Prompt:
Human: blackhillscorp.com under the Investor Relations heading.
Leading our quarterly earnings discussion today are Lin Evans, President and Chief Executive Officer; and Rich Kinzley, Senior Vice President and Chief Financial Officer.
Although we believe that our expectations and beliefs are based on reasonable assumptions, actual results may differ materially.
Ill begin on slide four, which lists our key achievements during the second quarter.
Our team delivered strong financial results, with earnings up 21% compared to last year.
We also delivered solid operational performance with strong execution of our capital plan, and we made excellent progress on our regulatory initiatives, including Storm Uri expense recovery actions.
After safety, one of our key operational priorities is providing reliable and resilient service to our customers.
During the record-breaking heat in June across the Western United States, the Black Hills team and our electric systems and generating fleet performed exceptionally well.
This was our second consecutive quarter that included extreme weather events, and our energy delivery systems performed as designed.
During both quarters, our diverse mix of power generation resources and our reliable and dispatchable generation capacity allowed us to serve customers and avoid rolling blackouts and other emergency actions that were required in other parts of the country.
The Black Hills team continued to execute our capital investment plan to maintain our enviable reliability and system resiliency and to serve our growing communities.
Were on track to deploy up to $647 million of capital for the year, and we continue to evaluate and develop new opportunities beyond 2021.
On the regulatory front, we had a very productive quarter.
As we said we would do, we filed rate reviews in Colorado, Iowa and Kansas.
In Colorado, we recently received approval for a new safety-focused investment rider for our gas utility.
And on June 30, we submitted our electric integrated resource plan for our South Dakota and Wyoming utilities in a moment, and then Rich will cover regulatory activity in more detail in his update.
Slide five lays out our financial outlook.
We affirmed our 2021 earnings guidance based on strong second quarter financial performance.
We also maintain our 2022 earnings guidance range.
We are targeting 5% to 7% earnings growth for 2023 through 2025 and at least 5% annual dividend growth.
Our growth plan is shown on slide six.
We continue to plan for capital investments of more than $3 billion through 2025.
We expect earnings growth to be driven by our robust capital plan to serve customers, incremental project opportunities and other earnings drivers that add margin with little or no capital investment.
In our electric utilities business, we are evaluating our transmission needs to develop expanded access to power markets and to cost-effectively serve loads across our electric utilities.
We also see opportunity to serve growing load in our prime data center market in Cheyenne, Wyoming.
We look forward to engaging our regulators regarding these potential transmission opportunities.
Our initial modeling leads us to believe interconnecting our three electric systems and expanding power market access would benefit our customers and shareholders while also supporting our long-term emissions reduction goals.
In addition, were exploring the potential for responsibly adding more renewable generation and pursuing additional renewable natural gas projects across our agriculture-heavy service territories.
We currently have a long list of potential renewable natural gas interconnect projects, and while our existing RNG business is relatively modest, RNG represents an interesting sustainability and perhaps longer-term financial opportunity.
Were very optimistic about population migration into our service territories.
Both our electric and gas utility service territories are seeing accelerating customer growth, and we continue to see evidence of firming customer growth trends.
Finally, were advancing our culture to be better every day through cultivating innovative solutions and leveraging technologies and data analytics as we encourage our team to find ways to serve our customers with more efficient and effective processes.
Moving to slide seven.
As I said earlier, on June 30, we submitted our integrated resource plan for our electric systems in South Dakota and Wyoming.
The resource plan modeled a variety of scenarios with the objective of accomplishing four goals: first, serve our growing customer demand for electricity; second, utilize resources that are cost-effective; third, maintain strong reliability; and finally, achieve our environmental goals as set forth in our ESG initiatives.
Our preferred plan proposes to add 100 megawatts of new renewable generation, evaluate the addition of up to 20 megawatts of battery storage to help maintain reliability, and evaluate and develop new transmission opportunities.
In addition, the plan proposes to convert our 90-megawatt Neil Simpson II coal-fired power plant to natural gas in 2025, the end of its engineered life.
This option helps provide system resiliency, demonstrates our continued support of a locally based energy economy and supports our emission reduction goals.
In addition to our resource plan, were supporting research to advance emissions-reducing technologies.
The funding for a feasibility study for a hydrogen pilot project we proposed was recently approved by the Wyoming Energy Authority and the University of Wyoming Energy Research Council.
The feasibility study will examine the viability of using hydrogen and natural gas generation.
Were also supporting the University of Wyomings research program for turbine firing technologies that would further reduce emissions.
As these technologies advance, future options for our generation resources will only continue to expand and, in turn, allow us to continue to cost-effectively and responsibly reduce our emissions.
Specifics about the pilot project and the associated capital necessary to execute our recently submitted resource plan are still in the early stages of evaluation.
As we work with regulators through the review of the resource plan and gain greater clarity on project specifics, we will provide estimates on potential incremental additions to our capital plan.
Any new generation investment would be incremental to our current capital plan.
We have included some transmission investment in our existing capital forecast, but there may be incremental opportunities.
Moving to slide eight.
We continue to make progress from an Environmental, Social and Governance, or ESG perspective.
Were taking a responsible approach to reducing our emissions, with goals to reduce emissions intensity for our electric operations of 40% by 2030 and 70% by 2040 off a 2005 baseline.
For our gas utilities, were targeting a 50% reduction by 2035 and have voluntarily committed to reducing methane emissions with our participation in the EPA Methane Challenge and the One Future Coalition.
We have a legacy of prioritizing ESG issues, and were working to holistically communicate that story as we continually enhance our disclosures.
During August, we will publish new disclosures for the Sustainability Accounting Standards Board and the Natural Gas Sustainability Initiative.
We will also soon publish our 2020 Corporate Sustainability Report and updated AGA and EEI quantitative reports.
I encourage you to visit our Investor website and review these materials once they are published.
And finally, on slide nine, were well-positioned as an integrated utility with a strong long-term growth outlook.
Were executing our customer-focused strategy and are confident in our future.
slide 11 summarizes earnings per share for the second quarter.
We delivered earnings per share as adjusted of $0.40 compared to $0.33 in Q2 2020, a 21% increase.
Overall, strong financial results were driven by new rates and rider revenues and recovery of wholesale power margins at our utilities.
Higher gross margins were partially offset by increases in O&M, DD&A and interest expense.
Weather was not a major driver of earnings during the non-peak second quarter for both our electric and gas utilities.
The net benefit to earnings from weather was $0.01 per share compared to normal and $0.01 below the second quarter last year.
Slide 12 illustrates the detailed drivers of change in net income quarter-over-quarter.
All amounts listed on this slide are after tax.
As I noted on the previous slide, the main drivers compared to last year were $9.2 million of gross margin improvement from new rates and riders and recovery of wholesale power margins at our utilities.
O&M increased due to higher employee costs and outside services, planned power plant maintenance-related expenses and operating expenses for new wind generation.
The improvement in other income expense over the prior year was driven by lower retirement benefit service costs and market impacts on nonqualified deferred compensation expense.
The additional quarter-over-quarter tax benefits of $4.3 million on the far right of the slide were primarily from two items: first, Nebraska Tax Cuts and Jobs Act customer bill credits, which reduced gross margins collected from customers and reduced income tax expense by the same amount; and second, increased flow-through tax benefits related to repairs and certain indirect costs.
As we promised last quarter, we made progress on mitigating Winter Storm Uris impact on earnings.
The first quarter net impact from Storm Uri was $12.5 million, or $0.15 per share.
As we told you then, we planned to offset approximately $0.05 of these costs through regulatory actions and ongoing power marketing opportunities.
We delivered $0.03 of the offsets in the second quarter, and we anticipate achieving the other $0.02 through the remainder of the year.
And we are on plan to mitigate the remaining $0.10 net storm year impact through O&M management and other opportunities.
Slide 13 shows the details of our recent regulatory activity.
In Kansas, we filed our first rate review in more than seven years, including a request to renew our existing 5-year system safety and integrity investment rider.
In Iowa, we filed our first rate review in more than a decade, including a request for a new system safety and integrity investment rider.
And Ill note that Iowa interim rates took effect in June.
And we continue to make progress on our rate review filed for Colorado Gas.
We expect all three of these rate reviews to conclude late this year or early next year, with new rates effective in Q1 2022.
Looking forward, we are tentatively planning to submit rate reviews for Arkansas Gas in the fourth quarter of this year and for Wyoming Electric in mid-2022.
And as previously noted, we are making progress on our Storm Uri recovery plans.
All our recovery applications have been filed, and we already received final approval and commenced recovery in Nebraska and South Dakota, with interim rates in place in Arkansas and Iowa.
Slide 14 shows our financial position through the lens of capital structure, credit ratings and financial flexibility.
We have a manageable debt maturity profile and are committed to maintaining our solid investment-grade credit ratings.
At the end of June, we had more than $500 million of available liquidity on our revolving credit facility.
And in July, we amended and extended our revolving credit facility with similar terms through July 2026.
We expect to finalize our refinancing strategy for the $600 million balance on our term loan in the third quarter.
We are evaluating refinancing options that align with our anticipated recovery period.
The weighted average length of recovery requested in our regulatory plans is 3.7 years.
