balance sheet – Free Bassuk http://freebassuk.com/ Wed, 09 Mar 2022 08:48:37 +0000 en-US hourly 1 https://wordpress.org/?v=5.9.3 https://freebassuk.com/wp-content/uploads/2021/07/icon.png balance sheet – Free Bassuk http://freebassuk.com/ 32 32 Tekmar Group (LON:TGP) makes moderate use of debt https://freebassuk.com/tekmar-group-lontgp-makes-moderate-use-of-debt/ Wed, 09 Mar 2022 07:47:08 +0000 https://freebassuk.com/tekmar-group-lontgp-makes-moderate-use-of-debt/ Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett said “volatility is far from synonymous with risk.” So it may be obvious that you need to take debt into account when thinking about the risk of a given stock, because too much debt can […]]]>

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett said “volatility is far from synonymous with risk.” So it may be obvious that you need to take debt into account when thinking about the risk of a given stock, because too much debt can sink a business. We can see that Tekmar Group plc (LON:TGP) uses debt in its business. But the real question is whether this debt makes the business risky.

What risk does debt carry?

Debt helps a business until the business struggles to pay it back, either with new capital or with free cash flow. In the worst case, a company can go bankrupt if it cannot pay its creditors. Although not too common, we often see companies in debt permanently diluting their shareholders because lenders force them to raise capital at a ridiculous price. Of course, the advantage of debt is that it often represents cheap capital, especially when it replaces dilution in a business with the ability to reinvest at high rates of return. When we think about a company’s use of debt, we first look at cash and debt together.

Discover our latest analysis for Tekmar Group

What is the net debt of the Tekmar group?

As you can see below, at the end of September 2021, the Tekmar Group had a debt of £6.05m, up from £3.00m a year ago. Click on the image for more details. On the other hand, he has £3.48m in cash, resulting in a net debt of around £2.57m.

AIM: TGP Debt to Equity History March 9, 2022

A look at the liabilities of the Tekmar group

We can see from the most recent balance sheet that the Tekmar group had liabilities of £12.5m due within a year, and liabilities of £3.65m due beyond . As compensation for these obligations, it had cash of £3.48 million as well as receivables valued at £17.4 million maturing within 12 months. Thus, he can boast that he has £4.68 million more in liquid assets than total Passives.

This excess liquidity suggests that the Tekmar group is taking a cautious approach to debt. Given that he has easily sufficient short-term cash, we don’t think he will have any problems with his lenders. There is no doubt that we learn the most about debt from the balance sheet. But ultimately, the company’s future profitability will decide whether the Tekmar Group can strengthen its balance sheet over time. So if you are focused on the future, you can check out this free report showing analyst earnings forecast.

Last year, the Tekmar Group recorded a loss before interest and tax and actually cut its revenue by 20%, to £31million. This is not what we hope to see.

Caveat Emptor

While Tekmar Group’s declining revenue is about as comforting as a wet blanket, arguably its loss of earnings before interest and taxes (EBIT) is even less appealing. Indeed, it lost a very considerable £3.6 million in EBIT. On the plus side, the company has adequate liquid assets, giving it time to grow and expand before its debt becomes a short-term issue. Still, we would be more encouraged to study the business in depth if it already had free cash flow. This one is a little too risky for our liking. There is no doubt that we learn the most about debt from the balance sheet. However, not all investment risks reside on the balance sheet, far from it. Know that Tekmar Group shows 2 warning signs in our investment analysis you should know…

In the end, sometimes it’s easier to focus on companies that don’t even need to take on debt. Readers can access a list of growth stocks with no net debt 100% freeat present.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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Sanlorenzo (BIT:SL) appears to be using debt sparingly https://freebassuk.com/sanlorenzo-bitsl-appears-to-be-using-debt-sparingly/ Sat, 05 Mar 2022 07:34:12 +0000 https://freebassuk.com/sanlorenzo-bitsl-appears-to-be-using-debt-sparingly/ Berkshire Hathaway’s Charlie Munger-backed outside fund manager Li Lu is quick to say, “The biggest risk in investing isn’t price volatility, but whether you’re going to suffer a permanent loss of capital “. It’s natural to consider a company’s balance sheet when looking at its riskiness, as debt is often involved when a company fails. […]]]>

Berkshire Hathaway’s Charlie Munger-backed outside fund manager Li Lu is quick to say, “The biggest risk in investing isn’t price volatility, but whether you’re going to suffer a permanent loss of capital “. It’s natural to consider a company’s balance sheet when looking at its riskiness, as debt is often involved when a company fails. We note that Sanlorenzo Spa (BIT:SL) has debt on its balance sheet. But should shareholders worry about its use of debt?

When is debt dangerous?

Debt and other liabilities become risky for a business when it cannot easily meet those obligations, either with free cash flow or by raising capital at an attractive price. Ultimately, if the company cannot meet its legal debt repayment obligations, shareholders could walk away with nothing. However, a more common (but still painful) scenario is that it has to raise new equity at a low price, thereby permanently diluting shareholders. Of course, debt can be an important tool in businesses, especially capital-intensive businesses. The first thing to do when considering how much debt a business has is to look at its cash and debt together.

See our latest analysis for Sanlorenzo

What is Sanlorenzo’s debt?

You can click on the chart below for historical figures, but it shows Sanlorenzo had €100.9m in debt in September 2021, up from €106.6m a year earlier. However, he has €139.1m in cash which offsets this, leading to a net cash of €38.3m.

BIT:SL Debt to Equity March 5, 2022

How strong is Sanlorenzo’s balance sheet?

According to the last published balance sheet, Sanlorenzo had liabilities of €265.5 million maturing within 12 months and liabilities of €76.3 million maturing beyond 12 months. In return for these obligations, it had cash of €139.1 million as well as receivables worth €125.6 million at less than 12 months. Thus, its liabilities outweigh the sum of its cash and (short-term) receivables by €77.1 million.

Given that Sanlorenzo has a market capitalization of €1.11 billion, it’s hard to believe that these liabilities pose a big threat. But there are enough liabilities that we certainly recommend that shareholders continue to monitor the balance sheet in the future. Despite its notable liabilities, Sanlorenzo has a net cash position, so it’s fair to say that it’s not heavily leveraged!

On top of that, we are pleased to report that Sanlorenzo increased its EBIT by 76%, reducing the specter of future debt repayments. The balance sheet is clearly the area to focus on when analyzing debt. But ultimately, the company’s future profitability will decide whether Sanlorenzo can strengthen its balance sheet over time. So if you are focused on the future, you can check out this free report showing analyst earnings forecast.

Finally, a business needs free cash flow to pay off its debts; book profits are not enough. Sanlorenzo may have net cash on the balance sheet, but it’s always interesting to see how well the company converts its earnings before interest and taxes (EBIT) into free cash flow, as this will influence both its need and its ability to manage debt. Over the past three years, Sanlorenzo has recorded a free cash flow of 47% of its EBIT, which is lower than expected. It’s not great when it comes to paying off debt.

Abstract

While it is always a good idea to look at a company’s total liabilities, it is very reassuring that Sanlorenzo has 38.3 million euros in net cash. And we liked the look of EBIT growth of 76% YoY last year. So is Sanlorenzo’s debt a risk? This does not seem to us to be the case. There is no doubt that we learn the most about debt from the balance sheet. However, not all investment risks reside on the balance sheet, far from it. Example: we have identified 2 warning signs for Sanlorenzo you should be aware.

If, after all that, you’re more interested in a fast-growing company with a strong balance sheet, check out our list of cash-neutral growth stocks right away.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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I View Splunk as a Business, Not an Investment: Here’s Why https://freebassuk.com/i-view-splunk-as-a-business-not-an-investment-heres-why/ Thu, 03 Mar 2022 15:30:00 +0000 https://freebassuk.com/i-view-splunk-as-a-business-not-an-investment-heres-why/ One of the former “Cloud Kings” who had fallen on hard times lately, Splunk (SPLK) hosted a big “news” night on Wednesday night, less than a month after the Wall Street Journal reported that Cisco Systems (CSCO) had made a run at the company, but the subject was no longer under discussion. The company reported […]]]>

One of the former “Cloud Kings” who had fallen on hard times lately, Splunk (SPLK) hosted a big “news” night on Wednesday night, less than a month after the Wall Street Journal reported that Cisco Systems (CSCO) had made a run at the company, but the subject was no longer under discussion. The company reported better-than-expected financial performance in the fourth quarter and finally named a new CEO. The company had spent months with board chairman Graham Smith as interim CEO as the search continued toward a conclusion.

For the fourth quarter, Splunk posted GAAP EPS of a loss of $0.88 per share, better than expected as it includes or rather does not adjust for stock-based compensation, amortization of intangible assets, restructuring charges or non-cash interest expense related to convertible senior notes. On an adjusted basis, the firm posted EPS of $0.67, which crushed it. Splunk also generated $901.119 million in revenue, easily beating Wall Street (by over $100 million) and enough for 20.9% annual growth.

A new boss

Splunk also announced that Gary Steele has been named the company’s new chief executive officer and member of the board of directors, effective April 11. Steele has over 30 years of experience and experience scaling SaaS operations, while building multi-billion dollar businesses. Steel was the founding CEO of Proofpoint, growing that company from start-up to publicly traded SaaS provider for some major large-cap clients. Prior to that, Steele served as CEO of Portera and held leadership positions at Sybase, Sun Microsystems and Hewlett-Packard (HPE).

Commenting on the hire, Graham Smith said, “Gary is a visionary leader whose expertise in software and cybersecurity, his deep understanding of SaaS and recurring revenue models, and his unwavering commitment to driving innovation and customer success globally will be invaluable to Splunk on our journey. to $5 billion (in annual revenue) and beyond.” In response, Steele said… “Splunk has incredible talent and an innovative, customer-centric philosophy. I can’t wait to get started and earn the right to call myself Splunker.” Smith will return to his sole role as chairman as soon as Steele joins the company.

Beyond the headlines

For the quarter, Cloud ARR (annual recurring revenue) grew 65% to $1.34 billion. Total ARR increased by 32% to $3.12 billion. Cloud revenue grew 69% to $289 million. The total number of customers generating a cloud ARR greater than $1 million increased by 70% to 317. The total number of customers generating a total ARR greater than $1 million increased by 32% to 675.

For the full year, cloud revenue grew 70% to $944 million. Total revenue generated increased by 20% to $2.67 billion. Operating cash flow printed at $128 million, producing $117 million of free cash flow.

During the quarter, Splunk joined the US Cybersecurity and Infrastructure Security Agency’s Joint Cyber ​​Security Collaborative and won the Naval Information Warfare Systems Command Award.

Advice

For the current quarter, Splunk is forecasting revenue of $615 million to $635 million, bringing the low end above the $609 million Wall Street was seeking. The adjusted operating margin should be between -20% and -25%.

For the full year, Cloud ARR is estimated to be a minimum of $2 billion, with a total ARR of approximately $3.9 billion. Total revenue is projected between $3.25 billion and $3.3 billion, versus a consensus of just over $3 billion. The adjusted operating margin for the full year should be between 0% and +2%. Cash flow from operations is expected to reach or exceed $400 million.

Balance sheet

Over the past 12 months, the company’s net cash position has declined, not by much, to $1.714 billion. This reduction is more than offset by an increase in accounts receivable, bringing current assets slightly to $3.276 billion. Current liabilities are $2.098 billion, which is up quite significantly, due to the growth in deferred revenue. At a current ratio of 1.56, I don’t see a brewing problem in Splunk to meet all short to medium term obligations. Total assets of $5.79 billion, which is down, still outweighs total liabilities less equity of $5.568 billion. This total liability less equity count was up 30% from a year ago, driven by growth in net convertible senior notes. I know this is common practice on Wall Street. You know that kind of non-routine action on the balance sheet, even if it won’t matter today or even this year, makes me uncomfortable.

Wall Street

By my count, six sell-side analysts rated five stars by TipRanks have given their opinion on Splunk since the quarterly earnings release and new CEO announcement. We have three “buy” or “equivalent buy” ratings and three “hold” or “equivalent hold” ratings. The average target price of the six is ​​equal to $147. The highest target among these six is ​​$175 (Matthew Hedberg of RBC Capital), while the lowest target is $130 (Gregg Moskowitz of Mizuho Securities).

Table

At first glance, there is something to like about this painting. The stock is anything but technically overbought. It would seem that if the stock can take and then hold the 50-day SMA at $117.52 and the 21-day EMA at $118.35, then a serious run can be made to the 200-day SMA ($134.81 ) and at the 38.2% Fibonacci retracement level ($132.65). ) of the massive sale from November to December. By the time SPLK gets there, these two resistance levels might be about to merge into one.

My problem with this chart is the action experienced since December. Let me show you what I mean…

Do you see the foundation of a base pattern that has formed a flat base? Not really, no ? Do you see a “rising wedge”? I think I can. A rising wedge for new kids is a bearish pattern even though the underlying security increases as the pattern builds. The explosive move most often when you see a wedge going up or down is in the opposite direction.

My thought

For two reasons… the possible rising wedge above and the lack of an attractive long-term balance sheet (in my opinion), I would consider SPLK a trader, not an investment, at least not as long as we haven’t seen new CEO Gary Steele in action. It’s not that I don’t think Splunk can pull it off, it’s just that they’re going to have to show me that they can.

(CSCO is a holding company of Member Club Action Alerts PLUS. Want to be alerted before AAP buys or sells this stock? Learn more now.)

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UMB FINANCIAL CORP MANAGEMENT REPORT OF FINANCIAL POSITION AND RESULTS OF OPERATIONS (Form 10-K) https://freebassuk.com/umb-financial-corp-management-report-of-financial-position-and-results-of-operations-form-10-k/ Thu, 24 Feb 2022 16:20:04 +0000 https://freebassuk.com/umb-financial-corp-management-report-of-financial-position-and-results-of-operations-form-10-k/ Management discussion and analysis This Management's Discussion and Analysis highlights the material changes in the results of operations and changes in financial condition for each of the three years in the period ended December 31, 2021. It should be read in conjunction with the accompanying Consolidated Financial Statements, Notes to Consolidated Financial Statements, and other […]]]>

Management discussion and analysis


This Management's Discussion and Analysis highlights the material changes in the
results of operations and changes in financial condition for each of the three
years in the period ended December 31, 2021. It should be read in conjunction
with the accompanying Consolidated Financial Statements, Notes to Consolidated
Financial Statements, and other financial statistics appearing elsewhere in this
Annual Report on Form 10-K. Results of operations for the periods included in
this review are not necessarily indicative of results to be attained during any
future period.

CAUTION REGARDING FORWARD-LOOKING STATEMENTS


From time to time the Company has made, and in the future will make,
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements can be identified by the fact
that they do not relate strictly to historical or current facts. Forward-looking
statements often use words such as "believe," "expect," "anticipate," "intend,"
"estimate," "project," "outlook," "forecast," "target," "trend," "plan," "goal,"
or other words of comparable meaning or future-tense or conditional verbs such
as "may," "will," "should," "would," or "could." Forward-looking statements
convey the Company's expectations, intentions, or forecasts about future events,
circumstances, results, or aspirations.

This report, including any information incorporated by reference in this report,
contains forward-looking statements. The Company also may make forward-looking
statements in other documents that are filed or furnished with the SEC. In
addition, the Company may make forward-looking statements orally or in writing
to investors, analysts, members of the media, or others.

All forward-looking statements, by their nature, are subject to assumptions,
risks, and uncertainties, which may change over time and many of which are
beyond the Company's control. You should not rely on any forward-looking
statement as a prediction or guarantee about the future. Actual future
objectives, strategies, plans, prospects, performance, conditions, or results
may differ materially from those set forth in any forward-looking statement.
While no list of assumptions, risks, or uncertainties could be complete, some of
the factors that may cause actual results or other future events, circumstances,
or aspirations to differ from those in forward-looking statements include:
     •    local, regional, national, or international business, economic, or
          political conditions or events;

• changes in laws or the regulatory environment, including as a result of

financial services laws or regulations;

• changes in monetary, tax or trade laws or policies, including as a

          result of actions by central banks or supranational authorities;


  • changes in accounting standards or policies;

• changes in investor sentiment or behavior towards the securities, capital or

          other financial markets, including changes in market liquidity or
          volatility or changes in interest or currency rates;

• changes in corporate or household spending, borrowing or saving;

• the Company’s ability to effectively manage its capital or liquidity or to

effectively attracting or deploying deposits;

• changes to any credit rating assigned to the Company or its affiliates;



  • adverse publicity or other reputational harm to the Company;


     •    changes in the Company's corporate strategies, the composition of its
          assets, or the way in which it funds those assets;


     •    the Company's ability to develop, maintain, or market products or

services or to absorb unforeseen costs or liabilities associated with

such products or services;

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• the Company’s ability to innovate to anticipate the needs of current markets or

future customers, to compete successfully in their chosen professions,

increase or maintain market share in changing competitive environments,

or to address price or other competitive pressures;

• changes in the credit, liquidity or any other condition of the assets of the Company

customers, counterparties or competitors;

• the Company’s ability to deal effectively with economic, commercial or

market slowdowns or disruptions;

• investigations, legal, regulatory or administrative proceedings,

          disputes, or rulings that create uncertainty for, or are adverse to, the
          Company or the financial-services industry;

• the Company’s ability to cope with the evolution or strengthening of regulations or

other governmental oversight or requirements;

• the Company’s ability to maintain secure and functional finances,

accounting, technology, data processing or other operating systems or

its facilities, including its ability to withstand cyberattacks;

• the adequacy of corporate governance, risk management

          framework, compliance programs, or internal controls, including its
          ability to control lapses or deficiencies in financial reporting or to
          effectively mitigate or manage operational risk;


     •    the efficacy of the Company's methods or models in assessing business
          strategies or opportunities or in valuing, measuring, monitoring, or
          managing positions or risk;


     •    the Company's ability to keep pace with changes in technology that

affect the Company or its customers, counterparties or competitors;


     •    mergers, acquisitions, or dispositions, including the Company's ability
          to integrate acquisitions and divest assets;

• the adequacy of the Company’s succession plan for the main executives or

other staff;

• the Company’s ability to increase its revenues, control its expenses or attract and

          retain qualified employees;


     •    natural disasters, war, terrorist activities, pandemics, or the outbreak
          of COVID-19 or similar outbreaks, and their effects on economic and
          business environment in which the Company operates;

• adverse effects due to COVID-19 on the Company and its customers,

          counterparties, employees, and third-party service providers, and the
          adverse impacts to its business, financial position, results of
          operations, and prospects; or

• other assumptions, risks or uncertainties described in the Risk Factors

(Item 1A), Management report and analysis of the financial situation

and results of operations (heading 7), or the notes to the consolidated statements

          Financial Statements (Item 8) in this Annual Report on Form 10-K or
          described in any of the Company's annual, quarterly or current reports.


Any forward-looking statement made by the Company or on its behalf speaks only
as of the date that it was made. The Company does not undertake to update any
forward-looking statement to reflect the impact of events, circumstances, or
results that arise after the date that the statement was made, except as
required by applicable securities laws. You, however, should consult further
disclosures (including disclosures of a forward-looking nature) that the Company
may make in any subsequent Annual Report on Form 10-K, Quarterly Report on Form
10-Q, or Current Report on Form 8-K.

Operating results

Overview


During the first quarter of 2020, the global economy began experiencing a
downturn related to the impacts of the COVID-19 global pandemic (the COVID-19
pandemic, or the pandemic). Such impacts have included significant volatility in
the global stock and fixed income markets, a 150-basis-point reduction in the
target federal funds rate, the enactment of the Coronavirus Aid, Relief, and
Economic Security (CARES) Act and the American Rescue Plan Act of 2021, both
authorizing the Paycheck Protection Program (PPP) administered by the Small
Business Administration, and a variety of rulings from the Company's banking
regulators.


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The Company continues to actively monitor developments related to COVID-19 and
its impact to its business, customers, employees, counterparties, vendors, and
service providers. During the year ended December 31, 2021, the Company's
results of operations included continued maintenance of the allowance for credit
losses (ACL) at a level appropriate given the state of key macroeconomic
variables utilized in the econometric models at December 31, 2021. Additionally,
the Company continued to see impacts of the volatile equity and debt markets and
low interest rate environment in its fee-based businesses.

In response to the COVID-19 pandemic, the Company formed a Pandemic Taskforce
and a steering group comprised of associates across multiple lines of business
and support functions and has taken several actions to offer various forms of
support to its customers, employees, and communities that have experienced
impacts resulting from the COVID-19 pandemic. The Company has also increased
purchases of computer hardware to support a remote workforce, as well as
incurred additional cleaning and janitorial expense to disinfect branch and
office locations. The Company has actively worked with customers impacted by the
economic downturn by offering payment deferrals and other loan
modifications. See further details under "Credit Risk Management" within "Item
7A. Quantitative and Qualitative Disclosures about Market Risk."

The COVID-19 pandemic and stay-at-home and similar mandates have also
necessitated certain actions related to the way the Company operates its
business. The Company transitioned most of its workforce off-site or to
work-from-home to help mitigate health risks and is currently moving forward
with plans to bring associates back in the office in a phased approach during
the first half of 2022. The Company is also carefully monitoring the activities
of its vendors and other third-party service providers to mitigate the risks
associated with any potential service disruptions.

The Company has detailed the impact of the COVID-19 pandemic in each applicable section of the “MD&A and Analysis of Financial Condition and Results of Operations” below.


The Company focuses on the following four core financial objectives. Management
believes these objectives will guide its efforts to achieve its vision, to
deliver the Unparalleled Customer Experience, all while seeking to improve net
income and strengthen the balance sheet while undertaking prudent risk
management.

The first financial objective is to continuously improve operating efficiencies.
The Company has focused on identifying efficiencies that simplify its
organizational and reporting structures, streamline back office functions and
take advantage of synergies and newer technologies among various platforms and
distribution networks. The Company has identified and expects to continue
identifying ongoing efficiencies through the normal course of business that,
when combined with increased revenue, will contribute to improved operating
leverage. For 2021, total revenue decreased 0.7%, and noninterest expense
increased 1.4%, as compared to the previous year. Revenue for 2020 included a
gain on the Company's investment in Tattooed Chef, Inc. (TTCF) of $108.8
million. Revenue for 2021 included a loss of $15.4 million on TTCF. The Company
continues to invest in technological advances that it believes will help
management drive operating leverage in the future through improved data analysis
and automation. The Company also continues to evaluate core systems and will
invest in enhancements that it believes will yield operating efficiencies.

The second financial objective is to increase net interest income through
profitable loan and deposit growth and the optimization of the balance
sheet. For 2021, net interest income increased $84.3 million, or 11.5%, as
compared to the previous year. The Company has shown increased net interest
income through the effects of increased volume, the mix of average earning
assets, and PPP income. Loans recorded under the PPP increased loan interest
income by $12.4 million in 2021 as compared to 2020. The additional increase in
interest income was driven by increased loan and securities balances and
liquidity. These increases were offset by a lower rate environment. Average
earning assets increased $6.7 billion, or 24.7%, compared to 2020. Average loan
balances increased $1.5 billion, average securities increased $2.2 billion, and
average interest-bearing due from banks increased $2.8 billion from prior year.
Average PPP loans decreased $229.0 million. The funding for these assets was
driven primarily by a 17.5% increase in average interest-bearing liabilities and
43.5% increase in noninterest-bearing deposits. Net interest margin, on a
tax-equivalent basis, decreased 31 basis points compared to the same period in
2020.

The third financial objective is to grow the Company's revenue from noninterest
sources. The Company seeks to grow noninterest revenues throughout all economic
and interest rate cycles, while positioning itself to benefit in periods of
economic growth. Noninterest income decreased $93.0 million, or 16.6%, to $467.2
million for the year ended December 31, 2021, compared to the same period in
2020. This decrease was primarily driven by the $108.8

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million gain on the Company's investment in TTCF in 2020, coupled with a loss on
TTCF of $15.4 million in 2021. The decreased revenue attributed to TTCF is
offset by increased fund services income and corporate trust income. These
changes are discussed in greater detail below under Noninterest income. As of
December 31, 2021, noninterest income represented 36.4% of total revenues, as
compared to 43.4% for 2020.

