For Immediate Release
Level One Bancorp, Inc. reports double digit loan and deposit growth year over year, coupled with a 21% reduction in nonaccrual loans in 2019
Farmington Hills, MI – July 30, 2019 – Level One Bancorp, Inc. (“Level One”) (Nasdaq: LEVL) today reported financial results for the second quarter of 2019, which included net income of $3.6 million, or $0.45 per diluted share. This compares to net income of $3.5 million, or $0.44 per diluted share, in the preceding quarter and $4.0 million, or $0.53 per diluted share, in the second quarter of 2018.
Patrick J. Fehring, President and Chief Executive Officer of Level One, commented "We are pleased to announce a solid second quarter with earnings of $3.6 million, or fully diluted earnings per share of $0.45. Our earnings were driven by quarter over quarter increases of 3.9% in loans and 6.8% in deposits, and year over year increases of 11.5% in loans and 15.4% in deposits. In addition, our noninterest income increased by $2.0 million, or 139%, from the second quarter of 2018, primarily due to the doubling of our mortgage originators in the third quarter of 2018. Finally, our asset quality improved as nonaccrual loans declined by $2.1 million during the quarter."
He added, "Offsetting these improvements, there was a $310 thousand increase in the provision for unfunded commitments (rolling up to other noninterest expense) due to a change in assumptions within the calculation. We continue to focus on our strategic priorities to ensure a strong organization for our shareholders, team members, and clients."
Second Quarter 2019 Financial Highlights
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| • | Net income was $3.6 million, or $0.45 per diluted share, for the second quarter of 2019 |
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| • | Net interest margin, on a fully taxable equivalent ("FTE") basis, was 3.50%, compared to 3.76% in the preceding quarter and 3.99% in the second quarter of 2018 |
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| • | Noninterest income increased 139.46% to $3.5 million in the second quarter of 2019, compared to $1.5 million in the second quarter of 2018, primarily due to higher mortgage banking activities income |
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| • | Total assets increased 13.79% to $1.51 billion at June 30, 2019, compared to $1.32 billion at June 30, 2018 |
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| • | Total loans increased 11.54% to $1.17 billion at June 30, 2019, compared to $1.05 billion at June 30, 2018 |
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| • | Total deposits increased 15.42% to $1.23 billion at June 30, 2019, compared to $1.07 billion at June 30, 2018 |
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| • | Book value per share increased 13.83% to $21.07 per share at June 30, 2019, compared to $18.51 per share at June 30, 2018 |
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| • | Tangible book value per share increased 14.97% to $19.81 per share at June 30, 2019, compared to $17.23 per share at June 30, 2018 |
Balance Sheet Review
Level One's total assets were $1.51 billion at June 30, 2019, an increase of $89.2 million, or 6.30%, from $1.42 billion at December 31, 2018, and up $182.5 million, or 13.79%, from $1.32 billion at June 30, 2018. The increase in total assets from December 31, 2018 was primarily due to an increase in originated loans, mortgage loans held for sale, securities available for sale, and cash and cash equivalents.
The investment securities portfolio was $218.1 million at June 30, 2019, an increase of $13.8 million, or 6.80%, from $204.3 million at December 31, 2018, and up $22.1 million, or 11.27%, from $196.0 million at June 30, 2018. The increase in the investment securities portfolio year to date and during the twelve months ended June 30, 2019 reflects our plan to increase the investment securities portfolio in line with total assets.
Total loans were $1.17 billion at June 30, 2019, an increase of $39.9 million, or 3.54%, from $1.13 billion at December 31, 2018, and up $120.7 million, or 11.54%, from $1.05 billion at June 30, 2018. The growth in total loans compared to December 31, 2018 and June 30, 2018 was primarily due to growth in our commercial loan portfolio and residential real estate loan portfolio.