New debt and deferred recovery of fuel costs for Storm Uri temporarily increased our debt to total capitalization ratio to 62% at the end of March, and it remained at that level at the end of June.
As we recover storm costs, repay debt and execute on our equity program, we expect to reduce our debt to total capitalization ratio, and we continue to target debt to total cap ratio in the mid-50s.
During the second quarter, we issued $40 million through our at-the-market equity offering program.
Our equity issuance expectations are still $100 million to $120 million for 2021 and $60 million to $80 million for 2022.
Moving to our dividend on slide 15.
In 2020, we proudly marked 50 consecutive years of annual dividend increases, one of the longest track records in our industry.
Since 2016, weve increased our dividend at an average annual rate of 6.6%.
And looking forward, we anticipate increasing our dividend by more than 5% annually through 2025 while maintaining our 50% to 60% payout target.
Were pleased with our strong second quarter financial results and the progress we made during the quarter on many fronts.
Were excited about our growth opportunities, with accelerating population migration into our service territories and many opportunities to continue to develop our strong capital program.
We continue to be well-positioned, both operationally and financially, to be ready to serve all our stakeholders.
 Assistant:

Chosen response:
compname reports qtrly gaap earnings per share $0.40.
black hills corp qtrly gaap earnings per share $0.40.


Prompt:
Human: blackhillscorp.com under the Investor Relations heading.
Leading our quarterly earnings discussion today are Linn Evans, President and Chief Executive Officer; and Rich Kinzley, Senior Vice President and Chief Financial Officer.
Although we believe that our expectations and beliefs are based on reasonable assumptions, actual results may differ materially.
Moving to Slide 4, I'd like to start, as we always do at Black Hills, with a focus on safety, the safety and the well-being of the people we work with and the communities we serve is paramount and we are committed to being on the forefront of safeguarding our co-workers and our customers at all times and especially now.
We continue to monitor the pandemic and its impact to our business, our customers and our communities.
While some of the service territories are experiencing an increase in infection rates, we are not anticipating significant lockdowns to close our local economies.
For our customers who need financial assistance, we are continuing to support them as well as local non-profits in our communities.
I'm extremely proud of our team's dedication to support and serve our customers.
They truly are going the extra mile to provide safe and reliable energy that our customers depend on as we improve life with energy every day.
Overall, financial impacts from COVID-19 are trending as expected for the year.
We continue to maintain strong liquidity to support our businesses.
And our supply chains and capital projects are operating with little impact.
Moving to Slide 6, we had an excellent third quarter.
We executed operationally and exercised diligent expense management delivering a 32% increase in earnings over the same period last year.
Based on the strength of our earnings and outlook, we are increasing this year's earnings guidance to a range of $3.60 to $3.70 per share.
We're also introducing guidance for next year in the range of $3.75 to $3.95 per share, reflecting our expectation for solid growth year-over-year.
We also increased our five-year capital forecast to continue serving the growing needs of our customers and communities.
We've identified an additional $239 million of capital projects.
And that increases our total five-year forecast of $2.9 billion.
95% of that $2.9 billion will be invested in our utilities.
Slide 7 lists the excellent strategic progress we made this quarter.
We obtained final approval from FERC for the Wygen I power purchase agreement.
The approval of this agreement allows us to continue to provide critical base load capacity and energy for our Wyoming Electric Utility.
We filed our new rate review and rider request for Colorado Gas.
Last Wednesday in Nebraska, we had a constructive hearing on a settlement agreement regarding our pending rate review.
We also maintain strong liquidity to support our capital investment program.
We're delivering on our promise to enhance communications on our ESG initiatives.
We recently disclosed new ESG reports using the EEI and AGA qualitative and quantitative templates.
And we will announce our greenhouse gas emissions reductions goals later this week in tandem with our updated Corporate Sustainability Report.
Not only did we announce a 5.6% increase in our dividend, we also completed 50 consecutive years of annual dividend increases, a remarkable achievement that exemplifies our legacy of sustainable growth.
Overall, it's been an outstanding quarter of strategic execution and we are confident in our strong outlook and continued success in delivering what we told you we would accomplish.
I'll start on Slide 9.
As Linn noted, we delivered strong financial performance for the quarter with earnings per share as adjusted of $0.58, up $0.14 from last year, driven by strong year-over-year Q3 results at our gas utilities.
Notable in the quarter were returns on invested capital of our utilities, favorable weather impacts, customer growth and favorable tax items.
We estimate weather positively impacted Q3 earnings per share by $0.05 compared to normal and by $0.11 compared to Q3 2019.
Results for the third quarter of this year include negative COVID impacts of approximately $0.03 per share, in line with our expectations.
Net income as adjusted increased 35% quarter-over-quarter, while earnings per share as adjusted increased 32% quarter-over-quarter, the difference driven by dilution from additional common shares outstanding from our equity issuance earlier this year.
On Slide 10, you see we increased our 2020 earnings guidance and initiated our 2021 earnings guidance, as Linn noted earlier in his remarks.
Our earnings guidance assumptions are shown in more detail in the appendix.
On Slide 11, we reconcile GAAP earnings to earnings as adjusted, a non-GAAP measure.
We do this to isolate special items and communicate earnings that we believe better represent our ongoing performance.
This slide displays the last five quarters and demonstrates the seasonality of our earnings.
There were no special items in the third quarter this year.
Slide 12 is a waterfall chart illustrating the primary drivers of our earnings results from third quarter of 2019 to third quarter of 2020.
All amounts on this chart are net of income taxes.
While I talk through the gross margin comparisons, I will refer to pre-tax margin impacts.
Our Electric Utilities gross margin benefited from rider revenues, power marketing results and a pickup related to the Tax Cuts and Jobs Act, which I will cover more in a moment.
Our Gas Utilities gross margin benefited from new rates, favorable weather conditions that increased agricultural loads, customer growth and mark-to-market gains on gas commodity contracts.
A bit more color on agricultural loads.
Last year was a record precipitation year in our Nebraska service territory and our irrigation loads were correspondingly low in the third quarter.
This year was hotter and drier than normal in Nebraska.
Compared to normal for agricultural loads, last year's Q3 pre-tax margins were negatively impacted by approximately $5 million, while this year's Q3 pre-tax margins were positively impacted by approximately $2 million.
So we had a $7 million pre-tax swing related to the agricultural loads comparing Q3 2019 to Q3 2020.
When looking at weather overall for this year's Q3, including the agricultural impacts, our Electric Utilities gross margin benefited by $1.6 million pre-tax compared to normal and our Gas Utilities gross margin benefited by $2.6 million pre-tax compared to normal.
The final comment on our Utilities gross margins relates to COVID impacts, which generally played out as we had forecast.
The combination of COVID net load impacts and forgiven late fees impacted our Utilities gross margin by approximately $1 million pre-tax.
Our non-regulated margins were slightly higher than last year, reflecting higher revenues from our new wind assets at our Power Generation segment, partially offset by lower tons sold in our Mining segment.
Total O&M increased compared to the prior year, largely driven by a $2.4 million after-tax expense from the retirement of certain assets at our Power Generation segment.
Net COVID-related O&M of $800,000 after-tax resulted from higher bad debt expense accruals and sequestration of the essential employees, partially offset by lower costs related to travel, training and outside services.
Depreciation increased as a result of additional plant placed in service.
Interest expense increased due to higher debt balances resulting from new debt issued to fund our capital investment program.
Other income expense was unfavorable to the prior year, reflecting additional expense for our non-qualified benefit plans this year related to stock market performance and higher pension expense.
We had a favorable effective tax rate in Q3 compared to the prior year.
This was driven by additional production tax credits from our wind assets placed in service last year and the release of reserves associated with the Tax Cuts and Jobs Act.
A bit more color on that.
We finalized certain regulatory proceedings around the TCJA during the third quarter and we're able to release associated reserve amounts, benefiting our Electric Utility gross margins by $1.5 million and income taxes by $2.1 million.
Slide 13 shows our financial position through the lens of capital structure, credit ratings and financial flexibility.
We are in excellent shape from a debt maturity and liquidity perspective and we continue to maintain solid investment grade credit ratings.
In February, we issued $100 million of equity to help support our 2020 capital investments.
We don't expect to issue any more equity in 2020.
You'll note in our 2021 guidance assumptions in the appendix we expect to issue $80 million to $100 million of equity through our at-the-market equity offering program in 2021.
We've mentioned previously the need to issue up to $50 million of equity in 2021 based on our previously disclosed forecast.
And the addition of $142 million to forecasted capital investments for 2020 and 2021 drives the increased equity need.
In June, we issued $400 million of 2.5% 10-year notes to term out our short-term debt and support our ongoing capital investment program, further enhancing our liquidity position.
This debt issuance was a great outcome and provides our customers low cost debt for the next decade.
At quarter end, we had $84 million of borrowings on our credit facility with no material debt maturities until late 2023.
As at the end of October, we continue to have over $600 million of liquidity available from capacity on our revolving credit facility.
Slide 14 illustrates our dividend growth track record.
We completed 50 consecutive years of increasing dividends in 2020 with strong and consistent increases in the past few years.
We maintain our target for a long-term dividend payout ratio of 50% to 60% of EPS, demonstrating our confidence in our long-term earnings growth prospects.
Moving to Slide 16.