The fourth financial objective is effective capital management. The Company
places a significant emphasis on maintaining a strong capital position, which
management believes promotes investor confidence, provides access to funding
sources under favorable terms, and enhances the Company's ability to capitalize
on business growth and acquisition opportunities. The Company continues to
maximize shareholder value through a mix of reinvesting in organic growth,
evaluating acquisition opportunities that complement the Company's strategies,
increasing dividends over time, and appropriately utilizing a share repurchase
program. At December 31, 2021, the Company had a total risk-based capital ratio
of 13.88% and $3.1 billion in total shareholders' equity, an increase of $128.5
million, or 4.3%, compared to total shareholders' equity at December 31, 2020.
The Company repurchased 68 thousand shares of common stock at an average price
of $81.36 per share during 2021 and declared $67.3 million in dividends, which
represents a 10.9% increase compared to dividends declared during 2020.

Earnings Summary


The Company recorded consolidated net income of $353.0 million for the year
ended December 31, 2021. This represents a 23.2% increase over 2020. Net income
for 2020 was $286.5 million, or an increase of 17.6% compared to 2019. Basic
earnings per share for the year ended December 31, 2021, were $7.31 per share
compared to $5.95 per share in 2020, an increase of 22.9%. Basic earnings per
share were $4.99 per share in 2019, or an increase of 19.2% from 2019 to 2020.
Fully diluted earnings per share increased 22.1% from 2020 to 2021 and increased
19.6% from 2019 to 2020. Return on average assets and return on average common
shareholder's equity for the year ended December 31, 2021 were 1.00% and 11.43%,
respectively, compared to 1.00% and 10.21%, respectively, for the year ended
December 31, 2020. Return on average assets and return on average common
shareholder's equity for the year ended December 31, 2019 were 1.02% and 9.94%,
respectively.

The Company's net interest income increased to $815.5 million in 2021 compared
to $731.2 million in 2020 and $670.9 million in 2019. In total, net interest
income increased $84.3 million, as compared to 2020, primarily driven by a
favorable volume variance of $85.0 million. See Table 2. The favorable volume
variance on earning assets was predominantly driven by an increase of $6.7
billion in average earning assets, or 24.7%. Average interest-bearing due from
banks increased $2.8 billion, average securities balances increased $2.2
billion, and average loan balances increased $1.5 billion for 2021 compared to
the same period in 2020. Net interest margin, on a fully tax-equivalent basis
(FTE), decreased to 2.50% for 2021, compared to 2.81% for the same period in
2020, as the asset yields and the cost of interest-bearing liabilities
decreased, coupled with an increased balance sheet. This created significant
margin compression. The Company has seen a decrease in the benefit from
interest-free funds as compared to 2020 driven by the lower rate
environment. The impact of this benefit decreased seven basis points compared to
2020 and is illustrated on Table 3. The magnitude and duration of this impact
will be largely dependent upon the FRB's policy decisions and market movements.
See Table 18 in Item 7A for an illustration of the impact of an interest rate
increase or decrease on net interest income as of December 31, 2021.

The provision for credit losses totaled $20.0 million for the year ended
December 31, 2021, which is a decrease of $110.5 million, or 84.7%, compared to
the same period in 2020. This change is the result of the adoption of the CECL
standard in 2020 and applying this methodology for computing the allowance for
credit losses, coupled with the impacts of the current and forecasted economic
environment related to the COVID-19 pandemic. See further discussion in
"Provision and Allowance for Credit Losses" in this report.

The Company had a decrease of $93.0 million, or 16.6%, in noninterest income in
2021, as compared to 2020, and an increase of $133.4 million, or 31.3%, in 2020,
compared to 2019. The decrease in 2021 and increase in 2020 is primarily
attributable to a decrease of $115.6 million and an increase of $118.4 million
in Investment securities gains, net. This is primarily driven by the $108.8
million gain on the Company's investment in TTCF in 2020 and a loss of $15.4
million in 2021. The decrease in 2021 is also impacted by increased fund
services income, corporate trust, and bankcard income. These are offset by a
decrease in brokerage income. The change in noninterest income in 2021 from
2020, and 2020 from 2019 is illustrated in Table 6.

Non-interest expense increased in 2021 by $11.6 millioni.e. 1.4%, compared to 2020 and increased by $43.1 millionor 5.5%, in 2020 compared to 2019. The increase in 2021 is mainly attributable to the increase in processing

                                       27
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fees and salary and employee benefits expense, offset by lower operating losses
and equipment expense. The increase in noninterest expense in 2021 from 2020,
and 2020 from 2019 is illustrated in Table 7.

Net interest income


Net interest income is a significant source of the Company's earnings and
represents the amount by which interest income on earning assets exceeds the
interest expense paid on liabilities. The volume of interest earning assets and
the related funding sources, the overall mix of these assets and liabilities,
and the interest rates paid on each affect net interest income. Table 2
summarizes the change in net interest income resulting from changes in volume
and rates for 2021, 2020 and 2019.

Net interest margin, presented in Table 1, is calculated as net interest income
on a fully tax- equivalent basis as a percentage of average earning assets. Net
interest income is presented on a tax-equivalent basis to adjust for the
tax-exempt status of earnings from certain loans and investments, which are
primarily obligations of state and local governments. A critical component of
net interest income and related net interest margin is the percentage of earning
assets funded by interest-free sources. Table 3 analyzes net interest margin for
the three years ended December 31, 2021, 2020 and 2019. Net interest income,
average balance sheet amounts and the corresponding yields earned and rates paid
for the years 2019 through 2021 are presented in Table 1 below.

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The following table presents, for the periods indicated, the average earning
assets and resulting yields, as well as the average interest-bearing liabilities
and resulting yields, expressed in both dollars and rates.

Table 1


THREE YEAR AVERAGE BALANCE SHEETS/YIELDS AND RATES (tax-equivalent basis)
(in millions)

                                                         2021                                               2020
                                                      Interest                                           Interest
                                      Average          Income/        Rate Earned/       Average          Income/        Rate Earned/
                                      Balance        Expense (1)        Paid (1)         Balance        Expense (1)        Paid (1)
ASSETS
Loans and loans held for sale
(FTE) (2) (3)                       $  16,629.9     $       619.3             3.72 %   $  15,126.1     $       586.0             3.87 %
Securities:
Taxable                                 7,422.4             127.6             1.72         5,256.7             105.7             2.01
Tax-exempt (FTE)                        4,247.0             124.5             2.93         4,226.4             126.3             2.99
Total securities                       11,669.4             252.1             2.16         9,483.1             232.0             2.45
Federal funds sold and resell
agreements                              1,234.5              10.1             0.81         1,099.4              11.8             1.08
Interest-bearing due from banks         4,063.1               5.4             0.13         1,218.9               3.8             0.31
Other earning assets (FTE)                 23.5               1.0             4.33            37.1               1.6             4.28
Total earning assets (FTE)             33,620.4             887.9             2.64        26,964.6             835.2             3.10
Allowance for credit losses              (204.7 )                                           (184.5 )
Cash and due from banks                   460.1                                              440.5
Other assets                            1,452.8                                            1,347.5
Total assets                        $  35,328.6                                        $  28,568.1

LIABILITIES AND SHAREHOLDERS'
EQUITY
Interest-bearing demand and
savings deposits                    $  16,982.9     $        24.1             0.14 %   $  14,446.2     $        49.1             0.34 %
Time deposits under $250,000              242.0               0.8             0.33           488.3               5.0             1.02
Time deposits of $250,000 or more         453.2               1.5             0.33           402.0               4.1             1.02
Total interest-bearing deposits        17,678.1              26.4             0.15        15,336.5              58.2             0.38
Borrowed funds                            270.5              12.7             4.68           137.0               7.3             5.30
Federal funds purchased                   163.8                 -             0.04            60.3               0.2             0.26
Securities sold under agreements
to repurchase                           2,454.3               6.9             0.28         1,963.5              11.6             0.59
Total interest-bearing
liabilities                            20,566.7              46.0             0.22        17,497.3              77.3             0.44
Noninterest-bearing demand
deposits                               11,254.8                                            7,845.6
Other                                     418.0                                              420.2
Total                                  32,239.5                                           25,763.1
Total shareholders' equity              3,089.1                                            2,805.0
Total liabilities and
shareholders' equity                $  35,328.6                                        $  28,568.1
Net interest income (FTE)                           $       841.9                                      $       757.9
Net interest spread (FTE)                                                     2.42 %                                             2.66 %
Net interest margin (FTE)                                                     2.50 %                                             2.81 %


(1) Interest income and yield are expressed on an ETP basis, using marginal tax

rate of 21% for 2021, 2020 and 2019. Tax-equivalent interest income and

returns take into account tax-exempt interest income net of refusal to

interest expense, for federal income tax purposes, relating to certain

non-taxable assets. Rates earned/paid may not match rates shown due to

presentation in millions. The tax-equivalent interest income amounts to $26.3

     million, $26.7 million, and $24.0 million in 2021, 2020, and 2019,
     respectively.

(2) Loan fees are included in interest income. These costs totaled $17.1 million,

$13.7 millionand $14.5 million in 2021, 2020 and 2019, respectively.

(3) Unaccrued loans are included in the calculation of the average

sales. Interest income on these loans is also included in loan income.

                                       29
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THREE YEAR AVERAGE BALANCE SHEETS/YIELDS AND RATES (tax-equivalent basis)
(in millions)

                                                                       2019
                                                                    Interest
                                                   Average          Income/          Rate Earned/
                                                   Balance        Expense (1)          Paid (1)
ASSETS
Loans and loans held for sale (FTE) (2) (3)      $  12,764.6     $        637.9               5.00 %
Securities:
Taxable                                              4,524.9              106.1               2.34
Tax-exempt (FTE)                                     3,797.0              113.7               3.00
Total securities                                     8,321.9              219.8               2.64
Federal funds sold and resell agreements               535.4               13.8               2.59
Interest-bearing due from banks                        584.8               12.9               2.20
Other earning assets (FTE)                              52.3                2.5               4.79
Total earning assets (FTE)                          22,259.0              886.9               3.98
Allowance for credit losses                           (107.4 )
Cash and due from banks                                454.6
Other assets                                         1,178.4
Total assets                                     $  23,784.6

LIABILITIES AND EQUITY Sight deposits and interest-bearing savings deposits $12,161.8 $138.7

               1.14 %
Time deposits under $250,000                           366.3                5.6               1.53
Time deposits of $250,000 or more                      644.1                9.9               1.54
Total interest-bearing deposits                     13,172.2              154.2               1.17
Borrowed funds                                          69.8                5.2               7.51
Federal funds purchased                                123.9                2.7               2.13
Securities sold under agreements to repurchase       1,533.4               29.9               1.95
Total interest-bearing liabilities                  14,899.3              192.0               1.29
Noninterest-bearing demand deposits                  6,132.2
Other                                                  301.3
Total                                               21,332.8
Total shareholders' equity                           2,451.8
Total liabilities and shareholders' equity       $  23,784.6
Net interest income (FTE)                                        $        694.9
Net interest spread (FTE)                                                                     2.69 %
Net interest margin (FTE)                                                                     3.12 %




                                       30
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Table 2

RATE-VOLUME ANALYSIS (in thousands)


This analysis attributes changes in net interest income either to changes in
average balances or to changes in average interest rates for earning assets and
interest-bearing liabilities. The change in net interest income that is due to
both volume and interest rate has been allocated to volume and interest rate in
proportion to the relationship of the absolute dollar amount of the change in
each. All interest rates are presented on a tax-equivalent basis and give effect
to tax-exempt interest income net of the disallowance of interest expense for
federal income tax purposes, related to certain tax-free assets. The loan
average balances and rates include nonaccrual loans.

       Average Volume                 Average Rate                                              Increase (Decrease)
    2021             2020           2021         2020            2021 vs. 2020          Volume         Rate          Total
                                                            Change in interest
                                                            earned on:
$ 16,629,867     $ 15,126,110         3.72 %       3.87 %   Loans                      $  56,636     $ (23,320 )   $  33,316
                                                            Securities:
   7,422,432        5,256,715         1.72         2.01     Taxable                       38,880       (16,956 )      21,924
   4,246,943        4,226,363         2.93         2.99     Tax-exempt                       689        (2,204 )      (1,515 )
                                                            Federal funds and resell
   1,234,533        1,099,447         0.81         1.08     agreements                     1,336        (3,128 )      (1,792 )
                                                           

Due bearing interest

   4,063,089        1,218,919         0.13         0.31     from banks                     4,757        (3,084 )       1,673
      23,480           37,086         4.33         4.28     Trading securities              (592 )          19          (573 )
  33,620,344       26,964,640         2.64         3.10     Total                        101,706       (48,673 )      53,033
                                                            Change in interest
                                                            incurred on:
                                                            Interest-bearing
  17,678,122       15,336,492         0.15         0.38     deposits                       7,804       (39,606 )     (31,802 )
     163,744           60,314         0.04         0.26     Federal funds purchased          119          (206 )         (87 )
                                                            Securities sold under
   2,454,290        1,963,499         0.28         0.59     agreements to repurchase       2,414        (7,180 )      (4,766 )
     270,498          136,957         4.68         5.30     Borrowed Funds                 6,337          (941 )       5,396
$ 20,566,654     $ 17,497,262         0.22 %       0.44 %   Total                         16,674       (47,933 )     (31,259 )
                                                            Net interest income        $  85,032     $    (740 )   $  84,292



       Average Volume                 Average Rate                                                Increase (Decrease)
    2020             2019           2020         2019             2020 vs. 2019          Volume          Rate          Total
                                                            Change in interest earned
                                                            on:

$15,126,110 $12,764,623 3.87% 5.00% Loans

             $ 106,011     $ (157,899 )   $  (51,888 )
                                                            Securities:

5,256,715 4,524,955 2.01 2.34 Taxable

                15,854        (16,206 )         (352 )
   4,226,363        3,796,983         2.99         3.00     Tax-exempt                     10,048           (292 )        9,756
                                                            Federal funds and resell
   1,099,447          535,393         1.08         2.59     agreements                      9,107        (11,110 )       (2,003 )
                                                            

Interest bearers due from

   1,218,919          584,756         0.31         2.20     banks                           7,267        (16,405 )       (9,138 )
      37,086           52,306         4.28         4.79     Trading securities               (569 )         (209 )         (778 )
  26,964,640       22,259,016         3.10         3.98     Total                         147,718       (202,121 )      (54,403 )
                                                            Change in interest
                                                            incurred on:

15,336,492 13,172,181 0.38 1.17 Interest-bearing deposits 21,986 (117,964 ) (95,978 )

      60,314          123,871         0.26         2.13     Federal funds purchased          (916 )       (1,565 )       (2,481 )
                                                            Securities sold under
   1,963,499        1,533,412         0.59         1.95     agreements to repurchase        6,904        (25,189 )      (18,285 )
     136,957           69,809         5.30         7.51     Borrowed Funds                  3,906         (1,889 )        2,017
$ 17,497,262     $ 14,899,273         0.44 %       1.29 %   Total                          31,880       (146,607 )     (114,727 )
                                                            Net interest income         $ 115,838     $  (55,514 )   $   60,324




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Table 3

ANALYSIS OF NET INTEREST MARGIN (in thousands)

                                                    2021             2020             2019
Average earning assets                          $ 33,620,344     $ 26,964,640     $ 22,259,016
Interest-bearing liabilities                      20,566,654       17,497,262       14,899,273
Interest-free funds                             $ 13,053,690     $  9,467,378     $  7,359,743
Free funds ratio (interest free funds to
average earning assets)                                38.83 %          35.11 %          33.06 %
Tax-equivalent yield on earning assets                  2.64 %           3.10 %           3.98 %
Cost of interest-bearing liabilities                    0.22             0.44             1.29
Net interest spread                                     2.42 %           2.66 %           2.69 %
Benefit of interest-free funds                          0.08             0.15             0.43
Net interest margin                                     2.50 %           2.81 %           3.12 %



The Company experienced an increase in net interest income of $84.3 million, or
11.5%, for the year ended December 31, 2021, compared to 2020. This follows an
increase of $60.3 million, or 9.0%, for the year ended December 31, 2020,
compared to 2019. Average earning assets for the year ended December 31, 2021
increased by $6.7 billion, or 24.7%, compared to the same period in 2020. Net
interest margin, on a tax-equivalent basis, decreased to 2.50% for 2021 compared
to 2.81% in 2020.

The Company funds a significant portion of its balance sheet with
noninterest-bearing demand deposits. Noninterest-bearing demand deposits
represented 45.9%, 36.5% and 32.1% of total outstanding deposits at December 31,
2021, 2020 and 2019, respectively. As illustrated in Table 3, the impact from
these interest-free funds was eight basis points in 2021, as compared to 15
basis points in 2020 and 43 basis points in 2019.

The Company has experienced an increase in net interest income during 2021 due
to a volume variance of $85.0 million, offset by a very minimal negative rate
variance of $0.7 million. The average rate on earning assets during 2021 has
decreased by 46 basis points, while the average rate on interest-bearing
liabilities decreased by 22 basis points, resulting in a 24 basis-point decrease
in spread. The volume of loans has increased from an average of $15.1 billion in
2020 to an average of $16.6 billion in 2021 driven by organic loan growth. The
volume of interest-bearing liabilities increased from $17.5 billion in 2020 to
$20.6 billion in 2021. The Company expects to see continued volatility in the
economic markets and government responses to these changes as a result of the
COVID-19 pandemic. These changing economic conditions and governmental responses
could have impacts on the balance sheet and income statement of the Company in
2022. Loan-related earning assets tend to generate a higher spread than those
earned in the Company's investment portfolio. By design, the Company's
investment portfolio is moderate in duration and liquid in its composition of
assets.

During 2022, approximately $1.6 billion of available-for-sale securities are
expected to have principal repayments.  This includes approximately $453 million
which will have principal repayments during the first quarter of 2022.  The
available-for-sale investment portfolio had an average life of 67.6 months, 70.1
months, and 70.9 months as of December 31, 2021, 2020, and 2019, respectively.

Allowance and Provision for Credit Losses


The ACL represents management's judgment of total expected losses included in
the Company's loan portfolio as of the balance sheet date. The Company's process
for recording the ACL is based on the evaluation of the Company's lifetime
historical loss experience, management's understanding of the credit quality
inherent in the loan portfolio, and the impact of the current economic
environment, coupled with reasonable and supportable economic forecasts.

A mathematical calculation of an estimate is made to assist in determining the
adequacy and reasonableness of management's recorded ACL. To develop the
estimate, the Company follows the guidelines in Accounting Standards
Codification (ASC) Topic 326, Financial Instruments - Credit Losses (ASC
326). The estimate reserves for assets held at amortized cost and any related
credit deterioration in the Company's available-for-sale debt security
portfolio. Assets held at amortized cost include the Company's loan book and
held-to-maturity security portfolio.

                                       32
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The process involves the consideration of quantitative and qualitative factors
relevant to the specific segmentation of loans. These factors have been
established over decades of financial institution experience and include
economic observation and loan loss characteristics. This process is designed to
produce a lifetime estimate of the losses, at a reporting date, that includes
evaluation of historical loss experience, current economic conditions,
reasonable and supportable forecasts, and the qualitative framework outlined by
the Office of the Comptroller of the Currency in the published 2020 Interagency
Policy Statement. This process allows management to take a holistic view of the
recorded ACL reserve and ensure that all significant and pertinent information
is considered.

The Company considers a variety of factors to ensure the safety and soundness of
its estimate including a strong internal control framework, extensive
methodology documentation, credit underwriting standards which encompass the
Company's desired risk profile, model validation, and ratio analysis. If the
Company's total ACL estimate, as determined in accordance with the approved ACL
methodology, is either outside a reasonable range based on review of economic
indicators or by comparison of historical ratio analysis, the ACL estimate is an
outlier and management will investigate the underlying reason(s). Based on that
investigation, issues or factors that previously had not been considered may be
identified in the estimation process, which may warrant adjustments to estimated
credit losses.

The ending result of this process is a recorded consolidated ACL that represents
management's best estimate of the total expected losses included in the loan
portfolio, held-to-maturity securities, and credit deterioration in
available-for-sale securities.

Table 4 presents the components of the allowance by loan portfolio segment. The
Company manages the ACL against the risk in the entire loan portfolio and
therefore, the allocation of the ACL to a particular loan segment may change in
the future. Management of the Company believes the present ACL is adequate
considering the Company's loss experience, delinquency trends and current
economic conditions. Future economic conditions and borrowers' ability to meet
their obligations, however, are uncertainties which could affect the Company's
ACL and/or need to change its current level of provision. For more information
on loan portfolio segments and ACL methodology refer to Note 3, "Loans and
Allowance for Credit Losses," in the Notes to the Consolidated Financial
Statements.

Table 4

ALLOCATION OF PROVISION FOR CREDIT LOSSES ON CREDIT (in thousands)


This table presents an allocation of the allowance for credit losses on loans
and percent of loans to total loans by loan portfolio segment, which represents
the total expected losses derived by both quantitative and qualitative methods.
The amounts presented are not necessarily indicative of actual future
charge-offs in any particular category and are subject to change.


                                                          2021                                2020
                                              Allowance         Percent of        Allowance         Percent of
                                              for credit      loans to total      for credit      loans to total
At December 31:                                 losses            loans             losses            loans
Commercial and industrial                    $    123,732               42.3 %   $    122,700               43.8 %
Specialty lending                                   1,738                3.0            5,219                3.2
Commercial real estate                             56,265               36.5           61,931               36.7
Consumer real estate                                3,921               13.5            6,586               12.1
Consumer                                              845                0.8            1,480                0.7
Credit cards                                        6,075                2.3           15,786                2.3
Leases and other                                    2,195                1.6            2,271                1.2
Total allowance for credit losses on loans   $    194,771              100.0 %   $    215,973              100.0 %




Table 5 presents a summary of the Company's ACL for the years ended December 31,
2021 and 2020. Also, please see "Quantitative and Qualitative Disclosures About
Market Risk - Credit Risk Management" in this report for information relating to
nonaccrual, past due, restructured loans, and other credit risk matters. For
more information on loan portfolio segments and ACL methodology refer to Note 3,
"Loans and Allowance for Credit Losses," in the Notes to the Consolidated
Financial Statements.

                                       33
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As illustrated in Table 5 below, the ACL decreased as a percentage of total
loans to 1.13% as of December 31, 2021, compared to 1.34% as of December 31,
2020. The provision for credit losses, including provision for off-balance sheet
credit exposures, totaled $20.0 million for the year ended December 31, 2021,
which is a decrease of $110.5 million, or 84.7%, compared to the same period in
2020. The provision for credit losses, including provision for off-balance sheet
credit exposures, totaled $130.5 million for the year ended December 31,
2020. This decrease is the result of the impacts of the current and forecasted
economic environment related to the COVID-19 pandemic during 2020 and 2021,
coupled with various portfolio changes.

Table 5

ANALYSIS OF THE PROVISION FOR CREDIT LOSSES (in thousands)


                                                            2021            

2020

Allowance - January 1                                   $    218,583     $  

101,788

Cumulative effect adjustment(1)                                    -        

9,030

Adjusted allowance - January 1                               218,583        

110,818

Provision for credit losses                                   23,000          127,890
Charge-offs:
Commercial                                                   (13,981 )         (8,587 )
Specialty lending                                            (31,945 )              -
Commercial real estate                                        (1,198 )        (11,939 )
Consumer real estate                                             (96 )           (219 )
Consumer                                                      (2,424 )           (607 )
Credit cards                                                  (6,011 )         (7,326 )
Leases and other                                                  (8 )            (11 )
Total charge-offs                                            (55,663 )        (28,689 )
Recoveries:
Commercial and industrial                                      6,694            6,473
Specialty lending                                                187                -
Commercial real estate                                         1,560               91
Consumer real estate                                             142               69
Consumer                                                         223              307
Credit cards                                                   1,967            1,618
Leases and other                                                  18                6
Total recoveries                                              10,791            8,564
Net charge-offs                                              (44,872 )        (20,125 )
Allowance for credit losses - end of period             $    196,711     $  

218,583

Allowance for credit losses on loans                    $    194,771     $  

215,973

Allowance for credit losses on held-to-maturity
securities                                                     1,940        

2,610

Loans at end of year, net of unearned interest            17,170,871       

16,103,651

Held-to-maturity securities at end of period               1,480,416        

1,014,614

Total assets at amortized cost                            18,651,287       

17,118,265

Average loans, net of unearned interest                   16,618,350       

15,109,392

Provision for credit losses on loans to loans at the end of the period

                                                       1.13 %      

1.34% Allowance for credit losses – end of period on total assets at amortized cost

                                        1.05 %           1.28 %
Allowance as a multiple of net charge-offs                     4.38x        

10.86x

Net charge-offs to average loans                                0.27 %           0.13 %


(1) Linked to the adoption of ASU no. 2016-13. See note 2, “New accounting

Pronunciations”, for more details.