Total deposits were $1.23 billion at June 30, 2019, an increase of $94.8 million, or 8.36%, from $1.13 billion at December 31, 2018, and up $164.2 million, or 15.42%, from $1.07 billion at June 30, 2018. The increase in deposits compared to December 31, 2018 and June 30, 2018 was primarily due to growth in our money market, savings and time deposits. Total deposit composition at June 30, 2019 consisted of 29.96% of demand deposit accounts, 25.66% of savings and money market accounts and 44.38% of time deposits.
Operating Results
Level One's net interest income decreased $277 thousand, or 2.18%, to $12.4 million in the second quarter of 2019, compared to $12.7 million in the preceding quarter, primarily as a result of higher costs of funds, partially offset by interest income on the higher balances of originated loans. Net interest income remained relatively flat as compared to the second quarter of 2018.
Level One’s net interest margin, on a FTE basis, was 3.50% in the second quarter of 2019, compared to 3.76% in the preceding quarter and 3.99% in the second quarter of 2018. This decrease in the net interest margin compared to the preceding quarter was primarily as a result of higher cost of funds and lower average loan yield quarter over quarter. The decrease in net interest margin year over year was primarily due to higher cost of funds as the federal funds rate rose 50 basis points.
Level One's noninterest income increased $1.2 million, or 52.10%, to $3.5 million in the second quarter of 2019, compared to $2.3 million in the preceding quarter, and increased $2.0 million, or 139.46%, compared to $1.5 million in the second quarter of 2018. The increase in noninterest income compared to the preceding quarter was primarily due to an increase in mortgage banking activity income as a result of increased volume of mortgage loans sold as well as an increase in volume of loans held for sale. The increase in noninterest income year over year was attributable to the same factors mentioned in the quarter to quarter analysis above, as well as an increase in the volume of our mortgage banking derivatives which is included in mortgage banking activities income. The increase in the mortgage banking activities income year over year was predominantly as a result of the doubling of our mortgage team in third quarter 2018.
Level One's noninterest expense increased $799 thousand, or 7.71%, to $11.2 million in the second quarter of 2019, compared to $10.4 million in the preceding quarter, and increased $1.5 million, or 15.06%, compared to $9.7 million in the second quarter of 2018. The increase in noninterest expenses quarter over quarter as well as year over year was primarily a result of increased salary and employee benefits due to the overall growth in team member headcount and a $310 thousand increase in the provision for unfunded commitment due to a change in the assumptions within the calculation, which resulted in a better representation of our line of credit utilization. The efficiency ratio, which is a measure of operating expenses as a percentage of net interest income and noninterest income, for the second quarter of 2019 was 70.15%, compared to 69.10% for the preceding quarter and 69.99% in the second quarter of 2018.
Level One's income tax provision was $767 thousand, or 17.75% of pretax income, in the second quarter of 2019, as compared to $747 thousand, or 17.73% of pretax income, in the preceding quarter and $860 thousand, or 17.65% of pretax income, in the second quarter of 2018.
Asset Quality
Nonaccrual loans were $14.5 million, or 1.25% of total loans, at June 30, 2019, a decrease of $3.9 million from nonaccrual loans of $18.4 million, or 1.64% of total loans, at December 31, 2018, and an increase of $3.2 million from nonaccrual loans of $11.3 million, or 1.08% of total loans, at June 30, 2018. The decrease in nonaccrual loans compared to December 31, 2018 is primarily due to the pay-off of a large loan relationship on nonaccrual status during the first quarter 2019. The increase in nonaccrual loans compared to second quarter 2018 was primarily due to four commercial loan relationships totaling $9.0 million moving to nonaccrual status, partially offset by pay-offs of three commercial loan relationships totaling $5.7 million.
Level One had $373 thousand of other real estate owned assets at June 30, 2019, compared to no other real estate owned assets at December 31, 2018 and June 30, 2018. Nonperforming assets, consisting of nonaccrual loans and other real estate owned, as a percentage of total assets were 0.99% at June 30, 2019, compared to 1.30% at December 31, 2018, and 0.85% at June 30, 2018.
