862       1,943,556  
                             
    Borrowings     69,142       42,913       102,865  
    Operating lease liability     19,211       10,931       12,117  
    Accrued interest and other liabilities     35,435       10,768       13,562  
    Total liabilities     3,864,703       2,000,474       2,072,100  
                             
    Shareholders’ Equity:                        
    Common stock – 50,000,000 shares authorized, no par value; issued and outstanding 32,142,427, 18,547,352 and 18,369,115 at September 30, 2024, June 30, 2024 and December 31, 2023)     441,684       224,006       222,036  
    Retained earnings     59,236       75,700       70,575  
    Accumulated other comprehensive loss – net of taxes     (2,856 )     (6,487 )     (4,459 )
    Total shareholders’ equity     498,064       293,219       288,152  
    Total liabilities and shareholders’ equity   $ 4,362,767     $ 2,293,693     $ 2,360,252  

    California BanCorp and Subsidiary

    Income Statements – Quarterly and Year-to-Date (Unaudited)

        Three Months Ended     Nine Months Ended  
        September 30,
    2024    		     June 30,
    2024    		     September 30,
    2023    		     September 30,
    2024    		     September 30,
    2023    		  
        ($ in thousands except share and per share data)  
    INTEREST AND DIVIDEND INCOME                                        
    Interest and fees on loans   $ 47,528     $ 29,057     $ 28,977     $ 105,169     $ 83,983  
    Interest on debt securities     1,687       1,229       942       4,129       2,506  
    Interest on tax-exempted debt securities     306       306       359       918       1,302  
    Interest and dividends from other institutions     4,606       1,257       1,206       7,024       3,162  
    Total interest and dividend income     54,127       31,849       31,484       117,240       90,953  
                                             
    INTEREST EXPENSE                                        
    Interest on NOW, savings, and money market accounts     11,073       7,039       5,922       24,882       13,555  
    Interest on time deposits     5,087       3,145       1,867       11,253       4,373  
    Interest on borrowings     1,025       658       434       2,662       1,446  
    Total interest expense     17,185       10,842       8,223       38,797       19,374  
    Net interest income     36,942       21,007       23,261       78,443       71,579  
                                             
    Provision for (reversal of ) credit losses (1)     22,963       2,893       (96 )     25,525       91  
    Net interest income after provision for (reversal of) credit losses     13,979       18,114       23,357       52,918       71,488  
                                             
    NONINTEREST INCOME                                        
    Service charges and fees on deposit accounts     1,136       568       470       2,229       1,439  
    Gain on sale of loans     8       —       (54 )     423       831  
    Bank owned life insurance income     398       266       238       925       693  
    Servicing and related income (expense) on loans     82       (5 )     61       150       223  
    Loss on sale of debt securities     —       —       —       —       34  
    Loss on sale of building and related fixed assets     —       (19 )     —       (19 )     —  
    Other charges and fees     (450 )     359       100       48       261  
    Total noninterest income     1,174       1,169       815       3,756       3,481  
                                             
    NONINTEREST EXPENSE                                        
    Salaries and employee benefits     15,385       8,776       9,736       33,771       29,651  
    Occupancy and equipment expenses     2,031       1,445       1,579       4,928       4,553  
    Data processing     1,536       1,186       1,144       3,872       3,376  
    Legal, audit and professional     669       557       598       1,742       2,050  
    Regulatory assessments     544       347       369       1,278       1,188  
    Director and shareholder expenses     520       229       215       952       642  
    Merger and related expenses     14,605       491       —       15,645       —  
    Core deposit intangible amortization     687       65       128       817       309  
    Other real estate owned expense     3       4,935       —       5,026       —  
    Other expense     1,700       974       1,012       3,635       2,638  
    Total noninterest expense     37,680       19,005       14,781       71,666       44,407  
    (Loss) income before income taxes     (22,527 )     278       9,391       (14,992 )     30,562  
    Income tax (benefit) expense     (6,063 )     88       2,835       (3,653 )     9,064  
    Net (loss) income   $ (16,464 )   $ 190     $ 6,556     $ (11,339 )   $ 21,498  
                                             
    Net (loss) income per share – basic   $ (0.59 )   $ 0.01     $ 0.36     $ (0.53 )   $ 1.18  
    Net (loss) income per share – diluted   $ (0.59 )   $ 0.01     $ 0.35     $ (0.53 )   $ 1.15  
    Weighted average common shares-diluted     27,705,844       18,799,513       18,672,132       21,579,175       18,632,890  
    Pre-tax, pre-provision income (2)   $ 436     $ 3,171     $ 9,295     $ 10,533     $ 30,653  

    (1) Included provision for (reversal of) unfunded loan commitments of $3.3 million, $(97) thousand and $(298) thousand for the three months ended September 30, 2024, June 30, 2024 and September 30, 2023, respectively, and $3.1 million and $(509) thousand for the nine months ended September 30, 2024 and 2023, respectively
    (2) Non-GAAP measure. See – GAAP to Non-GAAP reconciliation.

