Market Newsdesk

January 27, 2021 4:08 pm

SouthState Corporation Reports Fourth Quarter 2020 Results and Declares Quarterly Cash Dividend

PR Newswire

WINTER HAVEN, Fla., Jan. 27, 2021 /PRNewswire/ — SouthState Corporation (NASDAQ: SSB) today released its unaudited results of operations and other financial information for the three-month and twelve-month period ended December 31, 2020.

The Company reported consolidated net income of $1.21 per diluted common share for the three months ended December 31, 2020, compared to $1.34 per diluted common share for the three months ended September 30, 2020, and compared to $1.45 per diluted common share one year ago. During the fourth quarter of 2020, the Company incurred $38.8 million in swap termination expense (pre-tax) and $19.8 million in merger-related and branch closure expense (pre-tax). These charges were partially offset by an income tax benefit of $31.5 million related to the ability to carryback tax losses under the CARES Act.

Adjusted net income (non-GAAP) totaled $1.44 per diluted share for the three months ended December 31, 2020, compared to $1.58 per diluted share, in the third quarter of 2020, and compared to $1.48 per diluted share one year ago. Adjusted net income in the fourth quarter of 2020 excludes $16.3 million of merger-related and branch closure costs (after-tax), $31.8 million in swap termination expense (after-tax), and $31.5 million of income tax benefit referenced above. In the third quarter of 2020, adjusted net income excludes $17.4 million in merger-related costs (after-tax).

Highlights of the fourth quarter of 2020 include:

Returns

Reported & adjusted diluted Earnings per Share (“EPS”) of $1.21 and $1.44 (Non-GAAP), respectively.
Reported & adjusted Return on Average Tangible Common Equity of 13.1% (Non-GAAP) and 15.4% (Non-GAAP), respectively.
Pre-Provision Net Revenue (“PPNR”) of $144 million, or 1.50% PPNR ROAA (Non-GAAP).
Book value per share of $65.49 increased by $1.15 per share compared to the prior quarter.
Tangible book value (“TBV”) per share of $41.16, up $1.33 from prior quarter (Non-GAAP).

Performance

Net interest margin (“NIM”, tax equivalent) of 3.14% down 8 basis points from prior quarter.
Recognized $12.7 million in loan accretion compared to $22.4 million in the prior quarter.
Recognized $16.6 million in PPP net deferred loan fees compared to $8.5 million in the prior quarter.
Total deposit cost of 0.17% down 3 basis points from prior quarter.
Noninterest income of $98 million.

Mortgage revenue declined $22.9 million compared to the prior quarter, caused by fair value accounting on lower mortgage pipeline and loans held for sale.
Production and cash gain on sale margins remained strong.

Balance Sheet / Credit

Loans declined by $573.7 million, or 9.0% annualized, centered in $418.3 million in Paycheck Protection Program (“PPP”) loan reductions.
Loans, excluding PPP loans, decreased $155.4 million, or 2.7% annualized, including a $203 million decline in residential mortgage loans.
Total deposits increased $723.9 million with core deposit growth totaling $826.1 million, or 12.6% annualized.
Net charge-offs of $816,000, or 0.01% annualized, bringing the full year net charge-offs to $2.8 million, or 0.01% annualized.
Loan deferrals totaled $255.2 million, or 1.12% of the total loan portfolio, excluding PPP loans and held for sale loans as of December 31, 2020.

Other Events

Consolidated 20 branch locations in the fourth quarter with 4 scheduled to be consolidated in the first quarter of 2021.
Paid off $700.0 million in FHLB advances in early December.
Recognized income tax benefit of $31.5 million related to the ability to carryback tax losses from CARES Act.
Declared a cash dividend on common stock of $0.47 per share, payable on February 19, 2021 to shareholders of record as of February 12, 2021.
On January 27, 2021, the Board approved the authorization of a new 3.5 million share Company stock repurchase plan which expires in two years.

“We are pleased to close 2020 with another solid quarter”, said John C. Corbett, Chief Executive Officer. “Our diverse revenue streams continue to help offset the pressures of the historically low interest rate environment, and our longstanding strategic focus on soundness as a core value continues to help us report good credit quality metrics. We look forward to 2021 and our system conversion in the second quarter.”

“A year to the day after announcing our merger of equals, I am pleased to see the results of our partnership continue to pay off for our shareholders,” said Robert R. Hill, Jr., Executive Chairman. “We have achieved solid results in Soundness, Profitability and Growth this year. I could not be more pleased with our merger and how SouthState is positioned for the future.”

Fourth Quarter 2020 Financial Performance

	Three Months Ended					Twelve Months Ended
(Dollars in thousands, except per share data)	Dec. 31,	Sept. 30,	June 30,	Mar. 31,	Dec. 31,	Dec. 31,
INCOME STATEMENT	2020	2020	2020	2020	2019	2020	2019
Interest income
Loans, including fees (6)	$ 269,632	$ 280,825	$ 167,707	$ 133,034	$ 132,615	$ 851,198	$ 534,790
Investment securities, federal funds sold and securities
purchased under agreements to resell	16,738	14,469	12,857	14,766	14,839	58,830	56,037
Total interest income	286,370	295,294	180,564	147,800	147,454	910,028	590,827
Interest expense
Deposits	13,227	15,154	12,624	14,437	15,227	55,442	65,920
Federal funds purchased, securities sold under agreements
to repurchase, and other borrowings	7,596	9,792	5,383	5,350	5,771	28,121	20,632
Total interest expense	20,823	24,946	18,007	19,787	20,998	83,563	86,552
Net interest income	265,547	270,348	162,557	128,013	126,456	826,465	504,275
Provision for credit losses (“PCL”)	18,185	29,797	151,474	36,533	3,557	235,989	12,777
Net interest income after provision for credit losses	247,362	240,551	11,083	91,480	122,899	590,476	491,498
Noninterest income	97,871	114,790	54,347	44,132	36,307	311,140	143,565
Noninterest expense
Pre-tax operating expense	219,719	215,225	134,634	103,118	99,134	672,696	390,426
Merger and/or branch consolid. expense	19,836	21,662	40,279	4,129	1,494	85,906	4,552
SWAP termination expense	38,787	—	—	—	—	38,787	—
Federal Home Loan Bank advances prepayment fee	56	—	199	—	—	255	134
Pension plan termination expense	—	—	—	—	—	—	9,526
Total noninterest expense	278,398	236,887	175,112	107,247	100,628	797,644	404,638
Income (loss) before provision for income taxes	66,835	118,454	(109,682)	28,365	58,578	103,972	230,425
Income taxes (benefit) provision	(19,401)	23,233	(24,747)	4,255	9,487	(16,660)	43,942
Net income (loss)	$ 86,236	$ 95,221	$ (84,935)	$ 24,110	$ 49,091	$ 120,632	$ 186,483

Adjusted net income (non-GAAP) (3)
Net income (loss) (GAAP)	$ 86,236	$ 95,221	$ (84,935)	$ 24,110	$ 49,091	$ 120,632	$ 186,483
Securities gains, net of tax	(29)	(12)	—	—	(20)	(41)	(2,173)
Income taxes benefit – carryback tax loss	(31,468)	—	—	—	—	(31,468)	—
FHLB prepayment penalty, net of tax	46	—	154	—	—	200	107
Pension plan termination expense, net of tax	—	—	—	—	—	—	7,641
SWAP termination expense, net of tax	31,784	—	—	—	—	31,784
Initial provision for credit losses – NonPCD loans and UFC	—	—	92,212	—	—	92,212	—
Merger and/or branch consolid. expense	16,255	17,413	31,191	3,510	1,252	68,369	3,701
Adjusted net income (non-GAAP)	$ 102,824	$ 112,622	$ 38,622	$ 27,620	$ 50,323	$ 281,688	$ 195,759

Basic earnings (loss) per common share	$ 1.22	$ 1.34	$ (1.96)	$ 0.72	$ 1.46	$ 2.20	$ 5.40
Diluted earnings (loss) per common share	$ 1.21	$ 1.34	$ (1.96)	$ 0.71	$ 1.45	$ 2.19	$ 5.36
Adjusted net income per common share – Basic (non-GAAP) (3)	$ 1.45	$ 1.59	$ 0.89	$ 0.82	$ 1.49	$ 5.14	$ 5.36
Adjusted net income per common share – Diluted (non-GAAP) (3)	$ 1.44	$ 1.58	$ 0.89	$ 0.82	$ 1.48	$ 5.12	$ 5.66
Dividends per common share	$ 0.47	$ 0.47	$ 0.47	$ 0.47	$ 0.46	$ 1.88	$ 5.63
Basic weighted-average common shares outstanding	70,941,200	70,905,027	43,317,736	33,566,051	33,677,851	54,755,518	34,560,544
Diluted weighted-average common shares outstanding	71,294,864	71,075,866	43,317,736	33,804,908	33,964,216	55,062,748	34,797,444
Adjusted diluted weighted-average common shares outstanding *	71,294,864	71,075,866	43,606,333	33,804,908	33,964,216	55,062,748	34,797,444
Effective tax rate	-29.03%	19.61%	22.56%	15.00%	16.20%	-16.02%	19.07%
Adjusted effective tax rate	18.05%	19.61%	22.56%	15.00%	16.20%	14.24%	19.07%

*Adjusted diluted weighted average common shares was calculated with the result of adjusted net income (non-GAAP).

As compared with 3Q 2020:

Income taxes declined by $42.6 million due primarily to the recognition of a one-time benefit of $31.5 million related to the ability to carryback tax losses under the CARES Act, and lower income tax provision totaling $11.2 million on lower pretax income of $51.6 million.
For further discussion, please refer to the sections below titled “Net Interest Income and Margin”, “Non-interest Income and Expense”, and “Current Expected Credit Losses (“CECL”)”.

Performance and Capital Ratios

	Three Months Ended					Twelve Months Ended
	Dec. 31,	Sept. 30,	June 30,	Mar. 31,	Dec. 31,	Dec. 31,	Dec. 31,
PERFORMANCE RATIOS	2020	2020	2020	2020	2019	2020	2019
Return on average assets (annualized)	0.90%	1.00%	-1.49%	0.60%	1.23%	0.42%	1.21%
Adjusted return on average assets (annualized) (non-GAAP) (3)	1.08%	1.18%	0.68%	0.69%	1.26%	0.98%	1.27%
Return on average equity (annualized)	7.45%	8.31%	-11.78%	4.15%	8.26%	3.35%	7.89%
Adjusted return on average equity (annualized) (non-GAAP) (3)	8.88%	9.83%	5.36%	4.75%	8.47%	7.81%	8.28%
Return on average tangible common equity (annualized) (non-GAAP) (5)	13.05%	14.66%	-19.71%	8.35%	15.79%	6.67%	15.11%
Adjusted return on average tangible common equity (annualized) (non-GAAP) (3) (5)	15.35%	17.14%	10.23%	9.45%	16.17%	14.14%	15.82%
Efficiency ratio (tax equivalent)	76.26%	61.39%	80.52%	62.11%	61.64%	69.84%	62.52%
Adjusted efficiency ratio (non-GAAP) (7)	60.19%	55.78%	61.91%	59.72%	60.73%	58.90%	61.80%
Dividend payout ratio (2)	38.67%	35.01%	N/A	65.70%	31.62%	81.45%	30.94%
Book value per common share	$ 65.49	$ 64.34	$ 63.35	$ 69.40	$ 70.32
Tangible common equity per common share (non-GAAP) (5)	$ 41.16	$ 39.83	$ 38.33	$ 38.01	$ 39.13

CAPITAL RATIOS
Equity-to-assets	12.30%	12.07%	11.91%	13.95%	14.90%
Tangible equity-to-tangible assets (non-GAAP) (5)	8.10%	7.83%	7.56%	8.15%	8.88%
Tier 1 common equity (4) *	11.8%	11.5%	10.7%	11.0%	11.3%
Tier 1 leverage (4) *	8.3%	8.1%	13.3%	9.5%	9.7%
Tier 1 risk-based capital (4) *	11.8%	11.5%	10.7%	12.0%	12.3%
Total risk-based capital (4) *	14.2%	13.9%	12.9%	12.7%	12.8%

OTHER DATA
Number of branches	285	305	305	155	155
Number of employees (full-time equivalent basis)	5,184	5,266	5,369	2,583	2,547

*The regulatory capital ratios presented above include the assumption of the transitional method relative to the CAREs Act in relief of COVID-19 pandemic on the economy and financial institutions in the United States. The referenced relief allows a total five-year “phase in” of the CECL impact on capital and relief over the next two years for the impact on the allowance for credit losses resulting from COVID-19.

Balance Sheet and Capital

(dollars in thousands, except per share and share data)	Ending Balance
	Dec. 31,	Sept. 30,	June 30,	Mar. 31,	Dec. 31,
BALANCE SHEET	2020	2020	2020	2020	2019
*Assets*
Cash and cash equivalents	$ 4,609,255	$ 4,471,639	$ 4,363,708	$ 1,262,836	$ 688,704
Investment securities:
Securities held to maturity	955,542	–	–	–	–
Securities available for sale, at fair value	3,330,672	3,561,929	3,137,718	1,971,195	1,956,047
Trading securities	10,674	–	494	–	–
Other investments	160,443	185,199	133,430	62,994	49,124
Total investment securities	4,457,331	3,747,128	3,271,642	2,034,189	2,005,171
Loans held for sale	290,467	456,141	603,275	71,719	59,363
Loans:
Acquired – PCD	2,915,809	3,143,761	3,323,754	311,271	356,782
Acquired – NonPCD	9,458,869	10,557,968	11,577,833	1,632,700	1,760,427
Non-acquired	12,289,456	11,536,086	10,597,560	9,562,919	9,252,831
Less allowance for credit losses	(457,309)	(440,159)	(434,608)	(144,785)	(56,927)
Loans, net	24,206,825	24,797,656	25,064,539	11,362,105	11,313,113
Bank property held for sale	36,006	24,504	25,541	5,412	5,425
Other real estate owned (“OREO”)	11,914	13,480	18,016	7,432	6,539
Premises and equipment, net	579,239	626,259	627,943	312,151	317,321
Bank owned life insurance	559,368	556,475	556,807	233,849	234,567
Deferred tax asset	63,222	107,500	107,532	46,365	31,316
Mortgage servicing rights	43,820	34,578	25,441	26,365	30,525
Core deposit and other intangibles	162,592	171,637	170,911	46,809	49,816
Goodwill	1,563,942	1,566,524	1,603,383	1,002,900	1,002,900
Other assets	1,205,892	1,245,845	1,286,618	230,779	176,332
Total assets	$ 37,789,873	$ 37,819,366	$ 37,725,356	$ 16,642,911	$ 15,921,092

*Liabilities and Shareholders’ Equity*
Deposits:
Noninterest-bearing	$ 9,711,338	$ 9,681,095	$ 9,915,700	$ 3,367,422	$ 3,245,306
Interest-bearing	20,982,544	20,288,859	20,041,585	8,977,125	8,931,790
Total deposits	30,693,882	29,969,954	29,957,285	12,344,547	12,177,096
Federal funds purchased and securities
sold under agreements to repurchase	779,666	706,723	720,479	325,723	298,741
Other borrowings	390,179	1,089,637	1,089,279	1,316,100	815,936
Reserve for unfunded commitments	43,380	43,161	21,051	8,555	335
Other liabilities	1,234,886	1,446,478	1,445,411	326,943	255,971
Total liabilities	33,141,993	33,255,953	33,233,506	14,321,868	13,548,079

Shareholders’ equity:
Preferred stock – $.01 par value; authorized 10,000,000 shares	—	—	—	—	—
Common stock – $2.50 par value; authorized 160,000,000 shares	177,434	177,321	177,268	83,611	84,361
Surplus	3,765,406	3,764,482	3,759,166	1,584,322	1,607,740
Retained earnings	657,451	604,564	542,677	643,345	679,895
Accumulated other comprehensive income	47,589	17,046	12,739	9,765	1,017
Total shareholders’ equity	4,647,880	4,563,413	4,491,850	2,321,043	2,373,013
Total liabilities and shareholders’ equity	$ 37,789,873	$ 37,819,366	$ 37,725,356	$ 16,642,911	$ 15,921,092

Common shares issued and outstanding	70,973,477	70,928,304	70,907,119	33,444,236	33,744,385

Net Interest Income and Margin

	Three Months Ended
	December 31, 2020			September 30, 2020			December 31, 2019
(Dollars in thousands)	Average	Income/	Yield/	Average	Income/	Yield/	Average	Income/	Yield/
YIELD ANALYSIS	Balance	Expense	Rate	Balance	Expense	Rate	Balance	Expense	Rate
Interest-Earning Assets:
Federal funds sold, reverse repo, and time deposits	$ 4,509,137	$ 1,098	0.10%	$ 4,406,376	$ 1,215	0.11%	$ 573,957	$ 2,337	1.62%
Investment securities	4,070,218	15,641	1.53%	3,227,988	13,254	1.63%	1,889,311	12,502	2.63%
Loans held for sale	382,115	2,328	2.42%	556,670	4,151	2.97%	73,541	664	3.58%
Total loans, excluding PPP	22,701,841	245,273	4.30%	23,021,395	260,527	4.50%	11,297,402	131,951	4.63%
Total PPP loans	2,189,696	22,031	4.00%	2,291,238	16,147	2.80%
Total loans	24,891,536	267,304	4.27%	25,312,632	276,674	4.35%	11,297,401	131,951	4.63%
Total interest-earning assets	33,853,006	286,371	3.37%	33,503,666	295,294	3.51%	13,834,210	147,454	4.23%
Noninterest-earning assets	4,174,105			4,361,551			2,024,648
Total Assets	$ 38,027,111			$ 37,865,217			$ 15,858,858

Interest-Bearing Liabilities:
Transaction and money market accounts	$ 14,038,057	$ 6,675	0.19%	$ 13,671,430	$ 7,853	0.23%	$ 5,768,724	$ 8,010	0.55%
Savings deposits	2,667,211	505	0.08%	2,570,500	584	0.09%	1,313,991	769	0.23%
Certificates and other time deposits	3,805,708	6,047	0.63%	4,007,542	6,717	0.67%	1,684,633	6,448	1.52%
Federal funds purchased and repurchase agreements	754,457	435	0.23%	710,369	509	0.29%	290,287	590	0.81%
Other borrowings	876,781	7,161	3.25%	1,089,399	9,283	3.39%	815,847	5,181	2.52%
Total interest-bearing liabilities	22,142,214	20,823	0.37%	22,049,240	24,946	0.45%	9,873,482	20,998	0.84%
Noninterest-bearing liabilities	11,277,541			11,259,916			3,628,741
Shareholders’ equity	4,607,356			4,556,061			2,356,636
Total Non-IBL and shareholders’ equity	15,884,897			15,815,977			5,985,377
Total liabilities and shareholders’ equity	$ 38,027,111			$ 37,865,217			$ 15,858,859
Net interest income and margin (NON-TAX EQUIV.)		$ 265,548	3.12%		$ 270,348	3.21%		$ 126,456	3.63%
Net interest margin (TAX EQUIVALENT)			3.14%			3.22%			3.64%
Total Deposit Cost of Funds			0.17%			0.20%			0.50%
Overall Cost of Funds (including demand deposits)			0.26%			0.31%			0.63%

Total Accretion on acquired loans (6)		$ 12,686			$ 22,445			$ 7,416
TEFRA (included in NIM, tax equivalent)		$ 1,663			$ 734			$ 521

The remaining loan discount on acquired loans which will be accreted into loan interest income totals $97.7 million and the remaining net deferred fees on PPP loans totals $36.7 million as of December 31, 2020.

Noninterest Income and Expense

	Three Months Ended					Twelve Months Ended
	Dec. 31,	Sept. 30,	June 30,	Mar. 31,	Dec. 31,	Dec. 31,	Dec. 31,
(Dollars in thousands)	2020	2020	2020	2020	2019	2020	2019
Noninterest income:
Fees on deposit accounts	$ 25,153	$ 24,346	$ 16,679	$ 18,141	$ 19,161	$ 84,319	$ 75,435
Mortgage banking income	25,162	48,022	18,371	14,647	3,757	106,202	17,564
Trust and investment services income	7,506	7,404	7,138	7,389	6,935	29,437	29,244
Securities gains, net	35	15	—	—	24	50	2,711
Correspondent banking and capital market income	27,751	26,432	10,067	493	1,357	64,743	2,892
Bank owned life insurance income	3,341	4,127	1,381	2,530	1,361	11,379	6,005
Recoveries of fully charged off acquired loans	—	—	—	—	2,232	—	6,847
Other	8,923	4,444	711	932	1,480	15,010	2,867
Total noninterest income	$ 97,871	$ 114,790	$ 54,347	$ 44,132	$ 36,307	$ 311,140	$ 143,565

Noninterest expense:
Salaries and employee benefits	$ 138,982	$ 134,919	$ 81,720	$ 60,978	$ 58,218	$ 416,599	$ 234,747
Pension plan termination expense	–	–	–	–	—	–	9,526
SWAP termination expense	38,787	–	–	–	—	38,787	—
Occupancy expense	23,496	23,845	15,959	12,287	12,113	75,587	47,457
Information services expense	19,527	18,855	12,155	9,306	8,919	59,843	35,477
FHLB prepayment penalty	56	—	199	—	—	255	134
OREO expense and loan related	728	1,146	1,107	587	1,013	3,568	3,242
Business development and staff related	3,835	2,599	1,447	2,244	2,905	10,125	9,382
Amortization of intangibles	9,760	9,560	4,665	3,007	3,267	26,992	13,084
Professional fees	4,306	4,385	2,848	2,494	2,862	14,033	10,325
Supplies, printing and postage expense	2,809	2,755	1,610	1,505	1,464	8,679	5,881
FDIC assessment and other regulatory charges	3,403	2,849	2,403	2,058	1,327	10,713	4,545
Advertising and marketing	1,544	1,203	531	814	1,491	4,092	4,309
Other operating expenses	11,329	13,109	10,189	7,838	5,555	42,465	21,977
Branch consolid. or merger / convers related exp.	19,836	21,662	40,279	4,129	1,494	85,906	4,552
Total noninterest expense	$ 278,398	$ 236,887	$ 175,112	$ 107,247	$ 100,628	$ 797,644	$ 404,638

As compared with 3Q 2020:

Noninterest income declined by $16.9 million due to lower mortgage banking income of $22.9 million, primarily caused by fair value accounting on lower balances in the mortgage pipeline and loans held for sale.
This decline was partially offset by higher correspondent banking and capital markets income, fees on deposit accounts, and other income.
Noninterest expense increased by $41.5 million due primarily to $38.8 million swap termination cost. This was incurred on three cash flow hedges, which were terminated in early December.
Salaries and employee benefits were higher by $4.1 million due primarily to payroll taxes and additional incentives.
Merger-related and branch consolidation cost declined by $1.8 million.

Loans and Deposits

The following table presents a summary of the loan portfolio by type (dollars in thousands):

	Ending Balance
	Dec. 31,	Sept. 30,	June 30,	March 31,	Dec. 31,
LOAN PORTFOLIO	2020	2020	2020	2020	2019

Construction and land development	$ 1,899,066	$ 1,840,111	$ 1,999,062	$ 1,105,308	$ 1,016,692
Commercial non-owner occupied real estate	5,931,323	5,936,372	6,021,317	2,371,371	2,322,590
Commercial owner occupied real estate	4,842,092	4,846,020	4,762,520	2,177,738	2,158,701
Consumer owner occupied real estate	4,108,042	4,311,186	4,421,247	2,665,405	2,704,405
Home equity loans	1,336,689	1,347,798	1,378,406	758,482	758,020
Commercial and industrial	3,113,685	3,067,399	3,005,030	1,418,421	1,386,303
Other income producing property	587,448	629,497	650,237	327,696	346,554
Consumer non real estate	894,334	900,171	916,623	674,791	662,883
Other	17,993	7,540	8,372	7,678	13,892
Subtotal	22,730,672	22,886,094	23,162,814	11,506,890	11,370,040
PPP loans	1,933,462	2,351,721	2,336,333	–	–
Total loans	$ 24,664,134	$ 25,237,815	$ 25,499,147	$ 11,506,890	$ 11,370,040

The following table presents a summary of the deposit types (dollars in thousands):

	Ending Balance
	Dec. 31,	Sept. 30,	June 30,	March 31,	Dec. 31,
DEPOSITS	2020	2020	2020	2020	2019

Type
Demand deposits	$ 9,711,338	$ 9,681,095	$ 9,915,700	$ 3,367,422	$ 3,245,306
Interest bearing deposits	6,955,575	6,414,905	6,192,915	2,963,679	2,989,467
Savings	2,694,010	2,618,877	2,503,514	1,337,730	1,309,896
Money market	7,584,353	7,404,299	7,196,456	3,029,769	2,977,029
Time deposits	3,748,605	3,850,778	4,148,700	1,645,947	1,655,398

Total deposits	$ 30,693,881	$ 29,969,954	$ 29,957,285	$ 12,344,547	$ 12,177,096

Core deposits (excludes CDs)	26,945,276	26,119,176	25,808,585	10,698,600	10,521,698

Asset Quality

	Ending Balance
	Dec. 31,	Sept. 30,	June 30,	Mar. 31,	Dec. 31,
(Dollars in thousands)	2020	2020	2020	2020	2019
NONPERFORMING ASSETS:
Non-acquired
Non-acquired nonperforming loans	$ 29,171	$ 22,463	$ 22,883	$ 23,912	$ 22,816
Non-acquired OREO and other nonperforming assets	688	825	1,689	941	1,011
Total non-acquired nonperforming assets	29,859	23,288	24,572	24,853	23,827
Acquired
Acquired nonperforming loans (2019 periods acquired non-credit impaired loans only) *	77,668	89,974	100,399	32,791	11,114
Acquired OREO and other nonperforming assets	11,568	12,904	16,987	6,802	5,848
Total acquired nonperforming assets	89,236	102,878	117,386	39,593	16,962
Total nonperforming assets *	$ 119,095	$ 126,166	$ 141,958	$ 64,446	$ 40,789

	Three Months Ended
	Dec. 31,	Sept. 30,	June 30,	Mar. 31,	Dec. 31,
	2020	2020	2020	2020	2019
ASSET QUALITY RATIOS:
Allowance for non-acquired loan losses as a
percentage of non-acquired loans (1)	N/A	N/A	N/A	N/A	0.62%
Allowance for credit losses as a percentage of loans	1.85%	1.74%	1.70%	1.26%	N/A
Allowance for credit losses as a percentage of loans, excluding PPP loans	2.01%	1.92%	1.88%	N/A	N/A
Allowance for non-acquired loan losses as a
percentage of non-acquired nonperforming loans	N/A	N/A	N/A	N/A	249.50%
Allowance for credit losses as a percentage of nonperforming loans *	428.04%	391.47%	352.53%	255.34%	N/A
Net charge-offs on non-acquired loans as a percentage of average (annualized) (1)	N/A	N/A	N/A	N/A	0.06%
Net charge-offs as a percentage of average loans (annualized)	0.01%	0.01%	0.00%	0.05%	N/A
Net charge-offs on acquired loans as a percentage
of average acquired loans (annualized) (1)	N/A	N/A	N/A	N/A	-0.01%
Total nonperforming assets as a percentage
of total assets *	0.32%	0.33%	0.38%	0.39%	0.26%
Nonperforming loans as a percentage of period end loans *	0.43%	0.45%	0.48%	0.49%	0.30%

*Total nonperforming assets now include nonaccrual loans that are purchase credit deteriorated (“PCD loans”). Prior to January 1, 2020, these loans, which were called acquired credit impaired (“ACI”) loans, were excluded from nonperforming assets. The adoption of CECL resulted in the discontinuation of the pool-level accounting for ACI loans and replaced it with loan-level evaluation for PCD nonaccrual status. The Company’s nonperforming loans increased by $21.0 million in the first quarter of 2020 from these loans. The Company has not assumed or taken on any additional risk relative to these assets. With the merger with CSFL on June 7, 2020, the amount of acquired nonaccruals loans increased by approximately $69.9 million during the second quarter of 2020.

As compared with 3Q 2020:

Total OREO decreased by $1.6 million to $11.9 million.
Net charge-offs totaled $816,000, or 0.01% annualized, as a percentage of average loans, compared to $594,000, or 0.01% annualized.
Total allowance for credit losses (“ACL”) was $457.3 million, or 1.85% of period end loans compared to $440.2 million, or 1.74%.
ACL for unfunded commitments was $43.4 million, or 0.93% of the unfunded commitments (off balance sheet) compared to $43.2 million, or 0.94%.
The provision for credit losses declined $11.6 million.
Total nonperforming assets decreased $7.1 million to $119.1 million, representing 0.32% of total assets, a decline of 1 basis point. The decrease was $5.6 million in nonperforming loans and $1.5 million in other nonperforming assets.

Current Expected Credit Losses (“CECL”)

Effective January 1, 2020, the Company adopted ASU 2016-13 (“CECL”), which affects the allowance for credit losses and the liability for unfunded commitments (“UFC”). Below is a table showing the roll forward of the ACL and UFC for the fourth quarter of 2020:

	Allowance for Credit Losses (“ACL & UFC”)
	NonPCD ACL	PCD ACL	Total	UFC
Ending balance 9/30/2020	$ 286,506	$ 153,653	$ 440,159	$ 43,161
Charge offs	(2,031)		(2,031)
Acquired charge offs	(203)	(2,072)	(2,275)
Recoveries	939		939
Acquired recoveries	1,086	1,465	2,551
Provision for credit losses	29,173	(11,207)	17,966	219
Ending balance 12/31/2020	$ 315,470	$ 141,839	$ 457,309	$ 43,380

Period end loans (includes PPP Loans)	$ 21,748,325	$ 2,915,809	$ 24,664,134	N/A
Reserve to Loans (includes PPP Loans)	1.45%	4.86%	1.85%	N/A
Period end loans (excludes PPP Loans)	$ 19,814,863	$ 2,915,809	$ 22,730,672	N/A
Reserve to Loans (excludes PPP Loans)	1.59%	4.86%	2.01%	N/A
Unfunded commitments (off balance sheet) *				$ 4,670,868
Reserve to unfunded commitments (off balance sheet)				0.93%

* Unfunded commitments excludes unconditionally cancelable commitments and letters of credit.

Net charge offs of NonPCD loans totaled $209,000 for the quarter and for PCD loans totaled $607,000.
The provision for credit losses recorded during the fourth quarter reflects an $11.2 million decline in the ACL related to PCD loans primarily from $226 million in loan payments.
The provision for credit losses recorded during the fourth quarter reflects a $29.2 million increase in the ACL related to NonPCD loans primarily from the blending of two forecasted economic scenarios. The use of two forecast scenarios allowed for the consideration of the uncertainty around the rising cases of the COVID19 pandemic and resultant additional expected credit losses in the NonPCD loan portfolio.
The ACL for unfunded commitments totals $43.4 million, or 0.93% of the unfunded commitment balance compared to 0.94% at September 30, 2020.

Merger with CSFL

The merger with CSFL closed on June 7, 2020. The Company issued 37,271,069 shares using an exchange ratio of 0.3001. The total purchase price was $2.257 billion. The initial (preliminary) allocation of the purchase price to the fair value of assets and liabilities acquired was completed as of June 30, 2020. Below is a table that reflects that initial allocation of the purchase price and additional measurement period adjustments recorded during the third and fourth quarter of 2020:

South State Corporation					Fair Value of
CenterState Bank Corporation			3Q 2020	4Q 2020	Net Assets
Merger Date of June 7, 2020		Initial	Measurement	Measurement	Acquired at
	As Recorded	Fair Value	Period	Period	Date of
(Dollars in thousands)	by CSFL	Adjustments	Adjustments	Adjustments	Acquisition
Assets
Cash and cash equivalents	$ 2,566,450	$ —			$ 2,566,450
Investment securities	1,188,403	5,507	—	—	1,193,910
Loans held for sale	453,578	—			453,578
Loans	12,969,091	(48,342)	29,834	—	12,950,583
Premises and equipment	324,396	2,392	5,999	(2,490)	330,297
Intangible assets	1,294,211	(1,163,349)	10,000	—	140,862
Other real estate owned and repossessed assets	10,849	(791)	(49)	—	10,009
Bank owned life insurance	333,053	—			333,053
Deferred tax asset	54,122	(8,681)	(8,952)	750	37,239
Other assets	950,813	(604)	26	—	950,235
Total assets	$ 20,144,966	$ (1,213,868)	$ 36,858	$ (1,740)	$ 18,966,216

Liabilities
Deposits:
Noninterest-bearing	$ 5,291,443	$ —	$ —	$ —	$ 5,291,443
Interest-bearing	10,312,370	19,702	—	—	10,332,072
Total deposits	15,603,813	19,702	—	—	15,623,515
Federal funds purchased and securities
sold under agreements to repurchase	401,546	—	—	—	401,546
Other borrowings	278,900	(7,401)	—	—	271,499
Other liabilities	977,725	(4,592)	—	857	973,990
Total liabilities	17,261,984	7,709	—	857	17,270,550
Net identifiable assets acquired over liabilities assumed	2,882,982	(1,221,577)	36,858	(2,597)	1,695,666
Goodwill		600,483	(36,858)	(2,583)	561,042
Net assets acquired over liabilities assumed	$ 2,882,982	$ (621,094)	$ —	$ (5,180)	$ 2,256,708

Consideration:
South State Corporation common shares issued					37,271,069
Purchase price per share of the Company’s common stock					$ 60.27
Company common stock issued and cash
exchanged for fractional shares					$ 2,246,401
Stock Option Conversion					2,900
Restricted Stock Conversion					7,407
Fair value of total consideration transferred					$ 2,256,708

The measurement period adjustments during the fourth quarter of 2020 related to the merger between the Company and CSFL include the following:

Goodwill was reduced by $2.6 million with the measurement period adjustments recorded in the fourth quarter of 2020, and resulted in total goodwill from the merger with CSFL of $561.0 million.
Adjusted the discount rate applied to the bank owned life insurance split dollar liability, which increased the liability, by $857,000.
Adjusted the fair value of certain premises where updated information was received, which totaled $2.5 million.
Adjusted deferred tax asset by $750,000 for these adjustments noted above.
The purchase price (consideration transferred) decreased by $5.2 million to $2.9 million for stock options assumed and converted in the merger. The stock options assumed reflect their intrinsic value based upon a Black Scholes valuation.

In addition, with respect to the merger and conversion:

Merger-related and branch closure cost incurred during the fourth quarter totaled $19.8 million, pre-tax; and included contract terminations, professional fees, branch closure cost, and severance and support incentives to personnel.
The merger integration, conversion, and cost savings identification process remains on schedule.