In addition, we had $331 thousand of loans 90 days or more past due and still accruing at June 30, 2019, compared to $243 thousand at December 31, 2018 and $259 thousand at June 30, 2018, all of which consisted of purchase credit impaired loans.
Performing troubled debt restructured loans that were not included in nonaccrual loans at June 30, 2019 were $921 thousand, compared to $931 thousand at December 31, 2018 and $2.5 million at June 30, 2018. The decrease in performing trouble debt restructurings year over year was due to one commercial loan relationship totaling $1.5 million moving to nonaccrual. Borrowers who are in financial difficulty and who have been granted concessions that may include interest rate reductions, forbearance agreements, and principal deferral or reduction, are categorized as troubled debt restructured loans.
Net chargeoffs in the second quarter of 2019 were $36 thousand, or 0.01% of average loans on an annualized basis, compared to $28 thousand of net chargeoffs, or 0.01% of average loans on an annualized basis, for the preceding quarter and $669 thousand of net recoveries, or 0.26% of average loans on an annualized basis, for the quarter ended June 30, 2018.
Level One's second quarter of 2019 provision for loan losses was a provision expense of $429 thousand, compared to a provision expense of $422 thousand in the preceding quarter and a provision benefit of $710 thousand in the second quarter of 2018. The increase in the provision expense year over year was primarily due to a $700 thousand recovery in the second quarter of 2018. The allowance for loan losses was $12.4 million, or 1.06% of total loans, at June 30, 2019, compared to $11.6 million, or 1.03% of total loans, at December 31, 2018, and $11.5 million, or 1.10% of total loans, at June 30, 2018. As of June 30, 2019, the allowance for loan losses as a percentage of nonaccrual loans was 84.94%, compared to 62.70% at December 31, 2018, and 101.67% at June 30, 2018.
Capital
Total shareholders’ equity was $162.9 million at June 30, 2019, an increase of $11.1 million, or 7.32%, compared with $151.8 million at December 31, 2018, primarily as a result of increased retained earnings and accumulated other comprehensive income. Total shareholders' equity increased $19.4 million, or 13.54%, from $143.4 million at June 30, 2018 as a result of the same factors previously mentioned.
Recent Developments
Second Quarter Dividend: On June 20, 2019, Level One’s Board of Directors declared a quarterly cash dividend of $0.04 per share. This dividend was paid out on July 15, 2019, to stockholders of record at the close of business on June 30, 2019.
About Level One Bancorp, Inc.
Level One Bancorp, Inc. is the holding company for Level One Bank, a full-service commercial and consumer bank headquartered in Michigan with assets of approximately $1.51 billion as of June 30, 2019. It operates twelve banking centers throughout southeast Michigan and west Michigan. Level One Bank's success has been recognized both locally and nationally as the U.S. Small Business Administration's (SBA) "Community Lender of the Year" and "Export Finance Lender of the Year" and one of S&P Global's Top 10 "Best-Performing Community Banks" in the nation. Level One's commercial division provides a menu of products including lines of credit, term loans, leases, commercial mortgages, SBA loans, export-import financing, and a full suite of treasury management and private banking services. The consumer division offers personal savings and checking accounts and a complete array of consumer loan products including residential mortgages, home equity loans, auto loans, and credit card services. Level One Bank offers a variety of online banking services and a robust mobile banking application for individuals and businesses. Level One Bank offers the sophistication of a big bank, the heart of a community bank, and the spirit of an entrepreneur. For more information, visit www.levelonebank.com.
Forward-Looking Statements
This release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect management’s current views of future events and operations. These forward-looking statements are based on the information currently available to the Company as of the date of this release. It is important to note that these forward-looking statements are not guarantees of future performance and involve risk and uncertainties, including, but not limited to, the ability of the Company to implement its strategy and expand its lending operations, changes in interest rates and other general economic, business and political conditions, including changes in the financial markets, as well as other risks described in the Company's filings with the Securities and Exchange Commission. The Company does not undertake any obligation to update or revise any forward-looking statements to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.
