Market Newsdesk

October 28, 2021 4:24 pm

United States Steel Corporation Reports Record Third Quarter 2021 Results

Net earnings of $2.002 billion, or $6.97 per diluted share
Adjusted net earnings of $1.543 billion, or $5.36 per diluted share
Adjusted EBITDA of $2.027 billion
Liquidity of $4.503 billion, including cash of $2.044 billion

PITTSBURGH–(BUSINESS WIRE)–
United States Steel Corporation (NYSE: X) reported third quarter 2021 net earnings of $2.002 billion, or $6.97 per diluted share. Adjusted net earnings was $1.543 billion, or $5.36per diluted share. This compares to third quarter 2020 net loss of $234 million, or $1.06 per diluted share. Adjusted net loss for third quarter 2020 was $268 million, or $1.21 per diluted share.

Earnings Highlights

Three Months Ended

Nine Months Ended

September 30,

September 30,

(Dollars in millions, except per share amounts)

2021

2020

2021

2020

Net Sales

5,964

2,340

14,653

7,179

Segment earnings (loss) before interest and income taxes

Flat-Rolled

$

1,015

$

(159

)

$

1,740

$

(523

)

Mini Mill ^(a)

424

—

840

—

U. S. Steel Europe

394

13

706

(27

)

Tubular ^(b)

—

(52

)

(29

)

(147

)

Other

(2

)

(13

)

20

(33

)

Total segment earnings (loss) before interest and income taxes

$

1,831

$

(211

)

$

3,277

$

(730

)

Other items not allocated to segments

511

—

524

(388

)

Earnings (loss) before interest and income taxes

$

2,342

$

(211

)

$

3,801

$

(1,118

)

Net interest and other financial costs

80

47

472

144

Income tax expense (benefit)

260

(24

)

224

(48

)

Net earnings (loss)

$

2,002

$

(234

)

$

3,105

$

(1,214

)

Earnings (loss) per diluted share

$

6.97

$

(1.06

)

$

11.13

$

(6.43

)

Adjusted net earnings (loss) ^(c)

$

1,543

(268

)

$

2,790

(860

)

Adjusted net earnings (loss) per diluted share ^(c)

$

5.36

$

(1.21

)

$

9.99

$

(4.56

)

Adjusted earnings (loss) before interest, income taxes, depreciation and amortization (EBITDA) ^(c)

$

2,027

$

(49

)

$

3,864

$

(249

)

^(a) Mini Mill segment, added after January 15, 2021 with the purchase of the remaining equity interest in Big River Steel, does not include the newly constructed electric arc furnace (EAF) at our Fairfield Tubular Operations in Fairfield, Alabama.

^(b) The Fairfield EAF is included in the Tubular segment.

^(c) Please refer to the non-GAAP Financial Measures section of this document for the reconciliation of these amounts.

“We continue setting records, including record net earnings, record EBITDA, record EBITDA margin, record liquidity, record safety, and record quality and reliability,” said U. S. Steel President and Chief Executive Officer David B. Burritt. “Our balance sheet has been transformed and the cash flow generation of the business has us highly confident in our ability to pre-fund organic growth investments that will expand our existing competitive advantages. We are getting to our Best for All℠ future faster.”

Commenting on the Company’s strategy, Burritt continued, “It’s not either investing in our business or returning capital directly to stockholders, it’s both. Our future now includes a $300 million stock repurchase program and $0.05/share quarterly dividend to begin directly rewarding stockholders for the progress we have made so far. We are confident in the long-term value our new, highly capable mini mill will create as it further expands our competitive advantage to produce sustainable and differentiated steel. We are getting better, not bigger, by building on our Mini Mill segment’s industry-leading performance to create a business model that will continue to reward stockholders into the future.”

*****

The Company will conduct a conference call on third quarter 2021 earnings on Friday, October 29, 2021 at 8:30 a.m. EDT. To listen to the webcast of the conference call and to access the Company’s slide presentation, visit the U. S. Steel website, www.ussteel.com, and click “Investors” then “Events & Presentations.” Replays of the conference call will be available on the website after 10:30 a.m. on October 29, 2021.

UNITED STATES STEEL CORPORATION

PRELIMINARY SUPPLEMENTAL STATISTICS (Unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2021

2020

2021

2020

OPERATING STATISTICS

Average realized price: ($/net ton unless otherwise noted) ^(a)

Flat-Rolled

1,325

712

1,097

714

Mini Mill ^(b)

1,517

—

1,255

—

U. S. Steel Europe

1,143

608

932

616

U. S. Steel Europe (€/net ton)

969

520

779

548

Tubular

1,702

1,230

1,587

1,271

Steel shipments (thousands of net tons): ^(a)

Flat-Rolled

2,328

2,155

6,986

6,454

Mini Mill ^(b)

608

—

1,671

—

U. S. Steel Europe

1,064

790

3,274

2,201

Tubular

123

71

317

390

Total Steel Shipments

4,123

3,016

12,248

9,045

Intersegment steel (unless otherwise noted) shipments (thousands of net tons):

Flat-Rolled to Tubular

—

—

—

101

Flat-Rolled to USSE (iron ore pellets and fines)

—

687

439

912

Mini Mill ^(b) to Flat-Rolled

114

—

300

—

Raw steel production (thousands of net tons):

Flat-Rolled

2,634

2,207

7,700

6,823

Mini Mill ^(b)

750

—

2,007

—

U. S. Steel Europe

1,274

873

3,750

2,400

Tubular ^(c)

117

—

324

—

Raw steel capability utilization: ^(d)

Flat-Rolled

61

%

52

%

61

%

53

%

Mini Mill ^(b)

90

%

—

%

86

%

—

%

U. S. Steel Europe

101

%

69

%

100

%

64

%

Tubular

52

%

—

%

48

%

—

%

CAPITAL EXPENDITURES (dollars in millions)

Flat-Rolled

105

81

272

391

Mini Mill ^(b)

46

—

102

—

U. S. Steel Europe

13

16

39

64

Tubular

12

39

46

133

Other Businesses

—

—

1

3

Total

$

176

$

136

$

460

$

591

^(a) Excludes intersegment shipments.

^(b) Mini Mill segment added after January 15, 2021 with the purchase of the remaining equity interest in Big River Steel.

^(c) Tubular segment raw steel added in October 2020 with the start-up of the new electric arc furnace.

^(d) Based on annual raw steel production capability of 17.0 million net tons for Flat-Rolled, 3.3 million for Mini Mill, 5.0 million net tons for U. S. Steel Europe and 0.9 million for Tubular.

UNITED STATES STEEL CORPORATION

CONDENSED STATEMENT OF OPERATIONS (Unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,

(Dollars in millions, except per share amounts)

2021

2020

2021

2020

NET SALES

5,964

2,340

14,653

7,179

OPERATING EXPENSES (INCOME):

Cost of sales

3,881

2,295

10,633

7,174

Selling, general and administrative expenses

108

65

316

199

Depreciation, depletion and amortization

196

162

587

481

(Earnings) loss from investees

(57

)

31

(106

)

78

Gain on sale of Transtar

(506

)

—

(506

)

—

Asset impairment charges

—

—

28

263

Gain on equity investee transactions

—

—

(111

)

(31

)

Restructuring and other charges

—

—

37

130

Net loss (gain) on sale of assets

7

(2

)

(8

)

(2

)

Other (gains) losses, net

(7

)

—

(18

)

5

Total operating expenses

3,622

2,551

10,852

8,297

EARNINGS (LOSS) BEFORE INTEREST AND INCOME TAXES

2,342

(211

)

3,801

(1,118

)

Net interest and other financial costs

80

47

472

144

EARNINGS (LOSS) BEFORE INCOME TAXES

2,262

(258

)

3,329

(1,262

)

Income tax expense (benefit)

260

(24

)

224

(48

)

Net earnings (loss)

2,002

(234

)

3,105

(1,214

)

Net earnings attributable to noncontrolling interests

—

—

—

—

NET EARNINGS (LOSS) ATTRIBUTABLE TO UNITED STATES STEEL CORPORATION

$

2,002

$

(234

)

$

3,105

$

(1,214

)

COMMON STOCK DATA:

Net earnings (loss) per share attributable to

United States Steel Corporation stockholders:

Basic

$

7.41

$

(1.06

)

$

11.80

$

(6.43

)

Diluted

$

6.97

$

(1.06

)

$

11.13

$

(6.43

)

Weighted average shares, in thousands

Basic

270,175

220,402

263,209

188,766

Diluted

287,463

220,402

279,103

188,766

Dividends paid per common share

$

0.01

$

0.01

$

0.03

$

0.03

UNITED STATES STEEL CORPORATION

CONDENSED CASH FLOW STATEMENT (Unaudited)

Nine Months Ended

September 30,

(Dollars in millions)

2021

2020

Cash provided by (used in) operating activities:

Net earnings (loss)

$

3,105

$

(1,214

)

Depreciation, depletion and amortization

587

481

Gain on sale of Transtar

(506

)

—

Asset impairment charges

28

263

Gain on equity investee transactions

(111

)

(31

)

Restructuring and other charges

37

130

Loss on debt extinguishment

282

—

Pensions and other postretirement benefits

(88

)

(18

)

Deferred income taxes

59

(36

)

Working capital changes

(852

)

210

Income taxes receivable/payable

137

13

Other operating activities

(73

)

53

Total

2,605

(149

)

Cash used in investing activities:

Capital expenditures

(460

)

(591

)

Acquisition of Big River Steel, net of cash acquired

(625

)

—

Proceeds from the sale of Transtar

627

—

Investment in Big River Steel

—

(3

)

Proceeds from sale of assets

25

3

Proceeds from sale of ownership interests in equity investees

—

8

Other investing activities

(3

)

(4

)

Total

(436

)

(587

)

Cash (used in) provided by financing activities:

Issuance of short-term debt, net of financing costs

—

240

Repayment of short-term debt

(180

)

—

Revolving credit facilities – borrowings, net of financing costs

50

1,474

Revolving credit facilities – repayments

(911

)

(1,633

)

Issuance of long-term debt, net of financing costs

862

1,043

Repayment of long-term debt

(2,719

)

(8

)

Proceeds from public offering of common stock

790

410

Proceeds from Stelco Option Agreement

—

55

Other financing activities

(12

)

(7

)

Total

(2,120

)

1,574

Effect of exchange rate changes on cash

(15

)

10

Net increase in cash, cash equivalents and restricted cash

34

848

Cash, cash equivalents and restricted cash at beginning of the year

2,118

939

Cash, cash equivalents and restricted cash at end of the period

$

2,152

$

1,787

UNITED STATES STEEL CORPORATION

CONDENSED BALANCE SHEET (Unaudited)

September 30,

December 31,

(Dollars in millions)

2021

2020

Cash and cash equivalents

$

2,044

$

1,985

Receivables, net

2,403

994

Inventories

2,086

1,402

Other current assets

266

51

Total current assets

6,799

4,432

Operating lease assets

198

214

Property, plant and equipment, net

7,380

5,444

Investments and long-term receivables, net

628

1,177

Intangible assets, net

527

129

Goodwill

909

4

Other noncurrent assets

892

659

Total assets

$

17,333

$

12,059

Accounts payable and other accrued liabilities

3,000

1,884

Payroll and benefits payable

542

308

Short-term debt and current maturities of long-term debt

61

192

Other current liabilities

427

272

Total current liabilities

4,030

2,656

Noncurrent operating lease liabilities

148

163

Long-term debt, less unamortized discount and debt issuance costs

4,272

4,695

Employee benefits

202

322

Other long-term liabilities

673

344

United States Steel Corporation stockholders’ equity

7,916

3,786

Noncontrolling interests

92

93

Total liabilities and stockholders’ equity

$

17,333

$

12,059

UNITED STATES STEEL CORPORATION

NON-GAAP FINANCIAL MEASURES

RECONCILIATION OF ADJUSTED NET EARNINGS (LOSS)

Three Months Ended

Nine Months Ended

September 30,

September 30,

(In millions of dollars)

2021

2020

2021

2020

Reconciliation to adjusted net earnings (loss) attributable to United States Steel Corporation ^(a)

Net earnings (loss) attributable to United States Steel Corporation

$

2,002

$

(234

)

$

3,105

$

(1,214

)

Debt extinguishment

23

—

278

—

Asset impairment

—

—

26

263

Big River Steel – inventory step-up amortization

—

—

24

—

Big River Steel – unrealized (gains) losses

(11

)

—

3

—

Big River Steel – acquisition costs

—

—

9

—

Restructuring and other charges

—

—

36

123

Loss on USSE assets held for sale

7

—

7

—

Gain on sale of Transtar

(453

)

—

(453

)

—

Gain on previously held investment in Big River Steel

—

—

(111

)

—

Property sale

—

—

(14

)

—

Reversal of tax valuation allowance ^(b)

(25

)

—

(120

)

—

Tubular inventory impairment

—

—

—

24

Uncertain tax positions

—

—

—

13

Gain on previously held investment in UPI

—

—

—

(25

)

Big River Steel options and forward adjustments

—

(34

)

—

(40

)

December 24, 2018 Clairton coke making facility fire

—

—

—

(4

)

Total adjustments

(459

)

(34

)

(315

)

354

Adjusted net earnings (loss) attributable to United States Steel Corporation

$

1,543

(268

)

$

2,790

(860

)

^(a) The adjustments included in this table for the three and nine months ended September 30, 2021, were tax effected due to the partial reversals of the valuation allowance on our domestic deferred tax assets that occurred in the second and third quarters of 2021.

^(b)The $25 million and $120 million adjustments recorded in the three and nine months ended September 30, 2021, respectively, were related to partial reversals of the tax valuation allowance recorded against the Company’s net domestic deferred tax asset as a result of the Company’s three-year cumulative income position and a change in the projections of income in future years. There was an additional net benefit of $227 million and $394 million for the three and nine months ended September 30, 2021, respectively, included in earnings related to the reversals of the valuation allowance due to a change in estimated current year earnings.

UNITED STATES STEEL CORPORATION

NON-GAAP FINANCIAL MEASURES

RECONCILIATION OF ADJUSTED NET EARNINGS (LOSS)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2021

2020

2021

2020

Reconciliation to adjusted diluted net earnings (loss) per share ^(a)

Diluted net earnings (loss) per share

$

6.97

$

(1.06

)

$

11.13

$

(6.43

)

Debt extinguishment

0.08

—

1.00

—

Asset impairment

—

—

0.09

1.39

Big River Steel – inventory step-up amortization

—

—

0.09

—

Big River Steel – unrealized (gains) losses

(0.04

)

—

0.01

—

Big River Steel – acquisition costs

—

—

0.03

—

Restructuring and other charges

—

—

0.13

0.64

Loss on USSE assets held for sale

0.02

—

0.02

—

Gain on sale of Transtar

(1.57

)

—

(1.62

)

—

Gain on previously held investment in Big River Steel

—

—

(0.40

)

—

Property sale

—

—

(0.05

)

—

Reversal of tax valuation allowance ^(b)

(0.10

)

—

(0.44

)

—

Tubular inventory impairment

—

—

—

0.13

Uncertain tax positions

—

—

—

0.07

Gain on previously held investment in UPI

—

—

—

(0.13

)

Big River Steel options and forward adjustments

—

(0.15

)

—

(0.21

)

December 24, 2018 Clairton coke making facility fire

—

—

—

(0.02

)

Total adjustments

(1.61

)

(0.15

)

(1.14

)

1.87

Adjusted diluted net earnings (loss) per share

$

5.36

$

(1.21

)

$

9.99

$

(4.56

)

^(a) The adjustments included in this table for the three and nine months ended September 30, 2021, were tax effected due to the partial reversals of the valuation allowance on our domestic deferred tax assets that occurred in the second and third quarters of 2021.

^(b)The $0.10 and $0.44 adjustments per diluted share recorded in the three and nine months ended September 30, 2021, respectively, were related to partial reversals of the tax valuation allowance recorded against the Company’s net domestic deferred tax asset as a result of the Company’s three-year cumulative income position and a change in the projections of income in future years.

UNITED STATES STEEL CORPORATION

NON-GAAP FINANCIAL MEASURES

RECONCILIATION OF ADJUSTED EBITDA

Three Months Ended

Nine Months Ended

September 30,

September 30,

(Dollars in millions)

2021

2020

2021

2020

Reconciliation to Adjusted EBITDA

Net earnings (loss) attributable to United States Steel Corporation

$

2,002

$

(234

)

$

3,105

$

(1,214

)

Income tax expense (benefit)

260

(24

)

224

(48

)

Net interest and other financial costs

80

47

472

144

Depreciation, depletion and amortization expense

196

162

587

481

EBITDA

2,538

(49

)

4,388

(637

)

Asset impairment

—

—

28

263

Big River Steel – inventory step-up amortization

—

—

24

—

Big River Steel – unrealized (gains) losses

(12

)

—

3

—

Big River Steel – acquisition costs

—

—

9

—

Restructuring and other charges

—

—

37

130

Loss on USSE assets held for sale

7

—

7

—

Gain on sale of Transtar

(506

)

—

(506

)

—

Gain on previously held investment in Big River Steel

—

—

(111

)

—

Property sale

—

—

(15

)

—

Tubular inventory impairment

—

—

—

24

Gain on previously held investment in UPI

—

—

—

(25

)

December 24, 2018 Clairton coke making facility fire

—

—

—

(4

)

Adjusted EBITDA

$

2,027

$

(49

)

$

3,864

$

(249

)

We present adjusted net earnings (loss), adjusted net earnings (loss) per diluted share, earnings (loss) before interest, income taxes, depreciation and amortization (EBITDA) and adjusted EBITDA, which are non-GAAP measures, as additional measurements to enhance the understanding of our operating performance. We believe that EBITDA, considered along with net earnings (loss), is a relevant indicator of trends relating to our operating performance and provides management and investors with additional information for comparison of our operating results to the operating results of other companies.

Adjusted net earnings (loss) and adjusted net earnings (loss) per diluted share are non-GAAP measures that exclude the effects of items that include: debt extinguishment, asset impairment, Big River Steel – inventory step-up amortization, Big River Steel – unrealized (gains) losses, Big River Steel – acquisition costs, restructuring and other charges, loss on USSE assets held for sale, gain on sale of Transtar, gain on previously held investment in Big River Steel, property sale, reversal of tax valuation allowance, Tubular inventory impairment, uncertain tax positions, gain on previously held investment in UPI, Big River Steel options and forward adjustments and December 24, 2018 Clairton coke making facility fire (Adjustment Items). Adjusted EBITDA is also a non-GAAP measure that excludes the effects of certain Adjustment Items. We present adjusted net earnings (loss), adjusted net earnings (loss) per diluted share and adjusted EBITDA to enhance the understanding of our ongoing operating performance and established trends affecting our core operations by excluding the effects of events that can obscure underlying trends. U. S. Steel’s management considers adjusted net earnings (loss), adjusted net earnings (loss) per diluted share and adjusted EBITDA as alternative measures of operating performance and not alternative measures of the Company’s liquidity. U. S. Steel’s management considers adjusted net earnings (loss), adjusted net earnings (loss) per diluted share and adjusted EBITDA useful to investors by facilitating a comparison of our operating performance to the operating performance of our competitors. Additionally, the presentation of adjusted net earnings (loss), adjusted net earnings (loss) per diluted share and adjusted EBITDA provides insight into management’s view and assessment of the Company’s ongoing operating performance because management does not consider the adjusting items when evaluating the Company’s financial performance. Adjusted net earnings (loss), adjusted net earnings (loss) per diluted share and adjusted EBITDA should not be considered a substitute for net earnings (loss), earnings (loss) per diluted share or other financial measures as computed in accordance with U.S. GAAP and is not necessarily comparable to similarly titled measures used by other companies. A condensed consolidated statement of operations (unaudited), condensed consolidated cash flow statement (unaudited), condensed consolidated balance sheet (unaudited) and preliminary supplemental statistics (unaudited) for U. S. Steel are attached.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This release contains information that may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We intend the forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in those sections. Generally, we have identified such forward-looking statements by using the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “project,” “target,” “forecast,” “aim,” “should,” “will,” “may” and similar expressions or by using future dates in connection with any discussion of, among other things, financial performance, the construction or operation of new and existing facilities, operating performance, trends, events or developments that we expect or anticipate will occur in the future, statements relating to volume changes, share of sales and earnings per share changes, anticipated cost savings, potential capital and operational cash improvements, changes in global supply and demand conditions and prices for our products, international trade duties and other aspects of international trade policy, the integration of Big River Steel in our existing business, business strategies related to the combined business and statements expressing general views about future operating results. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. Forward-looking statements are not historical facts, but instead represent only the Company’s beliefs regarding future events, many of which, by their nature, are inherently uncertain and outside of the Company’s control. It is possible that the Company’s actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. Management believes that these forward-looking statements are reasonable as of the time made. However, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date when made. Our Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our Company’s historical experience and our present expectations or projections. These risks and uncertainties include, but are not limited to, the risks and uncertainties described in this report and in “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020 and those described from time to time in our future reports filed with the Securities and Exchange Commission.

References to “we,” “us,” “our,” the “Company,” and “U. S. Steel,” refer to United States Steel Corporation and its consolidated subsidiaries, references to “Big River Steel” refer to Big River Steel Holdings LLC and its direct and indirect subsidiaries unless otherwise indicated by the context, and “Transtar” refers to Transtar LLC and its direct and indirect subsidiaries unless otherwise indicated by the context.