Non-interest income


A key objective of the Company is the growth of noninterest income to provide a
diverse source of revenue not directly tied to interest rates.  Fee-based
services are typically non-credit related and are not generally affected by
fluctuations in interest rates. Noninterest income decreased in 2021 by $93.0
million, or 16.6%, compared to 2020 and increased in 2020 by $133.4 million, or
31.3%, compared to 2019. The decrease in 2021 is primarily

                                       34
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attributable to a decrease in net investment securities gains, offset by an increase in fund services income, corporate trust income and bank card income. These are offset by a decrease in brokerage income. The increase in 2020 is primarily attributable to net investment securities gains, fund services revenue, and trading and investment banking revenue.


The Company's fee-based services offer multiple products and services, which
management believes will more closely align with customer product demands. The
Company is currently emphasizing fee-based services including trust and
securities processing, bankcard, securities trading and brokerage and cash and
treasury management. Management believes that it can offer these products and
services both efficiently and profitably, as most have common platforms and
support structures.

Table 6

SUMMARY OF NON-INTEREST INCOME (in thousands)

                                       Year Ended December 31,                 Dollar Change               Percent Change
                                  2021          2020          2019          21-20          20-19        21-20         20-19
Trust and securities
processing                      $ 224,126     $ 194,646     $ 176,913     $   29,480     $  17,733        15.1 %         10.0 %
Trading and investment
banking                            30,939        32,945        23,466         (2,006 )       9,479        (6.1 )         40.4
Service charges on deposit
accounts                           86,056        83,879        82,748          2,177         1,131         2.6            1.4
Insurance fees and
commissions                         1,309         1,369         1,634            (60 )        (265 )      (4.4 )        (16.2 )
Brokerage fees                     12,171        24,350        31,261        (12,179 )      (6,911 )     (50.0 )        (22.1 )
Bankcard fees                      64,576        60,544        66,727          4,032        (6,183 )       6.7           (9.3 )
Investment securities gains,
net                                 5,057       120,634         2,245       (115,577 )     118,389       (95.8 )      5,273.5
Other                              42,941        41,799        41,776          1,142            23         2.7            0.1
Total noninterest income        $ 467,175     $ 560,166     $ 426,770     $  (92,991 )   $ 133,396       (16.6 )%        31.3 %


Non-interest revenue and year-over-year changes in non-interest revenue are summarized in Table 6 above. The dollar change and percent change columns highlight the respective net increase or decrease of non-interest revenue categories in 2021 compared to 2020, and in 2020 compared to 2019.


Trust and securities processing income consists of fees earned on personal and
corporate trust accounts, custody of securities services, trust investments and
wealth management services, and mutual fund assets servicing. This income
category increased by $29.5 million, or 15.1% in 2021, compared to 2020, and
increased by $17.7 million, or 10.0%, in 2020, compared to 2019. During 2021,
fund services income increased $27.5 million and corporate trust income
increased $5.8 million, offset by a decrease in wealth management income of $3.8
million. During 2020, fund services income increased $10.6 million and corporate
trust income increased $7.2 million.

Trading and investment banking income decreased $2.0 million, or 6.1%, in 2021
compared to 2020 and increased $9.5 million, or 40.4%, in 2020 compared to
2019. The decrease in 2021 compared to 2020 was driven by slightly lower trading
volume and lower market values. The increase in 2020 compared to 2019 was driven
by increased bond trading volume.

Commissions on deposit income increased $2.2 millioni.e. 2.6%, in 2021 compared to 2020 and increased $1.1 million, or 1.4%, in 2020 compared to 2019. The increase in 2021 compared to 2020 is explained by the increase in income from rental charges. The increase in 2020 compared to 2019 is explained by the increase in revenues from health services.


Brokerage fees decreased $12.2 million, or 50.0%, in 2021 compared to 2020 and
$6.9 million, or 22.1%, in 2020 compared to 2019. These decreases were primarily
due to lower money market and 12b-1 income driven by a decrease in volume and
interest rates.

Bankcard fees increased $4.0 million, or 6.7%, in 2021 compared to 2020, and
decreased $6.2 million, or 9.3%, in 2020 compared to 2019. The increase in 2021
compared to 2020 was primarily driven by increased interchange income, offset by
increased rewards and rebate expense. The decrease in 2020 compared to 2019 was
primarily driven by decreased interchange income, offset by decreased rewards
and rebate expense.

                                       35
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Investment securities gains, net decreased $115.6 million in 2021 compared to
2020 but increased by $118.4 million in 2020 compared to 2019, primarily driven
by changes in valuation of the Company's investment in TTCF. The decrease in
2021 was driven by the $15.4 million loss in 2021 on TTCF, coupled with the
$108.8 million gain on TTCF recorded in 2020. This decrease was offset by an
increase of $5.9 million in gains on equity securities without readily
determinable fair values. The increase in 2020 was driven by the $108.8 million
gain on TTCF, an increase of $3.9 million in gains on equity securities without
readily determinable fair values, and an increase of $3.8 million in gains on
sales of available-for-sale securities.

Non-interest expenses


Noninterest expense increased in 2021 by $11.6 million, or 1.4%, compared to
2020 and increased in 2020 by $43.1 million, or 5.5%, compared to 2019. From
2020 to 2021 the increases were driven by processing fees and salary and
employee benefits expense, offset by other miscellaneous expense, and equipment
expense. The main drivers of the increase from 2019 to 2020 were driven by
salary and employee benefits expense, other miscellaneous expense, and equipment
expense, offset by a decrease in marketing and business development
expense. Table 7 below summarizes the components of noninterest expense and the
respective year-over-year changes for each category.

Table 7

SUMMARY OF NON-INTEREST EXPENSES (in thousands)

                                       Year Ended December 31,                Dollar Change            Percent Change
                                  2021          2020          2019         21-20         20-19        21-20       20-19
Salaries and employee
benefits                        $ 504,442     $ 495,464     $ 461,445     $  8,978     $  34,019         1.8 %       7.4 %
Occupancy, net                     47,345        47,476        47,771         (131 )        (295 )      (0.3 )      (0.6 )
Equipment                          78,398        85,719        79,086       (7,321 )       6,633        (8.5 )       8.4
Supplies and services              14,986        15,537        18,699         (551 )      (3,162 )      (3.5 )     (16.9 )
Marketing and business
development                        18,533        14,679        26,257        3,854       (11,578 )      26.3       (44.1 )
Processing fees                    67,563        54,213        52,198       13,350         2,015        24.6         3.9
Legal and consulting               32,406        29,765        31,504        2,641        (1,739 )       8.9        (5.5 )
Bankcard                           19,145        18,954        17,750          191         1,204         1.0         6.8
Amortization of other
intangible assets                   4,757         6,517         5,506       (1,760 )       1,011       (27.0 )      18.4
Regulatory fees                    11,894        10,279        11,489        1,615        (1,210 )      15.7       (10.5 )
Other                              34,167        43,402        27,155       (9,235 )      16,247       (21.3 )      59.8
Total noninterest expense       $ 833,636     $ 822,005     $ 778,860     $ 11,631     $  43,145         1.4 %       5.5 %



Salaries and employee benefits expense increased $9.0 million, or 1.8%, in 2021
compared to 2020 and $34.0 million, or 7.4%, in 2020 compared to 2019. In 2021,
bonus and commission expense increased $8.7 million, or 7.5%, driven by business
volumes and revenue growth, and higher company performance. Salary and wage
expense increased $1.7 million, or 0.6%. These increases were offset by a
decrease in employee benefits expense of $1.4 million, or 1.7%. In 2020, bonus
and commission expense increased $23.6 million, or 25.3%, driven by business
volumes and revenue growth, and higher company performance. Salary and wage
expense increased $12.1 million, or 4.3%. These increases were offset by a
decrease in employee benefits expense of $1.7 million, or 2.1%.

Equipment expense decreased $7.3 million, or 8.5%, in 2021 compared to 2020, and
increased $6.6 million, or 8.4%, from 2019 to 2020, respectively. The decrease
in 2021 was driven by lower software amortization related to a transition to
cloud-based computing solutions. The increase in 2020 compared to 2019 was
driven by computer hardware and software expenses for the ongoing investments in
digital channel and integrated platform solutions to support business growth and
the continued modernization of core systems.

Marketing and business development expense increased $3.9 million, or 26.3%, in
2021 compared to 2020, but decreased $11.6 million, or 44.1%, in 2020 compared
to 2019. The increase in 2021 was driven by the timing of advertising and
business development projects and higher travel expenses as compared to
2020. The decrease in 2020 is driven by reduced travel and entertainment
expenses and business development expense related to the COVID-19 pandemic.

                                       36
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Processing fees expense increased $13.4 million, or 24.6%, in 2021 compared to
2020, and increased $2.0 million, or 3.9%, in 2020 compared to 2019. The
increases in 2021 and 2020 are primarily driven by the transition to cloud
computing solutions and ongoing investments in digital channel and integrated
platform solutions to support business growth and the continued modernization of
core systems.

Other non-interest expense decreased $9.2 millioni.e. 21.3%, in 2021 compared to 2020 and increased $16.2 million, or 59.8%, in 2020 compared to 2019. The decrease in 2021 is due to lower operating losses, partially offset by an increase in charitable contribution expenses. The increase in 2020 is mainly due to higher operating losses and derivative expenses.

Income taxes


Income tax expense totaled $76.0 million, $52.4 million, and $42.4 million in
2021, 2020, and 2019 respectively. These amounts equate to effective tax rates
of 17.7%, 15.5%, and 14.8% for 2021, 2020 and 2019, respectively. The increase
in the effective tax rate from 2020 to 2021 is primarily attributable to a
smaller portion of pre-tax income being earned from tax-exempt municipal
securities and higher state and local income taxes. The increase in the
effective tax rate from 2019 to 2020 is primarily attributable to a smaller
portion of pre-tax income being earned from tax-exempt municipal securities.

For further information on income taxes, refer to Note 16, “Income Taxes”, in the Notes to the Consolidated Financial Statements.

Activity area


The Company has strategically aligned its operations into the following three
reportable segments: Commercial Banking, Institutional Banking, and Personal
Banking (collectively, the Business Segments). Senior executive officers
regularly evaluate Business Segment financial results produced by the Company's
internal reporting system in deciding how to allocate resources and assess
performance for individual Business Segments.  Previously, the Company had the
following four Business Segments: Commercial Banking, Institutional Banking,
Personal Banking, and Healthcare Services. In the first quarter of 2020, the
Company merged the Healthcare Services segment into the Institutional Banking
segment to better reflect how the Company's core businesses, products and
services are currently being evaluated by management. The management accounting
system assigns balance sheet and income statement items to each Business Segment
using methodologies that are refined on an ongoing basis. For comparability
purposes, amounts in all periods are based on methodologies in effect at
December 31, 2021. Previously reported results have been reclassified in this
Form 10-K to conform to the Company's current organizational structure.

Table 8

COMMERCIAL BANKING OPERATING RESULTS (in thousands)

                                    Year Ended              Dollar       Percent
                                   December 31,             Change        Change
                                2021          2020          21-20         21-20
Net interest income           $ 556,673     $ 475,425     $   81,248         17.1 %
Provision for credit losses      15,553       119,424       (103,871 )      (87.0 )
Noninterest income               81,752       189,412       (107,660 )      (56.8 )
Noninterest expense             289,039       272,283         16,756          6.2
Income before taxes             333,833       273,130         60,703         22.2
Income tax expense               59,165        42,223         16,942         40.1
Net income                    $ 274,668     $ 230,907     $   43,761         19.0 %



For the year ended December 31, 2021, Commercial Banking net income increased
$43.8 million, or 19.0%, to $274.7 million compared to the same period in 2020.
Net interest income increased $81.2 million, or 17.1%, for the year ended
December 31, 2021, compared to the same period last year, primarily driven by
strong loan growth, earning asset mix changes, and the Company's participation
in the PPP. PPP loans averaged $802.4 million during 2021, and PPP income
increased $12.4 million as compared to 2020. Provision for credit losses
decreased $103.9 million as compared to 2020. The provision expense for 2020 was
significantly impacted by the adoption of CECL,

                                       37
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coupled with the impacts of the COVID-19 pandemic on the economic environment
and reasonable and supportable economic forecasts. The provision in 2021
represents substantial improvement in these forecasts. Noninterest income
decreased $107.7 million, or 56.8%, over the same period in 2020. Investment
securities gains, net decreased $117.0 million, primarily driven by the change
in market valuation on the Company's investment in TTCF. This decrease was
partially offset by increases of $3.3 million in deposit service charges, $2.7
million in gains on sales of assets, and $2.5 million in bankcard fees.
Noninterest expense increased $16.8 million, or 6.2%, as compared to the same
period in 2020. This increase was driven by an increase of $20.0 million in
technology, service, and overhead expenses, $4.9 million in salaries and
employee benefits expense, $1.8 million in marketing and business development
expense, $1.6 million in processing fees, and $1.3 million in regulatory
fees. These increases were partially offset by a decrease of $12.9 million in
operational losses as compared to 2020.

Table 9

INSTITUTIONAL BANK OPERATING RESULTS (in thousands)

                                    Year Ended             Dollar       Percent
                                   December 31,            Change        Change
                                2021          2020          21-20        21-20
Net interest income           $  87,644     $ 106,856     $ (19,212 )      (18.0 )%
Provision for credit losses         630           882          (252 )      (28.6 )
Noninterest income              273,413       254,874        18,539          7.3
Noninterest expense             292,080       286,635         5,445          1.9
Income before taxes              68,347        74,213        (5,866 )       (7.9 )
Income tax expense               12,113        11,472           641          5.6
Net income                    $  56,234     $  62,741     $  (6,507 )      (10.4 )%



For the year ended December 31, 2021, Institutional Banking net income decreased
$6.5 million, or 10.4%, compared to the same period last year.  Net interest
income decreased $19.2 million, or 18.0%, compared to the same period last year,
due to a decrease in funds transfer pricing driven by lower interest rates.
Noninterest income increased $18.5 million, or 7.3%, primarily due to increases
of $27.5 million in fund services income, $5.8 million in corporate trust
income, both recorded in trust and securities processing revenue, $0.9 million
in bankcard fees and $0.8 million in other income. The increases in fund
services income and corporate trust income are related to increased assets
administered as compared to the prior year. These increases were partially
offset by decreases of $12.0 million in brokerage fees and $4.7 million in bond
trading income. The decrease in brokerage fees is primarily due to lower 12b-1
and money market revenue and the decline in bond trading income is due to
decreased trading volumes. Noninterest expense increased $5.4 million, or 1.9%,
primarily driven by increases of $4.7 million in technology, service, and
overhead expenses and $4.5 million in processing fees. These increases were
partially offset by decreases of $2.8 million in salary and employee benefits
expense, and $1.3 million in equipment expense.

Table 10

OPERATING RESULTS OF THE INDIVIDUAL BANK (in thousands)

                                     Year Ended             Dollar       Percent
                                    December 31,            Change        Change
                                 2021          2020          21-20        21-20
Net interest income            $ 171,204     $ 148,948     $  22,256         14.9 %
Provision for credit losses        3,817        10,194        (6,377 )      (62.6 )
Noninterest income               112,010       115,880        (3,870 )       (3.3 )
Noninterest expense              252,517       263,087       (10,570 )       (4.0 )
Income (loss) before taxes        26,880        (8,453 )      35,333        418.0
Income tax expense (benefit)       4,764        (1,307 )       6,071        464.5
Net income (loss)              $  22,116     $  (7,146 )   $  29,262        409.5 %



For the year ended December 31, 2021, Personal Banking net income increased
$29.3 million as compared to the same period last year.  Net interest income
increased $22.3 million, or 14.9%, compared to the same period last year due to
increased loan balances. Provision for credit losses decreased $6.4 million. The
provision expense for 2020 was significantly impacted by the adoption of CECL,
coupled with the impacts of the COVID-19 pandemic on

                                       38
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the economic environment and reasonable and supportable economic forecasts. The
provision in 2021 represents substantial improvements in these
forecasts. Noninterest income decreased $3.9 million, or 3.3%, primarily driven
by a decrease of $3.8 million in trust income and $1.3 million in equity
earnings on alternative investments. Both decreases are related to the sale of
PCM in the first quarter of 2021. These decreases were partially offset by an
increase of $0.6 million in bankcard fees driven by higher interchange income.
Noninterest expense decreased $10.6 million, or 4.0%, primarily due to decreases
of $7.5 million in salary and employee benefits, $2.6 million in operational
losses, and $2.2 million in legal and consulting expense. These decreases were
partially offset by an increase of $1.8 million in marketing and business
development expense.

Balance sheet analysis

Loans and loans held for sale


Loans represent the Company's largest source of interest income. Loan balances
held for investment increased by $1.1 billion, or 6.6%, in 2021. This increase
was primarily driven by an increase of $374.5 million, or 19.3%, in consumer
real estate loans, $358.6 million, or 6.1%, in commercial real estate loans,
$196.0 million, or 2.8%, in commercial loans, and $91.4 million, or 47.9% in
lease and other loans.

Commercial & industrial loans and commercial real estate loans continue to
represent the largest segments of the Company's loan portfolio, comprising
approximately 42.3% and 36.5%, respectively, of total loans and loans held for
sale at the end of 2021 and 43.8% and 36.7%, respectively, of total loans and
loans held for sale at the end of 2020.

Commercial loans represent the largest percent of total loans. Commercial loans
at December 31, 2021 have increased $196.0 million, or 2.8%, as compared to
December 31, 2020, to 42.3% of total loans. Commercial loans represented 43.8%
of total loans at December 31, 2020. The Company's commercial loan balances have
been impacted by the Company's participation in the PPP. PPP loans totaled
$136.5 million and $1.3 billion as of December 31, 2021 and December 31, 2020,
respectively.

As a percentage of total loans, commercial real estate comprises 36.5% of total
loans compared to 36.7% in 2020. Commercial real estate loans increased $358.6
million, or 6.1%, compared to 2020. Generally, these loans are made for
investment and real estate development or working capital and business expansion
purposes and are primarily secured by real estate with a maximum loan-to-value
of 80%. Most of these properties are non-owner occupied and have guarantees as
additional security.

Consumer real estate loans increased $374.5 million, or 19.3%, and represented
13.5% of total loans. Specialty lending loans increased $11.1 million, or 2.2%,
and represented 3.0% of total loans as of December 31, 2021.

For more information on the segments of the loan portfolio, refer to Note 3, “Loans and allowance for credit losses”, in the notes to the consolidated financial statements.


Nonaccrual, past due and restructured loans are discussed under "Quantitative
and Qualitative Disclosure about Market Risk - Credit Risk Management" in Item
7A of this report.

Investment Securities

The Company's investment portfolio contains trading, available-for-sale (AFS),
and held-to-maturity (HTM) securities as well as FRB stock, Federal Home Loan
Bank (FHLB) stock, and other miscellaneous investments. Investment securities
totaled $13.8 billion as of December 31, 2021 and $10.6 billion as of December
31, 2020 and comprised 33.8% and 34.0% of the Company's earning assets,
respectively, as of those dates.

The Company's AFS securities portfolio comprised 86.7% of the Company's
investment securities portfolio at December 31, 2021, compared to 87.4% at
December 31, 2020. The Company's AFS securities portfolio provides liquidity as
a result of the composition and average life of the underlying securities. This
liquidity can be used to fund loan growth or to offset the outflow of
traditional funding sources. The average life of the AFS securities portfolio
decreased from 70.1 months at December 31, 2020 to 67.6 months at December 31,
2021. In addition to providing a potential source of liquidity, the AFS
securities portfolio can be used as a tool to manage interest rate

                                       39
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sensitivity. The Company’s objective in managing its portfolio of AFS securities is to maximize return within the Company’s liquidity, interest rate risk and credit risk objectives.


Management expects collateral pledging requirements for public funds, loan
demand, and deposit funding to be the primary factors impacting changes in the
level of AFS securities. There were $10.2 billion of AFS securities pledged to
secure U.S. Government deposits, other public deposits, certain trust deposits,
derivative transactions, and repurchase agreements at December 31, 2021. Of this
amount, securities with a market value of $171.2 million at December 31, 2021
were pledged at the Federal Reserve Discount Window but were unencumbered as of
that date.

The Company's HTM securities portfolio consists of private placement bonds,
which are issued primarily to refinance existing revenue bonds in the healthcare
and education sectors, and mortgage-backed securities. The Company's private
placement bond portfolio totaled $1.1 billion as of December 31, 2021, an
increase of $70.3 million, or 7.0%, from December 31, 2020. The Company's HTM
mortgage-backed securities portfolio totaled $396.1 million as of December 31,
2021. The average life of the HTM portfolio was 5.2 years at December 31, 2021,
compared to 6.1 years at December 31, 2020.

The securities portfolio generates the Company's second largest component of
interest income. The AFS, HTM, and Other securities portfolios achieved an
average yield on a tax-equivalent basis of 2.16% for 2021, compared to 2.45% in
2020. Securities available for sale had a net unrealized gain of $153.9 million
at year-end, compared to a net unrealized gain of $412.0 million the preceding
year. This market value change primarily reflects the impact of a larger
portfolio size, shorter average life, and declining mark interest rates as of
December 31, 2021, compared to December 31, 2020. These amounts are reflected,
on an after-tax basis, in the Company's Accumulated other comprehensive income
(loss) in shareholders' equity, as an unrealized gain of $118.5 million at
year-end 2021, compared to an unrealized gain of $314.5 million for 2020. The
AFS securities portfolio contains securities that have unrealized losses (see
the table of these securities in Note 4, "Securities," in the Notes to the
Consolidated Financial Statements). The unrealized losses in the Company's
investments were caused by changes in interest rates, and not from a decline in
credit of the underlying issuers. The U.S. Treasury, U.S. Agency, and GSE
mortgage-backed securities are all considered to be agency-backed securities
with no risk of loss as they are either explicitly or implicitly guaranteed by
the U.S. government. The changes in fair value in the agency-backed portfolios
are solely driven by change in interest rates caused by changing economic
conditions. The Company has no knowledge of any underlying credit issues and the
cash flows underlying the debt securities have not changed and are not expected
to be impacted by changes in interest rates. As of December 31, 2021, the
Company does not believe the decline in value in these portfolios is related to
credit impairments and instead is due to declining interest rates. The Company
does not have the intent to sell these securities and does not believe it is
more likely than not that the Company will be required to sell these securities
before a recovery of amortized cost. As of December 31, 2021, there is no ACL
related to the Company's available-for-sale securities as the decline in fair
value did not result from credit issues.

Included in Tables 11 and 12 are analyses of the fair value and average yield
(tax-equivalent basis) of securities available for sale and securities held to
maturity.