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| Media Contact: | Investor Relations Contact: |
| Nicole Ransom | Peter Root |
| (248) 538-2183 | (248) 538-2186 |
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| Summary Consolidated Financial Information |
| (Unaudited) | As of or for the three months ended |
| (Dollars in thousands, except per share data) | June 30, 2019 | | March 31, 2019 | | December 31, 2018 | | September 30, 2018 | | June 30, 2018 |
| Earnings Summary | | | | | | | | | |
| Interest income | $ | 17,657 |
| | $ | 17,442 |
| | $ | 17,041 |
| | $ | 16,629 |
| | $ | 15,380 |
|
| Interest expense | 5,216 |
| | 4,724 |
| | 4,228 |
| | 3,560 |
| | 2,965 |
|
| Net interest income | 12,441 |
| | 12,718 |
| | 12,813 |
| | 13,069 |
| | 12,415 |
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| Provision (benefit) for loan losses | 429 |
| | 422 |
| | (51 | ) | | 619 |
| | (710 | ) |
| Noninterest income | 3,477 |
| | 2,286 |
| | 2,307 |
| | 1,924 |
| | 1,452 |
|
| Noninterest expense | 11,167 |
| | 10,368 |
| | 10,384 |
| | 10,454 |
| | 9,705 |
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| Income before income taxes | 4,322 |
| | 4,214 |
| | 4,787 |
| | 3,920 |
| | 4,872 |
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| Income tax provision | 767 |
| | 747 |
| | 836 |
| | 665 |
| | 860 |
|
| Net income | $ | 3,555 |
| | $ | 3,467 |
| | $ | 3,951 |
| | $ | 3,255 |
| | $ | 4,012 |
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| Per Share Data | | | | | | | | | |
| Basic earnings per common share | $ | 0.46 |
| | $ | 0.45 |
| | $ | 0.51 |
| | $ | 0.42 |
| | $ | 0.54 |
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| Diluted earnings per common share | 0.45 |
| | 0.44 |
| | 0.50 |
| | 0.41 |
| | 0.53 |
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| Book value per common share | 21.07 |
| | 20.15 |
| | 19.58 |
| | 18.77 |
| | 18.51 |
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Tangible book value per share (1) | 19.81 |
| | 18.88 |
| | 18.31 |
| | 17.50 |
| | 17.23 |
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| Shares outstanding (in thousands) | 7,728 |
| | 7,749 |
| | 7,750 |
| | 7,749 |
| | 7,749 |
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| Average basic common shares (in thousands) | 7,741 |
| | 7,752 |
| | 7,750 |
| | 7,749 |
| | 7,456 |
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| Average diluted common shares (in thousands) | 7,856 |
| | 7,869 |
| | 7,893 |
| | 7,901 |
| | 7,613 |
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| Selected Period End Balances | | | | | | | | | |
| Total assets | $ | 1,505,376 |
| | $ | 1,456,552 |
| | $ | 1,416,215 |
| | $ | 1,446,269 |
| | $ | 1,322,913 |
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| Securities available-for-sale | 218,145 |
| | 226,874 |
| | 204,258 |
| | 199,051 |
| | 196,047 |
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| Total loans | 1,166,501 |
| | 1,131,097 |
| | 1,126,565 |
| | 1,114,999 |
| | 1,045,789 |
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| Total deposits | 1,229,445 |
| | 1,151,463 |
| | 1,134,635 |
| | 1,130,311 |
| | 1,065,216 |
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| Total liabilities | 1,342,509 |
| | 1,300,433 |
| | 1,264,455 |
| | 1,300,810 |
| | 1,179,468 |
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| Total shareholders' equity | 162,867 |
| | 156,119 |
| | 151,760 |
| | 145,459 |
| | 143,445 |
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Tangible shareholders' equity (1) | 153,121 |
| | 146,337 |
| | 141,926 |
| | 135,570 |
| | 133,501 |
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| Performance and Capital Ratios | | | | | | | | | |