Our customer-focused strategy is designed to deliver sustainable long-term value growth for customers and shareholders.
We're aligning our people, processes, technology and analytics to serve the growing needs of our customers and our growing communities.
We are investing in our customers' needs for safety, reliability, resiliency, growth and an overall positive customer experience.
These investments for customers positions us to deliver both long-term earnings and dividend growth for shareholders.
Our programmatic approach to these investments also provides greater consistency and clarity for the benefit of all of our stakeholders.
Turning to our capital investment plan on Slide 17.
We added $239 million to our five-year forecast for a total of $2.9 billion focused on projects and initiatives that maintain customer safety and reliability and foster customer growth over the next five years.
Most of the increased capital is related to additional programmatic investment in our Gas Utilities and more than half of the increase is planned for this year and next year.
For this year, we are increasing our capital investment by $64 million to $733 million and for next year, we're increasing our capital investment by $78 million to $633 million.
Going forward, we fully expect to invest at least $500 million annually to support our customers.
We continue to take a relatively conservative approach to our capital forecast.
We include opportunities that have a reasonable degree of certainty and then we add capital as we gain more clarity around incremental projects that will support our customers.
We anticipate that additional capital opportunities are likely over the planned period, especially in the outer years.
Slide 18 illustrates that our capital plan is utility focused with timely recovery on most of our investments.
95% of our forecasted investments are for our utilities and we anticipate 83% of our Gas Utility investments and 51% of our Electric Utility investments received timely recovery.
On the regulatory front, we've listed our current activity on Slide 19.
As noted earlier, rate reviews are under way for our Gas Utilities in Nebraska and Colorado.
We appreciate that we had a constructive hearing last Wednesday in Nebraska.
The hearing focused on our settlement agreement for the rate review, the rider we requested and for the consolidation of our two utilities in Nebraska.
In other regulatory initiatives, we continue to advance our Renewable Advantage program to add up to 200 megawatts of renewable energy in Colorado.
We're currently negotiating with the winning bidder on a 200 megawatt solar project to be constructed in Pueblo, Colorado.
We're excited to complete our Renewable Ready subscription-based program for our South Dakota and Wyoming Electric Utilities, our 52.5 megawatt Corriedale wind project, we are building to support that program is nearly complete and we expect it to be in full service prior to year end.
The wind facility is located near Cheyenne, Wyoming, one of the best wind resources in the United States.
On the ESG front, we have a strong legacy of sustainable growth and we're guided by our core values to safely and cost effectively serve our customers as we provide opportunities for our people to develop and advance their unique skills.
At Black Hills, we have a strong ESG commitment and we're prepared to tell our story more holistically.
An important initiative for us was the publication of our first ESG reports.
We use the EEI and AGA templates that I mentioned earlier, which will soon be followed by our greenhouse gas emission reduction goals, which we will release later this week.
We are adding or expanding renewable energy in all three of our Electric Utilities in Colorado, South Dakota and Wyoming.
This year, we were once again awarded Gold Star status in Colorado's Environmental Leadership Program.
Gold Star is the highest achievable status and I am proud that we have held this distinction since 2014.
In fact, we were the first utility in Colorado to achieve this designation.
We also recently voluntarily joined EPA's Methane Challenge program to reduce methane emissions beyond regulatory requirements in our Gas Utilities.
We continue to rigorously promote our strong safety culture with a goal to be the safest utility in the industry.
Our team is already delivering results better than industry average and they are staying on the forefront of processes and safeguards to keep people safe during the ongoing pandemic.
We're also very engaged in serving the needs of our customers through financial aid and supporting organizations like the United Way that offer critical assistance in times like these.
In 2019, we provided over $5.5 million in charitable giving and we continue to support our strong commitment to the economic viability of our customers and our communities.
Their impressive credentials and experience are already being instrumental in driving future growth while fulfilling our ESG commitments.
They participated in our Board meeting last week and are already adding value.
In closing, we are confident in our future.
We are well positioned as a low risk utility investment and complementary gas and electric utility businesses.
We're privileged to operate and stable in growing territories, which continue to be resilient even during the ongoing pandemic.
We have a solid financial position and liquidity.
And we are investing and being ready to serve the growing needs of our customers and communities as we improve life with energy.
And Rich and I are happy to respond to questions.
 Assistant:

Chosen response:
compname posts q3 adjusted earnings per share $0.58.
q3 adjusted earnings per share $0.58.
raises fy 2020 adjusted non-gaap earnings per share view to $3.60 to $3.70.
compname says initiates 2021 earnings per share guidance range of $3.75 to $3.95.
compname says increases 2020 to 2024 capital investment forecast by $239 million to $2.9 billion.


Prompt:
Human: Leading our quarterly earnings discussion today are Linn Evans, President and Chief Executive Officer; and Rich Kinzley, Senior Vice President and Chief Financial Officer.
Although we believe that our expectations and beliefs are based on reasonable assumptions, actual results may differ materially.
As we look back at 2020, I couldn't be prouder of what our team has accomplished.
Throughout an uncertain and disruptive year, I admired how the Black Hills Energy team rose to every challenge head-on.
I'm especially pleased how our team always kept their health and safety, and our customers' health and safety at the forefront, as we successfully executed in our customer-focused utility strategy, all while delivering strong financial performance that exceeded our guidance.
I believe, most of us will look back on 2020 as a year of seemingly endless challenge and yet as these challenges that prove the character and resilience of an organization and make us stronger.
Like those before us for the past 137 years at Black Hills, we adapted, we rallied together and we worked hard, truly exemplifying our ready-to-serve commitment and the incredible spirit within our team.
The Black Hills Energy team once again delivered a long list of accomplishments for our stakeholders throughout 2020.
Slides 4 through 6 highlight the success of consistently delivering on what we said we would do.
What I'd like to refer to as delivering a high say/do ratio.
Safety is our number one priority at Black Hills each and every day.
And is this priority and our genuine concern for our fellow coworkers, our customers and our communities that gave us a solid foundation upon which to confront the pandemic and build a stronger future.
For the seventh consecutive year, our safety culture produced an injury incident rate better than the utility average, demonstrating progress on our goal to become the safest utility in the industry.
Our team, combined with our resilient infrastructure, advanced our reputation of delivering industry-leading reliability for our customers.
As outages occurred, I was impressed throughout the year as my coworkers delivered a remarkable response, safely and efficiently restoring service with a ready-to-serve attitude and dedication.
We produced strong fourth quarter and full-year financial results as the economies in our Midwestern states continue to improve.
We are fortunate to operate and stable and growing territories where most of our communities remained open during the pandemic.
As we said we would, we have provided greater clarity into our longer-term earnings outlook.
We increased our 2021 guidance, we initiated 2022 guidance and we announced long-term earnings and dividend growth targets.
Rich will cover these targets in more detail during his comments.
I'm pleased that we successfully and safely executed on our customer-focused investment program.
Through solid planning and collaboration with contractors and suppliers, our team deployed $755 million in capital projects to further harden and modernize our energy systems.
These investments included our $79 million, 52.5-megawatt Corriedale wind project, which we constructed in our strong wind resource area near Cheyenne, Wyoming.
The project now serves customers in South Dakota and Wyoming through our innovative and voluntary customer subscription-based Renewable Ready program.
We also made terrific regulatory progress with the Nebraska and Wyoming commissions approving our consolidation applications and our rate reviews on constructive terms.
Both commissions approved our applications to consolidate multiple rate structures into a single statewide rate structure.
These approvals will help streamline our regulatory strategies in both states and provide efficiencies as we continuously improve how we serve and how we interact with our customers in those states.
In addition to receiving constructive revenue increases in both states, both states also approved riders to support our programmatic investment for safety and reliability.
Throughout the pandemic, we maintained our strong financial position and investment-grade credit ratings, executing upon our debt and equity financing needs on favorable terms during the year.
And our time tested staying power as a result of environmental, social and governance matters always being a core focus.
In 2020, we provide a greater transparency into our ESG profile and journey.
We published new qualitative and quantitative reports.
We issued an updated corporate sustainability report and we announced our goals to reduce greenhouse gas emissions intensity.
For our electric operations, we are on track to achieve a 40% reduction by 2030 and a 70% reduction by 2040, off a 2005 baseline.
We are currently developing our integrated resource plans for South Dakota and Wyoming, which we will complete this summer and in next year for Colorado.
These resource plans will provide detail regarding how we will achieve these goals, including options for our current resources and potential investment opportunities to meet customer demand.
For our natural gas utilities, we expect to cut greenhouse gas emissions intensity by 50% by 2035.
Again, that's off of the 2005 baseline.
We have already cut our gas utility emissions by one-third since 2005.
Slide 7 shows that we plan to invest over $600 million annually during the next five years for a total of over $3 billion.
Our base forecast of over $2.7 billion represented by the orange bars relates to projects that are fully planned and in progress.
As incremental projects are more refined for timing, cost and other factors, we will add them to our base forecast.
Incremental projects we are working on include additional electric generation and transmission projects, gas pipeline projects and additional programmatic investment.
Slides 27 through 32 in the appendix provide additional details related to our capital investment plan.
In addition, our dedicated growth team is aggressively pursuing new growth opportunities.