Conference Call

The Company will announce its fourth quarter 2020 earnings results in a news release after the market closes on January 27, 2021. At 10:00 a.m. Eastern Time on January 28, 2021, the Company will host a conference call to discuss its fourth quarter results. Callers wishing to participate may call toll-free by dialing 877-506-9272. The number for international participants is (412) 680-2004. The conference ID number is 10151303. Alternatively, individuals may listen to the live webcast of the presentation by visiting SouthStateBank.com. An audio replay of the live webcast is expected to be available by the evening of January 28, 2021 on the Investor Relations section of SouthStateBank.com.

South State Corporation is a financial services company headquartered in Winter Haven, Florida. South State Bank, N.A., the company’s nationally chartered bank subsidiary, provides consumer, commercial, mortgage and wealth management solutions to more than one million customers throughout Florida, Alabama, Georgia, the Carolinas and Virginia. The bank also serves clients coast to coast through its correspondent banking division. Additional information is available at SouthStateBank.com.

Non-GAAP Measures

Statements included in this press release include non-GAAP measures and should be read along with the accompanying tables that provide a reconciliation of non-GAAP measures to GAAP measures. Management believes that these non-GAAP measures provide additional useful information, which allows readers to evaluate the ongoing performance of the Company. Non-GAAP measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider the company’s performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the company. Non-GAAP measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the company’s results or financial condition as reported under GAAP.

Pre-provision net revenue (in thousands)	Dec. 31, 2020	Sept. 30, 2020	June 30, 2020

Netincome (loss) (GAAP)	$ 86,236	$ 95,221	$ (84,935)
PCL legacy SSB	18,185	29,797	31,259
PCL legacy CSB NonPCD and UFC – Day 1	–	–	119,079
PCL legacy CSB for June	–	–	1,136
Tax provision (benefit)	(19,401)	23,233	(24,747)
Merger-related costs	19,836	21,662	40,279
Securities gain	(35)	(15)	–
FHLB advance prepayment cost	56	–	199
Swap termination cost	38,787
CSB pre-merger PPNR	–	–	74,791

Pre-provision net revenue (PPNR) Non-GAAP	$ 143,664	$ 169,898	$ 157,061

SSB average asset balance (GAAP)	$ 38,027,111	$ 37,865,217	$ 22,898,925
CSB average asset balance pre-merger			14,604,081
Total average balance June 30, 2020 (Non-GAAP)			$ 37,503,006

ROAA PPNR	1.50%	1.79%	1.68%

	Three Months Ended					Twelve Months Ended
(Dollars in thousands, except per share data)	Dec. 31	Sept. 30,	June 30,	Mar. 31,	Dec. 31,	Dec. 31	Dec. 31,
RECONCILIATION OF GAAP TO Non-GAAP	2020	2020	2020	2020	2019	2020	2019
Adjusted net income (non-GAAP) (3)
Net income (loss) (GAAP)	$ 86,236	$ 95,221	$ (84,935)	$ 24,110	$ 49,091	$ 120,632	$ 186,483
Securities gains, net of tax	(29)	(12)	—	—	(20)	(41)	(2,173)
PCL – NonPCD loans & unfunded commitments	—	—	92,212	—	—	92,212	—
Pension plan termination expense, net of tax	—	—	—	—	—	—	7,641
Swap termination expense, net of tax	31,784					31,784
Provision (Benefit) for income taxes – carryback tax loss	(31,468)					(31,468)
FHLB prepayment penalty, net of tax	46	—	154	—	—	200	107
Merger and branch consolidation/acq. expense, net of tax	16,255	17,413	31,191	3,510	1,252	68,369	3,701
Adjusted net income (non-GAAP)	$ 102,824	$ 112,622	$ 38,622	$ 27,620	$ 50,323	$ 281,688	$ 195,759

Adjusted net income per common share – Basic (3)
Earnings (loss) per common share – Basic (GAAP)	$ 1.22	$ 1.34	$ (1.96)	$ 0.72	$ 1.46	$ 2.20	5.40
Effect to adjust for securities gains	(0.00)	(0.00)	—	—	(0.01)	(0.00)	(0.06)
Effect to adjust for PCL – NonPCD loans & unfunded commitments	—	—	2.13	—	–	1.68	–
Effect to adjust for pension plan termination expense, net of tax	—	—	—	—	–	—	0.22
Effect to adjust for swap termination expense, net of tax	0.45					0.58
Effect to adjust for benefit for income taxes – carryback tax loss	(0.44)					(0.57)
Effect to adjust for FHLB prepayment penalty, net of tax	0.00	—	0.00	—	–	0.00	0.00
Effect to adjust for merger & branch consol./acq expenses, net of tax	0.23	0.25	0.72	0.10	0.04	1.25	0.11
Adjusted net income per common share – Basic (non-GAAP)	$ 1.45	$ 1.59	$ 0.89	$ 0.82	$ 1.49	$ 5.14	$ 5.66

Adjusted net income per common share – Diluted (3)
Earnings (loss) per common share – Diluted (GAAP)	$ 1.21	$ 1.34	$ (1.96)	$ 0.71	$ 1.45	$ 2.19	$ 5.36
Effect to adjust for securities gains	(0.00)	(0.00)	—	—	(0.01)	(0.00)	(0.06)
Effect to adjust for swap termination expense, net of tax	0.45					0.58
Effect to adjust for benefit for income taxes – carryback tax loss	(0.44)					(0.57)
Effect to adjust for PCL – NonPCD loans & unfunded commitments	—	—	2.11	—	–	1.67	—
Effect to adjust for pension plan termination expense, net of tax	—	—	—	—	–	—	0.22
Effect to adjust for FHLB prepayment penalty, net of tax	—	—	0.00	—	–	0.00	0.00
Effect to adjust for merger & branch consol./acq expenses, net of tax	0.23	0.24	0.72	0.11	0.04	1.24	0.11
Effect of adjusted weighted ave shares due to adjusted net income	–	–	0.02			–	–
Adjusted net income per common share – Diluted (non-GAAP)	$ 1.44	$ 1.58	$ 0.89	$ 0.82	$ 1.48	$ 5.12	$ 5.63

Adjusted Return of Average Assets (3)
Return on average assets (GAAP)	0.90%	1.00%	-1.49%	0.60%	1.23%	0.42%	1.21%
Effect to adjust for swap termination expense	0.33%					0.12%
Effect to adjust for benefit for income taxes – carryback tax loss	-0.33%					-0.11%
Effect to adjust for securities gains	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	-0.01%
Effect to adjust for PCL – NonPCD loans & unfunded commitments	0.00%	0.00%	1.62%	0.00%	0.00%	0.32%	0.00%
Effect to adjust for pension plan termination expense, net of tax	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.05%
Effect to adjust for FHLB prepayment penalty, net of tax	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%
Effect to adjust for merger & branch consol./acq expenses, net of tax	0.18%	0.18%	0.55%	0.09%	0.03%	0.23%	0.02%
Adjusted return on average assets (non-GAAP)	1.08%	1.18%	0.68%	0.69%	1.26%	0.98%	1.27%

Adjusted Return of Average Equity (3)
Return on average equity (GAAP)	7.45%	8.31%	-11.78%	4.15%	8.26%	3.35%	7.89%
Effect to adjust for securities gains	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	-0.09%
Effect to adjust for swap termination expense	2.74%					0.88%
Effect to adjust for benefit for income taxes – carryback tax loss	-2.72%					-0.87%
Effect to adjust for PCL – NonPCD loans & unfunded commitments	0.00%	0.00%	12.79%	0.00%	0.00%	2.56%	0.00%
Effect to adjust for pension plan termination expense, net of tax	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.32%
Effect to adjust for FHLB prepayment penalty, net of tax	0.00%	0.00%	0.02%	0.00%	0.00%	0.01%	0.01%
Effect to adjust for merger & branch consol./acq expenses, net of tax	1.41%	1.52%	4.33%	0.60%	0.21%	1.88%	0.15%
Adjusted return on average equity (non-GAAP)	8.88%	9.83%	5.36%	4.75%	8.47%	7.81%	8.28%

Adjusted Return on Average Common Tangible Equity (3) (5)
Return on average common equity (GAAP)	7.45%	8.31%	-11.78%	4.15%	8.26%	3.35%	7.89%
Effect to adjust for securities gains	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	-0.09%
Effect to adjust for swap termination expense	2.74%					3.51%
Effect to adjust for benefit for income taxes – carryback tax loss	-2.72%					-0.87%
Effect to adjust for PCL – NonPCD loans & unfunded commitments	0.00%	0.00%	12.79%	0.00%	0.00%	2.56%	0.00%
Effect to adjust for pension plan termination expense, net of tax	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.32%
Effect to adjust for FHLB prepayment penalty, net of tax	0.00%	0.00%	0.02%	0.00%	0.00%	0.01%	0.00%
Effect to adjust for merger & branch consol./acq expenses, net of tax	1.40%	1.52%	4.32%	0.60%	0.21%	1.90%	0.16%
Effect to adjust for intangible assets	6.48%	7.31%	4.88%	4.70%	7.70%	3.68%	7.54%
Adjusted return on average common tangible equity (non-GAAP)	15.35%	17.14%	10.23%	9.45%	16.17%	14.14%	15.82%

	Three Months Ended
(Dollars in thousands, except per share data)	Dec. 31	Sept. 30,	June 30,	Mar. 31,	Dec. 31,
RECONCILIATION OF GAAP TO Non-GAAP	2020	2020	2020	2020	2019

Adjusted efficiency ratio (5)
Efficiency ratio	76.26%	61.39%	80.52%	62.11%	61.64%
Effect to adjust for one-time related costs and benefits	-16.07%	-5.61%	-18.61%	-2.39%	-0.91%
Adjusted efficiency ratio	60.19%	55.78%	61.91%	59.72%	60.73%

Tangible Book Value Per Common Share (5)
Book value per common share (GAAP)	$ 65.49	$ 64.34	$ 63.35	$ 69.40	$ 70.32
Effect to adjust for intangible assets	(24.33)	(24.51)	(25.02)	(31.39)	(31.19)
Tangible book value per common share (non-GAAP)	$ 41.16	$ 39.83	$ 38.33	$ 38.01	$ 39.13

Tangible Equity-to-Tangible Assets (5)
Equity-to-assets (GAAP)	12.30%	12.07%	11.91%	13.95%	14.90%
Effect to adjust for intangible assets	-4.20%	-4.24%	-4.35%	-5.80%	-6.02%
Tangible equity-to-tangible assets (non-GAAP)	8.10%	7.83%	7.56%	8.15%	8.88%

Footnotes to tables:

(1) Loan data excludes mortgage loans held for sale.

(2) The dividend payout ratio is calculated by dividing total dividends paid during the period by the total net income for the same period.

(3) Adjusted earnings, adjusted return on average assets, and adjusted return on average equity are non-GAAP measures and exclude the after-tax effect of gains on acquisitions, gains or losses on sales of securities, income tax benefit related to the carryback of tax losses under the CARES Act, swap termination expense, and merger and branch consolidation related expense. Management believes that non-GAAP adjusted measures provide additional useful information that allows readers to evaluate the ongoing performance of the company. Non-GAAP measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider the company’s performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the company. Non-GAAP measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the company’s results or financial condition as reported under GAAP. Adjusted earnings and the related adjusted return measures (non-GAAP) exclude the following from net income (GAAP) on an after-tax basis: (a) pre-tax merger and branch consolidation related expense of $19.8 million, $21.7 million, $40.3 million, $4.1 million, and $1.5 million, for the quarters ended December 31, 2020, September 30, 2020, June 30, 2020, March 31, 2020, and December 31, 2019, respectively; (b) securities (losses) gains, net of $35,000, $15,000, and $24,000, for the quarters ended December 31, 2020, September 30, 2020, and December 31, 2019, respectively; (c) FHLB prepayment penalty of $56,000 and $199,000 for the quarters ended December 31, 2020 and June 30, 2020; (d) swap termination expense for the quarter ended December 31, 2020, of $38.8 million; and (e) $31.5 million of tax carryback losses under the CARES Act for the quarter ended December 31, 2020.

(4) December 31, 2020 ratios are estimated and may be subject to change pending the final filing of the FR Y-9C; all other periods are presented as filed.

(5) The tangible measures are non-GAAP measures and exclude the effect of period end or average balance of intangible assets. The tangible returns on equity and common equity measures also add back the after-tax amortization of intangibles to GAAP basis net income. Management believes that these non-GAAP tangible measures provide additional useful information, particularly since these measures are widely used by industry analysts for companies with prior merger and acquisition activities. Non-GAAP measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider the company’s performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the company. Non-GAAP measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the company’s results or financial condition as reported under GAAP. The sections titled “Reconciliation of Non-GAAP to GAAP” provide tables that reconcile non-GAAP measures to GAAP.

(6) Includes loan accretion (interest) income related to the discount on acquired loans of $12.7 million, $22.4 million, $10.1 million$10.9 million, and $7.4 million, respectively, during the five quarters above.

(7) Adjusted efficiency ratio is calculated by taking the noninterest expense excluding swap termination expense, branch consolidation cost and merger cost, pension plan termination and the FHLB prepayment penalty divided by net interest income and noninterest income excluding securities gains (losses).

Cautionary Statement Regarding Forward Looking Statements

Statements included in this communication, which are not historical in nature are intended to be, and are hereby identified as, forward-looking statements for purposes of the safe harbor provided by Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are based on, among other things, management’s beliefs, assumptions, current expectations, estimates and projections about the financial services industry, the economy and SouthState. Words and phrases such as “may,” “approximately,” “continue,” “should,” “expects,” “projects,” “anticipates,” “is likely,” “look ahead,” “look forward,” “believes,” “will,” “intends,” “estimates,” “strategy,” “plan,” “could,” “potential,” “possible” and variations of such words and similar expressions are intended to identify such forward-looking statements. SouthState cautions readers that forward-looking statements are subject to certain risks, uncertainties and assumptions that are difficult to predict with regard to, among other things, timing, extent, likelihood and degree of occurrence, which could cause actual results to differ materially from anticipated results. Such risks, uncertainties and assumptions, include, among others, the following: (1) economic downturn risk, potentially resulting in deterioration in the credit markets, greater than expected noninterest expenses, excessive loan losses and other negative consequences, which risks could be exacerbated by potential negative economic developments resulting from the Covid19 pandemic, or from federal spending cuts and/or one or more federal budget-related impasses or actions; (2) interest rate risk primarily resulting from the low interest rate environment and historically low yield curve primarily due to government programs in place under the CARES Act and otherwise in response to the Covid19 pandemic, and their impact on the Bank’s earnings, including from the correspondent and mortgage divisions, housing demand, the market value of the bank’s loan and securities portfolios, and the market value of SouthState’s equity; (3) risks related to the merger and integration of SouthState and CSFL including, among others, (i) the risk that the cost savings and any revenue synergies from the merger may not be fully realized or may take longer than anticipated to be realized, (ii) the risk that the integration of each party’s operations will be materially delayed or will be more costly or difficult than expected or that the parties are otherwise unable to successfully integrate each party’s businesses into the other’s businesses, (iii) the amount of the costs, fees, expenses and charges related to the merger, (iv) reputational risk and the reaction of each company’s customers, suppliers, employees or other business partners to the merger, (4) the impact of increasing digitization of the banking industry and movement of customers to on-line platforms, and the possible impact on the Bank’s results of operations, customer base, expenses, suppliers and operations, (5) controls and procedures risk, including the potential failure or circumvention of our controls and procedures or failure to comply with regulations related to controls and procedures; (6) potential deterioration in real estate values; (7) the impact of competition with other financial institutions, including pricing pressures (including those resulting from the CARES Act) and the resulting impact, including as a result of compression to net interest margin; (8) credit risks associated with an obligor’s failure to meet the terms of any contract with the bank or otherwise fail to perform as agreed under the terms of any loan-related document; (9) liquidity risk affecting the Bank’s ability to meet its obligations when they come due; (10) risks associated with an anticipated increase in SouthState’s investment securities portfolio, including risks associated with acquiring and holding investment securities or potentially determining that the amount of investment securities SouthState desires to acquire are not available on terms acceptable to SouthState; (11) price risk focusing on changes in market factors that may affect the value of traded instruments in “mark-to-market” portfolios; (12) transaction risk arising from problems with service or product delivery; (13) compliance risk involving risk to earnings or capital resulting from violations of or nonconformance with laws, rules, regulations, prescribed practices, or ethical standards; (14) regulatory change risk resulting from new laws, rules, regulations, accounting principles, proscribed practices or ethical standards, including, without limitation, the possibility that regulatory agencies may require higher levels of capital above the current regulatory-mandated minimums and including the impact of the recently enacted CARES Act, the Consumer Financial Protection Bureau rules and regulations, and the possibility of changes in accounting standards, policies, principles and practices, including changes in accounting principles relating to loan loss recognition (CECL); (15) strategic risk resulting from adverse business decisions or improper implementation of business decisions; (16) reputation risk that adversely affects earnings or capital arising from negative public opinion; (17) terrorist activities risk that results in loss of consumer confidence and economic disruptions; (18) cybersecurity risk related to the dependence of SouthState on internal computer systems and the technology of outside service providers, as well as the potential impacts of internal or external security breaches, which may subject the company to potential business disruptions or financial losses resulting from deliberate attacks or unintentional events; (19) greater than expected noninterest expenses; ; (20) excessive loan losses; ((21) potential deposit attrition, higher than expected costs, customer loss and business disruption associated with the CSFL integration, and potential difficulties in maintaining relationships with key personnel; (22) the risks of fluctuations in market prices for SouthState common stock that may or may not reflect economic condition or performance of SouthState; (23) the payment of dividends on SouthState common stock, which is subject to legal and regulatory limitations as well as the discretion of the board of directors of SouthState, SouthState’s performance and other factors; (24) ownership dilution risk associated with potential acquisitions in which SouthState’s stock may be issued as consideration for an acquired company; (25) ;operational, technological, cultural, regulatory, legal, credit and other risks associated with the exploration, consummation and integration of potential future acquisition, whether involving stock or cash consideration; (26) major catastrophes such as hurricanes, tornados, earthquakes, floods or other natural or human disasters, including infectious disease outbreaks, including the ongoing COVID-19 pandemic, and the related disruption to local, regional and global economic activity and financial markets, and the impact that any of the foregoing may have on SouthState and its customers and other constituencies; and (27) other factors that may affect future results of SouthState and CenterState, as disclosed in SouthState’s Annual Report on Form 10-K, as amended, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, and CenterState’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, in each case filed by SouthState or CenterState, as applicable, with the U.S. Securities and Exchange Commission (“SEC”) and available on the SEC’s website at http://www.sec.gov, any of which could cause actual results to differ materially from future results expressed, implied or otherwise anticipated by such forward-looking statements.

All forward-looking statements speak only as of the date they are made and are based on information available at that time. SouthState does not undertake any obligation to update or otherwise revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by federal securities laws. As forward-looking statements involve significant risks and uncertainties, caution should be exercised against placing undue reliance on such statements.

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SOURCE SouthState Corporation

January 27, 2021 4:08 pm

Commerce Imposes Preliminary Duties on All Silicon Metal Imports From Malaysia; U.S. Producers Welcome Announcement

PR Newswire

WASHINGTON, Jan. 27, 2021 /PRNewswire/ — Globe Specialty Metals, Inc., a subsidiary of Ferroglobe PLC (NASDAQ:GSM) (“GSM”), and Mississippi Silicon LLC (“MS”), together representing the majority of American silicon metal production, today welcomed news that the U.S. Department of Commerce (“Commerce”) will impose preliminary duties of 7.41% on all silicon metal imports from Malaysia.

Last August, the U.S. International Trade Commission (ITC) preliminarily determined that imports from Malaysia, along with Bosnia and Herzegovina, Iceland, and Kazakhstan, are a cause of material injury to the U.S. industry. On November 30, 2020, Commerce subsequently announced duties of 120% on all silicon metal imports from Kazakhstan, and on December 8, 2020, announced duties up to 47.54% on imports from Bosnia and Herzegovina and Iceland. The Commerce and ITC investigations are now in their final phases.

“Today’s announcement is good news for our industry,” said Eddie Boardwine, Chief Operations Officer of MS. “The margins announced reflect unfair pricing by Malaysian producers that has distorted, and seriously harmed, the U.S. silicon metal market. Commerce’s decision creates significant risk to importers, whose final duty obligation will remain uncertain for several years. We appreciate the government’s efforts to respond to unfair trade practices and look forward to seeing conditions in the U.S. market reflect free and fair trade of silicon metal.”

On June 30, 2020, GSM and MS filed petitions to stop silicon metal producers in the four aforementioned countries from selling dumped and unfairly subsidized silicon metal imports into the United States. In their petitions, the companies asked Commerce and the ITC to impose duties to offset these unfair trade practices.

“Unfairly-traded silicon metal from countries like Malaysia has long been a challenge for our industry – today’s announcement is another welcome step toward leveling the playing field in the U.S. market,” said Marco Levi, Chief Executive Officer of GSM’s parent, Ferroglobe. “We appreciate the diligent efforts by the Commerce Department in this investigation.”

Final determinations will be announced in the Kazakhstan, Iceland, and Bosnia and Herzegovina investigations on February 21, 2021. Commerce’s final determination in the Malaysia investigation will be announced in early June, 2021.

Silicon metal is an important element added to various grades of aluminum alloys used in performance applications such as automotive components and aerospace products. Silicon metal also is a critical raw material in the production of silicone compounds used in numerous products including sealants, adhesives, rubber gaskets, caulking compounds, lubricants, food additives, coatings, polishes, and cosmetics, among others. In addition, silicon metal is the base material in the production of polysilicon, a highly purified form of silicon used in solar cells and semi-conductors.

For more on the petitions, see the companies’ press release.

For more on the ITC’s investigation, see the Commission’s press release.

For more on Commerce’s investigations, see the agency’s press release.

For more on Commerce’s preliminary determination in the Kazakhstan investigation, see the agency’s press release.

For more on Commerce’s preliminary determination in the Bosnia and Herzegovina and Iceland investigations, see the agency’s press release.

About Globe Specialty Metals and Mississippi Silicon

Globe Specialty Metals, Inc. is a wholly-owned U.S. subsidiary of Ferroglobe PLC, one of the world’s leading suppliers of silicon metal, silicon- and manganese- based specialty alloys and ferroalloys, serving a customer base across the globe in dynamic and fast-growing end markets, such as solar, automotive, consumer products, construction and energy. Through its subsidiaries, GSM owns metallurgical manufacturing facilities and other operations in Ohio, West Virginia, New York, Alabama, Indiana, Florida and Kentucky.

Mississippi Silicon LLC is a partnership between Rima Holding USA, Inc. and Clean Tech I LLC. Rima Holding USA Inc. is the majority owner of MS and also is associated with Rima Industrial S/A, a leading ferroalloy and non-ferrous metals producer in Brazil. Clean Tech I LLC is a partnership composed of strategic investors and financial advisers. MS’s manufacturing operation is based in Burnsville, MS, and its silicon metal serves customers throughout the United States.

Globe and Mississippi Silicon are represented in these proceedings by Adam H. Gordon, Esq. of The Bristol Group PLLC.

For more information, visit http://investor.ferroglobe.com and https://www.missilicon.com/.

Contact Elizabeth Heaton, [email protected], 202-445-9858.

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SOURCE Globe Specialty Metals / Mississippi Silicon

January 27, 2021 4:08 pm

Facebook Reports Fourth Quarter and Full Year 2020 Results

PR Newswire

MENLO PARK, Calif., Jan. 27, 2021 /PRNewswire/ — Facebook, Inc. (Nasdaq: FB) today reported financial results for the quarter and full year ended December 31, 2020.

“We had a strong end to the year as people and businesses continued to use our services during these challenging times,” said Mark Zuckerberg, Facebook founder and CEO. “I’m excited about our product roadmap for 2021 as we build new and meaningful ways to create economic opportunity, build community and help people just have fun.”

Fourth Quarter and Full Year 2020 Financial Highlights

	Three Months Ended December 31,				Year-over- Year % Change	Year Ended December 31,				Year-over- Year % Change
In millions, except percentages and
per share amounts	2020		2019			2020		2019
Revenue:
Advertising	$	27,187	$	20,736	31%	$	84,169	$	69,655	21%
Other	885		346		156%	1,796		1,042		72%
Total revenue	28,072		21,082		33%	85,965		70,697		22%
Total costs and expenses	15,297		12,224		25%	53,294		46,711		14%
Income from operations	$	12,775	$	8,858	44%	$	32,671	$	23,986	36%
Operating margin	46%		42%			38%		34%
Provision for income taxes	$	1,836	$	1,820	1%	$	4,034	$	6,327	(36)%
Effective tax rate	14%		20%			12%		25%
Net income	$	11,219	$	7,349	53%	$	29,146	$	18,485	58%
Diluted earnings per share (EPS)	$	3.88	$	2.56	52%	$	10.09	$	6.43	57%

Fourth Quarter and Full Year 2020 Operational and Other Financial Highlights

Facebook daily active users (DAUs) – DAUs were 1.84 billion on average for December 2020, an increase of 11% year-over-year.
Facebook monthly active users (MAUs) – MAUs were 2.80 billion as of December 31, 2020, an increase of 12% year-over-year.
Family daily active people (DAP) – DAP was 2.60 billion on average for December 2020, an increase of 15% year-over-year.
Family monthly active people (MAP) – MAP was 3.30 billion as of December 31, 2020, an increase of 14% year-over-year.
Capital expenditures – Capital expenditures, including principal payments on finance leases, were $4.82 billion and $15.72 billion for the fourth quarter and full year of 2020, respectively.
Cash and cash equivalents and marketable securities – Cash and cash equivalents and marketable securities were $61.95 billion as of December 31, 2020.
Headcount – Headcount was 58,604 as of December 31, 2020, an increase of 30% year-over-year.

In January 2021, the Board of Directors authorized incremental share repurchases of up to an additional $25 billion of our shares of Class A common stock. This authorization is in addition to the previously authorized repurchases of up to $34 billion of our shares of Class A common stock. As of the end of 2020, $8.6 billion remained on the previous share repurchase authorization.

CFO Outlook Commentary

We continue to face significant uncertainty as we manage through a number of cross currents in 2021.

We believe our business has benefited from two broad economic trends playing out during the pandemic. The first is the ongoing shift towards online commerce. The second is the shift in consumer demand towards products and away from services. We believe these shifts provided a tailwind to our advertising business in the second half of 2020 given our strength in product verticals sold via online commerce and our lower exposure to service verticals like travel. Looking forward, a moderation or reversal in one or both of these trends could serve as a headwind to our advertising revenue growth.

At the same time, in the first half of 2021, we will be lapping a period of growth that was negatively impacted by reduced advertising demand during the early stages of the pandemic. As a result, we expect year-over-year growth rates in total revenue to remain stable or modestly accelerate sequentially in the first and second quarters of 2021. In the second half of the year, we will lap periods of increasingly strong growth, which will significantly pressure year-over-year growth rates.

We also expect to face more significant ad targeting headwinds in 2021. This includes the impact of platform changes, notably iOS 14, as well as the evolving regulatory landscape. While the timing of the iOS 14 changes remains uncertain, we would expect to see an impact beginning late in the first quarter.

There is also continuing uncertainty around the viability of transatlantic data transfers in light of recent European regulatory developments, and like other companies in our industry, we are closely monitoring the potential impact on our European operations as these developments progress.

We expect 2021 total expenses to be in the range of $68-73 billion, unchanged from our prior outlook. This is driven by investments in technical and product talent as well as continued growth in infrastructure costs.

We continue to expect 2021 capital expenditures to be in the range of $21-23 billion, driven by data centers, servers, network infrastructure, and office facilities. Our outlook includes spend that was delayed from 2020 due to the impact of the pandemic on our construction efforts.

We continue to expect our full-year 2021 tax rate to be in the high-teens.

Webcast and Conference Call Information

Facebook will host a conference call to discuss the results at 2 p.m. PT / 5 p.m. ET today. The live webcast of Facebook’s earnings conference call can be accessed at investor.fb.com, along with the earnings press release, financial tables, and slide presentation. Facebook uses the investor.fb.com and about.fb.com/news/ websites as well as Mark Zuckerberg’s Facebook Page (https://www.facebook.com/zuck) as means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD.

Following the call, a replay will be available at the same website. A telephonic replay will be available for one week following the conference call at +1 (404) 537-3406 or +1 (855) 859-2056, conference ID 3993495.

Transcripts of conference calls with publishing equity research analysts held today will also be posted to the investor.fb.com website.

About Facebook

Founded in 2004, Facebook’s mission is to give people the power to build community and bring the world closer together. People use Facebook’s apps and technologies to connect with friends and family, find communities and grow businesses.

Contacts

Investors:
Deborah Crawford
[email protected] / investor.fb.com

Press:
Ryan Moore
[email protected] / about.fb.com/news/

Forward-Looking Statements

This press release contains forward-looking statements regarding our future business expectations. These forward-looking statements are only predictions and may differ materially from actual results due to a variety of factors including: the impact of the COVID-19 pandemic on our business and financial results; our ability to retain or increase users and engagement levels; our reliance on advertising revenue; our dependency on data signals and mobile operating systems, networks, and standards that we do not control; risks associated with new products and changes to existing products as well as other new business initiatives; our emphasis on community growth and engagement and the user experience over short-term financial results; maintaining and enhancing our brand and reputation; our ongoing privacy, safety, security, and content review efforts; competition; risks associated with government actions that could restrict access to our products or impair our ability to sell advertising in certain countries; litigation and government inquiries; privacy and regulatory concerns; risks associated with acquisitions; security breaches; and our ability to manage growth and geographically-dispersed operations. These and other potential risks and uncertainties that could cause actual results to differ from the results predicted are more fully detailed under the caption “Risk Factors” in our Quarterly Report on Form 10-Q filed with the SEC on October 30, 2020, which is available on our Investor Relations website at investor.fb.com and on the SEC website at www.sec.gov. Additional information will also be set forth in our Annual Report on Form 10-K for the year ended December 31, 2020. In addition, please note that the date of this press release is January 27, 2021, and any forward-looking statements contained herein are based on assumptions that we believe to be reasonable as of this date. We undertake no obligation to update these statements as a result of new information or future events.

Non-GAAP Financial Measures

To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with generally accepted accounting principles in the United States (GAAP), we use the following non-GAAP financial measures: revenue excluding foreign exchange effect, advertising revenue excluding foreign exchange effect and free cash flow. The presentation of these financial measures is not intended to be considered in isolation or as a substitute for, or superior to, financial information prepared and presented in accordance with GAAP. Investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures as an analytical tool. In addition, these measures may be different from non-GAAP financial measures used by other companies, limiting their usefulness for comparison purposes. We compensate for these limitations by providing specific information regarding the GAAP amounts excluded from these non-GAAP financial measures.

We believe these non-GAAP financial measures provide investors with useful supplemental information about the financial performance of our business, enable comparison of financial results between periods where certain items may vary independent of business performance, and allow for greater transparency with respect to key metrics used by management in operating our business.

We exclude the following items from our non-GAAP financial measures:

Foreign exchange effect on revenue. We translated revenue for the three months and full year ended December 31, 2020 using the prior year’s monthly exchange rates for our settlement or billing currencies other than the U.S. dollar, which we believe is a useful metric that facilitates comparison to our historical performance.

Purchases of property and equipment; Principal payments on finance leases. We subtract both purchases of property and equipment and principal payments on finance leases in our calculation of free cash flow because we believe that these two items collectively represent the amount of property and equipment we need to procure to support our business, regardless of whether we procure such property or equipment with a finance lease. We believe that this methodology can provide useful supplemental information to help investors better understand underlying trends in our business. Free cash flow is not intended to represent our residual cash flow available for discretionary expenditures.

For more information on our non-GAAP financial measures and a reconciliation of GAAP to non-GAAP measures, please see the “Reconciliation of GAAP to Non-GAAP Results” table in this press release.