###

Founded in 1901, United States Steel Corporation is a leading steel producer. With an unwavering focus on safety, the company’s customer-centric Best for All℠ strategy is advancing a more secure, sustainable future for U. S. Steel and its stakeholders. With a renewed emphasis on innovation, U. S. Steel serves the automotive, construction, appliance, energy, containers, and packaging industries with high value-added steel products such as U. S. Steel’s proprietary XG3™ advanced high-strength steel. The company also maintains competitively advantaged iron ore production and has an annual raw steelmaking capability of 26.2 million net tons. U. S. Steel is headquartered in Pittsburgh, Pennsylvania, with world-class operations across the United States and in Central Europe. For more information, please visit www.ussteel.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20211028006155/en/

John Ambler

Vice President

Corporate Communications

T – (412) 433-2407

E – [email protected]

Kevin Lewis

Vice President

Investor Relations

T – (412) 433-6935

E – [email protected]

KEYWORDS: Pennsylvania United States North America

INDUSTRY KEYWORDS: Steel Manufacturing

MEDIA:

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Posted on October 28, 2021 4:24 pm
Growth in Loan Originations, Strong Borrower Credit Highlight Successful Year for TFS Financial Corporation

Growth in Loan Originations, Strong Borrower Credit Highlight Successful Year for TFS Financial Corporation

CLEVELAND–(BUSINESS WIRE)–
TFS Financial Corporation (NASDAQ: TFSL) (the “Company”), the holding company for Third Federal Savings and Loan Association of Cleveland (the “Association”), today announced results for the three months and fiscal year ended September 30, 2021.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20211028006198/en/

Chairman and CEO Marc A. Stefanski (Photo: Business Wire)

The Company reported net income of $17.0 million for the quarter ended September 30, 2021 compared to net income of $13.6 million for the quarter ended September 30, 2020. The improvement when compared to the prior year quarter included an increase in net interest income and lower non-interest expense, partially offset by lower net gain on the sale of loans. Net income of $81.0 million was reported for the fiscal year ended September 30, 2021 compared to net income of $83.3 million for the fiscal year ended September 30, 2020. A decline in net interest income and higher non-interest expense for the current fiscal year offset the benefit of higher non-interest income and releases from the credit loss provision.

“Even after a year of unprecedented loan activity in 2020, our originations in 2021 were up 20 percent,” said Chairman and CEO, Marc A. Stefanski. “In addition, the credit profile of our current customers, and those with mortgages in the pipeline, has been another source of strength during both this last quarter and our fiscal year.”

Loan origination volumes remained high, as there were $3.63 billion of first mortgage loans originated during the fiscal year ended September 30, 2021 and $3.08 billion for the fiscal year ended September 30, 2020. New equity line of credit commitments were $1.65 billion and $1.23 billion, respectively, for the fiscal years ended September 30, 2021 and September 30, 2020. During the fiscal year ended September 30, 2021, $762.3 million of loans were sold for a net gain of $33.1 million compared to $844.3 million sold for a net gain of $28.4 million during the fiscal year ended September 30, 2020. By comparison, loan sales were $117.3 million for a gain of $1.9 million during the fiscal year ended September 30, 2019.

Net interest income increased $0.3 million, or 0.6%, to $57.4 million for the quarter ended September 30, 2021 from $57.1 million for the quarter ended June 30, 2021. Net interest income was $50.2 million for the quarter ended September 30, 2020. Net interest income decreased by $10.7 million, or 4.4%, to $231.6 million, for the fiscal year ended September 30, 2021 from $242.3 million for the fiscal year ended September 30, 2020. The decrease between fiscal years was primarily due to lower yields on loans as many borrowers refinanced to take advantage of the lower rate environment and a decrease in the average balances of loans due to loan sales and payoffs. In addition, the increase in lower yielding cash equivalent investments was a detriment to the overall yield on assets. Funding costs declined, partially offsetting the decrease in yield, through a reduction in the average balance of borrowed funds, including maturities and prior year terminations of Federal Home Loan Bank (“FHLB”) advances and their related swap contracts; the repricing of certificates of deposit, as they mature, to market rates of interest; and a heightened migration to lower-priced non-maturity deposit accounts from certificates of deposit due to historically low yield differentials. The quarter and year ended September 30, 2020 included $7.8 million of additional interest expense recognized on the terminations of advances and related swap contracts. The interest rate spread was 1.52% for both the fiscal years ended September 30, 2021 and September 30, 2020. The net interest margin was 1.66% and 1.69% for the fiscal years ended September 30, 2021 and September 30, 2020, respectively.

During the quarter ended September 30, 2021, a $2.0 million release of provision from the allowance for credit losses was recognized, bringing the total release of provision for the fiscal year to $9.0 million. A provision of $3.0 million was recorded for the prior fiscal year, with no provision during the quarter ended September 30, 2020. Releases from the allowance for credit losses during the recent fiscal year were primarily due to recoveries exceeding charge-offs and improvements in the economic trends and forecasts used to estimate credit losses for the reasonable and supportable period. On October 1, 2020, the Company adopted the Current Expected Credit Loss (“CECL”) methodology and recognized a $46.2 million increase to the allowance for credit losses and a related $35.8 million reduction to retained earnings, net of tax. The allowance for credit losses was $89.3 million, or 0.71% of total loans receivable, at September 30, 2021 and included a $25.0 million liability for unfunded commitments. At September 30, 2020, the allowance for credit losses was $46.9 million, or 0.36% of total loans receivable. The Company recorded $1.5 million and $5.2 million of net loan recoveries for the quarter and fiscal year ended September 30, 2021, respectively, compared to $1.4 million and $5.0 million of net loan recoveries for the quarter and fiscal year ended September 30, 2020, respectively.

Total loan delinquencies decreased $3.5 million to $24.7 million, or 0.20% of total loans receivable, at September 30, 2021 from $28.2 million, or 0.21% of total loans receivable, at September 30, 2020. Delinquencies at September 30, 2021 included a $2.1 million decrease in delinquencies on residential mortgages and a $1.3 million decrease on home equity loans and lines of credit when compared to September 30, 2020. Non-accrual loans decreased $9.4 million to $44.0 million, or 0.35% of total loans, at September 30, 2021 from $53.4 million, or 0.41% of total loans, at September 30, 2020.

At September 30, 2021, there were $21.8 million, or 0.17% of total loans receivable, in COVID-19 forbearance plans compared to $165.6 million, or 1.26% of total loans receivable, at September 30, 2020. Total troubled debt restructurings decreased $14.2 million, to $127.1 million at September 30, 2021, from $141.3 million at September 30, 2020. COVID-19 forbearance plans are not generally classified as troubled debt restructurings.

Non-interest income decreased $8.4 million to $8.7 million for the quarter ended September 30, 2021 from $17.1 million for the quarter ended September 30, 2020. The decrease was primarily due to a $7.2 million decrease in net gain on the sale of loans and a $1.1 million reduction in the fair value of interest rate lock commitments on mortgage loans originated for sale, both related to pricing movement in the secondary mortgage market. Non-interest income increased $2.0 million to $55.3 million for the fiscal year ended September 30, 2021 from $53.3 million for the fiscal year ended September 30, 2020, mainly due to increases in the net gain on the sale of loans and in the cash surrender value and death benefits on bank owned life insurance contracts. These increases were offset by a decrease in other non-interest income which, in the previous fiscal year, included $4.7 million of net gain on the sale of commercial property.

Total non-interest expense decreased $3.2 million to $47.4 million for quarter ended September 30, 2021 from $50.6 million for the quarter ended September 30, 2020, primarily due to a $3.5 million decrease in other operating expenses. This included a $2.2 million net positive change in pension expense/benefit and no fees for termination of borrowings and swap contracts compared to $1.1 million in fees during the same quarter last year. Total non-interest expense increased $3.5 million to $195.8 million for the fiscal year ended September 30, 2021 from $192.3 million for the fiscal year ended September 30, 2020, with increases in salary and employee benefits and marketing expense being the main reason. The increase in salary and benefits was spread between associate compensation, group health insurance, stock benefit plan expense, and a one-time $1,500 after-tax bonus paid to each associate during the first quarter of fiscal year 2021 in recognition of special efforts made during the pandemic crisis. The increase in marketing expense was timing related, as some marketing efforts were delayed during the previous fiscal year, in response to COVID-19.

Total assets decreased by $584.8 million, or 4.0%, to $14.06 billion at September 30, 2021 from $14.64 billion at September 30, 2020. This change was mainly due to the combination of loan sales and principal repayments on loans exceeding the total of new loan originations and the impact of adopting CECL, partially offset by an increase in bank owned life insurance contracts.

The combination of loans held for investment, net of allowance and deferred loan expenses, and mortgage loans held for sale decreased $622.1 million, or 4.7%, to $12.52 billion at September 30, 2021 from $13.14 billion at September 30, 2020, reflecting the impact of prepayments and increased loan sales during the fiscal year. The residential core mortgage loan portfolio, including loans held for sale, decreased $587.6 million during the fiscal year, to $10.28 billion. At September 30, 2021, 45% of the residential mortgage loan portfolio were adjustable rate mortgages and 13% were fixed rate mortgages originated with terms of 10 years or less. The drawn balances of the home equity loans and lines of credit portfolio decreased $18.0 million, to $2.21 billion, during the fiscal year ended September 30, 2021.

Total bank owned life insurance contracts increased $74.4 million, to $297.3 million at September 30, 2021, from $222.9 million at September 30, 2020, primarily due to $70 million of additional premiums placed during the current fiscal year.

Deposits decreased $231.9 million, or 2.5%, to $8.99 billion at September 30, 2021 from $9.23 billion at September 30, 2020. The decrease was the result of a $567.5 million decrease in our certificates of deposit (“CDs”), partially offset by a $136.2 million increase in our checking accounts, a $157.1 million increase in our savings accounts and $43.5 million of growth in our money market deposit accounts, for the fiscal year ended September 30, 2021. Total deposits included $492.0 million and $553.9 million of brokered CDs at September 30, 2021 and September 30, 2020, respectively.

Borrowed funds, all from the FHLB, decreased $429.9 million, or 12.2%, to $3.09 billion at September 30, 2021 from $3.52 billion at September 30, 2020. Included in the decrease were $525.0 million of 90 day advances that were utilized for longer term interest rate swap contracts that matured during the year and were paid off from available cash, partially offset by a $95.2 million net increase in long term advances.

Total shareholders’ equity increased $60.4 million, or 3.6%, to $1.73 billion at September 30, 2021 from $1.67 billion at September 30, 2020. Activity reflects $81.0 million of net income, a $64.2 million decrease in accumulated other comprehensive loss and $8.1 million of positive adjustments related to our stock compensation and employee stock ownership plans, reduced by $57.1 million of quarterly dividends and a $35.8 million provision to the allowance for credit losses, net of tax, with the adoption of CECL. The decrease in accumulated other comprehensive loss is primarily due to a net positive change in unrealized gains and losses on swap contracts. No shares of our common stock were repurchased during the fiscal year ended September 30, 2021.

The Company declared and paid a quarterly dividend of $0.2825 per share during the fourth fiscal quarter of 2021 and a quarterly dividend of $0.28 per share during the first, second and third fiscal quarters of 2021. As a result of a mutual member vote, Third Federal Savings and Loan Association of Cleveland, MHC (the “MHC”), the mutual holding company that owns approximately 81% of the outstanding stock of the Company, was able to waive receipt of its share of each dividend paid. Under current Federal Reserve regulations, the MHC is required to obtain the approval of its members every 12 months for the MHC to waive its right to receive dividends. As a result of a July 13, 2021 member vote and the subsequent non-objection of the Federal Reserve, the MHC has the approval to waive the receipt of up to $1.13 per share of possible dividends to be declared on the Company’s common stock during the twelve months subsequent to the members’ approval (i.e., through July 13, 2022), including a total of up to $0.8475 during the three quarters ending December 31, 2021, March 31, 2022 and June 30, 2022, to be declared at the discretion of the Company’s board of directors. The MHC has conducted the member vote to approve the dividend waiver each of the past eight years under Federal Reserve regulations and for each of those eight years, approximately 97% of the votes cast were in favor of the waiver.

The Association operates under the capital requirements for the standardized approach of the Basel III capital framework for U.S. banking organizations (“Basel III Rules”). At September 30, 2021 all of the Association’s capital ratios substantially exceed the amounts required for the Association to be considered “well capitalized” for regulatory capital purposes. The Association’s Tier 1 leverage ratio was 11.15%, its Common Equity Tier 1 and Tier 1 ratios, as calculated under the fully phased-in Basel III Rules, were each 20.43% and its total capital ratio was 21.00%. Additionally, the Company’s Tier 1 leverage ratio was 12.65%, its Common Equity Tier 1 and Tier 1 ratios were each 23.18% and its total capital ratio was 23.75%. The current capital ratios of the Association reflect the dilutive impact of $55.0 million of dividends that the Association paid to the Company, its sole shareholder, during the quarter ended December 31, 2020. Because of its intercompany nature, these dividends had no impact on the Company’s capital ratios or its consolidated statement of condition.

Presentation slides as of September 30, 2021 will be available on the Company’s website, www.thirdfederal.com, under the Investor Relations link within the “Recent Presentations” menu, beginning October 29, 2021. The Company will not be hosting a conference call to discuss its operating results.

Third Federal Savings and Loan Association is a leading provider of savings and mortgage products, and operates under the values of love, trust, respect, a commitment to excellence and fun. Founded in Cleveland in 1938 as a mutual association by Ben and Gerome Stefanski, Third Federal’s mission is to help people achieve the dream of home ownership and financial security. It became part of a public company in 2007 and celebrated its 80^th anniversary in May, 2018. Third Federal, which lends in 25 states and the District of Columbia, is dedicated to serving consumers with competitive rates and outstanding service. Third Federal, an equal housing lender, has 21 full service branches in Northeast Ohio, seven lending offices in Central and Southern Ohio, and 16 full service branches throughout Florida. As of September 30, 2021, the Company’s assets totaled $14.06 billion.

Forward Looking Statements

This report contains forward-looking statements, which can be identified by the use of such words as estimate, project, believe, intend, anticipate, plan, seek, expect and similar expressions. These forward-looking statements include, among other things:

statements of our goals, intentions and expectations;

statements regarding our business plans and prospects and growth and operating strategies;

statements concerning trends in our provision for credit losses and charge-offs on loans and off-balance sheet exposures;

statements regarding the trends in factors affecting our financial condition and results of operations, including asset quality of our loan and investment portfolios; and

estimates of our risks and future costs and benefits.

These forward-looking statements are subject to significant risks, assumptions and uncertainties, including, among other things, the following important factors that could affect the actual outcome of future events:

significantly increased competition among depository and other financial institutions;

inflation and changes in the interest rate environment that reduce our interest margins or reduce the fair value of financial instruments;

general economic conditions, either globally, nationally or in our market areas, including employment prospects, real estate values and conditions that are worse than expected;

the strength or weakness of the real estate markets and of the consumer and commercial credit sectors and its impact on the credit quality of our loans and other assets, and changes in estimates of the allowance for credit losses;

decreased demand for our products and services and lower revenue and earnings because of a recession or other events;

changes in consumer spending, borrowing and savings habits;

adverse changes and volatility in the securities markets, credit markets or real estate markets;

our ability to manage market risk, credit risk, liquidity risk, reputational risk, and regulatory and compliance risk;

our ability to access cost-effective funding;

legislative or regulatory changes that adversely affect our business, including changes in regulatory costs and capital requirements and changes related to our ability to pay dividends and the ability of Third Federal Savings, MHC to waive dividends;

changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board or the Public Company Accounting Oversight Board;

the adoption of implementing regulations by a number of different regulatory bodies, and uncertainty in the exact nature, extent and timing of such regulations and the impact they will have on us;

our ability to enter new markets successfully and take advantage of growth opportunities, and the possible short-term dilutive effect of potential acquisitions or de novo branches, if any;

our ability to retain key employees;

future adverse developments concerning Fannie Mae or Freddie Mac;

changes in monetary and fiscal policy of the U.S. Government, including policies of the U.S. Treasury and the FRS and changes in the level of government support of housing finance;

the continuing governmental efforts to restructure the U.S. financial and regulatory system;

the ability of the U.S. Government to remain open, function properly and manage federal debt limits;

changes in policy and/or assessment rates of taxing authorities that adversely affect us or our customers;

changes in accounting and tax estimates;

changes in our organization, or compensation and benefit plans and changes in expense trends (including, but not limited to trends affecting non-performing assets, charge-offs and provisions for credit losses);

the inability of third-party providers to perform their obligations to us;

civic unrest;

cyber-attacks, computer viruses and other technological risks that may breach the security of our websites or other systems to obtain unauthorized access to confidential information, destroy data or disable our systems; and

the impact of wide-spread pandemic, including COVID-19, on our business and the economy.

Because of these and other uncertainties, our actual future results may be materially different from the results indicated by any forward-looking statements. Any forward-looking statement made by us in this report speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future developments or otherwise, except as may be required by law.

TFS FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CONDITION (unaudited)

(In thousands, except share data)

September 30,

2021

September 30,

2020

ASSETS

Cash and due from banks

$

27,346

$

25,270

Other interest-earning cash equivalents

460,980

472,763

Cash and cash equivalents

488,326

498,033

Investment securities available for sale (amortized cost $420,542 and $447,384, respectively)

421,783

453,438

Mortgage loans held for sale ($0 and $36,078 measured at fair value, respectively)

8,848

36,871

Loans held for investment, net:

Mortgage loans

12,525,687

13,104,959

Other loans

2,778

2,581

Deferred loan expenses, net

44,859

42,459

Allowance for credit losses on loans

(64,289

)

(46,937

)

Loans, net

12,509,035

13,103,062

Mortgage loan servicing rights, net

8,941

7,860

Federal Home Loan Bank stock, at cost

162,783

136,793

Real estate owned, net

289

185

Premises, equipment, and software, net

37,420

41,594

Accrued interest receivable

31,107

36,634

Bank owned life insurance contracts

297,332

222,919

Other assets

91,586

104,832

TOTAL ASSETS

$

14,057,450

$

14,642,221

LIABILITIES AND SHAREHOLDERS’ EQUITY

Deposits

$

8,993,605

$

9,225,554

Borrowed funds

3,091,815

3,521,745

Borrowers’ advances for insurance and taxes

109,633

111,536

Principal, interest, and related escrow owed on loans serviced

41,476

45,895

Accrued expenses and other liabilities

88,641

65,638

Total liabilities

12,325,170

12,970,368

Commitments and contingent liabilities

Preferred stock, $0.01 par value, 100,000,000 shares authorized, none issued and outstanding

—

—

Common stock, $0.01 par value, 700,000,000 shares authorized; 332,318,750 shares issued; 280,761,299 and 280,150,006 outstanding at September 30, 2021 and September 30, 2020, respectively

3,323

3,323

Paid-in capital

1,746,887

1,742,714

Treasury stock, at cost; 51,557,451 and 52,168,744 shares at September 30, 2021 and September 30, 2020, respectively

(768,035

)

(767,649

)

Unallocated ESOP shares

(35,751

)

(40,084

)

Retained earnings—substantially restricted

853,657

865,514

Accumulated other comprehensive loss

(67,801

)

(131,965

)

Total shareholders’ equity

1,732,280

1,671,853

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

$

14,057,450

$

14,642,221

TFS FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

(In thousands, except share and per share data)

For the Three Months Ended

For the Year Ended

September 30,

September 30,

2021

2020

2021

2020

INTEREST AND DIVIDEND INCOME:

Loans, including fees

$

92,002

$

103,430

$

381,887

$

440,697

Investment securities available for sale

1,041

1,535

3,822

9,707

Other interest and dividend earning assets

1,033

797

3,642

4,894

Total interest and dividend income

94,076

105,762

389,351

455,298

INTEREST EXPENSE:

Deposits

21,617

31,379

97,319

140,242

Borrowed funds

15,061

24,217

60,402

72,788

Total interest expense

36,678

55,596

157,721

213,030

NET INTEREST INCOME

57,398

50,166

231,630

242,268

PROVISION (RELEASE) FOR CREDIT LOSSES

(2,000

)

—

(9,000

)

3,000

NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES

59,398

50,166

240,630

239,268

NON-INTEREST INCOME:

Fees and service charges, net of amortization

2,156

2,363

9,602

8,798

Net gain on the sale of loans

4,305

11,536

33,082

28,443

Increase in and death benefits from bank owned life insurance contracts

2,146

1,572

9,961

7,153

Other

74

1,581

2,654

8,857

Total non-interest income

8,681

17,052

55,299

53,251

NON-INTEREST EXPENSE:

Salaries and employee benefits

26,912

25,967

108,867

104,008

Marketing services

4,043

4,349

19,174

16,512

Office property, equipment and software

6,453

6,439

25,710

25,296

Federal insurance premium and assessments

2,233

2,438

9,085

10,625

State franchise tax

1,202

1,176

4,663

4,690

Other expenses

6,603

10,194

28,336

31,143

Total non-interest expense

47,446

50,563

195,835

192,274

INCOME BEFORE INCOME TAXES

20,633

16,655

100,094

100,245

INCOME TAX EXPENSE

3,618

3,077

19,087

16,928

NET INCOME

$

17,015

$

13,578

$

81,007

$

83,317

Earnings per share

Basic

$

0.06

$

0.05

$

0.29

$

0.30

Diluted

$

0.06

$

0.05

$

0.29

$

0.29

Weighted average shares outstanding

Basic

276,982,904

276,069,983

276,694,594

275,859,660

Diluted

278,880,379

277,704,691

278,576,254

277,803,058

TFS FINANCIAL CORPORATION AND SUBSIDIARIES

AVERAGE BALANCES AND YIELDS (unaudited)

Three Months Ended

Three Months Ended

September 30, 2021

September 30, 2020

Average

Balance

Interest

Income/

Expense

Yield/

Cost (1)

Average

Balance

Interest

Income/

Expense

Yield/

Cost (1)

(Dollars in thousands)

Interest-earning assets:

Interest-earning cash equivalents

$

570,903

$

221

0.15

%

$

466,487

$

118

0.10

%

Mortgage-backed securities

417,320

1,041

1.00

%

484,596

1,535

1.27

%

Loans (2)

12,544,760

92,002

2.93

%

13,265,564

103,430

3.12

%

Federal Home Loan Bank stock

162,783

812

2.00

%

136,793

679

1.99

%

Total interest-earning assets

13,695,766

94,076

2.75

%

14,353,440

105,762

2.95

%

Noninterest-earning assets

533,988

580,574

Total assets

$

14,229,754

$

14,934,014

Interest-bearing liabilities:

Checking accounts

$

1,117,897

263

0.09

%

$

981,012

310

0.13

%

Savings accounts

1,805,394

645

0.14

%

1,588,923

1,019

0.26

%

Certificates of deposit

6,144,461

20,709

1.35

%

6,681,372

30,050

1.80

%

Borrowed funds

3,146,515

15,061

1.91

%

3,657,533

24,217

2.65

%

Total interest-bearing liabilities

12,214,267

36,678

1.20

%

12,908,840

55,596

1.72

%

Noninterest-bearing liabilities

289,573

337,437

Total liabilities

12,503,840

13,246,277

Shareholders’ equity

1,725,914

1,687,737

Total liabilities and shareholders’ equity

$

14,229,754

$

14,934,014

Net interest income

$

57,398

$

50,166

Interest rate spread (1)(3)

1.55

%

1.23

%

Net interest-earning assets (4)

$

1,481,499

$

1,444,600

Net interest margin (1)(5)

1.68

%

1.40

%

Average interest-earning assets to average interest-bearing liabilities

112.13

%

111.19

%

Selected performance ratios:

Return on average assets (1)

0.48

%

0.36

%

Return on average equity (1)

3.94

%

3.22

%

Average equity to average assets

12.13

%

11.30

%

(1)

Annualized.