We are powering data centers and technology growth within our service territories and with more people moving into our service territories, we are ready-to-serve our growing customer demand.
We are adding to our reputation of delivering innovative solutions, products and technologies, including the expansion of renewables and cleaner technologies, such as electric vehicles and renewable natural gas.
Across all of our business, we continue to focus on cost discipline, along with our better every day culture to drive greater efficiency and value through continuous improvement.
Looking forward, we are confident in our future.
We are well positioned as an integrated pure-play utility serving a strong and growing region and jurisdictions with constructive regulatory environments.
I'm excited to work alongside with our highly engaged team executing our proven strategy to continue delivering strong results for all of our stakeholders.
Just like all of you, we are hopeful for a brighter year ahead, especially for our families and friends whose lives were deeply affected by the virus.
While the pandemic remains a serious issue, our business fundamentals remain strong and we are applying what we learned in 2020 to become more efficient, more responsive and more technology enabled.
I'll start on Slide 11 where you can see we delivered an 8.8% increase in earnings per share as adjusted for the fourth quarter and a 5.7% increase for the full-year compared to 2019.
2020 Adjusted earnings per share of $3.73 came in just above the top end of our guidance.
Full-year earnings were driven by strong margin growth from returns on our invested capital, new customer growth, excellent cost management and tax credits.
These positive drivers overcame net COVID impacts and higher share count.
Net full-year COVID impacts of $0.07 were consistent with our forecast.
This includes net load impacts and net expenses associated with the pandemic, which are detailed on Slide 35 in the appendix.
Net weather impacts for the fourth quarter and the full-year were fairly nominal, which we estimate as $0.01 lower than normal in Q4 and $0.05 lower than Q4 2019.
For the full-year, weather was $0.03 higher than normal, but $0.03 lower than 2019.
Slides 12 and 13 contain waterfall charts illustrating the primary drivers of our earnings results comparing Q4 2019 to Q4 2020 and full-year 2019 to 2020, all the amounts on these charts are net of income taxes.
As you can see, both the quarter and full-year show strong growth in margins that are natural gas utilities when compared to 2019.
This was driven by new rates from our constructive regulatory outcomes in Wyoming and Nebraska and by riders across our service territories.
Customer growth across our service territories also contributed nicely to margin in 2020.
Our electric utilities and non-regulated margins also increased for the full-year.
O&M increased by only 1.5% [Phonetic] for the full-year and that's including the O&M we incurred relate to COVID.
We are pleased with our team's O&M control in 2020, it really was outstanding.
DD&A increased as a result of our strong capital investment program in 2019 and 2020.
Interest expense increased due to higher debt balances resulting from new debt issued to fund our capital investment program, partially offset by lower short-term borrowing rates.
Other income expense was favorable to the prior year, reflecting expensing of project development costs in the prior year, which was partially offset by higher current year pension plan cost driven by lower interest rates.
Our effective tax rate for 2020 was 11.9%, compared to 12.2% in 2019, driven by higher tax credits.
Slide 14 shows our financial position through the lens of capital structure, credit ratings and financial flexibility.
We are in excellent shape from a debt maturity and liquidity perspective.
We continue to maintain solid investment-grade credit ratings.
Last February, we issued $100 million of equity to help support our 2020 capital investments.
You will note, in our 2021 and 2022 guidance assumptions in the appendix, we expect to issue $100 million to $120 million in 2021 and $60 million to $80 million in 2022 through our at-the-market equity offering program to support our ongoing capital investment plans.
On the debt side, in June, we issued $400 million of 2.5% 10-year notes to term out our short-term debt, further enhancing our liquidity position.
This debt issuance was a great outcome and provides our customers low-cost debt for the next decade.
At year-end, we had $234 million outstanding on our credit facility with no material debt maturities until late 2023.
As of February, we continue to maintain over $500 million of available liquidity.
While debt-to-total capitalization remained in the 58% to 59% range through 2020, we are targeting a debt-to-total cap ratio in the mid-50s.
As Linn noted, we are providing greater clarity into our long-term earnings outlook as outlined on Slide 15.
We see opportunities to continue our strong cost management into 2021 and accordingly, increased our 2021 guidance to $3.80 to $4 per share, up $0.05 on each end [Phonetic].
While issuing a second year of guidance is not our typical practice, we also provided 2022 guidance of $3.95 to $4.15 per share, which incorporates the new Wygen I contract starting January 1, 2022.
Our newly initiated 2022 guidance targets an approximate 5% earnings per share CAGR from 2019 to 2022.
Using 2022 as our base year, we expect to grow earnings per share in 2023 through 2025 at a 5% to 7% CAGR.
We are excited about our growth opportunities as we share this long-term earnings per share growth target.
Moving to our dividend on Slide 16.
In 2020, we proudly marked 50 consecutive years of annual dividend increases, one of the longest track records in our industry.
Since 2016, we have increased our dividend at an average annual rate of 6.6%.
Looking forward, we anticipate increasing our dividend by more than 5% annually through 2025, while maintaining our 50% to 60% payout target.
We are uniquely positioned as a pure-play utility in constructive jurisdictions with a complementary business mix across stable and growing territories.
These factors paired with our strong and sustainable growth outlook, provide an attractive investment opportunity.
 Assistant:

Chosen response:
increasing guidance for 2021 earnings per share available for common stock to be in the range of $3.80 to $4.00.
initiating guidance for 2022 earnings per share available for common stock in a range of $3.95 to $4.15.


Prompt:
Human: Information on these factors can be found in the Company's Annual Report on Form 10-K for the year ended December 31, 2020 and any subsequent quarterly report on Form 10-Q or Current Report on Form 8-K, which are available at the SEC website www.
Let me make a quick few remarks about the -- what we're seeing in our market before we get into our results.
Florida seemed to be in -- caught up in it more than probably any other state.
And there was a lot of concern as to whether that will impact the economy and to what extent.
I'm happy to report three months into it now, Delta seems fairly in the rearview mirror.
I think they have come down to even lower than they were three months back.
So we're happy about that.
But what we were most happy about is also that does not actually have the same kind of impact that previous surges have had on the economy.
I think the economy is learning to deliver these surges at when they happen.
Hopefully, there won't be anymore, but at least over the last three months, we did not see a significant impact to the local economy here or in other parts of the country where we do business.
But it's good to see Delta behind us obviously with a fair amount of pain that we wanted to of the healthcare side.
We -- the Delta surge did put our plans about return to office on hold a little bit.
We have started bringing people back in, in the summer.
We have to take a pause.
Later today, I will be making a call internally and we will be talking about how we're going to restart that process.
Our expectation is that by January -- first week of January, we will be in the new normal, and typically now that slowly started bringing people back.
We will start that but not even for Board meetings, we've not had in-person Board meeting since the start of the pandemic.
Yesterday, the Board met telephonically and decided it was time to -- to start meeting in person.
Our first in-person Board meeting, which will be over two days in the middle of November.
So I'm excited about that, too.
Overall, the economy here in Florida is doing well.
There are obviously widespread labor shortages and supply chain disruptions that everyone has talked about.
We are seeing that.
Our customers are feeling it.
Indirectly, we're feeling that as well.
But it's hard for me to say when those will resolve themselves.
But that is the challenges we're dealing with.
I look at this -- the biggest economic crisis of our lifetime that we went through.
It's 18 months into it.
If all we're dealing with the supply chain issues and labor shortages, I think that's a pretty good place to be.
This could happen a lot worse.
So I take this as actually a victory that these are the issues.
This could happen a lot worse.
Quickly getting into our quarter, we posted net income of $87 million or $0.94 a share.
This compares to $104 million we posted last quarter, which was $1.11 per share.
The annualized returns so far for the 9 months so far -- our return on equity is 12.4% and return on assets of 1.09%.
Net interest income declined slightly to $195 million from $198 million last quarter, but it was up compared to the third quarter of last year, which I think at that time, it was $188 million.
The net contracted 2.33% from 2.37%, mostly because of lower asset yields and less than expected commercial loan growth.
Also, less PPP impact this quarter versus last quarter was also a large reason for that contraction.
Cost of deposits, as we've been telling you, has -- continues to come down.
We dropped at 20 basis points this quarter.
It was 25 last quarters so 5 basis point reduction in the cost of deposits.
On a spot basis, we're actually at 19 basis points and I checked last night, we're down another basis points so like 18 basis points as of yesterday.
So the story on the deposit side continues.
We also had decent growth in deposits especially DDA -- non-interest DDA grew by $324 million.
But we did that very meaningfully -- we're not trying to grow the balance sheet.
Growing the balance sheet and hanging things up in liquidity does not really create value for anyone.
Instead, this quarter we decided not to grow the balance sheet.
We shrank it, freed up capital and bought back stock quite strongly.
In fact one of the things the Board did yesterday when we met is approved another $150 million buyback given that we are going to wind down the authorization that we have based on how quickly we bought stock this quarter.
Also, the fact that the stock was around $40 or so makes it very easy in my -- from my perspective given where our book value is we're trading at such a low multiple so easy.
It doesn't take much of rocket science to figure out, but it's a good buy.
So we've been aggressive and buying back and we've gone through much of that -- much of the authorization.
Loans -- Total loans excluding PPP runoff, they grew by $74 million.