FACEBOOK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions, except for per share amounts)
(Unaudited)

	Three Months Ended December 31,				Twelve Months Ended December 31,
	2020		2019		2020		2019
Revenue	$	28,072	$	21,082	$	85,965	$	70,697
Costs and expenses:
Cost of revenue	5,210		3,492		16,692		12,770
Research and development	5,208		3,877		18,447		13,600
Marketing and sales	3,280		3,026		11,591		9,876
General and administrative	1,599		1,829		6,564		10,465
Total costs and expenses	15,297		12,224		53,294		46,711
Income from operations	12,775		8,858		32,671		23,986
Interest and other income, net	280		311		509		826
Income before provision for income taxes	13,055		9,169		33,180		24,812
Provision for income taxes	1,836		1,820		4,034		6,327
Net income	$	11,219	$	7,349	$	29,146	$	18,485
Earnings per share attributable to Class A and Class B
common stockholders:
Basic	$	3.94	$	2.58	$	10.22	$	6.48
Diluted	$	3.88	$	2.56	$	10.09	$	6.43
Weighted-average shares used to compute earnings per
share attributable to Class A and Class B common
stockholders:
Basic	2,850		2,853		2,851		2,854
Diluted	2,890		2,871		2,888		2,876
Share-based compensation expense included in costs and
expenses:
Cost of revenue	$	120	$	90	$	447	$	377
Research and development	1,361		931		4,918		3,488
Marketing and sales	175		147		691		569
General and administrative	128		105		480		402
Total share-based compensation expense	$	1,784	$	1,273	$	6,536	$	4,836

FACEBOOK, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)

			December 31, 2020		December 31, 2019
Assets
Current assets:
	Cash and cash equivalents		$	17,576	$	19,079
	Marketable securities		44,378		35,776
	Accounts receivable, net of allowances of $114 and $92 as of December 31, 2020 and
	2019, respectively		11,335		9,518
	Prepaid expenses and other current assets		2,381		1,852
		Total current assets	75,670		66,225
Equity investments			6,234		86
Property and equipment, net			45,633		35,323
Operating lease right-of-use assets, net			9,348		9,460
Intangible assets, net			623		894
Goodwill			19,050		18,715
Other assets			2,758		2,673
Total assets			$	159,316	$	133,376

Liabilities and stockholders’ equity
Current liabilities:
	Accounts payable		$	1,331	$	1,363
	Partners payable		1,093		886
	Operating lease liabilities, current		1,023		800
	Accrued expenses and other current liabilities		11,152		11,735
	Deferred revenue and deposits		382		269
		Total current liabilities	14,981		15,053
Operating lease liabilities, non-current			9,631		9,524
Other liabilities			6,414		7,745
		Total liabilities	31,026		32,322
Commitments and contingencies
Stockholders’ equity:
	Common stock and additional paid-in capital		50,018		45,851
	Accumulated other comprehensive income (loss)		927		(489)
	Retained earnings		77,345		55,692
		Total stockholders’ equity	128,290		101,054
Total liabilities and stockholders’ equity			$	159,316	$	133,376

FACEBOOK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)

	Three Months Ended December 31,				Twelve Months Ended December 31,
	2020		2019		2020		2019
Cash flows from operating activities
Net income	$	11,219	$	7,349	$	29,146	$	18,485
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization	1,863		1,468		6,862		5,741
Share-based compensation	1,784		1,273		6,536		4,836
Deferred income taxes	(377)		(395)		(1,192)		(37)
Other	62		(6)		118		39
Changes in assets and liabilities:
Accounts receivable	(3,059)		(1,697)		(1,512)		(1,961)
Prepaid expenses and other current assets	225		577		135		47
Other assets	(25)		(26)		(34)		41
Accounts payable	(56)		112		(17)		113
Partners payable	278		289		178		348
Accrued expenses and other current liabilities	2,218		861		(1,054)		7,300
Deferred revenue and deposits	(3)		41		108		123
Other liabilities	(89)		(763)		(527)		1,239
Net cash provided by operating activities	14,040		9,083		38,747		36,314
Cash flows from investing activities
Purchases of property and equipment	(4,613)		(4,100)		(15,115)		(15,102)
Purchases of marketable securities	(5,737)		(4,758)		(33,930)		(23,910)
Sales of marketable securities	2,008		2,163		11,787		9,565
Maturities of marketable securities	3,260		3,104		13,984		10,152
Purchases of equity investments	(59)		—		(6,361)		(61)
Acquisitions of businesses, net of cash acquired, and purchases of
intangible assets	(5)		(445)		(388)		(508)
Other investing activities	(27)		—		(36)		—
Net cash used in investing activities	(5,173)		(4,036)		(30,059)		(19,864)
Cash flows from financing activities
Taxes paid related to net share settlement of equity awards	(1,121)		(627)		(3,564)		(2,337)
Repurchases of Class A common stock	(1,928)		(1,296)		(6,272)		(4,202)
Principal payments on finance leases	(205)		(141)		(604)		(552)
Net change in overdraft in cash pooling entities	48		37		24		(223)
Other financing activities	—		2		124		15
Net cash used in financing activities	(3,206)		(2,025)		(10,292)		(7,299)
Effect of exchange rate changes on cash, cash equivalents, and
restricted cash	314		177		279		4
Net increase (decrease) in cash, cash equivalents, and restricted cash	5,975		3,199		(1,325)		9,155
Cash, cash equivalents, and restricted cash at beginning of the period	11,979		16,080		19,279		10,124
Cash, cash equivalents, and restricted cash at end of the period	$	17,954	$	19,279	$	17,954	$	19,279

Reconciliation of cash, cash equivalents, and restricted cash to the condensed
consolidated balance sheets
Cash and cash equivalents	$	17,576	$	19,079	$	17,576	$	19,079
Restricted cash, included in prepaid expenses and other current
assets	241		8		241		8
Restricted cash, included in other assets	137		192		137		192
Total cash, cash equivalents, and restricted cash	$	17,954	$	19,279	$	17,954	$	19,279

FACEBOOK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)

	Three Months Ended December 31,				Twelve Months Ended December 31,
	2020		2019		2020		2019
Supplemental cash flow data
Cash paid for income taxes	$	1,107	$	2,654	$	4,229	$	5,182
Non-cash investing activities:
Acquisition of businesses in accrued expenses and
other current liabilities and other liabilities	$	118	$	—	$	118	$	—
Property and equipment in accounts payable and
accrued expenses and other current liabilities	$	2,201	$	1,887	$	2,201	$	1,887

Reconciliation of GAAP to Non-GAAP Results
(In millions, except percentages)
(Unaudited)

	Three Months Ended December 31,				Twelve Months Ended December 31,
	2020		2019		2020		2019
GAAP revenue	$	28,072	$	21,082	$	85,965	$	70,697
Foreign exchange effect on 2020 revenue using 2019
rates	(339)				120
Revenue excluding foreign exchange effect	$	27,733			$	86,085
GAAP revenue year-over-year change %	33%				22%
Revenue excluding foreign exchange effect year-over-
year change %	32%				22%
GAAP advertising revenue	$	27,187	$	20,736	$	84,169	$	69,655
Foreign exchange effect on 2020 advertising revenue
using 2019 rates	(332)				129
Advertising revenue excluding foreign exchange effect	$	26,855			$	84,298
GAAP advertising revenue year-over-year change %	31%				21%
Advertising revenue excluding foreign exchange effect
year-over-year change %	30%				21%

Net cash provided by operating activities	$	14,040	$	9,083	$	38,747	$	36,314
Purchases of property and equipment	(4,613)		(4,100)		(15,115)		(15,102)
Principal payments on finance leases	(205)		(141)		(604)		(552)
Free cash flow ⁽¹⁾	$	9,222	$	4,842	$	23,028	$	20,660




⁽¹⁾	Free cash flow in the full year ended December 31, 2020 reflects the $5.0 billion FTC settlement that was paid in April 2020.

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January 27, 2021 4:08 pm

Accuray Reports Second Quarter Fiscal 2021 Financial Results

PR Newswire

SUNNYVALE, Calif., Jan. 27, 2021 /PRNewswire/ — Accuray Incorporated (NASDAQ: ARAY) today reported its financial results for the second quarter of fiscal 2021 ended December 31, 2020.

Second Quarter Fiscal 2021 Summary

Net revenue of $97.5 million including $21.3 million of system revenue in China
Gross orders of $75.4 million, ending backlog of $596.2 million, an increase of 11 percent from December 31, 2019
GAAP operating income of $8.2 million and GAAP net income of $4.8 million compared to GAAP operating income of $3.6 million and GAAP net income of $10.7 million in the prior year second quarter
Adjusted EBITDA grew to $13.5 million from $7.1 million in the prior year second quarter
Received 510(k) FDA clearance for ClearRT™ Helical kVCT Imaging for the Radixact® System

“Our second quarter performance continues to reflect the positive momentum our business is making despite the headwinds created by the COVID-19 environment, said Josh Levine, President and CEO of Accuray. “Highlights from our second quarter performance include the beginning of system revenue conversion related to the Type A radiotherapy licenses in China as well as receiving 510(k) FDA clearance of our ClearRT Helical kVCT Imaging platform for the Radixact System. We are pleased with the continued resilience and commercial cadence that our business is exhibiting as well as the recent product innovation/upgrades coming through our development pipeline. We believe the additions of the Cyberknife S7 System, Synchrony on Radixact, and ClearRT Helical kVCT Imaging to our portfolio will have meaningful clinical impact for our customers and we look forward to the adoption of these important features and the functional improvement they represent in clinical practice.”

Fiscal Second Quarter Results

Gross orders totaled $75.4 million compared to $98.6 million for the prior fiscal year period. Backlog as of December 31, 2020 was $596.2 million, an increase of 11 percent compared to $539.4 million for the prior fiscal year period.

Total net revenue was $97.5 million compared to $98.8 million in the same prior fiscal year period. Product revenue totaled $41.8 million compared to $43.8 million in the same prior fiscal year period, while service revenue totaled $55.7 million compared to $55.1 million in the same prior fiscal year period.

Total gross profit for the fiscal 2021 second quarter was $40.8 million, or 41.9 percent of net revenue, comprised of product gross margin of 44.7 percent of product revenue and service gross margin of 39.8 percent of service revenue. This compares to total gross profit of $37.9 million, or 38.4 percent of net revenue, comprised of product gross margin of 44.0 percent of product revenue and service gross margin of 33.9 percent of service revenue in the prior fiscal year second quarter.

Operating expenses were $32.6 million, a decrease of 5 percent compared to $34.3 million in the prior fiscal year second quarter.

Net income was $4.8 million, or $0.05 per share, compared to a net income of $10.7 million, or $0.12 per share, in the same prior fiscal year period. The prior year second quarter net income included a non-cash, special gain of $13.0 million related to the value of the Company’s capital contribution to the Company’s China joint venture. This gain was recorded as non-operating, other income in the prior fiscal year second quarter.

Adjusted EBITDA for the second fiscal quarter 2021 was $13.5 million compared to $7.1 million in the same prior fiscal year period, which excludes the non-cash, special gain related to the Company’s capital contribution to the China joint venture recorded in the prior fiscal year second quarter.

Cash, cash equivalents and short-term restricted cash were $116.0 million as of December 31, 2020 compared with $95.5 million as of September 30, 2020.

Fiscal Six Months Results

For the six months ended December 31, 2020, gross product orders totaled $125.9 million compared to $177.0 million in the same prior fiscal year period. Ending product backlog was $596.2 million, approximately 11 percent higher than backlog at the end of the prior fiscal year second quarter.

Total net revenue for the six months ended December 31, 2020 was $182.8 million compared to $188.4 million in the same prior fiscal year period. Product revenue for the six months ended December 31, 2020 totaled $73.1 million compared to $81.4 million, while service revenue totaled $109.7 million compared to $107.0 million in the same prior fiscal year period.

Total gross profit for the six months ended December 31, 2020 was $76.2 million, or 41.7 percent of net revenue, comprised of product gross margin of 43.2 percent of product revenue and service gross margin of 40.7 percent of service revenue. This compares to total gross profit of $70.8 million, or 37.6 percent of net revenue, comprised of product gross margin of 43.4 percent of product revenue and service gross margin of 33.2 percent of service revenue in the same prior fiscal year period.

Operating expenses for the six months ended December 31, 2020 were $62.6 million, a decrease of 12 percent compared with $71.5 million in the same prior fiscal year period.

Net income was $5.2 million, or $0.06 per share, for the six months ended December 31, 2020, compared to net income of $1.4 million, or $0.02 per share, in the same prior fiscal year period. The prior year six month period ended December 31, 2019 included a non-cash, special gain of $13.0 million related to the value of the Company’s capital contribution to the Company’s China joint venture. The gain was recorded as non-operating, other income in the prior fiscal year second quarter.

Adjusted EBITDA for the six months ended December 31, 2020 was $22.5 million, compared to $6.1 million in the prior fiscal year period, which excludes the non-cash, special gain related to the Company’s capital contribution to the China joint venture recorded in the prior fiscal year second quarter.

Financial Guidance

The impact of the COVID-19 pandemic on Accuray’s fiscal 2021 results remains uncertain. Given the continued evolution of the COVID-19 pandemic and the uncertainty surrounding its impact on the global economy and the healthcare industry, Accuray believes it is prudent to refrain from providing financial guidance for fiscal year 2021.

Conference Call Information

Accuray will host a conference call beginning at 1:30 p.m. PT/4:30 p.m. ET today to discuss results for the second quarter of fiscal 2021 as well as recent corporate developments. Conference call dial-in information is as follows:

U.S. callers: (877) 270-2148
International callers: (412) 902-6510

Individuals interested in listening to the live conference call via the Internet may do so by logging on to the Investor Relations section of Accuray’s website, www.accuray.com.

In addition, a taped replay of the conference call will be available beginning approximately one hour after the call’s conclusion and will be available for seven days. The replay telephone number is (877) 344-7529 (USA), or (412) 317-0088 (International), Conference ID: 10151157. An archived webcast will also be available at Accuray’s website until Accuray announces its results for the third quarter of fiscal 2021.

Use of Non-GAAP Financial Measures

Accuray has supplemented its GAAP net income (loss) with a non-GAAP measure of adjusted earnings before interest, taxes, depreciation, amortization, gain on contribution to equity method investment in joint venture and stock-based compensation (“adjusted EBITDA”). Management believes that this non-GAAP financial measure provides useful supplemental information to management and investors regarding the performance of the Company and facilitates a meaningful comparison of results for current periods with previous operating results. A reconciliation of GAAP net income (the most directly comparable GAAP measure) to non-GAAP adjusted EBITDA is provided in the schedules below.

There are limitations in using non-GAAP financial measures because they are not prepared in accordance with GAAP and may be different from non-GAAP financial measures used by other companies. These non-GAAP financial measures should not be considered in isolation or as a substitute for GAAP financial measures. Investors and potential investors should consider non-GAAP financial measures only in conjunction with the Company’s consolidated financial statements prepared in accordance with GAAP.

About Accuray

Accuray Incorporated (Nasdaq: ARAY) develops, manufactures and sells radiotherapy systems that are intended to make cancer treatments shorter, safer, personalized and more effective, ultimately enabling patients to live longer, better lives. Our radiation treatment delivery systems in combination with fully-integrated software solutions set the industry standard for precision and cover the full range of radiation therapy and radiosurgery procedures. For more information, please visit www.accuray.com.

Safe Harbor Statement

Statements made in this press release that are not statements of historical fact are forward-looking statements and are subject to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements in this press release relate, but are not limited, to the Company’s future results of operations, including expectations regarding gross orders, order volume and age-outs; expectations regarding the effect of the COVID-19 pandemic on the Company; the Company’s ability to adapt and make the necessary adjustments to compete and operate effectively; the Company’s continued resilience and ability to continue to realize the benefits of working capital management and cash preservation activities; expectations regarding future sales in China; expectations regarding the Company’s Chinese joint venture, including the timing of and ability to drive revenue conversion and introduce a Type B product to the market in China as well as the operating impact of the joint venture on the Company’s income statement; expectations regarding the Company’s product innovations and developments, including expectations related to future regulatory approvals; expectations regarding the Company’s product portfolio, the clinical impact and value of those products on our customers, and market adoption of such products, including with respect to the Company’s Synchrony on Radixact, CyberKnife S7 System and Clear RT Helical kVCT Imaging upgrades as well as other strategic product innovations; expectations regarding the commercial launch of Clear RT Helical kVCT Imaging; expectations regarding the new Centers for Medicare and Medicaid Services alternative payment model and reimbursement schedule; expectations regarding the future of radiotherapy treatment; and the Company’s leadership position in radiation oncology innovation and technologies. These forward-looking statements involve risks and uncertainties. If any of these risk or uncertainties materialize, or if any of the Company’s assumptions prove incorrect, actual results could differ materially from the results express or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, the effect of the COVID-19 pandemic on the operations of the Company and those of its customers and suppliers; the Company’s ability to achieve widespread market acceptance of its products, including new product and software offerings; the Company’s ability to develop new products or enhance existing products to meet customers’ needs and compete favorably in the market, the Company’s ability to effectively integrate and execute the joint venture, the Company’s ability to realize the expected benefits of the joint venture; the ability of customers in China to obtain Class A or B user licenses to purchase radiotherapy systems; risks inherent in international operations; the Company’s ability to effectively manage its growth; the Company’s ability to maintain or increase its gross margins on product sales and services; delays in regulatory approvals or the development or release of new offerings; the Company’s ability to meet the covenants under its credit facilities; the Company’s ability to convert backlog to revenue; and such other risks identified under the heading “Risk Factors” in the Company’s Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission (the “SEC”) on November 4, 2020 and as updated periodically with the Company’s other filings with the SEC.

Forward-looking statements speak only as of the date the statements are made and are based on information available to the Company at the time those statements are made and/or management’s good faith belief as of that time with respect to future events. The Company assumes no obligation to update forward-looking statements to reflect actual performance or results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws. Accordingly, investors should not put undue reliance on any forward-looking statements.

Accuray Incorporated Condensed Consolidated Statements of Operations (in thousands, except per share data) (Unaudited)

	Three Months Ended December 31,				Six Months Ended December 31,
	2020		2019		2020		2019
Gross Orders	$	75,365	$	98,556	$	125,893	$	177,043
Net Orders		42,462		89,904		66,016		128,885
Order Backlog		596,214		539,357		596,214		539,357
Net revenue:
Products	$	41,805	$	43,760	$	73,063	$	81,365
Services		55,654		55,066		109,728		107,038
Total net revenue		97,459		98,826		182,791		188,403
Cost of revenue:
Cost of products		23,102		24,518		41,528		46,088
Cost of services		33,526		36,408		65,029		71,472
Total cost of revenue		56,628		60,926		106,557		117,560
Gross profit		40,831		37,900		76,234		70,843
Operating expenses:
Research and development		11,956		13,064		24,104		26,405
Selling and marketing		10,348		11,327		19,246		24,593
General and administrative		10,328		9,886		19,217		20,502
Total operating expenses		32,632		34,277		62,567		71,500
Income (loss) from operations		8,199		3,623		13,667		(657)
Income on equity investment, net		1,117		—		1,089		—
Other income (expense), net		(4,260)		7,766		(8,954)		3,327
Income before provision for income taxes		5,056		11,389		5,802		2,670
Provision for income taxes		287		679		631		1,316
Net income	$	4,769	$	10,710	$	5,171	$	1,354
Net income per share – basic	$	0.05	$	0.12	$	0.06	$	0.02
Net income per share – diluted	$	0.05	$	0.12	$	0.06	$	0.02
Weighted average common shares used in computing income per share:
Basic		92,025		89,517		91,609		89,145
Diluted		93,353		90,279		92,607		90,095

Accuray Incorporated Condensed Consolidated Balance Sheets (in thousands) (Unaudited)

	December 31,		June 30,
	2020		2020
Assets
Current assets:
Cash and cash equivalents	$	107,322	$	107,577
Restricted cash		8,692		997
Accounts receivable, net		65,367		90,599
Inventories		138,655		134,374
Prepaid expenses and other current assets		22,309		21,227
Deferred cost of revenue		2,577		2,712
Total current assets		344,922		357,486
Property and equipment, net		13,773		15,349
Investment in joint venture		17,019		13,929
Goodwill		57,963		57,717
Intangible assets, net		549		663
Operating lease right-of-use assets		26,110		28,647
Other assets		17,806		17,136
Total assets	$	478,142	$	490,927
Liabilities and equity
Current liabilities:
Accounts payable	$	10,876	$	23,126
Accrued compensation		21,942		17,963
Operating lease liabilities, current		8,587		8,224
Other accrued liabilities		24,396		27,180
Customer advances		19,516		22,571
Deferred revenue		80,884		83,207
Short-term debt		12,530		—
Total current liabilities		178,731		182,271
Long-term other liabilities		9,195		7,416
Deferred revenue		23,391		24,125
Operating lease liabilities, non-current		20,965		24,173
Long-term debt		168,082		189,307
Total liabilities		400,364		427,292
Equity:
Common stock		93		91
Additional paid-in capital		551,409		545,741
Accumulated other comprehensive income (loss)		2,818		(484)
Accumulated deficit		(476,542)		(481,713)
Total equity		77,778		63,635
Total liabilities and equity	$	478,142	$	490,927

Accuray Incorporated Reconciliation of GAAP Net Income to Adjusted Earnings Before Interest, Taxes, Depreciation, Amortization and Stock-Based Compensation (Adjusted EBITDA) (in thousands) (Unaudited)

	Three Months Ended December 31,				Six Months Ended December 31,
	2020		2019		2020		2019
GAAP net income	$	4,769	$	10,710	$	5,171	$	1,354
Depreciation and amortization		1,663		1,846		3,313		3,697
Stock-based compensation		2,364		2,149		4,608		3,849
Interest expense, net		4,430		4,683		8,823		8,883
Gain on contribution to equity method investment in joint venture (a)		—		(12,965)		—		(12,965)
Provision for income taxes		287		679		631		1,316
Adjusted EBITDA	$	13,513	$	7,102	$	22,546	$	6,134


(a) Consists of non-cash gain related to the value of the Company’s capital contribution to the China joint venture.

Joe Diaz	Beth Kaplan
Investor Relations, Lytham Partners	Public Relations Director, Accuray
+1 (602) 889-9700	+1 (408) 789-4426
[email protected]	[email protected]

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SOURCE Accuray Incorporated

January 27, 2021 4:08 pm

Washington Trust Reports Fourth Quarter and Full-Year 2020 Earnings

PR Newswire

WESTERLY, R.I., Jan. 27, 2021 /PRNewswire/ — Washington Trust Bancorp, Inc. (Nasdaq:WASH), parent company of The Washington Trust Company, today announced fourth quarter 2020 net income of $18.6 million, or $1.07 per diluted share, compared to net income of $18.3 million, or $1.06 per diluted share, reported for the third quarter of 2020. Net income for the year ended December 31, 2020 totaled $69.8 million, or $4.00 per diluted share, compared to $69.1 million, or $3.96 per diluted share, reported for the prior year.

“Washington Trust reported strong earnings for 2020, a year marked by unprecedented challenges, disruption, and uncertainties,” stated Edward O. Handy III, Washington Trust Chairman and Chief Executive Officer. “Our success was due to the spirit and resilience of our dedicated team of employees, who maintained high service levels and ‘business as usual’ operations during a major pandemic; the strength and stability of our balance sheet, which continued to provide a diverse stream of earnings during the most volatile of operating environments; and the loyalty and perseverance of our customers, who have trusted us to help them through these difficult times.”

Selected financial highlights for the fourth quarter and full-year 2020 include:

Returns on average equity and average assets for the fourth quarter were 13.96% and 1.28%, respectively, compared to 13.99% and 1.24%, respectively, in the preceding quarter. Full-year returns on average equity and average assets for 2020 were 13.51% and 1.22%, respectively, compared to 14.34% and 1.34%, respectively, in the prior year.
Mortgage banking revenues amounted to $14.1 million for the fourth quarter and totaled a record $47.4 million for the year. Full-year 2020 mortgage banking revenues were up by $32.6 million, or 220%, from a year ago. The volume of both mortgage originations and sales reached record highs in 2020.
Wealth management revenues were $9.2 million for the fourth quarter, up by $252 thousand, or 3%, from the preceding quarter. Wealth management assets under administration (“AUA”) amounted to a record $6.9 billion at December 31, 2020.
Total loans amounted to $4.2 billion, up by $303.0 million, or 8%, from a year ago, largely due to origination of Paycheck Protection Program (“PPP”) loans in 2020.
In-market deposits (total deposits less out-of-market wholesale brokered deposits) amounted to $3.8 billion at December 31, 2020, up by $573 million, or 18%, from a year ago.

Net Interest Income
Net interest income was $32.2 million for the fourth quarter of 2020, up by $589 thousand, or 2%, from the third quarter of 2020. The net interest margin was 2.39% for the fourth quarter, up by 8 basis points from the the preceding quarter. Both net interest income and the net interest margin benefited from $423 thousand, or 3 basis points, of accelerated net deferred fee amortization associated with PPP loans that were forgiven by the Small Business Association (“SBA”) in the fourth quarter of 2020. Linked quarter changes included:

Average interest-earning assets decreased by $82 million, largely due to a decrease of $71 million in average loans. The yield on interest-earning assets for the fourth quarter was 2.92%, down by 6 basis points from the preceding quarter, reflecting the impact of lower market interest rates.
Average interest-bearing liabilities decreased by $90 million, resulting from a decrease of $199 million in average wholesale funding balances, partially offset by an increase of $110 million in average in-market deposits. The cost of interest-bearing liabilities for the fourth quarter of 2020 was 0.67%, down by 18 basis points from the preceding quarter, reflecting the impact of lower market interest rates.

Noninterest Income
Noninterest income totaled $27.7 million for the fourth quarter of 2020, up by $2.3 million, or 9%, from the third quarter of 2020. Included in other noninterest income for the fourth quarter of 2020 was a gain of $1.4 million associated with the sale of our limited partnership interest in a low-income housing tax credit investment. Excluding this gain, noninterest income totaled $26.3 million, up by $859 thousand, or 3%, from the third quarter of 2020. Other linked quarter changes included:

Mortgage banking revenues totaled $14.1 million for the fourth quarter of 2020, up by $1.7 million, or 14%, from the third quarter of 2020, with a decrease in realized gains offset by an increase in unrealized gains. Net realized gains decreased on a linked quarter basis, reflecting lower sales volume partially offset by a higher sales yield. Mortgage loans sold to the secondary market amounted to $318 million in the fourth quarter of 2020, down by $36 million, or 10%, from the preceding quarter. Net unrealized gains increased on a linked quarter basis, reflecting an increase in the fair value of mortgage loan commitments as of December 31, 2020.
Wealth management revenues amounted to $9.2 million in the fourth quarter of 2020, up by $252 thousand, or 3%, on a linked quarter basis due to an increase in asset-based revenues of $280 thousand, or 3%.
Wealth management AUA amounted to $6.9 billion at December 31, 2020, up by $471 million, or 7%, from September 30, 2020. The increase reflected net investment appreciation of $540 million, partially offset by net client asset outflows of $69 million in the fourth quarter of 2020. The average balance of AUA for the fourth quarter of 2020 increased by approximately $213 million, or 3%, from the average balance for the preceding quarter.
Loan related derivative income totaled $173 thousand in the fourth quarter of 2020, down by $1.1 million from the preceding quarter, reflecting lower volume of commercial borrower interest rate swap transactions.

Noninterest Expense
Noninterest expense totaled $34.1 million for the fourth quarter of 2020, up by $1.8 million, or 5%, from the third quarter of 2020. Included in noninterest expense for the fourth quarter of 2020 was debt prepayment penalty expense of $1.4 million, resulting from paying off higher-yielding FHLB advances in the fourth quarter of 2020. Excluding the debt prepayment penalty expense, noninterest expense totaled $32.7 million, up by $352 thousand, or 1%, from the third quarter of 2020.

Salaries and employee benefits expense, our largest noninterest expense, amounted to $22.1 million for the fourth quarter of 2020, up by $183 thousand, or 1%, from the preceding quarter. The remaining increase in noninterest expense reflects modest changes across a variety of other noninterest expense categories, including outsourced services, legal, audit and professional fees, advertising and promotion and other expenses.

Income Tax
Income tax expense totaled $5.5 million for the fourth quarter of 2020, up by $383 thousand from the preceding quarter, largely due to a higher level of pre-tax income. The effective tax rate for the fourth quarter of 2020 was 22.9%, compared to 21.9% in the preceding quarter. Based on current federal and applicable state income statutes, the Corporation currently expects its full-year 2021 effective tax rate to be approximately 22.0%.

Investment Securities
The securities portfolio totaled $895 million at December 31, 2020, down by $19 million, or 2%, from September 30, 2020, due to routine pay-downs on mortgage-backed securities and calls of debt securities. These decreases were partially offset by purchases of U.S. government agency and U.S. government-sponsored debt securities, including mortgage-backed securities. Fourth quarter 2020 purchases totaled $142 million, with a weighted average yield of 1.64%. Securities represented 16% of total assets at both December 31, 2020 and September 30, 2020.

Loans
Total loans amounted to $4.2 billion at December 31, 2020, down by $86 million, or 2%, from the end of the preceding quarter. Linked quarter changes included:

Commercial loans decreased by $38 million, or 2%, from September 30, 2020. In the fourth quarter of 2020, payoffs and pay-downs amounted to approximately $105 million and included $18 million of PPP loans that were forgiven by the SBA.
Residential real estate loans decreased by $39 million, or 3%, from September 30, 2020, reflecting increased payoff and refinancing activity.
The consumer loan portfolio decreased by $9 million, or 3%, from the balance at September 30, 2020.

Deposits and Borrowings
Total deposits amounted to $4.4 billion at December 31, 2020, up by $93 million, or 2%, from the end of the preceding quarter. Included in total deposits are out-of-market wholesale brokered time deposits, which increased by $7 million, or 1%, from September 30, 2020. Excluding wholesale brokered time deposits, in-market deposits at December 31, 2020 were up by $85 million, or 2%, from the end of the preceding quarter.

Federal Home Loan Bank advances totaled $594 million at December 31, 2020, down by $120 million from September 30, 2020. There were no Paycheck Protection Program Liquidity Facility (“PPPLF”) borrowings outstanding at December 31, 2020, compared to $106 million at September 30, 2020.

Asset Quality
Nonperforming assets amounted to $13.2 million at December 31, 2020, down by $1.5 million from the end of the preceding quarter. Total nonaccrual loans amounted to $13.2 million, or 0.31% of total loans, at December 31, 2020, compared to $14.7 million, or 0.34% of total loans, at September 30, 2020.

Total past due loans amounted to $12.4 million, or 0.30% of total loans, at December 31, 2020, compared to $10.4 million, or 0.24% of total loans, at September 30, 2020. The $2.0 million increase in past due loans was concentrated in residential real estate loans.

Total troubled debt restructured (“TDR”) loans amounted to $15.7 million as of December 31, 2020, up by $7.1 million from September 30, 2020, largely due to restructurings of two commercial and industrial loan relationships that did not qualify for TDR accounting relief.

The allowance for credit losses (“ACL”) on loans amounted to $44.1 million, or 1.05% of total loans, at December 31, 2020, compared to $42.6 million, or 1.00% of total loans, at September 30, 2020. The ACL on unfunded commitments, included in other liabilities on the Consolidated Balance Sheets, amounted to $2.4 million at December 31, 2020 as compared to $2.2 million, at September 30, 2020.

In the fourth quarter of 2020, a provision for credit losses of $1.8 million was charged to earnings, compared to $1.3 million in the preceding quarter. In the fourth quarter of 2020, net charge-offs of $118 thousand were recognized, compared to $96 thousand in the preceding quarter.

Capital and Dividends
Total shareholders’ equity was $534.2 million at December 31, 2020, up by $6.5 million from September 30, 2020. This increase included net income of $18.6 million, which was partially offset by $9.1 million in dividend declarations and a charge of $3.9 million to the accumulated other comprehensive income component of shareholders’ equity associated with the annual remeasurement of pension plan liabilities. This charge was largely due to a decline in the discount rate used to measure the present value of pension plan liabilities as a result of a reduction in market interest rates in 2020.

Capital levels at December 31, 2020 exceeded the regulatory minimum levels to be considered well capitalized, with a total risk-based capital ratio of 13.51% at December 31, 2020, compared to 13.09% at September 30, 2020.

Book value per share amounted to $30.94 at December 31, 2020, compared to $30.57 at September 30, 2020.

The Board of Directors declared a quarterly dividend of 52 cents per share for the quarter ended December 31, 2020, representing an increase of 1 cent per share from the preceding quarter. The dividend was paid on January 8, 2021 to shareholders of record on January 4, 2021.

Conference Call
Washington Trust will host a conference call to discuss its fourth quarter results, business highlights and outlook on Thursday, January 28, 2021 at 8:30 a.m. (Eastern Time). Individuals may dial in to the call at 1-888-243-4451. An audio replay of the call will be available, shortly after the conclusion of the call, by dialing 1-877-344-7529 and entering the Replay PIN Number 10151312; the audio replay will be available through February 4, 2021. Also, a webcast of the call will be posted in the Investor Relations section of Washington Trust’s web site, http://ir.washtrust.com, and will be available through March 31, 2021.

Background
Washington Trust Bancorp, Inc. is the parent of The Washington Trust Company. Founded in 1800, Washington Trust is the oldest community bank in the nation, the largest state-chartered bank headquartered in Rhode Island and one of the Northeast’s premier financial services companies. Washington Trust offers a full range of financial services, including commercial banking, mortgage banking, personal banking and wealth management and trust services through its offices located in Rhode Island, Connecticut and Massachusetts. The Corporation’s common stock trades on NASDAQ under the symbol WASH. Investor information is available on the Corporation’s web site at http://ir.washtrust.com.

Forward-Looking Statements
This press release contains statements that are “forward-looking statements”. We may also make forward-looking statements in other documents we file with the SEC, in our annual reports to shareholders, in press releases and other written materials, and in oral statements made by our officers, directors or employees. You can identify forward-looking statements by the use of the words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “assume,” “outlook,” “will,” “should,” and other expressions that predict or indicate future events and trends and which do not relate to historical matters. You should not rely on forward-looking statements, because they involve known and unknown risks, uncertainties and other factors, some of which are beyond our control. These risks, uncertainties and other factors may cause our actual results, performance or achievements to be materially different from the anticipated future results, performance or achievements expressed or implied by the forward-looking statements.

Some of the factors that might cause these differences include the following: the negative impacts and disruptions of the COVID-19 pandemic and measures taken to contain its spread on our employees, customers, business operations, credit quality, financial position, liquidity and results of operations; the length and extent of the economic contraction as a result of the COVID-19 pandemic; continued deterioration in local, regional, national or international economic conditions or conditions affecting the banking or financial services industries, financial capital markets and the customers and communities we serve; changes in consumer behavior due to changing political, business and economic conditions, including increased unemployment, or legislative or regulatory initiatives; the possibility that future credits losses are higher than currently expected due to changes in economic assumptions or adverse economic developments; volatility in national and international financial markets; reductions in net interest income resulting from interest rate volatility as well as changes in the balance and mix of loans and deposits; reductions in the market value or outflows of wealth management assets under administration; decreases in the value of securities and other assets; reductions in loan demand; changes in loan collectibility, increases in defaults and charge-off rates; changes in the size and nature of our competition; changes in legislation or regulation and accounting principles, policies and guidelines; operational risks including, but not limited to, cybersecurity incidents, fraud, natural disasters and future pandemics; reputational risk relating to our participation in the Paycheck Protection Program and other pandemic-related legislative and regulatory initiatives and programs; and changes in the assumptions used in making such forward-looking statements. In addition, the factors described under “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, as updated by our Quarterly Reports on Form 10-Q and other filings submitted to the SEC, may result in these differences. You should carefully review all of these factors and you should be aware that there may be other factors that could cause these differences. These forward-looking statements were based on information, plans and estimates at the date of this report, and we assume no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.

Supplemental Information – Explanation of Non-GAAP Financial Measures
In addition to results presented in accordance with generally accepted accounting principles (“GAAP”), this press release contains certain non-GAAP financial measures. Washington Trust’s management believes that the supplemental non-GAAP information, which consists of measurements and ratios based on tangible equity and tangible assets, 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 determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures which may be presented by other companies. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies’ non-GAAP financial measures having the same or similar names.