(2)

Loans include both mortgage loans held for sale and loans held for investment.

(3)

Interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.

(4)

Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(5)

Net interest margin represents net interest income divided by total interest-earning assets.

TFS FINANCIAL CORPORATION AND SUBSIDIARIES

AVERAGE BALANCES AND YIELDS (unaudited)

Year Ended

Year Ended

September 30, 2021

September 30, 2020

Average

Balance

Interest

Income/

Expense

Yield/

Cost

Average

Balance

Interest

Income/

Expense

Yield/

Cost

(Dollars in thousands)

Interest-earning assets:

Interest-earning cash

equivalents

$

567,035

$

673

0.12

%

$

307,902

$

1,909

0.62

%

Mortgage-backed securities

428,590

3,822

0.89

%

527,195

9,707

1.84

%

Loans (1)

12,800,542

381,887

2.98

%

13,366,447

440,697

3.30

%

Federal Home Loan Bank stock

155,322

2,969

1.91

%

120,011

2,985

2.49

%

Total interest-earning assets

13,951,489

389,351

2.79

%

14,321,555

455,298

3.18

%

Noninterest-earning assets

532,786

540,421

Total assets

$

14,484,275

$

14,861,976

Interest-bearing liabilities:

Checking accounts

$

1,079,699

1,140

0.11

%

$

917,552

1,477

0.16

%

Savings accounts

1,742,042

2,992

0.17

%

1,530,977

7,775

0.51

%

Certificates of deposit

6,339,412

93,187

1.47

%

6,621,289

130,990

1.98

%

Borrowed funds

3,303,925

60,402

1.83

%

3,785,026

72,788

1.92

%

Total interest-bearing liabilities

12,465,078

157,721

1.27

%

12,854,844

213,030

1.66

%

Noninterest-bearing liabilities

321,958

298,520

Total liabilities

12,787,036

13,153,364

Shareholders’ equity

1,697,239

1,708,612

Total liabilities and shareholders’ equity

$

14,484,275

$

14,861,976

Net interest income

$

231,630

$

242,268

Interest rate spread (2)

1.52

%

1.52

%

Net interest-earning assets (3)

$

1,486,411

$

1,466,711

Net interest margin (4)

1.66

%

1.69

%

Average interest-earning assets to average interest-bearing liabilities

111.92

%

111.41

%

Selected performance ratios:

Return on average assets

0.56

%

0.56

%

Return on average equity

4.77

%

4.88

%

Average equity to average assets

11.72

%

11.50

%

(1)

Loans include both mortgage loans held for sale and loans held for investment.

(2)

Interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.

(3)

Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(4)

Net interest margin represents net interest income divided by total interest-earning assets.

View source version on businesswire.com: https://www.businesswire.com/news/home/20211028006198/en/

Jennifer Rosa

(216) 429-5037

KEYWORDS: Ohio United States North America

INDUSTRY KEYWORDS: Banking Professional Services

MEDIA:

Logo

Photo

Chairman and CEO Marc A. Stefanski (Photo: Business Wire)

Posted on October 28, 2021 4:24 pm
U.S. Century Bank Reports Third Quarter 2021 Results

MIAMI, Oct. 28, 2021 (GLOBE NEWSWIRE) — U.S. Century Bank (the “Company” or the “Bank”) (NASDAQ: USCB) reported net income of $6.6 million for the three months ended September 30, 2021, compared with net income of $3.4 million for the same period in 2020. The Company reported net loss per diluted share for the three months ended September 30, 2021 of $5.11 and $1.02 for Class A and Class B common stock, respectively, compared to net income per diluted share for the same period in 2020 of $0.51 and $0.10 for Class A and Class B common stock, respectively. In the third quarter of 2021, the Company completed an exchange of then outstanding preferred shares for Class A common shares and thereafter redeemed the remaining outstanding preferred shares, at a liquidation value that exceeded book value, causing a one-time reduction in net income available to common stockholders of $89.6 million. Additionally, the reported net income of $6.6 million for the third quarter in 2021 includes a default interest recovery of $2.5 million ($0.11 EPS impact) from a prior lending customer of the Bank. The loan was originated in 2008 and subsequently went through many iterations of credit collection. This payment reflects the final payment and settlement of lien judgments against the customer.

Operating net income per diluted share (non-GAAP) for the three months ended September 30, 2021 was $0.37 and $0.07 for Class A and Class B common stock, respectively, compared to operating net income per diluted share (non-GAAP) for the same period in 2020 of $0.51 and $0.10 for Class A and Class B, respectively. Operating net income per diluted share (non-GAAP) in the third quarter of 2021 excludes the $89.6 million one-time accounting impact of the exchange and redemption of the preferred shares. A reconciliation of non-GAAP measures to GAAP measures appears at the end of this press release.

“I am extremely proud about the milestones that we have achieved in such a short amount of time despite the many and varied challenges of the COVID-19 pandemic. During the third quarter of 2021, we issued 4,600,000 shares of Class A common stock at a price of $10.00 per share through the completion of our initial public offering. We also managed to simplify our capital structure through the exchange and redemption of the remaining Class C and Class D preferred shares.” said Luis de la Aguilera, President and Chief Executive Officer.

Profitability

Annualized return on average assets for the quarter ended September 30, 2021 was 1.50% compared to 0.93% in the third quarter of 2020.

Annualized return on average stockholders’ equity for the quarter ended September 30, 2021 was 13.41% compared to 8.11% in the third quarter of 2020.

The efficiency ratio for the quarter ended September 30, 2021 decreased to 50.92% compared to 65.02% for the third quarter in 2020.

Net interest margin (NIM) increased to 3.19% for the quarter ended September 30, 2021 compared to 3.17% for the third quarter in 2020.

Net interest income was $13.5 million for the quarter ended September 30, 2021, an increase of $2.4 million or 21.21% compared to the third quarter in 2020. The increase was primarily driven by higher loan and investment income along with lower deposit costs.

Balance Sheet

Total assets were $1.8 billion at September 30, 2021, representing an increase of $264.0 million or 17.70% from the third quarter in 2020.

Total deposits were $1.5 billion at September 30, 2021, representing an increase of $232.0 million or 18.52%, from the third quarter in 2020.

Total shareholders’ equity was $201.9 million at September 30, 2021, representing an increase of $33.3 million or 19.77% from the third quarter in 2020.

Total loans were $1.2 billion at September 30, 2021, representing an increase of $134.3 million or 12.89% from the third quarter in 2020.

The Company purchased a portfolio of yacht loans within the quarter. The portfolio includes loans that are secured by 30 vessels with an aggregate principal balance of $48.0 million.

The Company classified $100 million of securities to held-to-maturity (HTM) for the quarter ended September 30, 2021 to protect tangible book value in a rising rate environment.

Asset Quality

The allowance for credit losses was $14.9 million at September 30, 2021, down from $15.2 million at September 30, 2020.

The allowance for credit losses represented 1.27% of total loans at September 30, 2021 compared to 1.46% at September 30, 2020.

Non-performing loans to total loans was less than 0.01% at September 30, 2021 compared to 0.16% at September 30, 2020.

N
on-interest Income and Non-interest Expense

Non-interest income totaled $4.2 million for the three months ended September 30, 2021, representing an increase of $2.4 million or 137.63% compared to the same period in 2020. The increase was primarily driven by a $2.5 million in default interest from a prior lending customer of the Bank.

Non-interest expense was $9.0 million for the three months ended September 30, 2021 compared to $8.4 million for the same period in 2020.

Capital

The Company exceeded all regulatory capital requirements and remained significantly above “well-capitalized” guidelines. Total risk-based capital ratio was 15.10% at September 30, 2021 compared to 14.34% for the third quarter in 2020.

Conference Call and Webcast

U.S. Century Bank will host a conference call on Friday, October 29, 2021 at 9:00 a.m. Eastern Time to discuss the Company’s unaudited financial results for the quarter ended September 30, 2021. To access the conference call, dial (844) 221-2148 (domestically) or (929) 517-0937 (internationally) and use conference code 9479777.

Additionally, interested parties can listen to a live webcast of the call in the “Investor Relations” section of the Company’s website at www.uscentury.com. An archived version of the webcast will be available in the same location shortly after the live call has ended.

About U.S. Century Bank

Established in 2002, U.S. Century Bank is one of the largest community banks headquartered in Miami, and one of the largest community banks in the state. U.S. Century is rated 4-star by BauerFinancial, the nation’s leading independent bank rating firm. U.S. Century Bank offers customers a wide range of financial products and services. U.S. Century Bank has received awards and accolades from numerous organizations for its philanthropic support and leadership, including the Beacon Council, Greater Miami Chamber of Commerce, South Florida Hispanic Chamber of Commerce and others. For more information or to find a U.S. Century branch near you, please call (305) 715-5200 or visit www.uscentury.com.

Forwa
rd-Looking Statements

Statements included in this earning release that 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 21E of the Securities Exchange Act of 1934, as amended. The words “may,” “will,” “anticipate,” “should,” “would,” “believe,” “contemplate,” “expect,” “aim,” “plan,” “estimate,” “continue,” “may” and “intend,” as well as other similar words and expressions of the future, are intended to identify forward-looking statements. These forward-looking statements include statements related to our projected growth, anticipated future financial performance, and management’s long-term performance goals, as well as statements relating to the anticipated effects on results of operations and financial condition from expected developments or events, or business and growth strategies, including anticipated internal growth.

These forward-looking statements involve significant risks and uncertainties that could cause our actual results to differ materially from those anticipated in such statements. Potential risks and uncertainties include, but are not limited to:

the strength of the United States economy in general and the strength of the local economies in which we conduct operations;

the COVID-19 pandemic and its impact on us, our employees, customers and third-party service providers, and the ultimate extent of the impacts of the pandemic and related government stimulus programs;

our ability to successfully manage interest rate risk, credit risk, liquidity risk, and other risks inherent to our industry;

the accuracy of our financial statement estimates and assumptions, including the estimates used for our credit loss reserve and deferred tax asset valuation allowance;

the efficiency and effectiveness of our internal control environment;

our ability to comply with the extensive laws and regulations to which we are subject, including the laws for each jurisdiction where we operate;

legislative or regulatory changes and changes in accounting principles, policies, practices or guidelines, including the effects of forthcoming CECL implementation;

the effects of our lack of a diversified loan portfolio and concentration in the South Florida market, including the risks of geographic, depositor, and industry concentrations, including our concentration in loans secured by real estate;

the concentration of ownership of our Class A common stock;

our ability to fund or access the capital markets at attractive rates and terms and manage our growth, both organic growth as well as growth through other means, such as future acquisitions;

inflation, interest rate, unemployment rate, market, and monetary fluctuations;

increased competition and its effect on pricing of our products and services as well as our margins;

the effectiveness of our risk management strategies, including operational risks, including, but not limited to, client, employee, or third-party fraud and security breaches; and

other risks described from time to time in our filings with the FDIC.

All forward-looking statements are necessarily only estimates of future results, and there can be no assurance that actual results will not differ materially from expectations. Therefore, you are cautioned not to place undue reliance on any forward-looking statements. Further, forward-looking statements included in this presentation are made only as of the date hereof, and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, unless required to do so under the federal securities laws. You should also review the risk factors we describe in the reports we will file from time to time with the FDIC.

Non-GAAP Financial Measures

This earning release includes financial information determined by methods other than in accordance with generally accepted accounting principles (“GAAP”). This financial information includes certain operating performance measures. Management has included these non-GAAP measures because it believes these measures may provide useful supplemental information for evaluating the Company’s underlying performance trends. Further, management uses these measures in managing and evaluating the Company’s business and intends to refer to them in discussions about our operations and performance. Operating performance measures should be viewed in addition to, and not as an alternative to or substitute for, measures determined in accordance with GAAP, and are not necessarily comparable to non-GAAP measures that may be presented by other companies. To the extent applicable, reconciliations of these non-GAAP measures to the most directly comparable GAAP measures can be found in the ‘Non-GAAP Reconciliation Tables’ included in the exhibits to this earning release.

You should assume that all numbers are unaudited unless otherwise noted.

Contacts:

Investor Relations

[email protected]

Media Relations

Martha Guerra-Kattou
(305) 715-5141
[email protected]

U.S. CENTURY BANK AND SUBSIDIARIES (UNAUDITED)

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per share data)

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

Interest income:

Loans, including fees $ 12,538 $ 11,819 $ 35,944 $ 35,528

Investment securities 1,858 1,274 5,670 3,756

Interest-bearing deposits in financial institutions 38 52 77 261

Total interest income 14,434 13,145 41,691 39,545

Interest expense:

Interest-bearing deposits 16 38 45 128

Savings and money markets accounts 501 660 1,572 2,550

Time deposits 306 1,127 1,239 3,845

Federal Home Loan Bank advances 140 207 415 925

Total interest expense 963 2,032 3,271 7,448

Net interest income before provision for credit losses 13,471 11,113 38,420 32,097

Provision for (recovery of) credit losses – – (160 ) 3,250

Net interest income after provision for credit losses 13,471 11,113 38,580 28,847

Non-interest income:

Service fees 856 777 2,648 2,236

Gain (loss) on sale of securities available for sale, net (70 ) – 179 423

   Gain on sale of loans held for sale, net 532 612 1,519 840

   Other non-interest income 2,899 386 3,708 1,146

Total non-interest income 4,217 1,775 8,054 4,645

Non-interest expense:

Salaries and employee benefits 5,313 4,907 15,804 14,769

Occupancy 1,192 1,419 3,990 4,254

Regulatory assessment and fees 317 179 690 520

Consulting and legal fees 357 342 915 771

Network and information technology services 358 407 1,198 1,156

Other operating 1,470 1,124 3,761 3,300

Total non-interest expense 9,007 8,378 26,358 24,770

Net income before income tax expense 8,681 4,510 20,276 8,722

Income tax expense 2,088 1,106 4,849 2,139

Net income 6,593 3,404 15,427 6,583

Preferred stock dividend 542 782 2,077 2,345

Exchange and redemption of preferred shares 89,585 – 89,585 –

Net income (loss) available to common stockholders $ (83,534 ) $ 2,622 $ (76,235 ) $ 4,238

Allocation of net income (loss) per common stock class:
⁽¹⁾

Class A $ (77,278 ) $ 1,994 $ (65,747 ) $ 3,223

Class B $ (6,256 ) $ 628 $ (10,488 ) $ 1,015

Per share information:

Class A common stock⁽²⁾

Net income (loss) per share, basic $ (5.11 ) $ 0.51 $ (8.57 ) $ 0.83

Net income (loss) per share, diluted $ (5.11 ) $ 0.51 $ (8.57 ) $ 0.82

Class B common stock

Net income (loss) per share, basic $ (1.02 ) $ 0.10 $ (1.71 ) $ 0.17

Net income (loss) per share, diluted $ (1.02 ) $ 0.10 $ (1.71 ) $ 0.17

Weighted average shares outstanding:

Class A common stock⁽²⁾

Basic 15,121,460 3,887,469 7,674,609 3,887,469

Diluted 15,121,460 3,944,455 7,674,609 3,944,455

Class B common stock

Basic 6,121,052 6,121,052 6,121,052 6,121,052

Diluted 6,121,052 6,121,052 6,121,052 6,121,052

(1) The allocation of net income (loss) available to common stockholders was based on the weighted average shares outstanding per common share class to the total weighted average shares outstanding during each period. The income (loss) allocation is calculated using the weighted average shares outstanding of Class B common stock on a as-converted basis (20% per share equivalent to Class A common stock).

(2) For the three and nine months ended September 30, 2020, the common stock outstanding, weighted average shares and net income per share for the Class A common stock were adjusted to reflect the 1 for 5 reverse stock split that occurred in June of 2021.

U.S. CENTURY BANK AND SUBSIDIARIES (UNAUDITED)

SELECTED FINANCIAL DATA

(Dollars in thousands, except per share data)

As of and for the three months ended

9/30/2021 6/30/2021 3/31/2021 12/31/2020 9/30/2020

Income Statement Data:

Net interest income $ 13,471 $ 12,474 $ 12,475 $ 11,499 $ 11,113

Provision for (recovery of) credit losses – – (160 ) – –

Net interest income after provision for credit losses 13,471 12,474 12,635 11,499 11,113

Service fees 856 903 889 1,030 777

Gain (loss) on sale of securities available for sale, net (70 ) 187 62 11 –

Gain (loss) on sale of loans held for sale, net 532 23 964 (1 ) 612

Other income 2,899 403 406 414 386

Total non-interest income 4,217 1,516 2,321 1,454 1,775

Salaries and employee benefits 5,313 5,213 5,278 4,435 4,907

Occupancy 1,192 1,411 1,387 1,402 1,419

Regulatory assessment and fees 317 195 178 171 179

Consulting and legal fees 357 373 185 274 342

Network and information technology services 358 332 508 380 407

Other operating 1,470 1,150 1,141 1,603 1,124

Total non-interest expenses 9,007 8,674 8,677 8,265 8,378

Net income before income tax expense 8,681 5,316 6,279 4,688 4,510

Income tax expense 2,088 1,263 1,498 449 1,106

Net income 6,593 4,053 4,781 4,239 3,404

Preferred stock dividend 542 754 781 782 782

Exchange and redemption of preferred shares 89,585 – – – –

Net income (loss) available to common stockholders $ (83,534 ) $ 3,299 $ 4,000 $ 3,457 $ 2,622

Allocation of net income (loss) per common stock class:
⁽¹⁾

Class A $ (77,278 ) $ 2,509 $ 3,042 $ 2,629 $ 1,994

Class B $ (6,256 ) $ 790 $ 958 $ 828 $ 628

Per share information:

Class A common stock ⁽²⁾

Net income (loss) per share, basic $ (5.11 ) $ 0.65 $ 0.78 $ 0.68 $ 0.51

Net income (loss) per share, diluted $ (5.11 ) $ 0.64 $ 0.78 $ 0.67 $ 0.51

Class B common stock

Net income (loss) per share, basic $ (1.02 ) $ 0.13 $ 0.16 $ 0.14 $ 0.10

Net income (loss) per share, diluted $ (1.02 ) $ 0.13 $ 0.16 $ 0.14 $ 0.10

Balance Sheet Data (at period end):

Cash and cash equivalents $ 69,597 $ 47,117 $ 105,940 $ 47,734 $ 177,411

Securities available-for-sale $ 328,171 $ 395,804 $ 341,344 $ 334,322 $ 189,507

Securities held-to-maturity $ 99,866 $ – $ – $ – $ –

Loans held for investment ⁽³⁾ $ 1,176,412 $ 1,145,095 $ 1,103,981 $ 1,038,504 $ 1,042,106

Allowance for credit losses $ (14,900 ) $ (14,848 ) $ (15,009 ) $ (15,086 ) $ (15,207 )

Total assets $ 1,755,011 $ 1,667,005 $ 1,633,359 $ 1,501,742 $ 1,491,036

Non-interest-bearing deposits $ 570,091 $ 555,993 $ 516,550 $ 442,467 $ 416,564

Interest-bearing deposits $ 914,498 $ 882,783 $ 887,681 $ 830,935 $ 836,058

Federal Home Loan Bank advances and other borrowings $ 36,000 $ 36,000 $ 36,000 $ 36,000 $ 41,000

Total liabilities $ 1,553,093 $ 1,500,703 $ 1,462,934 $ 1,330,741 $ 1,322,450

Total stockholders’ equity $ 201,918 $ 166,302 $ 170,425 $ 171,001 $ 168,586

Capital ratios:

Leverage ratio 9.69 % 7.91 % 8.57 % 8.61 % 8.73 %

Common equity tier 1 capital 13.85 % 9.24 % 9.47 % 9.71 % 9.68 %

Tier 1 risk-based capital 13.85 % 11.44 % 12.54 % 12.99 % 13.08 %

Total risk-based capital 15.10 % 12.69 % 13.80 % 14.24 % 14.34 %

(1) The allocation of net income (loss) available to common stockholders was based on the weighted average shares outstanding per common share class to the total weighted average shares outstanding during each period. The income (loss) allocation is calculated using the weighted average shares outstanding of Class B common stock on a as-converted basis (20% per share equivalent to Class A common stock).

(2) The quarters ended June 30, 2021 and prior were all adjusted for the 1 for 5 reverse stock split.

(3) Loan amounts include deferred fees/costs.