Residential business remained strong as has been the case for the last several quarters.
Commercial segments, the payoffs outpaced production.
On the production side, actually we were pretty happy.
Our production -- we try to go back and say, let's see what we were doing pre-pandemic and we compared the production this quarter to the third quarter of 2019.
Production was actually higher this quarter.
But it's the -- it's two things that we can control, one being payoffs and the other line utilization.
Those have been disappointed [Phonetic] this quarter, which is why it all adds up to only about $74 million of growth in the loan portfolio.
What else, credit, I would say nothing but good news on the credit front.
I know these days, credit is not on people's mind or should always be on everyone's mind, that's the primary risk we take as a bank.
So I'm happy to report on the credit front criticized classified assets declined by $240 million.
Loans under temporary deferral or modified under the CARES Act also declined to $285 million.
They were $497 million I believe at end of last quarter, so almost cut in half.
NPL ratio also got better.
It was 1.21% this quarter.
Last quarter, it was 1.28%.
By the way, that includes the guaranteed portion of SBA loans.
So if you exclude that NPL ratio, it's actually 99 basis points.
The $69 million large commercial loan that we spoke to you about last quarter, it's the resolution of that is moving forward.
We're pretty happy with how we reserve for it and feel very comfortable in that level of reserve.
Net charge-offs annualized was 19 basis points.
Last year, I think we were at about 26 basis points.
So good news on the net charge-offs front as well.
Capital, book value has grown to $34.39, tangible is at $33.53.
Before I hand this over to Tom, just let me say, sort of what are the top in my mind in terms of what we're trying to achieve in the short to medium term sales is basically loan growth but not reaching for loan growth as getting caught up in that and going outside of the risk, that's not acceptable but loan growth restarting the growth engine on the left of the balance sheet is a top priority, continue to improve deposits, while we've made a lot of progress on that.
I think there is more work to be done there, especially in light of the fact that actually it will rise, maybe nine months, maybe less, maybe a little more but some -- on great environment that we have to be ready for it.
And we are basically working our deposit business to be -- that.
In the very short-term is to return to office safely is another priority and then launching in new markets.
The new markets we've talked about last time to you, we don't really have much to share yet because it's not going to ready for primetime, but we have been working for the last three months on finalizing and hopefully over the -- over the course of next threemonths, we will make some announcements and launch one or two new markets.
So I wanted to spend a little time first on deposits, give you a little bit more detail and perspective on some of the things that we're working on and what we achieved in the quarter.
So as Raj said, average non-interest bearing deposits grew by $749 million for the quarter and $2.7 billion compared to the third quarter of 2020.
Period-end non-interest bearing DDA grew by $324 million, while total deposits shrank by $493 million.
So we break down a little bit the $324 million of NII DDA growth for the quarter, it was again broad spread across all geographies, across all business units and very heavily focused on new client acquisition.
I'd also spend a little bit of time working on the deposit portfolio, the work that Raj is talking about is, has been a daily level of kind of bruising work that's not that glamorous but we're working very hard on new account operating relationships, cross-selling within the book, ensuring the ECR rates are set at appropriate levels really working hard on kind of the building blocks of this and I think the two places that you see it, number one, are the continued NII DDA growth obviously in the $324 million, but also secondarily, if you look at service charges, deposit fees on accounts was up 33% for this quarter compared to the same period last year.
So we're really starting to see excellent kind of cadence in the rhythm in both continued NII DDA growth, continued opening of new operating account business, which is really our central focus as a strategy and continuing for a surging in the level of service charge revenue that we have from these accounts.
So all of that is -- is a big part of what Raj talks about when we're talking about the entire deposit mix and the quality of the deposit book.
A little further down, money market accounts declined by $1.1 billion this quarter as we continue to execute the strategy of the quality of the base.
We have looked hard at accounts that we think are highly susceptible to increases in rates once we get into a different interest rate environment and we've taken a lot of steps to ensure that we're moving out deposit accounts right now on a proactive basis as we continue to grow the operating account business and take advantage of that entire dynamic to have just an overall better quality book.
Switching to the loan side, as Raj said, excluding PPP loans, the total portfolio grew by $74 million in the third quarter.
Residential continued to be strong, reflecting the strength in the housing market and the rate environment.
The overall resi portfolio grew by $751 million for the quarter.
Of that, the EBL segment was $50 million and the pure residential correspondent portfolio grew by $701 million.
In the mortgage warehousing business, which is also benefited from a strong housing market, there we saw a decline of $141 million for the quarter.
Most of that is starting to see some normalization in this segment.
This refi activity begins to moderate.
And we see a little bit lower line utilization in this area.
Although we continue to be interested in growing commitments and expect our commitment book to grow in the short-term.
For the C&I business, it was up $13 million for the quarter, including owner occupied CRE loans and I'll talk a little bit more about what we see in that the segment.
The remaining commercial portfolio declined for the quarter.
The largest decline was in CRE including multifamily, which was down by an aggregate of $317 million for the quarter.
The New York multifamily portfolio, which you have been following now with us for a number of years, declined by $76 million for the quarter.
But at this point, we believe that, that's stabilizing.
That's the lowest level of run-off that we have seen in a number of quarters.
And we're actually starting to see some positives in the multifamily market in New York.
I'm sure you all have followed it.
We're starting to see rent increases in the market.
We're starting to see people return back to the New York City.
Multifamily market schools are reopening and things are happening that are driving people returning to the city.
There's been an awful lot of data out in the last couple of months about rent -- rent levels even with concessions improving back to sort of pre-pandemic levels, and we are looking at new opportunities now in the multifamily space within the New York market.
So we're feeling better.
We're feeling good about the portfolio we have today at the current level that it's had and we're feeling better about the short-term growth opportunities within multifamily in New York.
I'd land a little bit more on Raj's comments about production.
When we looked at production across the commercial lines especially C&I, CRE and small business areas, it was better than pre-pandemic levels for the same quarter.
We are seeing a reasonable return of pipeline particularly in the C&I area where we have a large pipeline heading into the fourth quarter and the first quarter of next year.
So we're seeing clients investing more.
We are still fighting through kind of low utilization rates and even really of the accounts that we're bringing on from an NII DDA perspective that have lines of credit with them even those lines are coming in at pretty low utilization rates, but we think ultimately that patience will pay off for us and as people start making more capex expenditures and growing more solidly in 2022, we believe these relationships including existing ones we have, we'll start to see improvements in these areas.
But actually overall production and pipeline build, we feel pretty optimistic about right now heading into the fourth quarter and heading into -- into 2022.
Yeah, line utilization bottomed out in the first quarter.
It's starting to improve all through the second quarter.
So we were pretty optimistic because we're seeing a very steady trend of improvement.
But in the third quarter, it's really stagnated so it haven't gone down, but it really hasn't come beyond where it was in the second quarter.
So -- And to Tom's point in the new business that we're writing, the line business, it comes on utilization levels, especially in that new business is very low, lower than its existing book as well.
So it's all dry powder so when these bottlenecks and the economy are resolved, this should create growth.
But it's hard for me to say, it was to happen a quarter from now or two quarters and three quarters from now.
But that's sort of what we're seeing.
Tom, you were done?
Yeah, no, I was just [Speech Overlap] I was going to give the PPP update.
As for PPP, $159 million of the First Draw PPP loans were forgiven in Q3.
As of September 30, there was a total of $49 million in PPP loans outstanding under the First Draw program and $283 million of outstanding under the Second Draw program.
We expect to open the forgiveness portal for the Second Draw program next month.
But obviously, this is kind of winding down at this point.
Quick update on deferrals and CARES Act modifications.
Slide 16 in the supplemental deck also provides more detail on this.
For commercial, no commercial loans around short-term deferral as of September 30.
$244 million of commercial loans remained on modified terms under the CARES Act, compared to $436 million at June 30.
The largest decline in loans modified under the CARES Act was $144 million decline in the hotel portfolio.
The hotel portfolio, particularly in Florida, continues to to rebound and if you try to get a hotel in certain areas of Florida lately, good luck, particularly in the Keys and other coastal properties just the occupancy has really returned strongly there.
So we're -- we're feeling good to see that change come about.
Today, $414 million in commercial loans have rolled off modification.
100% of these loans have either paid off or resumed regular payments from residential perspective excluding the Ginnie Mae early buyout portfolio $40 million of loans remained on short-term deferral or have been modified under the longer-term CARES Act prepayment plan at September 30.
Of the $533 million in residential loans that were granted an initial payment deferral $493 million or 92% of rolled off.
Of those that have rolled off, 95% have been paid or are making regular payments.
I think the last thing I'd say on the loan portfolio is also when we look at the $74 million in growth, keep in mind that we had $175 million of payoffs in in criticized and classified loans.
So while it certainly impacted the loan growth number, it did contribute to the overall improvement in the credit quality and we're happy to see that.
Give a little bit more detail on the numbers for the quarter, starting with the NIM.
The NIM did decline this quarter to 2.33% from 2.37%.
The PPP fee recognition had a bigger impact on the NIM last quarter than it did this quarter.
If we factor out the impact of PPP fees and the impact of increasing prepayment fees on some of our securities, the NIM actually would have been flat quarter-over-quarter.