    California BanCorp and Subsidiary
    Average Balance Sheets and Yield Analysis
    (Unaudited)

        Three Months Ended  
        September 30, 2024     June 30, 2024     September 30, 2023  
        Average Balance     Income/
    Expense    		     Yield/
    Cost    		     Average Balance     Income/
    Expense    		     Yield/
    Cost    		     Average Balance     Income/
    Expense    		     Yield/
    Cost    		  
    Assets   ($ in thousands)  
    Interest-earning assets:                                                                        
    Total loans   $ 2,783,581     $ 47,528       6.79 %   $ 1,882,845     $ 29,057       6.21 %   $ 1,924,384     $ 28,977       5.97 %
    Taxable debt securities     149,080       1,687       4.50 %     123,906       1,229       3.99 %     111,254       942       3.36 %
    Tax-exempt debt securities (1)     53,682       306       2.87 %     53,754       306       2.90 %     59,630       359       3.02 %
    Deposits in other financial institutions     161,616       2,215       5.45 %     47,417       638       5.41 %     50,367       681       5.36 %
    Fed funds sold/resale agreements     143,140       1,886       5.24 %     19,062       261       5.51 %     20,653       283       5.44 %
    Restricted stock investments and other bank stock     24,587       505       8.17 %     17,091       358       8.42 %     16,365       242       5.87 %
    Total interest-earning assets     3,315,686       54,127       6.49 %     2,144,075       31,849       5.97 %     2,182,653       31,484       5.72 %
    Total noninterest-earning assets     277,471                       150,603                       131,288                  
    Total assets   $ 3,593,157                     $ 2,294,678                     $ 2,313,941                  
                                                                             
    Liabilities and Shareholders’ Equity                                                                        
    Interest-bearing liabilities:                                                                        
    Interest-bearing NOW accounts   $ 617,373     $ 2,681       1.73 %   $ 361,244     $ 2,134       2.38 %   $ 353,714     $ 1,706       1.91 %
    Money market and savings accounts     999,322       8,392       3.34 %     653,244       4,905       3.02 %     675,609       4,216       2.48 %
    Time deposits     421,241       5,087       4.80 %     259,722       3,145       4.87 %     183,745       1,867       4.03 %
    Total interest-bearing deposits     2,037,936       16,160       3.15 %     1,274,210       10,184       3.21 %     1,213,068       7,789       2.55 %
    Borrowings:                                                                        
    FHLB advances     611       9       5.86 %     27,391       387       5.68 %     11,731       163       5.51 %
    Subordinated debt     52,246       1,016       7.74 %     17,901       271       6.09 %     17,830       271       6.03 %
    Total borrowings     52,857       1,025       7.71 %     45,292       658       5.84 %     29,561       434       5.82 %
    Total interest-bearing liabilities     2,090,793       17,185       3.27 %     1,319,502       10,842       3.30 %     1,242,629       8,223       2.63 %
                                                                             
    Noninterest-bearing liabilities:                                                                        
    Noninterest-bearing deposits (2)     1,031,844                       658,001                       768,148                  
    Other liabilities     41,962                       23,054                       25,722                  
    Shareholders’ equity     428,558                       294,121                       277,442                  
    Total Liabilities and Shareholders’ Equity   $ 3,593,157                     $ 2,294,678                     $ 2,313,941                  
                                                                             
    Net interest spread                     3.22 %                     2.67 %                     3.09 %
    Net interest income and margin           $ 36,942       4.43 %           $ 21,007       3.94 %           $ 23,261       4.23 %
    Cost of deposits   $ 3,069,780     $ 16,160       2.09 %   $ 1,932,211     $ 10,184       2.12 %   $ 1,981,216     $ 7,789       1.56 %
    Cost of funds   $ 3,122,637     $ 17,185       2.19 %   $ 1,977,503     $ 10,842       2.21 %   $ 2,010,777     $ 8,223       1.62 %

    (1) Tax-exempt debt securities yields are presented on a tax equivalent basis using a 21% tax rate.
    (2) Average noninterest-bearing deposits represent 33.61%, 34.05% and 38.77% of average total deposits for the three months ended September 30, 2024, June 30, 2024 and September 30, 2023, respectively.