Table 11

SECURITIES AVAILABLE FOR SALE (in thousands)



                                                 U.S. Treasury Securities                  U.S. Agency Securities
                                                                   Weighted                                 Weighted
December 31, 2021                            Fair Value          Average Yield        Fair Value          Average Yield
Due in one year or less                    $            -                     - %   $            -                     - %
Due after 1 year through 5 years                   69,174                  0.85            124,932                  2.29
Due after 5 years through 10 years                      -                     -                  -                     -
Due after 10 years                                      -                     -                  -                     -
Total                                      $       69,174                  0.85 %   $      124,932                  2.29 %




                                       40
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                                                                                                State and Political
                                                  Mortgage-backed Securities                        Subdivisions
                                                                       Weighted                                Weighted
December 31, 2021                             Fair Value             

Average yield Fair value Average yield Maturity in one year or less

                    $          58,963                    2.33 %   $      163,373                2.30 %
Due after 1 year through 5 years                   4,362,831                    1.73            335,743                2.55
Due after 5 years through 10 years                 3,451,389                    1.76            728,909                2.60
Due after 10 years                                    91,872                    2.16          2,194,663                3.30
Total                                      $       7,965,055                    1.75 %   $    3,422,688                3.02 %



                                                     Corporates                  Collateralized Loan Obligations
                                                              Weighted                                Weighted
December 31, 2021                          Fair Value       Average Yield      Fair Value          Average Yield
Due in one year or less                   $      5,070                3.03 %   $        -                        - %
Due after 1 year through 5 years               229,789                1.78              -                        -
Due after 5 years through 10 years              82,987                3.16         27,612                     1.17
Due after 10 years                                   -                   -         49,207                     1.22
Total                                     $    317,846                2.17 %   $   76,819                     1.20 %




                                                 U.S. Treasury Securities                  U.S. Agency Securities
                                                                   Weighted                                 Weighted
December 31, 2020                            Fair Value          Average Yield       Fair Value           Average Yield
Due in one year or less                    $       20,102                  1.03 %   $         202                    1.89 %
Due after 1 year through 5 years                   10,638                  2.59            95,747                    2.68
Due after 5 years through 10 years                      -                     -                 -                       -
Due after 10 years                                      -                     -                 -                       -
Total                                      $       30,740                  1.55 %   $      95,949                    2.67 %



                                                                                               State and Political
                                                 Mortgage-backed Securities                        Subdivisions
                                                                      Weighted                                Weighted
December 31, 2020                             Fair Value           Average Yield          Fair Value        Average Yield
Due in one year or less                    $        171,564                  (3.18 )%   $      226,929                2.21 %
Due after 1 year through 5 years                  2,834,805                   2.19             450,435                2.36
Due after 5 years through 10 years                2,283,389                   1.99             641,051                2.63
Due after 10 years                                  178,423                   1.76           2,305,204                3.37
Total                                      $      5,468,181                   1.93 %    $    3,623,619                3.02 %



                                                Corporates
                                                         Weighted
December 31, 2020                     Fair Value       Average Yield
Due in one year or less              $          -                   - %
Due after 1 year through 5 years           55,249                2.98
Due after 5 years through 10 years         25,950                3.85
Due after 10 years                              -                   -
Total                                $     81,199                3.27 %






                                       41
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Table 12

SECURITIES HELD TO MATURITY (in thousands)

                                            State and Political Subdivisions         Mortgage-backed Securities
                                                                 Weighted                             Weighted
                                                                  Average                              Average
                                                               Yield/Average                        Yield/Average
December 31, 2021                           Fair Value           Maturity         Fair Value          Maturity
Due in one year or less                    $     17,797                  1.60 %   $        -                     - %
Due after 1 year through 5 years                156,927                  2.36        393,717                  1.54
Due after 5 years through 10 years              481,785                  2.49              -                     -
Due over 10 years                               392,165                  2.08              -                     -
Total                                      $  1,048,674                  2.30 %   $  393,717                  1.54 %




                                          State and Political Subdivisions
                                                                   Weighted
                                                                    Average
                                                                 Yield/Average
December 31, 2020                         Fair Value               Maturity
Due in one year or less              $              4,936                  1.78 %
Due after 1 year through 5 years                  126,901                  

2h30

Due after 5 years through 10 years                435,038                  2.47
Due over 10 years                                 462,569                  2.30
Total                                $          1,029,444                  2.37 %



The table below provides detailed information on the other titles at December 31, 2021 and 2020:


Table 13

OTHER SECURITIES (in thousands)

                                                                  December 31,
                                                               2021          2020
FRB and FHLB stock                                           $  36,222     $  33,222
Equity securities with readily determinable fair values         64,149      

134 197

Equity securities with no easily determinable fair value 226,727

 128,634
Total                                                        $ 327,098     $ 296,053



Equity securities with readily determinable fair values are generally traded on
an exchange and market prices are readily available. Equity securities with
readily determinable fair values includes the Company's investment in TTCF,
which had a fair value of $12.5 million as of December 31, 2021 and $106.9
million as of December 31, 2020. During 2021, the Company sold a portion of this
investment with a value of $79.0 million. Equity securities without readily
determinable fair values are generally carried at cost less impairment. Equity
securities without readily determinable fair values also include PCM alternative
investments in hedge funds and private equity funds, which are accounted for as
equity-method investments. During the first quarter of 2021, the Company sold
its membership interest in PCM. Unrealized gains or losses on equity securities
with and without readily determinable fair values are recognized in the
Investment Securities gains, net line of the Company's Consolidated Statements
of Income.

For further information on the Company’s investment securities, refer to Note 4, “Securities”, in the Notes to the Consolidated Financial Statements.

                                       42
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Other productive assets


Federal funds transactions essentially are overnight loans between financial
institutions, which allow for either the daily investment of excess funds or the
daily borrowing of another institution's funds in order to meet short-term
liquidity needs. The net borrowed position was $12.6 million at December 31,
2021 compared to $65.6 million at December 31, 2020.

The Bank buys and sells federal funds as agent for non-affiliated banks. Because
the transactions are pursuant to agency arrangements, these transactions do not
appear on the balance sheet and averaged $394.7 million in 2021 and $362.5
million in 2020.

At December 31, 2021, the Company held securities purchased under agreements to
resell of $1.2 billion compared to $1.7 billion at December 31, 2020. The
Company uses these instruments as short-term secured investments, in lieu of
selling federal funds, or to acquire securities required for collateral
purposes. Balances will fluctuate based on the Company's liquidity and
investment decisions as well as the Company's correspondent bank borrowing
levels. These investments averaged $1.2 billion in 2021 and $1.1 billion in
2020.

The Company also maintains an active securities trading inventory. The average
holdings in the securities trading inventory in 2021 were $23.5 million,
compared to $37.1 million in 2020, and were recorded at fair market value. As
discussed in "Quantitative and Qualitative Disclosures About Market Risk -
Trading Account" in Part II, Item 7A, the Company offsets the trading account
securities by the sale of exchange-traded financial futures contracts, with both
the trading account and futures contracts marked to market daily.

Interest-bearing due from banks totaled $8.8 billion as of December 31, 2021
compared to $3.1 billion as of December 31, 2020 and includes amounts due from
the FRB and interest-bearing accounts held at other financial institutions. The
amount due from the FRB averaged $4.0 billion and $1.2 billion during the years
ended December 31, 2021 and 2020, respectively. The increase in the FRB balance
from 2020 to 2021 is primarily due to an increase in deposit balances as a
result of the Company's participation in the PPP. The interest-bearing accounts
held at other financial institutions totaled $41.2 million and $43.1 million at
December 31, 2021 and 2020, respectively.

Deposits and borrowed funds


Deposits represent the Company's primary funding source for its asset base. In
addition to the core deposits garnered by the Company's retail branch structure,
the Company continues to focus on its cash management services, as well as its
asset management and mutual fund servicing businesses in order to attract and
retain additional core deposits. Deposits totaled $35.6 billion at December 31,
2021 and $27.1 billion at December 31, 2020, an increase of $8.5 billion, or
31.6%. Deposits averaged $28.9 billion in 2021, and $23.2 billion in 2020.

Noninterest-bearing demand deposits averaged $11.3 billion in 2021 and $7.8
billion in 2020. These deposits represented 38.9% of average deposits in 2021,
compared to 33.8% in 2020. The Company's large commercial customer base provides
a significant source of noninterest-bearing deposits. Many of these commercial
accounts do not earn interest; however, they receive an earnings credit to
offset the cost of other services provided by the Company.

Table 14

MATURITIES OF UNINSURED TERM DEPOSITS (in thousands)


                                           December 31,
                                        2021          2020
Maturing within 3 months              $ 318,112     $ 269,489

After 3 months but within 6 months 8,616 16,596 After 6 months but within 12 months 46,839 32,526 After 12 months

                          19,664        17,486
Total                                 $ 393,231     $ 336,097



From December 31, 2021There was $27.4 billion uninsured deposits, compared to $19.7 billion from December 31, 2020.

                                       43
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Table 15

ANALYSIS OF AVERAGE DEPOSITS (in thousands)


                                              December 31,
                                          2021             2020

Rising:

Noninterest-bearing demand            $ 11,254,761     $  7,845,667

Interest-bearing current and savings accounts 16,982,864 14,446,164 Term deposits $250,000

               242,017          488,346
Total core deposits                     28,479,642       22,780,177

Term deposits of $250,000 or more 453,241 401,982 Total deposits

                        $ 28,932,883     $ 23,182,159

As a % of total deposits:
Noninterest-bearing demand                    38.9 %           33.9 %
Interest-bearing demand and savings           58.7             62.3
Time deposits under $250,000                   0.8              2.1
Total core deposits                           98.4             98.3
Time deposits of $250,000 or more              1.6              1.7
Total deposits                               100.0 %          100.0 %



Capital resources and liquidity


The Company places a significant emphasis on the maintenance of a strong capital
position, which it believes promotes investor confidence, provides access to
funding sources under favorable terms, and enhances the Company's ability to
capitalize on business growth and acquisition opportunities. Higher levels of
liquidity, however, bear corresponding costs, measured in terms of lower yields
on short-term, more liquid earning assets, and higher expenses for extended
liability maturities. The Company manages capital for each subsidiary based upon
the subsidiary's respective risks and growth opportunities as well as regulatory
requirements.

Total equity increased $128.5 millioni.e. 4.3% to $3.1 billion at
December 31, 2021 compared to December 31, 2020.


The Board authorized, at its April 27, 2021, April 28, 2020, and April 23, 2019
meetings, the repurchase of up to two million shares of the Company's common
stock during the twelve months following each meeting (each a Repurchase
Authorization). During 2021 and 2020, the Company acquired 67,671 shares and
1,208,623 shares, respectively, of its common stock pursuant to the applicable
Repurchase Authorization. During March 2020, the Company entered into an
agreement with Bank of America Merrill Lynch (BAML) to repurchase an aggregate
of $30.0 million of the Company's common stock through an accelerated share
repurchase agreement (ASR). Under the ASR, the Company repurchased a total of
653,498 shares, which was completed during the second quarter of 2020. The ASR
was entered into pursuant to the April 23, 2019 Repurchase Authorization. The
Company has not made any repurchase of its securities other than pursuant to the
Repurchase Authorizations.

Risk-based capital guidelines established by regulatory agencies set minimum
capital standards based on the level of risk associated with a financial
institution's assets. The Company has implemented the Basel III regulatory
capital rules adopted by the FRB. Basel III capital rules include a minimum
ratio of common equity tier 1 capital to risk-weighted assets of 4.5% and a
minimum tier 1 risk-based capital ratio of 6%. A financial institution's total
capital is also required to equal at least 8% of risk-weighted assets.

The risk-based capital guidelines indicate the specific risk weightings by type
of asset. Certain off-balance sheet items (such as standby letters of credit and
binding loan commitments) are multiplied by credit conversion factors to
translate them into balance sheet equivalents before assigning them specific
risk weightings. The Company is also required to maintain a leverage ratio equal
to or greater than 4%. The leverage ratio is tier 1 core capital to total
average assets less goodwill and intangibles. The Company's capital position as
of December 31, 2021 is summarized in the table below and exceeded regulatory
requirements.

                                       44
--------------------------------------------------------------------------------

Table 16

CAPITAL AT RISK (in thousands)


This table computes risk-based capital in accordance with current regulatory
guidelines. These guidelines as of December 31, 2021, excluded net unrealized
gains or losses on securities available for sale from the computation of
regulatory capital and the related risk-based capital ratios.

                                                                   Risk-Weighted Category
                                     0%              20%              50%             100%           150%           Total
Risk-Weighted Assets
Loans held for sale             $          -     $          -     $     1,277     $          -     $       -     $      1,277
Loans and leases                     197,502           56,444       2,034,309       14,787,721        94,895       17,170,871
Securities available for sale      1,912,659        9,579,777          13,307          316,840             -       11,822,583
Securities held to maturity          206,368          209,778       1,064,270                -             -        1,480,416
Trading securities                     1,625            4,219          21,671            4,360             -           31,875
Cash and due from banks            8,901,154          354,573               -                -             -        9,255,727
All other assets                      26,394           24,465          35,457        1,424,229             -        1,510,545
Category totals                 $ 11,245,702     $ 10,229,256     $ 3,170,291     $ 16,533,150     $  94,895     $ 41,273,294

Risk-weighted totals            $          -     $  2,045,851     $ 1,585,146     $ 16,533,150     $ 142,343     $ 20,306,490
Off-balance-sheet items (3)                -           14,395          41,195        3,592,832             -        3,648,422
Total risk-weighted assets      $          -     $  2,060,246     $ 1,626,341     $ 20,125,982     $ 142,343     $ 23,954,912



                                         Total
Regulatory Capital
Shareholders' equity                  $ 3,145,424
Less adjustments (1)                     (259,848 )
Common equity Tier 1/Tier 1 capital     2,885,576
Additional Tier 2 capital (2)             438,708
Total capital                         $ 3,324,284



                                                                      Company
Capital ratios
Common Equity Tier 1 capital to risk-weighted assets                         12.05 %
Tier 1 capital to risk-weighted assets                                       12.05 %
Total capital to risk-weighted assets                                        13.88 %
Leverage ratio (Tier 1 capital to total average assets less
adjustments (1))                                                              7.61 %


(1) Adjustments include a portion of goodwill and intangibles as well as

unrealized capital gains/losses on available-for-sale securities, cash flow hedges,

     and the impact of the Company's election to use the five-year CECL
     transition.

(2) Includes the Company’s ACL (including the off-balance sheet reserve

agreements), subordinated long-term debt and preferred subordinated trust

Remarks.

(3) After application of credit conversion factor and risk weighting.

For more information on regulatory capital requirements, see note 10, “Regulatory requirements”, in the notes to the consolidated financial statements, under section 8.


Repurchase agreements are transactions involving the exchange of investment
funds by the customer for securities by the Company, under an agreement to
repurchase the same issues at an agreed-upon price and date. Securities sold
under agreements to repurchase and federal funds purchased totaled $3.2 billion
at December 31, 2021, and $2.3 billion at December 31, 2020. Repurchase
agreements and federal funds purchased averaged $2.6 billion in 2021 and $2.0
billion in 2020. The Company enters into these transactions with its downstream
correspondent banks, commercial customers, and various trust, mutual fund, and
local government relationships.

                                       45
--------------------------------------------------------------------------------


The Company is a member bank with the FHLB of Des Moines, and through this
relationship, the Company owns $10.0 million of FHLB stock and has access to
additional liquidity and funding sources through FHLB advances. The Company's
borrowing capacity is dependent upon the amount of collateral the Company places
at the FHLB. Based on the collateral pledged, the Company had $1.6 billion of
borrowing capacity at the FHLB at December 31, 2021. The Company had no
outstanding advances at FHLB Des Moines as of December 31, 2021.

To enhance general working capital needs, the Company has a revolving line of
credit with Wells Fargo Bank, N.A. which allows the Company to borrow up to
$30.0 million for general working capital purposes. The interest rate applied to
borrowed balances will be at the Company's option, either 1.25% above LIBOR or
1.75% below the prime rate on the date of an advance. The Company pays a 0.4%
unused commitment fee for unused portions of the line of credit. The Company had
no advances outstanding at December 31, 2021.

Long-term debt totaled $271.5 million at December 31, 2021, compared to $269.6
million at December 31, 2020. In September 2020, the Company issued $200.0
million in aggregate subordinated notes due in September 2030. The Company
received $197.7 million, after deducting underwriting discounts and commissions
and offering expenses, and used the proceeds from the offering for general
corporate purposes, including, among other uses, contributing Tier 1 capital
into the Bank. The subordinated notes were issued with a fixed-to-fixed rate of
3.70% and an effective rate of 3.93%, due to issuance costs, with an interest
rate reset date of September 2025. The remainder of the Company's long-term debt
was assumed from the acquisition of Marquette and consists of debt obligations
payable to four unconsolidated trusts (Marquette Capital Trust I, Marquette
Capital Trust II, Marquette Capital Trust III, and Marquette Capital Trust IV)
that previously issued trust preferred securities. These long-term debt
obligations had an aggregate contractual balance of $103.1 million and had a
carrying value of $73.2 million at December 31, 2021 and $71.7 million at
December 31, 2020. Interest rates on trust preferred securities are tied to the
three-month LIBOR with spreads ranging from 133 basis points to 160 basis points
and reset quarterly. The trust preferred securities have maturity dates ranging
from January 2036 to September 2036. For further information on long-term debt
refer to Note 9, "Borrowed Funds," in the Notes to the Consolidated Financial
Statements.

The Company has material off-balance sheet arrangements in the form of loan
commitments, commercial and standby letters of credit, futures contracts and
forward exchange contracts, which have maturity dates rather than payment due
dates. These commitments and contingent liabilities are not required to be
recorded on the Company's balance sheet. Since commitments associated with
letters of credit and lending and financing arrangements may expire unused, the
amounts shown do not necessarily reflect the actual future cash funding
requirements. See Table 17 below, as well as Note 15, "Commitments,
Contingencies and Guarantees" in the Notes to Consolidated Financial Statements
under Item 8 for detailed information and further discussion of these
arrangements. Management does not anticipate any material losses from its
off-balance sheet arrangements.

Table 17

COMMITMENTS, MATERIAL CASH REQUIREMENTS AND OFF-BALANCE SHEET ARRANGEMENTS (in thousands)


The table below details the commitments, material cash requirements, and
off-balance sheet arrangements for the Company as of December 31, 2021 and
includes principal payments only. The Company has no capital leases or long-term
purchase obligations.

                                                                Payments due by Period
                                                      Less than 1                                     More than 5
                                         Total            year         1-3 years       3-5 years         years
Material Cash Requirements
Federal funds purchased and
repurchase agreements                 $ 3,225,838     $  3,225,588     $        -     $         -     $       250
Long-term debt obligations                273,213                -              -               -         273,213
Operating lease obligations                72,238           12,398         20,100          16,375          23,365
Time deposits                             851,641          734,551         92,044          20,910           4,136
Total                                 $ 4,422,930     $  3,972,537     $  112,144     $    37,285     $   300,964




                                       46
--------------------------------------------------------------------------------

                                                                Maturities due by Period
                                                       Less than 1                                      More than 5
                                         Total             year          1-3 years       3-5 years         years
Commitments, Contingencies and
Guarantees
Commitments to extend credit for
loans (excluding credit card loans)   $ 10,122,617     $  4,246,041     $ 3,906,483     $ 1,270,424     $   699,669
Commitments to extend credit under
credit card loans                        3,743,165        3,743,165               -               -               -
Commercial letters of credit                 2,754            2,754               -               -               -
Standby letters of credit                  365,030          264,424          83,809          16,797               -
Forward contracts                            9,729            9,729               -               -               -
Spot foreign exchange contracts              2,946            2,946               -               -               -
Total                                 $ 14,246,241     $  8,269,059     $ 3,990,292     $ 1,287,221     $   699,669



As of December 31, 2021, the Company's total liabilities for unrecognized tax
benefits were $8.8 million. The Company cannot reasonably estimate the
settlement of these liabilities. Therefore, these liabilities have been excluded
from the table above. See Note 16, "Income Taxes," in the Notes to the
Consolidated Financial Statements for information regarding the liabilities
associated with unrecognized tax benefits.

For further analysis of capital and liquidity, see “Quantitative and Qualitative Disclosures of Market Risk – Liquidity Risk” in Section 7A of this report.

Significant Accounting Policies and Estimates


Management's Discussion and Analysis of Financial Condition and Results of
Operations discusses the Company's Consolidated Financial Statements, which have
been prepared in accordance with accounting principles generally accepted in the
United States of America (GAAP). The preparation of these Consolidated Financial
Statements requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of contingent
liabilities at the date of the Consolidated Financial Statements and the
reported amounts of revenues and expenses during the reporting period. On an
on-going basis, management evaluates its estimates and judgments, including
those related to customers and suppliers, allowance for credit losses, bad
debts, investments, financing operations, long-lived assets, taxes, other
contingencies and litigation. Management bases its estimates and judgments on
historical experience and on various other factors that are believed to be
reasonable under the circumstances, the results of which have formed the basis
for making such judgments about the carrying value of assets and liabilities
that are not readily apparent from other sources. Under different assumptions or
conditions, actual results may differ from the recorded estimates.

Management believes that the Company’s significant accounting policies and estimates are those relating to the allowance for credit losses.

Provision for credit losses


The Company's ACL represents management's judgment of the total expected losses
included in the Company's assets held at amortized cost. The Company's process
for recording the ACL is based on the evaluation of the Company's lifetime
historical loss experience, management's understanding of the credit quality
inherent in the loan portfolio, and the impact of the current economic
environment, coupled with reasonable and supportable economic forecasts.

A mathematical calculation of an estimate is made to assist in determining the
adequacy and reasonableness of management's recorded ACL. To develop the
estimate, the Company follows the guidelines in ASC Topic 326, Financial
Instruments - Credit Losses. The estimate reserves for assets held at amortized
cost, which include the Company's loan and held-to-maturity security
portfolios.

The estimation process involves the consideration of quantitative and
qualitative factors relevant to the specific segmentation of loans. These
factors have been established over decades of financial institution experience
and include economic observation and loan loss characteristics. This process is
designed to produce a lifetime estimate of the losses, at a reporting date, that
is based on evaluation of historical loss experience, current economic

                                       47

————————————————– ——————————


conditions, reasonable and supportable forecasts, and the qualitative framework
outlined by the Office of the Comptroller of the Currency in the published 2020
Interagency Policy Statement. This process allows management to take a holistic
view of the recorded ACL reserve and ensure that all significant and pertinent
information is considered in its estimate.

The Company considers a variety of factors to ensure the safety and soundness of
its estimate including a strong internal control framework, extensive
methodology documentation, credit underwriting standards which encompass the
Company's desired risk profile, model validation, and ratio analysis. If the
Company's total ACL estimate, as determined in accordance with the approved ACL
methodology, is either outside a reasonable range based on review of economic
indicators or by comparison of historical ratio analysis, the ACL estimate is an
outlier and management will investigate the underlying reason(s). Based on that
investigation, issues or factors that previously had not been considered may be
identified in the estimation process, which may warrant adjustments to estimated
credit losses.

The ending result of this process is a recorded consolidated ACL that represents
management's best estimate of the total expected losses included in the loan and
held-to-maturity security portfolios considering available information, from
internal and external sources, relevant to assessing exposure to credit loss
over the contractual term of the instrument. While management utilizes its best
judgment and information available, the ultimate adequacy of the ACL is
dependent upon a variety of factors beyond the Company's control, including the
performance of its portfolios, the economy, and changes in interest rates. As
such, significant downturns in circumstances relating to loan quality and
economic conditions could result in a requirement for additional
allowance. Likewise, an upturn in loan quality and improved economic conditions
may allow a reduction in the required allowance. In either instance,
unanticipated changes could have a significant impact on the Company's Provision
for credit losses and ACL reported in its Consolidated Income Statements and
Consolidated Balance Sheets, respectively.

For more information on loan portfolio segments, the Company's ACL methodology,
and management's assumptions in estimating the ACL, refer to the section
captioned "Allowance for Credit Losses" within Note 3, "Loans and Allowance for
Credit Losses," in the Notes to the Consolidated Financial Statements.

© Edgar Online, source Previews

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First Financial: Leading and Successful TX Franchise (NASDAQ: FFIN) https://freebassuk.com/first-financial-leading-and-successful-tx-franchise-nasdaq-ffin/ Wed, 23 Feb 2022 16:37:00 +0000 https://freebassuk.com/first-financial-leading-and-successful-tx-franchise-nasdaq-ffin/ Luis M/iStock via Getty Images Overview First Financial Bankshares, Inc. (FFIN) is a Texas-based $13 billion commercial bank. It accepts checking, savings and money market accounts, as well as term deposits; and offers home, commercial, agricultural, and consumer loans to businesses, professionals, individuals, and farms and ranches. As of December 31, 2020, it had 78 […]]]>

Luis M/iStock via Getty Images

Overview

First Financial Bankshares, Inc. (FFIN) is a Texas-based $13 billion commercial bank. It accepts checking, savings and money market accounts, as well as term deposits; and offers home, commercial, agricultural, and consumer loans to businesses, professionals, individuals, and farms and ranches. As of December 31, 2020, it had 78 financial centers across Texas.