Loan growth was ready this quarter, not commercial and we seen more commercial growth as opposed to residential growth we likely would have seen some uptick in that NIM.
The yield on loans decreased to 3.45% from 3.59% last quarter, recognition of PPP fees, the differential in that quarter-over-quarter if it hadn't been for that the yield on loans would have declined by only 6 basis points for the quarter and most of that 6 basis points really was attributable to the shift from residential to -- from commercial to residential.
Eventually, obviously, we believe that level will swing back the other way.
I know you've been asking me, so I'll answer you now.
There are still $8.1 million worth of deferred fees on PPP loans remaining to be recognized almost all of that $8 million relates to the Second Draw program.
So I don't really think we'll see much of that in the fourth quarter.
Yield on securities declined from 1.56% to 1.49% and accelerated prepayments, which we think some day has to come to an end but keeps not coming to an end.
It just keeps getting faster on that mortgage-backed securities accounted for almost all of that quarterly decline in yields.
The total cost of deposits declined by 5 basis points quarter-over-quarter.
The cost of interest bearing deposit is down 6 basis points.
And our best expectation right now is that NIM would remain relatively stable over the fourth quarter, but obviously there are things that contribute to that that are a little bit difficult for us to predict, but that's our best expectation as of now.
And we can comfortably say the cost of deposits will continue to grow for at least to one quarter.
With respect to the allowance and the provision, overall, the provision for credit losses for the quarter was a recovery of $11.8 million.
Slide 9 through 11 of our deck provide further details on the ACL.
The ACL declined from 77 basis points to 70 basis points over the course of the quarter.
Most significant drivers to that change, $2.3 million decrease related to the economic forecast.
This is becoming less impactful than it has been in prior quarters, which is not surprising as things start to stabilize, a $4.5 million decrease due to charge-offs, another $3.7 million due to a variety of changes in the portfolio, including the mix of new production and ad bids [Phonetic], the further shift to loan segments with lower expected loss rates primarily residential impact on PDs of an improving borrower financial performance, risk rating changes, etc, and a $5.9 million decrease in the amount of qualitative overlays and this is mainly just a shift things that are now being captured by the models.
This last quarter, we didn't think the models were adequately capturing.
The largest component of the reduction in the reserve with the CRE portfolio.
The CRE model was particularly sensitive to unemployment, which improved this quarter and the commercial property forecast also improved, particularly for retail and multifamily, where we saw improving forecast in vacancy rates.
There was also a reduction in criticized, classified pre-loans, which impacts the reserve.
We also saw the resi reserve come down.
This was caused by residential loans continuing to come off deferral and resuming payments and changes in the economic forecast related to unemployment and long-term interest rates also had an impact.
Remind you that almost 20% of the resi both this government insured and actually carries no reserve.
C&I reserves actually ticked up a little bit as a percentage of loans this quarter.
With respect to risk rating migration, if you see -- you can see some details on this in Slides 23 through 25 of our deck, the total criticized and classified commercial loans declined by $240 million this quarter, most of that within the substandard accruing category, which declined by $252 million.
Special Mention ticked up a little an substandard non-accruing ticked down a little.
Total non-performing loans decreased $277 million this quarter from $293 million at June 30.
The decline in criticized and classified assets really occurred across pretty much all portfolio segments with the largest decline in CRE.
Looking at other income and expense, there's not really anything material to call out this quarter.
On the year-to-date basis, we had initially guided to mid single digit increase in non-interest expense and that's the looks like where we're going to -- likely going to land by the end of the year and I would also note the 33% year-over-year increase in deposit service charges and fees, which Tom mentioned and we're pretty happy about that.
ETR was a little lower this quarter mainly due to a temporary reduction in the Florida tax rate.
Last point I'll make, you'll see in the next couple of weeks, we'll be filing an S-3, a Shelf registration, we don't read anything into that that you all don't feel like you need to call me, our Shelf registration is expiring and we just want to have an active shelf on file.
We're not planning anything so but you'll see that.
Let's jump into it.
 Assistant:

Chosen response:
compname posts q3 earnings per share $0.94.
q3 earnings per share $0.94.


Prompt:
Human: I hope you are all doing well and staying safe.
While the majority of our production employees continue to work from home, we have many dedicated employees at our manufacturing sites and with customers all adhering to the many layered health and safety protocols.
As a matter of fact, we delivered a record quarter in terms of earnings per share and tied the record for quarterly sales.
We improved manufacturing output and experienced more consistent order demand after the trough in activity last quarter stemming from the rapid onset of widespread pandemic lockdowns.
Not surprisingly, and as we anticipated, most flow instrumentation end markets remain challenged.
Bob will walk you through the details of the quarter and after that, I'll come back and talk further about the market outlook and what we're hearing from customers in the current environment.
As you can see on slide 4, total sales for the third quarter were $113.6 million compared to $108.6 million in the same period last year, an increase of 5%.
As we noted last quarter, activity levels began to improve as lockdown started to be lifted in mid-May and into June and this activity stabilization continued out throughout the third quarter.
In municipal water, overall sales increased 11%, a roughly equal combination of improved order rates and recovery of the backlog built in Q2, which as we noted last quarter was the result of lockdown induced manufacturing disruptions which limited our output.
Positive revenue mix trends continued with further adoption of smart metering solutions including ORION Cellular radios and BEACON software-as-a-service revenue along with ultrasonic meter penetration.
As noted and as anticipated, flow instrumentation sales declined 18% year-over-year, reflective of the broadly challenged markets and application served globally.
Operating profit as a percent of sales was 17.2%, a 210 basis point increase from the prior year's 15.1% with improved gross profit margins and SEA leverage contributing to the strong results.
Gross margin for the quarter was 39.6%, up 120 basis points year-over-year.
Margins benefited from higher sales volumes and positive sales mix.
Notably, the overall trends of ultrasonic meter adoption and AMI implementations, including higher BEACON software-as-a-service and ORION Cellular radio sales.
While copper prices, which serve as a proxy for Brass have been increasing.
Our average price cost in the third quarter was effectively neutral compared to the prior year due in part to the normal purchasing to production lag.
Finally, a reminder that prior year's results included a non-recurring discrete warranty provision associated with the products sold only outside North America.
SEA expenses for the third quarter were $25.5 million down $300,000 year-over-year with higher personnel costs, mostly offset by lower travel, trade show and other ongoing pandemic impacted expenses.
The expense run rate was $2.3 million higher than the second quarter's $23.2 million reflecting the lifting of the temporary cost actions taken in the second quarter in response to the rapid onset of the pandemic.
The income tax provision in the third quarter of 2020 was 23.9%, slightly higher than the prior year's 22.1% rate.
In summary, earnings per share was $0.51 in the third quarter of 2020, an increase of 16% from the prior year earnings per share of $0.44.
Working capital as a percent of sales was 23% relatively in line with the prior two quarters.
We again delivered strong free cash flow which at $19.1 million dollars was consistent with the prior year comparable quarter despite the deferral of our federal income tax quarterly instalment payment under the CARES Act from the second quarter into the third quarter.
Our year-to-date free cash flow of $67.8 million was 22% higher than the prior year $55.6 million and is currently tracking at 187% conversion to net earnings.
We ended the quarter with approximately $94 million of cash on the balance sheet as we paid down the small euro line of credit with excess cash.
We continue to have full access to our untapped $125 million credit facility.
Our stable balance sheet and ample liquidity remain a clear source of strength for Badger Meter.
Unfortunately, much of the globe, including the majority of US states are experiencing a resurgence in COVID cases.
While this continues to create uncertainty, we are optimistic that extensive lockdowns will not again become a necessity, regardless, we remain fully prepared to manage safely in support of our customers in the critical and essential water sector.
Municipal water customer base is large and diverse.
The potential for some to experience difficult budgetary challenges exist due to a variety of contributing factors.
However, as we've continued to learn from our active dialog across the spectrum of customers, their activities are essential and in many cases regulated.
Some are implementing temporary cost reduction measures such as hiring freezes and travel restrictions.
However, spending on critical and necessary activities, which includes metering solutions required for billing and controlling non-revenue water continues in many respects.
Our large and diverse customer base means that there will not be a sole or single response as each municipal operation is unique with different needs and priorities.
Municipal water bid tenders and awards are mostly proceeding as planned, although a few have incurred extended timelines or deferrals.
There have been no widespread or significant cancellations and most daily order activity has returned to near normal.
Our supply chain and the logistics partners continue to operate with new safety protocols and processes in place to address the needs of customers with no critical shortages currently.
In spite of other challenges and uncertainty, I'm extremely pleased with the level of execution of our team as evidenced by our operational and financial results.
Through the first nine months of 2020.
Most of this fiscal year, we've been managing in a pandemic environment with countless changes to how all of us do business and severe economic shock to the global economy.
Despite that backdrop, we have delivered municipal water sales growth, strong EBITDA margin expansion, robust working capital management and cash flow and an increase in earnings per share.
It is a true testament to the criticality of the water industry and the exceptional Badger Meter team.
Now turning to the outlook.
Let me start at a granular level where I do want to highlight a few items in terms of near-term outlook.
First, the benefit of the backlog conversion into sales we saw in Q3.
On a year-to-date basis, it is neutral, created in Q2, recovered in Q3.