U.S. CENTURY BANK AND SUBSIDIARIES (UNAUDITED)

AVERAGE BALANCES, RATIOS, AND OTHER

(Dollars in thousands)

As of and for the three months ended

9/30/2021 6/30/2021 3/31/2021 12/31/2020 9/30/2020

Average balance sheet data:

Cash and cash equivalents $ 116,622 $ 108,028 $ 86,157 $ 154,415 $ 159,230

Securities available-for-sale $ 346,407 $ 382,990 $ 334,723 $ 251,294 $ 187,096

Securities held-to-maturity $ 51,238 $ – $ – $ – $ –

Loans held for investment $ 1,144,275 $ 1,088,492 $ 1,071,782 $ 1,036,249 $ 1,032,264

Total assets $ 1,741,423 $ 1,660,060 $ 1,573,881 $ 1,522,735 $ 1,460,732

Interest-bearing deposits $ 912,330 $ 896,271 $ 861,300 $ 854,206 $ 813,031

Total deposits $ 1,477,258 $ 1,432,165 $ 1,343,676 $ 1,291,427 $ 1,222,900

Federal Home Loan Bank advances and other borrowings $ 36,000 $ 36,000 $ 36,000 $ 37,522 $ 43,935

Total liabilities $ 1,546,414 $ 1,493,129 $ 1,402,305 $ 1,353,424 $ 1,293,905

Total stockholders’ equity $ 195,009 $ 166,931 $ 171,576 $ 169,311 $ 166,827

Performance ratios:

Return on average assets⁽¹⁾ 1.50 % 0.98 % 1.23 % 1.11 % 0.93 %

Return on average equity ⁽¹⁾ 13.41 % 9.74 % 11.30 % 9.96 % 8.11 %

Net interest margin ⁽¹⁾ 3.19 % 3.14 % 3.35 % 3.14 % 3.17 %

Non-interest income to average assets ⁽¹⁾ 0.96 % 0.37 % 0.60 % 0.38 % 0.48 %

Efficiency ratio ⁽²⁾ 50.92 % 62.00 % 58.64 % 63.81 % 65.02 %

Loans by type (at period end):
⁽³⁾

Residential real estate $ 201,124 $ 213,575 $ 231,554 $ 232,754 $ 247,620

Commercial real estate $ 693,469 $ 673,944 $ 650,762 $ 606,425 $ 603,544

Commercial and industrial $ 137,486 $ 155,440 $ 174,546 $ 157,330 $ 159,882

Foreign banks $ 58,839 $ 62,042 $ 45,659 $ 38,999 $ 27,847

Consumer and other $ 87,515 $ 43,979 $ 5,627 $ 5,507 $ 6,356

Asset quality data:

Allowance for credit losses to total loans 1.27 % 1.30 % 1.36 % 1.45 % 1.46 %

Allowance for credit losses to non-performing loans 82778 % 74240 % 2214 % 956 % 930 %

Non-accrual loans less non-accrual TDRs – – 228 303 4

Non-accrual TDRs 18 20 450 1,275 1,632

Loans- over 90 days past due and accruing – – – – –

Total non-performing loans ⁽⁴⁾ 18 20 678 1,578 1,636

Non-performing loans to total loans 0.00 % 0.00 % 0.06 % 0.15 % 0.16 %

Non-performing assets to total assets 0.00 % 0.00 % 0.04 % 0.11 % 0.11 %

Net charge-offs (recoveries of) to average loans ⁽¹⁾ -0.02 % 0.06 % -0.03 % 0.05 % 0.04 %

Net charge-offs (recovery of) credit losses (51 ) 160 (83 ) 121 116

Interest rates and yields:

Loans 4.29 % 4.19 % 4.43 % 4.36 % 4.48 %

Investment securities 1.86 % 2.04 % 2.19 % 2.35 % 2.68 %

Total interest-earning assets 3.43 % 3.41 % 3.69 % 3.57 % 3.75 %

Deposits 0.22 % 0.26 % 0.34 % 0.44 % 0.59 %

Borrowings and repurchase agreements 1.52 % 1.52 % 1.52 % 1.55 % 1.84 %

Total interest-bearing liabilities 0.40 % 0.45 % 0.57 % 0.71 % 0.94 %

Other information:

Full-time equivalent employees 184 183 186 179 178

(1) Annualized.

(2) Efficiency ratio is defined as total non-interest expense divided by sum of net interest income and total non-interest income.

(3) Loan amounts exclude deferred fees/costs.

(4) The amounts for total non-performing loans and total non-performing assets are the same for the periods presented since there were no impaired investments or other real estate owned (OREO) recorded.

U.S. CENTURY BANK AND SUBSIDIARIES (UNAUDITED)

NET INTEREST INCOME

(Dollars in thousands)

Three Months Ended September 30,

2021 2020

Average
Balance Interest Yield/Rate
⁽¹⁾ Average
Balance Interest Yield/Rate
⁽¹⁾

Assets

Interest-earning assets:

Loans ⁽²⁾ $ 1,144,275 $ 12,538 4.29 % $ 1,032,264 $ 11,819 4.48 %

Investment securities ⁽³⁾ 399,745 1,858 1.86 % 190,144 1,274 2.68 %

Other interest earnings assets 109,639 38 0.14 % 151,721 52 0.14 %

Total interest-earning assets 1,653,659 14,434 3.43 % 1,374,129 13,145 3.75 %

Non-interest earning assets 87,764 86,603

Total assets $ 1,741,423 $ 1,460,732

Liabilities and stockholders’ equity

Interest-bearing liabilities:

Interest-bearing demand deposits $ 55,621 16 0.11 % $ 47,905 38 0.31 %

Saving and money market deposits 627,654 501 0.32 % 483,754 660 0.54 %

Time deposits 229,055 306 0.53 % 281,372 1,127 1.59 %

Total interest-bearing deposits 912,330 823 0.36 % 813,031 1,825 0.89 %

Borrowings and repurchase agreements 36,000 140 1.52 % 43,935 207 1.84 %

Total interest-bearing liabilities 948,330 963 0.40 % 856,966 2,032 0.94 %

Non-interest bearing demand deposits 564,928 409,869

Other non-interest-bearing liabilities 33,156 27,070

Total liabilities 1,546,414 1,293,905

Stockholders’ equity 195,009 166,827

Total liabilities and stockholders’ equity $ 1,741,423 $ 1,460,732

Net interest income $ 13,471 $ 11,113

Net interest spread ⁽⁴⁾ 3.03 % 2.81 %

Net interest margin ⁽⁵⁾ 3.19 % 3.17 %

(1) Annualized.

(2) Average loan balances include non-accrual loans. Interest income on loans includes amortization of deferred loan fees, net of deferred loan costs.

(3) At fair value except for securities held to maturity.

(4) Net interest spread is the average yield on total interest-earning assets minus the average rate on total interest-bearing liabilities.

(5) Net interest margin is the ratio of net interest income to total interest-earning assets.

U.S. CENTURY BANK AND SUBSIDIARIES (UNAUDITED)

NON-GAAP FINANCIAL MEASURES

(Dollars in thousands)

As of and for the three months ended

9/30/2021 6/30/2021 3/31/2021 12/31/2020 9/30/2020

Pre-Tax Pre-Provision (“PTPP”) Income:

Net income $ 6,593 $ 4,053 $ 4,781 $ 4,239 $ 3,404

Plus: Provision for income taxes 2,088 1,263 1,498 449 1,106

Plus: Provision for (recovery of) credit losses – – (160 ) – –

PTPP income $ 8,681 $ 5,316 $ 6,119 $ 4,688 $ 4,510

PTPP Return on Average Assets:

PTPP income $ 8,681 $ 5,316 $ 6,119 $ 4,688 $ 4,510

Average assets $ 1,741,423 $ 1,660,060 $ 1,573,881 $ 1,522,735 $ 1,460,732

PTPP return on average assets⁽¹⁾ 1.98 % 1.28 % 1.58 % 1.22 % 1.23 %

Operating Net Income:

Net income $ 6,593 $ 4,053 $ 4,781 $ 4,239 $ 3,404

Less: Net gains (losses) on sale of securities (70 ) 187 62 11 –

Less: Tax effect on sale of securities 17 (46 ) (15 ) (3 ) –

Operating net income $ 6,646 $ 3,912 $ 4,734 $ 4,231 $ 3,404

Operating PTPP Income:

PTPP income $ 8,681 $ 5,316 $ 6,119 $ 4,688 $ 4,510

Less: Net gains (losses) on sale of securities (70 ) 187 62 11 –

Operating PTPP Income $ 8,751 $ 5,129 $ 6,057 $ 4,677 $ 4,510

Operating PTPP Return on Average Assets:

Operating PTPP income $ 8,751 $ 5,129 $ 6,057 $ 4,677 $ 4,510

Average assets $ 1,741,423 $ 1,660,060 $ 1,573,881 $ 1,522,735 $ 1,460,732

Operating PTPP Return on average assets⁽¹⁾ 1.99 % 1.24 % 1.56 % 1.22 % 1.23 %

Operating Return on Average Asset:

Operating net income $ 6,646 $ 3,912 $ 4,734 $ 4,231 $ 3,404

Average assets $ 1,741,423 $ 1,660,060 $ 1,573,881 $ 1,522,735 $ 1,460,732

Operating return on average assets ⁽¹⁾ 1.51 % 0.95 % 1.22 % 1.11 % 0.93 %

(1) Annualized.

U.S. CENTURY BANK AND SUBSIDIARIES (UNAUDITED)

NON-GAAP FINANCIAL MEASURES

(Dollars in thousands, except per share data)

As of and for the three months ended

9/30/2021 6/30/2021 3/31/2021 12/31/2020 9/30/2020

Tangible Book Value per Common Share (at period-end):

Total stockholders’ equity (GAAP) $ 201,918 $ 166,302 $ 170,425 $ 171,001 $ 168,586

Less: Intangible assets – – – – –

Less: Preferred stock – 24,616 32,077 32,077 32,077

Tangible stockholders’ equity (non-GAAP) $ 201,918 $ 141,686 $ 138,348 $ 138,924 $ 136,509

Total shares issued and outstanding (at period-end):

Class A common shares 18,767,541 3,889,469 3,889,469 3,889,469 3,887,469

Class B common shares ⁽¹⁾ 1,224,212 1,224,212 1,224,212 1,224,212 1,224,212

Total common shares outstanding 19,991,753 5,113,681 5,113,681 5,113,681 5,111,681

Tangible book value per common share (non-GAAP)⁽²⁾ $ 10.10 $ 27.71 $ 27.05 $ 27.17 $ 26.71

Operating Net Income Available to Common Stockholders:

Net income (GAAP) $ 6,593 $ 4,053 $ 4,781 $ 4,239 $ 3,404

Less: Preferred dividends 542 754 781 782 782

Less: Exchange and redemption of preferred shares 89,585 – – – –

Net income (loss) available to common stockholders (GAAP) (83,534 ) 3,299 4,000 3,457 2,622

Add back: Exchange and redemption of preferred shares 89,585 – – – –

Operating net income avail. to common stock (non-GAAP) ⁽³⁾ $ 6,051 $ 3,299 $ 4,000 $ 3,457 $ 2,622

Allocation of operating net income per common stock class:

Class A common stock $ 5,598 $ 2,509 $ 3,042 $ 2,629 $ 1,994

Class B common stock $ 453 $ 790 $ 958 $ 828 $ 628

Weighted average shares outstanding:

Class A common stock

Basic 15,121,460 3,889,469 3,889,469 3,887,512 3,887,469

Diluted 15,187,729 3,933,636 3,913,279 3,911,322 3,944,455

Class B common stock

Basic 6,121,052 6,121,052 6,121,052 6,121,052 6,121,052

Diluted 6,121,052 6,121,052 6,121,052 6,121,052 6,121,052

Diluted EPS:

^{(3) (4) (5)}

Class A common stock

Net income (loss) per diluted share (GAAP) $ (5.11 ) $ 0.64 $ 0.78 $ 0.67 $ 0.51

Add back: Exchange and redemption of preferred shares 5.48 – – – –

Operating net income per diluted share (non-GAAP) $ 0.37 $ 0.64 $ 0.78 $ 0.67 $ 0.51

Class B common stock

Net income (loss) per diluted share (GAAP) $ (1.02 ) $ 0.13 $ 0.16 $ 0.14 $ 0.10

Add back: Exchange and redemption of preferred shares 1.09 – – – –

Operating net income per diluted share (non-GAAP) $ 0.07 $ 0.13 $ 0.16 $ 0.14 $ 0.10

(1) Class B Non-Voting Common Stock, $1.00 par value per share; 8,000,000 shares authorized; 6,121,052 issued and outstanding (convertible to 1,224,212 shares of Class A Voting Common Stock); 6,121,052 shares issued and outstanding as adjusted (convertible to 1,224,212 shares of Class A Voting Common Stock). Pursuant to the terms of the Amended and Restated Articles, each share of Class B non-voting common stock is convertible to 0.2 shares of Class A Voting Common Stock after adjustment based on the completion of the Reverse Stock Split of our Class A common stock.

(2) Tangible book value per common share is equal to total stockholders’ equity, excluding preferred stock and intangible assets, divided by the number of shares of common stock outstanding at period-end (including Class A common stock and Class B common stock on an as-converted basis).

(3) The Company believes these non-GAAP measurements are a key indicator of the ongoing earnings power of the Company.

(4) For the quarter ended September 30, 2021, basic net loss per share is the same as diluted net loss per share as the inclusion of all potential common shares outstanding would have been antidilutive.

(5) In calculating net income (loss) per diluted share, the allocation of operating net income available to common stockholders was based on the weighted average shares outstanding per common share class to the total weighted average shares outstanding during each period. The operating net income allocation was calculated using the weighted average shares outstanding of Class B common stock on a as-converted basis.

Posted on October 28, 2021 4:24 pm
Federated Hermes, Inc. reports third quarter 2021 earnings

– Fixed-income assets reach a record $97 billion

– Long-term assets reach a record $220 billion

– Board declares $0.27 per share quarterly dividend

PR Newswire

PITTSBURGH, Oct. 28, 2021 /PRNewswire/ — Federated Hermes, Inc. (NYSE: FHI), a global leader in active, responsible investing, today reported earnings per diluted share (EPS) of $0.73 for Q3 2021, compared to $0.85 for the same quarter last year, on net income of $71.4 million for Q3 2021, compared to $85.8 million for Q3 2020. Federated Hermes reported YTD 2021 EPS of $2.04, compared to $2.29 for the same period in 2020, on YTD 2021 net income of $201.7 million, compared to $231.2 million for the same period in 2020. As reported for Q2 2021, Federated Hermes’ YTD 2021 results include a $14.5 million, or $0.10 per diluted share, noncash U.K. tax expense.

Federated Hermes’ total managed assets were $634.1 billion at Sept. 30, 2021, up $19.3 billion or 3% from $614.8 billion at Sept. 30, 2020 and down $11.7 billion or 2% from $645.8 billion at June 30, 2021. Total average managed assets for Q3 2021 were $633.1 billion, up $5.0 billion or less than 1% from $628.1 billion reported for Q3 2020 and down $6.6 billion or 1% from $639.7 billion for Q2 2021.

“As clients continued to rely on our diversified investment options, Federated Hermes’ fixed-income assets reached a record high in the third quarter, which marked our sixth consecutive quarter with positive net flows in fixed-income assets,” said J. Christopher Donahue, president and chief executive officer. “Investors sought a range of Federated Hermes’ fixed-income strategies, including multisector, high-yield and low-duration offerings, which have offered a yield advantage in this low-rate environment.”

Federated Hermes’ board of directors declared a dividend of $0.27 per share. The dividend is payable on Nov.15, 2021 to shareholders of record as of Nov. 8, 2021. During Q3 2021, Federated Hermes purchased 593,619 shares of Federated Hermes class B common stock for $17.7 million.

Equity assets were $97.4 billion at Sept. 30, 2021, up $17.0 billion or 21% from $80.4 billion at Sept. 30, 2020 and down $3.1 billion or 3% from $100.5 billion at June 30, 2021. Top-selling equity funds during Q3 2021 on a net basis were Federated Hermes Global Equity ESG Fund, Federated Hermes International Equity Fund, Federated Hermes MDT Small Cap Core Fund, Federated Hermes Global Small Cap Equity Fund and Federated Hermes Global Equity Fund (UCITS).

Fixed-income assets were a record $97.2 billion at Sept. 30, 2021, up $17.7 billion or 22% from $79.5 billion at Sept. 30, 2020 and up $6.4 billion or 7% from $90.8 billion at June 30, 2021. Top-selling fixed-income funds during Q3 2021 on a net basis were Federated Hermes Ultrashort Bond Fund, Federated Hermes Total Return Bond Fund, Federated Hermes Institutional High Yield Bond Fund, Federated Hermes Short-Term Income Fund and Federated Hermes Short-Intermediate Municipal Fund.

Alternative/private market assets were a record $22.1 billion at Sept. 30, 2021, up $4.0 billion or 22% from $18.1 billion at Sept. 30, 2020 and up $1.1 billion or 5% from $21.0 billion at June 30, 2021.

Money market assets were $413.7 billion at Sept. 30, 2021, down $19.3 billion or 4% from $433.0 billion at Sept. 30, 2020 and down $16.1 billion or 4% from $429.8 billion at June 30, 2021. Money market fund assets were $292.3 billion at Sept. 30, 2021, down $33.6 billion or 10% from $325.9 billion at Sept. 30, 2020 and down $9.7 billion or 3% from $302.0 billion at June 30, 2021.

Financial Summary

As reported for Q2 2021, the U.K. enacted legislation that increased its corporate income tax rate from 19% to 25% effective April 1, 2023. As a result, Federated Hermes’ YTD 2021 income tax provision includes a $14.5 million noncash U.K. tax expense (recorded in Q2) to revalue certain deferred tax assets and liabilities.

Q3 2021 vs. Q3 2020

Revenue decreased $37.9 million or 10% primarily due to an increase in voluntary fee waivers related to certain money market funds in order for those funds to maintain positive or zero net yields (voluntary yield-related fee waivers) and lower average money market assets. For further information on the waivers, see “Impact of voluntary yield-related fee waivers” below. These decreases were partially offset by an increase in revenue due to higher average equity and fixed-income assets.

During Q3 2021, Federated Hermes derived 82% of its revenue from long-term assets (53% from equity, 19% from fixed-income and 10% from alternative/private markets and multi-asset), 17% from money market assets, and 1% from sources other than managed assets.

Operating expenses decreased $22.9 million or 9% primarily due to decreased distribution expenses predominantly resulting from higher voluntary yield-related fee waivers.

Nonoperating income (expenses), net decreased $8.0 million or 128% primarily due to an increase in the market value of investments in Q3 2020 compared to a slight decrease in Q3 2021.

Q3 2021 vs. Q2 2021

Revenue increased $15.5 million or 5% primarily due to a decrease in voluntary yield-related fee waivers, an extra day of revenue in Q3 2021 and an increase in revenue due to higher average fixed-income and equity assets. These increases were partially offset by a decrease in revenue due to lower average money market assets.

Operating expenses decreased $1.0 million.

Nonoperating income (expenses), net decreased $8.6 million or 126% primarily due to an increase in the market value of investments in Q2 2021 compared to a slight decrease in Q3 2021.

YTD 2021 vs. YTD 2020

Revenue decreased $105.5 million or 10% primarily due to an increase in voluntary yield-related fee waivers and a decrease in revenue from lower average money market assets. These decreases were partially offset primarily by an increase in revenue due to higher average long-term assets.

For the nine months ended Sept. 30, 2021, Federated Hermes derived 80% of its revenue from long-term assets (52% from equity, 18% from fixed-income and 10% from alternative/private markets and multi-asset), 19% from money market assets, and 1% from sources other than managed assets.

Operating expenses decreased $79.9 million or 10% primarily due to decreased distribution expenses predominantly resulting from higher voluntary yield-related fee waivers.

Nonoperating income (expense), net decreased $6.3 million or 47% primarily due to a gain recorded in 2020 from a fair value adjustment to the equity investment of a previously nonconsolidated entity. This decrease was partially offset by higher gains recorded from the increase in market value of investments in 2021 when compared to the prior year.

Impact of voluntary yield-related fee waivers

During the three and nine months ended Sept. 30, 2021, voluntary yield-related fee waivers totaled $109.2 million and $310.2 million, respectively. These fee waivers were partially offset by related reductions in distribution expenses of $72.3 million and $204.9 million, respectively, such that the net negative pre-tax impact to Federated Hermes was $36.9 million and $105.3 million for the three and nine months ended Sept. 30, 2021, respectively. During the three and nine months ended Sept. 30, 2020, voluntary yield-related fee waivers totaled $36.8 million and $56.9 million, respectively. These fee waivers were largely offset by related reductions in distribution expenses of $33.0 million and $51.0 million, respectively, such that the net negative pre-tax impact to Federated Hermes was $3.8 million and $5.9 million for the three and nine months ended Sept. 30, 2020, respectively.

Short-term interest rates remained near historic lows during Q3 2021 as technical factors at the front end of the yield curve kept yields on short-term government securities—including repurchase agreements and Treasury bills—just above zero. As a result, the net negative impact on pre-tax income from voluntary yield-related fee waivers on money market mutual funds and certain separate accounts may be approximately $39 million during Q4 2021. The amount of voluntary yield-related fee waivers can vary based on a number of factors, including, among others, interest rates, yields, asset levels, asset flows and the ability of distributors to share in waivers. Any change in these factors can impact the amount and level of voluntary yield-related fee waivers, including in a material way.

Federated Hermes’ level of business activity and financial results are dependent upon many factors, including market conditions, investment performance and investor behavior. These factors and others, including asset levels and mix, product sales and redemptions, market appreciation or depreciation, revenues, fee waivers, expenses and regulatory changes, can significantly impact Federated Hermes’ business activity levels and financial results. Risk factors and uncertainties that can influence Federated Hermes’ financial results are discussed in the company’s annual and quarterly reports as filed with the Securities and Exchange Commission (SEC).