From a loan portfolio perspective, the bank is a commercial lender with real estate accounting for approximately 70% of the loan portfolio. Commercial property accounts for more than half of the property loan portfolio. C&I represents 20% of the portfolio. Consumer and auto loans are around 10% and 8% respectively. The bank’s credit quality is at the forefront of the industry, posting less than 1% NPL over the years. COVID 19 has caused NPLs to increase, but it is not significant and has been well managed. The 2021 provisioning reversal suggests that 2020 credit losses were not as severe as initially estimated.

In terms of funding mix, DC is only a tiny fraction of the total funding mix, around 4%. The cost of financing is considerably lower than its peers, given the strong deposit franchise.

The bank is relatively well managed from a cost discipline perspective. An average efficiency rate of 40% is industry leading. The management team mentioned plans to pursue acquisitions in key growth markets with assets between $1 billion and $3 billion. Investors should expect both cost reduction/system integration and further growth from acquisitions.

Historically, the bank has used acquisitions to penetrate major markets. In the last three trades that closed, two trades are paid for via expensive stocks, trading at around 30x P/E. The acquisition of Commercial Bancshares was financed with a combination of cash and equity which sold at ~54x P/E. The management team has been creative in using an attractive currency to historically drive expansion in key markets.

  • September 19, 2019 TB&T Bancshares, Inc.
  • October 12, 2017 Commercial Bancshares, Inc.
  • 01-Apr-2015 FBC Bancshares, Inc.

History of mergers and acquisitions

Company deposits

The last thing that deserves special attention is the bank’s trust and wealth management franchise. The wealth management business has grown steadily over the past few years and as such the contribution of fees to total revenue has increased, reducing the bank’s dependence on earnings from the balance sheet to over time.

Transaction Review

First Financial Bankshares, Inc. (FFIN) reported net income of $227.6 million for fiscal 2021, compared to $202.0 million for the prior year. Earnings per share were $1.59 versus $1.42 a year earlier. Revenue for the year increased to $513.7 million from $470.3 million in fiscal 2020. During the fourth quarter, First Financial Bankshares, Inc. reported an ROA and ROE of 1 .7% and 12.7%, respectively. The efficiency ratio is 46.2% and the net interest income/income is 74.3%.

From a profitability perspective, the bank has consistently generated a return on investment above 1% over the past five years, particularly in FY20, with credit losses that are only comparable to historical averages. The improvement in the efficiency ratio reflects the discipline of cost management. The ability to generate more than 2% return on investment from 2018 to 2020 is impressive and is the result of cost discipline, fee growth, high quality deposit franchise and credit quality.

Historical balance sheet growth has also been impressive. As regular readers of commercial banking analysis know, commercial banking generates profits through the balance sheets. Asset growth, typically used as a proxy for loan growth, drives overall NIM-driven profitability. Growth in non-interest income shows how the bank has improved to diversify its income. Net income vs. asset growth and non-interest income growth will tell investors how efficiently this bank is operating, and finally, EPS growth vs. net income growth shows the effectiveness of the management team in deploying capital (i.e. share buybacks) . Over the past six years, total assets, non-interest income, net income and EPS have increased by 14%, 11%, 15% and 15% respectively. Given the bank’s central location in the fast-growing Texas markets, we continue to view population migration as the tailwind supporting strong growth expected in the future.

Operation matrix

Corporate documents, 10K

Evaluation

The stock is priced at 29.6x P/E and 4.6x P/TBV.

Evaluation

Business Deposits, CapIQ

Risk/Reward

From a risk perspective, the only downside is the high valuation, both from a P/E and P/TBV perspective. The bank has delivered strong operating results and a reduction in loan growth will hurt the valuation.

From a compensation perspective, the bank’s fundamentals are very strong. Credit quality is industry leading, deposit supply is top notch, geographic exposure will continue to drive growth, the bank has several different levers to drive growth through both organic and acquisitions.

Conclusion

In our opinion, First Financial is a top quality bank. Although we like the fundamentals, however, on a relative return basis, we like SVB Financial (SIVB) much more. As described in our previous article, SIVB has a strong franchise that will benefit from a secular growth trajectory. Our view is that the growth trajectory for technology and life sciences can potentially outlast the attractiveness of the TX market. Additionally, SIVB sells at much more attractive multiples compared to First Financials. On a stand-alone basis, we like First Financial. In relative terms, we found SIVB more attractive.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations Table of Contents https://freebassuk.com/managements-discussion-and-analysis-of-financial-condition-and-results-of-operations-table-of-contents/ Tue, 22 Feb 2022 22:25:05 +0000 https://freebassuk.com/managements-discussion-and-analysis-of-financial-condition-and-results-of-operations-table-of-contents/ Page Executive Summary 26 Recent Developments 27 Financial Highlights 28 Balance Sheet Overview 30 Supplemental Financial Data 31 Business Segment Operations 36 Consumer Banking 37 Global Wealth & Investment Management 40 Global Banking 42 Global Markets 44 All Other 45 Managing Risk 46 Strategic Risk Management 49 Capital Management 49 Liquidity Risk 54 Credit Risk […]]]>
Page
           Executive Summary                                              26
           Recent Developments                                            27
           Financial Highlights                                           28
           Balance Sheet Overview                                         30
           Supplemental Financial Data                                    31
           Business Segment Operations                                    36
           Consumer Banking                                               37
           Global Wealth & Investment Management                          40
           Global Banking                                                 42
           Global Markets                                                 44
           All Other                                                      45
           Managing Risk                                                  46
           Strategic Risk Management                                      49
           Capital Management                                             49
           Liquidity Risk                                                 54
           Credit Risk Management                                         59
           Consumer Portfolio Credit Risk Management                      60
           Commercial Portfolio Credit Risk Management                    65
           Non-U.S. Portfolio                                             71

         Loan and Lease Contractual Maturities                            72
           Allowance for Credit Losses                                    73
           Market Risk Management                                         75
           Trading Risk Management                                        76
           Interest Rate Risk Management for the Banking Book             79
           Mortgage Banking Risk Management                               80
           Compliance and Operational Risk Management                     80
           Reputational Risk Management                                   81
           Climate Risk Management                                        81
           Complex Accounting Estimates                                   82
           Non-GAAP Reconciliations                                       85


25 Bank of America


————————————————– ——————————

Management report and analysis of the financial situation and operating results


Bank of America Corporation (the "Corporation") and its management may make
certain statements that constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements can be identified by the fact that they do not relate strictly to
historical or current facts. Forward-looking statements often use words such as
"anticipates," "targets," "expects," "hopes," "estimates," "intends," "plans,"
"goals," "believes," "continue" and other similar expressions or future or
conditional verbs such as "will," "may," "might," "should," "would" and "could."
Forward-looking statements represent the Corporation's current expectations,
plans or forecasts of its future results, revenues, provision for credit losses,
expenses, efficiency ratio, capital measures, strategy and future business and
economic conditions more generally, and other future matters. These statements
are not guarantees of future results or performance and involve certain known
and unknown risks, uncertainties and assumptions that are difficult to predict
and are often beyond the Corporation's control. Actual outcomes and results may
differ materially from those expressed in, or implied by, any of these
forward-looking statements.
You should not place undue reliance on any forward-looking statement and should
consider the following uncertainties and risks, as well as the risks and
uncertainties more fully discussed under Item 1A. Risk Factors of this Annual
Report on Form 10-K: and in any of the Corporation's subsequent Securities and
Exchange Commission Filings: the Corporation's potential judgments, orders,
settlements, penalties, fines and reputational damage resulting from pending or
future litigation and regulatory investigations, proceedings and enforcement
actions, including as a result of our participation in and execution of
government programs related to the Coronavirus Disease 2019 (COVID-19) pandemic,
such as the processing of unemployment benefits for California and certain other
states; the possibility that the Corporation's future liabilities may be in
excess of its recorded liability and estimated range of possible loss for
litigation, and regulatory and government actions; the possibility that the
Corporation could face increased claims from one or more parties involved in
mortgage securitizations; the Corporation's ability to resolve representations
and warranties repurchase and related claims; the risks related to the
discontinuation of the London Interbank Offered Rate and other reference rates,
including increased expenses and litigation and the effectiveness of hedging
strategies; uncertainties about the financial stability and growth rates of
non-U.S. jurisdictions, the risk that those jurisdictions may face difficulties
servicing their sovereign debt, and related stresses on financial markets,
currencies and trade, and the Corporation's exposures to such risks, including
direct, indirect and operational; the impact of U.S. and global interest rates,
inflation, currency exchange rates, economic conditions, trade policies and
tensions, including tariffs, and potential geopolitical instability; the impact
of the interest rate and inflationary environment on the Corporation's business,
financial condition and results of operations; the possibility that future
credit losses may be higher than currently expected due to changes in economic
assumptions, customer behavior, adverse developments with respect to U.S. or
global economic conditions and other uncertainties, including the impact of
supply chain disruptions, inflationary pressures and labor shortages on the
economic recovery and our business; the Corporation's concentration of credit
risk; the Corporation's ability to achieve its expense targets and expectations
regarding revenue, net interest income, provision for credit losses, net
charge-offs, effective tax
rate, loan growth or other projections; adverse changes to the Corporation's
credit ratings from the major credit rating agencies; an inability to access
capital markets or maintain deposits or borrowing costs; estimates of the fair
value and other accounting values, subject to impairment assessments, of certain
of the Corporation's assets and liabilities; the estimated or actual impact of
changes in accounting standards or assumptions in applying those standards;
uncertainty regarding the content, timing and impact of regulatory capital and
liquidity requirements; the impact of adverse changes to total loss-absorbing
capacity requirements, stress capital buffer requirements and/or global
systemically important bank surcharges; the potential impact of actions of the
Board of Governors of the Federal Reserve System on the Corporation's capital
plans; the effect of changes in or interpretations of income tax laws and
regulations; the impact of implementation and compliance with U.S. and
international laws, regulations and regulatory interpretations, including, but
not limited to, recovery and resolution planning requirements, Federal Deposit
Insurance Corporation assessments, the Volcker Rule, fiduciary standards,
derivatives regulations and the Coronavirus Aid, Relief, and Economic Security
Act and any similar or related rules and regulations; a failure or disruption in
or breach of the Corporation's operational or security systems or
infrastructure, or those of third parties, including as a result of cyberattacks
or campaigns; the transition and physical impacts of climate change; our ability
to achieve environmental, social and governance goals and commitments or the
impact of any changes in the Corporation's sustainability strategy or
commitments generally; the impact of any future federal government shutdown and
uncertainty regarding the federal government's debt limit or changes in fiscal,
monetary or regulatory policy; the emergence of widespread health emergencies or
pandemics, including the magnitude and duration of the COVID-19 pandemic and its
impact on the U.S. and/or global, financial market conditions and our business,
results of operations, financial condition and prospects; the impact of natural
disasters, extreme weather events, military conflict, terrorism or other
geopolitical events; and other matters.
Forward-looking statements speak only as of the date they are made, and the
Corporation undertakes no obligation to update any forward-looking statement to
reflect the impact of circumstances or events that arise after the date the
forward-looking statement was made.
Notes to the Consolidated Financial Statements referred to in the Management's
Discussion and Analysis of Financial Condition and Results of Operations (MD&A)
are incorporated by reference into the MD&A. Certain prior-year amounts have
been reclassified to conform to current-year presentation. Throughout the MD&A,
the Corporation uses certain acronyms and abbreviations which are defined in the
Glossary.

Executive Summary

Business Overview
The Corporation is a Delaware corporation, a bank holding company (BHC) and a
financial holding company. When used in this report, "the Corporation," "we,"
"us" and "our" may refer to Bank of America Corporation individually, Bank of
America Corporation and its subsidiaries, or certain of Bank of America
Corporation's subsidiaries or affiliates. Our principal executive offices are
located in Charlotte, North Carolina. Through our various bank and nonbank
subsidiaries throughout the U.S. and in international markets, we provide a
diversified range of

Bank of America 26

————————————————– ——————————


banking and nonbank financial services and products through four business
segments: Consumer Banking, Global Wealth & Investment Management (GWIM), Global
Banking and Global Markets, with the remaining operations recorded in All Other.
We operate our banking activities primarily under the Bank of America, National
Association (Bank of America, N.A. or BANA) charter. At December 31, 2021, the
Corporation had $3.2 trillion in assets and a headcount of approximately 208,000
employees.
As of December 31, 2021, we served clients through operations across the U.S.,
its territories and approximately 35 countries. Our retail banking footprint
covers all major markets in the U.S., and we serve approximately 67 million
consumer and small business clients with approximately 4,200 retail financial
centers, approximately 16,000 ATMs, and leading digital banking platforms
(www.bankofamerica.com) with approximately 41 million active users, including
approximately 33 million active mobile users. We offer industry-leading support
to approximately three million small business households. Our GWIM businesses,
with client balances of $3.8 trillion, provide tailored solutions to meet client
needs through a full set of investment management, brokerage, banking, trust and
retirement products. We are a global leader in corporate and investment banking
and trading across a broad range of asset classes serving corporations,
governments, institutions and individuals around the world.

RECENT DEVELOPMENTS


Capital Management
On February 2, 2022, the Corporation announced that the Board of Directors
declared a quarterly cash common stock dividend of $0.21 per share, payable on
March 25, 2022 to shareholders of record as of March 4, 2022.
For more information on our capital resources and regulatory developments, see
Capital Management on page 49.

COVID-19 Pandemic
The Coronavirus Disease 2019 (COVID-19) pandemic (the pandemic) has impacted the
Corporation and may continue to do so, as uncertainty remains about the duration
of the pandemic and the timing and strength of the global economic recovery. As
the pandemic continues to evolve, we regularly evaluate protocols and processes
in place to execute our business continuity plans. In conjunction with our
efforts to support clients affected by the pandemic, we have cumulatively
originated $35.4 billion in loans under the Paycheck Protection Program (PPP)
with amounts outstanding of $4.7 billion and $22.7 billion at December 31, 2021
and 2020. For more information on PPP loans, see Note 1 - Summary of Significant
Accounting Principles to the Consolidated Financial Statements.
The future direct and indirect impact of the pandemic on our businesses, results
of operations and financial condition remains uncertain. Should current economic
conditions deteriorate or if the pandemic worsens due to various factors,
including through the spread of more easily communicable variants of COVID-19,
such conditions could have an adverse effect on our businesses and results of
operations and could adversely affect our financial condition.
For more information on how the risks related to the pandemic adversely affect
our businesses, results of operations and financial condition, see Part 1. Item
1A. Risk Factors on page 8.

LIBOR and Other Benchmark Rates
Subject to the continued publication of certain non-representative London
Interbank Offered Rate (LIBOR) benchmark settings based on a modified
calculation (i.e., on a "synthetic" basis), British Pound Sterling, Euro, Swiss
Franc and Japanese Yen LIBOR settings and one-week and two-month U.S. dollar
(USD) LIBOR settings ceased or became no longer representative of the underlying
market the rates seek to measure (i.e., non-representative) immediately after
December 31, 2021, and the remaining USD LIBOR settings (i.e., overnight, one
month, three month, six month and 12 month) will cease or become
non-representative immediately after June 30, 2023. Separately, the Federal
Reserve, the Office of the Comptroller of the Currency (OCC) and the Federal
Deposit Insurance Corporation (FDIC) issued supervisory guidance encouraging
banks to cease entering into new contracts that use USD LIBOR as a reference
rate by December 31, 2021 subject to certain regulatory-approved exceptions (USD
LIBOR Guidance).
As a result, a major transition has been and continues to be in progress in the
global financial markets with respect to the replacement of Interbank Offered
Rates (IBORs). This is a complex process impacting a variety of our businesses
and operations. IBORs have historically been used in many of the Corporation's
products and contracts, including derivatives, consumer and commercial loans,
mortgages, floating-rate notes and other adjustable-rate products and financial
instruments. In response, the Corporation established an enterprise-wide IBOR
transition program, with active involvement of senior management and regular
reports to the Management Risk Committee (MRC) and Enterprise Risk Committee
(ERC). The program continues to drive the Corporation's industry and regulatory
engagement, client and financial contract changes, internal and external
communications, technology and operations modifications, including updates to
its operational models, systems and processes, introduction of new products,
migration of existing clients, and program strategy and governance.
As of December 31, 2021, the Corporation has transitioned or otherwise addressed
IBOR-based products and contracts referencing the rates that ceased or became
non-representative after December 31, 2021, including LIBOR-linked commercial
loans, LIBOR-based adjustable-rate consumer mortgages, LIBOR-linked derivatives
and interdealer trading of certain USD LIBOR and other interest rate swaps, and
related hedging
27 Bank of America

--------------------------------------------------------------------------------

arrangements. Additionally, in accordance with the USD LIBOR Guidance, the
Corporation has ceased entering into new contracts that use USD LIBOR as a
reference rate, subject to certain regulatory-approved exceptions.
The Corporation launched capabilities and services to support the issuance and
trading in products indexed to various alternative reference rates (ARRs) and
developed employee training programs as well as other internal and external
sources of information on the various challenges and opportunities that the
replacement of IBORs has presented and continues to present. The Corporation
continues to monitor a variety of market scenarios as part of its transition
efforts, including risks associated with insufficient preparation by individual
market participants or the overall market ecosystem, ability of market
participants to meet regulatory and industry-wide recommended milestones and
access and demand by clients and market participants to liquidity in certain
products, including LIBOR products.
With respect to the transition of LIBOR products referencing USD LIBOR settings
ceasing or becoming non-representative as of June 30, 2023, a significant
majority of the Corporation's notional contractual exposure to such LIBOR
currencies, of which the significant majority is derivatives contracts, have
been remediated (i.e., updated to include fallback provisions to ARRs based on
market driven protocols, regulatory guidance and industry-recommended fallback
provisions and related mechanisms) and the Corporation is continuing to
remediate the remaining USD LIBOR exposure. The remaining exposure, a majority
of which is made up of derivatives and commercial loans and which represents a
small minority of outstanding USD LIBOR notional contractual exposure of the
Corporation, will require active dialogue with clients to modify the contracts.
For any residual exposures after June 2023 that continue to have no fallback
provisions, the Corporation is assessing and planning to leverage relevant
contractual and statutory solutions, including relevant state legislation and
any future federal legislation, to transition such exposure to ARRs.
The Corporation has implemented regulatory, tax and accounting changes and
continues to monitor current and potential impacts of the transition, including
Internal Revenue Service tax regulations and guidance and Financial Accounting
Standards Board guidance. In addition, the Corporation has engaged impacted
clients in connection with the transition by providing ARRs education and the
timing of transition events. The Corporation is also working actively with
global regulators, industry working groups and trade associations. For more
information on the expected replacement of LIBOR and other benchmark rates, see
Item 1A. Risk Factors - Other on page 21.

Changes to Overdraft Services
In January 2022, the Corporation announced changes to its overdraft services for
consumer and small business clients, which include eliminating non-sufficient
funds (NSF) fees beginning in February 2022 and reducing overdraft fees from $35
to $10 beginning in May 2022. Fees from overdraft services were approximately $1
billion in 2021 and recorded in Consumer Banking as service charges in the
Consolidated Statement of Income. Due to the policy changes, in 2022 the
Corporation expects a significant reduction in NSF and overdraft fees.



Financial Highlights
Table 1                      Summary Income Statement and Selected Financial Data

(Dollars in millions, except per share information)                                                                        2021                     2020
Income statement
Net interest income                                                                                                 $        42,934          $        43,360
Noninterest income                                                                                                           46,179                   42,168
Total revenue, net of interest expense                                                                                       89,113                   85,528
Provision for credit losses                                                                                                  (4,594)                  11,320
Noninterest expense                                                                                                          59,731                   55,213
Income before income taxes                                                                                                   33,976                   18,995
Income tax expense                                                                                                            1,998                    1,101
Net income                                                                                                                   31,978                   17,894
Preferred stock dividends                                                                                                     1,421                    1,421
Net income applicable to common shareholders                                                                        $        30,557          $        16,473

Per common share information
Earnings                                                                                                            $          3.60          $          1.88
Diluted earnings                                                                                                               3.57                     1.87
Dividends paid                                                                                                                 0.78                     0.72
Performance ratios
Return on average assets (1)                                                                                                   1.05  %                  0.67  %
Return on average common shareholders' equity (1)                                                                             12.23                     

6.76

Return on average tangible common shareholders' equity (2)                                                                    17.02                     9.48
Efficiency ratio (1)                                                                                                          67.03                    64.55

Balance sheet at year end
Total loans and leases                                                                                              $       979,124          $       927,861
Total assets                                                                                                              3,169,495                2,819,627
Total deposits                                                                                                            2,064,446                1,795,480
Total liabilities                                                                                                         2,899,429                2,546,703
Total common shareholders' equity                                                                                           245,358                  248,414
Total shareholders' equity                                                                                                  270,066                  272,924


(1)For definitions, see Key Metrics on page 169.
(2)Return on average tangible common shareholders' equity is a non-GAAP
financial measure. For more information and a corresponding reconciliation to
the most closely related financial measures defined by accounting principles
generally accepted in the United States of America (GAAP), see Non-GAAP
Reconciliations on page 85.

Net income was $32.0 billion or $3.57 per diluted share in 2021 compared to
$17.9 billion or $1.87 per diluted share in 2020. The increase in net income was
due to improvement in the provision for credit losses and higher revenue,
partially offset by higher noninterest expense.
For discussion and analysis of our consolidated and business segment results of
operations for 2020 compared to 2019, see the Financial Highlights and Business
Segment Operations sections in the MD&A of the Corporation's 2020 Annual Report
on Form 10-K.

Net Interest Income
Net interest income decreased $426 million to $42.9 billion in 2021 compared to
2020. Net interest yield on a fully taxable-equivalent (FTE) basis decreased 24
basis points (bps) to 1.66 percent for 2021. The decrease in net interest income
was primarily driven by lower interest rates and average loan balances,
partially offset by higher average balances of debt securities. For more
information on net interest yield and the FTE basis, see Supplemental Financial
Data on page 31, and for more information on interest rate risk management, see
Interest Rate Risk Management for the Banking Book on page 79.






        Bank of America 28

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Non-interest income

Table 2 Non-interest income

(Dollars in millions)                                    2021          2020
Fees and commissions:
Card income                                           $  6,218      $  5,656
Service charges                                          7,504         7,141
Investment and brokerage services                       16,690        14,574
Investment banking fees                                  8,887         7,180
Total fees and commissions                              39,299        34,551
Market making and similar activities                     8,691         8,355

Other income                                            (1,811)         (738)

Total noninterest income                              $ 46,179      $ 42,168

Non-interest income increased $4.0 billion for $46.2 billion in 2021 compared to 2020. The following highlights the significant changes.


?  Card income increased $562 million primarily driven by increased client
activity and merchant services revenue.
?  Service charges increased $363 million primarily due to higher treasury and
credit service charges and increased client activity.
?  Investment and brokerage services increased $2.1 billion primarily driven by
higher market valuations and assets under management (AUM) flows, partially
offset by declines in AUM pricing.
?  Investment banking fees increased $1.7 billion primarily due to higher
advisory fees as well as higher debt and equity issuance fees.
?  Market making and similar activities increased $336 million primarily driven
by strong sales and trading performance in Equities, partially offset by a
weaker performance in Fixed Income, Currencies and Commodities (FICC), which
benefited from a more favorable market environment in 2020.
?  Other income decreased $1.1 billion primarily due to a $704 million gain on
sales of certain mortgage loans in the prior year, as well as higher partnership
losses on tax credit investments.

Provision for Credit Losses
The provision for credit losses improved $15.9 billion to a benefit of $4.6
billion in 2021 compared to 2020. The benefit was primarily due to improvements
in the macroeconomic outlook and credit quality. For more information on the
provision for credit losses, see Allowance for Credit Losses on page 73.