Washington Trust Bancorp, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited; Dollars in thousands)

	Dec 31, 2020	Sep 30, 2020	Jun 30, 2020	Mar 31, 2020	Dec 31, 2019
Assets:
Cash and due from banks	$194,143	$204,113	$215,601	$178,678	$132,193
Short-term investments	8,125	7,902	7,739	6,591	6,262
Mortgage loans held for sale, at fair value	61,614	68,095	43,997	49,751	27,833
Available for sale debt securities, at fair value	894,571	913,850	938,446	917,392	899,490
Federal Home Loan Bank stock, at cost	30,285	37,469	50,017	53,576	50,853
Loans:
Total loans	4,195,990	4,282,047	4,287,641	4,090,396	3,892,999
Less: allowance for credit losses on loans	44,106	42,645	41,441	39,665	27,014
Net loans	4,151,884	4,239,402	4,246,200	4,050,731	3,865,985
Premises and equipment, net	28,870	27,711	28,067	28,543	28,700
Operating lease right-of-use assets	29,521	29,861	27,022	26,098	26,792
Investment in bank-owned life insurance	84,193	83,623	83,056	83,053	82,490
Goodwill	63,909	63,909	63,909	63,909	63,909
Identifiable intangible assets, net	6,305	6,530	6,759	6,988	7,218
Other assets	159,749	167,327	166,147	155,669	100,934
Total assets	$5,713,169	$5,849,792	$5,876,960	$5,620,979	$5,292,659
Liabilities:
Deposits:
Noninterest-bearing deposits	$832,287	$840,444	$815,770	$622,893	$609,924
Interest-bearing deposits	3,546,066	3,445,249	3,285,666	3,083,421	2,888,958
Total deposits	4,378,353	4,285,693	4,101,436	3,706,314	3,498,882
Federal Home Loan Bank advances	593,859	713,868	1,005,051	1,198,534	1,141,464
Payment Protection Program Lending Facility	—	105,746	38,900	—	—
Junior subordinated debentures	22,681	22,681	22,681	22,681	22,681
Operating lease liabilities	31,717	32,012	29,125	28,184	28,861
Other liabilities	152,364	162,099	159,604	156,669	97,279
Total liabilities	5,178,974	5,322,099	5,356,797	5,112,382	4,789,167
Shareholders’ Equity:
Common stock	1,085	1,085	1,085	1,085	1,085
Paid-in capital	125,610	124,768	123,684	123,167	123,281
Retained earnings	418,246	408,773	399,386	387,243	390,363
Accumulated other comprehensive income (loss)	(7,391)	(3,403)	(462)	929	(11,237)
Treasury stock, at cost	(3,355)	(3,530)	(3,530)	(3,827)	—
Total shareholders’ equity	534,195	527,693	520,163	508,597	503,492
Total liabilities and shareholders’ equity	$5,713,169	$5,849,792	$5,876,960	$5,620,979	$5,292,659

Washington Trust Bancorp, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited; Dollars and shares in thousands, except per share amounts)
	For the Three Months Ended					For the Twelve Months Ended
	Dec 31, 2020	Sep 30, 2020	Jun 30, 2020	Mar 31, 2020	Dec 31, 2019	Dec 31, 2020	Dec 31, 2019
Interest income:
Interest and fees on loans	$34,487	$34,925	$36,005	$40,008	$40,079	$145,425	$165,519
Interest on mortgage loans held for sale	569	468	440	285	359	1,762	1,237
Taxable interest on debt securities	3,869	4,870	5,477	5,834	5,817	20,050	26,367
Nontaxable interest on debt securities	—	—	—	—	—	—	18
Dividends on Federal Home Loan Bank stock	414	532	654	640	693	2,240	2,855
Other interest income	35	39	36	349	435	459	1,667
Total interest and dividend income	39,374	40,834	42,612	47,116	47,383	169,936	197,663
Interest expense:
Deposits	4,632	5,532	7,112	8,536	9,144	25,812	37,101
Federal Home Loan Bank advances	2,305	3,354	4,382	5,765	6,015	15,806	26,168
Junior subordinated debentures	122	135	171	213	230	641	980
Other interest expense	72	159	2	—	—	233	—
Total interest expense	7,131	9,180	11,667	14,514	15,389	42,492	64,249
Net interest income	32,243	31,654	30,945	32,602	31,994	127,444	133,414
Provision for credit losses	1,781	1,325	2,200	7,036	—	12,342	1,575
Net interest income after provision for credit losses	30,462	30,329	28,745	25,566	31,994	115,102	131,839
Noninterest income:
Wealth management revenues	9,206	8,954	8,605	8,689	8,894	35,454	36,848
Mortgage banking revenues	14,077	12,353	14,851	6,096	3,669	47,377	14,795
Card interchange fees	1,148	1,161	1,031	947	1,100	4,287	4,214
Service charges on deposit accounts	767	598	517	860	941	2,742	3,684
Loan related derivative income	173	1,264	99	2,455	1,116	3,991	3,993
Income from bank-owned life insurance	569	567	791	564	570	2,491	2,354
Net realized gains (losses) on securities	—	—	—	—	27	—	(53)
Other income	1,787	571	426	316	301	3,100	1,245
Total noninterest income	27,727	25,468	26,320	19,927	16,618	99,442	67,080
Noninterest expense:
Salaries and employee benefits	22,075	21,892	19,464	19,468	18,374	82,899	72,761
Outsourced services	2,950	3,160	2,784	3,000	2,752	11,894	10,598
Net occupancy	2,083	2,012	1,909	2,019	1,986	8,023	7,821
Equipment	1,025	934	895	977	996	3,831	4,081
Legal, audit and professional fees	1,014	1,252	659	822	692	3,747	2,535
FDIC deposit insurance costs	330	392	674	422	109	1,818	618
Advertising and promotion	640	384	186	259	402	1,469	1,534
Amortization of intangibles	226	228	230	230	229	914	943
Debt prepayment penalties	1,413	—	—	—	—	1,413	—
Other expenses	2,353	2,090	1,677	3,256	3,215	9,376	9,849
Total noninterest expense	34,109	32,344	28,478	30,453	28,755	125,384	110,740
Income before income taxes	24,080	23,453	26,587	15,040	19,857	89,160	88,179
Income tax expense	5,514	5,131	5,547	3,139	4,321	19,331	19,061
Net income	$18,566	$18,322	$21,040	$11,901	$15,536	$69,829	$69,118

Net income available to common shareholders	$18,524	$18,285	$21,000	$11,869	$15,502	$69,678	$68,979

Weighted average common shares outstanding:
Basic	17,264	17,260	17,257	17,345	17,351	17,282	17,331
Diluted	17,360	17,317	17,292	17,441	17,436	17,402	17,414
Earnings per common share:
Basic	$1.07	$1.06	$1.22	$0.68	$0.89	$4.03	$3.98
Diluted	$1.07	$1.06	$1.21	$0.68	$0.89	$4.00	$3.96

Cash dividends declared per share	$0.52	$0.51	$0.51	$0.51	$0.51	$2.05	$2.00

Washington Trust Bancorp, Inc. and Subsidiaries
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited; Dollars and shares in thousands, except per share amounts)

	Dec 31, 2020		Sep 30, 2020		Jun 30, 2020		Mar 31, 2020		Dec 31, 2019
Share and Equity Related Data:
Book value per share	$30.94		$30.57		$30.14		$29.48		$29.00
Tangible book value per share – Non-GAAP (1)	$26.87		$26.49		$26.04		$25.37		$24.90
Market value per share	$44.80		$30.66		$32.75		$36.56		$53.79
Shares issued at end of period	17,363		17,363		17,363		17,363		17,363
Shares outstanding at end of period	17,265		17,260		17,260		17,252		17,363

Capital Ratios (2) :
Tier 1 risk-based capital	12.61	%	12.23	%	11.95	%	11.62	%	12.23	%
Total risk-based capital	13.51	%	13.09	%	12.78	%	12.42	%	12.94	%
Tier 1 leverage ratio	8.95	%	8.77	%	8.42	%	8.77	%	9.04	%
Common equity tier 1	12.06	%	11.69	%	11.40	%	11.08	%	11.65	%

Balance Sheet Ratios:
Equity to assets	9.35	%	9.02	%	8.85	%	9.05	%	9.51	%
Tangible equity to tangible assets – Non-GAAP (1)	8.22	%	7.91	%	7.74	%	7.89	%	8.28	%
Loans to deposits (3)	96.2	%	100.5	%	104.6	%	110.6	%	111.3	%

											For the Twelve Months Ended
	For the Three Months Ended										For the Twelve Months Ended
	Dec 31, 2020		Sep 30, 2020		Jun 30, 2020		Mar 31, 2020		Dec 31, 2019		Dec 31, 2020		Dec 31, 2019
Performance Ratios (4) :
Net interest margin (5)	2.39	%	2.31	%	2.31	%	2.61	%	2.61	%	2.40	%	2.77	%
Return on average assets (net income divided by average assets)	1.28	%	1.24	%	1.46	%	0.89	%	1.18	%	1.22	%	1.34	%
Return on average tangible assets – Non-GAAP (1)	1.30	%	1.26	%	1.48	%	0.90	%	1.20	%	1.24	%	1.36	%
Return on average equity (net income available for common shareholders divided by average equity)	13.96	%	13.99	%	16.51	%	9.49	%	12.24	%	13.51	%	14.34	%
Return on average tangible equity – Non-GAAP (1)	16.10	%	16.19	%	19.15	%	11.05	%	14.26	%	15.66	%	16.85	%
Efficiency ratio (6)	56.9	%	56.6	%	49.7	%	58.0	%	59.2	%	55.3	%	55.2	%


(1)	See the section labeled “Supplemental Information – Calculation of Non-GAAP Financial Measures” at the end of this document.
(2)	Estimated for December 31, 2020 and actuals for prior periods.
(3)	Period-end balances of net loans and mortgage loans held for sale as a percentage of total deposits.
(4)	Annualized based on the actual number of days in the period.
(5)	Fully taxable equivalent (FTE) net interest income as a percentage of average-earnings assets.
(6)	Total noninterest expense as percentage of total revenues (net interest income and noninterest income).

Washington Trust Bancorp, Inc. and Subsidiaries
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited; Dollars in thousands)

	For the Three Months Ended					For the Twelve Months Ended
	Dec 31, 2020	Sep 30, 2020	Jun 30, 2020	Mar 31, 2020	Dec 31, 2019	Dec 31, 2020	Dec 31, 2019
Wealth Management Results
Wealth Management Revenues:
Asset-based revenues	$9,066	$8,786	$8,156	$8,355	$8,731	$34,363	$35,806
Transaction-based revenues	140	168	449	334	163	1,091	1,042
Total wealth management revenues	$9,206	$8,954	$8,605	$8,689	$8,894	$35,454	$36,848

Assets Under Administration (AUA):
Balance at beginning of period	$6,395,652	$6,138,845	$5,337,733	$6,235,801	$6,126,327	$6,235,801	$5,910,814
Net investment appreciation (depreciation) & income	540,189	335,209	671,602	(772,735)	310,766	774,265	1,119,826
Net client asset inflows (outflows)	(69,104)	(78,402)	129,510	(125,333)	(243,175)	(143,329)	(836,722)
Other (1)	—	—	—	—	41,883	—	41,883
Balance at end of period	$6,866,737	$6,395,652	$6,138,845	$5,337,733	$6,235,801	$6,866,737	$6,235,801

Percentage of AUA that are managed assets	91%	90%	90%	89%	90%	91%	90%

Mortgage Banking Results
Mortgage Banking Revenues:
Realized gains on loan sales, net (2)	$13,394	$14,280	$10,646	$3,688	$4,608	$42,008	$13,978
Unrealized gains (losses), net (3)	813	(1,555)	4,415	2,325	(1,025)	5,998	354
Loan servicing fee income, net (4)	(130)	(372)	(210)	83	86	(629)	463
Total mortgage banking revenues	$14,077	$12,353	$14,851	$6,096	$3,669	$47,377	$14,795

Residential Mortgage Loan Originations:
Originations for retention in portfolio	$134,002	$132,726	$126,894	$108,498	$120,882	$502,120	$347,390
Originations for sale to secondary market (5)	312,226	377,137	299,321	183,222	160,175	1,171,906	598,103
Total mortgage loan originations	$446,228	$509,863	$426,215	$291,720	$281,057	$1,674,026	$945,493

Residential Mortgage Loans Sold:
Sold with servicing rights retained	$240,104	$317,920	$246,945	$44,498	$42,612	$849,467	$96,160
Sold with servicing rights released (5)	78,072	36,250	58,279	117,693	134,091	290,294	495,012
Total mortgage loans sold	$318,176	$354,170	$305,224	$162,191	$176,703	$1,139,761	$591,172


(1)	Represents the classification of certain non-fee generating assets as AUA due to a reporting change in the fourth quarter of 2019.
(2)	Includes gains on loan sales, commission income on loans originated for others, servicing right gains, and gains (losses) on forward loan commitments.
(3)	Represents fair value adjustments on mortgage loans held for sale and forward loan commitments.
(4)	Represents loan servicing fee income, net of servicing right amortization and valuation adjustments.
(5)	Includes brokered loans (loans originated for others).

Washington Trust Bancorp, Inc. and Subsidiaries
END OF PERIOD LOAN COMPOSITION
(Unaudited; Dollars in thousands)

	Dec 31, 2020	Sep 30, 2020	Jun 30, 2020	Mar 31, 2020	Dec 31, 2019
Loans:
Commercial real estate (1)	$1,633,024	$1,665,745	$1,630,998	$1,618,020	$1,547,572
Commercial & industrial	817,408	822,269	852,445	655,157	585,289
Total commercial	2,450,432	2,488,014	2,483,443	2,273,177	2,132,861

Residential real estate (2)	1,467,312	1,506,726	1,508,223	1,510,472	1,449,090

Home equity	259,185	268,551	277,632	287,134	290,874
Other	19,061	18,756	18,343	19,613	20,174
Total consumer	278,246	287,307	295,975	306,747	311,048
Total loans	$4,195,990	$4,282,047	$4,287,641	$4,090,396	$3,892,999


(1)	Commercial real estate loans consist of commercial mortgages and construction and development loans. Commercial mortgages are loans secured by income producing property.
(2)	Residential real estate loans consist of mortgage and homeowner construction loans secured by one- to four-family residential properties.

	December 31, 2020				December 31, 2019
	Count	Balance	% of Total		Count	Balance	% of Total
Commercial Real Estate Portfolio Segmentation:
Multi-family dwelling	137	$524,874	32	%	123	$430,502	28	%
Retail	136	339,569	21		110	314,661	20
Office	73	290,756	18		78	294,910	19
Hospitality	40	157,720	10		32	128,867	8
Healthcare	15	109,321	7		16	110,409	7
Industrial and warehouse	28	97,055	6		25	82,432	5
Commercial mixed use	22	42,405	2		48	73,895	5
Other	38	71,324	4		70	111,896	8
Commercial real estate loans	489	$1,633,024	100	%	502	$1,547,572	100	%

Commercial & Industrial Portfolio Segmentation:
Healthcare and social assistance	253	$200,217	24	%	86	$138,857	24	%
Manufacturing	146	88,802	11		65	53,561	9
Owner occupied and other real estate	268	74,309	9		157	46,033	8
Educational services	53	64,969	8		22	56,556	10
Retail	192	63,895	8		75	43,386	7
Accommodation and food services	271	47,020	6		64	16,562	3
Professional, scientific and technical	265	39,295	5		66	37,599	6
Entertainment and recreation	91	29,415	4		35	30,807	5
Information	32	28,394	3		11	22,162	4
Finance and insurance	106	26,244	3		57	28,501	5
Transportation and warehousing	42	24,061	3		23	20,960	4
Public administration	26	23,319	3		23	25,107	4
Other	772	107,468	13		225	65,198	11
Commercial & industrial loans	2,517	$817,408	100	%	909	$585,289	100	%

Washington Trust Bancorp, Inc. and Subsidiaries
SUPPLEMENTAL LOAN PORTFOLIO INFORMATION
(Unaudited; Dollars in thousands)

	December 31, 2020				January 21, 2021
	Count	Balance	% of Outstanding Balance, excl PPP loans (1)		Count	Balance	% of Outstanding Balance, excl PPP loans (1)
Loan Deferments by Portfolio:
Commercial Real Estate Deferments by Segment:
Hospitality	20	$83,073	53	%	16	$69,529	44	%
Retail	5	39,781	12		3	20,600	6
Healthcare	2	22,305	20		2	22,345	20
Office	2	2,457	1		2	2,457	1
Commercial mixed use	1	637	2		—	—	—
Multi-family dwelling	1	364	—		1	364	—
Other	7	27,785	39		7	27,786	39
Subtotal – commercial real estate deferments	38	176,402	11		31	143,081	9
Commercial & Industrial Deferments by Segment:
Healthcare and social assistance	5	19,620	13		5	19,702	13
Accommodation and food services	2	2,889	12		2	2,889	12
Transportation and warehousing	4	1,120	5		4	1,120	5
Manufacturing	2	947	1		2	947	1
Entertainment and recreation	3	560	2		3	557	2
Owner occupied and other real estate	1	326	1		1	326	1
Other	4	7,673	12		4	7,676	12
Subtotal – commercial & industrial deferments	21	33,135	5		21	33,217	5
Total commercial deferments	59	209,537	9		52	176,298	8
Residential real estate deferments	66	34,049	2		52	26,404	2
Consumer deferments	11	1,110	—		10	715	—
Total loan deferments	136	$244,696	6	%	114	$203,417	5	%


(1)	Percent of respective outstanding portfolio segment balance, excluding PPP loans, as of December 31, 2020.

	December 31, 2020
	Count	Balance	% of Total
PPP Loans By Industry:
Healthcare and social assistance	173	$47,354	24	%
Accommodation and food services	209	23,678	12
Manufacturing	89	23,321	12
Professional, scientific and technical	220	20,031	10
Retail	134	12,107	6
Educational services	32	9,681	5
Owner occupied and other real estate	115	9,241	5
Entertainment and recreation	61	3,386	2
Information	20	2,478	1
Transportation and warehousing	21	2,059	1
Finance and insurance	55	2,000	1
Public administration	4	483	—
Other	573	43,961	21
Total PPP loans (included in the commercial & industrial loan portfolio)	1,706	$199,780	100	%

Average PPP loan size		$117
Net unamortized fees on PPP loans		$3,893

Washington Trust Bancorp, Inc. and Subsidiaries
END OF PERIOD LOAN AND DEPOSIT COMPOSITION
(Unaudited; Dollars in thousands)

	December 31, 2020			December 31, 2019
	Balance	% of Total		Balance	% of Total
Commercial Real Estate Loans by Property Location:
Connecticut	$649,919	40	%	$616,484	40	%
Massachusetts	468,947	29		458,029	30
Rhode Island	431,133	26		394,929	25
Subtotal	1,549,999	95		1,469,442	95
All other states	83,025	5		78,130	5
Total commercial real estate loans	$1,633,024	100	%	$1,547,572	100	%

Residential Real Estate Loans by Property Location:
Massachusetts	$994,800	68	%	$932,726	64	%
Rhode Island	331,713	23		356,392	25
Connecticut	122,102	8		140,574	10
Subtotal	1,448,615	99		1,429,692	99
All other states	18,697	1		19,398	1
Total residential real estate loans	$1,467,312	100	%	$1,449,090	100	%

	Dec 31, 2020	Sep 30, 2020	Jun 30, 2020	Mar 31, 2020	Dec 31, 2019
Deposits:
Noninterest-bearing demand deposits	$832,287	$840,444	$815,770	$622,893	$609,924
Interest-bearing demand deposits	174,290	170,198	158,343	178,391	159,938
NOW accounts	698,706	644,909	617,792	528,650	520,295
Money market accounts	910,167	877,536	834,954	784,893	765,899
Savings accounts	466,507	439,383	417,195	382,509	373,503
Time deposits (in-market)	704,855	729,058	728,801	776,992	784,481
In-market deposits	3,786,812	3,701,528	3,572,855	3,274,328	3,214,040
Wholesale brokered time deposits	591,541	584,165	528,581	431,986	284,842
Total deposits	$4,378,353	$4,285,693	$4,101,436	$3,706,314	$3,498,882

Washington Trust Bancorp, Inc. and Subsidiaries
CREDIT & ASSET QUALITY DATA
(Unaudited; Dollars in thousands)

	Dec 31, 2020		Sep 30, 2020		Jun 30, 2020		Mar 31, 2020		Dec 31, 2019
Asset Quality Ratios:
Nonperforming assets to total assets	0.23	%	0.25	%	0.27	%	0.32	%	0.35	%
Nonaccrual loans to total loans	0.31	%	0.34	%	0.37	%	0.44	%	0.45	%
Total past due loans to total loans	0.30	%	0.24	%	0.34	%	0.40	%	0.40	%
Allowance for credit losses on loans to nonaccrual loans	334.21	%	289.31	%	258.73	%	221.37	%	155.18	%
Allowance for credit losses on loans to total loans	1.05	%	1.00	%	0.97	%	0.97	%	0.69	%

Nonperforming Assets:
Commercial real estate	$—		$431		$431		$450		$603
Commercial & industrial	—		—		—		290		657
Total commercial	—		431		431		740		1,260
Residential real estate	11,981		12,792		13,850		15,423		14,297
Home equity	1,128		1,429		1,648		1,667		1,763
Other consumer	88		88		88		88		88
Total consumer	1,216		1,517		1,736		1,755		1,851
Total nonaccrual loans	13,197		14,740		16,017		17,918		17,408
Other real estate owned	—		—		—		28		1,109
Total nonperforming assets	$13,197		$14,740		$16,017		$17,946		$18,517

Past Due Loans (30 days or more past due):
Commercial real estate	$265		$431		$431		$1,275		$1,433
Commercial & industrial	3		21		3		310		1
Total commercial	268		452		434		1,585		1,434
Residential real estate	10,339		8,081		12,499		12,293		11,429
Home equity	1,667		1,753		1,633		2,482		2,696
Other consumer	118		108		106		115		130
Total consumer	1,785		1,861		1,739		2,597		2,826
Total past due loans	$12,392		$10,394		$14,672		$16,475		$15,689

Accruing loans 90 days or more past due	$—		$—		$—		$—		$—
Nonaccrual loans included in past due loans	$8,521		$8,799		$10,553		$11,385		$11,477

Troubled Debt Restructurings:
Accruing TDRs	$13,340		$5,709		$5,473		$373		$376
Nonaccrual TDRs	2,345		2,894		998		490		492
Total TDRs	$15,685		$8,603		$6,471		$863		$868

Washington Trust Bancorp, Inc. and Subsidiaries
CREDIT & ASSET QUALITY DATA
(Unaudited; Dollars in thousands)
	For the Three Months Ended					For the Twelve Months Ended
	Dec 31, 2020	Sep 30, 2020	Jun 30, 2020	Mar 31, 2020	Dec 31, 2019	Dec 31, 2020	Dec 31, 2019
Nonaccrual Loan Activity:
Balance at beginning of period	$14,740	$16,017	$17,918	$17,408	$14,902	$17,408	$11,707
Additions to nonaccrual status	707	971	237	1,729	2,766	3,644	11,982
Loans returned to accruing status	(1,112)	(1,623)	(154)	(393)	—	(3,282)	(1,570)
Loans charged-off	(246)	(111)	(325)	(635)	(132)	(1,317)	(2,020)
Loans transferred to other real estate owned	(285)	—	—	(28)	—	(313)	(2,000)
Payments, payoffs and other changes	(607)	(514)	(1,659)	(163)	(128)	(2,943)	(691)
Balance at end of period	$13,197	$14,740	$16,017	$17,918	$17,408	$13,197	$17,408

Allowance for Credit Losses on Loans:
Balance at beginning of period	$42,645	$41,441	$39,665	$27,014	$26,997	$27,014	$27,072
Adoption of CECL accounting standard (Topic 326)	—	—	—	6,501	—	6,501	—
Provision for credit losses on loans (1)	1,579	1,300	2,084	6,773	—	11,736	1,575
Charge-offs	(245)	(111)	(326)	(635)	(132)	(1,317)	(2,020)
Recoveries	127	15	18	12	149	172	387
Balance at end of period	$44,106	$42,645	$41,441	$39,665	$27,014	$44,106	$27,014

Allowance for Credit Losses on Unfunded Commitments:
Balance at beginning of period	$2,180	$2,155	$2,039	$293	$317	$293	$293
Adoption of CECL accounting standard (Topic 326)	—	—	—	1,483	—	1,483	—
Provision for credit losses on unfunded commitments (2)	202	25	116	263	(24)	606	1,427
Balance at end of period (3)	$2,382	$2,180	$2,155	$2,039	$293	$2,382	$1,720


(1)	Included in provision for credit losses in the Consolidated Statements of Income.
(2)	Included in provision for credit losses in the Consolidated Statements of Income for each period in 2020. For periods prior to 2020, included in other noninterest expense in the Consolidated Statements of Income.
(3)	Included in other liabilities in the Consolidated Balance Sheets.

	For the Three Months Ended										For the Twelve Months Ended
	Dec 31, 2020		Sep 30, 2020		Jun 30, 2020		Mar 31, 2020		Dec 31, 2019		Dec 31, 2020		Dec 31, 2019
Net Loan Charge-Offs (Recoveries):
Commercial real estate	$133		$—		$19		$153		($44)		$305		$903
Commercial & industrial	(12)		—		284		290		(15)		562		(147)
Total commercial	121		—		303		443		(59)		867		756
Residential real estate	(20)		99		—		—		—		79		486
Home equity	9		(4)		(5)		172		17		172		318
Other consumer	8		1		10		8		25		27		73
Total consumer	17		(3)		5		180		42		199		391
Total	$118		$96		$308		$623		($17)		$1,145		$1,633

Net charge-offs to average loans (annualized)	0.01	%	0.01	%	0.03	%	0.06	%	—	%	0.03	%	0.04	%

The following table presents average balance and interest rate information. Tax-exempt income is converted to a fully taxable equivalent basis using the statutory federal income tax rate adjusted for applicable state income taxes net of the related federal tax benefit. Unrealized gains (losses) on available for sale securities and fair value adjustments on mortgage loans held for sale are excluded from the average balance and yield calculations. Nonaccrual loans, as well as interest recognized on these loans, are included in amounts presented for loans.

Washington Trust Bancorp, Inc. and Subsidiaries
CONSOLIDATED AVERAGE BALANCE SHEETS (FTE Basis)
(Unaudited; Dollars in thousands)
For the Three Months Ended	December 31, 2020				September 30, 2020				Quarter Change
	Average Balance	Interest	Yield/ Rate		Average Balance	Interest	Yield/ Rate		Average Balance	Interest	Yield/ Rate
	Average Balance	Interest	Yield/ Rate		Average Balance	Interest	Yield/ Rate		Average Balance	Interest	Yield/ Rate
Assets:
Cash, federal funds sold and short-term investments	$172,731	$35	0.08	%	$168,106	$39	0.09	%	$4,625	($4)	(0.01)	%
Mortgage loans held for sale	71,113	569	3.18		61,043	468	3.05		10,070	101	0.13
Taxable debt securities	892,112	3,869	1.73		906,977	4,870	2.14		(14,865)	(1,001)	(0.41)
FHLB stock	33,320	414	4.94		43,839	532	4.83		(10,519)	(118)	0.11
Commercial real estate	1,658,809	11,905	2.86		1,652,136	11,649	2.81		6,673	256	0.05
Commercial & industrial	818,611	7,174	3.49		849,452	6,920	3.24		(30,841)	254	0.25
Total commercial	2,477,420	19,079	3.06		2,501,588	18,569	2.95		(24,168)	510	0.11
Residential real estate	1,475,699	13,206	3.56		1,510,621	14,047	3.70		(34,922)	(841)	(0.14)
Home equity	264,811	2,229	3.35		276,221	2,320	3.34		(11,410)	(91)	0.01
Other	18,209	226	4.94		18,706	237	5.04		(497)	(11)	(0.10)
Total consumer	283,020	2,455	3.45		294,927	2,557	3.45		(11,907)	(102)	—
Total loans	4,236,139	34,740	3.26		4,307,136	35,173	3.25		(70,997)	(433)	0.01
Total interest-earning assets	5,405,415	39,627	2.92		5,487,101	41,082	2.98		(81,686)	(1,455)	(0.06)
Noninterest-earning assets	362,848				377,348				(14,500)
Total assets	$5,768,263				$5,864,449				($96,186)
Liabilities and Shareholders’ Equity:
Interest-bearing demand deposits	$161,664	$81	0.20	%	$157,986	$83	0.21	%	$3,678	($2)	(0.01)	%
NOW accounts	664,055	115	0.07		631,148	99	0.06		32,907	16	0.01
Money market accounts	903,607	963	0.42		839,032	977	0.46		64,575	(14)	(0.04)
Savings accounts	455,933	70	0.06		428,781	67	0.06		27,152	3	—
Time deposits (in-market)	711,838	2,566	1.43		730,464	3,015	1.64		(18,626)	(449)	(0.21)
Total interest-bearing in-market deposits	2,897,097	3,795	0.52		2,787,411	4,241	0.61		109,686	(446)	(0.09)
Wholesale brokered time deposits	589,272	837	0.57		463,756	1,291	1.11		125,516	(454)	(0.54)
Total interest-bearing deposits	3,486,369	4,632	0.53		3,251,167	5,532	0.68		235,202	(900)	(0.15)
FHLB advances	634,081	2,305	1.45		860,758	3,354	1.55		(226,677)	(1,049)	(0.10)
Junior subordinated debentures	22,681	122	2.14		22,681	135	2.37		—	(13)	(0.23)
PPPLF borrowings	81,858	72	0.35		180,128	159	0.35		(98,270)	(87)	—
Total interest-bearing liabilities	4,224,989	7,131	0.67		4,314,734	9,180	0.85		(89,745)	(2,049)	(0.18)
Noninterest-bearing demand deposits	838,713				842,949				(4,236)
Other liabilities	176,592				186,981				(10,389)
Shareholders’ equity	527,969				519,785				8,184
Total liabilities and shareholders’ equity	$5,768,263				$5,864,449				($96,186)
Net interest income (FTE)		$32,496				$31,902				$594
Interest rate spread			2.25	%			2.13	%			0.12	%
Net interest margin			2.39	%			2.31	%			0.08	%

Interest income amounts presented in the preceding table include the following adjustments for taxable equivalency:

For the Three Months Ended	Dec 31, 2020	Sep 30, 2020	Quarter Change
Commercial loans	$253	$248	$5
Total	$253	$248	$5


Washington Trust Bancorp, Inc. and Subsidiaries
CONSOLIDATED AVERAGE BALANCE SHEETS (FTE Basis)
(Unaudited; Dollars in thousands)
For the Twelve Months Ended	December 31, 2020				December 31, 2019				Change
	Average Balance	Interest	Yield/ Rate		Average Balance	Interest	Yield/ Rate		Average Balance	Interest	Yield/ Rate
	Average Balance	Interest	Yield/ Rate		Average Balance	Interest	Yield/ Rate		Average Balance	Interest	Yield/ Rate
Assets:
Cash, federal funds sold and short-term investments	$160,427	$459	0.29	%	$85,447	$1,667	1.95	%	$74,980	($1,208)	(1.66)	%
Mortgage loans for sale	54,237	1,762	3.25		30,928	1,237	4.00		23,309	525	(0.75)
Taxable debt securities	902,278	20,050	2.22		947,875	26,367	2.78		(45,597)	(6,317)	(0.56)
Nontaxable debt securities	—	—	—		450	23	5.11		(450)	(23)	(5.11)
Total securities	902,278	20,050	2.22		948,325	26,390	2.78		(46,047)	(6,340)	(0.56)
FHLB stock	45,235	2,240	4.95		47,761	2,855	5.98		(2,526)	(615)	(1.03)
Commercial real estate	1,632,460	52,231	3.20		1,481,116	68,193	4.60		151,344	(15,962)	(1.40)
Commercial & industrial	767,176	27,410	3.57		596,451	28,545	4.79		170,725	(1,135)	(1.22)
Total commercial	2,399,636	79,641	3.32		2,077,567	96,738	4.66		322,069	(17,097)	(1.34)
Residential real estate	1,488,343	55,866	3.75		1,368,824	54,932	4.01		119,519	934	(0.26)
Home equity	277,296	10,032	3.62		286,767	14,011	4.89		(9,471)	(3,979)	(1.27)
Other	18,929	941	4.97		23,153	1,137	4.91		(4,224)	(196)	0.06
Total consumer	296,225	10,973	3.70		309,920	15,148	4.89		(13,695)	(4,175)	(1.19)
Total loans	4,184,204	146,480	3.50		3,756,311	166,818	4.44		427,893	(20,338)	(0.94)
Total interest-earning assets	5,346,381	170,991	3.20		4,868,772	198,967	4.09		477,609	(27,976)	(0.89)
Noninterest-earning assets	358,569				300,549				58,020
Total assets	$5,704,950				$5,169,321				$535,629
Liabilities and Shareholders’ Equity:
Interest-bearing demand deposits	$159,366	$806	0.51	%	$144,836	$2,537	1.75	%	$14,530	($1,731)	(1.24)	%
NOW accounts	593,105	368	0.06		469,540	310	0.07		123,565	58	(0.01)
Money market accounts	839,915	5,402	0.64		693,921	7,713	1.11		145,994	(2,311)	(0.47)
Savings accounts	415,741	265	0.06		365,927	272	0.07		49,814	(7)	(0.01)
Time deposits (in-market)	742,236	13,138	1.77		794,124	16,056	2.02		(51,888)	(2,918)	(0.25)
Total interest-bearing in-market deposits	2,750,363	19,979	0.73		2,468,348	26,888	1.09		282,015	(6,909)	(0.36)
Wholesale brokered time deposits	501,306	5,833	1.16		461,862	10,213	2.21		39,444	(4,380)	(1.05)
Total interest-bearing deposits	3,251,669	25,812	0.79		2,930,210	37,101	1.27		321,459	(11,289)	(0.48)
FHLB advances	920,704	15,806	1.72		1,015,914	26,168	2.58		(95,210)	(10,362)	(0.86)
Junior subordinated debentures	22,681	641	2.83		22,681	980	4.32		—	(339)	(1.49)
PPPLF borrowings	66,492	233	0.35		—	—	—		66,492	233	0.35
Total interest-bearing liabilities	4,261,546	42,492	1.00		3,968,805	64,249	1.62		292,741	(21,757)	(0.62)
Noninterest-bearing demand deposits	759,841				615,049				144,792
Other liabilities	167,861				104,463				63,398
Shareholders’ equity	515,702				481,004				34,698
Total liabilities and shareholders’ equity	$5,704,950				$5,169,321				$535,629
Net interest income (FTE)		$128,499				$134,718				($6,219)
Interest rate spread			2.20	%			2.47	%			(0.27)	%
Net interest margin			2.40	%			2.77	%			(0.37)	%

Interest income amounts presented in the preceding table include the following adjustments for taxable equivalency:

For the Twelve Months Ended	Dec 31, 2020	Dec 31, 2019	Change
Commercial loans	$1,055	$1,299	($244)
Nontaxable debt securities	—	5	(5)
Total	$1,055	$1,304	($249)

Washington Trust Bancorp, Inc. and Subsidiaries
SUPPLEMENTAL INFORMATION – Calculation of Non-GAAP Financial Measures
(Unaudited; Dollars in thousands, except per share amounts)

	Dec 31, 2020		Sep 30, 2020		Jun 30, 2020		Mar 31, 2020		Dec 31, 2019
Tangible Book Value per Share:
Total shareholders’ equity, as reported	$534,195		$527,693		$520,163		$508,597		$503,492
Less:
Goodwill	63,909		63,909		63,909		63,909		63,909
Identifiable intangible assets, net	6,305		6,530		6,759		6,988		7,218
Total tangible shareholders’ equity	$463,981		$457,254		$449,495		$437,700		$432,365

Shares outstanding, as reported	17,265		17,260		17,260		17,252		17,363

Book value per share – GAAP	$30.94		$30.57		$30.14		$29.48		$29.00
Tangible book value per share – Non-GAAP	$26.87		$26.49		$26.04		$25.37		$24.90

Tangible Equity to Tangible Assets:
Total tangible shareholders’ equity	$463,981		$457,254		$449,495		$437,700		$432,365

Total assets, as reported	$5,713,169		$5,849,792		$5,876,960		$5,620,979		$5,292,659
Less:
Goodwill	63,909		63,909		63,909		63,909		63,909
Identifiable intangible assets, net	6,305		6,530		6,759		6,988		7,218
Total tangible assets	$5,642,955		$5,779,353		$5,806,292		$5,550,082		$5,221,532

Equity to assets – GAAP	9.35	%	9.02	%	8.85	%	9.05	%	9.51	%
Tangible equity to tangible assets – Non-GAAP	8.22	%	7.91	%	7.74	%	7.89	%	8.28	%

	For the Three Months Ended										For the Twelve Months Ended
	Dec 31, 2020		Sep 30, 2020		Jun 30, 2020		Mar 31, 2020		Dec 31, 2019		Dec 31, 2020		Dec 31, 2019
Return on Average Tangible Assets:
Net income, as reported	$18,566		$18,322		$21,040		$11,901		$15,536		$69,829		$69,118

Total average assets, as reported	$5,768,263		$5,864,449		$5,789,692		$5,394,948		$5,227,035		$5,704,950		$5,169,321
Less average balances of:
Goodwill	63,909		63,909		63,909		63,909		63,909		63,909		63,909
Identifiable intangible assets, net	6,414		6,641		6,871		7,100		7,330		6,755		7,681
Total average tangible assets	$5,697,940		$5,793,899		$5,718,912		$5,323,939		$5,155,796		$5,634,286		$5,097,731

Return on average assets – GAAP	1.28	%	1.24	%	1.46	%	0.89	%	1.18	%	1.22	%	1.34	%
Return on average tangible assets – Non-GAAP	1.30	%	1.26	%	1.48	%	0.90	%	1.20	%	1.24	%	1.36	%

Return on Average Tangible Equity:
Net income available to common shareholders, as reported	$18,524		$18,285		$21,000		$11,869		$15,502		$69,678		$68,979

Total average equity, as reported	$527,969		$519,785		$511,751		$503,124		$502,614		$515,702		$481,004
Less average balances of:
Goodwill	63,909		63,909		63,909		63,909		63,909		63,909		63,909
Identifiable intangible assets, net	6,414		6,641		6,871		7,100		7,330		6,755		7,681
Total average tangible equity	$457,646		$449,235		$440,971		$432,115		$431,375		$445,038		$409,414

Return on average equity – GAAP	13.96	%	13.99	%	16.51	%	9.49	%	12.24	%	13.51	%	14.34	%
Return on average tangible equity – Non-GAAP	16.10	%	16.19	%	19.15	%	11.05	%	14.26	%	15.66	%	16.85	%

Category: Earnings

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SOURCE Washington Trust Bancorp, Inc.