Federated Hermes will host an earnings conference call at 9 a.m. Eastern on Oct. 29, 2021. Investors are invited to listen to the earnings teleconference by calling 888-506-0062 (domestic) or 973-528-0011 (international) prior to the 9 a.m. start time. To listen online, go to the Investor Relations section and the Analyst Information tab of FederatedHermes.com at least 15 minutes prior to register and join the call. A replay will be available at approximately 12:30 p.m. Eastern on Oct. 29, 2021. To access the telephone replay, dial 877-481-4010 (domestic) or 919-882-2331 (international) and enter access code 43175. The online replay will be available via FederatedHermes.com for one year.

Federated Hermes, Inc. is a leading global investment manager with $634.1 billion in assets under management as of Sept. 30, 2021. Guided by our conviction that responsible investing is the best way to create wealth over the long term, our investment solutions span equity, fixed-income, alternative/private markets, multi-asset and liquidity management strategies. Providing world-class active investment management and engagement services to more than 11,000 institutions and intermediaries, our clients include corporations, government entities, insurance companies, foundations and endowments, banks and broker/dealers. Headquartered in Pittsburgh, Federated Hermes’ nearly 2,000 employees include those in London, New York, Boston and offices worldwide. For more information, visit FederatedHermes.com.

Federated Hermes ranks in the top 7% of equity fund managers in the industry, the top 10% of fixed-income fund managers and the top 11% of money market fund managers¹. Federated Hermes also ranks as the 10th-largest manager of model-delivered SMAs². For more information, including an analyst presentation, visit FederatedHermes.com.

###

1) ISS Market Intelligence (SIMFUND), Sept. 30, 2021. Based on assets under management in open-end funds.

2) Money Management Institute/Cerulli, Q2 2021.

Federated Securities Corp. is distributor of the Federated Hermes funds.

Separately managed accounts are made available through Federated Global Investment Management Corp., Federated Investment Counseling, Federated MDTA LLC, Hermes Fund Managers Ireland Limited, Hermes Investment Management Limited, and Hermes GPE LLP, each a registered investment advisor in one or more of the U.S., U.K. or Ireland.

Certain statements in this press release, such as those related to performance, investor preferences and demand, asset flows, asset mix, interest rates, and fee waivers constitute or may constitute forward-looking statements, which involve known and unknown risks, uncertainties and other factors that may cause the actual results, levels of activity, performance or achievements of the company, or industry results, to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Other risks and uncertainties include the ability of the company to predict the level of fee waivers and expenses in future quarters, predict whether performance fees or carried interest will be earned and retained, and sustain product demand, asset flows and mix, which could vary significantly depending on various factors, such as market conditions, investment performance and investor behavior. Other risks and uncertainties include the risk factors discussed in the company’s annual and quarterly reports as filed with the SEC. As a result, no assurance can be given as to future results, levels of activity, performance or achievements, and neither the company nor any other person assumes responsibility for the accuracy and completeness, or updating, of such statements in the future.

Unaudited Condensed Consolidated Statements of Income

(in thousands, except per share data)

Quarter Ended

% Change
Q3 2020 to
Q3 2021

Quarter Ended

% Change
Q2 2021 to
Q3 2021

Sept. 30, 2021

Sept. 30, 2020

June 30, 2021

Revenue

Investment advisory fees, net

$

230,210

$

260,089

(11)

%

$

214,289

7

%

Administrative service fees, net—affiliates

76,853

83,028

(7)

77,750

(1)

Other service fees, net

19,526

21,338

(8)

19,001

3

Total Revenue

326,589

364,455

(10)

311,040

5

Operating Expenses

Compensation and related

131,996

126,186

5

132,769

(1)

Distribution

38,486

73,726

(48)

38,115

1

Systems and communications

18,537

16,193

14

18,954

(2)

Professional service fees

14,294

14,006

2

15,122

(5)

Office and occupancy

11,036

10,578

4

11,082

0

Advertising and promotional

4,660

2,921

60

4,623

1

Travel and related

1,643

542

203

898

83

Other

7,535

6,922

9

7,668

(2)

Total Operating Expenses

228,187

251,074

(9)

229,231

0

Operating Income

98,402

113,381

(13)

81,809

20

Nonoperating Income (Expenses)

Investment income (loss), net

42

6,622

(99)

7,393

(99)

Debt expense

(476)

(494)

(4)

(346)

38

Other, net

(1,319)

103

NM

(184)

NM

Total Nonoperating Income (Expenses), net

(1,753)

6,231

(128)

6,863

(126)

Income before income taxes

96,649

119,612

(19)

88,672

9

Income tax provision

23,163

32,928

(30)

35,193

(34)

Net income including the noncontrolling interests in subsidiaries

73,486

86,684

(15)

53,479

37

Less: Net income (loss) attributable to the noncontrolling interests in subsidiaries

2,124

862

146

(2,405)

188

Net Income

$

71,362

$

85,822

(17)

%

$

55,884

28

%

Amounts Attributable to Federated Hermes, Inc.

Earnings Per Share¹

Basic

$

0.73

$

0.86

(15)

%

$

0.57

28

%

Diluted

$

0.73

$

0.85

(14)

%

$

0.56

30

%

Weighted-Average Shares Outstanding

Basic and Diluted

93,320

96,039

93,964

Dividends Declared Per Share

$

0.27

$

0.27

$

0.27

1)

Unvested share-based awards that receive non-forfeitable dividend rights are deemed participating securities and are required to be considered in the computation of basic earnings per share under the “two-class method.” As such, total net income of $3.0 million, $3.4 million and $2.4 million available to unvested restricted Federated Hermes shareholders for the quarterly periods ended Sept. 30, 2021, Sept. 30, 2020 and June 30, 2021, respectively, was excluded from the computation of basic earnings per share. In addition to the amounts excluded from the basic earnings per share calculation, the computation of diluted earnings per share excludes net income available to unvested shareholders of a nonpublic consolidated subsidiary.

Unaudited Condensed Consolidated Statements of Income

(in thousands, except per share data)

Nine Months Ended

Sept. 30, 2021

Sept. 30, 2020

% Change

Revenue

Investment advisory fees, net

$

692,188

$

745,875

(7)

%

Administrative service fees, net—affiliates

228,904

238,960

(4)

Other service fees, net

57,710

99,515

(42)

Total Revenue

978,802

1,084,350

(10)

Operating Expenses

Compensation and related

408,385

365,104

12

Distribution

120,990

258,925

(53)

Systems and communications

56,086

46,179

21

Professional service fees

44,052

41,162

7

Office and occupancy

33,358

32,539

3

Advertising and promotional

12,107

10,981

10

Travel and related

2,838

4,026

(30)

Other

23,297

22,058

6

Total Operating Expenses

701,113

780,974

(10)

Operating Income

277,689

303,376

(8)

Nonoperating Income (Expenses)

Investment income (loss), net

9,446

7,011

35

Debt expense

(1,313)

(2,211)

(41)

Other, net

(1,158)

8,426

(114)

Total Nonoperating Income (Expenses), net

6,975

13,226

(47)

Income before income taxes

284,664

316,602

(10)

Income tax provision

83,353

81,852

2

Net income including the noncontrolling interests in subsidiaries

201,311

234,750

(14)

Less: Net income (loss) attributable to the noncontrolling interests in subsidiaries

(419)

3,554

(112)

Net Income

$

201,730

$

231,196

(13)

%

Amounts Attributable to Federated Hermes, Inc.

Earnings Per Share¹

Basic

$

2.05

$

2.30

(11)

%

Diluted

$

2.04

$

2.29

(11)

%

Weighted-Average Shares Outstanding

Basic and Diluted

94,160

96,726

Dividends Declared Per Share

$

0.81

$

0.81

1)

Unvested share-based awards that receive non-forfeitable dividend rights are deemed participating securities and are required to be considered in the computation of basic earnings per share under the “two-class method.” As such, total net income of $8.4 million and $8.9 million available to unvested restricted Federated Hermes shareholders for the nine months ended Sept. 30, 2021 and Sept. 30, 2020, respectively, was excluded from the computation of basic earnings per share. In addition to the amounts excluded from the basic earnings per share calculation, the computation of diluted earnings per share excludes net income available to unvested shareholders of a nonpublic consolidated subsidiary.

Unaudited Condensed Consolidated Balance Sheets

(in thousands)

Sept. 30, 2021

Dec. 31, 2020

Assets

Cash and other investments

$

345,085

$

438,771

Other current assets

132,957

136,572

Intangible assets, net, including goodwill

1,271,178

1,282,020

Other long-term assets

197,189

203,476

Total Assets

$

1,946,409

$

2,060,839

Liabilities, Redeemable Noncontrolling Interests and Equity

Current liabilities

$

234,712

$

265,446

Long-term debt

102,150

75,000

Other long-term liabilities

349,224

346,409

Redeemable noncontrolling interests

55,472

236,987

Equity excluding treasury stock

1,608,658

1,461,728

Treasury stock

(403,807)

(324,731)

Total Liabilities, Redeemable Noncontrolling Interests and Equity

$

1,946,409

$

2,060,839

Unaudited Changes in Long-Term Assets – By Asset Class

(in millions)

Quarter Ended

Nine Months Ended

Sept. 30, 2021

June 30, 2021

Sept. 30, 2020

Sept. 30, 2021

Sept. 30, 2020

Equity

Beginning assets

$

100,506

$

96,170

$

76,859

$

91,788

$

89,011

Sales¹

4,332

5,366

4,186

17,458

14,845

Redemptions¹

(5,707)

(6,784)

(5,552)

(19,655)

(20,674)

Net sales (redemptions)¹

(1,375)

(1,418)

(1,366)

(2,197)

(5,829)

Net exchanges

3

8

31

43

(62)

Acquisitions/(dispositions)

408

0

0

408

(71)

Impact of foreign exchange²

(510)

171

578

(934)

249

Market gains and (losses)³

(1,607)

5,575

4,303

8,317

(2,893)

Ending assets

$

97,425

$

100,506

$

80,405

$

97,425

$

80,405

Fixed Income

Beginning assets

$

90,801

$

86,464

$

73,143

$

84,277

$

69,023

Sales¹

12,935

10,584

9,859

34,706

28,237

Redemptions¹

(6,604)

(7,418)

(4,897)

(22,306)

(20,092)

Net sales (redemptions)¹

6,331

3,166

4,962

12,400

8,145

Net exchanges

(7)

(7)

(36)

(58)

(5)

Acquisitions/(dispositions)

17

0

0

17

(1)

Impact of foreign exchange²

(89)

25

135

(124)

9

Market gains and (losses)³

173

1,153

1,342

714

2,375

Ending assets

$

97,226

$

90,801

$

79,546

$

97,226

$

79,546

Alternative/Private Markets

Beginning assets⁴

$

20,962

$

19,301

$

17,485

$

19,084

$

18,102

Sales¹

1,319

1,330

586

3,127

2,266

Redemptions¹

(533)

(546)

(411)

(1,710)

(1,954)

Net sales (redemptions)¹

786

784

175

1,417

312

Net exchanges

0

(1)

0

(2)

(1)

Acquisitions/(dispositions)

81

0

0

81

452

Impact of foreign exchange²

(554)

54

708

(361)

(446)

Market gains and (losses)³

789

824

(222)

1,845

(273)

Ending assets

$

22,064

$

20,962

$

18,146

$

22,064

$

18,146

Multi-asset

Beginning assets

$

3,699

$

3,981

$

3,705

$

3,948

$

4,199

Sales¹

71

88

45

226

191

Redemptions¹

(103)

(544)

(155)

(817)

(558)

Net sales (redemptions)¹

(32)

(456)

(110)

(591)

(367)

Net exchanges

9

14

(4)

28

(23)

Acquisitions/(dispositions)

54

0

0

54

0

Impact of foreign exchange²

0

0

1

(1)

1

Market gains and (losses)³

(38)

160

145

254

(73)

Ending assets

$

3,692

$

3,699

$

3,737

$

3,692

$

3,737

Total Long-term Assets

Beginning assets⁴

$

215,968

$

205,916

$

171,192

$

199,097

$

180,335

Sales¹

18,657

17,368

14,676

55,517

45,539

Redemptions¹

(12,947)

(15,292)

(11,015)

(44,488)

(43,278)

Net sales (redemptions)¹

5,710

2,076

3,661

11,029

2,261

Net exchanges

5

14

(9)

11

(91)

Acquisitions/(dispositions)

560

0

0

560

380

Impact of foreign exchange²

(1,153)

250

1,422

(1,420)

(187)

Market gains and (losses)³

(683)

7,712

5,568

11,130

(864)

Ending assets

$

220,407

$

215,968

$

181,834

$

220,407

$

181,834

1)

For certain accounts, Sales and Redemptions are calculated as the remaining difference between beginning and ending assets after the calculation of total investment return.

2)

Reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.

3)

Reflects the approximate changes in the fair value of the securities held by the portfolios and, to a lesser extent, reinvested dividends, distributions and net investment income.

4)

The beginning assets for the nine months ended September 30, 2020 include $8.2 billion of fund assets managed by a previously non-consolidated entity, HGPE, in which Federated Hermes held an equity method investment. Effective March 1, 2020, HGPE became a consolidated subsidiary.

Unaudited Changes in Long-Term Assets – By Asset Class and Product Type

(in millions)

Quarter Ended

Sept. 30, 2021

Equity

Fixed Income

Alternative / Private Markets

Multi-asset

Total

Funds

Separate Accounts¹

Funds

Separate Accounts¹

Funds

Separate Accounts¹

Funds

Separate Accounts¹

Funds^.

Separate Accounts¹

Beginning assets

$

59,933

$

40,573

$

58,486

$

32,315

$

13,225

$

7,737

$

3,517

$

182

$

135,161

$

80,807

Sales

2,655

1,677

7,273

5,662

1,140

179

71

0

11,139

7,518

Redemptions

(3,522)

(2,185)

(5,587)

(1,017)

(494)

(39)

(99)

(4)

(9,702)

(3,245)

Net sales (redemptions)

(867)

(508)

1,686

4,645

646

140

(28)

(4)

1,437

4,273

Net exchanges

3

0

43

(50)

0

0

9

0

55

(50)

Acquisitions/(dispositions)

408

0

17

0

81

0

54

0

560

0

Impact of foreign exchange²

(283)

(227)

(71)

(18)

(345)

(209)

0

0

(699)

(454)

Market gains and (losses)³

(976)

(631)

101

72

692

97

(34)

(4)

(217)

(466)

Ending assets

$

58,218

$

39,207

$

60,262

$

36,964

$

14,299

$

7,765

$

3,518

$

174

$

136,297

$

84,110

Nine Months Ended

Sept. 30, 2021

Equity

Fixed Income

Alternative / Private Markets

Multi-asset

Total

Funds

Separate Accounts¹

Funds

Separate Accounts¹

Funds

Separate Accounts¹

Funds

Separate Accounts¹

Funds

Separate Accounts¹

Beginning assets

$

54,312

$

37,476

$

53,557

$

30,720

$

12,100

$

6,984

$

3,744

$

204

$

123,713

$

75,384

Sales

11,758

5,700

24,724

9,982

2,325

802

224

2

39,031

16,486

Redemptions

(11,717)

(7,938)

(18,434)

(3,872)

(1,483)

(227)

(779)

(38)

(32,413)

(12,075)

Net sales (redemptions)

41

(2,238)

6,290

6,110

842

575

(555)

(36)

6,618

4,411

Net exchanges

(360)

403

(10)

(48)

(2)

0

27

1

(345)

356

Acquisition-related

408

0

17

0

81

0

54

0

560

0

Impact of foreign exchange²

(463)

(471)

(90)

(34)

(225)

(136)

0

(1)

(778)

(642)

Market gains and (losses)³

4,280

4,037

498

216

1,503

342

248

6

6,529

4,601

Ending assets

$

58,218

$

39,207

$

60,262

$

36,964

$

14,299

$

7,765

$

3,518

$

174

$

136,297

$

84,110

1)

Includes separately managed accounts, institutional accounts, certain sub-advised funds and other managed products. For certain accounts, Sales and Redemptions are calculated as the remaining difference between beginning and ending assets after the calculation of total investment return.

2)

Reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.

3)

Reflects the approximate changes in the fair value of the securities held by the portfolios and, to a lesser extent, reinvested dividends, distributions and net investment income.

Unaudited Changes in Long-Term Assets – By Product Type

(in millions)

Quarter Ended

Nine Months Ended

Sept. 30, 2021

June 30, 2021

Sept. 30, 2020

Sept. 30, 2021

Sept. 30, 2020

Total Fund Assets

Beginning assets

$

135,161

$

128,376

$

104,322

$

123,713

$

107,724

Sales

11,139

12,639

10,635

39,031

34,197

Redemptions

(9,702)

(10,936)

(8,328)

(32,413)

(31,954)

Net sales (redemptions)

1,437

1,703

2,307

6,618

2,243

Net exchanges

55

12

(9)

(345)

(85)

Acquisitions/(dispositions)

560

0

0

560

0

Impact of foreign exchange¹

(699)

138

851

(778)

(220)

Market gains and (losses)²

(217)

4,932

3,340

6,529

1,149

Ending assets

$

136,297

$

135,161

$

110,811

$

136,297

$

110,811

Total Separate Account Assets³

Beginning assets⁵

$

80,807

$

77,540

$

66,870

$

75,384

$

72,611

Sales⁴

7,518

4,729

4,041

16,486

11,342

Redemptions⁴

(3,245)

(4,356)

(2,687)

(12,075)

(11,324)

Net sales (redemptions)⁴

4,273

373

1,354

4,411

18

Net exchanges

(50)

2

0

356

(6)

Acquisitions/(dispositions)

0

0

0

0

380

Impact of foreign exchange¹

(454)

112

571

(642)

33

Market gains and (losses)²

(466)

2,780

2,228

4,601

(2,013)

Ending assets

$

84,110

$

80,807

$

71,023

$

84,110

$

71,023

Total Long-term Assets³

Beginning assets⁵

$

215,968

$

205,916

$

171,192

$

199,097

$

180,335

Sales⁴

18,657

17,368

14,676

55,517

45,539

Redemptions⁴

(12,947)

(15,292)

(11,015)

(44,488)

(43,278)

Net sales (redemptions)⁴

5,710

2,076

3,661

11,029

2,261

Net exchanges

5

14

(9)

11

(91)

Acquisitions/(dispositions)

560

0

0

560

380

Impact of foreign exchange¹

(1,153)

250

1,422

(1,420)

(187)

Market gains and (losses)²

(683)

7,712

5,568

11,130

(864)

Ending assets

$

220,407

$

215,968

$

181,834

$

220,407

$

181,834

1)

Reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.

2)

Reflects the approximate changes in the fair value of the securities held by the portfolios and, to a lesser extent, reinvested dividends, distributions and net investment income.

3)

Includes separately managed accounts, institutional accounts, certain sub-advised funds and other managed products.

4)

For certain accounts, Sales and Redemptions are calculated as the remaining difference between beginning and ending assets after the calculation of total investment return.

5)

The beginning assets for the nine months ended September 30, 2020 includes $8.2 billion of fund assets managed by a previously non-consolidated entity, HGPE, in which Federated Hermes held an equity method investment. Effective March 1, 2020, HGPE became a consolidated subsidiary.

Unaudited Managed Assets

(in millions)

Sept. 30, 2021

June 30, 2021

March 31, 2021

Dec. 31, 2020

Sept. 30, 2020

By Asset Class

Equity

$

97,425

$

100,506

$

96,170

$

91,788

$

80,405

Fixed-income

97,226

90,801

86,464

84,277

79,546

Alternative / private markets

22,064

20,962

19,301

19,084

18,146

Multi-asset

3,692

3,699

3,981

3,948

3,737

Total long-term assets

220,407

215,968

205,916

199,097

181,834

Money market

413,713

429,804

419,080

420,333

432,952

Total Managed Assets

$

634,120

$

645,772

$

624,996

$

619,430

$

614,786

By Product Type

Funds:

Equity

$

58,218

$

59,933

$

56,767

$

54,312

$

46,093

Fixed-income

60,262

58,486

55,581

53,557

49,779

Alternative / private markets

14,299

13,225

12,231

12,100

11,393

Multi-asset

3,518

3,517

3,797

3,744

3,546

Total long-term assets

136,297

135,161

128,376

123,713

110,811

Money market

292,311

301,971

297,182

301,855

325,940

Total Fund Assets

$

428,608

$

437,132

$

425,558

$

425,568

$

436,751

Separate Accounts:

Equity

$

39,207

$

40,573

$

39,403

$

37,476

$

34,312

Fixed-income

36,964

32,315

30,883

30,720

29,767

Alternative / private markets

7,765

7,737

7,070

6,984

6,753

Multi-asset

174

182

184

204

191

Total long-term assets

84,110

80,807

77,540

75,384

71,023

Money market

121,402

127,833

121,898

118,478

107,012

Total Separate Account Assets

$

205,512

$

208,640

$

199,438

$

193,862

$

178,035

Total Managed Assets

$

634,120

$

645,772

$

624,996

$

619,430

$

614,786

Unaudited Average Managed Assets

Quarter Ended

(in millions)

Sept. 30, 2021

June 30, 2021

March 31, 2021

Dec. 31, 2020

Sept. 30, 2020

By Asset Class

Equity

$

100,076

$

99,165

$

95,167

$

85,572

$

80,403

Fixed-income

93,685

88,405

86,939

82,144

76,798

Alternative / private markets

21,446

20,047

19,278

18,549

18,270

Multi-asset

3,713

4,067

3,974

3,831

3,786

Total long-term assets

218,920

211,684

205,358

190,096

179,257

Money market

414,141

427,993

412,720

420,436

448,795

Total Avg. Managed Assets

$

633,061

$

639,677

$

618,078

$

610,532

$

628,052

By Product Type

Funds:

Equity

$

59,918

$

58,662

$

56,832

$

50,022

$

46,020

Fixed-income

59,618

57,006

55,416

51,934

48,418

Alternative / private markets

13,704

12,703

12,239

11,670

11,539

Multi-asset

3,533

3,880

3,783

3,634

3,590

Total long-term assets

136,773

132,251

128,270

117,260

109,567

Money market

289,566

301,990

288,403

311,769

338,814

Total Avg. Fund Assets

$

426,339

$

434,241

$

416,673

$

429,029

$

448,381

Separate Accounts:

Equity

$

40,158

$

40,503

$

38,335

$

35,550

$

34,383

Fixed-income

34,067

31,399

31,523

30,210

28,380

Alternative / private markets

7,742

7,344

7,039

6,879

6,731

Multi-asset

180

187

191

197

196

Total long-term assets

82,147

79,433

77,088

72,836

69,690

Money market

124,575

126,003

124,317

108,667

109,981

Total Avg. Separate Account Assets

$

206,722

$

205,436

$

201,405

$

181,503

$

179,671

Total Avg. Managed Assets

$

633,061

$

639,677

$

618,078

$

610,532

$

628,052

Unaudited Average Managed Assets

Nine Months Ended

(in millions)

Sept. 30, 2021

Sept. 30, 2020

By Asset Class

Equity

$

98,136

$

78,930

Fixed-income

89,676

71,823

Alternative / private markets¹

20,257

18,091

Multi-asset

3,918

3,808

Total long-term assets

211,987

172,652

Money market

418,285

442,381

Total Avg. Managed Assets

$

630,272

$

615,033

By Product Type

Funds:

Equity

$

58,471

$

44,106

Fixed-income

57,346

45,221

Alternative / private markets¹

12,882

11,342

Multi-asset

3,732

3,619

Total long-term assets

132,431

104,288

Money market

293,320

328,730

Total Avg. Fund Assets

$

425,751

$

433,018

Separate Accounts:

Equity

$

39,665

$

34,824

Fixed-income

32,330

26,602

Alternative / private markets

7,375

6,749

Multi-asset

186

189

Total long-term assets

79,556

68,364

Money market

124,965

113,651

Total Avg. Separate Account Assets

$

204,521

$

182,015

Total Avg. Managed Assets

$

630,272

$

615,033

1)

The average balance for the nine months ended September 30, 2020 includes $8.2 billion of fund assets managed by a previously non-consolidated entity, HGPE, in which Federated Hermes held an equity method investment. Effective March 1, 2020, HGPE became a consolidated subsidiary.