Non-interest expenses


Table 3           Noninterest Expense

(Dollars in millions)                                          2021          2020
Compensation and benefits                                   $ 36,140      $ 32,725
Occupancy and equipment                                        7,138         7,141
Information processing and communications                      5,769        

5,222

Product delivery and transaction related                       3,881         3,433
Marketing                                                      1,939         1,701
Professional fees                                              1,775         1,694
Other general operating                                        3,089         3,297
Total noninterest expense                                   $ 59,731      $ 55,213


Noninterest expense increased $4.5 billion to $59.7 billion in 2021 compared to
2020. The increase was primarily due to higher compensation and benefits
expense, higher costs associated with processing transactional card claims
related to state unemployment benefits, a contribution to the Bank of America
Foundation and an impairment charge for real estate rationalization.

income tax expense

Table 4 Income tax expense

(Dollars in millions)                           2021           2020
Income before income taxes                   $ 33,976       $ 18,995
Income tax expense                              1,998          1,101
Effective tax rate                                5.9  %         5.8  %


Income tax expense was $2.0 billion for 2021 compared to $1.1 billion in 2020,
resulting in an effective tax rate of 5.9 percent compared to 5.8 percent.
The effective tax rates for 2021 and 2020 were driven by the impact of our
recurring tax preference benefits and positive income tax adjustments from the
impact of U.K. tax law changes discussed below. Our recurring tax preference
benefits primarily consist of tax credits from environmental, social and
governance (ESG) investments in affordable housing and renewable energy,
aligning with our responsible growth strategy to address global sustainability
challenges. Absent these tax credits, the impact of the U.K. tax law changes and
other discrete items, the effective tax rates would have been approximately 25
percent and 26 percent for 2021 and 2020.
In June 2021, the U.K. enacted the 2021 Finance Act, which included an increase
in the U.K. corporation income tax rate to 25 percent from 19 percent. This
change is effective April 1, 2023 and unfavorably affects income tax expense on
future U.K. earnings. In addition, in July 2020, the U.K. enacted a repeal of
the final two percent of scheduled decreases in the U.K. corporation income tax
rate. As a result, in 2021 and 2020, the Corporation recorded write-ups of U.K.
net deferred tax assets of approximately $2.0 billion and $700 million, with
corresponding positive income tax adjustments. These write-ups were reversals of
previously recorded write-downs of net deferred tax assets for prior changes in
the U.K. corporation income tax rate.

29 Bank of America

————————————————– ——————————


Balance Sheet Overview

Table 5                 Selected Balance Sheet Data

                                                                                 December 31
(Dollars in millions)                                                     2021                 2020              $ Change            % Change
Assets
Cash and cash equivalents                                            $   348,221          $   380,463          $ (32,242)                   (8) %
Federal funds sold and securities borrowed or purchased under
agreements to resell                                                     250,720              304,058            (53,338)                  (18)
Trading account assets                                                   247,080              198,854             48,226                    24
Debt securities                                                          982,627              684,850            297,777                    43
Loans and leases                                                         979,124              927,861             51,263                     6
Allowance for loan and lease losses                                      (12,387)             (18,802)             6,415                   (34)
All other assets                                                         374,110              342,343             31,767                     9
Total assets                                                         $ 3,169,495          $ 2,819,627          $ 349,868                    12
Liabilities
Deposits                                                             $ 2,064,446          $ 1,795,480          $ 268,966                    15
Federal funds purchased and securities loaned or sold under
agreements to repurchase                                                 192,329              170,323             22,006                    13
Trading account liabilities                                              100,690               71,320             29,370                    41
Short-term borrowings                                                     23,753               19,321              4,432                    23
Long-term debt                                                           280,117              262,934             17,183                     7
All other liabilities                                                    238,094              227,325             10,769                     5
Total liabilities                                                      2,899,429            2,546,703            352,726                    14
Shareholders' equity                                                     270,066              272,924             (2,858)                   (1)
Total liabilities and shareholders' equity                           $ 3,169,495          $ 2,819,627          $ 349,868                    12


Assets

At December 31, 2021, total assets were approximately $3.2 trillion, up $349.9
billion from December 31, 2020. The increase in assets was primarily due to
higher debt securities that were primarily funded by deposit growth, an increase
in loans and leases and higher trading account assets, partially offset by lower
federal funds sold and securities borrowed or purchased under agreements to
resell and cash and cash equivalents.

Cash and Cash Equivalents
Cash and cash equivalents decreased $32.2 billion primarily driven by higher
investments in debt securities.

Federal Funds Sold and Securities Borrowed or Purchased Under Agreements to
Resell
Federal funds transactions involve lending reserve balances on a short-term
basis. Securities borrowed or purchased under agreements to resell are
collateralized lending transactions utilized to accommodate customer
transactions, earn interest rate spreads and obtain securities for settlement
and for collateral. Federal funds sold and securities borrowed or purchased
under agreements to resell decreased $53.3 billion primarily due to the
investment of excess cash into debt securities.

Trading Account Assets
Trading account assets consist primarily of long positions in equity and
fixed-income securities including U.S. government and agency securities,
corporate securities and non-U.S. sovereign debt. Trading account assets
increased $48.2 billion primarily due to an increase in inventory within Global
Markets.

Debt Securities
Debt securities primarily include U.S. Treasury and agency securities,
mortgage-backed securities (MBS), principally agency MBS, non-U.S. bonds,
corporate bonds and municipal debt. We use the debt securities portfolio
primarily to manage interest rate and liquidity risk and to leverage market
conditions that create economically attractive returns on these investments.
Debt securities increased $297.8 billion primarily driven by the deployment of
deposit inflows. For more information on debt

securities, see Note 4 – Securities to the consolidated financial statements.


Loans and Leases
Loans and leases increased $51.3 billion primarily driven by growth in
commercial loans and higher securities-based lending within consumer loans. For
more information on the loan portfolio, see Credit Risk Management on page 59.

Allowance for Loan and Lease Losses
The allowance for loan and lease losses decreased $6.4 billion primarily due to
improvements in the macroeconomic outlook and credit quality. For more
information, see Allowance for Credit Losses on page 73.

All Other Assets
All other assets increased $31.8 billion primarily driven by higher margin loans
and loans held-for-sale (LHFS).

Passives

AT December 31, 2021total liabilities were approximately $2.9 trillionat the top
$352.7 billion from December 31, 2020mainly due to growth in deposits.

Deposits

Deposits increased $269.0 billion mainly due to an increase in retail and wholesale deposits.


Federal Funds Purchased and Securities Loaned or Sold Under Agreements to
Repurchase
Federal funds transactions involve borrowing reserve balances on a short-term
basis. Securities loaned or sold under agreements to repurchase are
collateralized borrowing transactions utilized to accommodate customer
transactions, earn interest rate spreads and finance assets on the balance
sheet. Federal funds purchased and securities loaned or sold under agreements to
repurchase increased $22.0 billion primarily driven by client activity within
Global Markets.

Trading Account Liabilities
Trading account liabilities consist primarily of short positions in equity and
fixed-income securities including U.S. Treasury and agency securities, corporate
securities and non-U.S. sovereign

Bank of America 30

————————————————– ——————————

debt. Trading account liabilities increased $29.4 billion mainly due to higher levels of short positions in global markets.


Short-term Borrowings
Short-term borrowings provide an additional funding source and primarily consist
of Federal Home Loan Bank (FHLB) short-term borrowings, notes payable and
various other borrowings that generally have maturities of one year or less.
Short-term borrowings increased $4.4 billion primarily due to an increase in
short-term commercial paper issuances to manage liquidity needs. For more
information on short-term borrowings, see Note 10 - Securities Financing
Agreements, Short-term Borrowings and Restricted Cash to the Consolidated
Financial Statements.

Long-term Debt
Long-term debt increased $17.2 billion primarily due to debt issuances,
partially offset by maturities, redemptions and valuation adjustments. For more
information on long-term debt, see Note 11 - Long-term Debt to the Consolidated
Financial Statements.

Shareholders' Equity
Shareholders' equity decreased $2.9 billion primarily due to returns of capital
to shareholders through common stock repurchases and common and preferred stock
dividends, market value decreases on derivatives and debt securities and the
redemption of preferred stock, partially offset by net income.

Cash Flows Overview
The Corporation's operating assets and liabilities support our global markets
and lending activities. We believe that cash flows from operations, available
cash balances and our ability to generate cash through short- and long-term debt
are sufficient to fund our operating liquidity needs. Our investing activities
primarily include the debt securities portfolio and loans and leases. Our
financing activities reflect cash flows primarily related to customer deposits,
securities financing agreements, long-term debt and common and preferred stock.
For more information on liquidity, see Liquidity Risk on page 54.

Additional financial data


Non-GAAP Financial Measures
In this Form 10-K, we present certain non-GAAP financial measures. Non-GAAP
financial measures exclude certain items or otherwise include components that
differ from the most directly comparable measures calculated in accordance with
GAAP. Non-GAAP financial measures are provided as additional useful information
to assess our financial condition, results of operations (including
period-to-period operating performance) or compliance with prospective
regulatory requirements. These non-GAAP financial measures are not intended as a
substitute for GAAP financial measures and may not be defined or calculated the
same way as non-GAAP financial measures used by other companies.
We view net interest income and related ratios and analyses on an FTE basis,
which when presented on a consolidated basis are non-GAAP financial measures. To
derive the FTE basis, net interest income is adjusted to reflect tax-exempt
income on an equivalent before-tax basis with a corresponding increase in income
tax expense. For purposes of this calculation, we use the federal statutory tax
rate of 21 percent and a representative state tax rate. Net interest yield,
which measures the basis points we earn over the cost of funds, utilizes net
interest income on an FTE basis. We believe that presentation of these items on
an FTE basis allows for comparison of amounts from
both taxable and tax-exempt sources and is consistent with industry practices.
We may present certain key performance indicators and ratios excluding certain
items (e.g., debit valuation adjustment (DVA) gains (losses)) which result in
non-GAAP financial measures. We believe that the presentation of measures that
exclude these items is useful because such measures provide additional
information to assess the underlying operational performance and trends of our
businesses and to allow better comparison of period-to-period operating
performance.
We also evaluate our business based on certain ratios that utilize tangible
equity, a non-GAAP financial measure. Tangible equity represents shareholders'
equity or common shareholders' equity reduced by goodwill and intangible assets
(excluding mortgage servicing rights (MSRs)), net of related deferred tax
liabilities ("adjusted" shareholders' equity or common shareholders' equity).
These measures are used to evaluate our use of equity. In addition,
profitability, relationship and investment models use both return on average
tangible common shareholders' equity and return on average tangible
shareholders' equity as key measures to support our overall growth objectives.
These ratios are as follows:

?  Return on average tangible common shareholders' equity measures our net
income applicable to common shareholders as a percentage of adjusted average
common shareholders' equity. The tangible common equity ratio represents
adjusted ending common shareholders' equity divided by total tangible assets.
?  Return on average tangible shareholders' equity measures our net income as a
percentage of adjusted average total shareholders' equity. The tangible equity
ratio represents adjusted ending shareholders' equity divided by total tangible
assets.
?  Tangible book value per common share represents adjusted ending common
shareholders' equity divided by ending common shares outstanding.

We believe ratios utilizing tangible equity provide additional useful
information because they present measures of those assets that can generate
income. Tangible book value per common share provides additional useful
information about the level of tangible assets in relation to outstanding shares
of common stock.
The aforementioned supplemental data and performance measures are presented in
Tables 6 and 7.
For more information on the reconciliation of these non-GAAP financial measures
to the corresponding GAAP financial measures, see Non-GAAP Reconciliations on
page 85.

Key Performance Indicators
We present certain key financial and nonfinancial performance indicators (key
performance indicators) that management uses when assessing our consolidated
and/or segment results. We believe they are useful to investors because they
provide additional information about our underlying operational performance and
trends. These key performance indicators (KPIs) may not be defined or calculated
in the same way as similar KPIs used by other companies. For information on how
these metrics are defined, see Key Metrics on page 169.
Our consolidated key performance indicators, which include various equity and
credit metrics, are presented in Table 1 on page 28, Table 6 on page 32 and
Table 7 on page 33.
For information on key segment performance metrics, see Business Segment
Operations on page 36.

31 Bank of America

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© Edgar Online, source Previews

]]>
TRONOX HOLDINGS PLC Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-K) https://freebassuk.com/tronox-holdings-plc-managements-discussion-and-analysis-of-financial-condition-and-results-of-operations-form-10-k/ Tue, 22 Feb 2022 13:48:05 +0000 https://freebassuk.com/tronox-holdings-plc-managements-discussion-and-analysis-of-financial-condition-and-results-of-operations-form-10-k/ The following discussion should be read in conjunction with Tronox Holdings plc's consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K. This discussion and other sections in this Annual Report on Form 10-K contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, […]]]>
The following discussion should be read in conjunction with Tronox Holdings
plc's consolidated financial statements and the related notes included elsewhere
in this Annual Report on Form 10-K. This discussion and other sections in this
Annual Report on Form 10-K contain forward-looking statements, within the
meaning of the Private Securities Litigation Reform Act of 1995, that involve
risks and uncertainties, and actual results could differ materially from those
discussed in the forward-looking statements as a result of numerous
factors. Forward-looking statements provide current expectations of future
events based on certain assumptions and include any statement that does not
directly relate to any historical or current fact. Forward-looking
statements also can be identified by words such as "future," "anticipates,"
"believes," "estimates," "expects," "intends," "plans," "predicts," "will,"
"would," "could," "can," "may," and similar terms. There are important factors
that could cause our actual results, level of activity, performance or
achievements to differ materially from the results, level of activity,
performance or achievements expressed or implied by the forward-looking
statements. In particular, you should consider the numerous risks and
uncertainties outlined in Item 1A. "Risk Factors."

This Management's Discussion and Analysis of Financial Condition and Results of
Operations contains certain financial measures, in particular the presentation
of earnings before interest, taxes, depreciation and amortization ("EBITDA") and
Adjusted EBITDA, which are not presented in accordance with
accounting principles generally accepted in the United States ("U.S. GAAP"). We
are presenting these non-U.S. GAAP financial measures because we believe they
provide us and readers of this Form 10-K with additional insight into our
operational performance relative to earlier periods and relative to our
competitors. We do not intend for these non-U.S. GAAP financial measures to be a
substitute for any U.S. GAAP financial information. Readers of these statements
should use these non-U.S. GAAP financial measures only in conjunction with the
comparable U.S. GAAP financial measures. A reconciliation of net income (loss)
to EBITDA and Adjusted EBITDA is also provided herein.

Executive Overview


Tronox Holdings plc (referred to herein as "Tronox", "we", "us", or "our")
operates titanium-bearing mineral sand mines and beneficiation operations in
Australia, South Africa and Brazil to produce feedstock materials that can be
processed into TiO2 for pigment, high purity titanium chemicals, including
titanium tetrachloride, and Ultrafine© titanium dioxide used in certain
specialty applications. It is our long-term strategic goal to be vertically
integrated and consume all of our feedstock materials in our own nine TiO2
pigment facilities which we operate in the United States, Australia, Brazil, UK,
France, the Netherlands, China and the Kingdom of Saudi Arabia ("KSA"). We
believe that vertical integration is the best way to achieve our ultimate goal
of delivering low cost, high-quality pigment to our coatings and other TiO2
customers throughout the world. The mining, beneficiation and smelting of
titanium bearing mineral sands creates meaningful quantities of zircon and pig
iron, which we also supply to customers around the world.

We are a public limited company listed on the New York Stock Exchange and are registered under the laws of England and Wales.

Working environment

The following analysis includes trends and factors that could affect future results of operations:


Throughout the current COVID-19 pandemic, our operations have been designated as
essential to support the continued manufacturing of products such as food and
medical packaging, medical equipment, pharmaceuticals, and personal protective
gear.

The fourth quarter of 2021 results were driven by robust demand across our end
markets, with the supply to demand balance remaining tight due to below
seasonally normal levels of TiO2, production challenges caused by supplier force
majeures and delivery times extended by shipping delays. Fourth quarter revenue
increased 13% compared to the prior year, driven by higher TiO2, Zircon and pig
iron prices. On a year over year basis, TiO2 average selling prices increased
17% on a local currency basis and 15% on a US dollar basis and Zircon average
selling prices increased 26%. Both TiO2 and Zircon sales volumes remained
relatively flat in line with prior year levels. Revenue from feedstock and other
products decreased 11% on a year over year basis due to the internal consumption
of all feedstocks in the quarter compared to the prior year, partially offset by
increased pig iron revenue from higher average selling prices. Sequentially,
revenue increased 2% in the fourth quarter of 2021 compared to the third quarter
of 2021, as price increases of TiO2, Zircon and pig iron were partially offset
by volume declines of TiO2 and Zircon. TiO2 average selling prices grew 3%
sequentially on a US dollar basis and 4% on a local currency basis. TiO2 volumes
were
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constrained by global logistics challenges and supply chain and certain raw
material availability that resulted in a 4% sequential decline. Revenue from
Zircon sales increased 3% sequentially, as a 9% increase in average selling
prices due to improved pricing, was partially offset by 6% lower sales volumes.
Feedstock and other product revenues increased 26% sequentially mainly due to
both higher pig iron volumes and selling prices.

Gross profit decreased sequentially from the third quarter to the fourth quarter
of 2021 due to lower sales volumes of TiO2 and Zircon, higher production costs
due to transitory inflation and increased freight rates, partially offset by
favorable impacts of average selling prices. Gross profit increased year over
year due to the increase in average selling prices of TiO2, Zircon and pig iron
and the favorable impact of sales volumes and product mix partially offset by
unfavorable impacts of foreign currency as well as higher production costs and
increased freight rates partially offset by favorable overhead absorption and
cost savings.

From December 31, 2021our total available liquidity was $677 millionincluding $228 million in cash and cash equivalents and $449 million available under revolving credit agreements.


During the year ended December 31, 2021, we made several discretionary
prepayments on our debt facilities primarily on the New Term Loan Facility and
Standard Bank Term Loan Facility. During the fourth quarter of 2021, we made an
additional $202 million of voluntary prepayments on our New Term Loan Facility.
As of December 31, 2021, our total debt was $2.6 billion and net debt to
trailing-twelve month Adjusted EBITDA was 2.5x. The Company also has no
financial covenants on its term loan or bonds and only one springing financial
covenant on its Cash Flow revolver facility, which we do not expect to be
triggered based on our current scenario planning.

Consolidated operating results from continuing operations

Year ended December 31, 2021 Compared to the year ended December 31, 2020

                                                                             Reported Amounts
                                                                         Year Ended December 31,
                                                                 2021             2020            Variance
                                                                        (Millions of U.S. Dollars)
Net sales                                                     $ 3,572          $ 2,758          $  814
Cost of goods sold                                              2,677            2,137             540
Gross profit                                                  $   895          $   621          $  274
Gross Margin                                                     25.1  %          22.5  %          2.6   pts

Selling, general and administrative expenses                      318              347             (29)
Restructuring                                                       -                3              (3)
Income from operations                                            577              271             306
Interest expense                                                 (157)            (189)             32
Interest income                                                     7                8              (1)
Loss on extinguishment of debt                                    (65)              (2)            (63)
Other income, net                                                  12               26             (14)
Income from continuing operations before income taxes             374              114             260
Income tax (provision) benefit                                    (71)             881            (952)
Net income from continuing operations                         $   303       

$995 ($692)


Effective tax rate                                                 19  %          (773) %            792 pts

EBITDA(1)                                                     $   821          $   599          $  222
Adjusted EBITDA(1)                                            $   947          $   668          $  279
Adjusted EBITDA as % of Net Sales                                26.5  %          24.2  %          2.3   pts


_____________________

(1)  EBITDA and Adjusted EBITDA are Non-U.S. GAAP financials measures. Please
refer to the "Non-U.S. GAAP Financial Measures" section of this Management's
Discussion and Analysis of Financial Condition and Results of Operations for a
discussion of these measures and a reconciliation of these measures to Net
income (loss) from continuing operations.
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Net sales of $3,572 million for the year ended December 31, 2021 increased by
30% compared to $2,758 million for the same period in 2020. Revenue increased
primarily due to both higher TiO2 and Zircon sales volumes and average selling
prices. Net sales by type of product for the years ended December 31, 2021 and
2020 were as follows:

The table below shows reported revenues by product:

                                                   Year Ended
                                                  December 31,
(Millions of dollars, except percentages)      2021         2020        Variance       Percentage
TiO2                                         $ 2,793      $ 2,176      $     617             28  %
Zircon                                           478          283            195             69  %
Feedstock and other products                     301          299              2              1  %
Total net sales                              $ 3,572      $ 2,758      $     814             30  %


For the year ended December 31, 2021, TiO2 revenue increased $617 million, or
28%, compared to the prior year due to a $369 million increase in sales volumes
and an increase of $217 million in average selling prices. Foreign currency
positively impacted TiO2 revenue by $31 million due primarily to the
strengthening of the Euro. Zircon revenues increased $195 million primarily due
to a 55% increase in sales volumes and a 9% increase in average selling prices.
Feedstock and other products revenue increased $2 million primarily due to an
increase in average selling prices and sales volumes of pig iron partially
offset by a decrease in sales volumes of CP slag and other feedstocks.

Gross profit of $895 million for the year ended December 31, 2021 was 25.1% of net sales compared to 22.5% of net sales for the same period in 2020. The increase in gross margin is mainly due to:

•the favorable impact of approximately 8 points due to the increase in the selling prices of TiO2, Zircon and cast iron;

•the favorable impact of around 1 point on the volume of sales and the product mix;


•the net unfavorable impact of approximately 4 points due to changes in foreign
exchange rates, primarily due to the South African Rand and Australian dollar;
and

•the net unfavorable impact of approximately 2 points due to higher production
costs and increased freight rates offset by favorable overhead absorption and
cost savings.

Selling, general and administrative ("SG&A") expenses decreased $29 million when
comparing the year ended December 31, 2021 to the prior year. The SG&A expenses
decrease was primarily driven by $29 million of lower professional fees and
lower integration costs of $9 million, partially offset by $16 million of
increased employee costs primarily driven by higher incentive compensation. The
remaining net decrease was driven by individually immaterial amounts.

Income from operations for the year ended December 31, 2021 of $577 million,
increased by $306 million or 113% compared to the same period in 2020 which is
primarily attributable to the higher gross margin and lower selling, general and
administrative expenses.

Adjusted EBITDA as a percentage of net sales was 26.5% for the year ended
December 31, 2021, an increase of 2.3 points from 24.2% in the prior year. On a
reported basis, the higher gross profit and lower SG&A expenses as discussed
above were the primary drivers of the year-over-year increase in Adjusted EBITDA
percentage.

Interest expense for the year ended December 31, 2021 decreased $32 million
compared to the same period in 2020. The decrease is primarily due to the
following: 1) lower average debt outstanding balances and lower average interest
rates on the New Term Loan Facility as compared to the Prior Term Loan Facility,
2) lower average debt outstanding balance on the New Standard Bank Term Loan
Facility as compared to the Prior Standard Bank Term Loan Facility, and 3) lower
average interest rates on the Senior Notes due 2029 as compared to the Senior
Notes due 2025 and the Senior Notes due 2026. These decreases in interest
expense are partially offset by the four months of additional interest expense
in the current year associated with the 6.5% Senior Secured Notes due 2025,
which were issued on May 1, 2020.

Interest income for the year ended December 31, 2021 decreased by $1 million
compared to the prior year primarily due to lower cash balances from the use of
cash to paydown the New Term Loan Facility, the Standard Bank Term Loan Facility
and the Tikon Loan.

Loss on extinguishment of debt of $65 million for the year ended December 31,
2021 is primarily comprised of the following: 1) call premiums paid of $21
million and $19 million in relation to the refinancing of our $615 million
Senior Notes due 2026 and our $450 million Senior Notes due 2025, respectively,
2) the write-off of certain existing debt issuance costs and original issue
discount as well as certain new lender and other third party fees associated
with the refinancing of our new revolver
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and term loan and issuance of our new senior notes due 2029 and 3) approximately
$9 million write-off of existing debt issuance costs and original issue discount
as a result of the $398 million voluntary prepayments made on the New Term Loan
Facility.

Other income, net for the year ended December 31, 2021 primarily consisted of
$16 million net realized and unrealized foreign currency gains, $8 million
associated with the monthly technical service fee relating to the Jazan slagger
we receive from AMIC, and $5 million of pension income primarily due to the
expected return on plan assets offset by pension related interest costs and
amortization of actuarial gain/losses partially offset by $18 million related to
the breakage fee associated with the termination of the TTI acquisition. The
foreign currency gains were primarily related to the South African Rand and the
Australian dollar due to the remeasurement of our U.S. dollar denominated
working capital and other long-term obligations partially offset by the impact
of our foreign currency derivatives.