January 27, 2021 4:08 pm

CP demonstrates resiliency of model and team; reports record fourth-quarter and full-year 2020 results

PR Newswire

CALGARY, AB, Jan. 27, 2021 /PRNewswire/ – Canadian Pacific Railway Limited (TSX: CP) (NYSE: CP) today announced its fourth-quarter results, including revenues of $2.01 billion, a record-low operating ratio (“OR”) of 53.9 percent, diluted earnings per share (“EPS”) of $5.95 and record adjusted diluted EPS of $5.06.

Fourth-quarter 2020 highlights

Revenues decreased 3 percent to $2.01 billion, from $2.07 billion in Q4 2019
OR improved by 310 basis points (bps) to 53.9 percent
Diluted EPS improved 23 percent to $5.95, from $4.82 in Q4 2019, while adjusted diluted EPS rose 6 percent to record $5.06, from $4.77 in Q4 2019

“With a foundation of strong operational performance and a commitment to controlling what we can, the team continues to deliver,” said Keith Creel, CP President and CEO. “Despite the continued COVID-19 impacts, volumes steadily improved over the second half of 2020 and we saw revenue ton mile (“RTM”) growth in the fourth quarter.”

Full-year 2020 highlights

Federal Railroad Administration (“FRA”)-reportable personal injuries declined 22 percent to a record-low 1.11 from 1.42 in 2019, and CP’s FRA-reportable train accident frequency decreased 9 percent versus 2019 to a record-low 0.96 from 1.06
Revenues decreased 1 percent to $7.71 billion, from $7.79 billion in 2019
OR improved to a record-low 57.1 percent, a 280 bps improvement year over year
Diluted EPS increased 3 percent to a record $17.97 from $17.52, while adjusted diluted EPS rose 7.5 percent to a record $17.67, from $16.44 in 2019

“I’m proud to say that our 2020 full-year results, including from a safety perspective, exceeded our expectations, in what has been one of the most challenging years any of us have faced,” said Creel. “I’m continually impressed by the resiliency of the CP family, particularly those who provide an essential service to North Americans day in and day out, no matter the challenges. The 12,000-strong CP family responded to extraordinary circumstances in 2020 with grit and courage, ensuring that our railway was able to serve our customers, shareholders and communities.”

Full-year 2021 guidance

Double-digit adjusted diluted EPS growth relative to 2020’s adjusted diluted EPS of $17.67
High single-digit volume growth, as measured in RTMs
Capital expenditures of $1.55 billion

CP’s guidance is based on the following key assumptions:

Effective tax rate of 24.6 percent
Other components of net periodic benefit recovery will increase by approximately $40 million versus 2020

“The uncertainty caused by the COVID-19 pandemic dramatically disrupted global supply chains,” said Creel. “By leveraging our unique growth opportunities and applying our precision scheduled railroading operating model, CP is continuing to lead the industry. The momentum we’ve created in the fourth quarter will continue into 2021.”

CP will discuss its results with the financial community in a conference call beginning at 4:30 p.m. ET (2:30 p.m. MT) on Jan. 27, 2021.

Conference Call Access

Toronto participants dial in number: 1-647-427-7450
Operator assisted toll free dial in number: 1-888-231-8191
Callers should dial in 10 minutes prior to the call.

Webcast
We encourage you to access the webcast and presentation material in the Investors section of CP’s website at investor.cpr.ca.

A replay of the fourth-quarter conference call will be available by phone through to Feb. 3, 2021 at 416-849-0833 or toll free 1-855-859-2056, password 6346098.

Non-GAAP Measures
Although CP has provided a forward-looking non-GAAP measure (adjusted diluted EPS), management is unable to reconcile, without unreasonable efforts, the forward-looking adjusted diluted EPS to the most comparable GAAP measure (diluted EPS), due to unknown variables and uncertainty related to future results. These unknown variables may include unpredictable transactions of significant value. In recent years, CP has recognized changes in income tax rates and a change to an uncertain tax item. These or other similar, large unforeseen transactions affect diluted EPS but may be excluded from CP’s adjusted diluted EPS. Additionally, the U.S.-to-Canadian dollar foreign exchange (FX) rate is unpredictable and can have a significant impact on CP’s reported results but may be excluded from CP’s adjusted diluted EPS. In particular, CP excludes the FX impact of translating the Company’s debt and lease liabilities from adjusted diluted EPS. Please see Note on forward-looking information below for further discussion.

For information regarding non-GAAP measures, including reconciliations to the nearest GAAP measures, see the attached supplementary schedule Non-GAAP Measures.

Note on forward-looking information
This news release contains certain forward-looking information and forward-looking statements (collectively, “forward-looking information”) within the meaning of applicable securities laws. Forward-looking information includes, but is not limited to, statements concerning expectations, beliefs, plans, goals, objectives, assumptions and statements about possible future events, conditions, and results of operations or performance. Forward-looking information may contain statements with words or headings such as “financial expectations”, “key assumptions”, “anticipate”, “believe”, “expect”, “plan”, “will”, “outlook”, “should” or similar words suggesting future outcomes. This news release contains forward-looking information relating, but not limited to, statements concerning 2021 volume including as measured in RTMs, EPS growth and adjusted diluted EPS growth, capital program investments, the U.S.-to-Canadian dollar exchange rate, annualized effective tax rate, other components of net periodic benefit recovery, cost control efforts, the success of our business, our operations, priorities and plans, anticipated financial and operational performance, business prospects, demand for our services and growth opportunities.

The forward-looking information contained in this news release is based on current expectations, estimates, projections and assumptions, having regard to CP’s experience and its perception of historical trends, and includes, but is not limited to, expectations, estimates, projections and assumptions relating to: North American and global economic growth; commodity demand growth; sustainable industrial and agricultural production; commodity prices and interest rates; foreign exchange rates (as specified herein); effective tax rates (as specified herein); performance of our assets and equipment; sufficiency of our budgeted capital expenditures in carrying out our business plan; geopolitical conditions, applicable laws, regulations and government policies; the availability and cost of labour, services and infrastructure; the satisfaction by third parties of their obligations to CP; our ability to realize upon business plans including cost control efforts; and the continued impact of the novel strain of coronavirus (and the disease known as COVID-19) on CP’s businesses, operating results, cash flows and/or financial condition. Although management of CP believes the expectations, estimates, projections and assumptions reflected in the forward-looking information presented herein are reasonable as of the date hereof, there can be no assurance that they will prove to be correct. Current conditions, economic and otherwise, render assumptions, although reasonable when made, subject to greater uncertainty.

Undue reliance should not be placed on forward-looking information as actual results may differ materially from those expressed or implied by forward-looking information. By its nature, CP’s forward-looking information involves inherent risks and uncertainties that could cause actual results to differ materially from the forward looking information, including, but not limited to, the following factors: changes in business strategies; general North American and global economic, credit and business conditions; risks associated with agricultural production, such as weather conditions and insect populations; the availability and price of energy commodities; the effects of competition and pricing pressures; industry capacity; shifts in market demand; changes in commodity prices; uncertainty surrounding timing and volumes of commodities being shipped via CP; inflation; geopolitical instability; changes in laws, regulations and government policies, including regulation of rates; changes in taxes and tax rates; potential increases in maintenance and operating costs; changes in fuel prices; uncertainties of investigations, proceedings or other types of claims and litigation; labour disputes; risks and liabilities arising from derailments; transportation of dangerous goods; timing of completion of capital and maintenance projects; currency and interest rate fluctuations; effects of changes in market conditions and discount rates on the financial position of pension plans and investments; trade restrictions or other changes to international trade arrangements; climate change; various events that could disrupt operations, including severe weather, such as droughts, floods, avalanches and earthquakes, and cybersecurity attacks, as well as security threats and governmental response to them, and technological changes; and the pandemic created by the outbreak of COVID-19 and resulting effects on economic conditions, the demand environment for logistics requirements and energy prices, restrictions imposed by public health authorities or governments, fiscal and monetary policy responses by governments and financial institutions, and disruptions to global supply chains. The foregoing list of factors is not exhaustive. These and other factors are detailed from time to time in reports filed by CP with securities regulators in Canada and the United States. Reference should be made to “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Forward-Looking Statements” in CP’s annual and interim reports on Form 10-K and 10-Q.

The forward-looking information contained in this news release is made as of the date hereof. Except as required by law, CP undertakes no obligation to update publicly or otherwise revise any forward-looking information, or the foregoing assumptions and risks affecting such forward-looking information, whether as a result of new information, future events or otherwise.

About Canadian Pacific
Canadian Pacific is a transcontinental railway in Canada and the United States with direct links to major ports on the west and east coasts. CP provides North American customers a competitive rail service with access to key markets in every corner of the globe. CP is growing with its customers, offering a suite of freight transportation services, logistics solutions and supply chain expertise. Visit cpr.ca to see the rail advantages of CP. CP-IR

FINANCIAL INFORMATION

INTERIM CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

	For the three months ended December 31				For the year ended December 31
(in millions of Canadian dollars, except share and per share data)	2020		2019		2020		2019
Revenues
Freight	$	1,968	$	2,024	$	7,541	$	7,613
Non-freight	44		45		169		179
Total revenues	2,012		2,069		7,710		7,792
Operating expenses
Compensation and benefits	433		396		1,560		1,540
Fuel	169		227		652		882
Materials	54		49		216		210
Equipment rents	34		35		142		137
Depreciation and amortization	197		178		779		706
Purchased services and other (Note 5)	197		294		1,050		1,193
Total operating expenses	1,084		1,179		4,399		4,668

Operating income	928		890		3,311		3,124
Less:
Other income (Note 3)	(96)		(31)		(7)		(89)
Other components of net periodic benefit recovery	(85)		(87)		(342)		(381)
Net interest expense	112		112		458		448
Income before income tax expense	997		896		3,202		3,146
Income tax expense (Note 4)	195		232		758		706
Net income	$	802	$	664	$	2,444	$	2,440

Earnings per share
Basic earnings per share	$	5.97	$	4.84	$	18.05	$	17.58
Diluted earnings per share	$	5.95	$	4.82	$	17.97	$	17.52

Weighted-average number of shares (millions)
Basic	134.2		137.2		135.5		138.8
Diluted	134.8		137.7		136.0		139.3

Dividends declared per share	$	0.9500	$	0.8300	$	3.5600	$	3.1400

See Notes to Interim Consolidated Financial Information.

INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

	For the three months ended December 31				For the year ended December 31
(in millions of Canadian dollars)	2020		2019		2020		2019
Net income	$	802	$	664	$	2,444	$	2,440
Net gain in foreign currency translation adjustments, net of hedging activities	36		14		18		37
Change in derivatives designated as cash flow hedges	3		2		9		10
Change in pension and post-retirement defined benefit plans	(541)		(722)		(407)		(661)
Other comprehensive loss before income taxes	(502)		(706)		(380)		(614)
Income tax recovery on above items	104		176		88		135
Other comprehensive loss	(398)		(530)		(292)		(479)
Comprehensive income	$	404	$	134	$	2,152	$	1,961

See Notes to Interim Consolidated Financial Information.

INTERIM CONSOLIDATED BALANCE SHEETS AS AT

(unaudited)

	December 31		December 31
(in millions of Canadian dollars)	2020		2019
Assets
Current assets
Cash and cash equivalents	$	147	$	133
Accounts receivable, net	825		805
Materials and supplies	208		182
Other current assets	141		90
	1,321		1,210
Investments (Note 5)	199		341
Properties	20,422		19,156
Goodwill and intangible assets (Note 5)	366		206
Pension asset	894		1,003
Other assets	438		451
Total assets	$	23,640	$	22,367
Liabilities and shareholders’ equity
Current liabilities
Accounts payable and accrued liabilities	$	1,467	$	1,693
Long-term debt maturing within one year	1,186		599
	2,653		2,292
Pension and other benefit liabilities	832		785
Other long-term liabilities	585		562
Long-term debt	8,585		8,158
Deferred income taxes	3,666		3,501
Total liabilities	16,321		15,298
Shareholders’ equity
Share capital	1,983		1,993
Additional paid-in capital	55		48
Accumulated other comprehensive loss	(2,814)		(2,522)
Retained earnings	8,095		7,550
	7,319		7,069
Total liabilities and shareholders’ equity	$	23,640	$	22,367

See Notes to Interim Consolidated Financial Information.

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	For the three months ended December 31				For the year ended December 31
(in millions of Canadian dollars)	2020		2019		2020		2019
Operating activities
Net income	$	802	$	664	$	2,444	$	2,440
Reconciliation of net income to cash provided by operating activities:
Depreciation and amortization	197		178		779		706
Deferred income tax expense	88		65		221		181
Pension recovery and funding	(58)		(89)		(250)		(360)
Foreign exchange gain on debt and lease liabilities (Note 3)	(103)		(37)		(14)		(94)
Other operating activities, net	—		56		11		143
Change in non-cash working capital balances related to operations	59		196		(389)		(26)
Cash provided by operating activities	985		1,033		2,802		2,990
Investing activities
Additions to properties	(330)		(500)		(1,671)		(1,647)
Investment in Detroit River Tunnel Partnership (Note 5)	(398)		—		(398)		—
Investment in Central Maine & Québec Railway	—		(174)		19		(174)
Proceeds from sale of properties and other assets	13		8		22		26
Other	(2)		(2)		(2)		(8)
Cash used in investing activities	(717)		(668)		(2,030)		(1,803)
Financing activities
Dividends paid	(128)		(114)		(467)		(412)
Issuance of CP Common Shares	20		6		52		26
Purchase of CP Common Shares (Note 6)	(564)		(170)		(1,509)		(1,134)
Issuance of long-term debt, excluding commercial paper	—		—		958		397
Repayment of long-term debt, excluding commercial paper	(10)		(9)		(84)		(500)
Net issuance (repayment) of commercial paper	384		(77)		270		524
Net increase in short-term borrowings	—		—		5		—
Other	—		(10)		11		(12)
Cash used in financing activities	(298)		(374)		(764)		(1,111)
Effect of foreign currency fluctuations on U.S. dollar-denominated cash and cash equivalents	(6)		(3)		6		(4)
Cash position
(Decrease) increase in cash and cash equivalents	(36)		(12)		14		72
Cash and cash equivalents at beginning of period	183		145		133		61
Cash and cash equivalents at end of period	$	147	$	133	$	147	$	133

Supplemental disclosures of cash flow information:
Income taxes paid	$	127	$	127	$	582	$	506
Interest paid	$	60	$	71	$	443	$	444

See Notes to Interim Consolidated Financial Information.

INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(unaudited)

	For the three months ended December 31
(in millions of Canadian dollars except per share data)		Common shares (in millions)	Share capital		Additional paid-in capital		Accumulated other comprehensive loss		Retained earnings		Total shareholders’ equity
Balance at October 1, 2020		134.5	$	1,978	$	56	$	(2,416)	$	7,961	$	7,579
Net income		—	—		—		—		802		802
Other comprehensive loss		—	—		—		(398)		—		(398)
Dividends declared ($0.9500 per share)		—	—		—		—		(126)		(126)
Effect of stock-based compensation expense		—	—		4		—		—		4
CP Common Shares repurchased (Note 6)		(1.3)	(19)		—		—		(542)		(561)
Shares issued under stock option plan		0.1	24		(5)		—		—		19
Balance at December 31, 2020		133.3	$	1,983	$	55	$	(2,814)	$	8,095	$	7,319
Balance at October 1, 2019		137.5	$	1,982	$	45	$	(1,992)	$	7,180	$	7,215
Net income		—	—		—		—		664		664
Other comprehensive loss		—	—		—		(530)		—		(530)
Dividends declared ($0.8300 per share)		—	—		—		—		(114)		(114)
Effect of stock-based compensation expense		—	—		4		—		—		4
CP Common Shares repurchased (Note 6)		(0.6)	(8)		—		—		(180)		(188)
Shares issued under stock option plan		0.1	19		(1)		—		—		18
Balance at December 31, 2019		137.0	$	1,993	$	48	$	(2,522)	$	7,550	$	7,069

	For the year ended December 31
(in millions of Canadian dollars except per share data)		Common shares (in millions)	Share capital		Additional paid-in capital		Accumulated other comprehensive loss		Retained earnings		Total shareholders’ equity
Balance at December 31, 2019, as previously reported		137.0	$	1,993	$	48	$	(2,522)	$	7,550	$	7,069
Impact of accounting change (Note 2)		—	—		—		—		(1)		(1)
Balance at January 1, 2020, as restated		137.0	$	1,993	$	48	$	(2,522)	$	7,549	$	7,068
Net income		—	—		—		—		2,444		2,444
Other comprehensive loss		—	—		—		(292)		—		(292)
Dividends declared ($3.5600 per share)		—	—		—		—		(479)		(479)
Effect of stock-based compensation expense		—	—		17		—		—		17
CP Common Shares repurchased (Note 6)		(4.0)	(58)		—		—		(1,419)		(1,477)
Shares issued under stock option plan		0.3	48		(10)		—		—		38
Balance at December 31, 2020		133.3	$	1,983	$	55	$	(2,814)	$	8,095	$	7,319
Balance at January 1, 2019		140.5	$	2,002	$	42	$	(2,043)	$	6,630	$	6,631
Net income		—	—		—		—		2,440		2,440
Other comprehensive loss		—	—		—		(479)		—		(479)
Dividends declared ($3.1400 per share)		—	—		—		—		(434)		(434)
Effect of stock-based compensation expense		—	—		15		—		—		15
CP Common Shares repurchased (Note 6)		(3.8)	(54)		—		—		(1,086)		(1,140)
Shares issued under stock option plan		0.3	45		(9)		—		—		36
Balance at December 31, 2019		137.0	$	1,993	$	48	$	(2,522)	$	7,550	$	7,069

See Notes to Interim Consolidated Financial Information.

NOTES TO INTERIM CONSOLIDATED FINANCIAL INFORMATION

December 31, 2020

(unaudited)

1 Basis of presentation

This unaudited interim consolidated financial information of Canadian Pacific Railway Limited (“CP”, or “the Company”), expressed in Canadian dollars, reflects management’s estimates and assumptions that are necessary for its fair presentation in conformity with generally accepted accounting principles in the United States of America (“GAAP”). It does not include all disclosures required under GAAP for annual financial statements and interim financial statements, and should be read in conjunction with the 2019 annual consolidated financial statements and notes included in CP’s 2019 Annual Report on Form 10-K and 2020 interim consolidated financial statements. The accounting policies used are consistent with the accounting policies used in preparing the 2019 annual consolidated financial statements, except for the newly adopted accounting policies discussed in Note 2.

CP’s operations can be affected by seasonal fluctuations such as changes in customer demand and weather-related issues. This seasonality could impact quarter-over-quarter comparisons.

In management’s opinion, the unaudited interim consolidated financial information includes all adjustments (consisting of normal and recurring adjustments) necessary to present fairly such information. Interim results are not necessarily indicative of the results expected for the fiscal year.

2 Accounting changes

Implemented in 2020

Financial Instruments – Credit Losses

On January 1, 2020, the Company adopted the new Accounting Standards Update (“ASU”) 2016-13, issued by the Financial Accounting Standards Board (“FASB”), and all related amendments under FASB Accounting Standards Codification (“ASC”) Topic 326, Financial Instruments – Credit Losses. Using a modified retrospective approach, the Company recognized a cumulative-effect adjustment to its opening retained earnings balance in the period of adoption. Accordingly, comparative financial information has not been restated and continues to be reported under the accounting standards in effect for those periods.

The impact of the adoption of ASC 326 as at January 1, 2020 was an increase in the allowance for credit losses of $1 million, with the offsets to “Deferred income taxes” and “Retained earnings” on the Company’s Interim Consolidated Balance Sheet.

3 Other income

	For the three months ended December 31				For the year ended December 31
(in millions of Canadian dollars)	2020		2019		2020		2019
Foreign exchange gain on debt and lease liabilities	$	(103)	$	(37)	$	(14)	$	(94)
Other foreign exchange losses (gains)	1		—		(1)		(4)
Other	6		6		8		9
Other income	$	(96)	$	(31)	$	(7)	$	(89)

4 Income taxes

During the fourth quarter and for the year ended 2020, the Company revalued its deferred income tax balances as a result of a corporate income tax rate decrease due to a change relating to a tax return filing election for the state of North Dakota, resulting in a net recovery of $29 million. There were no changes in unrecognized tax benefits as a result of a specific uncertain tax position of a prior period (2019 – $24 million expense).

During the fourth quarter of 2019, there were no changes in corporate income tax rates. For the year ended 2019, revaluations of deferred income tax balances totaled a net recovery of $88 million associated with a decrease in the Alberta provincial corporate income tax rate.

5 Business combination

On December 22, 2020, CP completed its acquisition of the 83.5 percent ownership of the Detroit River Tunnel Partnership (“DRTP”) held by OMERS Infrastructure Management Inc. for cash, net of cash acquired, of $398 million. DRTP owns a 1.6-mile rail tunnel linking Windsor, Ontario, and Detroit, Michigan.

Prior to the close of the transaction, CP owned a 16.5 percent interest in DRTP, which was accounted for as an equity method investment. As a result of the acquisition, the Company recognized a before-tax gain of $68 million on the remeasurement to fair value of its previously-held equity interest within “Purchased services and other”.

The acquisition of DRTP has been accounted for as a business combination under the acquisition method of accounting. The acquired assets and assumed liabilities are recorded at their estimated fair values at the date of acquisition, including goodwill of $90 million. The goodwill relates primarily to the contract that DRTP has for CP’s use of the tunnel and deferred taxes recognized as a result of the purchase price allocation. The purchase price allocation was prepared on a preliminary basis and is subject to change as additional information becomes available concerning the fair value and tax bases of the net assets acquired.

6 Shareholders’ equity

On December 17, 2019, the Company announced a normal course issuer bid (“NCIB”), commencing December 20, 2019, to purchase up to 4.80 million Common Shares in the open market for cancellation on or before December 19, 2020. Upon expiry of this NCIB, the Company had purchased 4.27 million Common Shares for $1,577 million.

On October 19, 2018, the Company announced a NCIB, commencing October 24, 2018, to purchase up to 5.68 million Common Shares for cancellation on or before October 23, 2019. The Company completed this NCIB on October 23, 2019.

All purchases were made in accordance with the respective NCIB at prevailing market prices plus brokerage fees, or such other prices that were permitted by the Toronto Stock Exchange, with consideration allocated to “Share capital” up to the average carrying amount of the shares and any excess allocated to “Retained earnings”.

The following table provides activities under the share repurchase programs:

	For the three months ended December 31				For the year ended December 31
	2020		2019		2020		2019
Number of Common Shares repurchased⁽¹⁾	1,321,494		610,688		3,973,076		3,794,149
Weighted-average price per share⁽²⁾	$	424.26	$	308.74	$	371.74	$	300.65
Amount of repurchase (in millions)⁽²⁾	$	561	$	189	$	1,477	$	1,141

⁽¹⁾	Includes shares repurchased but not yet cancelled at quarter end.
⁽²⁾	Includes brokerage fees.

Summary of Rail Data

	Fourth Quarter							Year
Financial (millions, except per share data)	2020		2019		Total Change		% Change	2020		2019		Total Change		% Change

Revenues
Freight	$	1,968	$	2,024	$	(56)	(3)	$	7,541	$	7,613	$	(72)	(1)
Non-freight	44		45		(1)		(2)	169		179		(10)		(6)
Total revenues	2,012		2,069		(57)		(3)	7,710		7,792		(82)		(1)

Operating expenses
Compensation and benefits	433		396		37		9	1,560		1,540		20		1
Fuel	169		227		(58)		(26)	652		882		(230)		(26)
Materials	54		49		5		10	216		210		6		3
Equipment rents	34		35		(1)		(3)	142		137		5		4
Depreciation and amortization	197		178		19		11	779		706		73		10
Purchased services and other	197		294		(97)		(33)	1,050		1,193		(143)		(12)
Total operating expenses	1,084		1,179		(95)		(8)	4,399		4,668		(269)		(6)

Operating income	928		890		38		4	3,311		3,124		187		6

Less:
Other income	(96)		(31)		(65)		210	(7)		(89)		82		(92)
Other components of net periodic benefit recovery	(85)		(87)		2		(2)	(342)		(381)		39		(10)
Net interest expense	112		112		—		—	458		448		10		2

Income before income tax expense	997		896		101		11	3,202		3,146		56		2

Income tax expense	195		232		(37)		(16)	758		706		52		7

Net income	$	802	$	664	$	138	21	$	2,444	$	2,440	$	4	—
Operating ratio (%)	53.9		57.0		(3.1)		(310) bps	57.1		59.9		(2.8)		(280) bps

Basic earnings per share	$	5.97	$	4.84	$	1.13	23	$	18.05	$	17.58	$	0.47	3

Diluted earnings per share	$	5.95	$	4.82	$	1.13	23	$	17.97	$	17.52	$	0.45	3

Shares Outstanding
Weighted average number of basic shares outstanding (millions)	134.2		137.2		(3.0)		(2)	135.5		138.8		(3.3)		(2)
Weighted average number of diluted shares outstanding (millions)	134.8		137.7		(2.9)		(2)	136.0		139.3		(3.3)		(2)

Foreign Exchange
Average foreign exchange rate (US$/Canadian$)	0.77		0.76		0.01		1	0.75		0.75		—		—
Average foreign exchange rate (Canadian$/US$)	1.30		1.32		(0.02)		(2)	1.34		1.33		0.01		1

Summary of Rail Data (Continued)

	Fourth Quarter								Year
Commodity Data	2020		2019		Total Change		% Change	FX Adjusted % Change⁽¹⁾	2020		2019		Total Change		% Change	FX Adjusted % Change⁽¹⁾

Freight Revenues (millions)
– Grain	$	508	$	473	$	35	7	8	$	1,829	$	1,684	$	145	9	8
– Coal	155		168		(13)		(8)	(8)	566		682		(116)		(17)	(17)
– Potash	103		95		8		8	10	493		462		31		7	6
– Fertilizers and sulphur	78		64		14		22	24	290		250		40		16	15
– Forest products	84		75		9		12	14	328		304		24		8	7
– Energy, chemicals and plastics	366		491		(125)		(25)	(25)	1,519		1,534		(15)		(1)	(1)
– Metals, minerals and consumer products	155		173		(18)		(10)	(9)	629		752		(123)		(16)	(17)
– Automotive	109		85		24		28	31	324		352		(28)		(8)	(9)
– Intermodal	410		400		10		3	3	1,563		1,593		(30)		(2)	(2)
Total Freight Revenues	$	1,968	$	2,024	$	(56)	(3)	(2)	$	7,541	$	7,613	$	(72)	(1)	(1)

Freight Revenue per Revenue Ton- Mile (RTM) (cents)
– Grain	4.23		4.64		(0.41)		(9)	(8)	4.38		4.56		(0.18)		(4)	(4)
– Coal	2.92		3.15		(0.23)		(7)	(7)	3.06		3.13		(0.07)		(2)	(2)
– Potash	2.50		2.88		(0.38)		(13)	(12)	2.62		2.67		(0.05)		(2)	(2)
– Fertilizers and sulphur	6.02		6.57		(0.55)		(8)	(7)	6.19		6.50		(0.31)		(5)	(5)
– Forest products	5.87		6.11		(0.24)		(4)	(3)	5.97		6.11		(0.14)		(2)	(3)
– Energy, chemicals and plastics	5.91		5.81		0.10		2	3	6.28		5.23		1.05		20	20
– Metals, minerals and consumer products	6.53		7.04		(0.51)		(7)	(6)	6.75		7.04		(0.29)		(4)	(5)
– Automotive	22.95		28.15		(5.20)		(18)	(16)	24.53		24.67		(0.14)		(1)	(1)
– Intermodal	5.81		5.59		0.22		4	4	5.61		5.68		(0.07)		(1)	(2)
Total Freight Revenue per RTM	4.89		5.14		(0.25)		(5)	(4)	4.96		4.93		0.03		1	—

Freight Revenue per Carload
– Grain	$	3,719	$	3,978	$	(259)	(7)	(6)	$	3,810	$	3,904	$	(94)	(2)	(3)
– Coal	2,103		2,240		(137)		(6)	(6)	2,174		2,241		(67)		(3)	(3)
– Potash	2,869		3,094		(225)		(7)	(6)	3,026		3,094		(68)		(2)	(3)
– Fertilizers and sulphur	4,906		4,444		462		10	12	4,708		4,386		322		7	6
– Forest products	4,641		4,310		331		8	9	4,581		4,252		329		8	7
– Energy, chemicals and plastics	4,541		4,857		(316)		(7)	(6)	4,919		4,284		635		15	15
– Metals, minerals and consumer products	2,914		3,192		(278)		(9)	(8)	3,034		3,210		(176)		(5)	(6)
– Automotive	3,132		2,972		160		5	8	3,054		3,077		(23)		(1)	(2)
– Intermodal	1,470		1,528		(58)		(4)	(3)	1,489		1,523		(34)		(2)	(2)
Total Freight Revenue per Carload	$	2,704	$	2,883	$	(179)	(6)	(5)	$	2,784	$	2,752	$	32	1	1


⁽¹⁾	This earnings measure has no standardized meaning prescribed by GAAP and, therefore, is unlikely to be comparable to similar measures presented by other companies. This measure is defined and reconciled in Non-GAAP Measures of this Earnings Release.

Summary of Rail Data (Continued)

	Fourth Quarter				Year
Commodity Data (Continued)	2020	2019	Total Change	% Change	2020	2019	Total Change	% Change

Millions of RTM
– Grain	12,013	10,184	1,829	18	41,747	36,941	4,806	13
– Coal	5,301	5,335	(34)	(1)	18,510	21,820	(3,310)	(15)
– Potash	4,120	3,294	826	25	18,784	17,297	1,487	9
– Fertilizers and sulphur	1,296	974	322	33	4,683	3,846	837	22
– Forest products	1,432	1,228	204	17	5,491	4,974	517	10
– Energy, chemicals and plastics	6,191	8,455	(2,264)	(27)	24,172	29,356	(5,184)	(18)
– Metals, minerals and consumer products	2,374	2,459	(85)	(3)	9,325	10,684	(1,359)	(13)
– Automotive	475	302	173	57	1,321	1,427	(106)	(7)
– Intermodal	7,054	7,153	(99)	(1)	27,858	28,033	(175)	(1)
Total RTMs	40,256	39,384	872	2	151,891	154,378	(2,487)	(2)

Carloads (thousands)
– Grain	136.6	118.9	17.7	15	480.1	431.4	48.7	11
– Coal	73.7	75.0	(1.3)	(2)	260.4	304.3	(43.9)	(14)
– Potash	35.9	30.7	5.2	17	162.9	149.3	13.6	9
– Fertilizers and sulphur	15.9	14.4	1.5	10	61.6	57.0	4.6	8
– Forest products	18.1	17.4	0.7	4	71.6	71.5	0.1	—
– Energy, chemicals and plastics	80.6	101.1	(20.5)	(20)	308.8	358.1	(49.3)	(14)
– Metals, minerals and consumer products	53.2	54.2	(1.0)	(2)	207.3	234.3	(27.0)	(12)
– Automotive	34.8	28.6	6.2	22	106.1	114.4	(8.3)	(7)
– Intermodal	279.0	261.8	17.2	7	1,049.6	1,046.1	3.5	—
Total Carloads	727.8	702.1	25.7	4	2,708.4	2,766.4	(58.0)	(2)

	Fourth Quarter								Year
	2020		2019		Total Change		% Change	FX Adjusted % Change⁽¹⁾	2020		2019		Total Change		% Change	FX Adjusted % Change⁽¹⁾

Operating Expenses (millions)
Compensation and benefits	$	433	$	396	$	37	9	10	$	1,560	$	1,540	$	20	1	1
Fuel	169		227		(58)		(26)	(25)	652		882		(230)		(26)	(27)
Materials	54		49		5		10	10	216		210		6		3	3
Equipment rents	34		35		(1)		(3)	(3)	142		137		5		4	2
Depreciation and amortization	197		178		19		11	11	779		706		73		10	10
Purchased services and other	197		294		(97)		(33)	(33)	1,050		1,193		(143)		(12)	(12)
Total Operating Expenses	$	1,084	$	1,179	$	(95)	(8)	(8)	$	4,399	$	4,668	$	(269)	(6)	(6)


⁽¹⁾	This earnings measure has no standardized meaning prescribed by GAAP and, therefore, is unlikely to be comparable to similar measures presented by other companies. This measure is defined and reconciled in Non-GAAP Measures of this Earnings Release.