View original content:https://www.prnewswire.com/news-releases/federated-hermes-inc-reports-third-quarter-2021-earnings-301411432.html

SOURCE Federated Hermes, Inc.

Posted on October 28, 2021 4:24 pm
United States Steel Corporation Announces a $300 Million Stock Repurchase Program and Increases Its Quarterly Dividend to $0.05 Per Share

United States Steel Corporation Announces a $300 Million Stock Repurchase Program and Increases Its Quarterly Dividend to $0.05 Per Share

PITTSBURGH–(BUSINESS WIRE)–
United States Steel Corporation (NYSE: X) (“U. S. Steel”) today announced that its Board of Directors approved significant enhancements to its capital allocation priorities aligned with the continued execution of its Best for All℠^{strategy. The enhancements include:}

A stock repurchase program under which up to $300 million of the Company’s outstanding common stock may be repurchased at the discretion of management.

A quarterly dividend of $0.05 per share, a 400%, or $0.04 per share, increase over the previous quarter’s dividend. The dividend is payable Thursday, December 9, 2021 to stockholders of record at the close of business on Monday, November 8, 2021.

“Today’s announcement demonstrates the significant progress we have made in the execution of our Best for All strategy,” said U. S. Steel President and Chief Executive Officer David B. Burritt. “We have made substantial progress on our announced deleveraging plans and expect to complete our incremental $1.0 billion target by the end of the year and ahead of schedule. Our expected $3.1 billion of total 2021 deleveraging combined with our robust cash and liquidity position has also allowed us to confidently begin executing organic growth investments aligned with long-term value creation. Today’s capital allocation enhancements further affirm our bullish outlook for the long-term future of U. S. Steel, are attractive uses of capital and demonstrate that our strategy is truly best for all by ensuring our stockholders directly benefit from the company’s continued success.”

The shares will be purchased from time to time at prevailing market prices, through open market or privately negotiated transactions, depending upon market conditions. Under the program, the purchases will be funded from cash on hand, and the repurchased shares will be held as treasury shares. There is no guarantee as to the exact number of shares to be repurchased by the Company, and the Company may discontinue purchases at any time that management determines additional purchases are not warranted. As of October 25, 2021, the Company had approximately 270.2 million shares outstanding.

Forward-Looking Statements

This release contains information that may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We intend the forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in those sections. Generally, we have identified such forward-looking statements by using the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “project,” “target,” “forecast,” “aim,” “should,” “will,” “may” and similar expressions or by using future dates in connection with any discussion of, among other things, the timing, size and form of stock repurchase transactions. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. Forward-looking statements are not historical facts, but instead represent only the Company’s beliefs regarding future events, many of which, by their nature, are inherently uncertain and outside of the Company’s control. It is possible that the Company’s actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. Management believes that these forward-looking statements are reasonable as of the time made. However, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date when made. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from the Company’s historical experience and our present expectations or projections. These risks and uncertainties include, but are not limited to the risks and uncertainties described in “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020, and those described from time to time in our future reports filed with the Securities and Exchange Commission. References to “we,” “us,” “our,” the “Company,” and “U. S. Steel,” refer to United States Steel Corporation and its consolidated subsidiaries.

Founded in 1901, United States Steel Corporation is a leading steel producer. With an unwavering focus on safety, the company’s customer-centric Best for All℠ strategy is advancing a more secure, sustainable future for U. S. Steel and its stakeholders. With a renewed emphasis on innovation, U. S. Steel serves the automotive, construction, appliance, energy, containers, and packaging industries with high value-added steel products such as U. S. Steel’s proprietary XG3™ advanced high-strength steel. The company also maintains competitively advantaged iron ore production and has an annual raw steelmaking capability of 26.2 million net tons. U. S. Steel is headquartered in Pittsburgh, Pennsylvania, with world-class operations across the United States and in Central Europe. For more information, please visit www.ussteel.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20211028006158/en/

John O. Ambler

Vice President

Corporate Communications

T – (412) 433-2407

E – [email protected]

Kevin Lewis

Vice President

Investor Relations

T – (412) 433-6935

E – [email protected]

KEYWORDS: Pennsylvania United States North America

INDUSTRY KEYWORDS: Steel Manufacturing

MEDIA:

Logo

Posted on October 28, 2021 4:24 pm
COPT Executes 67,800 SF Lease with the U.S. Government at 310 Sentinel Way in The National Business Park

COPT Executes 67,800 SF Lease with the U.S. Government at 310 Sentinel Way in The National Business Park

COLUMBIA, Md.–(BUSINESS WIRE)–
Corporate Office Properties Trust (“COPT” or the “Company”) (NYSE: OFC) executed a lease with the U.S. Government for 67,800 square feet at 310 Sentinel Way (“310 NBP”). With this transaction, 310 NBP is now 65% leased.

About COPT

COPT is a REIT that owns, manages, leases, develops and selectively acquires office and data center properties. The majority of its portfolio is in locations that support the United States Government and its contractors, most of whom are engaged in national security, defense and information technology (“IT”) related activities servicing what it believes are growing, durable, priority missions (“Defense/IT Locations”). The Company also owns a portfolio of office properties located in select urban/urban-like submarkets in the Greater Washington, DC/Baltimore region with durable Class-A office fundamentals and characteristics (“Regional Office Properties”). As of September 30, 2021, the Company derived 88% of its core portfolio annualized rental revenue from Defense/IT Locations and 12% from its Regional Office Properties. As of the same date and including 19 properties owned through unconsolidated joint ventures, COPT’s core portfolio of 184 office and data center shell properties encompassed 21.5 million square feet and was 94.8% leased; the Company also owned one wholesale data center with a capacity of 19.25 megawatts that was 86.7% leased.

Forward-Looking Information

This press release may contain “forward-looking” statements, as defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, that are based on the Company’s current expectations, estimates and projections about future events and financial trends affecting the Company. Forward-looking statements can be identified by the use of words such as “may,” “will,” “should,” “could,” “believe,” “anticipate,” “expect,” “estimate,” “plan” or other comparable terminology. Forward-looking statements are inherently subject to risks and uncertainties, many of which the Company cannot predict with accuracy and some of which the Company might not even anticipate. Although the Company believes that the expectations, estimates and projections reflected in such forward-looking statements are based on reasonable assumptions at the time made, the Company can give no assurance that these expectations, estimates and projections will be achieved. Future events and actual results may differ materially from those discussed in the forward-looking statements and the Company undertakes no obligation to update or supplement any forward-looking statements.

The areas of risk that may affect these expectations, estimates and projections include, but are not limited to, those risks described in Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

Source: Corporate Office Properties Trust

View source version on businesswire.com: https://www.businesswire.com/news/home/20211028006099/en/

IR Contacts:

Stephanie Krewson-Kelly

443-285-5453

[email protected]

Michelle Layne

443-285-5452

[email protected]

KEYWORDS: District of Columbia Maryland United States North America

INDUSTRY KEYWORDS: Commercial Building & Real Estate Construction & Property Other Defense Finance REIT Public Policy/Government Professional Services White House/Federal Government Defense

MEDIA:

Logo

Posted on October 28, 2021 4:24 pm
COPT Executes Build-to-Suit Lease with Northrop Grumman at Redstone Gateway

COPT Executes Build-to-Suit Lease with Northrop Grumman at Redstone Gateway

Two-Building, 263,000 SF Campus is Scheduled for Lease Commencement in 2H 2022

COLUMBIA, Md.–(BUSINESS WIRE)–
Corporate Office Properties Trust (“COPT” or the “Company”) (NYSE: OFC) executed two build-to-suit leases with Northrop Grumman Corporation (“Northrop Grumman”), one of the largest defense contractors in the U.S. and the world. COPT will invest approximately $103 million to construct a two-building campus totaling 263,000 square feet. Lease commencement dates for both buildings are expected in the second half of 2022.

“We are excited to welcome Northrop Grumman to the Redstone Gateway community,” stated Stephen E. Budorick, COPT’s President & Chief Executive Officer. “Upon completion of their two-building campus in 2022, Redstone Gateway will consist of 2.2 million square feet supporting the missions at Redstone Arsenal. Additionally, this transaction brings our development leasing for the year to 1.2 million square feet, which exceeds our goal by nearly 20%,” he added.

About COPT

COPT is a REIT that owns, manages, leases, develops and selectively acquires office and data center properties. The majority of its portfolio is in locations that support the United States Government and its contractors, most of whom are engaged in national security, defense and information technology (“IT”) related activities servicing what it believes are growing, durable, priority missions (“Defense/IT Locations”). The Company also owns a portfolio of office properties located in select urban/urban-like submarkets in the Greater Washington, DC/Baltimore region with durable Class-A office fundamentals and characteristics (“Regional Office Properties”). As of September 30, 2021, the Company derived 88% of its core portfolio annualized rental revenue from Defense/IT Locations and 12% from its Regional Office Properties. As of the same date and including 19 properties owned through unconsolidated joint ventures, COPT’s core portfolio of 184 office and data center shell properties encompassed 21.5 million square feet and was 94.8% leased; the Company also owned one wholesale data center with a capacity of 19.25 megawatts that was 86.7% leased.

Forward-Looking Information

This press release may contain “forward-looking” statements, as defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, that are based on the Company’s current expectations, estimates and projections about future events and financial trends affecting the Company. Forward-looking statements can be identified by the use of words such as “may,” “will,” “should,” “could,” “believe,” “anticipate,” “expect,” “estimate,” “plan” or other comparable terminology. Forward-looking statements are inherently subject to risks and uncertainties, many of which the Company cannot predict with accuracy and some of which the Company might not even anticipate. Although the Company believes that the expectations, estimates and projections reflected in such forward-looking statements are based on reasonable assumptions at the time made, the Company can give no assurance that these expectations, estimates and projections will be achieved. Future events and actual results may differ materially from those discussed in the forward-looking statements and the Company undertakes no obligation to update or supplement any forward-looking statements.

The areas of risk that may affect these expectations, estimates and projections include, but are not limited to, those risks described in Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

Source: Corporate Office Properties Trust

View source version on businesswire.com: https://www.businesswire.com/news/home/20211028006098/en/

IR Contacts:

Stephanie Krewson-Kelly

443-285-5453

[email protected]

Michelle Layne

443-285-5452

[email protected]

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Posted on October 28, 2021 4:24 pm
Teekay Group Announces Third Quarter 2021 Earnings Results Conference Calls

HAMILTON, Bermuda, Oct. 28, 2021 (GLOBE NEWSWIRE) — Teekay Corporation (Teekay) (NYSE:TK), Teekay LNG Partners L.P. (Teekay LNG) (NYSE:TGP), and Teekay Tankers Ltd. (Teekay Tankers) (NYSE:TNK) plan to release their financial results for the third quarter of 2021 before market open on Thursday, November 4, 2021.

All shareholders and interested parties are invited to listen to the live conference calls by choosing from the following options:

By dialing:

Entity Date Time (ET) Telephone Number (North America) Telephone Number (International) Conference Code

Teekay November 4, 2021 11:00 a.m. 1 800 378 0327 1 647 490 5367 9020635

Teekay Tankers November 4, 2021 12:00 p.m. 1 800 367 2403 1 647 490 5367 3170266

By accessing the webcasts, which will be available on Teekay’s website at www.teekay.com at the times noted above (the archives will remain on the website for a period of one year).

Accompanying Third Quarter of 2021 Earnings Presentations will also be available at www.teekay.com in advance of the conference call start times.

About Teekay

Teekay is a leading provider of international crude oil and gas marine transportation services. Teekay provides these services primarily through its directly-owned fleet and its controlling ownership interests in Teekay LNG Partners L.P. (NYSE:TGP), one of the world’s largest independent owners and operators of LNG carriers, and Teekay Tankers Ltd. (NYSE:TNK), one of the world’s largest owners and operators of mid-sized crude tankers. The consolidated Teekay entities manage and operate total assets under management of approximately $9 billion, comprised of approximately 130 liquefied gas carriers, conventional tankers, and other marine assets. With offices in 10 countries and approximately 5,350 seagoing and shore-based employees, Teekay provides a comprehensive set of marine services to the world’s leading oil and gas companies.

Teekay’s common stock is listed on the New York Stock Exchange where it trades under the symbol “TK”.

About Teekay LNG

Teekay LNG is one of the world’s largest independent owners and operators of LNG carriers, providing LNG and LPG services primarily under long-term, fee-based charter contracts through its interests in 47 LNG carriers, 21 mid-size LPG carriers, and seven multi-gas carriers. Teekay LNG’s ownership interests in these vessels range from 20 to 100 percent. In addition, Teekay LNG owns a 30 percent interest in an LNG regasification terminal. Teekay LNG is a publicly traded master limited partnership formed by Teekay Corporation (NYSE: TK) as part of its strategy to expand its operations in the LNG and LPG shipping sectors.

Teekay LNG Partners’ common units and preferred units trade on the New York Stock Exchange under the symbols “TGP”, “TGP PR A” and “TGP PR B”, respectively.

About Teekay Tankers

Teekay Tankers currently has a fleet of 49 double-hull tankers (including 26 Suezmax tankers, 14 Aframax tankers and nine LR2 product tankers), and also has two time chartered-in tankers. Teekay Tankers’ vessels are typically employed through a mix of short- or medium-term fixed-rate time charter contracts and spot tanker market trading. Teekay Tankers also owns a Very Large Crude Carrier (VLCC) through a 50 percent-owned joint venture. In addition, Teekay Tankers owns a ship-to-ship transfer business that performs full service lightering and lightering support operations in the U.S. Gulf and Caribbean. Teekay Tankers was formed in December 2007 by Teekay Corporation as part of its strategy to expand its conventional oil tanker business.

Teekay Tankers’ Class A common stock trades on the New York Stock Exchange under the symbol “TNK.”

For Investor Relations

enquiries contact:

Ryan Hamilton
Tel: +1 (604) 609-2963
Website: www.teekay.com

Posted on October 28, 2021 4:23 pm
Enova Reports Third Quarter 2021 Results

– Total revenue increased 21% sequentially and 57% from the third quarter of 2020 to $320 million

– Strong third quarter profitability with diluted earnings per share from continuing operations of $1.36 and adjusted earnings per share of $1.50

– Total company originations increased 26% sequentially to a record $856 million

– Continued strong credit performance with consolidated portfolio net charge-offs as a percentage of average combined loan and finance receivables of 4.2%, down from 4.7% in the third quarter of 2020

– At September 30, cash and marketable securities totaled $306 million and available capacity on committed facilities totaled $694 million

PR Newswire

CHICAGO, Oct. 28, 2021 /PRNewswire/ — Enova International (NYSE: ENVA), a leading financial technology company powered by machine learning and artificial intelligence, today announced financial results for the third quarter ending September 30, 2021.

“We are pleased to again report a strong quarter of growth across all of our businesses,” said David Fisher, Enova’s CEO. “We continued to see rising demand, driven by increased spending as the economy recovers. Our accelerated marketing activities were highly successful in capturing the growing demand, particularly from new customers, which as a percentage of originations were the highest since the company’s first year of operation. We expect this momentum to continue into the fourth quarter and believe that our demonstrated ability to capture market share combined with strong credit metrics provides good tailwinds as we enter 2022.”

Third Quarter 2021 Summary

Total revenue of $320 million in the third quarter of 2021 increased 57% from $205 million in the third quarter of 2020.

Net revenue margin of 77% in the third quarter of 2021 compared to 89% in the third quarter of 2020.

Net income from continuing operations of $52 million, or $1.36 per diluted share, in the third quarter of 2021, compared to $94 million, or $3.09 per diluted share, in the third quarter of 2020.

Third quarter 2021 adjusted EBITDA of $100 million, a non-GAAP measure, compared to $136 million in the third quarter of 2020.

Adjusted earnings of $57 million, or $1.50 per diluted share, both non-GAAP measures, in the third quarter of 2021, compared to adjusted earnings of $90 million, or $2.97 per diluted share, in the third quarter of 2019.

“We are encouraged by the growth in originations this quarter and our ability to deliver solid top and bottom-line results,” said Steve Cunningham, CFO of Enova. “Credit performance across the portfolio remains very good, which contributed to our strong financial results this quarter. Looking forward, given the improving macroeconomic environment we expect credit to remain a tailwind and this is reflected in the fair value of our portfolio as we exited the quarter.”

Outlook

Enova is monitoring and adapting quickly to changes in the current environment as the economy recovers from the impacts of the COVID-19 pandemic. Given the ongoing uncertainties in the operating environment the Company is not providing guidance for the fourth quarter of 2021.

For information regarding the non-GAAP financial measures discussed in this release, please see “Non-GAAP Financial Measures” and “Reconciliation of GAAP to Non-GAAP Financial Measures” below.

CFPB Civil Investigative Demand

The Company has received a Civil Investigative Demand (“CID”) from the Consumer Financial Protection Bureau (“CFPB”) concerning certain loan processing issues. Enova has been cooperating fully with the CFPB by providing data and information in response to the CID. Enova anticipates being able to expeditiously complete the investigation as several of the issues were self-disclosed and the Company has provided, and will continue to provide, restitution to customers who may have been negatively impacted.

“Enova has led the industry in providing innovative products that help consumers and small businesses and we are committed to putting customers first and complying with regulatory requirements,” said Sean Rahilly, General Counsel & Chief Compliance Officer at Enova International. “We have devoted significant efforts to continually improving our technology and processes, as well as ongoing enhancements to our systems and controls to prevent negative customer experiences. Working with our regulatory authorities like the CFPB is a critical part of the process of providing financial services and we look forward to completing the investigation.”

Conference Call

Enova will host a conference call to discuss its third quarter results at 4 p.m. Central Time / 5 p.m. Eastern Time today, October 28^th. The live webcast of the call can be accessed at the Enova Investor Relations website at http://ir.enova.com, along with the company’s earnings press release and supplemental financial information. The U.S. dial-in for the call is 1-855-560-2575 (1-412-542-4161 for non-U.S. callers). Please ask to join the Enova International call. A replay of the conference call will be available until November 4, 2021, at 10:59 p.m. Central Time / 11:59 p.m. Eastern Time, while an archived version of the webcast will be available on the Enova International Investor Relations website for 90 days. The U.S. dial-in for the conference call replay is 1-877-344-7529 (1-412-317-0088). The replay access code is 10160556.

About Enova

Enova International (NYSE: ENVA) is a leading financial technology company providing online financial services through its artificial intelligence and machine learning powered lending platform. Enova serves the needs of non-prime consumers and small businesses, who are frequently underserved by traditional banks. Enova has provided more than 7 million customers with over $40 billion in loans and financing with market leading products that provide a path for them to improve their financial health. You can learn more about the company and its brands at www.enova.com.

Cautionary Statement Concerning Forward Looking Statements

This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 about the business, financial condition and prospects of Enova. These forward-looking statements give current expectations or forecasts of future events and reflect the views and assumptions of Enova’s senior management with respect to the business, financial condition and prospects of Enova as of the date of this release and are not guarantees of future performance. The actual results of Enova could differ materially from those indicated by such forward-looking statements because of various risks and uncertainties applicable to Enova’s business, including, without limitation, those risks and uncertainties indicated in Enova’s filings with the Securities and Exchange Commission (“SEC”), including our annual report on Form 10-K, quarterly reports on Forms 10-Q and current reports on Forms 8-K. These risks and uncertainties are beyond the ability of Enova to control, and, in many cases, Enova cannot predict all of the risks and uncertainties that could cause its actual results to differ materially from those indicated by the forward-looking statements. When used in this release, the words “believes,” “estimates,” “plans,” “expects,” “anticipates” and similar expressions or variations as they relate to Enova or its management are intended to identify forward-looking statements. Enova cautions you not to put undue reliance on these statements. Enova disclaims any intention or obligation to update or revise any forward-looking statements after the date of this release.