We maintain full valuation allowances related to the total net deferred tax
assets in Australia, Switzerland and the United Kingdom. The provisions for
income taxes associated with these jurisdictions include no tax benefits with
respect to losses incurred and tax expense only to the extent of current tax
payments. Additionally, we have valuation allowances against other specific tax
assets.

The effective tax rate was 19% and (773)% for the years ended December 31, 2021
and 2020, respectively. The large negative effective tax rate for the year ended
December 31, 2020 is caused by the release of valuation allowances for deferred
tax assets in the U.S. and Brazil, partially offset by the recording of
valuation allowances in Saudi Arabia and the U.K. The net impact was $905
million benefit to the income tax provision. Refer to Note 8 of notes to
consolidated financial statements for further information. Additionally, the
effective tax rates for the years ended December 31, 2021 and 2020 are
influenced by a variety of factors, primarily income and losses in jurisdictions
with valuation allowances, disallowable expenditures, prior year accruals, and
our jurisdictional mix of income at tax rates different than the U.K. statutory
rate.

Year ended December 31, 2020 Compared to the year ended December 31, 2019


A discussion of our results of operations for the year ended December 31, 2020
versus December 31, 2019 is included in Part II, Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Results of Operation", included in our Annual Report on Form 10-K for the year
ended December 31, 2020.

Other comprehensive income (loss)


There was an other comprehensive loss of $104 million for the year ended
December 31, 2021 compared to other comprehensive loss of $20 million for the
year ended December 31, 2020. This increase in comprehensive loss was primarily
driven by unfavorable movements of foreign currency translation adjustments of
$113 million for the year ended December 31, 2021 as compared to unfavorable
foreign currency translation adjustments of $4 million in the prior year. In
addition, we recognized net losses on derivative instruments of $11 million in
the year ended December 31, 2021 as compared to none in the prior year. These
losses were partially offset by $20 million of pension and postretirement gains
for the year ended December 31, 2021 as compared to $16 million of pension and
postretirement losses for the prior year.

A discussion of our comprehensive (loss) income for the year ended December 31,
2020 versus December 31, 2019 is included in Part II, Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations - Other
Comprehensive (Loss) Income", included in our Annual Report on Form 10-K for the
year ended December 31, 2020.

Cash and capital resources

In 2021, our liquidity decreased by $364 million for $677 million.

The table below shows our liquidity, including amounts available under our credit facilities, as of the following dates:

                                                December 31,       December 31,
                                                    2021               2020
Cash and cash equivalents                      $         228      $         619
Available under the Wells Fargo Revolver                   -                

285

Available under the new Cash Flow Revolver               329                

Available under the Standard Credit Facility              63                

68

Available under the Emirates Revolver                     38                

50

Available under the SABB Facility                         19                 19
Total                                          $         677      $       1,041



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Historically, we have funded our operations and met our commitments through cash
generated by operations, issuance of unsecured notes, bank financings and
borrowings under lines of credit. In the next twelve months, we expect that our
operations will provide sufficient cash for our operating expenses, capital
expenditures, interest payments and debt repayments, however, if necessary, we
have the ability to borrow under our debt and revolving credit agreements (see
Note 15 of notes to consolidated financial statements). This is predicated on
our achieving our forecast which could be negatively impacted by items outside
of our control, in particular, macroeconomic conditions including the economic
impacts caused by continued impact of the COVID-19 pandemic. Consistent with our
actions in 2020 in response to the COVID-19 pandemic, if negative events occur
in the future, we may need to reduce our capital spend, cut back on operating
costs, and other items within our control to maintain appropriate liquidity.

Working capital (calculated as current assets less current liabilities) was
$1.2 billion at December 31, 2021, compared to $1.7 billion at December 31,
2020. The decrease year over year is primarily due to the decrease in cash as we
made several voluntary prepayments on our debt obligations as is discussed below
and in Note 15 of notes to consolidated financial statements and reductions in
inventories as the supply / demand balance remains tight due to continued strong
demand.

As of and for the year ended December 31, 2021, the non-guarantor subsidiaries
of our 6.5% Senior Secured Notes and our Senior Notes due 2029 represented
approximately 20% of our total consolidated liabilities, approximately 25% of
our total consolidated assets, approximately 44% of our total consolidated net
sales and approximately 49% of our Consolidated EBITDA (as such term is defined
in 6.5% Senior Secured Notes Indenture and the 2029 Indenture). In addition, as
of December 31, 2021, our non-guarantor subsidiaries had $777 million of total
consolidated liabilities (including trade payables but excluding intercompany
liabilities), all of which would have been structurally senior to the 6.5%
Senior Secured Notes and the 2029 Notes. See Note 15 of notes to consolidated
financial statements for additional information.

AT December 31, 2021we had outstanding letters of credit and bank guarantees $53 million. See note 15 of the notes to the consolidated financial statements.


Principal factors that could affect our ability to obtain cash from external
sources include (i) debt covenants that limit our total borrowing capacity; (ii)
increasing interest rates applicable to our floating rate debt; (iii) increasing
demands from third parties for financial assurance or credit enhancement; (iv)
credit rating downgrades, which could limit our access to additional debt; (v) a
decrease in the market price of our common stock and debt obligations; and (vi)
volatility in public debt and equity markets.

As of December 31, 2021, our credit rating with Moody's was B1 stable outlook
unchanged from December 31, 2020. Starting in the first quarter of 2021 and
through December 31, 2021, our credit rating with Standard & Poor's changed
positively to B stable and further changed positively to Ba3 during the first
quarter of 2022. See Note 15 of notes to consolidated financial statements.

Cash and cash equivalents


We consider all investments with original maturities of three months or less to
be cash equivalents. As of December 31, 2021, our cash and cash equivalents were
invested in money market funds and we also receive earnings credits for some
balances left in our bank operating accounts. We maintain cash and cash
equivalents in bank deposit and money market accounts that may exceed federally
insured limits. The financial institutions where our cash and cash equivalents
are held are highly rated and geographically dispersed, and we have a policy to
limit the amount of credit exposure with any one institution. We have not
experienced any losses in such accounts and believe we are not exposed to
significant credit risk.

The use of our cash includes payment of our operating expenses, capital
expenditures, servicing our interest and debt repayment obligations, making
pension contributions and making quarterly dividend payments. On November 9,
2021, we updated our capital allocation policy and announced that our Board of
Directors had authorized the repurchase of up to $300 million of the Company's
ordinary shares through February 2024. Under the updated policy, the Board
intends to increase the annual dividend to $0.50 per share beginning with the
first quarterly dividend in 2022. We also expect to continue to invest in our
businesses through cost reduction, as well as growth and vertical
integration-related capital expenditures including projects such as newTRON and
various mine development projects as well as continued reductions in our debt.

Cash repatriation


At December 31, 2021, we held $228 million in cash and cash equivalents in these
respective jurisdictions: $5 million in the United States, $54 million in South
Africa, $59 million in Australia, $30 million in Brazil, $40 million in Saudi
Arabia, $19 million in China, and $21 million in Europe. Our credit facilities
limit transfers of funds from subsidiaries in the United States to certain
foreign subsidiaries. In addition, at December 31, 2021, we held $4 million of
restricted cash of which $3 million is in Australia related to performance bonds
and $1 million is in Saudi Arabia related to vendor supply agreement guarantees.
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Tronox Holdings plc has foreign subsidiaries with undistributed earnings at
December 31, 2021. We have made no provision for deferred taxes related to these
undistributed earnings because they are considered indefinitely reinvested in
the foreign jurisdictions.

Debt Obligations

In March 2021, the Company closed the refinancing of its existing first lien
term loan credit agreement with a new seven-year first lien term loan credit
facility (the "New Term Loan Facility") and existing revolving syndicated
facility agreement with a new five-year cash flow revolving facility (the "New
Revolving Facility"). Pursuant to the New Term Loan Facility, the Company's
wholly owned subsidiary, Tronox Finance LLC borrowed $1,300 million of first
lien term loans. Pursuant to the New Revolving Facility, the lenders thereunder
have agreed to provide revolving commitments of $350 million. The Company also
paid down approximately $313 million, with cash on hand, of debt in conjunction
with the refinancing transaction. Refer to Note 15 of notes to consolidated
financial statements for further details.

On March 15, 2021, Tronox Incorporated, a wholly-owned indirect subsidiary of
the Company, issued its 4.625% senior notes due 2029 for an aggregate principal
amount of $1,075 million. The net proceeds was used to fund the redemption in
full on March 31, 2021 of the Company's outstanding $615 million aggregate
principal amount of 6.50% senior notes due 2026 and the redemption in full on
April 1, 2021 of Company's outstanding $450 million aggregate principal amount
of 5.75% senior notes due 2025. Refer to Note 15 of notes to consolidated
financial statements for further details.

On October 1, 2021, Tronox Minerals Sands Proprietary Limited, a wholly-owned
indirect subsidiary of the Company, entered into an amendment and restatement of
a new credit facility with Standard Bank. The new credit facility provides the
Company with (a) a new five-year term loan facility in an aggregate principal
amount of R1.5 billion (approximately $98 million) (the "New Standard Bank Term
Loan Facility") and (b) a new three-year revolving credit facility (the "New
Standard Bank Revolving Credit Facility") providing initial revolving
commitments of R1.0 billion (approximately $63 million at December 31, 2021
exchange rate). As a result of the amended facility, the Company repaid the
remaining outstanding principal balance of R390 million (approximately $26
million) of the Standard Bank Term Loan Facility on September 30, 2021 and we
drewdown the R1.5 billion (approximately $98 million) on the new term loan
facility in November 2021.

During the year ended December 31, 2021, the Company made several voluntary
prepayments totaling $398 million on the New Term Loan Facility. As a result of
these voluntary prepayments, the Company recorded $9 million in "Loss on
extinguishment of debt" within the Consolidated Statement of Operations for the
year ended December 31, 2021.

During the year ended December 31, 2021, the Company made several voluntary
prepayments totaling R1,040 million (approximately $69 million) on the Prior
Standard Bank Term Loan Facility. Additionally, on September 30, 2021, in
conjunction with the Company's refinancing of the Prior Standard Bank Term Loan
Facility, the Company repaid the remaining outstanding principal balance of R390
million (approximately $26 million). During the year ended December 31, 2021,
the Company repaid the remaining outstanding principal balance of CNY 111
million (approximately $17 million) on the Tikon loan. No prepayment penalties
were required as a result of these principal prepayments.

On a consolidated basis, no additional debt has been incurred as a result of the above debt refinancing transactions.

AT December 31, 2021 and 2020, our long-term debt, net of unamortized discount and debt issuance costs, was $2.6 billion and $3.3 billionrespectively.


At December 31, 2021 and 2020, our net debt (the excess of our debt over cash
and cash equivalents) was $2.3 billion and $2.7 billion, respectively. See Note
15 of notes to consolidated financial statements.

Cash flow

Completed exercises December 31, 2021 and 2020

The following table presents the cash flows for the periods indicated:

                                                                         Year Ended December 31,
                                                                         2021                  2020
                                                                        (Millions of U.S. dollars)
Net cash provided by operating activities                          $          740          $     355
Net cash used in investing activities                                        (269)              (229)
Net cash (used in) provided by financing activities                          (877)               214
Effect of exchange rate changes on cash                                       (10)                (3)
Net (decrease) increase in cash and cash equivalents               $        

(416) $337

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Cash Flows provided by Operating Activities - Cash provided by our operating
activities is driven by net income adjusted for non-cash items and changes in
working capital items. The following table summarizes our net cash provided by
operating activities for 2021 and 2020:
                                                                         Year Ended December 31,
                                                                         2021                 2020
                                                                       (Millions of U.S. dollars)
Net income                                                         $       

303 $995
Net adjustments to reconcile net income (loss) to net cash provided by operating activities

                                             455               (488)
Income related cash generation                                               758                507
Net change in assets and liabilities                                         (18)              (152)
Net cash provided by our operating activities                      $        

740 $355




Net cash provided by operating activities was $740 million in 2021 as compared
to $355 million in 2020. The increase of $385 million period over period is
primarily due to a $251 million improvement in net income net of non-cash
adjustments and a decrease of $134 million use of cash for net assets and
liabilities. The lower use of cash for working capital was primarily driven by
decreases in inventories and prepaid and other current assets of $74 million and
$82 million, respectively, and an increase in account payable and accrued
liabilities of $36 million partially offset by an increase in accounts
receivable of $59 million and an increased use of cash in long-term other assets
and liabilities of $10 million.

Cash Flows used in Investing Activities - Net cash used in investing activities
for the year ended December 31, 2021 was $269 million as compared to
$229 million for the year ended December 31, 2020. The $40 million increase in
use of cash year over year is primarily driven by higher capital expenditures of
$272 million. The prior year also included $36 million for a loan to AMIC
related to a titanium slag smelter facility (see Note 24 of notes to
consolidated financial statements) of which there was no comparable amount in
the current year.

Cash Flows (used in) provided by Financing Activities - Net cash used in
financing activities during the year ended December 31, 2021 was $877 million as
compared to cash provided by financing activities of $214 million for the year
ended December 31, 2020. The current year is primarily comprised of repayments
of long-term debt of $3 billion partially offset by proceeds from long-term debt
of $2 billion due to the various debt refinancing transactions that occurred
during the current year (refer to Note 15 of notes to consolidated financial
statements) as well as the Company's continued focus on making discretionary
debt repayments in order to achieve its previously stated gross debt target. As
a result of the debt refinancing transactions, there was a $77 million use of
cash for debt issuance costs and call premiums paid in 2021 as compared to $10
million in 2020. Additionally, dividends paid were $65 million during the year
ended December 31, 2021 as compared to $40 million in the same period of 2020.

Completed exercises December 31, 2020 and 2019


A discussion of our cash flows for the year ended December 31, 2020 versus 2019
is included in Part II, Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Cash Flows", included in our
Annual Report on Form 10-K for the year ended December 31, 2020.

Contractual obligations

The following table presents information relating to our contractual obligations as of December 31, 2021:

Payments of contractual obligations due by period(3)

                                                                 Less than            1-3             3-5             More than
                                                Total             1 year             years           years             5 years
                                                                         (Millions of U.S. dollars)
Long-term debt and lease financing (including
interest)(1)                                  $ 3,370          $      151          $  303          $   757          $    2,159
Purchase obligations(2)                           655                 231             209              157                  58
Operating leases                                  226                  34              42               29                 121
Pension and other post-retirement benefit
obligations(4)                                    312                  37              65               64                 146
Asset retirement obligations(5)                   446                  17              26               25                 378
Total                                         $ 5,009          $      470          $  645          $ 1,032          $    2,862


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__________________

(1)We have calculated interest on the new term loan facility at LIBOR plus a margin of 2.25%. See Note 15 of the Notes to our Consolidated Financial Statements.


(2)Includes obligations to purchase requirements of process chemicals, supplies,
utilities and services. We have various purchase commitments for materials,
supplies, and services entered into in the ordinary course of business. Included
in the purchase commitments table above are contracts, which require minimum
volume purchases that extend beyond one year or are renewable annually and have
been renewed for 2022. Certain contracts allow for changes in minimum required
purchase volumes in the event of a temporary or permanent shutdown of a
facility. We believe that all of our purchase obligations will be utilized in
our normal operations.

(3)The table excludes contingent obligations, as well as any possible payments
for uncertain tax positions given the inability to estimate the possible amounts
and timing of any such payments.

(4)Pension and other post-retirement benefit ("OPEB") obligations of $312
million include estimates of pension plan contributions and expected future
benefit payments for unfunded pension and OPEB plans. Pension plan contributions
are forecasted for 2022 only. Expected future unfunded pension and OPEB benefit
payments are forecasted only through 2031. Contribution and unfunded benefit
payment estimates are based upon current valuation assumptions. Estimates of
pension contributions after 2022 and unfunded benefit payments after 2031 are
not included in the table because the timing of their resolution cannot be
estimated. Refer to Note 23 in notes to consolidated financial statements for
further discussion on our pension and OPEB plans.

(5) Asset retirement obligations are presented at undiscounted and uninflated values.

No-we GAAP Financial Measures


EBITDA and Adjusted EBITDA, which are used by management to measure performance,
are not presented in accordance with U.S. GAAP. We define EBITDA as net income
(loss) excluding the impact of income taxes, interest expense, interest income
and depreciation, depletion and amortization. We define Adjusted EBITDA as
EBITDA excluding the impact of nonrecurring items such as restructuring charges,
gain or loss on debt extinguishments, impairment charges, gains or losses on
sale of assets, acquisition-related transaction costs and pension settlements
and curtailment gains or losses. Adjusted EBITDA also excludes non-cash items
such as share-based compensation costs and pension and postretirement costs.
Additionally, we exclude from Adjusted EBITDA, realized and unrealized foreign
currency remeasurement gains and losses.

Management believes that EBITDA and Adjusted EBITDA is useful to investors, as
it is commonly used in the industry as a means of evaluating operating
performance. We do not intend for these non-U.S. GAAP financial measures to be a
substitute for any U.S. GAAP financial information. Readers of these statements
should use these non-U.S. GAAP financial measures only in conjunction with the
comparable U.S. GAAP financial measures. Since other companies may calculate
EBITDA and Adjusted EBITDA differently than we do, EBITDA and Adjusted EBITDA,
as presented herein, may not be comparable to similarly titled measures reported
by other companies. Management believes these non-U.S. GAAP financial measures:

• reflect our ongoing operations in a manner that permits meaningful period-to-period comparison and analysis of trends in our operations, as they exclude revenues and expenses that do not reflect current operating results. Classes ;

•provide useful information to understand and evaluate our results of operations and compare financial results from period to period; and

•provide a normalized view of our operating performance by excluding non-monetary or infrequent items.


Adjusted EBITDA is one of the primary measures management uses for planning and
budgeting processes, and to monitor and evaluate financial and operating
results. In addition, Adjusted EBITDA is a factor in evaluating management's
performance when determining incentive compensation.
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The following table reconciles net income (loss) to EBITDA and Adjusted EBITDA
for the periods presented:
                                                                       Year Ended December 31,
                                                               2021              2020              2019
Net income (loss), (U.S. GAAP)                             $     303        

$995 ($97)
Income from discontinued operations, net of tax (see Note 6), (we GAAP)

                                                    -                 -                 5

Net income (loss) from continuing operations, (we GAAP) 303

       995              (102)
Interest expense                                                 157               189               201
Interest income                                                   (7)               (8)              (18)
Income tax provision                                              71              (881)               14
Depreciation, depletion and amortization expense                 297               304               280
EBITDA (non-U.S. GAAP)                                           821               599               375
Inventory step-up(a)                                               -                 -                98
Contract loss(b)                                                   -                 -                19
Share-based compensation(c)                                       31                30                32
Transaction costs(d)                                              18                14                32
Restructuring(e)                                                   -                 3                22
Integration costs(f)                                               -                10                16
Loss on extinguishment of debt(g)                                 65                 2                 3
Foreign currency remeasurement(h)                                (16)               (4)               (6)
Pension settlement and curtailment gains(i)                        -                (2)               (1)
Costs associated with Exxaro deal(j)                               6                 -                 4
Costs associated with former CEO retirement(k)                     1                 -                 -
Gain on asset sale(l)                                             (2)                -                 -
Office closure costs(m)                                            3                 -                 -
Insurance proceeds(n)                                              -               (11)                -
Other items(o)                                                    20                27                21
Adjusted EBITDA (non-U.S. GAAP)                            $     947          $    668          $    615


________________

(a) The amount for 2019 represents a pre-tax charge related to the recognition of an increase in the value of inventories following the recognition of purchases.

(b) The 2019 amount represents a pre-tax charge for estimated losses we expect to incur under the supply agreement with Venator. See Note 3 of the notes to the consolidated financial statements.

(c) Represents non-cash stock-based compensation. See note 22 of the notes to the consolidated financial statements.


(d)2021 amount represents the breakage fee and other costs associated with the
termination of the TTI transaction which were primarily recorded in "Other
income (expense)" in the Consolidated Statements of Operations. 2020 amount
represents transaction costs associated with the TTI acquisition which were
recorded in "Selling, general and administrative expenses" in the Consolidated
Statement of Operations. 2019 amounts represent transaction costs associated
with the Cristal Transaction which were recorded in "Selling, general and
administrative expenses" in the Consolidated Statements of Operations.

(e)2020 and 2019 amounts represent amounts for employee-related costs, including
severance, which was recorded in "Restructuring" in the Consolidated Statements
of Operations. See Note 4 of notes to consolidated financial statements.

(f)2020 and 2019 amounts represent integration costs associated with the Cristal
transaction after the acquisition which were recorded in "Selling, general and
administrative expenses" in the Consolidated Statements of Operations.

(g)2021 amount represents the loss in connection with the following: 1)
termination of its Wells Fargo Revolver, 2) amendment and restatement of its
term loan facility including the new revolving credit facility, 3) termination
of its Senior Notes due 2026 and its Senior Notes due 2025, 4) issuance of its
Senior Notes due 2029 and 5) several voluntary prepayments made on the New Term
Loan Facility. See Note 15 of notes to consolidated financial statements. 2020
amount represents the loss in connection with a voluntary prepayment on the
Prior Term Loan Facility. 2019 amount represents the loss in connection with the
modification of the Wells Fargo Revolver and termination of the ABSA Revolver
and a voluntary prepayment made on the Prior Term Loan Facility.

(h)Represents realized and unrealized gains and losses associated with foreign
currency remeasurement related to third-party and intercompany receivables and
liabilities denominated in a currency other than the functional currency of the
entity holding them, which are included in "Other income (expense), net" in the
Consolidated Statements of Operations.

(i) The 2020 amount represents a curtailment gain due to the plan benefit freeze partially offset by pension settlements. The 2019 amount represents the settlement gain related to the we Pension Plan (acquired as part of the Cristal transaction).

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(j)2021 amount represents costs associated with the Exxaro flip-in transaction
which are included in "Selling, general and administrative expenses" in the
Consolidated Statements of Operations. 2019 amount represents the payment to
Exxaro for capital gains tax on the disposal of its ordinary shares in Tronox
Holdings plc included in "Other income (expense), net" in the Consolidated
Statements of Operations.

(k)2021 amount represents costs, excluding share-based compensation, associated
with the retirement agreement of the former CEO which were recorded in "Selling,
general and administrative expenses" in the Consolidated Statements of
Operations. The $2 million of share based compensation expense associated with
the former CEO is included in the total share-based compensation amounts of $31
million in the table above.

(l) The amount for 2021 represents the gain on European Union carbon credits sold in
March 2021 which have been recorded in “Cost of Goods Sold” in the Consolidated Statement of Income.


(m)Represents impairments of our right-of-use assets associated with the early
termination of our leases and other costs related to the closure of our
Baltimore and New York City offices which are included in "Selling, general and
administrative expenses" in the Consolidated Statements of Operations.

(n) The 2020 amount represents the reimbursement of claims related to the failure of the Ginkgo concentrator that we inherited as part of the Cristal transaction.

(o) Includes non-cash retirement and post-retirement expenses, accretion expense, severance and other items included in “Selling general and administrative expenses” and “Cost of goods sold” in the statements consolidated results.

Significant Accounting Policies and Estimates


The preparation of financial statements in conformity with U.S. GAAP requires
management to make certain estimates and assumptions regarding matters that are
inherently uncertain and that ultimately affect the reported amounts of assets,
liabilities, revenues and expenses, and the disclosure of contingent assets and
liabilities. The estimates and assumptions are based on management's experience
and understanding of current facts and circumstances. These estimates may differ
from actual results. Certain of our accounting policies are considered critical,
as they are both important to reflect our financial position and results of
operations and require significant or complex judgment on the part of
management. The following is a summary of certain accounting policies considered
critical by management.

Asset retirement obligations


To the extent a legal obligation exists, an asset retirement obligation ("ARO")
is recorded at its estimated fair value and accretion expense is recognized over
time as the discounted liability is accreted to its expected settlement value.
Because AROs represent financial obligations to be settled in the future,
uncertainties exist in estimating the timing and amount of the associated costs
to be incurred. Fair value is measured using expected future cash outflows,
adjusted for expected inflation and discounted at our credit-adjusted risk-free
interest rate. No market-risk premium has been included in our calculation of
ARO balances since we can make no reliable estimate. Management believes these
estimates and assumptions are reasonable; however, they are inherently
uncertain. Refer to Notes 19 to the consolidated financial statements for a
summary of the estimates and assumptions utilized. At December 31, 2021, AROs
were $149 million of which the long-term portion of $139 million is recorded in
"Asset retirement obligations" and the short-term portion of $10 million is
recorded in "Accrued liabilities" in the Consolidated Balance Sheet.