Summary of Rail Data (Continued)

	Fourth Quarter				Year
	2020	2019	Total Change	% Change	2020	2019	Total Change	% Change

Operations Performance
Gross ton-miles (“GTMs”) (millions)	71,977	71,495	482	1	272,360	280,724	(8,364)	(3)
Train miles (thousands)	7,844	8,374	(530)	(6)	30,324	32,924	(2,600)	(8)
Average train weight – excluding local traffic (tons)	9,889	9,163	726	8	9,707	9,129	578	6
Average train length – excluding local traffic (feet)	8,207	7,405	802	11	7,929	7,388	541	7
Average terminal dwell (hours)	6.7	5.9	0.8	14	6.5	6.4	0.1	2
Average train speed (miles per hour, or “mph”)⁽¹⁾	21.9	22.4	(0.5)	(2)	22.0	22.2	(0.2)	(1)
Locomotive productivity (GTMs / operating horsepower)⁽²⁾	207	210	(3)	(1)	207	202	5	2
Fuel efficiency⁽³⁾	0.948	0.952	(0.004)	—	0.942	0.955	(0.013)	(1)
U.S. gallons of locomotive fuel consumed (millions)⁽⁴⁾	68.2	68.1	0.1	—	256.7	268.1	(11.4)	(4)
Average fuel price (U.S. dollars per U.S. gallon)	1.91	2.53	(0.62)	(25)	1.90	2.49	(0.59)	(24)

Total Employees and Workforce
Total employees (average)⁽⁵⁾	12,028	12,860	(832)	(6)	12,168	13,103	(935)	(7)
Total employees (end of period)⁽⁵⁾	11,890	12,694	(804)	(6)	11,890	12,694	(804)	(6)
Workforce (end of period)⁽⁶⁾	11,904	12,732	(828)	(7)	11,904	12,732	(828)	(7)

Safety Indicators ⁽⁷⁾
FRA personal injuries per 200,000 employee-hours	1.07	1.36	(0.29)	(21)	1.11	1.42	(0.31)	(22)
FRA train accidents per million train-miles	0.70	0.44	0.26	59	0.96	1.06	(0.10)	(9)


⁽¹⁾	Average train speed is defined as a measure of the line-haul movement from origin to destination including terminal dwell hours. It is calculated dividing the total train miles travelled by the total train hours operated. This calculation does not include delay time related to customers or foreign railroads and excludes the time and distance travelled by: i) trains used in or around CP’s yards; ii) passenger trains; and iii) trains used for repairing track.
⁽²⁾	Locomotive productivity is defined as daily GTMs divided by daily average operating horsepower. Operating horsepower excludes units offline, up or in storage, or in use on other railways, and includes foreign units online.
⁽³⁾	Fuel efficiency is defined as U.S. gallons of locomotive fuel consumed per 1,000 GTMs.
⁽⁴⁾	Includes gallons of fuel consumed from freight, yard and commuter service but excludes fuel used in capital projects and other non-freight activities.
⁽⁵⁾	An employee is defined as an individual currently engaged in full-time, part-time, or seasonal employment with CP.
⁽⁶⁾	Workforce is defined as total employees plus contractors and consultants.
⁽⁷⁾	FRA personal injuries per 200,000 employee-hours for the three months ended December 31, 2019 was previously reported as 1.31, restated to 1.36 in this Earnings Release. This restatement reflects new information available within specified periods stipulated by the FRA but that exceed the Company’s financial reporting timeline.

Non-GAAP Measures

The Company presents Non-GAAP measures to provide a basis for evaluating underlying earnings and liquidity trends in the Company’s business that can be compared with the results of operations in prior periods. In addition, these Non-GAAP measures facilitate a multi-period assessment of long-term profitability, allowing management and other external users of the Company’s consolidated financial information to compare profitability on a long-term basis, including assessing future profitability, with that of the Company’s peers.

These Non-GAAP measures have no standardized meaning and are not defined by GAAP and, therefore, may not be comparable to similar measures presented by other companies. The presentation of these Non-GAAP measures is not intended to be considered in isolation from, as a substitute for, or as superior to the financial information presented in accordance with GAAP.

Non-GAAP Performance Measures

The Company uses adjusted earnings results including Adjusted income and Adjusted diluted earnings per share to evaluate the Company’s operating performance and for planning and forecasting future business operations and future profitability. These Non-GAAP measures provide meaningful supplemental information regarding operating results because they exclude certain significant items that are not considered indicative of future financial trends either by nature or amount. As a result, these items are excluded for management assessment of operational performance, allocation of resources and preparation of annual budgets. These significant items may include, but are not limited to, restructuring and asset impairment charges, individually significant gains and losses from sales of assets, the foreign exchange (“FX”) impact of translating the Company’s debt and lease liabilities (including borrowings under the credit facility), discrete tax items, changes in income tax rates, changes to an uncertain tax item and certain items outside the control of management. These items may not be non-recurring. However, excluding these significant items from GAAP results allows for a consistent understanding of the Company’s consolidated financial performance when performing a multi-period assessment including assessing the likelihood of future results. Accordingly, these Non-GAAP financial measures may provide insight to investors and other external users of the Company’s consolidated financial information.

Significant items that impact reported earnings for 2020 and 2019 include:

2020:

in the fourth quarter, a deferred tax recovery of $29 million due to a change relating to a tax return filing election for the state of North Dakota that favourably impacted Diluted EPS by 22 cents; and
during the course of the year, a net non-cash gain of $14 million ($12 million after deferred tax) due to FX translation of debt and lease liabilities that favourably impacted Diluted EPS by 9 cents as follows:

in the fourth quarter, a $103 million gain ($90 million after deferred tax) that favourably impacted Diluted EPS by 67 cents;
in the third quarter, a $40 million gain ($38 million after deferred tax) that favourably impacted Diluted EPS by 29 cents;
in the second quarter, an $86 million gain ($82 million after deferred tax) that favourably impacted Diluted EPS by 59 cents; and
in the first quarter, a $215 million loss ($198 million after deferred tax) that unfavourably impacted Diluted EPS by $1.44.

2019:

in the fourth quarter, a deferred tax expense of $24 million as a result of a provision for an uncertain tax item of a prior period that unfavourably impacted Diluted EPS by 17 cents;
in the second quarter, a deferred tax recovery of $88 million due to the change in the Alberta provincial corporate income tax rate that favourably impacted Diluted EPS by 63 cents; and
during the course of the year, a net non-cash gain of $94 million ($86 million after deferred tax) due to FX translation of debt and lease liabilities that favourably impacted Diluted EPS by 62 cents as follows:

in the fourth quarter, a $37 million gain ($32 million after deferred tax) that favourably impacted Diluted EPS by 22 cents;
in the third quarter, a $25 million loss ($22 million after deferred tax) that unfavourably impacted Diluted EPS by 15 cents;
in the second quarter, a $37 million gain ($34 million after deferred tax) that favourably impacted Diluted EPS by 24 cents; and
in the first quarter, a $45 million gain ($42 million after deferred tax) that favourably impacted Diluted EPS by 30 cents.

2021 Outlook

As a result of a 2021 plan built on sustainable, profitable, growth along with further productivity improvement, CP expects high single-digit revenue ton-mile (“RTM”) growth and double-digit Adjusted diluted EPS growth. CP’s expectations for Adjusted diluted EPS growth in 2021 are based on Adjusted diluted EPS of $17.67 in 2020. As CP continues to enhance the service, productivity and safety of the network, the Company plans to invest a total of approximately $1.55 billion in capital programs. CP’s outlook assumes an annualized effective tax rate of approximately 24.6 percent. CP estimates other components of net periodic benefit recovery to increase by approximately $40 million versus 2020. Adjusted diluted EPS is defined and discussed further below.

Although CP has provided a forward-looking Non-GAAP measure (Adjusted diluted EPS), management is unable to reconcile, without unreasonable efforts, the forward-looking Adjusted diluted EPS to the most comparable GAAP measure, due to unknown variables and uncertainty related to future results. These unknown variables may include unpredictable transactions of significant value. In recent years, CP has recognized changes in income tax rates and a change to an uncertain tax item. These or other similar, large unforeseen transactions affect diluted EPS but may be excluded from CP’s Adjusted diluted EPS. Additionally, the U.S.-to-Canadian dollar exchange rate is unpredictable and can have a significant impact on CP’s reported results but may be excluded from CP’s Adjusted diluted EPS. In particular, CP excludes the FX impact of translating the Company’s debt and lease liabilities from Adjusted diluted EPS. Please see Note on Forward-Looking Information in this Earnings Release for further discussion.

Reconciliation of GAAP Performance Measures to Non-GAAP Performance Measures

The following tables reconcile the most directly comparable measures presented in accordance with GAAP to the Non-GAAP measures:

Adjusted income is calculated as Net income reported on a GAAP basis adjusted for significant items.

	For the three months ended December 31				For the year ended December 31
(in millions)	2020		2019		2020		2019
Net income as reported	$	802	$	664	$	2,444	$	2,440
Less significant items (pre-tax):
Impact of FX translation gain on debt and lease liabilities	103		37		14		94
Add:
Tax effect of adjustments⁽¹⁾	13		5		2		8
Income tax rate changes	(29)		—		(29)		(88)
Provision for uncertain tax item	—		24		—		24
Adjusted income	$	683	$	656	$	2,403	$	2,290

⁽¹⁾

The tax effect of adjustments was calculated as the pre-tax effect of the adjustments multiplied by the applicable tax rate for the above items of 12.35% and 13.58% for the three months and year ended December 31, 2020, and 13.43% and 8.55% for the three months and year ended December 31, 2019, respectively. The applicable tax rates reflect the taxable jurisdictions and nature, being on account of capital or income, of the significant items.

Adjusted diluted earnings per share is calculated using Adjusted income, as defined above, divided by the weighted-average diluted number of Common Shares outstanding during the period as determined in accordance with GAAP.

	For the three months ended December 31				For the year ended December 31
	2020		2019		2020		2019
Diluted earnings per share as reported	$	5.95	$	4.82	$	17.97	$	17.52
Less significant items (pre-tax):
Impact of FX translation gain on debt and lease liabilities	0.76		0.26		0.10		0.67
Add:
Tax effect of adjustments⁽¹⁾	0.09		0.04		0.01		0.05
Income tax rate changes	(0.22)		—		(0.21)		(0.63)
Provision for uncertain tax item	—		0.17		—		0.17
Adjusted diluted earnings per share	$	5.06	$	4.77	$	17.67	$	16.44

⁽¹⁾

Adjusted Return on Invested Capital (“Adjusted ROIC”)

Adjusted ROIC is calculated as Adjusted return divided by Adjusted average invested capital. Adjusted return is defined as Net income adjusted for interest expense, tax effected at the Company’s adjusted annualized effective tax rate, and significant items in the Company’s Consolidated Financial Statements, tax effected at the applicable tax rate. Adjusted average invested capital is defined as the sum of total Shareholders’ equity, Long-term debt, and Long-term debt maturing within one year, as presented in the Company’s Consolidated Financial Statements, each averaged between the beginning and ending balance over a rolling 12-month period, adjusted for the impact of significant items, tax effected at the applicable tax rate, on closing balances as part of this average. Adjusted ROIC excludes significant items reported in the Company’s Consolidated Financial Statements, as these significant items are not considered indicative of future financial trends either by nature or amount, and excludes interest expense, net of tax, to incorporate returns on the Company’s overall capitalization. Adjusted ROIC is a performance measure that measures how productively the Company uses its long-term capital investments, representing critical indicators of good operating and investment decisions made by management, and is an important performance criteria in determining certain elements of the Company’s long-term incentive plan. Adjusted ROIC is reconciled below from Return on average shareholders’ equity, the most comparable measure calculated in accordance with GAAP.

Beginning in the first quarter of 2020, CP aligned the reconciliation sequence for Adjusted ROIC to start with Net income, with no change to the calculated Adjusted return.

Calculation of Return on average shareholders’ equity

	For the year ended December 31
(in millions, except for percentages)	2020		2019
Net income as reported	$	2,444	$	2,440
Average shareholders’ equity	$	7,194	$	6,853
Return on average shareholders’ equity	34.0%		35.6%

Reconciliation of Net income to Adjusted return

	For the year ended December 31
(in millions)	2020		2019
Net income as reported	$	2,444	$	2,440
Add:
Net interest expense	458		448
Tax on interest⁽¹⁾	(113)		(112)
Significant items:
Impact of FX translation gain on debt and lease liabilities (pre-tax)	(14)		(94)
Tax on significant items⁽²⁾	2		8
Income tax rate changes	(29)		(88)
Provision for uncertain tax item	—		24
Adjusted return	$	2,748	$	2,626

⁽¹⁾	Tax was calculated at the adjusted annualized effective tax rate of 24.61% and 24.96% for each of the above items for the years ended December 31, 2020 and 2019, respectively.
⁽²⁾	Tax was calculated as the pre-tax effect of the adjustments multiplied by the applicable tax rate for the above items of 13.58% and 8.55% for the years ended December 31, 2020 and 2019, respectively.

Reconciliation of Average shareholders’ equity to Adjusted average invested capital

	For the year ended December 31
(in millions)	2020		2019
Average shareholders’ equity	$	7,194	$	6,853
Average Long-term debt, including long-term debt maturing within one year	9,264		8,726
	$	16,458	$	15,579
Less:
Income tax rate changes	15		44
Provision for uncertain tax item	—		(12)
Adjusted average invested capital	$	16,443	$	15,547

Calculation of Adjusted ROIC

	For the year ended December 31
(in millions, except for percentages)	2020		2019
Adjusted return	$	2,748	$	2,626
Adjusted average invested capital	$	16,443	$	15,547
Adjusted ROIC	16.7%		16.9%

Free Cash

Free cash is calculated as Cash provided by operating activities, less Cash used in investing activities, adjusted for changes in cash and cash equivalents balances resulting from FX fluctuations, and the acquisitions of Central Maine and Québec Railway (“CMQ”) and DRTP. Free cash is a measure that management considers to be a valuable indicator of liquidity. Free cash is useful to investors and other external users of the Company’s Consolidated Financial Statements as it assists with the evaluation of the Company’s ability to generate cash to satisfy debt obligations and discretionary activities such as dividends, share repurchase programs, and other strategic opportunities. The acquisitions of CMQ and DRTP are not indicative of investment trends and have also been excluded from Free cash. Free cash should be considered in addition to, rather than as a substitute for, Cash provided by operating activities.

Reconciliation of Cash Provided by Operating Activities to Free Cash

	For the three months ended December 31				For the year ended December 31
(in millions)	2020		2019		2020		2019
Cash provided by operating activities	$	985	$	1,033	$	2,802	$	2,990
Cash used in investing activities	(717)		(668)		(2,030)		(1,803)
Effect of foreign currency fluctuations on U.S. dollar-denominated cash and cash equivalents	(6)		(3)		6		(4)
Less:
Investment in Central Maine and Québec Railway	—		(174)		19		(174)
Investment in Detroit River Tunnel Partnership	(398)		—		(398)		—
Free cash	$	660	$	536	$	1,157	$	1,357

Foreign Exchange Adjusted % Change

FX adjusted % change allows certain financial results to be viewed without the impact of fluctuations in foreign currency exchange rates, thereby facilitating period-to-period comparisons in the analysis of trends in business performance. Financial result variances at constant currency are obtained by translating the comparable period of the prior year results denominated in U.S. dollars at the foreign exchange rates of the current period.

FX adjusted % changes in revenues are further used in calculating FX adjusted % change in freight revenue per carload and RTM. FX adjusted % changes in revenues are as follows:

	For the three months ended December 31
(in millions)	Reported 2020		Reported 2019		Variance due to FX		FX Adjusted 2019		FX Adjusted % Change
Freight revenues by line of business
Grain	$	508	$	473	$	(3)	$	470	8
Coal	155		168		—		168		(8)
Potash	103		95		(1)		94		10
Fertilizers and sulphur	78		64		(1)		63		24
Forest products	84		75		(1)		74		14
Energy, chemicals and plastics	366		491		(5)		486		(25)
Metals, minerals and consumer products	155		173		(2)		171		(9)
Automotive	109		85		(2)		83		31
Intermodal	410		400		(2)		398		3
Freight revenues	1,968		2,024		(17)		2,007		(2)
Non-freight revenues	44		45		—		45		(2)
Total revenues	$	2,012	$	2,069	$	(17)	$	2,052	(2)

	For the year ended December 31
(in millions)	Reported 2020		Reported 2019		Variance due to FX		FX Adjusted 2019		FX Adjusted % Change
Freight revenues by line of business
Grain	$	1,829	$	1,684	$	8	$	1,692	8
Coal	566		682		1		683		(17)
Potash	493		462		2		464		6
Fertilizers and sulphur	290		250		2		252		15
Forest products	328		304		3		307		7
Energy, chemicals and plastics	1,519		1,534		3		1,537		(1)
Metals, minerals and consumer products	629		752		7		759		(17)
Automotive	324		352		3		355		(9)
Intermodal	1,563		1,593		4		1,597		(2)
Freight revenues	7,541		7,613		33		7,646		(1)
Non-freight revenues	169		179		—		179		(6)
Total revenues	$	7,710	$	7,792	$	33	$	7,825	(1)

FX adjusted % changes in operating expenses are as follows:

	For the three months ended December 31
(in millions)	Reported 2020		Reported 2019		Variance due to FX		FX Adjusted 2019		FX Adjusted % Change
Compensation and benefits	$	433	$	396	$	(2)	$	394	10
Fuel	169		227		(2)		225		(25)
Materials	54		49		—		49		10
Equipment rents	34		35		—		35		(3)
Depreciation and amortization	197		178		(1)		177		11
Purchased services and other	197		294		(2)		292		(33)
Total operating expenses	$	1,084	$	1,179	$	(7)	$	1,172	(8)

	For the year ended December 31
(in millions)	Reported 2020		Reported 2019		Variance due to FX		FX Adjusted 2019		FX Adjusted % Change
Compensation and benefits	$	1,560	$	1,540	$	5	$	1,545	1
Fuel	652		882		8		890		(27)
Materials	216		210		—		210		3
Equipment rents	142		137		2		139		2
Depreciation and amortization	779		706		2		708		10
Purchased services and other	1,050		1,193		6		1,199		(12)
Total operating expenses	$	4,399	$	4,668	$	23	$	4,691	(6)

FX adjusted % change in operating income is as follows:

	For the three months ended December 31
(in millions)	Reported 2020		Reported 2019		Variance due to FX		FX Adjusted 2019		FX Adjusted % Change
Operating income	$	928	$	890	$	(10)	$	880	5

	For the year ended December 31
(in millions)	Reported 2020		Reported 2019		Variance due to FX		FX Adjusted 2019		FX Adjusted % Change
Operating income	$	3,311	$	3,124	$	10	$	3,134	6

Dividend Payout Ratio and Adjusted Dividend Payout Ratio

Dividend payout ratio is calculated as dividends declared per share divided by Diluted EPS. Adjusted dividend payout ratio is calculated as dividends declared per share divided by Adjusted diluted EPS, as defined above. These ratios are measures of shareholder return and provide information on the Company’s ability to declare dividends on an ongoing basis.

Calculation of Dividend Payout Ratio

	For the year ended December 31
(in dollars, except for percentages)	2020		2019
Dividends declared per share	$	3.5600	$	3.1400
Diluted EPS	17.97		17.52
Dividend payout ratio	19.8%		17.9%

Calculation of Adjusted Dividend Payout Ratio

	For the year ended December 31
(in dollars, except for percentages)	2020		2019
Dividends declared per share	$	3.5600	$	3.1400
Adjusted diluted EPS	17.67		16.44
Adjusted dividend payout ratio	20.1%		19.1%

Adjusted Net Debt to Adjusted EBITDA Ratio

Adjusted net debt to Adjusted earnings before interest, tax, depreciation and amortization (“EBITDA”) ratio is calculated as Adjusted net debt divided by Adjusted EBITDA. The Adjusted net debt to Adjusted EBITDA ratio is a key credit measure used to assess the Company’s financial capacity. The ratio provides information on the Company’s ability to service its debt and other long-term obligations. The Adjusted net debt to Adjusted EBITDA ratio is reconciled below from the Long-term debt to Net income ratio, the most comparable measure calculated in accordance with GAAP.

Calculation of Long-term Debt to Net Income Ratio

(in millions, except for ratios)	2020		2019
Long-term debt including long-term debt maturing within one year as at December 31	$	9,771	$	8,757
Net income for the year ended December 31	2,444		2,440
Long-term debt to Net income ratio	4.0		3.6

Reconciliation of Long-term Debt to Adjusted Net Debt

Adjusted net debt is defined as Long-term debt, Long-term debt maturing within one year and Short-term borrowing as reported on the Company’s Consolidated Balance Sheets adjusted for pension plans deficit, operating lease liabilities recognized on the Company’s Consolidated Balance Sheets, and Cash and cash equivalents.

(in millions)	2020		2019
Long-term debt including long-term debt maturing within one year as at December 31	$	9,771	$	8,757
Add:
Pension plans deficit⁽¹⁾	328		294
Operating lease liabilities	311		354
Less:
Cash and cash equivalents	147		133
Adjusted net debt as at December 31	$	10,263	$	9,272

⁽¹⁾	Pension plans deficit is the total funded status of the Pension plans in deficit only.

Reconciliation of Net Income to EBIT, Adjusted EBIT and Adjusted EBITDA

Earnings before interest and tax (“EBIT”) is calculated as Net income before Net interest expense and Income tax expense. Adjusted EBIT excludes significant items reported in both Operating income and Other (income) expense. Adjusted EBITDA is calculated as Adjusted EBIT plus operating lease expense and Depreciation and amortization, less Other components of net periodic benefit recovery.

	For the year ended December 31
(in millions)	2020		2019
Net income as reported	$	2,444	$	2,440
Add:
Net interest expense	458		448
Income tax expense	758		706
EBIT	3,660		3,594
Less significant items (pre-tax):
Impact of FX translation gain on debt and lease liabilities	14		94
Adjusted EBIT	3,646		3,500
Add:
Operating lease expense	78		83
Depreciation and amortization	779		706
Less:
Other components of net periodic benefit recovery	342		381
Adjusted EBITDA	$	4,161	$	3,908

Calculation of Adjusted Net Debt to Adjusted EBITDA Ratio

(in millions, except for ratios)	2020		2019
Adjusted net debt as at December 31	$	10,263	$	9,272
Adjusted EBITDA for the year ended December 31	4,161		3,908
Adjusted net debt to Adjusted EBITDA ratio	2.5		2.4

View original content:http://www.prnewswire.com/news-releases/cp-demonstrates-resiliency-of-model-and-team-reports-record-fourth-quarter-and-full-year-2020-results-301216459.html

SOURCE Canadian Pacific

January 27, 2021 4:08 pm

QCR Holdings, Inc. Announces Record Net Income of $18.3 Million for the Fourth Quarter and $60.6 Million for the Full Year 2020

Fourth Quarter and Full Year 2020 Highlights

Record net income of $18.3 million, or $1.14 per diluted share
Adjusted net income (non-GAAP) of $19.1 million, or $1.20 per diluted share
Noninterest income of $32.0 million for the quarter and $113.8 million for the year
Adjusted NIM (TEY)(non-GAAP) was up 1 basis point after further adjusting for higher third quarter interest recoveries on previously charged-off loans
Annualized core loan and lease growth (non-GAAP) of 9.0% for the quarter and 7.8% for the year, excluding SBA Paycheck Protection Program (“PPP”) loans
Core deposits relatively stable for the quarter and up 22.3% for the year
Provision expense of $7.1 million for the quarter, increasing ALLL to total loans and leases, excluding PPP loans (non-GAAP), by 7 basis points to 2.12%
Nonperforming assets improved by 22% for the quarter and now represent only 0.26% of total assets

MOLINE, Ill., Jan. 27, 2021 (GLOBE NEWSWIRE) — QCR Holdings, Inc. (NASDAQ: QCRH) (the “Company”) today announced record net income of $18.3 million and diluted earnings per share (“EPS”) of $1.14 for the fourth quarter of 2020, compared to net income of $17.3 million and diluted EPS of $1.09 for the third quarter of 2020. Pre-provision, pre-tax adjusted net income (non-GAAP) was $30.4 million in the fourth quarter of 2020, compared to a record $42.2 million in the third quarter of 2020.

The Company reported adjusted net income (non-GAAP) of $19.1 million and adjusted diluted EPS of $1.20 for the fourth quarter of 2020, compared to adjusted net income (non-GAAP) of $17.7 million and adjusted diluted EPS of $1.11 for the third quarter of 2020. For the fourth quarter of 2019, net income and diluted EPS were $15.9 million and $0.99, respectively, and adjusted net income (non-GAAP) and adjusted diluted EPS were $15.4 million and $0.96, respectively.

	For the Quarter Ended
	December 31,			September 30,			December 31,
$ in millions (except per share data)	2020			2020			2019
Net Income	$	18.3		$	17.3		$	15.9
Diluted EPS	$	1.14		$	1.09		$	0.99
Adjusted Net Income (non-GAAP)	$	19.1		$	17.7		$	15.4
Adjusted Diluted EPS (non-GAAP)	$	1.20		$	1.11		$	0.96
Pre-Provision/Pre-Tax Adjusted Income (non-GAAP)	$	30.4		$	42.2		$	20.4
Pre-Provision/Pre-Tax Adjusted ROAA (non-GAAP)		2.08	%		2.90	%		1.58	%
See GAAP to non-GAAP reconciliations

“We are very pleased with our financial performance in 2020, highlighted by record net income for the fourth quarter and full year,” said CEO Larry J. Helling. “Our strong results were driven by robust revenue growth, record fee income and increased net interest income. We grew core loans by nearly 8% for the year, while maintaining disciplined underwriting and solid credit quality. Our asset quality and credit metrics improved during the quarter as we improved nonperforming assets by 22%, down to only 0.26% of total assets.”

“Additionally, we continued to see a reduction in loan deferrals at year-end, as most of our clients who received payment relief early in the COVID-19 pandemic have resumed making normal payments,” Helling said. “We believe this speaks to the high quality of our loan portfolio and the resiliency of our local markets, which continue to exhibit improving economic activity.”

______________________________
Adjusted non-GAAP measurements of financial performance exclude non-recurring income and expense items. The Company believes these measurements provide a better comparison for analysis and may provide a better indicator of future performance.

Annualized Loan and Lease Growth of 9.0% for the Quarter and 7.8% for the Year, excluding PPP Loans (non-GAAP)

During the fourth quarter of 2020, the Company’s total loans and leases, excluding PPP loans, increased $87.5 million to a total of $4.0 billion. Loan and lease growth during the quarter was 9.0% on an annualized basis. Continued loan and lease growth was funded by some of the Company’s excess liquidity. Core deposits (excluding brokered deposits) declined by $18.8 million and brokered deposits declined by $54.3 million as the Company allowed certain higher cost brokered deposits to run off the balance sheet. In addition, short-term borrowings decreased by $50.0 million during the quarter. At quarter-end, the percentage of wholesale funds to total assets was 3.2%, which was down from 4.9% in the third quarter of 2020 as the Company’s need for wholesale funding continued to decline. Additionally, at quarter-end, the percentage of gross loans and leases to total assets was 74.8%, up from 72.4% in the third quarter, driven primarily by lower excess liquidity.

“Our solid loan growth for the quarter was driven by strength in our core commercial lending business, as well as our Specialty Finance Group,” added Helling. “However, until we have better visibility on the pandemic recovery, we are targeting organic loan growth for the full year 2021 of between 6% and 8%, slightly lower than our long-term goal of 9%.”

Net Interest Income of $43.7 million

Net interest income for the fourth quarter of 2020 totaled $43.7 million, compared to $44.6 million for the third quarter of 2020 and $39.9 million for the fourth quarter of 2019. The slight decrease was primarily due to a decline in the yield on earning assets of 8 basis points on a linked quarter basis, primarily due to the higher than normal amount of interest recoveries on previously charged-off loans in the third quarter. Acquisition-related net accretion totaled $1.1 million for the fourth quarter of 2020, up from $833 thousand in the third quarter of 2020 and $931 thousand for the fourth quarter of 2019. Adjusted net interest income (non-GAAP) was $45.3 million for the fourth quarter of 2020, compared to $45.7 million for the third quarter of 2020 and $40.8 million for the fourth quarter of 2019.

Net interest income totaled $167.0 million for the year ended December 31, 2020, compared to $155.6 million for the year ended December 31, 2019.

Excluding the impact of interest recoveries in the prior quarter, which created an 8 basis point reduction in adjusted NIM (non-GAAP) on a linked-quarter basis, adjusted NIM was up 1 basis point. The reported net interest margin was 3.25%. On a tax-equivalent yield basis (non-GAAP), net interest margin was 3.45%, decreasing by 11 and 6 basis points, respectively, from the third quarter of 2020. Net interest margin, excluding acquisition-related net accretion (non-GAAP) was 3.37%, down 7 basis points from the third quarter. The total cost of interest-bearing funds was down 2 basis points for the quarter, as further improvement in our deposit costs was partially offset by the full quarter impact of our $50.0 million subordinated note offering in the third quarter.

	For the Quarter Ended
	December 31,	September 30,	December 31,
	2020	2020	2019
NIM	3.25%	3.36%	3.36%
NIM (TEY)(non-GAAP)	3.45%	3.51%	3.51%
Adjusted NIM (TEY)(non-GAAP)	3.37%	3.44% (1)	3.43%
See GAAP to non-GAAP reconciliations

(1) Increased by 8 bps due to one-time interest recoveries on previously charged-off loans.

“Our deposit costs decreased significantly over the course of the year as we grew core deposits and significantly reduced our wholesale funding,” stated Todd A. Gipple, President, Chief Operating Officer and Chief Financial Officer. “However, our average loan yields also decreased due to the sharp decline in short-term interest rates. Despite this and the fact that we carried a significant amount of excess liquidity for most of the year, we were able to protect our margins, as adjusted NIM increased by 2 basis points for the full year.”

Noninterest Income of $32.0 million

Noninterest income for the fourth quarter of 2020 totaled $32.0 million, compared to $38.0 million for the third quarter of 2020. The decrease was primarily due to a $5.3 million reduction in swap fee income from the record third quarter. Wealth management revenue was $3.3 million for the quarter, down $232 thousand from the third quarter, due to the impact of the sale of the Bates Companies in the third quarter. Excluding that impact, wealth management revenue was up $241 thousand on a linked-quarter basis. In addition, securities gains decreased by $1.2 million and gain on sale of loans increased by $316 thousand from the prior quarter. Noninterest income increased $14.5 million, or an increase of 83% compared to the fourth quarter of 2019, excluding the gain on sale of Rockford Bank & Trust (“RB&T”), which was recorded in that quarter.

Noninterest income for the year ended December 31, 2020, totaled $113.8 million, compared to $66.5 million for the year ended December 31, 2019, excluding the gain on the sale of RB&T, an increase of 71%.

“Our noninterest income was again driven by another strong quarter of swap fee income. Swap fee income totaled $74.8 million for the full year 2020 as a result of strong demand for these lending products, where we are making high-quality, long-term variable rate loans and are enabling our clients to lock in attractive fixed long-term rates through the use of swaps. The pipeline of swap loans at our banks and our Specialty Finance Group remains healthy and we believe that this source of fee income remains sustainable for the foreseeable future,” added Gipple. “Our current expectation is that swap fee income will be approximately $14 to $18 million per quarter for 2021.”

Noninterest Expenses of $46.4 million

Noninterest expense for the fourth quarter of 2020 totaled $46.4 million, compared to $40.8 million for the third quarter of 2020 and $46.3 million for the fourth quarter of 2019. The linked-quarter increase was due to several factors, but primarily the result of increased salary and benefits expense of $4.4 million, driven by strong financial results in the second half of the year. In addition, occupancy and equipment expense increased by $1.1 million, and advertising and marketing expense increased by $526 thousand. These increases were partially offset by a linked-quarter decline in losses on liability extinguishment of $417 thousand and loss on the sale of a subsidiary of $452 thousand.

Asset Quality Remains Strong and NPAs Improved

Continued to Build Reserves

Nonperforming assets (“NPAs”) totaled $14.8 million at the end of the fourth quarter, a decrease of $4.1 million from the third quarter of 2020. The decrease was primarily due to a reduction in nonaccrual loans as a number of loans returned to performing status or were either monetized or charged-off during the quarter. The ratio of NPAs to total assets improved to 0.26% on December 31, 2020, compared to 0.32% on September 30, 2020, and 0.27% on December 31, 2019. In addition, the Company’s criticized loans and classified loans to total loans and leases decreased to 3.24% and 1.55%, respectively, from 3.53% and 1.66% as of September 30, 2020.

The Company’s provision for loan and lease losses totaled $7.1 million for the fourth quarter of 2020, down from $20.3 million in the prior quarter. As of December 31, 2020, the Company’s allowance to total loans and leases was 1.98%, which was up from 1.87% on September 30, 2020, and from 0.98% at December 31, 2019. Excluding the $273 million impact of PPP loans that are on the Company’s balance sheet, the ALLL to total loans and leases was 2.12% (non-GAAP).

In accordance with GAAP for acquisition accounting, loans acquired through past acquisitions were recorded at market value; therefore, there was no allowance associated with the acquired loans at the acquisition date. Management continues to evaluate the allowance needed on the acquired loans factoring in the net remaining discount of $3.1 million on December 31, 2020.