| Return on average assets (annualized) | 0.95 | % | | 0.96 | % | | 1.11 | % | | 0.95 | % | | 1.23 | % |
| Return on average equity (annualized) | 8.92 |
| | 8.99 |
| | 10.69 |
| | 8.95 |
| | 11.97 |
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Net interest margin (fully taxable equivalent)(2) | 3.50 |
| | 3.76 |
| | 3.73 |
| | 3.97 |
| | 3.99 |
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| Efficiency ratio (noninterest expense/net interest income plus noninterest income) | 70.15 |
| | 69.10 |
| | 68.68 |
| | 69.73 |
| | 69.99 |
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| Dividend payout ratio | 8.69 |
| | 6.72 |
| | 5.87 |
| | 7.13 |
| | 5.78 |
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| Total shareholders' equity to total assets | 10.82 |
| | 10.72 |
| | 10.72 |
| | 10.06 |
| | 10.84 |
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Tangible equity to tangible assets (1) | 10.24 |
| | 10.11 |
| | 10.09 |
| | 9.44 |
| | 10.17 |
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| Common equity tier 1 to risk-weighted assets | 11.64 |
| | 11.78 |
| | 11.82 |
| | 11.75 |
| | 12.11 |
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| Tier 1 capital to risk-weighted assets | 11.64 |
| | 11.78 |
| | 11.82 |
| | 11.75 |
| | 12.11 |
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| Total capital to risk-weighted assets | 13.79 |
| | 13.95 |
| | 14.00 |
| | 13.99 |
| | 14.44 |
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| Tier 1 capital to average assets (leverage ratio) | 10.01 |
| | 10.19 |
| | 10.21 |
| | 10.31 |
| | 10.60 |
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| Asset Quality Ratios: | | | | | | | | | |
| Net charge-offs (recoveries) to average loans | 0.01 | % | | 0.01 | % | | 0.10 | % | | 0.07 | % | | (0.26 | )% |
| Nonperforming assets as a percentage of total assets | 0.99 |
| | 1.17 |
| | 1.30 |
| | 0.89 |
| | 0.85 |
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| Nonaccrual loans as a percent of total loans | 1.25 |
| | 1.47 |
| | 1.64 |
| | 1.15 |
| | 1.08 |
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| Allowance for loan losses as a percentage of period-end loans | 1.06 |
| | 1.06 |
| | 1.03 |
| | 1.07 |
| | 1.10 |
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| Allowance for loan losses as a percentage of nonaccrual loans | 84.94 |
| | 71.85 |
| | 62.70 |
| | 92.36 |
| | 101.67 |
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| Allowance for loan losses as a percentage of nonaccrual loans, excluding allowance allocated to loans accounted for under ASC 310-30 | 79.41 |
| | 66.33 |
| | 57.71 |
| | 84.72 |
| | 92.93 |
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(1) See section entitled "GAAP Reconciliation of Non-GAAP Financial Measures" below.
(2) Presented on a tax equivalent basis using a 21% tax rate.
GAAP Reconciliation of Non-GAAP Financial Measures
Some of the financial measures included in this earnings release are not measures of financial performance recognized by GAAP. These non-GAAP financial measures include tangible shareholders' equity, tangible book value per share, and the ratio of tangible shareholders' equity to tangible assets. Our management uses these non-GAAP financial measures in its analysis of our performance, and we believe financial analysts and others frequently use these measures, and other similar measures, to evaluate capital adequacy. We calculate: (i) tangible shareholders' equity as total shareholders' equity less core deposit intangibles and goodwill; (ii) tangible book value per share as tangible shareholders' equity divided by shares of common stock outstanding; and (iii) tangible assets as total assets, less core deposit intangibles and goodwill.