Environmental issues


Liabilities for environmental matters are recognized when remedial efforts are
probable and the costs can be reasonably estimated. Such liabilities are based
on our best estimate of the undiscounted future costs required to complete the
remedial work. The recorded liabilities are adjusted periodically as remediation
efforts progress or as additional technical, regulatory or legal information
becomes available. Given the uncertainties regarding the status of laws,
regulations, enforcement policies, the impact of other potentially responsible
parties, technology and information related to individual sites, we do not
believe it is possible to develop an estimate of the range or reasonably
possible environmental loss in excess of our recorded liabilities. At
December 31, 2021, environmental liabilities (both short term and long term)
were $72 million, primarily related to the Cristal transaction.

For further discussion, see Environmental Matters included elsewhere in this
section entitled, "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and Notes 2 and 20 to the consolidated financial
statements.

Income taxes


We have operations in several countries around the world and are subject to
income and similar taxes in these countries. The estimation of the amounts of
income tax involves the interpretation of complex tax laws and regulations and
how foreign taxes affect domestic taxes, as well as the analysis of the
realizability of deferred tax assets, tax audit findings and uncertain tax
positions. Although we believe our tax accruals are adequate, differences may
occur in the future, depending on the resolution of pending and new tax matters.

Deferred tax assets and liabilities are determined based on temporary
differences between the financial reporting and tax bases of assets and
liabilities using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. A valuation allowance is provided against a deferred tax asset when it
is more
                                       47
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likely than not that all or some portion of the deferred tax asset will not be
realized. We periodically assess the likelihood that we will be able to recover
our deferred tax assets and reflect any changes in our estimates in the
valuation allowance with a corresponding adjustment to earnings or other
comprehensive income (loss) as appropriate. ASC 740, Income Taxes, requires that
all available positive and negative evidence be weighted to determine whether a
valuation allowance should be recorded.

The amount of income taxes we pay are subject to ongoing audits by federal,
state and foreign tax authorities, which may result in proposed assessments. Our
estimate of the potential outcome for any uncertain tax issue is highly
judgmental. We assess our income tax positions, and record tax benefits for all
years subject to examination based upon our evaluation of the facts,
circumstances and information available at the reporting date. For those tax
positions for which it is more likely than not that a tax benefit will be
sustained, we record the amount that has a greater than 50% likelihood of being
realized upon settlement with a taxing authority that has full knowledge of all
relevant information. Interest and penalties are accrued as part of tax expense,
where applicable. If we do not believe that it is more likely than not that a
tax benefit will be sustained, no tax benefit is recognized.

See Notes 2 and 8 to the consolidated financial statements for additional information.

Contingencies


From time to time, we may be subject to lawsuits, investigations and disputes
(some of which involve substantial amounts claimed) arising out of the conduct
of our business, including matters relating to commercial transactions, prior
acquisitions and divestitures including our acquisition of Cristal, employee
benefit plans, intellectual property, and environmental, health and safety
matters. We recognize a liability for any contingency that is probable of
occurrence and reasonably estimable. We continually assess the likelihood of
adverse judgments or outcomes in these matters, as well as potential ranges of
possible losses (taking into consideration any insurance recoveries), based on a
careful analysis of each matter with the assistance of outside legal counsel
and, if applicable, other experts. Such contingencies are significant and the
accounting requires considerable management judgments in analyzing each matter
to assess the likely outcome and the need for establishing appropriate
liabilities and providing adequate disclosures.

Refer to notes 2 and 20 of the consolidated financial statements for more information.


Long-Lived Assets

Key estimates related to long-lived assets (property, plant and equipment,
mineral leaseholds, and intangible assets) include useful lives, recoverability
of carrying values, and the existence of any asset retirement obligations. As a
result of future decisions, such estimates could be significantly modified. The
estimated useful lives of property, plant and equipment range from three to
forty years, and depreciation is recognized on a straight-line basis. Useful
lives are estimated based upon our historical experience, engineering estimates,
and industry information. These estimates include an assumption regarding
periodic maintenance. Mineral leaseholds are depreciated over their useful lives
as determined under the units of production method. Intangible assets with
finite useful lives are amortized on the straight-line basis over their
estimated useful lives. The amortization methods and remaining useful lives are
reviewed quarterly.

We evaluate the recoverability of the carrying value of long-lived assets that
are held and used whenever events or changes in circumstances indicate that the
carrying value may not be recoverable. Under such circumstances, we assess
whether the projected undiscounted cash flows of our long-lived assets are
sufficient to recover the carrying amount of the asset group being assessed. If
the undiscounted projected cash flows are not sufficient, we calculate the
impairment amount by discounting the projected cash flows using our
weighted-average cost of capital. For assets that satisfy the criteria to be
classified as held for sale, an impairment loss, if any, is recognized to the
extent the carrying amount exceeds fair value, less cost to sell. The amount of
the impairment of long-lived assets is written off against earnings in the
period in which the impairment is determined.

Retirement and post-retirement benefits


We provide pension benefits for qualifying employees in the United States and
internationally, with the largest in the United Kingdom. Because pension
benefits represent financial obligations that will ultimately be settled in the
future with employees who meet eligibility requirements, uncertainties exist in
estimating the timing and amount of future payments, and significant estimates
are required to calculate pension expense and liabilities relating to these
plans. The company utilizes the services of independent actuaries, whose models
are used to help facilitate these calculations. Several key assumptions are used
in actuarial models to calculate pension expense and liability amounts recorded
in the financial statements; the most significant variables in the models are
the expected rate of return on plan assets, the discount rate, and the expected
rate of compensation increase. Management believes the assumptions used in the
actuarial calculations are reasonable, reflect the company's experience and
expectations for the future and are within accepted practices in each of the
respective geographic locations in which it operates. However, actual results in
any given year often differ from actuarial assumptions due to economic events
and different rates of
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retirement, mortality, and turnover. Refer to Notes 2 and 23 to the consolidated
financial statements for a summary of the plan assumptions and additional
information on our pension arrangements.

Expected Return on Plan Assets - In forming the assumption of the long-term rate
of return on plan assets, we consider the expected earnings on funds already
invested, earnings on contributions expected to be made in the current year, and
earnings on reinvested returns. The long-term rate of return estimation
methodology for the plans is based on a capital asset pricing model using
historical data and a forecasted earnings model. An expected return on plan
assets analysis is performed which incorporates the current portfolio
allocation, historical asset-class returns, and an assessment of expected future
performance using asset-class risk factors. A 100 basis point change in these
expected long-term rates of return, with all other variables held constant,
would change our pension expense by approximately $4 million.


Discount Rate - The discount rates selected for estimation of the actuarial
present value of the benefit obligations are determined based on the prevailing
market rate for high-quality, fixed-income debt instruments with maturities
corresponding to the expected timing of benefit payments as of the annual
measurement date for each of the various plans. These rates change from year to
year based on market conditions that affect corporate bond yields. A 100 basis
points change in discount rates, with all other variables held constant, would
decrease/increase our pension expense by approximately $1 million. A 100 basis
points reduction in discount rates would increase the PBO by approximately $72
million whereas a 100 basis point increase in discount rates would have a
favorable impact to the PBO of approximately $61 million.

Rates of Compensation Increase - We determine these rates based on review of the
underlying long-term salary increase trend characteristic of the local labor
markets and historical experience, as well as comparison to peer companies. A
100 basis points change in the expected rate of compensation increase, with all
other variables held constant, would change our pension expense by approximately
$1 million and would impact the PBO by approximately $6 million.

Recent accounting pronouncements

See Note 2 of the Notes to the Consolidated Financial Statements for recently issued accounting pronouncements.


Environmental Matters

We are subject to a broad array of international, federal, state, and local laws
and regulations relating to safety, pollution, protection of the environment,
and the generation, storage, handling, transportation, treatment, disposal, and
remediation of hazardous substances and waste materials. In the ordinary course
of business, we are subject to frequent environmental inspections and
monitoring, and occasional investigations by governmental enforcement
authorities. Under these laws, we are or may be required to obtain or maintain
permits or licenses in connection with our operations. In addition, under these
laws, we are or may be required to remove or mitigate the effects on the
environment of the disposal or release of chemical, petroleum, low-level
radioactive and other substances at our facilities. We may incur future costs
for capital improvements and general compliance under environmental, health, and
safety laws, including costs to acquire, maintain, and repair pollution control
equipment. Environmental laws and regulations are becoming increasingly
stringent, and compliance costs are significant and will continue to be
significant in the foreseeable future. There can be no assurance that such laws
and regulations or any environmental law or regulation enacted in the future is
not likely to have a material effect on our business. We believe we are in
compliance with applicable environmental rules and regulations in all material
respects.

See Section 3. Legal Proceedings for more information.

© Edgar Online, source Previews

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Does Petrus Resources (TSE:PRQ) have a healthy balance sheet? https://freebassuk.com/does-petrus-resources-tseprq-have-a-healthy-balance-sheet/ Sun, 20 Feb 2022 14:42:15 +0000 https://freebassuk.com/does-petrus-resources-tseprq-have-a-healthy-balance-sheet/ Howard Marks said it well when he said that, rather than worrying about stock price volatility, “the possibility of permanent loss is the risk I worry about…and that every practical investor that I know is worried”. So it seems smart money knows that debt – which is usually involved in bankruptcies – is a very […]]]>

Howard Marks said it well when he said that, rather than worrying about stock price volatility, “the possibility of permanent loss is the risk I worry about…and that every practical investor that I know is worried”. So it seems smart money knows that debt – which is usually involved in bankruptcies – is a very important factor when you’re assessing a company’s risk. We can see that Petrus Resources Ltd. (TSE:PRQ) uses debt in its business. But the real question is whether this debt makes the business risky.

What risk does debt carry?

Generally speaking, debt only becomes a real problem when a company cannot easily repay it, either by raising capital or with its own cash flow. An integral part of capitalism is the process of “creative destruction” where bankrupt companies are mercilessly liquidated by their bankers. Although not too common, we often see companies in debt permanently diluting their shareholders because lenders force them to raise capital at a ridiculous price. Of course, the advantage of debt is that it often represents cheap capital, especially when it replaces dilution in a business with the ability to reinvest at high rates of return. When we think about a company’s use of debt, we first look at cash and debt together.

Discover our latest analysis for Petrus Resources

What is Petrus Resources net debt?

As you can see below, Petrus Resources had C$59.5 million in debt as of September 2021, up from C$115.8 million the previous year. On the other hand, it has C$1.51 million in cash, resulting in a net debt of approximately C$58.0 million.

TSX:PRQ Debt to Equity Historical February 20, 2022

A look at the liabilities of Petrus Resources

Zooming in on the latest balance sheet data, we can see that Petrus Resources had liabilities of C$79.5 million due within 12 months and liabilities of C$40.2 million due beyond. On the other hand, it had liquid assets of 1.51 million Canadian dollars and 9.16 million Canadian dollars of receivables due within one year. Thus, its liabilities outweigh the sum of its cash and (current) receivables of C$109.0 million.

This deficit is considerable compared to its market capitalization of 149.2 million Canadian dollars, so it suggests that shareholders monitor the use of debt by Petrus Resources. If its lenders asked it to shore up its balance sheet, shareholders would likely face significant dilution.

In order to assess a company’s debt relative to its earnings, we calculate its net debt divided by its earnings before interest, taxes, depreciation and amortization (EBITDA) and its earnings before interest and taxes (EBIT) divided by its expenses. interest (its interest coverage). In this way, we consider both the absolute amount of debt, as well as the interest rates paid on it.

Even though Petrus Resources’ debt is only 2.2, its interest coverage is really very low at 0.27. The main reason for this is that it has such high depreciation and amortization. These fees may be non-monetary, so they could be excluded when it comes to repaying the debt. But accounting fees are there for a reason: some assets seem to lose value. Either way, it’s safe to say that the company has significant debt. Notably, Petrus Resources recorded a loss in EBIT last year, but improved it to a positive EBIT of C$2.6 million over the last twelve months. There is no doubt that we learn the most about debt from the balance sheet. But you can’t look at debt in total isolation; since Petrus Resources will need revenue to repay this debt. So, if you want to know more about its earnings, it might be worth checking out this graph of its long-term trend.

Finally, while the taxman may love accounting profits, lenders only accept cash. It is therefore important to check how much of its earnings before interest and taxes (EBIT) converts into actual free cash flow. Fortunately for all shareholders, Petrus Resources has actually produced more free cash flow than EBIT over the past year. This kind of high cash conversion gets us as excited as the crowd when the beat drops at a Daft Punk concert.

Our point of view

Neither the ability of Petrus Resources to cover its interest charges with its EBIT nor its level of total liabilities gave us confidence in its ability to take on more debt. But the good news is that it seems to be able to easily convert EBIT to free cash flow. We think Petrus Resources’ debt makes it a bit risky, after looking at the aforementioned data points together. Not all risk is bad, as it can increase stock price returns if it pays off, but this leverage risk is worth keeping in mind. When analyzing debt levels, the balance sheet is the obvious starting point. But at the end of the day, every business can contain risks that exist outside of the balance sheet. Be aware that Petrus Resources displays 2 warning signs in our investment analysis and 1 of them does not suit us too much…

Of course, if you’re the type of investor who prefers to buy stocks without the burden of debt, then feel free to check out our exclusive list of cash-efficient growth stocks today.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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HEICO stock: positive growth, but limited upside (NYSE:HEI) https://freebassuk.com/heico-stock-positive-growth-but-limited-upside-nysehei/ Sun, 20 Feb 2022 08:47:00 +0000 https://freebassuk.com/heico-stock-positive-growth-but-limited-upside-nysehei/ mikulas1/E+ via Getty Images HEICO Company (NYSE: HEI) was founded in 1957 under its original name Heinicke Instruments. Over time, it has grown into a multi-billion dollar aerospace and defense manufacturing company with a wide range of products and interests. Focusing on niche markets, the company has developed many profitable parts used in a wide […]]]>

mikulas1/E+ via Getty Images

HEICO Company (NYSE: HEI) was founded in 1957 under its original name Heinicke Instruments. Over time, it has grown into a multi-billion dollar aerospace and defense manufacturing company with a wide range of products and interests. Focusing on niche markets, the company has developed many profitable parts used in a wide variety of industries, from aircraft, medical, space and telecommunications equipment manufacturers. They also deal in commercial and military aviation parts. Based in Hollywood, Florida, HEICO has two main branches, the Flight Support Group – responsible for supplying FAA-approved aircraft spare parts, and the Electronic Technologies Group – responsible for manufacturing specific parts to meet niche technology needs. A third group of the company focuses on selling these parts to various other manufacturing companies in a B2B model.

HEICO stock price

tradingview.com

In this article, I will show that despite market stability and a profitable history, HEICO is not worth an investment at this immediate time. COVID has changed the way the world works; more people are working and meeting remotely, which will cause travel rates to stagnate. With the uncertainty surrounding new variants coupled with rapid inflation, the immediate future of the market is very uncertain. HEICO is diversified enough to mitigate these covid-related losses, and they are making a steady profit. However, with the current price level so close to their 52-week high and no exciting growth on the horizon, the status quo is not attractive enough to warrant an investment. For this reason, investors should refrain from making any decision in this case.

Miscellaneous Offers Prop HEICO Up

One of the most attractive aspects of HEICO on paper is its history of maintaining a fairly stable market value, even in times of instability. This is probably due to the great diversity from which they generate income. The company has three main branches, each dealing with a particular market need. While mass production of common parts is a relatively common revenue generator, HEICO focuses more on niche markets, offering innovative products used in the manufacture of devices requiring sensitive electronics or aerospace capabilities.

HEICO Corporate Structure

heico.com

According to their website, HEICO’s Flight Support Group is “the world’s largest independent supplier of FAA-approved aircraft spare parts.” But the company doesn’t just sell parts, it also manufactures, designs, installs, replaces and repairs several critical systems in aircraft. They are associated with all the major names in the airline industry and offer a multitude of services. One of their most important partnerships is with aircraft manufacturing giant Boeing (NYSE: BA), with around 60% of the branch’s profits being made through this partnership. Additionally, this branch has secured many major military aviation contracts, increasing its overall customer base and maintaining a stable revenue stream. The company’s Electronics Technology Group segment is a maintainer in the aerospace industry. He is responsible for the manufacturing and testing of critical sub-components used in sensitive and specialized electronic equipment.

The last branch deals with partnerships and specific fabrications. HEICO develops the manufacture of a specific part or component that corresponds to the assembly of a specific company. Their versatility, stable customer base, ability to serve niche markets and lucrative partnerships rank them among the leading aerospace manufacturing companies in the market.

Financial outlook

HEICO price vs revenue

ycharts.com

There’s nothing particularly shocking about HEICO’s earnings. Over the past five years, they have seen revenue increases in 4 of them, with the only year down being the pandemic in 2020. In 2020, their revenue fell from just over $2 billion in 2019 to just under $1.8 billion in 2020. last year in 2021, HEICO got back on track posting revenues of nearly $1.9 billion, returning to their top of 2019.

HEICO price vs net profit

ycharts.com

Net income, however, has been a point of setback over the past three years. While the pandemic can be blamed for the loss in 2020, the 2021 report showed a decrease from the previous year. In 2019, HEICO recorded a net income of $327,896,000. In 2020, that number has dropped to $313,984,000. 2021 followed with a three-year low in net income, posting a total of $304,220,000. This equates to a 7.2% decline in net income from 2019 to present. Net income is an important factor that affects the share price and is probably one of the factors limiting growth despite the increase in income. This could be linked to several factors, including supply chain disruption and an increase in operating expenses, reported in 2021 at $334,523,000, the highest mark since 2019, when operating expenses were to a record high of $356,743,000.

HEICO Price vs Assets vs Liabilities and EBITDA

ycharts.com

In terms of the balance of the company, everything seems to be evolving positively, or at least remaining in the status quo. The company is incredibly stable, holding $937,385,000 in current assets, down slightly from 2019’s mark of just over $1 billion, but up from 2017 and 2018. respectively. HEICO has almost no debt for a multi-billion dollar company, with its long-term debt for 2021 standing at just $234,983,000. That number is down significantly from 2020, when the company had long-term debt of $738,786,000. HEICO has repaid 68% of its long-term debt between 2020 and 2021, which will help increase its future profitability. This likely contributed to a strong 2021 EBITDA release of +$486.78 million.

HEICO also holds an impressive capital surplus of $1.9 billion. This is a big plus for the company as it represents another form of cash remaining after dividends are paid to shareholders. This cash again represents stability and is a positive asset for a business. There is nothing dangerous about finances that worries HEICO; Unfortunately, despite all of its strong financials, increased revenue, and positive balance sheet, that doesn’t seem to reflect much on the stock price. HEICO stock price currently stands at $139.70. That’s down from its January high of $149.63. Prior to January 2022, HEICO’s 5-year high was $144.67 in 2019. There is not much risk in an investment, but as current prices are close to the 52-week high forecast currently , there’s not much room to win either.

Conclusion

There is no doubt that HEICO is a powerful company with strong leadership and a long profitable history. The aerospace and defense market is expected to see growth, and after a pandemic hit 2020, the business appears to be back on a positive trend. The advantage of stable companies is that they present little or no investment risk. On the other hand, they offer little opportunity for growth or upside. HEICO is diversified enough to mitigate losses that may be related to another covid shutdown, and they are making a steady profit.

However, with their stock prices so close to their 52-week high and no real exciting growth on the horizon, the status quo is not attractive enough to warrant an investment. For this reason, investors should sit on the sidelines and wait for a correction that might make establishing a position more attractive.

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Parsvnath Developers (NSE:PARSVNATH) seems to use a lot of debt https://freebassuk.com/parsvnath-developers-nseparsvnath-seems-to-use-a-lot-of-debt/ Sat, 19 Feb 2022 02:53:23 +0000 https://freebassuk.com/parsvnath-developers-nseparsvnath-seems-to-use-a-lot-of-debt/ Legendary fund manager Li Lu (whom Charlie Munger once backed) once said, “The greatest risk in investing is not price volatility, but whether you will suffer a permanent loss of capital. It’s natural to consider a company’s balance sheet when looking at its riskiness, as debt is often involved when a company fails. We note […]]]>

Legendary fund manager Li Lu (whom Charlie Munger once backed) once said, “The greatest risk in investing is not price volatility, but whether you will suffer a permanent loss of capital. It’s natural to consider a company’s balance sheet when looking at its riskiness, as debt is often involved when a company fails. We note that Parsvnath Developers Limited (NSE:PARSVNATH) has debt on its balance sheet. But does this debt worry shareholders?

What risk does debt carry?

Debt helps a business until the business struggles to pay it back, either with new capital or with free cash flow. Ultimately, if the company cannot meet its legal debt repayment obligations, shareholders could walk away with nothing. Although not too common, we often see companies in debt permanently diluting their shareholders because lenders force them to raise capital at a ridiculous price. Of course, debt can be an important tool in businesses, especially capital-intensive businesses. The first thing to do when considering how much debt a business has is to look at its cash flow and debt together.

Check out our latest analysis for Parsvnath Developers

What is Parsvnath Developers net debt?

You can click on the graph below for historical figures, but it shows that as of September 2021, Parsvnath developers had ₹36.4 billion in debt, an increase from ₹30.1 billion, on a year. On the other hand, he has ₹1.05 billion in cash, resulting in a net debt of around ₹35.4 billion.

NSEI: PARSVNATH Debt to Equity History February 19, 2022

A Look at the Responsibilities of Parsvnath Developers

According to the latest published balance sheet, Parsvnath Developers had liabilities of ₹52.0 billion due within 12 months and liabilities of ₹26.0 billion due beyond 12 months. As compensation for these obligations, it had cash of ₹1.05 billion as well as receivables valued at ₹2.91 billion due within 12 months. Thus, its liabilities total ₹74.1 billion more than the combination of its cash and short-term receivables.

This deficit casts a shadow over the ₹7.18 billion society, like a colossus towering above mere mortals. So we definitely think shareholders need to watch this one closely. Ultimately, Parsvnath Developers would likely need a major recapitalization if its creditors were to demand repayment.

We measure a company’s leverage against its earning power by looking at its net debt divided by its earnings before interest, taxes, depreciation and amortization (EBITDA) and calculating how easily its earnings before interest and taxes (EBIT ) covers its interest charge (interest coverage). Thus, we consider debt to earnings with and without amortization and depreciation expense.

Low interest coverage of 0.11x and an extremely high net debt to EBITDA ratio of 54.6 shook our confidence in Parsvnath Developers like a punch in the gut. This means that we would consider him to be heavily indebted. Worse still, Parsvnath Developers has seen its EBIT soar to 26% over the past 12 months. If profits continue like this in the long term, there is an unimaginable chance of repaying this debt. There is no doubt that we learn the most about debt from the balance sheet. But you can’t look at debt in total isolation; since Parsvnath Developers will need revenue to repay this debt. So, when considering debt, it is definitely worth looking at the earnings trend. Click here for an interactive preview.

Finally, while the taxman may love accounting profits, lenders only accept cash. We must therefore clearly examine whether this EBIT generates a corresponding free cash flow. Over the past two years, Parsvnath Developers has actually produced more free cash flow than EBIT. This kind of strong cash generation warms our hearts like a puppy in a bumblebee suit.

Our point of view

To be frank, Parsvnath Developers’ EBIT growth rate and track record of keeping total liabilities under control makes us rather uncomfortable with its level of leverage. But on the bright side, its conversion from EBIT to free cash flow is a good sign and makes us more optimistic. Considering all the above factors, it seems that Parsvnath Developers has too much debt. That kind of risk is acceptable to some, but it certainly doesn’t float our boat. The balance sheet is clearly the area to focus on when analyzing debt. But at the end of the day, every business can contain risks that exist outside of the balance sheet. For example Parsvnath Developers has 3 warning signs (and 1 which is significant) that we think you should know about.

Of course, if you’re the type of investor who prefers to buy stocks without the burden of debt, then feel free to check out our exclusive list of cash-efficient growth stocks today.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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