    California BanCorp and Subsidiary
    Average Balance Sheets and Yield Analysis
    (Unaudited)

        Nine Months Ended  
        September 30, 2024     September 30, 2023  
        Average Balance     Income/
    Expense    		     Yield/
    Cost    		     Average Balance     Income/
    Expense    		     Yield/
    Cost    		  
    Assets   ($ in thousands)  
    Interest-earning assets:                                                
    Total loans   $ 2,194,059     $ 105,169       6.40 %   $ 1,906,327     $ 83,983       5.89 %
    Taxable debt securities     133,321       4,129       4.14 %     104,881       2,506       3.19 %
    Tax-exempt debt securities (1)     53,759       918       2.89 %     68,043       1,302       3.24 %
    Deposits in other financial institutions     87,966       3,569       5.42 %     43,629       1,675       5.13 %
    Fed funds sold/resale agreements     57,634       2,281       5.29 %     21,182       798       5.04 %
    Restricted stock investments and other bank stock     19,383       1,174       8.09 %     15,774       689       5.84 %
    Total interest-earning assets     2,546,122       117,240       6.15 %     2,159,836       90,953       5.63 %
    Total noninterest-earning assets     189,573                       133,224                  
    Total assets   $ 2,735,695                     $ 2,293,060                  
                                                     
    Liabilities and Shareholders’ Equity                                                
    Interest-bearing liabilities:                                                
    Interest-bearing NOW accounts   $ 446,759     $ 6,860       2.05 %   $ 290,326     $ 3,301       1.52 %
    Money market and savings accounts     767,916       18,022       3.13 %     674,452       10,254       2.03 %
    Time deposits     312,544       11,253       4.81 %     170,620       4,373       3.43 %
    Total interest-bearing deposits     1,527,219       36,135       3.16 %     1,135,398       17,928       2.11 %
    Borrowings:                                                
    FHLB advances     26,105       1,103       5.64 %     16,282       632       5.19 %
    Subordinated debt     29,425       1,559       7.08 %     17,807       814       6.11 %
    Total borrowings     55,530       2,662       6.40 %     34,089       1,446       5.67 %
    Total interest-bearing liabilities     1,582,749       38,797       3.27 %     1,169,487       19,374       2.21 %
                                                     
    Noninterest-bearing liabilities:                                                
    Noninterest-bearing deposits (2)     784,609                       829,082                  
    Other liabilities     30,524                       24,086                  
    Shareholders’ equity     337,813                       270,405                  
                                                     
    Total Liabilities and Shareholders’ Equity   $ 2,735,695                     $ 2,293,060                  
                                                     
    Net interest spread                     2.88 %                     3.42 %
    Net interest income and margin           $ 78,443       4.12 %           $ 71,579       4.43 %
    Cost of deposits   $ 2,311,828     $ 36,135       2.09 %   $ 1,964,480     $ 17,928       1.22 %
    Cost of funds   $ 2,367,358     $ 38,797       2.19 %   $ 1,998,569     $ 19,374       1.30 %

    (1) Tax-exempt debt securities yields are presented on a tax equivalent basis using a 21% tax rate.
    (2) Average noninterest-bearing deposits represent 33.94%, and 42.20% of average total deposits for the nine months ended September 30, 2024 and September 30, 2023, respectively.

    California BanCorp and Subsidiary
    GAAP to Non-GAAP Reconciliation
    (Unaudited)

    The following tables present a reconciliation of non-GAAP financial measures to GAAP measures for: (1) adjusted net (loss) income, (2) efficiency ratio, (3) adjusted efficiency ratio, (4) pre-tax pre-provision income, (5) adjusted pre-tax pre-provision income, (6) average tangible common equity, (7) adjusted return on average assets, (8) adjusted return on average equity, (9) return on average tangible common equity, (10) adjusted return on average tangible common equity, (11) tangible common equity, (12) tangible assets, (13) tangible common equity to tangible asset ratio, and (14) tangible book value per share. We believe the presentation of certain non-GAAP financial measures provides useful information to assess our consolidated financial condition and consolidated results of operations and to assist investors in evaluating our financial results relative to our peers. These non-GAAP financial measures complement our GAAP reporting and are presented below to provide investors and others with information that we use to manage the business each period. Because not all companies use identical calculations, the presentation of these non-GAAP financial measures may not be comparable to other similarly titled measures used by other companies. These non-GAAP measures should be taken together with the corresponding GAAP measures and should not be considered a substitute of the GAAP measures.