But as you analyze the municipal water growth rate in the quarter, order activity alone accounted for a solid mid-single-digit growth rate in sales.
The second as Bob noted, copper prices on average have trended up and with our normal leg, this will be a factor in Q4.
I remind you that, while still important, the impact of Brass on our cost structure has been moderating over time as we sell more software and radios versus primarily in meters.
Lastly, you may recall, we had a seasonally strong fourth quarter of municipal water sales a year ago, which creates a tougher comp for the balance of 2020.
Turning to the more important longer-term dynamics, it is clear that COVID-19 will have a profound impact on the global water sector and we will -- and we believe there will be a catalyst or increased adoption of smart water solutions.
Our customers have a need for holistic integrated solutions that operationalize real time data.
These digitally enabled solutions such as our smart meter AMI offering reduce overall cost and offer safer remote solutions.
These factors are in addition to the secular drivers that have already been evolving such as the need to reduce non-revenue water, drive conservation, address the aging workforce of utilities and connect with end consumers.
With our robust cash flow and ample liquidity, we are actively investing in, and developing products and solutions to address these challenges.
This includes both organic and acquisition driven growth geared toward augmenting our offerings and attractive adjacencies serving water-related markets and applications.
For example added sensors and instruments for complementary data elements, such as pressure and temperature, which are used to determine system health.
It also includes expanding functionality of our ion water software app [Phonetic] that helps drive consumer engagement.
We will continue to stay close to the rapidly changing implications of the pandemic on both near term operations and longer-term trends and are prepared to successfully manage all aspects within our control.
 Assistant:

Chosen response:
q3 earnings per share $0.51.
q3 sales $113.6 million versus refinitiv ibes estimate of $101.5 million.
believe long term opportunities for growth remain intact.


Prompt:
Human: Our earnings slides provide a reconciliation of the GAAP to non-GAAP financial metrics used.
Core means the designated financial metrics excluding the impact of the recent s::can and ATI acquisitions.
We believe this reference point is important for year-over-year comparability.
I'm not sure how often in the term supply chain challenges or inflation are going to be referenced during the quarterly earnings cycle over the next month, but I can only imagine it's going to be an all-time record.
While we clearly faced our fair share of those challenges, I want to focus my introductory comments and recognizing the tremendous execution of our Badger Meter teams globally, for their proactive and constructive dialog with customers to manage priorities, expectations and build trust, for their agility and effectively redesigning certain product components to provide greater flexibility on supply sources, for their unrelenting diligence and supplier and logistics management, and for their collaboration across functions to maximize our deliveries to customers.
These strategic and tactical actions by our world-class team allowed us to deliver record sales and earnings this quarter, while we added to our already record backlog.
Turning to Slide 4.
Our total sales for the third quarter were $128.7 million, an increase of 13.3% over the $113.6 million in the same period last year.
Total utility water product line sales increased 12.2%.
Excluding approximately $10 million of sales from the s::can and ATI acquisitions, core utility water revenues increased 1.7% year-over-year.
A great result considering both the difficult prior year comparison and current year supply chain challenges.
In addition to the difficult comparison, our manufacturing output in the current quarter continued to be limited by supplier shortages of certain electronics and other components along with logistics challenges.
We did experience growth in mechanical meter, cellular radio and BEACON software as a service levels, and we continue to realize the benefit from strategic value-based pricing actions.
Strong orders continued in the third quarter of 2021, and we exited the quarter with another record high backlog.
Our water quality solution sales were also impacted by supply chain challenges on a more modest basis, yet still delivered results in line with our expectations.
The flow instrumentation product line did not escape the impact of production limitations from component shortages, but delivered a strong 18.5% year-over-year increase in sales.
Improved demand trends across the majority of global end markets and applications as well as an easier comparison led to the increase year-over-year.
We are very pleased with the margin performance in the quarter, in light of widespread inflation, difficult comparisons and the dynamic supply chain impact on manufacturing operations.
Starting with gross margins, we increased gross profit dollars by $6.2 million and as a percent of sales, gross margins improved 20 basis points to 39.8% from 39.6%.
Margins benefited from favorable acquisition mix as well as the higher volumes and positive product sales mix, namely higher SaaS revenues, along with favorable value-based pricing realization.
These factors combined more than offset increasing cost headwinds across purchase components, including higher brass, resin and other materials, as well as freight and logistics.
As our margins demonstrate, we have executed well thus far and proactively implementing pricing mechanisms to offset existing cost increases, however, as been well publicized, the breadth and pace of inflationary pressures is increasing.
We will continue to actively monitor pricing in light of these circumstances, recognizing there'll be leading and lagging impacts in this dynamic environment.
SEA expenses in the third quarter were $31.7 million consistent with the first two quarters on a dollar basis, with sequentially improved leverage as a percent of sales to 24.7%.
SEA expenses increased $6.2 million year-over-year with the inclusion of the water quality acquisitions as well as more normalized pandemic impacted expenses such as travel.
As a result of the above, overall operating profit margin was 15.1% compared to a record 17.2% in the prior year quarter.
The income tax provision in the third quarter of 2021 was 18.3%, below the prior year's 23.9% and our normalized rate in the mid 20% range due to a discrete favorable income tax benefit related to equity compensation transactions.
In summary, earnings per share was $0.54 in the third quarter of 2021, an increase of 6% from the prior year's earnings per share of $0.51.
Working capital as a percent of sales was 25.6%, an increase of 140 basis points compared to the prior quarter-end.
The modest elevation in accounts receivable and inventory are temporary byproduct of the current supply chain environment.
For example, we are strategically maintaining higher levels of certain inventory components and work in process, capitalizing on spot availability and capacity.
In addition, certain customers are understandably deferring payment on partial shipments.
We believe these are transitory repercussions of the current environment.
Free cash flow of $13.9 million was lower than the prior year, the result of this higher working capital.
On a year-to-date basis, free cash flow conversion of net earnings is 125%.
Turning to Slide 5.
We've updated the quarterly sales comparison chart which highlights the key factors driving uneven year-over-year top line trends.
The growth rate we experienced this quarter excluding the acquisitions was the result of strong customer demand, which was muted by headwinds from the varied supply chain challenges and difficult prior year core utility water comparisons.
As we enter fourth quarter and look to 2022, our backlog is supportive of continued sales growth with the level of quarterly sales quite frankly dependent on the level of supply chain disruption.
While this could be the variability in the cadence of sales, it is important to recognize two things.
With regard to our execution.
One, our performance thus far is delivering total sales growth despite the significantly supply challenged environment.
And two, that our orders and awards are not being canceled or postponed, but simply shifting to the future.
We feel very good about our competitive position and the underlying drivers supporting our markets.
In summary, here on Slide 6, we believe that our strong order momentum and backlog confirms the underlying market demand for our solutions, which combine data, communications and analytics into tailorable solutions to enable customers to be more efficient, effective and sustainable throughout the water ecosystem.
The water quality acquisitions continue to perform well and the integration work that has been underway, including customer discussions, confirm the growing need and acceptance of online low maintenance and reagent free solutions for real-time water quality monitoring.
These distributed solutions will be a game changer for utilities, wastewater and industrial customers alike.
We remain optimistic about our future prospects as we continue to execute on our growth strategy, but in tandem we are acutely aware of the challenges presented by the current disruption to the supply chain and global shortage of electronics and other components, accelerating broad-based inflation as well as the potential for further impacts from the pandemic.
While these challenges are not unique to Badger Meter or even our industry, the ongoing headwinds have the ability to impact top line growth rates and exert increasing margin pressures.
The breadth of these challenges is greater than what we've experienced previously, but the playback -- playbook for addressing them is not new.
Finally, I want to mention our work with AT&T on the connected climate initiative they launched in August.
We are one of the several partners that AT&T highlighted for our efforts to reduce the impact of climate change via the the water and energy savings associated with our smart water offerings.
Using infrastructure free cellular technology in our ORION LTE-M radio, enables our AMi solutions to deliver more resilient, efficient and sustainable water solutions.
 Assistant:

Chosen response:
badger meter q3 earnings per share $0.54.
q3 earnings per share $0.54.
q3 sales $128.7 million versus refinitiv ibes estimate of $127 million.
anticipate component shortages and lengthened lead times will ease over time, but assume they will persist well into 2022.


Prompt:
Human: And while we believe our assumptions are reasonable, there are a variety of reasons actual results may differ materially from those projected.
I'm -- as is our custom, we will go through market conditions here in the islands.
If you look at the unemployment slide here, you see that the economy here in the islands is steadily improving, are really being driven by a nice improvement or regaining traction in the visitor industry, as well as improvement in what we call the local economy.
UHERO's economic pulse indicator, which is a high frequency aggregation of numerous data points, has basically the local economy now at 72% versus pre-pandemic levels.
A quarter ago, I think we reported 62% to you, so sized [Phonetic] improvement there.
And you see all of this relating into better unemployment rates.
Unemployment now is down to 7.7%, the fifth consecutive month of declines.
The real estate market here in the islands like many markets is very strong.
Oahu's single-family homes were up; in terms of sales, 49% June versus June a year ago.
Sales price -- median sales prices were up 27%, and inventories are very constrained.