Strong Capital Levels

As of December 31, 2020, the Company’s total risk-based capital ratio was 15.13%, the common equity tier 1 ratio was 10.69% and the tangible common equity to tangible assets ratio was 9.08%. By comparison, these respective ratios were 14.93%, 10.44% and 8.42% as of September 30, 2020.

Focus on Three Strategic Long-Term Initiatives

As part of the Company’s ongoing efforts to grow earnings and drive attractive long-term returns for shareholders, it continues to operate under three key strategic long-term initiatives:

Organic loan and lease growth of 9% per year, funded by core deposits;
Grow fee-based income by at least 6% per year; and
Limit our annual operating expense growth to 5% per year.

These initiatives are long-term targets. Due to the impact of the COVID-19 pandemic, among other factors, the Company may not be able to achieve these goals for the full year 2021.

Supplemental Presentation and Where to Find It

In addition to this press release, the Company has included a supplemental presentation that provides further information regarding the Company’s loan exposures and deferrals. Investors, analysts and other interested persons may find this presentation on the Securities and Exchange Commission’s EDGAR filing system at www.sec.gov/edgar.shtml, or on the Company’s website at www.qcrh.com.

Conference Call Details

The Company will host an earnings call/webcast tomorrow, January 28, 2021, at 10:00 a.m. Central Time. Dial-in information for the call is toll-free: 888-346-9286 (international 412-317-5253). Participants should request to join the QCR Holdings, Inc. call. The event will be available for replay through February 11, 2021. The replay access information is 877-344-7529 (international 412-317-0088); access code 10151041. A webcast of the teleconference can be accessed at the Company’s News and Events page at www.qcrh.com. An archived version of the webcast will be available at the same location shortly after the live event has ended.

About Us

QCR Holdings, Inc., headquartered in Moline, Illinois, is a relationship-driven, multi-bank holding company serving the Quad Cities, Cedar Rapids, Cedar Valley, Des Moines/Ankeny and Springfield communities through its wholly-owned subsidiary banks. The banks provide full-service commercial and consumer banking and trust and wealth management services. Quad City Bank & Trust Company, based in Bettendorf, Iowa, commenced operations in 1994, Cedar Rapids Bank & Trust Company, based in Cedar Rapids, Iowa, commenced operations in 2001, Community State Bank, based in Ankeny, Iowa, was acquired by the Company in 2016, and Springfield First Community Bank, based in Springfield, Missouri, was acquired by the Company in 2018. Additionally, the Company serves the Waterloo/Cedar Falls, Iowa community through Community Bank & Trust, a division of Cedar Rapids Bank & Trust Company. Quad City Bank & Trust Company engages in commercial leasing through its wholly-owned subsidiary, m2 Equipment Finance, LLC, based in Milwaukee, Wisconsin, and also provides correspondent banking services. The Company has 24 locations in Iowa, Missouri, Wisconsin and Illinois. As of December 31, 2020, the Company had approximately $5.7 billion in assets, $4.3 billion in loans and $4.6 billion in deposits. For additional information, please visit the Company’s website at www.qcrh.com.

Special Note Concerning Forward-Looking Statements.

This document contains, and future oral and written statements of the Company and its management may contain, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations, plans, objectives, future performance and business of the Company. Forward-looking statements, which may be based upon beliefs, expectations and assumptions of the Company’s management and on information currently available to management, are generally identifiable by the use of words such as “believe,” “expect,” “anticipate,” “predict,” “suggest,” “appear,” “plan,” “intend,” “estimate,” ”annualize,” “may,” “will,” “would,” “could,” “should” or other similar expressions. Additionally, all statements in this document, including forward-looking statements, speak only as of the date they are made, and the Company undertakes no obligation to update any statement in light of new information or future events.

A number of factors, many of which are beyond the ability of the Company to control or predict, could cause actual results to differ materially from those in its forward-looking statements. These factors include, among others, the following: (i) the strength of the local, state, national and international economies (including the impact of the new presidential administration and the impact of tariffs, a U.S. withdrawal from or significant renegotiation of trade agreements, trade wars and other changes in trade regulations); (ii) the economic impact of any future terrorist threats and attacks, widespread disease or pandemics (including the COVID-19 pandemic in the United States), or other adverse external events that could cause economic deterioration or instability in credit markets, and the response of the local, state and national governments to any such adverse external events; (iii) changes in accounting policies and practices (including the new current expected credit loss (CECL) impairment standards, that will change how the Company estimates credit losses when implemented); (iv) changes in state and federal laws, regulations and governmental policies concerning the Company’s general business; (v) changes in interest rates and prepayment rates of the Company’s assets (including the impact of LIBOR phase-out); (vi) increased competition in the financial services sector and the inability to attract new customers; (vii) changes in technology and the ability to develop and maintain secure and reliable electronic systems; (viii) unexpected results of acquisitions, which may include failure to realize the anticipated benefits of acquisitions and the possibility that transaction costs may be greater than anticipated; (ix) the loss of key executives or employees; (x) changes in consumer spending; and (xi) unexpected outcomes of existing or new litigation involving the Company. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Additional information concerning the Company and its business, including additional factors that could materially affect the Company’s financial results, is included in the Company’s filings with the Securities and Exchange Commission.

Contacts:
Todd A. Gipple	Kim K. Garrett
President	Vice President
Chief Operating Officer	Corporate Communications
Chief Financial Officer	Investor Relations Manager
(309) 743-7745	(319) 743-7006
[email protected]	[email protected]

QCR Holdings, Inc.
Consolidated Financial Highlights
(Unaudited)

	As of
	December 31,		September 30,		June 30,		March 31,		December 31,
	2020		2020		2020		2020		2019

	(dollars in thousands)

CONDENSED BALANCE SHEET

Cash and due from banks	$	61,329	$	68,932	$	88,577	$	169,827	$	76,254
Federal funds sold and interest-bearing deposits		95,676		302,668		142,900		206,708		157,691
Securities		838,131		782,088		748,883		684,571		611,341
Net loans/leases		4,166,753		4,168,395		4,079,432		3,662,435		3,654,204
Intangibles		11,381		11,902		13,872		14,421		14,970
Goodwill		74,066		74,066		74,248		74,248		74,748
Derivatives		222,757		236,381		225,164		195,973		87,827
Other assets		212,704		220,128		220,920		213,134		220,049
Assets held for sale		–		–		10,765		10,758		11,966
Total assets	$	5,682,797	$	5,864,560	$	5,604,761	$	5,232,075	$	4,909,050

Total deposits	$	4,599,137	$	4,672,268	$	4,349,775	$	4,170,478	$	3,911,051
Total borrowings		177,114		226,962		376,250		244,399		278,955
Derivatives		229,270		244,510		233,589		203,744		88,436
Other liabilities		83,483		148,207		87,539		71,185		90,254
Liabilities held for sale		–		–		1,588		3,130		5,003
Total stockholders’ equity		593,793		572,613		556,020		539,139		535,351
Total liabilities and stockholders’ equity	$	5,682,797	$	5,864,560	$	5,604,761	$	5,232,075	$	4,909,050

ANALYSIS OF LOAN PORTFOLIO
Loan/lease mix:
Commercial and industrial loans	$	1,726,723	$	1,823,049	$	1,850,110	$	1,484,979	$	1,507,825
Commercial real estate loans		2,107,629		1,999,715		1,869,162		1,783,086		1,736,396
Direct financing leases		66,016		73,011		79,105		83,324		87,869
Residential real estate loans		252,121		245,032		241,069		237,742		239,904
Installment and other consumer loans		91,302		102,471		99,150		106,728		109,352
Deferred loan/lease origination costs, net of fees		7,338		4,699		1,663		8,809		8,859
Total loans/leases	$	4,251,129	$	4,247,977	$	4,140,259	$	3,704,668	$	3,690,205
Less allowance for estimated losses on loans/leases		84,376		79,582		60,827		42,233		36,001
Net loans/leases	$	4,166,753	$	4,168,395	$	4,079,432	$	3,662,435	$	3,654,204

ANALYSIS OF SECURITIES PORTFOLIO
Securities mix:
U.S. government sponsored agency securities	$	15,336	$	18,437	$	17,472	$	19,457	$	20,078
Municipal securities		627,523		569,075		526,192		493,664		447,853
Residential mortgage-backed and related securities		132,842		134,147		145,672		122,853		120,587
Asset backed securities		40,683		40,665		39,797		28,499		16,887
Other securities		21,747		19,764		19,750		20,098		5,936
Total securities	$	838,131	$	782,088	$	748,883	$	684,571	$	611,341

ANALYSIS OF DEPOSITS
Deposit mix:
Noninterest-bearing demand deposits	$	1,145,378	$	1,175,085	$	1,177,482	$	829,782	$	777,224
Interest-bearing demand deposits		2,987,469		2,938,194		2,488,755		2,440,907		2,407,502
Time deposits		460,659		499,021		560,982		617,979		571,343
Brokered deposits		5,631		59,968		122,556		281,810		154,982
Total deposits	$	4,599,137	$	4,672,268	$	4,349,775	$	4,170,478	$	3,911,051

ANALYSIS OF BORROWINGS
Borrowings mix:
Term FHLB advances	$	–	$	40,000	$	90,000	$	55,000	$	50,000
Overnight FHLB advances		15,000		–		55,000		40,000		109,300
FRB borrowings		–		–		100,000		30,000		–
Other short-term borrowings		5,430		30,430		24,818		13,067		13,423
Subordinated notes		118,691		118,577		68,516		68,455		68,394
Junior subordinated debentures		37,993		37,955		37,916		37,877		37,838
Total borrowings	$	177,114	$	226,962	$	376,250	$	244,399	$	278,955

QCR Holdings, Inc.
Consolidated Financial Highlights
(Unaudited)

	For the Quarter Ended
	December 31,			September 30,			June 30,			March 31,		December 31,
	2020			2020			2020			2020		2019

	(dollars in thousands, except per share data)

INCOME STATEMENT
Interest income	$	49,851		$	50,890		$	48,650		$	48,982	$	52,977
Interest expense		6,144			6,309			7,694			11,276		13,058
Net interest income		43,707			44,581			40,956			37,706		39,919
Provision for loan/lease losses		7,080			20,342			19,915			8,367		979
Net interest income after provision for loan/lease losses	$	36,627		$	24,239		$	21,041		$	29,339	$	38,940


Trust department fees	$	2,388		$	2,280		$	2,227		$	2,312	$	2,365
Investment advisory and management fees		926			1,266			1,399			1,727		1,589
Deposit service fees		1,875			1,403			1,286			1,477		1,787
Gain on sales of residential real estate loans		1,462			1,370			1,196			652		823
Gain on sales of government guaranteed portions of loans		224			–			–			–		159
Swap fee income		21,402			26,688			19,927			6,804		7,409
Securities gains (losses), net		617			1,802			65			–		26
Earnings on bank-owned life insurance		461			502			612			329		533
Debit card fees		923			946			775			758		766
Correspondent banking fees		270			220			198			215		194
Gain on sale of assets and liabilities of subsidiary		–			–			–			–		12,286
Other		1,469			1,482			941			922		1,868
Total noninterest income	$	32,017		$	37,959		$	28,626		$	15,196	$	29,805


Salaries and employee benefits	$	30,446		$	25,999		$	21,304		$	18,519	$	24,220
Occupancy and equipment expense		4,917			3,807			3,748			4,032		4,019
Professional and data processing fees		3,871			3,758			3,646			3,369		3,570
Post-acquisition compensation, transition and integration costs		25			(32	)		70			151		1,855
Disposition costs		64			192			(83	)		517		3,325
FDIC insurance, other insurance and regulatory fees		1,272			1,301			908			683		523
Loan/lease expense		465			403			339			228		349
Net cost of (income from) and gains/losses on operations of other real estate		(4	)		16			(332	)		13		232
Advertising and marketing		1,276			750			552			682		1,670
Bank service charges		523			488			501			504		516
Losses on liability extinguishment		1,457			1,874			429			147		288
Correspondent banking expense		205			205			212			216		216
Intangibles amortization		521			531			548			549		560
Goodwill impairment		–			–			–			500		3,000
Loss on sale of subsidiary		(147	)		305			–			–		–
Other		1,473			1,241			1,288			1,313		1,951
Total noninterest expense	$	46,364		$	40,838		$	33,130		$	31,423	$	46,294

Net income before income taxes	$	22,280		$	21,360		$	16,537		$	13,112	$	22,451
Federal and state income tax expense		4,009			4,016			2,798			1,884		6,560
Net income	$	18,271		$	17,344		$	13,739		$	11,228	$	15,891

Basic EPS	$	1.16		$	1.10		$	0.87		$	0.71	$	1.01
Diluted EPS	$	1.14		$	1.09		$	0.86		$	0.70	$	0.99


Weighted average common shares outstanding		15,775,596			15,767,152			15,747,056			15,796,796		15,772,703
Weighted average common and common equivalent shares outstanding		15,973,054			15,923,578			15,895,336			16,011,456		16,033,043

QCR Holdings, Inc.
Consolidated Financial Highlights
(Unaudited)

	For the Year Ended
	December 31,			December 31,
	2020			2019

	(dollars in thousands, except per share data)

INCOME STATEMENT
Interest income	$	198,373		$	216,076
Interest expense		31,423			60,517
Net interest income		166,950			155,559
Provision for loan/lease losses		55,704			7,066
Net interest income after provision for loan/lease losses	$	111,246		$	148,493


Trust department fees	$	9,207		$	9,559
Investment advisory and management fees		5,318			6,995
Deposit service fees		6,041			6,812
Gain on sales of residential real estate loans		4,680			2,571
Gain on sales of government guaranteed portions of loans		224			748
Swap fee income		74,821			28,295
Securities gains (losses), net		2,484			(30	)
Earnings on bank-owned life insurance		1,904			1,973
Debit card fees		3,402			3,357
Correspondent banking fees		903			773
Gain on sale of assets and liabilities of subsidiary		–			12,286
Other		4,814			5,429
Total noninterest income	$	113,798		$	78,768


Salaries and employee benefits	$	96,268		$	92,063
Occupancy and equipment expense		16,504			15,106
Professional and data processing fees		14,644			13,381
Post-acquisition compensation, transition and integration costs		214			3,582
Disposition costs		690			3,325
FDIC insurance, other insurance and regulatory fees		4,164			2,955
Loan/lease expense		1,435			1,097
Net cost of (income from) and gains/losses on operation of other real estate		(307	)		3,789
Advertising and marketing		3,260			4,548
Bank service charges		2,016			2,009
Losses on liability extinguishment		3,907			436
Correspondent banking expense		838			836
Intangibles amortization		2,149			2,266
Goodwill impairment		500			3,000
Loss on sale of subsidiary		158			–
Other		5,315			6,841
Total noninterest expense	$	151,755		$	155,234

Net income before taxes	$	73,289		$	72,027
Income tax expense		12,707			14,619
Net income	$	60,582		$	57,408

Basic EPS	$	3.89		$	3.65
Diluted EPS	$	3.80		$	3.60

Weighted average common shares outstanding		15,571,650			15,730,016
Weighted average common and common equivalent shares outstanding		15,952,637			15,967,775

QCR Holdings, Inc.
Consolidated Financial Highlights
(Unaudited)

	As of and for the Quarter Ended															For the Year Ended
	December 31,			September 30,			June 30,			March 31,			December 31,			December 31,			December 31,
	2020			2020			2020			2020			2019			2020			2019

	(dollars in thousands, except per share data)

COMMON SHARE DATA
Common shares outstanding		15,805,711			15,792,357			15,790,611			15,773,736			15,828,098
Book value per common share (1)	$	37.57		$	36.26		$	35.21		$	34.18		$	33.82
Tangible book value per common share (2)	$	32.16		$	30.82		$	29.63		$	28.56		$	28.15
Closing stock price	$	39.59		$	27.41		$	31.18		$	27.07		$	43.86
Market capitalization	$	625,748		$	432,869		$	492,351		$	426,995		$	694,220
Market price / book value		105.38	%		75.60	%		88.55	%		79.20	%		129.69	%
Market price / tangible book value		123.09	%		88.95	%		105.23	%		94.79	%		155.76	%
Earnings per common share (basic) LTM (3)	$	3.84		$	3.69		$	3.55		$	3.54		$	3.65
Price earnings ratio LTM (3)		10.31 x			7.43 x			8.78 x			7.65 x			12.02 x
TCE / TA (4)		9.08	%		8.42	%		8.48	%		8.76	%		9.25	%


CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
Beginning balance	$	572,613		$	556,020		$	539,139		$	535,351		$	519,743
Net income		18,271			17,344			13,739			11,228			15,891
Other comprehensive income (loss), net of tax		3,157			(614	)		3,622			(3,691	)		(683	)
Common stock cash dividends declared		(947	)		(945	)		(945	)		(942	)		(947	)
Proceeds from issuance of 9,400 shares of common stock as a result of the performance based targets met for Bates Companies		–			–			–			–			399
Repurchase and cancellation of 100,932 shares of common stock as a result of a share repurchase program		–			–			–			(3,780	)		–
Other (5)		699			808			465			973			948
Ending balance	$	593,793		$	572,613		$	556,020		$	539,139		$	535,351


REGULATORY CAPITAL RATIOS (6):
Total risk-based capital ratio		15.13	%		14.93	%		13.71	%		13.54	%		13.33	%
Tier 1 risk-based capital ratio		11.49	%		11.25	%		11.07	%		11.16	%		11.04	%
Tier 1 leverage capital ratio		9.49	%		9.21	%		8.91	%		10.19	%		9.53	%
Common equity tier 1 ratio		10.69	%		10.44	%		10.25	%		10.31	%		10.18	%


KEY PERFORMANCE RATIOS AND OTHER METRICS
Return on average assets (annualized)		1.25	%		1.19	%		0.95	%		0.91	%		1.23	%		1.08	%		1.09	%
Return on average total equity (annualized)		12.43	%		12.06	%		9.88	%		8.23	%		11.93	%		10.70	%		11.09	%
Net interest margin		3.25	%		3.36	%		3.14	%		3.40	%		3.36	%		3.28	%		3.29	%
Net interest margin (TEY) (Non-GAAP)(7)		3.45	%		3.51	%		3.27	%		3.56	%		3.51	%		3.44	%		3.43	%
Efficiency ratio (Non-GAAP) (8)		61.23	%		49.48	%		47.61	%		59.40	%		66.40	%		54.05	%		66.18	%
Gross loans and leases / total assets (10)		74.81	%		72.43	%		74.01	%		70.95	%		75.36	%		74.81	%		74.80	%
Gross loans and leases / total deposits (10)		92.43	%		90.92	%		95.18	%		88.83	%		94.35	%		92.43	%		94.95	%
Effective tax rate		17.99	%		18.80	%		16.92	%		14.37	%		29.22	%		17.34	%		16.26	%
Full-time equivalent employees		714			687			712			703			697			714			766


AVERAGE BALANCES
Assets	$	5,842,299		$	5,820,555		$	5,800,164		$	4,948,311		$	5,147,754		$	5,604,074		$	5,088,055
Loans/leases		4,250,951			4,185,275			3,999,523			3,686,410			3,868,435			4,031,567			3,853,918
Deposits		4,742,602			4,726,881			4,732,626			3,954,707			4,227,572			4,540,266			4,228,418
Total stockholders’ equity		588,042			575,061			556,047			545,548			532,624			566,240			507,383



(1) Includes accumulated other comprehensive income (loss).
(2) Includes accumulated other comprehensive income (loss) and excludes intangible assets.
(3) LTM : Last twelve months.
(4) TCE / TCA : tangible common equity / total tangible assets. See GAAP to non-GAAP reconciliations.
(5) Includes mostly common stock issued for options exercised and the employee stock purchase plan, as well as stock-based compensation.
(6) Ratios for the current quarter are subject to change upon final calculation for regulatory filings due after earnings release.
(7) TEY : Tax equivalent yield. See GAAP to Non-GAAP reconciliations.
(8) See GAAP to Non-GAAP reconciliations.
(9) Growth in full-time equivalents from September 30, 2020 to December 31, 2020 due to the addition of new positions created to build scale.
Decrease from June 30, 2020 to September 30, 2020 due to sale of Bates Companies and interns employed only during the summer.
(10) Excludes assets held for sale as of December 31, 2019, March 31, 2020 and June 30, 2020.

QCR Holdings, Inc.
Consolidated Financial Highlights
(Unaudited)

ANALYSIS OF NET INTEREST INCOME AND MARGIN

	For the Quarter Ended
	December 31, 2020						September 30, 2020						December 31, 2019
	Average Balance		Interest Earned or Paid		Average Yield or Cost		Average Balance		Interest Earned or Paid		Average Yield or Cost		Average Balance		Interest Earned or Paid		Average Yield or Cost

	(dollars in thousands)

Fed funds sold	$	1,216	$	1	0.08	%	$	2,205	$	1	0.18	%	$	2,933	$	12	1.62	%
Interest-bearing deposits at financial institutions		279,024		82	0.12	%		321,679		92	0.11	%		208,040		868	1.66	%
Securities (1)		795,696		7,207	3.62	%		749,425		6,836	3.66	%		610,676		5,913	3.84	%
Restricted investment securities		18,790		236	4.92	%		19,714		249	4.94	%		21,226		283	5.29	%
Loans (1)		4,250,951		44,956	4.21	%		4,185,275		45,654	4.34	%		3,868,435		47,684	4.89	%
Total earning assets (1)	$	5,345,677	$	52,482	3.91	%	$	5,278,298	$	52,832	3.99	%	$	4,711,310	$	54,760	4.61	%

Interest-bearing deposits	$	3,033,119	$	2,060	0.27	%	$	2,932,988	$	2,086	0.28	%	$	2,520,696	$	6,547	1.03	%
Time deposits		530,813		1,752	1.31	%		638,031		2,399	1.50	%		865,392		4,631	2.12	%
Short-term borrowings		19,115		3	0.17	%		26,996		11	0.17	%		19,491		87	1.77	%
Federal Home Loan Bank advances		33,207		80	0.94	%		57,078		211	1.45	%		87,527		210	0.95	%
Subordinated debentures		118,612		1,678	5.66	%		77,783		1,031	5.30	%		68,356		1,004	5.83	%
Junior subordinated debentures		37,969		571	5.88	%		37,936		571	5.89	%		37,813		579	6.07	%
Total interest-bearing liabilities	$	3,772,835	$	6,144	0.64	%	$	3,770,812	$	6,309	0.66	%	$	3,599,275	$	13,058	1.44	%

Net interest income (1)			$	46,338					$	46,523					$	41,702
Net interest margin (2)					3.25	%					3.36	%					3.36	%
Net interest margin (TEY) (Non-GAAP) (1) (2) (3)					3.45	%					3.51	%					3.51	%
Adjusted net interest margin (TEY) (Non-GAAP) (1) (2) (3)					3.37	%					3.44	%					3.43	%



	For the Year Ended
	December 31, 2020						December 31, 2019
	Average Balance		Interest Earned or Paid		Average Yield or Cost		Average Balance		Interest Earned or Paid		Average Yield or Cost

	(dollars in thousands)

Fed funds sold	$	2,398	$	19	0.79	%	$	8,898	$	204	2.29	%
Interest-bearing deposits at financial institutions		315,616		669	0.21	%		179,635		3,910	2.18	%
Securities (1)		715,808		26,773	3.74	%		635,650		24,150	3.80	%
Restricted investment securities		20,270		1,031	5.00	%		21,559		1,174	5.45	%
Loans (1)		4,031,567		178,097	4.42	%		3,857,547		193,365	5.01	%
Total earning assets (1)	$	5,085,659	$	206,589	4.06	%	$	4,703,289	$	222,803	4.74	%

Interest-bearing deposits	$	2,797,669	$	11,980	0.43	%	$	2,443,989	$	29,898	1.22	%
Time deposits		690,222		11,289	1.64	%		966,745		20,977	2.17	%
Short-term borrowings		22,625		84	0.37	%		16,837		363	2.16	%
Federal Home Loan Bank advances		74,167		1,087	1.44	%		108,536		2,895	2.67	%
Other borrowings		–		–	0.00	%		13,563		512	3.77	%
Subordinated debentures		83,404		4,697	5.63	%		60,883		3,564	5.85	%
Junior subordinated debentures		37,913		2,286	5.93	%		37,751		2,308	6.11	%
Total interest-bearing liabilities	$	3,706,000	$	31,423	0.85	%	$	3,648,304	$	60,517	1.66	%

Net interest income (1)			$	175,166					$	162,286
Net interest margin (2)					3.28	%					3.31	%
Net interest margin (TEY) (Non-GAAP) (1) (2) (3)					3.44	%					3.45	%
Adjusted net interest margin (TEY) (Non-GAAP) (1) (2) (3)					3.38	%					3.36	%



(1) Includes nontaxable securities and loans. Interest earned and yields on nontaxable securities and loans are determined on a tax equivalent basis using a 21% tax rate.
(2) See “Select Financial Data – Subsidiaries” for a breakdown of amortization/accretion included in net interest margin for each period presented.
(3) TEY : Tax equivalent yield. See GAAP to Non-GAAP reconciliations.

QCR Holdings, Inc.
Consolidated Financial Highlights
(Unaudited)

	As of
	December 31,			September 30,			June 30,			March 31,			December 31,
	2020			2020			2020			2020			2019

	(dollars in thousands, except per share data)

ROLLFORWARD OF ALLOWANCE FOR LOAN/LEASE LOSSES
Beginning balance	$	79,582		$	60,827		$	42,233		$	36,001		$	36,116
Provision charged to expense		7,080			20,342			19,915			8,367			979
Loans/leases charged off		(2,779	)		(1,819	)		(1,450	)		(2,335	)		(1,182	)
Recoveries on loans/leases previously charged off		493			232			129			200			88
Ending balance	$	84,376		$	79,582		$	60,827		$	42,233		$	36,001


NONPERFORMING ASSETS
Nonaccrual loans/leases	$	13,940		$	17,597		$	12,099		$	11,628		$	7,902
Accruing loans/leases past due 90 days or more		3			86			99			1,419			33
Troubled debt restructures – accruing		741			1,061			920			545			979
Total nonperforming loans/leases		14,684			18,744			13,118			13,592			8,914
Other real estate owned		20			125			157			3,298			4,129
Other repossessed assets		135			110			25			45			41
Total nonperforming assets	$	14,839		$	18,979		$	13,300		$	16,935		$	13,084


ASSET QUALITY RATIOS
Nonperforming assets / total assets (1)		0.26	%		0.32	%		0.24	%		0.32	%		0.27	%
Allowance / total loans/leases (2)		1.98	%		1.87	%		1.47	%		1.14	%		0.98	%
Allowance / nonperforming loans/leases (2)		574.61	%		424.57	%		463.69	%		310.72	%		403.87	%
Net charge-offs as a % of average loans/leases		0.05	%		0.04	%		0.03	%		0.06	%		0.03	%



INTERNALLY ASSIGNED RISK RATING (3)
Special mention (rating 6)	$	71,482		$	79,587		$	104,608		$	34,738		$	19,952
Substandard (rating 7)		66,081			70,409			39,855			36,612			33,649
Doubtful (rating 8)		–			–			–			–			–
	$	137,563		$	149,996		$	144,463		$	71,350		$	53,601

Criticized loans (4)	$	137,563		$	149,996		$	144,463		$	71,350		$	53,601
Classified loans (5)		66,081			70,409			39,855			36,612			33,649

Criticized loans as a % of total loans/leases		3.24	%		3.53	%		3.49	%		1.93	%		1.45	%
Classified loans as a % of total loans/leases		1.55	%		1.66	%		0.96	%		0.99	%		0.91	%



(1) Excludes assets held for sale.
(2) Upon acquisition and per GAAP, acquired loans are recorded at market value which eliminates the allowance and impacts these ratios.
(3) Amounts exclude the government guaranteed portion, if any. The Company assigns internal risk ratings of Pass (Rating 2) for the government guaranteed portion.
(4) Criticized loans are defined as C&I and CRE loans with internally assigned risk ratings of 6, 7, or 8, regardless of performance.
(5) Classified loans are defined as C&I and CRE loans with internally assigned risk ratings of 7 or 8, regardless of performance.

QCR Holdings, Inc.
Consolidated Financial Highlights
(Unaudited)

		For the Quarter Ended									For the Year Ended
		December 31,			September 30,			December 31,			December 31,			December 31,
	SELECT FINANCIAL DATA – SUBSIDIARIES	2020			2020			2019			2020			2019

		(dollars in thousands)

	TOTAL ASSETS

	Quad City Bank and Trust (1)	$	2,149,469		$	2,205,935		$	1,682,477
	m2 Equipment Finance, LLC		243,090			241,452			239,794
	Cedar Rapids Bank and Trust		1,952,308			2,012,182			1,572,324
	Community State Bank – Ankeny		1,000,670			937,017			853,834
	Springfield First Community Bank		779,955			803,478			748,753

	TOTAL DEPOSITS

	Quad City Bank and Trust (1)	$	1,866,635		$	1,955,360		$	1,458,587
	Cedar Rapids Bank and Trust		1,378,108			1,399,267			1,248,598
	Community State Bank – Ankeny		875,400			822,261			735,089
	Springfield First Community Bank		569,036			592,528			531,498

	TOTAL LOANS & LEASES

	Quad City Bank and Trust (1)	$	1,556,762		$	1,556,798		$	1,329,667
	m2 Equipment Finance, LLC		244,325			241,783			236,735
	Cedar Rapids Bank and Trust		1,362,056			1,387,372			1,174,963
	Community State Bank – Ankeny		707,681			683,086			639,270
	Springfield First Community Bank		624,629			620,721			546,306

	TOTAL LOANS & LEASES / TOTAL DEPOSITS

	Quad City Bank and Trust (1)		83	%		80	%		91	%
	Cedar Rapids Bank and Trust		99	%		99	%		94	%
	Community State Bank – Ankeny		81	%		83	%		87	%
	Springfield First Community Bank		110	%		105	%		103	%


	TOTAL LOANS & LEASES / TOTAL ASSETS

	Quad City Bank and Trust (1)		72	%		71	%		79	%
	Cedar Rapids Bank and Trust		70	%		69	%		75	%
	Community State Bank – Ankeny		71	%		73	%		75	%
	Springfield First Community Bank		80	%		77	%		73	%

	ALLOWANCE AS A PERCENTAGE OF LOANS/LEASES

	Quad City Bank and Trust (1)		1.95	%		1.86	%		1.03	%
	m2 Equipment Finance, LLC		2.63	%		2.53	%		1.51	%
	Cedar Rapids Bank and Trust (2)		2.35	%		2.22	%		1.14	%
	Community State Bank – Ankeny (2)		2.02	%		1.92	%		1.04	%
	Springfield First Community Bank (2)		1.23	%		1.09	%		0.41	%

	RETURN ON AVERAGE ASSETS

	Quad City Bank and Trust (1)		1.52	%		0.56	%		1.44	%		0.99	%		1.30	%
	Cedar Rapids Bank and Trust		0.59	%		2.66	%		1.82	%		1.81	%		1.84	%
	Community State Bank – Ankeny		3.25	%		0.82	%		1.38	%		1.25	%		1.34	%
	Springfield First Community Bank		3.02	%		1.52	%		1.44	%		1.74	%		1.32	%

	NET INTEREST MARGIN PERCENTAGE (3)

	Quad City Bank and Trust (1)		3.19	%		3.07	%		3.55	%		3.17	%		3.39	%
	Cedar Rapids Bank and Trust (5)		3.51	%		3.54	%		3.49	%		3.47	%		3.43	%
	Community State Bank – Ankeny (4)		3.77	%		4.12	%		4.35	%		3.89	%		4.33	%
	Springfield First Community Bank (6)		4.03	%		3.75	%		3.95	%		3.87	%		3.93	%

	ACQUISITION-RELATED AMORTIZATION/ACCRETION INCLUDED IN NET
	INTEREST MARGIN, NET

	Cedar Rapids Bank and Trust	$	103		$	217		$	103		$	430		$	547
	Community State Bank – Ankeny		132			56			94			325			877
	Springfield First Community Bank		880			598			775			2,671			3,088
	QCR Holdings, Inc. (7)		(38	)		(38	)		(41	)		(155	)		(168	)

(1)	Quad City Bank and Trust figures include m2 Equipment Finance, LLC, as this entity is wholly-owned and consolidated with the Bank. m2 Equipment Finance, LLC is also presented separately for certain (applicable) measurements.
(2)	Upon acquisition and per GAAP, acquired loans are recorded at market value, which eliminates the allowance and impacts this ratio.
(3)	Includes nontaxable securities and loans. Interest earned and yields on nontaxable securities and loans are determined on a tax equivalent basis using a 21% tax rate.
(4)	Community State Bank’s net interest margin percentage includes various purchase accounting adjustments. Excluding those adjustments, net interest margin would have been 3.69% for the quarter ended December 31, 2020, 4.06% for the quarter ended September 30, 2020 and 4.27% for the quarter ended December 31, 2019.
(5)	Cedar Rapids Bank and Trust’s net interest margin percentage includes various purchase accounting adjustments. Excluding those adjustments, net interest margin would have been 3.47% for the quarter ended December 31, 2020, 3.46% for the quarter ended September 30, 2020 and 3.46% for the quarter ended December 31, 2019.
(6)	Springfield First Community Bank’s net interest margin percentage includes various purchase accounting adjustments. Excluding those adjustments, net interest margin would have been 3.59% for the quarter ended December 31, 2020, 4.02% for the quarter ended September 30, 2020 and 3.47% for the quarter ended December 31, 2019.
(7)	Relates to the trust preferred securities acquired as part of the Guaranty Bank acquisition in 2017 and the Community National Bank acquisition in 2013.