Non-GAAP Financial Measures
In addition to the financial information prepared in conformity with generally accepted accounting principles, or GAAP, Enova provides historical non-GAAP financial information. Management believes that presentation of non-GAAP financial information is meaningful and useful in understanding the activities and business metrics of Enova’s operations. Management believes that these non-GAAP financial measures reflect an additional way of viewing aspects of Enova’s business that, when viewed with its GAAP results, provide a more complete understanding of factors and trends affecting its business.

Management provides non-GAAP financial information for informational purposes and to enhance understanding of Enova’s GAAP consolidated financial statements. Readers should consider the information in addition to, but not instead of or superior to, Enova’s financial statements prepared in accordance with GAAP. This non-GAAP financial information may be determined or calculated differently by other companies, limiting the usefulness of those measures for comparative purposes.

Combined Loans and Finance Receivables
The combined loans and finance receivables measures are non-GAAP measures that include loans and finance receivables that Enova owns or has purchased and loans that Enova guarantees. Management believes these non-GAAP measures provide investors with important information needed to evaluate the magnitude of potential receivable losses and the opportunity for revenue performance of the loans and finance receivable portfolio on an aggregate basis. Management also believes that the comparison of the aggregate amounts from period to period is more meaningful than comparing only the amounts reflected on Enova’s consolidated balance sheet since revenue is impacted by the aggregate amount of receivables owned by Enova and those guaranteed by Enova as reflected in its consolidated financial statements.

Adjusted Earnings Measures
In addition to reporting financial results in accordance with GAAP, Enova has provided adjusted earnings and adjusted earnings per share, or, collectively, the Adjusted Earnings Measures, which are non-GAAP measures. Management believes that the presentation of these measures provides investors with greater transparency and facilitates comparison of operating results across a broad spectrum of companies with varying capital structures, compensation strategies, derivative instruments and amortization methods, which provides a more complete understanding of Enova’s financial performance, competitive position and prospects for the future. Management also believes that investors regularly rely on non-GAAP financial measures, such as the Adjusted Earnings Measures, to assess operating performance and that such measures may highlight trends in Enova’s business that may not otherwise be apparent when relying on financial measures calculated in accordance with GAAP. In addition, management believes that the adjustments shown below are useful to investors in order to allow them to compare Enova’s financial results during the periods shown without the effect of each of these expense items.

Adjusted EBITDA Measures
In addition to reporting financial results in accordance with GAAP, Enova has provided Adjusted EBITDA and Adjusted EBITDA margin, or, collectively, the Adjusted EBITDA measures, which are non-GAAP measures. Adjusted EBITDA is a non-GAAP measure that Enova defines as earnings excluding depreciation, amortization, interest, foreign currency transaction gains or losses, taxes and stock-based compensation. In addition, management believes that the adjustments for transaction-related costs, lease termination and cease-use loss (gain), other nonoperating expenses and equity method investment income shown below are useful to investors in order to allow them to compare our financial results during the periods shown without the effect of the expense items. Adjusted EBITDA margin is a non-GAAP measure that Enova defines as Adjusted EBITDA as a percentage of total revenue. Management believes Adjusted EBITDA Measures are used by investors to analyze operating performance and evaluate Enova’s ability to incur and service debt and Enova’s capacity for making capital expenditures. Adjusted EBITDA Measures are also useful to investors to help assess Enova’s estimated enterprise value.

ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share data)

(Unaudited)

September 30,

December 31,

2021

2020

2020

Assets

Cash and cash equivalents

$

229,088

$

490,033

$

297,273

Restricted cash

59,053

45,017

71,927

Loans and finance receivables at fair value

1,635,282

693,370

1,241,506

Income taxes receivable

4,799

—

—

Other receivables and prepaid expenses

52,975

25,117

40,301

Property and equipment, net

81,149

63,403

79,417

Operating lease right-of-use assets

36,105

20,370

40,123

Goodwill

279,275

267,868

267,974

Intangible assets, net

37,458

1,623

26,008

Other assets

52,315

27,363

43,546

Total assets

$

2,467,499

$

1,634,164

$

2,108,075

Liabilities and Stockholders’ Equity

Accounts payable and accrued expenses

$

124,584

$

76,526

$

124,071

Operating lease liabilities

61,985

35,258

67,956

Income taxes currently payable

—

15,339

2,624

Deferred tax liabilities, net

71,297

69,874

48,129

Long-term debt

1,075,380

863,472

946,461

Total liabilities

1,333,246

1,060,469

1,189,241

Commitments and contingencies

Stockholders’ equity:

Common stock, $0.00001 par value, 250,000,000 shares authorized,
43,224,666, 36,190,857 and 41,936,784 shares issued and
36,427,705, 30,111,727 and 35,762,926 outstanding as of
September 30, 2021 and 2020 and December 31, 2020, respectively

—

—

—

Preferred stock, $0.00001 par value, 25,000,000 shares authorized,
no shares issued and outstanding

—

—

—

Additional paid in capital

217,051

74,868

187,981

Retained earnings

1,057,111

618,775

849,466

Accumulated other comprehensive loss

(8,185)

(8,547)

(6,898)

Treasury stock, at cost (6,796,961, 6,079,130 and 6,173,858 shares as
of September 30, 2021 and 2020 and December 31, 2020, respectively)

(133,041)

(111,401)

(113,201)

Total Enova International, Inc. stockholders’ equity

1,132,936

573,695

917,348

Noncontrolling interest

1,317

—

1,486

Total stockholders’ equity

1,134,253

573,695

918,834

Total liabilities and stockholders’ equity

$

2,467,499

$

1,634,164

$

2,108,075

ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

(Unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2021

2020

2021

2020

Revenue

$

320,160

$

204,545

$

844,324

$

819,858

Change in Fair Value

(73,778)

(22,777)

(100,443)

(379,168)

Net Revenue

246,382

181,768

743,881

440,690

Expenses

Marketing

79,726

4,629

163,548

42,175

Operations and technology

37,966

17,702

108,628

65,472

General and administrative

33,557

33,656

116,321

83,943

Depreciation and amortization

8,914

3,770

23,001

11,444

Total Expenses

160,163

59,757

411,498

203,034

Income from Operations

86,219

122,011

332,383

237,656

Interest expense, net

(18,163)

(18,634)

(57,493)

(59,387)

Foreign currency transaction loss

(109)

(30)

(383)

(7)

Equity method investment income

529

—

2,558

—

Other nonoperating expenses

—

—

(1,128)

—

Income before Income Taxes

68,476

103,347

275,937

178,262

Provision for income taxes

16,667

9,671

67,607

30,812

Net income from continuing operations before noncontrolling
interest

51,809

93,676

208,330

147,450

Less: Net income attributable to noncontrolling interest

261

—

685

—

Net income from continuing operations

51,548

93,676

207,645

147,450

Net loss from discontinued operations

—

(9)

—

(297)

Net income attributable to Enova International, Inc.

$

51,548

$

93,667

$

207,645

$

147,153

Earnings (Loss) Per Share attributable to Enova International, Inc.:

Earnings (loss) per common share – basic:

Continuing operations

$

1.40

$

3.11

$

5.68

$

4.78

Discontinued operations

—

—

—

(0.01)

Earnings (loss) per common share – basic

$

1.40

$

3.11

$

5.68

$

4.77

Earnings (loss) per common share – diluted:

Continuing operations

$

1.36

$

3.09

$

5.48

$

4.73

Discontinued operations

—

—

—

(0.01)

Earnings (loss) per common share – diluted

$

1.36

$

3.09

$

5.48

$

4.72

Weighted average common shares outstanding:

Basic

36,744

30,108

36,554

30,880

Diluted

37,984

30,363

37,874

31,180

ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(dollars in thousands)

(Unaudited)

Nine Months Ended September 30,

2021

2020

Cash flows from operating activities

Cash flows from operating activities – continuing operations

$

325,157

$

623,530

Cash flows from operating activities – discontinued operations

—

(297)

Total cash flows provided by operating activities

325,157

623,233

Cash flows from investing activities

Loans and finance receivables

(470,416)

40,505

Acquisitions

(29,153)

(3,597)

Purchases of property and equipment

(22,031)

(19,835)

Other investing activities

25

57

Total cash flows (used in) provided by investing activities

(521,575)

17,130

Cash flows provided by (used in) financing activities

115,433

(186,103)

Effect of exchange rates on cash, cash equivalents and restricted cash

(74)

(174)

Net (decrease) increase in cash, cash equivalents and restricted cash

(81,059)

454,086

Cash, cash equivalents and restricted cash at beginning of year

369,200

80,964

Cash, cash equivalents and restricted cash at end of period

$

288,141

$

535,050

ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

LOANS AND FINANCE RECEIVABLES FINANCIAL AND OPERATING DATA

(dollars in thousands)

The following table shows loans and finance receivables and related loan loss activity, which is based on loan and finance receivable balances, for continuing operations for the three months ended September 30, 2021 and 2020.

Three Months Ended September 30,

2021

2020

Change

Ending combined loan and finance receivable principal balance:

Company owned

$

1,586,449

$

651,289

$

935,160

Guaranteed by the Company^(a)

11,354

6,905

4,449

Total combined loan and finance receivable principal balance^(b)

$

1,597,803

$

658,194

$

939,609

Ending combined loan and finance receivable fair value balance:

Company owned

$

1,635,282

$

693,370

$

941,912

Guaranteed by the Company^(a)

16,921

7,411

9,510

Ending combined loan and finance receivable fair value balance^(b)

$

1,652,203

$

700,781

$

951,422

Fair value as a % of principal^(c)

103.4

%

106.5

%

(3.1)

%

Ending combined loan and finance receivable balance, including principal
and accrued fees/interest outstanding:

Company owned

$

1,650,771

$

698,964

$

951,807

Guaranteed by the Company^(a)

13,239

8,100

5,139

Ending combined loan and finance receivable balance^(b)

$

1,664,010

$

707,064

$

956,946

Average combined loan and finance receivable balance, including principal
and accrued fees/interest outstanding:

Company owned^(d)

$

1,540,424

$

747,956

$

792,468

Guaranteed by the Company^(a)(d)

11,366

6,855

4,511

Average combined loan and finance receivable balance^(a)(d)

$

1,551,790

$

754,811

$

796,979

Revenue

$

316,042

$

203,397

$

112,645

Change in fair value

(72,546)

(22,777)

(49,769)

Net revenue

243,496

180,620

62,876

Net revenue margin

77.0

%

88.8

%

(11.8)

%

Change in fair value as a % of average loan and finance receivable balance^(d)

4.7

%

3.0

%

1.7

%

Delinquencies:

>30 days delinquent

$

90,782

$

25,841

$

64,941

>30 days delinquent as a % of loan and finance receivable balance^(c)

5.5

%

3.7

%

1.8

%

Charge-offs:

Charge-offs (net of recoveries)

$

64,896

$

35,166

$

29,730

Charge-offs (net of recoveries) as a % of average loan and finance
receivable balance^(d)

4.2

%

4.7

%

(0.5)

%

______________________________

(a)
Represents loans originated by third-party lenders through the CSO programs, which are not included in our consolidated balance sheets.

(b)   Non-GAAP measure.

(c)    Determined using period-end balances.

(d)   The average combined loan and finance receivable balance is the average of the month-end balances during the period.

ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(dollars in thousands, except per share data)

Adjusted Earnings Measures

Three Months Ended

Nine Months Ended

September 30,

September 30,

2021

2020

2021

2020

Net income from continuing operations

$

51,548

$

93,676

$

207,645

$

147,450

Adjustments:

Transaction-related costs^(a)

—

6,593

1,424

6,593

Lease termination and cease-use loss (gain)^(b)

(113)

—

(113)

—

Other nonoperating expenses^(c)

—

—

1,128

—

Intangible asset amortization

2,013

27

4,848

562

Stock-based compensation expense

5,018

3,768

16,072

10,888

Foreign currency transaction loss

102

30

373

7

Cumulative tax effect of adjustments

(1,581)

(2,454)

(5,843)

(4,251)

Adjusted earnings

$

56,987

$

90,036

$

225,534

$

149,645

Diluted earnings per share

$

1.36

$

3.09

$

5.48

$

4.73

Adjusted earnings per share

$

1.50

$

2.97

$

5.95

$

4.80

Adjusted EBITDA

Three Months Ended

Nine Months Ended

September 30,

September 30,

2021

2020

2021

2020

Net income from continuing operations

$

51,548

$

93,676

$

207,645

$

147,450

Depreciation and amortization expenses

8,912

3,770

22,990

11,444

Interest expense, net

17,966

18,634

57,013

59,387

Foreign currency transaction loss

102

30

373

7

Provision for income taxes

16,667

9,671

67,607

30,812

Stock-based compensation expense

5,018

3,768

16,072

10,888

Adjustments:

Transaction-related costs^(a)

—

6,593

1,424

6,593

Lease termination and cease-use loss (gain)^(b)

(113)

—

(113)

—

Other nonoperating expenses^(c)

—

—

1,128

—

Equity method investment income

(529)

—

(2,558)

—

Adjusted EBITDA

$

99,571

$

136,142

$

371,581

$

266,581

Adjusted EBITDA margin calculated as follows:

Total Revenue

$

320,160

$

204,545

$

844,324

$

819,858

Adjusted EBITDA

99,571

136,142

371,581

266,581

Adjusted EBITDA as a percentage of total revenue

31.1

%

66.6

%

44.0

%

32.5

%

_____________________________

(a)
In the first quarter of 2021, the Company incurred expenses totaling $1.4 million ($1.1 million net of tax) related to acquisitions and a divestiture of a subsidiary.
         In the third quarter of 2020, the Company incurred expenses totaling $6.6 million ($5.0 million net of tax) related to an acquisition.

(b)
In the third quarter of 2021, the Company recorded a gain of $0.1 million ($0.1 million net of tax) upon the exit of leased office space.

(c)
In the first quarter of 2021, the Company recorded other nonoperating expense of $0.4 million ($0.3 million net of tax) related to the repurchase of securitization
          notes. In the second quarter of 2021, the Company recorded other nonoperating expense of $0.8 million ($0.6 million net of tax) related to an incomplete transaction.

View original content to download multimedia:https://www.prnewswire.com/news-releases/enova-reports-third-quarter-2021-results-301411287.html

SOURCE Enova International, Inc.

Posted on October 28, 2021 4:23 pm
WashREIT Announces Third Quarter 2021 Results and Updates Progress on Transformation

WASHINGTON, Oct. 28, 2021 (GLOBE NEWSWIRE) — Washington Real Estate Investment Trust (“WashREIT” or the “Company”) (NYSE: WRE), a multifamily REIT with properties in the Washington metro region and the Southeast, reported financial and operating results today for the quarter ended September 30, 2021:

Third Quarter Results

Net income was $31.3 million, or $0.37 per diluted share

NAREIT FFO was $3.1 million, or $0.04 per diluted share

Core FFO was $17.0 million, or $0.20 per diluted share

Net Operating Income (NOI) was $27.1 million

Multifamily Highlights

New lease rates improved significantly throughout the third quarter and post quarter-end. New Lease Rate Growth on an effective basis was approximately 9% for leases signed in September and 11% for leases signed thus far in October.

Occupancy continues to track above our expectations as rents grow and the forward trend is favorable, suggesting that occupancy should remain strong into the winter months. Average same-store occupancy increased 70 basis points from the second quarter to the third quarter to 95.8%, and 40 basis points post quarter-end to date, allowing for continued growth in lease rates.

Concessions declined significantly throughout the third quarter and post quarter end. Total concessions for September move-ins declined over 95% compared to June move-ins driven by both a decline in the number of new leases with concessions and a decline in the average concession amount per lease.

Concession amortization began to decline on a monthly basis during September and is expected to continue to decline over the next two quarters as the leases signed during the pandemic expire. Excluding the impact of amortization related to concessions granted in prior periods, same-store multifamily NOI increased 2% on a year-over-year basis during the third quarter.

Resident credit continues to remain strong as 99% of same-store cash rents were collected during the third quarter

Trove is currently 85% occupied and is expected to stabilize near year-end

Transformation Update

Completed the sale of the office portfolio, excluding Watergate 600, for gross proceeds of $766 million

Completed the sale of the retail portfolio for gross proceeds of $168.3 million

Completed the acquisition of The Oxford, a 240-unit Class B multifamily property in Conyers, GA for $48 million. The Oxford has performed very well thus far with New Lease Rate Growth of 25% for September move-ins and 26% for October move-ins.

Entered into binding agreements to acquire two properties in the Atlanta market for $106 million. These transactions are expected to close during the fourth quarter, subject to customary closing conditions. We have also been awarded and are moving toward a binding contract for another property in Atlanta for approximately $97 million. If we are successful in this pursuit, we expect to close during the fourth quarter.

Redeemed all $300 million of senior unsecured notes due 2022 on August 26^th and repaid $150 million of amounts outstanding under the term loan maturing in 2023

Liquidity Position

Renewed the $700 million revolving credit facility for a four-year term ending in August 2025 with two six-month extension options. The amended credit agreement includes an accordion feature that allows the Company to increase the aggregate facility to $1.5 billion.

Current available liquidity is approximately $1.0 billion, consisting of the entire capacity under the Company’s $700 million revolving credit facility and cash on hand

The Company has no secured debt and no scheduled maturities until July 2023

“Overall, we are off to a very good start as we progress our geographic expansion,” said Paul T. McDermott, President and CEO. “In just over four months since our transformation announcement, we have completed the exit of our commercial segments and have already deployed or committed over 55% of our $450 million multifamily acquisition target. We have closed on the acquisition of one property, have two more properties under binding agreement, and have been awarded and are completing due diligence on one additional property in the Atlanta market. We have an active pipeline of opportunities that align with our strategies and offer the growth prospects that we are targeting through our geographic expansion, and we are confident we can allocate our capital appropriately over the balance of this year and into early next year.”

Third Quarter Operating Results

Multifamily Same-Store NOI – Same-store NOI decreased 0.4% compared to the corresponding prior year period due to the cumulative impact of COVID-19 on rental income. Excluding the impact of amortization related to concessions granted in prior periods, same-store multifamily NOI increased 2% on a year-over-year basis during the third quarter. Average Occupancy for the quarter was 95.8%.

Other Same-Store NOI – The Other portfolio is comprised of one asset, Watergate 600. Same-store NOI declined by 4.9% compared to the corresponding prior year period due to higher taxes and payroll expenses, and a bad debt recovery which had a favorable impact on the prior year period. Watergate 600 was 88.4% occupied and 91.2% leased at quarter end.

2021 Guidance and Outlook

The Company is reinstating full-year 2021 guidance including its outlook on key assumptions and metrics. The Company expects to establish full year guidance for 2022 on its year-end earnings call.

Core FFO for 2021 is expected to range from $1.05 to $1.08 per fully diluted share. The following assumptions are included in the Core FFO guidance for 2021 as set forth above:

Full Year Outlook on Key Assumptions and Metrics

Same-store multifamily NOI is expected to range between $90.0 million to $90.5 million for the full year 2021, which implies a fourth quarter growth rate of approximately 4.5% compared to the prior year period

Watergate 600 NOI is expected to be approximately $12.75 million

The office portfolio sale closed on July 26^th for gross proceeds of $766 million

The acquisition of The Oxford closed on August 10^th for $48 million

The retail portfolio sale closed on September 22^nd for gross proceeds of $168.3 million

$300 million of senior notes maturing in 2022 were redeemed on August 26^th

$150 million of the amount outstanding under the term loan maturing in 2023 was paid down on September 27^th

Entered into binding agreements to acquire two properties in the Atlanta market for $106 million. These transactions are expected to close during the fourth quarter, subject to customary closing conditions. We have also been awarded and are moving toward a binding contract for another property in Atlanta for approximately $97 million. If we are successful in this pursuit, we expect to close during the fourth quarter.

Over the remainder of the year and into early next year, approximately $200 million of additional multifamily acquisitions are expected to be completed in the Southeastern markets of Atlanta, Raleigh/Durham and/or Charlotte

Full Year 2021

Same-Store NOI

Multifamily $90.0 million – $90.5 million

Other ~$12.75 million

Non-Same-Store NOI ^(a) $3.75 million – $4.25 million

Non-residential NOI ^(b) ~$0.8 million

Other income ~$3 million

Expenses

Property Management Expenses ~$6.0 million

G&A $26.75 million – $27.25 million

Interest Expense ~$34.0 million

^(a) Includes Trove and The Oxford

^(b) Includes revenues and expenses from retail and public parking garage operations at multifamily properties.

WashREIT’s Core FFO guidance and outlook are based on a number of factors, many of which are outside the Company’s control and all of which are subject to change. WashREIT may change the guidance provided during the year as actual and anticipated results vary from these assumptions, but WashREIT undertakes no obligation to do so.

2021 Guidance Reconciliation Table

A reconciliation of projected net income per diluted share to projected Core FFO per diluted share for the full year ending December 31, 2021 is as follows:

Low High

Net income per diluted share                                      $ 0.20 $ 0.23

Real estate depreciation and amortization 0.85 0.85

Gain on sale of depreciable real estate (0.55 ) (0.55 )

Discontinued real estate depreciation 0.27 0.27

NAREIT FFO per diluted share 0.77 0.80

Core adjustments 0.28 0.28

Core FFO per diluted share                                                                           $ 1.05 $ 1.08

Dividends

On October 5, 2021, WashREIT paid a quarterly dividend of $0.17 per share.

WashREIT announced today that its Board of Trustees has declared a quarterly dividend of $0.17 per share to be paid on January 5, 2022 to shareholders of record on December 22, 2021.