The following presents these non-GAAP financial measures along with their most directly comparable financial measure calculated in accordance with GAAP:
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| | As of |
| (Dollars in thousands, except per share data) | June 30, 2019 | | March 31, 2019 | | December 31, 2018 | | September 30, 2018 | | June 30,
2018 |
| | (Unaudited) | | (Unaudited) | | | | (Unaudited) | | (Unaudited) |
| Total shareholders' equity | $ | 162,867 |
| | $ | 156,119 |
| | $ | 151,760 |
| | $ | 145,459 |
| | $ | 143,445 |
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| Less: | | | | | | | | | |
| Goodwill | 9,387 |
| | 9,387 |
| | 9,387 |
| | 9,387 |
| | 9,387 |
|
| Core deposit intangibles | 359 |
| | 395 |
| | 447 |
| | 502 |
| | 557 |
|
| Tangible shareholders' equity | $ | 153,121 |
| | $ | 146,337 |
| | $ | 141,926 |
| | $ | 135,570 |
| | $ | 133,501 |
|
| | | | | | | | | | |
| Shares outstanding (in thousands) | 7,728 |
| | 7,749 |
| | 7,750 |
| | 7,749 |
| | 7,749 |
|
| Tangible book value per share | $ | 19.81 |
| | $ | 18.88 |
| | $ | 18.31 |
| | $ | 17.50 |
| | $ | 17.23 |
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| | | | | | | | | | |
| Total assets | $ | 1,505,376 |
| | $ | 1,456,552 |
| | $ | 1,416,215 |
| | $ | 1,446,269 |
| | $ | 1,322,913 |
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| Less: | | | | | | | | | |
| Goodwill | 9,387 |
| | 9,387 |
| | 9,387 |
| | 9,387 |
| | 9,387 |
|
| Core deposit intangibles | 359 |
| | 395 |
| | 447 |
| | 502 |
| | 557 |
|
| Tangible assets | $ | 1,495,630 |
| | $ | 1,446,770 |
| | $ | 1,406,381 |
| | $ | 1,436,380 |
| | $ | 1,312,969 |
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| | | | | | | | | | |
| Tangible equity to tangible assets | 10.24 | % | | 10.11 | % | | 10.09 | % | | 9.44 | % | | 10.17 | % |
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| Consolidated Balance Sheets | | | | | |
| | As of |
| | June 30, | | December 31, | | June 30, |
| (Dollars in thousands) | 2019 | | 2018 | | 2018 |
| Assets | (Unaudited) | | | | (Unaudited) |
| Cash and cash equivalents | $ | 50,120 |
| | $ | 33,296 |
| | $ | 34,767 |
|
| Securities available-for-sale | 218,145 |
| | 204,258 |
| | 196,047 |
|
| Federal Home Loan Bank stock | 8,325 |
| | 8,325 |
| | 8,303 |
|
| Mortgage loans held for sale, at fair value | 22,822 |
| | 5,595 |
| | 3,991 |
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| Loans: | | | | | |
| Originated loans | 1,088,395 |
| | 1,041,898 |
| | 946,724 |
|
| Acquired loans | 78,106 |
| | 84,667 |
| | 99,065 |
|
| Total loans | 1,166,501 |
| | 1,126,565 |
| | 1,045,789 |
|
| Less: Allowance for loan losses | (12,353) |
| | (11,566) |
| | (11,465) |
|
| Net loans | 1,154,148 |
| | 1,114,999 |
| | 1,034,324 |
|
| Premises and equipment, net | 13,188 |
| | 13,242 |
| | 13,144 |
|
| Goodwill | 9,387 |
| | 9,387 |
| | 9,387 |
|
| Other intangible assets, net | 359 |
| | 447 |
| | 557 |
|