QCR Holdings, Inc.
Consolidated Financial Highlights
(Unaudited)

	As of
	December 31,			September 30,			June 30,			March 31,			December 31,
GAAP TO NON-GAAP RECONCILIATIONS	2020			2020			2020			2020			2019

	(dollars in thousands, except per share data)
TANGIBLE COMMON EQUITY TO TANGIBLE ASSETS RATIO (1)

Stockholders’ equity (GAAP)	$	593,793		$	572,613		$	556,020		$	539,139		$	535,351
Less: Intangible assets		85,447			85,968			88,120			88,669			89,717
Tangible common equity (non-GAAP)	$	508,346		$	486,645		$	467,900		$	450,470		$	445,634

Total assets (GAAP)	$	5,682,797		$	5,864,560		$	5,604,761		$	5,232,075		$	4,909,050
Less: Intangible assets		85,447			85,968			88,120			88,669			89,717
Tangible assets (non-GAAP)	$	5,597,350		$	5,778,592		$	5,516,641		$	5,143,406		$	4,819,333

Tangible common equity to tangible assets ratio (non-GAAP)		9.08	%		8.42	%		8.48	%		8.76	%		9.25	%

TANGIBLE COMMON EQUITY TO TANGIBLE ASSETS RATIO EXCLUDING PPP LOANS (1)

Stockholder’s equity (GAAP)	$	593,793		$	572,613		$	556,020		$	539,139		$	535,351
Less: PPP loan interest income (post-tax) (2)		7,691			4,934			2,085			–			–
Less: Intangible assets		85,447			85,968			88,120			88,669			89,717
Tangible common equity, excluding PPP loan income (non-GAAP)	$	500,655		$	481,711		$	465,815		$	450,470		$	445,634

Total assets (GAAP)	$	5,682,797		$	5,864,560		$	5,604,761		$	5,232,075		$	4,909,050
Less: PPP loans		273,146			357,506			358,052			–			–
Less: Intangible assets		85,447			85,968			88,120			88,669			89,717
Tangible assets, excluding PPP loans (non-GAAP)	$	5,324,204		$	5,421,086		$	5,158,589		$	5,143,406		$	4,819,333

Tangible common equity to tangible assets ratio, excluding PPP loans (non-GAAP)		9.40	%		8.89	%		9.03	%		8.76	%		9.25	%


(1) This ratio is a non-GAAP financial measure. The Company’s management believes that this measurement is important to many investors in the marketplace who are interested in changes period-to-period in common equity. In compliance with applicable rules of the SEC, this non-GAAP measure is reconciled to stockholders’ equity and total assets, which are the most directly comparable GAAP financial measures.
(2) PPP interest income (post-tax) is calculated using an estimated effective tax rate of 21%.

QCR Holdings, Inc.
Consolidated Financial Highlights
(Unaudited)

GAAP TO NON-GAAP RECONCILIATIONS	For the Quarter Ended															For the Year Ended
	December 31,			September 30,			June 30,			March 31,			December 31,			December 31,			December 31,
ADJUSTED NET INCOME (1)	2020			2020			2020			2020			2019			2020			2019

	(dollars in thousands, except per share data)

Net income (GAAP)	$	18,271		$	17,344		$	13,739		$	11,228		$	15,891		$	60,582		$	57,408

Less non-core items (post-tax) (2):
Income:
Securities gains(losses), net		487			1,424			51			–			21		$	1,962		$	(22	)
Loss on syndicated loan		(210	)		–			–			–					$	(210	)
Gain on sale of assets and liabilities of subsidiary		–			–			–			–			8,539			–			8,539
Total non-core income (non-GAAP)	$	277		$	1,424		$	51		$	–		$	8,560		$	1,752		$	8,517

Expense:
Losses on debt extinguishment, net	$	1,151		$	1,480		$	339		$	116		$	228		$	3,087		$	345
Goodwill impairment		–			–			–			500			3,000			500			3,000
Disposition costs		51			152			(66	)		408			2,627			545			2,627
Tax expense on expected liquidation of RB&T BOLI		–			–			–			–			790			–			790
Post-acquisition compensation, transition and integration costs		20			(25	)		55			119			1,465			169			2,828
Loss on sale of subsidiary		(102	)		212			–			–			–			110			–
Total non-core expense (non-GAAP)	$	1,119		$	1,819		$	329		$	1,143		$	8,110		$	4,411		$	9,590
Adjusted net income (non-GAAP) (1)	$	19,113		$	17,739		$	14,016		$	12,372		$	15,441		$	63,240		$	58,480

PRE-PROVISION/PRE-TAX ADJUSTED INCOME (1)
Net income (GAAP)	$	18,271		$	17,344		$	13,739		$	11,228		$	15,891		$	60,582		$	57,408
Less: Non-core income not tax-effected		351			1,802			65			–			12,313			2,218			12,258
Plus: Non-core expense not tax-effected		1,399			2,339			416			1,315			9,258			5,469			11,132
Provision expense		7,080			20,342			19,915			8,367			979			55,704			7,066
Federal and state income tax expense		4,009			4,016			2,798			1,884			6,560			12,707			14,619
Pre-provision/pre-tax adjusted income (non-GAAP) (1)	$	30,408		$	42,239		$	36,803		$	22,794		$	20,375		$	132,244		$	77,966

PRE-PROVISION/PRE-TAX ADJUSTED RETURN ON AVERAGE ASSETS (NON-GAAP)

Pre-provision/pre-tax adjusted income (non-GAAP)	$	30,408		$	42,239		$	36,803		$	22,794		$	20,375		$	132,244		$	77,966

Average Assets	$	5,842,299		$	5,820,555		$	5,800,164		$	4,948,311		$	5,147,754		$	5,604,074		$	5,102,980

Pre-provision/pre-tax adjusted return on average assets (non-GAAP)		2.08	%		2.90	%		2.54	%		1.84	%		1.58	%		2.36	%		2.04	%

ADJUSTED EARNINGS PER COMMON SHARE (1)

Adjusted net income (non-GAAP) (from above)	$	19,113		$	17,739		$	14,016		$	12,372		$	15,441		$	63,240		$	58,480

Weighted average common shares outstanding		15,775,596			15,767,152			15,747,056			15,796,796			15,772,703			15,571,650			15,730,016
Weighted average common and common equivalent shares outstanding		15,973,054			15,923,578			15,895,336			16,011,456			16,033,043			15,952,637			15,967,775

Adjusted earnings per common share (non-GAAP):
Basic	$	1.21		$	1.13		$	0.89		$	0.78		$	0.98		$	4.06		$	3.72
Diluted	$	1.20		$	1.11		$	0.88		$	0.77		$	0.96		$	3.96		$	3.66

ADJUSTED RETURN ON AVERAGE ASSETS (1)

Adjusted net income (non-GAAP) (from above)	$	19,113		$	17,739		$	14,016		$	12,372		$	15,441		$	63,240		$	58,480

Average Assets	$	5,842,299		$	5,820,555		$	5,800,164		$	4,948,311		$	5,147,754		$	5,604,074		$	5,102,980

Adjusted return on average assets (annualized) (non-GAAP)		1.31	%		1.22	%		0.97	%		1.00	%		1.20	%		1.13	%		1.15	%

NET INTEREST MARGIN (TEY) (4)

Net interest income (GAAP)	$	43,707		$	44,581		$	40,948		$	37,698		$	39,919		$	166,950		$	155,559

Plus: Tax equivalent adjustment (3)		2,631			1,942			1,728			1,790			1,783			8,216			6,727

Net interest income – tax equivalent (Non-GAAP)	$	46,338		$	46,523		$	42,676		$	39,488		$	41,702		$	175,166		$	162,286

Less: Acquisition accounting net accretion		1,077			833			736			625			931			3,271			4,344

Adjusted net interest income	$	45,261		$	45,690		$	41,940		$	38,863		$	40,771		$	171,895		$	157,942

Average earning assets	$	5,345,677		$	5,278,298		$	5,252,663		$	4,461,018		$	4,711,310		$	5,085,659		$	4,703,289

Net interest margin (GAAP)		3.25	%		3.36	%		3.14	%		3.40	%		3.36	%		3.28	%		3.31	%
Net interest margin (TEY) (Non-GAAP)		3.45	%		3.51	%		3.27	%		3.56	%		3.51	%		3.44	%		3.45	%
Adjusted net interest margin (TEY) (Non-GAAP)		3.37	%		3.44	%		3.21	%		3.50	%		3.43	%		3.38	%		3.36	%

EFFICIENCY RATIO (5)

Noninterest expense (GAAP)	$	46,364		$	40,838		$	33,122		$	31,415		$	46,294		$	151,755		$	155,234

Net interest income (GAAP)	$	43,707		$	44,581		$	40,948		$	37,698		$	39,919		$	166,950		$	155,559
Noninterest income (GAAP)		32,017			37,959			28,626			15,196			29,805			113,798			78,768
Total income	$	75,724		$	82,540		$	69,574		$	52,894		$	69,724		$	280,748		$	234,327

Efficiency ratio (noninterest expense/total income) (Non-GAAP)		61.23	%		49.48	%		47.61	%		59.39	%		66.40	%		54.05	%		66.25	%

ALLOWANCE FOR LOAN AND LEASE LOSSES TO TOTAL LOANS AND LEASES, EXCLUDING PPP LOANS (6)

Allowance for loan and lease losses	$	84,376		$	79,582		$	60,827		$	42,233		$	36,001		$	84,376		$	36,001

Total loans and leases	$	4,251,129		$	4,247,977		$	4,140,259		$	3,704,668		$	3,690,205		$	4,251,129		$	3,690,205
Less: PPP loans		273,146			357,506			358,052			358,052			–			273,146			–
Total loans and leases, excluding PPP loans	$	3,977,983		$	3,890,471		$	3,782,207		$	3,346,616		$	3,690,205		$	3,977,983		$	3,690,205

Allowance for loan and lease losses to total loans and leases, excluding PPP loans		2.12	%		2.05	%		1.61	%		1.26	%		0.98	%		2.12	%		0.98	%


LOAN GROWTH ANNUALIZED, EXCLUDING PPP LOANS
Total loans and leases	$	4,251,129		$	4,247,977		$	4,140,259		$	3,704,668		$	3,690,205		$	4,251,129		$	3,690,205
Less: PPP loans		273,146			357,506			358,052			–			–			273,146			–
Total loans and leases, excluding PPP loans	$	3,977,983		$	3,890,471		$	3,782,207		$	3,704,668		$	3,690,205		$	3,977,983		$	3,690,205

Loan growth annualized, excluding PPP loans		9.00	%		11.45	%		8.37	%		1.57	%		8.86	%		7.80	%		-0.07	%


(1) Adjusted net income, Adjusted net income attributable to QCR Holdings, Inc. common stockholders, Adjusted earnings per common share and Adjusted return on average assets are non-GAAP financial measures. The Company’s management believes that these measurements are important to investors as they exclude non-recurring income and expense items, therefore, they provide a more realistic run-rate for future periods. In compliance with applicable rules of the SEC, this non-GAAP measure is reconciled to net income, which is the most directly comparable GAAP financial measure.
(2) Nonrecurring items (post-tax) are calculated using an estimated effective tax rate of 21% with the exception of goodwill impairment which is not deductible for tax and gain/loss on sale of assets and liabilities of subsidiary has an estimated effective tax rate of 30.5%.
(3) Interest earned and yields on nontaxable securities and loans are determined on a tax equivalent basis using a 21%.
(4) Net interest margin (TEY) is a non-GAAP financial measure. The Company’s management utilizes this measurement to take into account the tax benefit associated with certain loans and securities. It is also standard industry practice to measure net interest margin using tax-equivalent measures. In compliance with applicable rules of the SEC, this non-GAAP measure is reconciled to net interest income, which is the most directly comparable GAAP financial measure. In addition, the Company calculates net interest margin without the impact of acquisition accounting net accretion as this can fluctuate and it’s difficult to provide a more realistic run-rate for future periods.
(5) Efficiency ratio is a non-GAAP measure. The Company’s management utilizes this ratio to compare to industry peers. The ratio is used to calculate overhead as a percentage of revenue. In compliance with the applicable rules of the SEC, this non-GAAP measure is reconciled to noninterest expense, net interest income and noninterest income, which are the most directly comparable GAAP financial measures.
(6) Allowance for loan and lease losses to total loans and leases, excluding PPP loans is a non-GAAP measure. The Company’s management utilizes this ratio to remove from the allowance calculation the impact of PPP loans which are fully guaranteed by the federal government and for which these loans have no allowance for loan and lease loss allocation.

January 27, 2021 4:08 pm

FNCB Bancorp, Inc. Declares First Quarter 2021 Dividend

DUNMORE, Pa., Jan. 27, 2021 (GLOBE NEWSWIRE) — On January 27, 2021, the Board of Directors of FNCB Bancorp, Inc. (NASDAQ:FNCB) declared a dividend of $0.06 per share for the first quarter of 2021, an increase of $0.005, or 9.1%, from $0.055 per share for the first quarter of 2020. The first quarter 2021 dividend is payable on March 15, 2021 to shareholders of record as of March 1, 2021.

About FNCB Bancorp, Inc.:

FNCB Bancorp, Inc. is the bank holding company of FNCB Bank. Locally-based for 110 years, FNCB Bank continues as a premier community bank in Northeastern Pennsylvania – offering a full suite of personal, small business and commercial banking solutions with industry-leading mobile, online and in-branch products and services. FNCB currently operates through 17 community offices located in Lackawanna, Luzerne and Wayne Counties and remains dedicated to making its customers’ banking experience simply better. For more information about FNCB, visit www.fncb.com.

FNCB may from time to time make written or oral “forward-looking statements,” including statements contained in our filings with the Securities and Exchange Commission (“SEC”), in our reports to shareholders, and in our other communications, which are made in good faith by us pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements include statements with respect to FNCB’s beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions, that are subject to significant risks and uncertainties, and are subject to change based on various factors (some of which are beyond our control). The words “may,” “could,” “should,” “will,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” “project,” “future” and similar expressions are intended to identify forward-looking statements. The following factors, among others, could cause FNCB’s financial performance to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements: the effect of the coronavirus (“COVID-19”) pandemic on FNCB and its customers, the Commonwealth of Pennsylvania and the United States, related to the economy and overall financial stability; government and regulatory responses to the COVID-19 pandemic; government intervention in the U.S. financial system including the effects of recent legislative, tax, accounting and regulatory actions and reforms, including, but not limited to, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and the Tax Cuts and Jobs Act; political instability; the ability of FNCB to manage credit risk; weakness in the economic environment, in general, and within FNCB’s market area; the deterioration of one or a few of the commercial real estate loans with relatively large balances contained in FNCB’s loan portfolio; greater risk of loan defaults and losses from concentration of loans held by FNCB, including those to insiders and related parties; if FNCB’s portfolio of loans to small and mid-sized community-based businesses increases its credit risk; if FNCB’s ALLL is not sufficient to absorb actual losses or if increases to the ALLL were required; FNCB is subject to interest-rate risk and any changes in interest rates could negatively impact net interest income or the fair value of FNCB’s financial assets; if management concludes that the decline in value of any of FNCB’s investment securities is other-than-temporary could result in FNCB recording an impairment loss; if FNCB’s risk management framework is ineffective in mitigating risks or losses to FNCB; if FNCB is unable to successfully compete with others for business; a loss of depositor confidence resulting from changes in either FNCB’s financial condition or in the general banking industry; if FNCB is unable to retain or grow its core deposit base; inability or insufficient dividends from its subsidiary, FNCB Bank; if FNCB loses access to wholesale funding sources; interruptions or security breaches of FNCB’s information systems; any systems failures or interruptions in information technology and telecommunications systems of third parties on which FNCB depends; security breaches; if FNCB’s information technology is unable to keep pace with growth or industry developments or if technological developments result in higher costs or less advantageous pricing; the loss of management and other key personnel; dependence on the use of data and modeling in both its management’s decision-making generally and in meeting regulatory expectations in particular; additional risk arising from new lines of business, products, product enhancements or services offered by FNCB; inaccuracy of appraisals and other valuation techniques FNCB uses in evaluating and monitoring loans secured by real property and other real estate owned; unsoundness of other financial institutions; damage to FNCB’s reputation; defending litigation and other actions; dependence on the accuracy and completeness of information about customers and counterparties; risks arising from future expansion or acquisition activity; environmental risks and associated costs on its foreclosed real estate assets; any remediation ordered, or adverse actions taken, by federal and state regulators, including requiring FNCB to act as a source of financial and managerial strength for the FNCB Bank in times of stress; costs arising from extensive government regulation, supervision and possible regulatory enforcement actions; new or changed legislation or regulation and regulatory initiatives; noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations; failure to comply with numerous “fair and responsible banking” laws; any violation of laws regarding privacy, information security and protection of personal information or another incident involving personal, confidential or proprietary information of individuals; any rulemaking changes implemented by the Consumer Financial Protection Bureau; inability to attract and retain its highest performing employees due to potential limitations on incentive compensation contained in proposed federal agency rulemaking; any future increases in FNCB Bank’s FDIC deposit insurance premiums and assessments; and the success of FNCB at managing the risks involved in the foregoing and other risks and uncertainties, including those detailed in FNCB’s filings with the SEC.

FNCB cautions that the foregoing list of important factors is not all inclusive. Readers are also cautioned not to place undue reliance on any forward-looking statements, which reflect management’s analysis only as of the date of this report, even if subsequently made available by FNCB on its website or otherwise. FNCB does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of FNCB to reflect events or circumstances occurring after the date of this report.

Readers should carefully review the risk factors described in the Annual Report and other documents that FNCB periodically files with the SEC, including its Form 10-K for the year ended December 31, 2019 and Form 10-Q for the quarters ended March 31, June 30,.and September 30, 2020.

INVESTOR CONTACT:

James M. Bone, Jr., CPA
Executive Vice President and
Chief Financial Officer
FNCB Bank
(570) 348-6419
[email protected]

January 27, 2021 4:08 pm

Werner Enterprises Announces Sale of Werner Global Logistics to Scan Global Logistics Group

OMAHA, Neb., Jan. 27, 2021 (GLOBE NEWSWIRE) — Werner Enterprises , Inc. (NASDAQ: WERN) (“Werner”), one of the nation’s largest transportation and logistics companies, announced the sale of its Werner Global Logistics (“WGL”) freight forwarding services for international ocean and air shipments to Scan Global Logistics Group (“SGL”). Werner Logistics will continue to provide North American truck brokerage, freight management, intermodal and final mile services. Werner also entered into an agreement with SGL to offer comprehensive international logistics solutions to its existing and future North American customers. WGL provides services to customers with international freight forwarding operations primarily in the United States, China and Mexico.

Through the agreement with SGL, WGL customers will benefit from SGL’s expansive network of over 115 locations across the globe, their modern transportation management technology, global multi-channel service offerings and SGL’s ability to provide local and international solutions in new trade lanes across the Asian Pacific, European, Middle-Eastern and Latin American markets. The strategic selection of SGL was based on their close alignment with Werner’s customer-centric business practices, associate-focused business approach and global logistics expertise. SGL has logistics and freight forwarding operations in over 30 countries and has over 40 offices in North America.

“After working with the SGL team and understanding their core values and capabilities, I am excited for WGL’s international customers, associates and transportation partners worldwide,” said Werner’s Vice Chairman, President and Chief Executive Officer Derek Leathers. “We are proud of the global operation WGL has built and are confident it will continue to succeed as part of the SGL family. Going forward, we remain committed to our North American logistics capabilities in truck brokerage, freight management, intermodal and final mile services.” Werner will continue to focus its resources, talent and technology by providing superior truckload and logistics services in North America.

“Innovative solutions in logistics has been our focus for over three decades,” said SGL’s North American Chief Operating Officer – International Julien Ranzato. “Werner’s established culture, leadership, network and core values are a great fit for us, and we look forward to continuing and expanding our relationship with Werner on international and domestic business opportunities that will result from this strategic partnership.”

WGL’s freight forwarding services for international ocean and air shipments generated $53 million of revenues in fiscal year 2020. The WGL sale is expected to result in a gain of one cent per diluted share and close on February 26, 2021. Terms of the agreement were not disclosed. BG Strategic Advisors acted as exclusive financial advisor to Werner.

Werner was founded in 1956 and is a premier transportation and logistics company, with coverage throughout North America. Werner maintains its corporate headquarters in Omaha, Nebraska and maintains offices in the United States, Canada and Mexico. Werner is among the five largest truckload carriers in the United States, with a diversified portfolio of transportation services that includes dedicated; medium-to-long-haul, regional and expedited van; and temperature-controlled. The Werner Logistics portfolio includes North American truck brokerage, freight management, intermodal and final mile services.

SGL has been in the international freight forwarding business since 1975 and is headquartered in Denmark, with North American headquarters in Seattle, WA, USA. SGL’s business activities focus on international freight-forwarding services worldwide primarily by air and sea, with supporting IT, logistics, warehousing and road services. The SGL Group maintains offices in 30 countries on 6 continents. SGL’s main focus is to create solutions to complex logistics challenges. For more information please visit www.scangl.com.

Werner’s common stock trades on the NASDAQ Global Select Market^SM under the symbol “WERN.” For further information about Werner, visit the company’s website at www.werner.com.

Contact: John J. Steele
Executive Vice President, Treasurer
and Chief Financial Officer
(402) 894-3036

January 27, 2021 4:08 pm

Bonanza Creek Provides an Operational Update, Issues First Quarter 2021 Guidance, and Announces 4th Quarter 2020 Conference Call

DENVER, Jan. 27, 2021 (GLOBE NEWSWIRE) — Bonanza Creek Energy, Inc. (NYSE: BCEI) (the “Company” or “Bonanza Creek”) today issued preliminary results for the fourth quarter and full year 2020, and provided guidance for the first quarter of 2021. The Company also announced the date of its conference call to discuss fourth quarter and full year 2020 results.

Highlights for the fourth quarter and full year 2020 include:

Average sales volumes are expected to be 25.0 thousand barrels of oil equivalent per day (“MBoe/d”) for the fourth quarter, with oil representing 54% of total volumes
Average sales volumes are expected to be 25.2 MBoe/d for the full year (54% oil), up 8% over full year 2019; at the mid-point of the most recent annual 2020 guidance range of 25.0 to 25.5 MBoe/d
Total capital expenditures for the fourth quarter are estimated at $3.2 million, bringing the total 2020 capital expenditures to approximately $67.7 million; within the most recent annual guidance range of $60 to $70 million
Lease operating expenses (“LOE”) are expected to be $2.20 per Boe for the fourth quarter; down slightly from the third quarter of 2020, and down 27% from the fourth quarter of 2019
Full year 2020 LOE of approximately $2.38 per Boe is down 19% from 2019; below our most recent annual guidance range of $2.40 to $2.60 per Boe
Rocky Mountain Infrastructure (“RMI”) net effective cost is expected to be $1.01 per Boe for the fourth quarter, which is comprised of approximately $1.57 per Boe of operating expenses, offset by $0.56 per Boe of RMI operating revenue from working interest partners
For the year, RMI’s net effective cost is expected to be $1.03 per Boe, with operating expenses of $1.62 per Boe versus the most recent annual guidance range of $1.50 to $1.80 per Boe
The Company exited 2020 with no debt and approximately $25 million in cash
Year-end 2020 total proved reserves are estimated to be 118.2 million BOE, and proved developed producing reserves are estimated to be 56.4 million BOE, in both cases using commodity prices required by SEC regulations

Eric Greager, President and Chief Executive Officer, commented, “We turned in a strong fourth quarter to successfully finish a challenging year. This is a cost and margin business, and I couldn’t be more proud of the BCEI team’s discipline. We quickly reacted to the deteriorating conditions in March by halting capital activity, paying-off our credit facility, and exiting the year with no debt and $25 million in cash. The team’s focus drove unit costs to all-time lows, and despite minimal investment, delivered a stable production profile that exceeded expectations. The productivity, professionalism, and dedication of our employees is second to none.”

Greager continued, “In November, we announced a transformative and highly compelling transaction with HighPoint Resources. We’re planning for a shareholder vote later this quarter, and we continue to make steady progress toward closing the transaction.”

First Quarter 2021 Bonanza Creek Guidance

The Company is providing guidance for the first quarter of 2021 for Bonanza Creek as a stand-alone company. Additional guidance for 2021 on a combined basis will be provided after the closing of the HighPoint transaction.

The Company’s stand-alone 2021 capital plan assumes the completion of 30 gross (25.8 net) drilled, uncompleted (“DUC”) wells. Completion activities for these wells started in early January and are expected to continue through the second quarter with the first wells turned to sales during the second quarter. Total capital expenditure guidance for the first quarter of 2021 is $35 to $40 million.

Average quarterly production was expected to begin declining following the third quarter of 2020, and is expected to continue to decline until production from DUC wells begin to offset the base decline during the second quarter of 2021. First quarter production guidance is a range of 22.0 to 24.0 MBoe/d with the mid-point of 23.0 MBoe/d representing an 8% decline from the fourth quarter of 2020.

The table below outlines the Company’s full guidance for the first quarter of 2021.

1Q 2021 Guidance	Low		High
Capital Expenditures ($MM)	$35	—	$40
Production (MBoe/d)	22.0	—	24.0
% Oil	45 %	—	50 %
Lease Operating Expenses ($MM)	$5.0	—	$5.5
RMI Operating Expenses ($MM)	$3.5	—	$4.0
Recurring Cash G&A ($MM)	$6.0	—	$6.5
Production Taxes (% of revenue)	5%	—	6%
Oil Differential ($/Bbl)	$4.00	—	$5.00

Note: Guidance is forward-looking information that is subject to considerable change and numerous risks and uncertainties, many of which are beyond the Company’s control. See “Forward-Looking Statements” below.

Conference Call to Discuss Fourth Quarter and Full Year 2020 Results

The Company is scheduled to release its fourth quarter and full year 2020 operating and financial results after market close on Wednesday, February 17, 2021, and will host a conference call to discuss these results the following morning, on Thursday, February 18, at 9:00 a.m. Mountain Time (11:00 a.m. Eastern Time). A live webcast and replay of this event will be available on the Investor Relations section of the Company’s website at www.bonanzacrk.com. Dial-in information for the conference call is included below.

Type	Phone Number	Passcode
Live participant	877-793-4362	784 8187
Replay	855-859-2056	784 8187

About Bonanza Creek Energy, Inc.

Bonanza Creek Energy, Inc. is an independent oil and natural gas company engaged in the acquisition, exploration, development, and production of oil and associated liquids-rich natural gas in the Rocky Mountain region of the United States. The Company’s assets and operations are concentrated in rural, unincorporated Weld County, Colorado, within the Wattenberg Field, focused on the Niobrara and Codell formations. The Company’s common shares are listed for trading on the NYSE under the symbol: “BCEI.” For more information about the Company, please visit www.bonanzacrk.com. Please note that the Company routinely posts important information about the Company under the Investor Relations section of its website.

No Offer or Solicitation

This communication relates to a proposed business combination transaction (the “Merger”) between Bonanza Creek Energy, Inc. (“BCEI”) and HighPoint Resources Corporation (“HPR”), which includes the commencement by BCEI and HPR of an exchange offer (the “Exchange Offer”) and the solicitation of a prepackaged plan of reorganization for HPR and its subsidiaries (the “Prepackaged Plan” and, together with the Exchange Offer and the Merger, the “Transaction”) to effect the exchange of unsecured senior notes of HPR for shares of BCEI common stock, par value $0.01 per share (the “BCEI common stock”), or unsecured senior notes to be issued by BCEI in connection with the Exchange Offer. Communications in this document do not constitute an offer to sell or the solicitation of an offer to subscribe for or buy any securities or a solicitation of any vote or approval with respect to the Transaction, the Exchange Offer or otherwise, nor shall there be any sale, issuance or transfer of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.

Important Additional Information

In connection with the Transaction, BCEI and HPR have filed or intend to file materials with the U.S. Securities and Exchange Commission (the “SEC”), including (1) a joint proxy statement in preliminary and definitive form (the “Joint Proxy Statement”), (2) a consent solicitation and prospectus with respect to the Exchange Offer (the “Exchange Prospectus”), of which the Prepackaged Plan will be a part, (3) a Registration Statement on Form S-4, Registration No. 333-251401, with respect to the Merger (the “Merger Registration Statement”), of which the Joint Proxy Statement will be a part, and (4) a Registration Statement on Form S-4, Registration No. 333-251402, with respect to the Exchange Offer (together with the Merger Registration Statement, the “Registration Statements”), of which the Exchange Prospectus will be a part. After the Registration Statements are declared effective by the SEC, BCEI and HPR intend to send the definitive form of the Joint Proxy Statement to the shareholders of BCEI and the shareholders of HPR, and BCEI and HPR intend to send the definitive form of the Exchange Prospectus to the debt holders of HPR. These documents are not substitutes for the Joint Proxy Statement, Exchange Prospectus or Registration Statements or for any other document that BCEI or HPR may file with the SEC and send to BCEI’s shareholders or HPR’s shareholders or debt holders in connection with the Transaction. INVESTORS AND SECURITY HOLDERS OF BCEI AND HPR ARE URGED TO CAREFULLY AND THOROUGHLY READ THE JOINT PROXY STATEMENT, REGISTRATION STATEMENTS AND EXCHANGE PROSPECTUS, AS EACH MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME, AND OTHER RELEVANT DOCUMENTS FILED BY BCEI AND HPR WITH THE SEC, WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT BCEI, HPR, THE TRANSACTION, THE RISKS RELATED THERETO AND RELATED MATTERS.

Investors will be able to obtain free copies of the Registration Statements, Joint Proxy Statement and Exchange Prospectus, as each may be amended from time to time, and other relevant documents filed by BCEI and HPR with the SEC (when they become available) through the website maintained by the SEC at www.sec.gov. Copies of documents filed with the SEC by BCEI will be available free of charge from BCEI’s website at www.bonanzacrk.com under the “For Investors” tab or by contacting BCEI’s Investor Relations Department at (720) 225-6679 or [email protected]. Copies of documents filed with the SEC by HPR will be available free of charge from HPR’s website at www.hpres.com under the “Investors” tab or by contacting HPR’s Investor Relations Department at (303) 312-8514 or [email protected].

Participants in the Solicitation

BCEI, HPR and their respective directors and certain of their executive officers and other members of management and employees may be deemed, under SEC rules, to be participants in the solicitation of proxies from BCEI’s shareholders and HPR’s shareholders in connection with the Transaction. Information regarding the executive officers and directors of BCEI is included in its definitive proxy statement for its 2020 annual meeting filed with the SEC on April 24, 2020. Information regarding the executive officers and directors of HPR is included in its definitive proxy statement for its 2020 annual meeting filed with the SEC on March 18, 2020. Additional information regarding the persons who may be deemed participants and their direct and indirect interests, by security holdings or otherwise, will be set forth in the Registration Statements, Joint Proxy Statement and other materials when they are filed with the SEC in connection with the Transaction. Free copies of these documents may be obtained as described in the paragraphs above.

Forward-Looking Statements and Cautionary Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. These statements are based on certain assumptions made by the Company based on management’s experience, perception of historical trends and technical analyses, current conditions, anticipated future developments and other factors believed to be appropriate and reasonable by management. When used in this press release, the words “will,” “potential,” “believe,” “estimate,” “intend,” “expect,” “may,” “should,” “anticipate,” “could,” “plan,” “predict,” “project,” “profile,” “model” or their negatives, other similar expressions or the statements that include those words, are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These statements include statements regarding development and completion expectations and strategy; decreasing operating and capital costs; and 2021 guidance. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, that may cause actual results to differ materially from those implied or expressed by the forward-looking statements, including the following: changes in natural gas, oil and NGL prices; general economic conditions, including the performance of financial markets and interest rates; drilling results; shortages of oilfield equipment, services and personnel; operating risks such as unexpected drilling conditions; ability to acquire adequate supplies of water; risks related to derivative instruments; access to adequate gathering systems and pipeline take-away capacity; and pipeline and refining capacity constraints. Further information on such assumptions, risks and uncertainties is available in the Company’s SEC filings. We refer you to the discussion of risk factors in our Annual Report on Form 10-K for the year ended December 31, 2019, our subsequently filed Quarterly Reports on Form 10-Q, and other filings submitted by us to the Securities Exchange Commission. The Company’s SEC filings are available on the Company’s website at www.bonanzacrk.com and on the SEC’s website at www.sec.gov. All of the forward-looking statements made in this press release are qualified by these cautionary statements.

Certain statements in this document concerning the Transaction, including any statements regarding the expected timetable for completing the Transaction, the results, effects, benefits and synergies of the Transaction, future opportunities for the combined company, future financial performance and condition, guidance and any other statements regarding BCEI’s future expectations, beliefs, plans, objectives, financial conditions, assumptions or future events or performance that are not historical facts are “forward-looking” statements based on assumptions currently believed to be valid. Specific forward-looking statements include statements regarding BCEI plans and expectations with respect to the Transaction and the anticipated impact of the Transaction on the combined company’s results of operations, financial position, growth opportunities and competitive position. The forward-looking statements are intended to be subject to the safe harbor provided by Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995.

These forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from those anticipated, including, but not limited to, the possibility that shareholders of BCEI may not approve the issuance of new shares of BCEI common stock in the Transaction or that shareholders of HPR may not approve the Merger Agreement; the risk that a condition to closing of the Transaction may not be satisfied, that either party may terminate the Merger Agreement or that the closing of the Transaction might be delayed or not occur at all; potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement or completion of the transaction; the diversion of management time on transaction-related issues; the ultimate timing, outcome and results of integrating the operations of BCEI and HPR; the effects of the business combination of BCEI and HPR, including the combined company’s future financial condition, results of operations, strategy and plans; the ability of the combined company to realize anticipated synergies in the timeframe expected or at all; changes in capital markets and the ability of the combined company to finance operations in the manner expected; regulatory approval of the transaction; the effects of commodity prices; the risks of oil and gas activities; the risk that the requisite amount of HPR debt does not participate in the Exchange Offer and that HPR may need to reorganize in bankruptcy as a result; the risks and unpredictability inherent in the bankruptcy process; and the fact that operating costs and business disruption may be greater than expected following the public announcement or consummation of the Transaction. Expectations regarding business outlook, including changes in revenue, pricing, capital expenditures, cash flow generation, strategies for our operations, oil and natural gas market conditions, legal, economic and regulatory conditions, and environmental matters are only forecasts regarding these matters.

All forward-looking statements speak only as of the date they are made and are based on information available at that time. BCEI does not assume any obligation to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements were made or to reflect the occurrence of unanticipated events except as required by federal securities laws. As forward-looking statements involve significant risks and uncertainties, caution should be exercised against placing undue reliance on such statements.

For further information, please contact:

Scott Landreth
Senior Director, Finance & Investor Relations and Treasurer
720-225-6679
[email protected]

Schedule 1: Rocky Mountain Infrastructure (“RMI”) Net Effective Cost

(in thousands, unaudited)

RMI net effective cost is a supplemental non-GAAP financial measure that is used by management to assess only the net cash impact the Company’s wholly owned subsidiary, Rocky Mountain Infrastructure, LLC, has on the Company’s consolidated financials. Management believes the net effective cost provides external users of the Company’s consolidated financial statements, such as industry analysts, investors, lenders, and rating agencies, with additional information to assist in their analysis of the Company. The Company defines the RMI net effective cost as GAAP midstream operating expense less revenue generated from working interest partners utilizing the RMI assets.

The following table presents a reconciliation of the GAAP financial measures of midstream operating expense and RMI working interest partner revenue to the non-GAAP financial measure of RMI net effective cost.

	Three Months Ended	Twelve Months Ended
	12/31/2020	12/31/2020
Midstream operating expense	$3,610	$14,948
RMI working interest partner revenue	(1,279)	(5,430)
RMI net effective cost	$2,331	$9,518