Conference Call Information

The Third Quarter 2021 Earnings Call is scheduled for Friday, October 29, 2021 at 11:00 A.M. Eastern Time. Conference Call access information is as follows:

USA Toll Free Number: 1-888-506-0062

International Toll Number: 1-973-528-0011

Conference ID: 714844

The instant replay of the Earnings Call will be available until Friday, November 12, 2021. Instant replay access information is as follows:

USA Toll Free Number: 1-877-481-4010

International Toll Number: 1-919-882-2331

Conference ID: 42838

The live on-demand webcast of the Conference Call will be available on the Investor section of WashREIT’s website at www.washreit.com. Online playback of the webcast will be available following the Conference Call.

About WashREIT

WashREIT owns approximately 7,300 residential apartment homes in the Washington, DC metro and the Southeast. WashREIT also owns and operates approximately 300,000 square feet of commercial space in the Washington, DC metro region. We are focused on providing quality housing to under-served, middle-income renters in submarkets poised for strong, sustained demand. With a proven track record in residential repositioning, we are utilizing the experience and research from the Washington, DC metro region to continue to grow as we geographically diversify into Southeastern markets. We are targeting the deepest demand segments in submarkets with the greatest probability of rent growth outperformance, and tailoring our specific investment strategy to best create value.

Note: WashREIT’s press releases and supplemental financial information are available on the Company website at www.washreit.com or by contacting Investor Relations at (202) 774-3200.

Forward Looking Statements

Certain statements in our earnings release and on our conference call are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and involve risks and uncertainties. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” or “potential” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. Such statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance, or achievements of WashREIT to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Currently, one of the most significant factors continues to be the adverse effect of the COVID-19 virus, including any variants and mutations thereof, the actions taken to contain the pandemic or mitigate the impact of COVID-19, and the direct and indirect economic effects of the pandemic and containment measures. The extent to which COVID-19 continues to impact WashREIT, its properties and its residents and tenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, the continued speed and success of the vaccine distribution, effectiveness and willingness of people to take COVID-19 vaccines, and the duration of associated immunity and their efficacy against emerging variants of COVID-19, among others. Moreover, investors are cautioned to interpret many of the risks identified in the risk factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2020 filed on February 16, 2021, as being heightened as a result of the ongoing and numerous adverse impacts of COVID-19. Additional factors which may cause the actual results, performance, or achievements of WashREIT to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements include, but are not limited to the risks associated with the failure to enter into and/or complete contemplated acquisitions or dispositions within the price ranges anticipated and on the terms and timing anticipated, or at all; our ability to execute on our strategies, including new strategies with respect to our operations and our portfolio, including the acquisition of residential properties in the Southeastern markets, on the terms anticipated, or at all, and to realize any anticipated benefits, including the performance of any acquired residential properties at the levels anticipated; our ability to lease up Trove on the timing anticipated; our ability to reduce actual net leverage to levels consistent with our targeted net leverage range; the risks associated with ownership of real estate in general and our real estate assets in particular; the economic health of the greater Washington, DC metro region and the larger Southeastern region; changes in the composition and geographic location of our portfolio; fluctuations in interest rates; reductions in or actual or threatened changes to the timing of federal government spending; the risks related to use of third-party providers; the economic health of our residents and tenants; the availability and terms of financing and capital and the general volatility of securities markets; compliance with applicable laws, including those concerning the environment and access by persons with disabilities; the risks related to not having adequate insurance to cover potential losses; the risks related to our organizational structure and limitations of stock ownership; changes in the market value of securities; terrorist attacks or actions and/or cyber-attacks; failure to qualify and maintain our qualification as a REIT and the risks of changes in laws affecting REITs; and other risks and uncertainties detailed from time to time in our filings with the SEC, including our 2020 Form 10-K filed on February 16, 2021. While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. We undertake no obligation to update our forward-looking statements or risk factors to reflect new information, future events, or otherwise.

This Earnings Release also includes certain forward-looking non-GAAP information. Due to the high variability and difficulty in making accurate forecasts and projections of some of the information excluded from these estimates, together with some of the excluded information not being ascertainable or accessible, the Company is unable to quantify certain amounts that would be required to be included in the most directly comparable GAAP financial measures without unreasonable efforts.

CONTACT: 1775 Eye Street, NW, Suite 1000

Amy Hopkins Washington, DC 20006

Vice President, Investor Relations Tel 202-774-3198

E-Mail: [email protected] Fax 301-984-9610

www.washreit.com

WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES

FINANCIAL HIGHLIGHTS

(In thousands, except per share data)

(Unaudited)

Three Months Ended September 30, Nine Months Ended September 30,

OPERATING RESULTS 2021 2020 2021 2020

Revenue

Real estate rental revenue $ 42,499 $ 43,716 $ 124,403 $ 133,216

Expenses

Property operating and maintenance 9,901 10,372 28,655 29,598

Real estate taxes and insurance 5,544 5,741 16,525 17,420

Property management 1,499 1,541 4,448 4,682

General and administrative 7,909 6,330 19,838 17,963

Transformation costs 1,016 — 4,796 —

Depreciation and amortization 18,252 18,064 52,542 52,683

44,121 42,048 126,804 122,346

Loss on sale of real estate — — — (7,539 )

Real estate operating (loss) income (1,622 ) 1,668 (2,401 ) 3,331

Other income (expense)

Interest expense (8,106 ) (8,711 ) (28,387 ) (28,307 )

Loss on interest rate derivatives (106 ) — (5,866 ) —

(Loss) gain on extinguishment of debt (12,727 ) — (12,727 ) 262

Other income 231 — 3,037 —

(20,708 ) (8,711 ) (43,943 ) (28,045 )

Loss from continuing operations (22,330 ) (7,043 ) (46,344 ) (24,714 )

Discontinued operations:

Income from operations of properties sold or held for sale 7,208 6,087 23,083 20,071

Gain on sale of real estate, net 46,441 — 46,441 —

Income from discontinued operations 53,649 6,087 69,524 20,071

Net income (loss) $ 31,319 $ (956 ) $ 23,180 $ (4,643 )

Loss from continuing operations $ (22,330 ) $ (7,043 ) $ (46,344 ) $ (24,714 )

Depreciation and amortization 18,252 18,064 52,542 52,683

Loss on sale of depreciable real estate — — — 7,539

Funds from continuing operations (4,078 ) 11,021 6,198 35,508

Income from discontinued operations 53,649 6,087 69,524 20,071

Discontinued operations real estate depreciation and amortization — 12,406 22,904 37,106

Gain on sale of real estate, net (46,441 ) — (46,441 ) —

Funds from discontinued operations 7,208 18,493 45,987 57,177

NAREIT funds from operations $ 3,130 $ 29,514 $ 52,185 $ 92,685

Non-cash loss (gain) on extinguishment of debt $ 833 $ — $ 833 $ (1,177 )

Tenant improvements and incentives, net of reimbursements (331 ) (4,013 ) (904 ) (6,962 )

External and internal leasing commissions capitalized (378 ) (1,081 ) (2,784 ) (2,407 )

Recurring capital improvements (1,485 ) (1,068 ) (3,508 ) (2,880 )

Straight-line rents, net (347 ) (522 ) (1,520 ) (1,840 )

Non-cash fair value interest expense — — — (59 )

Non-real estate depreciation & amortization of debt costs 1,330 956 4,024 2,808

Amortization of lease intangibles, net (32 ) 464 540 1,465

Amortization and expensing of restricted share and unit compensation 2,651 2,479 6,478 5,901

Adjusted funds from operations $ 5,371 $ 26,729 $ 55,344 $ 87,534

Three Months Ended September 30, Nine Months Ended September 30,

Per share data: 2021 2020 2021 2020

Loss from continuing operations (Basic) $ (0.26 ) $ (0.09 ) $ (0.55 ) $ (0.31 )

(Diluted) $ (0.26 ) $ (0.09 ) $ (0.55 ) $ (0.31 )

Net income (loss) (Basic) $ 0.37 $ (0.01 ) $ 0.27 $ (0.06 )

(Diluted) $ 0.37 $ (0.01 ) $ 0.27 $ (0.06 )

NAREIT FFO (Basic) $ 0.04 $ 0.36 $ 0.61 $ 1.12

(Diluted) $ 0.04 $ 0.36 $ 0.61 $ 1.12

Dividends paid $ 0.17 $ 0.30 $ 0.77 $ 0.90

Weighted average shares outstanding – basic 84,496 82,186 84,457 82,142

Weighted average shares outstanding – diluted 84,496 82,186 84,457 82,142

Weighted average shares outstanding – diluted (for NAREIT FFO) 84,586 82,357 84,534 82,322

WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

(Unaudited)

September 30, 2021 December 31, 2020

Assets

Land $ 306,507 $ 301,709

Income producing property 1,544,217 1,473,335

1,850,724 1,775,044

Accumulated depreciation and amortization (384,392 ) (335,006 )

Net income producing property 1,466,332 1,440,038

Properties under development or held for future development 30,254 36,494

Total real estate held for investment, net 1,496,586 1,476,532

Investment in real estate held for sale, net — 795,687

Cash and cash equivalents 307,797 7,697

Restricted cash 605 593

Rents and other receivables 14,713 9,725

Prepaid expenses and other assets 33,109 29,587

Other assets related to properties sold or held for sale — 89,997

Total assets $ 1,852,810 $ 2,409,818

Liabilities

Notes payable, net $ 496,823 $ 945,370

Line of credit — 42,000

Accounts payable and other liabilities 38,864 44,067

Dividend payable 14,440 25,361

Advance rents 1,747 2,461

Tenant security deposits 4,480 4,221

Other liabilities related to properties sold or held for sale — 25,229

Total liabilities 556,354 1,088,709

Equity

Shareholders’ equity

Preferred shares; $0.01 par value; 10,000 shares authorized; no shares issued or outstanding — —

Shares of beneficial interest, $0.01 par value; 150,000 and 100,000 shares authorized; 84,628 and 84,409 shares issued and outstanding, as of September 30, 2021 and December 31, 2020, respectively 846 844

Additional paid in capital 1,656,821 1,649,366

Distributions in excess of net income (341,052 ) (298,860 )

Accumulated other comprehensive loss (20,468 ) (30,563 )

Total shareholders’ equity 1,296,147 1,320,787

Noncontrolling interests in subsidiaries 309 322

Total equity 1,296,456 1,321,109

Total liabilities and equity $ 1,852,810 $ 2,409,818

The following tables contain reconciliations of net loss for the periods presented (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Net income (loss) $ 31,319 $ (956 ) $ 23,180 $ (4,643 )

Adjustments:

Property management 1,499 1,541 4,448 4,682

General and administrative 7,909 6,330 19,838 17,963

Transformation costs 1,016 — 4,796 —

Real estate depreciation and amortization 18,252 18,064 52,542 52,683

Loss on sale of real estate — — — 7,539

Interest expense 8,106 8,711 28,387 28,307

Loss on interest rate derivatives 106 — 5,866 —

Loss (gain) on extinguishment of debt 12,727 — 12,727 (262 )

Other income (231 ) — (3,037 ) —

Discontinued operations:

Income from operations of properties sold or held for sale (7,208 ) (6,087 ) (23,083 ) (20,071 )

Gain on sale of real estate, net (46,441 ) — (46,441 ) —

Total Net Operating Income (NOI) $ 27,054 $ 27,603 $ 79,223 $ 86,198

Multifamily NOI:

Same-store portfolio $ 22,405 $ 22,494 $ 67,052 $ 69,654

Acquisitions 276 — 276 —

Development 1,000 34 1,732 (199 )

Non-residential 219 104 $ 575 $ 387

Total 23,900 22,632 69,635 69,842

Watergate 600 NOI 3,154 3,316 9,588 9,748

Other NOI ⁽¹⁾ — 1,655 — 6,608

Total NOI $ 27,054 $ 27,603 $ 79,223 $ 86,198

⁽¹⁾ Represents other continuing operations office properties sold in 2020: Monument II, 1227 25th Street, John Marshall II

The following table contains a reconciliation of net income (loss) to core funds from operations for the periods presented (in thousands, except per share data):

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Net income (loss) $ 31,319 $ (956 ) $ 23,180 $ (4,643 )

Add:

Real estate depreciation and amortization 18,252 18,064 52,542 52,683

Loss on sale of depreciable real estate — — — 7,539

Discontinued operations:

Gain on sale of real estate, net (46,441 ) — (46,441 ) —

Real estate depreciation and amortization — 12,406 22,904 37,106

NAREIT funds from operations 3,130 29,514 52,185 92,685

Add:

Loss (gain) on extinguishment of debt 12,727 — 12,727 (262 )

Loss on interest rate derivatives 106 — 5,866 —

Severance expense — — 173 —

Transformation costs 1,016 — 4,796 —

Core funds from operations $ 16,979 $ 29,514 $ 75,747 $ 92,423

Three Months Ended September 30, Nine Months Ended September 30,

Per share data: 2021 2020 2021 2020

NAREIT FFO (Basic) $ 0.04 $ 0.36 $ 0.61 $ 1.12

(Diluted) $ 0.04 $ 0.36 $ 0.61 $ 1.12

Core FFO (Basic) $ 0.20 $ 0.36 $ 0.89 $ 1.12

(Diluted) $ 0.20 $ 0.36 $ 0.89 $ 1.12

Weighted average shares outstanding – basic 84,496 82,186 84,457 82,142

Weighted average shares outstanding – diluted
(for NAREIT and Core FFO) 84,586 82,357 84,534 82,322

Non-GAAP Financial Measures

Adjusted EBITDA is earnings before interest expense, taxes, depreciation, amortization, gain/loss on sale of real estate, casualty gain/loss, real estate impairment, gain/loss on extinguishment of debt, gain/loss on interest rate derivatives, severance expense, acquisition expenses and gain from non-disposal activities and transformation costs. Adjusted EBITDA is included herein because we believe it helps investors and lenders understand our ability to incur and service debt and to make capital expenditures. Adjusted EBITDA is a non-GAAP and non-standardized measure and may be calculated differently by other REITs.

Adjusted Funds From Operations (“AFFO”) is a non-GAAP measure. It is calculated by subtracting from FFO (1) recurring expenditures, tenant improvements and leasing costs, that are capitalized and amortized and are necessary to maintain our properties and revenue stream (excluding items contemplated prior to acquisition or associated with development / redevelopment of a property) and (2) straight line rents, then adding (3) non-real estate depreciation and amortization, (4) non-cash fair value interest expense and (5) amortization of restricted share compensation, then adding or subtracting the (6) amortization of lease intangibles, (7) real estate impairment and (8) non-cash gain/loss on extinguishment of debt, as appropriate. AFFO is included herein, because we consider it to be a performance measure of a REIT’s ability to incur and service debt and to distribute dividends to its shareholders. AFFO is a non-GAAP and non-standardized measure, and may be calculated differently by other REITs.

Core Adjusted Funds From Operations (“Core AFFO”) is calculated by adjusting AFFO for the following items (which we believe are not indicative of the performance of Washington REIT’s operating portfolio and affect the comparative measurement of Washington REIT’s operating performance over time): (1) gains or losses on extinguishment of debt and gains or losses on interest rate derivatives, (2) costs related to the acquisition of properties, (3) non-share-based executive transition costs, severance expenses and other expenses related to corporate restructuring and executive retirements or resignations, (4) property impairments, casualty gains and losses, and gains or losses on sale not already excluded from FAD, as appropriate, (5) relocation expense and (6) transformation costs. These items can vary greatly from period to period, depending upon the volume of our acquisition activity and debt retirements, among other factors. We believe that by excluding these items, Core AFFO serves as a useful, supplementary performance measure of Washington REIT’s ability to incur and service debt, and distribute dividends to its shareholders. Core AFFO is a non-GAAP and non-standardized measure, and may be calculated differently by other REITs.

Core Funds From Operations (“Core FFO”) is calculated by adjusting NAREIT FFO for the following items (which we believe are not indicative of the performance of Washington REIT’s operating portfolio and affect the comparative measurement of Washington REIT’s operating performance over time): (1) gains or losses on extinguishment of debt and gains or losses on interest rate derivatives, (2) expenses related to acquisition and structuring activities, (3) executive transition costs, severance expenses and other expenses related to corporate restructuring and executive retirements or resignations, (4) property impairments, casualty gains and losses, and gains or losses on sale not already excluded from NAREIT FFO, as appropriate, (5) relocation expense and (6) transformation costs. These items can vary greatly from period to period, depending upon the volume of our acquisition activity and debt retirements, among other factors. We believe that by excluding these items, Core FFO serves as a useful, supplementary measure of Washington REIT’s ability to incur and service debt, and distribute dividends to its shareholders. Core FFO is a non-GAAP and non-standardized measure, and may be calculated differently by other REITs.

NAREIT Funds From Operations (“FFO”) is defined by 2018 National Association of Real Estate Investment Trusts, Inc. (“NAREIT”) FFO White Paper Restatement, as net income (computed in accordance with generally accepted accounting principles (“GAAP”)) excluding gains (or losses) associated with the sale of property, impairment of depreciable real estate and real estate depreciation and amortization. We consider NAREIT FFO to be a standard supplemental measure for equity real estate investment trusts (“REITs”) because it facilitates an understanding of the operating performance of our properties without giving effect to real estate depreciation and amortization, which historically assumes that the value of real estate assets diminishes predictably over time. Since real estate values have instead historically risen or fallen with market conditions, we believe that NAREIT FFO more accurately provides investors an indication of our ability to incur and service debt, make capital expenditures and fund other needs. Our FFO may not be comparable to FFO reported by other real estate investment trusts. These other REITs may not define the term in accordance with the current NAREIT definition or may interpret the current NAREIT definition differently. NAREIT FFO is a non-GAAP measure.

Net Operating Income (“NOI”), defined as real estate rental revenue less direct real estate operating expenses, is a non-GAAP measure. NOI is calculated as net income, less non-real estate revenue and the results of discontinued operations (including the gain or loss on sale, if any), plus interest expense, depreciation and amortization, lease origination expenses, general and administrative expenses, acquisition costs, real estate impairment, casualty gain and losses and gain or loss on extinguishment of debt. NOI does not include management expenses, which consist of corporate property management costs and property management fees paid to third parties. We believe that NOI is a useful performance measures because, when compared across periods, it reflects the impact on operations of trends in occupancy rates, rental rates and operating costs on an unleveraged basis, providing perspective not immediately apparent from net income. NOI excludes certain components from net income in order to provide results more closely related to a property’s results of operations. For example, interest expense is not necessarily linked to the operating performance of a real estate asset. In addition, depreciation and amortization, because of historical cost accounting and useful life estimates, may distort operating performance at the property level. As a result of the foregoing, we provide NOI as a supplement to net income, calculated in accordance with GAAP. NOI does not represent net income or income from continuing operations calculated in accordance with GAAP. As such, NOI should not be considered an alternative to these measures as an indication of our operating performance.

Other Definitions

Average Effective Monthly Rent Per Home represents the average of effective rent (net of concessions) for in-place leases and the market rent for vacant homes.

Average Occupancy is based on average daily occupied homes as a percentage of total homes.

Current Strategy represents the class of each community in our portfolio based on a set of criteria. Our strategies consist of the following subcategories: Class A, Class A-, Class B Value-Add and Class B. A community’s class is dependent on a variety of factors, including its vintage, site location, amenities and services, rent growth drivers and rent relative to the market.

Class A communities are recently-developed, well-located, have competitive amenities and services and command average rental rates well above market median rents.

Class A- communities have been developed within the past 20 years and feature operational improvements and unit upgrades and command rents at or above median market rents.

Class B Value-Add communities are over 20 years old but feature operational improvements and strong potential for unit renovations. These communities command average rental rates below median market rents for units that have not been renovated.

Class B communities are over 20 years old, feature operational improvements and command average rental rates below median market rents.

Debt Service Coverage Ratio is computed by dividing earnings attributable to the controlling interest before interest expense, taxes, depreciation, amortization, real estate impairment, gain on sale of real estate, gain/loss on extinguishment of debt, severance expense, relocation expense, acquisition and structuring expenses and gain/loss from non-disposal activities by interest expense (including interest expense from discontinued operations) and principal amortization.

Debt to Total Market Capitalization is total debt divided by the sum of total debt plus the market value of shares outstanding at the end of the period.

Earnings to Fixed Charges Ratio is computed by dividing earnings attributable to the controlling interest by fixed charges. For this purpose, earnings consist of income from continuing operations (or net income if there are no discontinued operations) plus fixed charges, less capitalized interest. Fixed charges consist of interest expense (excluding interest expense from discontinued operations), including amortized costs of debt issuance, plus interest costs capitalized.

Ending Occupancy is calculated as occupied homes as a percentage of total homes as of the last day of that period.

Lease Rate Growth is defined as the average percentage change in either gross (excluding the impact of concessions) or effective rent (net of concessions) for a new or renewed lease compared to the prior lease based on the move-in date. The blended rate represents the weighted average of new and renewal lease rate growth achieved.

Recurring Capital Expenditures represent non-accretive building improvements required to maintain current revenues. Recurring capital expenditures do not include acquisition capital that was taken into consideration when underwriting the purchase of a building or which are incurred to bring a building up to “operating standard”.

Retention represents the percentage of leases renewed that were set to expire in the period presented.

Same-store Portfolio Properties include properties that were owned for the entirety of the years being compared, and exclude properties under redevelopment or development and properties acquired, sold or classified as held for sale during the years being compared. We categorize our properties as “same-store” or “non-same-store” for purposes of evaluating comparative operating performance. We define development properties as those for which we have planned or ongoing major construction activities on existing or acquired land pursuant to an authorized development plan. Development properties are categorized as same-store when they have reached stabilized occupancy (90%) before the start of the prior year. We define redevelopment properties as those for which have planned or ongoing significant development and construction activities on existing or acquired buildings pursuant to an authorized plan, which has an impact on current operating results, occupancy and the ability to lease space with the intended result of a higher economic return on the property. We categorize a redevelopment property as same-store when redevelopment activities have been complete for the majority of each year being compared.

Transformation Costs include costs related to the strategic transformation including consulting, advisory and termination benefits.

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