So median days on market are down 60% from a year ago to eight days and months of inventory is down 52% from a year ago to 1.2 months of inventory.
The condominium sector here on Oahu, similar story, a little bit more muted though, but sales up 134% June on June.
Median sales price is up 9% and inventory conditions very similar to the single-family home market.
So a very strong real estate sector here on Oahu and generally, throughout the Hawaiian Islands.
The visitor industry, as I mentioned, is doing quite nicely.
So you see this chart here really since the relaunch of our -- or the launch of our Safe Travels program, visitor arrivals have increased substantively, basically now approaching pre-pandemic levels.
Airlift is a great story in June.
Actually, we had 1,027,000 seats into the islands, which is a 14.3% increase from June of 2019, and July and August forecasts are even more robust than that.
So the airlines are doing their jobs.
Arrivals are looking good.
The most recent data we have from the Hawaii Tourism Authority has arrivals at 74% of 2019 levels, so pre-pandemic levels.
Visitor days at 83%, pre-pandemic levels.
And expenditures at just under 80% of 2019 levels.
And we have reason to believe that the balance of the summer, June, July and August should eclipse those numbers as well.
Hotels are doing quite nicely.
As of June, we're back up to about 97% of our room stock back in service.
Occupancies are running at 77% statewide versus 84% pre-pandemic in 2019.
Average daily rates were very robust at $320 for June versus $280 for the same month in 2019.
So, if you can believe it, RevPAR, or revenue per available room, is actually higher as of June of this year than it was in June of 2019 at $246 per available room versus $235 per available room June of 2019.
So, very strong performance in the hotel sector.
And forward bookings, just talking to a number of professionals in the industry, seems to be very strong as things stand right now.
The COVID condition here in the islands is reasonably good.
Rolling seven day averages have us in the top half of the country.
Although we are concerned like most other marketplaces over the emergence of the Delta variant.
And vaccinations, for the most part, have gone well.
So, we're in the 36 percentile of the country and hopefully -- obviously like most marketplace, we would love to get that number higher.
So, that's a synopsis of the marketplace.
Growth from core customers remained solid in the second quarter.
Core loans net of PPP waivers increased by $113 million, or 1%, in the quarter and by $250 million year-over-year.
Waivers on PPP loans have accelerated and resulted in a net decline of $212 million in the quarter.
Our strong deposit growth continued, increasing $613 million, or 3.1%, linked quarter and $2.7 billion, or 16%, year-over-year.
With the loan to deposit ratio of 60%, our strong deposit base remains a stable source of liquidity.
Together with our healthy cash balance of $910 million at the end of the quarter, we maintain significant flexibility for further loan and investment growth, and we continue to deploy liquidity to support net interest income as well as mitigate the impact of near-term rate pressures.
Consistent with this strategy, we added $1 billion of liquid and safe investments to the portfolio, increasing total balances to $8.5 billion.
Net income for the second quarter was $67.5 million, or $1.68 per common share, up from $59.9 million in the first quarter and $38.9 million in the second quarter of 2020.
Net interest income in the second quarter was $123.5 million, up from $120.6 million in the first quarter and down from $126.7 million in the second quarter of 2020.
Included in the second and first quarters' net interest income were $3.8 million and $0.9 million, respectively, of accelerated loan fees from PPP loan waivers.
Included in the second quarter of 2020 net interest income was an interest recovery of $2.9 million.
Adjusting for PPP loan forgiveness, net interest income was slightly higher than the first quarter as the impact from lower interest rates was offset by the deployment of liquidity.
As Mary will discuss later.
we recorded a negative provision for credit losses of $16.1 million this quarter.
Noninterest income totaled $44.4 million in the second quarter, up from $43 million in the first quarter and down from $51.3 million in the second quarter of 2020.
Included in the second quarter were gains of $3.7 million from the sale of investment securities.
Included in the second quarter of 2020 was a gain of $14.2 million from the sale of our remaining Visa shares.
Adjusting for these changes, the decrease from the first quarter was due to lower mortgage banking income, primarily from the impact of rate volatility on MSR valuations.
In the second quarter, we recorded an MSR impairment of $1.1 million versus a recovery of $2.2 million in the first quarter.
Adjusting for the MSR valuations, mortgage banking income was up about $400,000 quarter-over-quarter.
Partially offsetting the MSR valuation impairment or higher service charges and other transaction fees, the increase from the second quarter of 2020 was mainly due to an increase of $5.4 million from fees on deposit accounts and other service charges due to the reopening of the economy.
We expect noninterest income will be approximately $42 million to $43 million per quarter for the remainder of the year from the increasing deposit fees, service charges and other transaction fees from the improving economy.
Noninterest expense in the second quarter totaled $96.5 million.
The second quarter's expenses included charges of $3.2 million related to the early termination of repurchase agreements and term debt and a $3.1 million benefit from the sale of property.
The termination of the repos and term debt allowed us to reduce our non-core funding, reposition some securities at a net gain and increase our net interest income.
With the improving economic provisioning and earnings outlook for 2021, accruals for corporate incentive compensation are back to pre-pandemic levels and were $3.2 million higher than the second quarter of 2020.
In the second quarter of 2021, we also experienced higher levels of variable expenses from rising production, as well as continuing investments in innovation initiatives.
The remaining core expenses were nearly flat with expenses from the second quarter of 2020 and overall expenses continued to be managed in a disciplined manner.
Excluding one-time items, our normalized full year noninterest expense projection, including restoration of corporate incentives, remains approximately $385 million, with the third and fourth quarter expenses being approximately the same as the second quarter at $96 million to $97 million.
The effective tax rate for the second quarter was 22.84%.
Currently, we expect the effective tax rate for 2021 will be approximately 24%, driven by higher pre-tax income.
Our return on assets during the first quarter was 1.23%.
The return on common equity was 19.6%.
And our efficiency ratio was 57.47%.
Our net interest margin in the second quarter was 2.37%, a decline of 6 basis points from the first quarter.
The decline in the margin in the second quarter reflects the ongoing impact from the strong deposit growth and lower rates, partially offset by deployment of liquidity.
We expect the margin will decline approximately 5 basis points to 6 basis points in the third quarter, primarily due to the continued deposit growth and the recent decrease in long-term rates, then stabilize in the fourth quarter.
Net interest income in the third quarter will be approximately flat to slightly higher than the second quarter.
The increase in NII is expected from continued balance sheet growth, deployment of excess liquidity and stable interest rates, but we remain asset sensitive and are well positioned for higher rates.
These estimates exclude the impact of PPP loan prepayments, which have been volatile and unpredictable.
We strengthened our capital levels through our very successful issuance of $180 million in preferred stock.
The addition of preferred capital together with our strong earnings increased our Tier 1 capital and leverage ratios to 13.9% and 7.31%, respectively, adding to our excess levels.
We are well positioned for continued growth over and above the strong deposit growth of $4.4 billion we've already absorbed into our balance sheet since the beginning of 2020.
During the second quarter, we paid out $27 million, or 40%, of net income in dividends.
Our strong capital levels and income generation will enable us to restart the share repurchase program this month, which has been suspended since the first quarter of 2020.
The remaining share buyback authority is $113 million.
And finally, consistent with our improving income levels, our Board declared a dividend of $0.70 per common share for the third quarter of 2021, an increase of $0.03 per share.
At the end of the quarter, customer loan balances on deferral were down 88% from their peak to 1.8% of total loans.
You'll recall, given we had the capacity to do so, we elected to partner with our customers through this unprecedented event and provided extended relief primarily through principal deferrals on low margin real estate.
Accordingly, 93% of loans remaining under deferral are secured, with our consumer residential deferrals having a weighted average loan-to-value of 68%, and our commercial deferrals having a weighted average loan-to-value of 46% with 97% continuing to pay interest.
Return to payment performance previously deferred loans has continued to be strong with less than 1% of these customers delinquent 30 days or more at the end of the quarter.
Credit metrics remained strong and stable in the quarter.
Net charge-offs were $1.2 million as compared with net charge-offs of $2.9 million in the first quarter and net charge-offs of $5.1 million in the second quarter of 2020.
Non-performing assets totaled $19 million, up $1.1 million for the linked period and down $3.7 million year-over-year.
Loans delinquent 30 days or more were $29.8 million or 25 basis points of total loans at quarter-end, down $10.1 million for the linked period and up $6.3 million from the second quarter of last year.
Criticized exposure continued to decrease during the quarter, dropping from 2.6% of loans to 2.17% of total loans.
As Dean noted, we recorded a negative provision for credit losses of $16.1 million.
This included a negative provision to the allowance for credit losses of $16.8 million, which with net charge-offs of $1.2 million reduced the allowance to $180.4 million, representing 1.5% of total loans and leases or 1.56% net of PPP balances.
The decrease in the allowance is reflective of the most recent UHERO economic outlook and forecast for our market, coupled with our credit risk profile.
The allowance does continue to consider and provide for the potential downside risk inherent with the pandemic.
The reserve for unfunded credit commitments was $4.5 million at the end of the quarter with a provision of $1.5 million made to fund the linked-period increase.
We are now happy to answer any questions you may have.
 Assistant:

Chosen response:
compname posts q2 earnings per share $1.68.
oration second quarter 2021 financial results.
q2 earnings per share $1.68.