        Three Months Ended     Nine Months Ended  
        September 30,
    2024    		     June 30,
    2024    		     September 30,
    2023    		     September 30,
    2024    		     September 30,
    2023    		  
        ($ in thousands)  
    Adjusted net income                                        
    Net (loss) income   $ (16,464 )   $ 190     $ 6,556     $ (11,339 )   $ 21,498  
    Add: After-tax Day1 provision for non PCD loans and unfunded loan commitments (1)     14,978       —       —       14,978       —  
    Add: After-tax merger and related expenses (1)     10,576       412       —       11,535       —  
    Adjusted net (loss) income (non-GAAP)   $ 9,090     $ 602     $ 6,556     $ 15,174     $ 21,498  
                                             
    Efficiency Ratio                                        
    Noninterest expense   $ 37,680     $ 19,005     $ 14,781     $ 71,666     $ 44,407  
    Deduct: Merger and related expenses     14,605       491       —       15,645       —  
    Adjusted noninterest expense     23,075       18,514       14,781       56,021       44,407  
                                             
    Net interest income     36,942       21,007       23,261       78,443       71,579  
    Noninterest income     1,174       1,169       815       3,756       3,481  
    Total net interest income and noninterest income   $ 38,116     $ 22,176     $ 24,076     $ 82,199     $ 75,060  
    Efficiency ratio (non-GAAP)     98.9 %     85.7 %     61.4 %     87.2 %     59.2 %
    Adjusted efficiency ratio (non-GAAP)     60.5 %     83.5 %     61.4 %     68.2 %     59.2 %
                                             
    Pre-tax pre-provision income                                        
    Net interest income   $ 36,942     $ 21,007     $ 23,261     $ 78,443     $ 71,579  
    Noninterest income     1,174       1,169       815       3,756       3,481  
    Total net interest income and noninterest income     38,116       22,176       24,076       82,199       75,060  
    Less: Noninterest expense     37,680       19,005       14,781       71,666       44,407  
    Pre-tax pre-provision income (non-GAAP)     436       3,171       9,295       10,533       30,653  
    Add: Merger and related expenses     14,605       491       —       15,645       —  
    Adjusted pre-tax pre-provision income (non-GAAP)   $ 15,041     $ 3,662     $ 9,295     $ 26,178     $ 30,653  

    (1) After-tax merger and related expenses are presented using a 29.56% tax rate.

    Return on Average Assets, Equity, and Tangible Equity                                        
    Net (loss) income   $ (16,464 )   $ 190     $ 6,556     $ (11,339 )   $ 21,498  
    Adjusted net (loss) income (non-GAAP)   $ 9,090     $ 602     $ 6,556     $ 15,174     $ 21,498  
                                             
    Average assets   $ 3,593,157     $ 2,294,678     $ 2,313,941     $ 2,735,695     $ 2,293,060  
    Average shareholders’ equity     428,558       294,121       277,442       337,813       270,405  
    Less: Average intangible assets     104,409       38,900       39,158       60,917       39,249  
    Average tangible common equity (non-GAAP)   $ 324,149     $ 255,221     $ 238,284     $ 276,896     $ 231,156  
                                             
    Return on average assets     (1.82 %)     0.03 %     1.12 %     (0.55 %)     1.25 %
    Adjusted return on average assets (non-GAAP)     1.01 %     0.11 %     1.12 %     0.74 %     1.25 %
    Return on average equity     (15.28 %)     0.26 %     9.38 %     (4.48 %)     10.63 %
    Adjusted return on average equity (non-GAAP)     8.44 %     0.82 %     9.38 %     6.00 %     10.63 %
    Return on average tangible common equity (non-GAAP)     (20.21 %)     0.30 %     10.92 %     (5.47 %)     12.43 %
    Adjusted return on average tangible common equity (non-GAAP)     11.16 %     0.95 %     10.92 %     7.32 %     12.43 %
        September 30,
    2024    		     December 31,
    2023    		  
        ($ in thousands except share and per share data)  
    Tangible Common Equity Ratio/Tangible Book Value Per Share                
    Shareholders’ equity   $ 498,064     $ 288,152  
    Less: Intangible assets     135,546       38,998  
    Tangible common equity (non-GAAP)   $ 362,518     $ 249,154  
                     
    Total assets   $ 4,362,767     $ 2,360,252  
    Less: Intangible assets     135,546       38,998  
    Tangible assets (non-GAAP)   $ 4,227,221     $ 2,321,254  
                     
    Equity to asset ratio     11.42 %     12.21 %
    Tangible common equity to tangible asset ratio (non-GAAP)     8.58 %     10.73 %
    Book value per share   $ 15.50     $ 15.69  
    Tangible book value per share (non-GAAP)   $ 11.28     $ 13.56  
    Shares outstanding     32,142,427       18,369,115  

    INVESTOR RELATIONS CONTACT
    Kevin Mc Cabe
    California Bank of Commerce, N.A.
    kmccabe@bankcbc.com
    818.637.7065

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