| Bank-owned life insurance | 11,992 |
| | 11,866 |
| | 11,703 |
|
| Income tax benefit | 791 |
| | 2,467 |
| | 2,510 |
|
| Other assets | 16,099 |
| | 12,333 |
| | 8,180 |
|
| Total assets | $ | 1,505,376 |
| | $ | 1,416,215 |
| | $ | 1,322,913 |
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| Liabilities | |
| | | | |
| Deposits: | |
| | | | |
| Noninterest-bearing demand deposits | $ | 317,747 |
| | $ | 309,384 |
| | $ | 320,213 |
|
| Interest-bearing demand deposits | 50,605 |
| | 52,804 |
| | 57,060 |
|
| Money market and savings deposits | 315,477 |
| | 287,575 |
| | 247,542 |
|
| Time deposits | 545,616 |
| | 484,872 |
| | 440,401 |
|
| Total deposits | 1,229,445 |
| | 1,134,635 |
| | 1,065,216 |
|
| Borrowings | 76,934 |
| | 99,574 |
| | 86,594 |
|
| Subordinated notes | 14,920 |
| | 14,891 |
| | 14,867 |
|
| Other liabilities | 21,210 |
| | 15,355 |
| | 12,791 |
|
| Total liabilities | 1,342,509 |
| | 1,264,455 |
| | 1,179,468 |
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| Shareholders' equity | |
| | | | |
| Common stock, no par value per share: | |
| | | | |
| Authorized - 20,000,000 shares | |
| | | | |
| Issued and outstanding - 7,728,280 shares at June 30, 2019, 7,750,216 shares at December 31, 2018, and 7,748,641 shares at June 30, 2018 | 89,442 |
| | 90,621 |
| | 90,201 |
|
| Retained earnings | 69,295 |
| | 62,891 |
| | 56,383 |
|
| Accumulated other comprehensive income (loss), net of tax | 4,130 |
| | (1,752) |
| | (3,139) |
|
| Total shareholders' equity | 162,867 |
| | 151,760 |
| | 143,445 |
|
| Total liabilities and shareholders' equity | $ | 1,505,376 |
| | $ | 1,416,215 |
| | $ | 1,322,913 |
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| Consolidated Statements of Income | | | | | | | | | |
| (Unaudited) | Three months ended | | Six months ended |
| | June 30, | | March 31, | | June 30, | | June 30, | | June 30, |
| (In thousands, except per share data) | 2019 | | 2019 | | 2018 | | 2019 | | 2018 |
| Interest income | | | | | | | | | |
| Originated loans, including fees | $ | 14,125 |
| | $ | 13,894 |
| | $ | 11,833 |
| | $ | 28,019 |
| | $ | 23,011 |
|
| Acquired loans, including fees | 1,637 |
| | 1,757 |
| | 2,293 |
| | 3,394 |
| | 4,719 |
|
| Securities: | | | | | | | | | |
| Taxable | 980 |
| | 936 |
| | 667 |
| | 1,916 |
| | 1,241 |
|
| Tax-exempt | 595 |
| | 545 |
| | 380 |
| | 1,140 |
| | 731 |
|
| Federal funds sold and other | 320 |
| | 310 |
| | 207 |
| | 630 |
| | 452 |
|
| Total interest income | 17,657 |
| | 17,442 |
| | 15,380 |
| | 35,099 |
| | 30,154 |
|
| Interest Expense | |
| | | | | | | | |
| Deposits | 4,617 |
| | 4,121 |
| | 2,487 |
| | 8,738 |
| | 4,665 |
|
| Borrowed funds | 346 |
| | 353 |
| | 225 |
| | 699 |
| | 444 |
|
| Subordinated notes | 253 |
| | 250 |
| | 253 |
| | 503 |
| | 503 |
|
| Total interest expense | 5,216 |
| | 4,724 |
| | 2,965 |
| | 9,940 |
| | 5,612 |
|
| Net interest income | 12,441 |
| | 12,718 |
| | 12,415 |
| | 25,159 |
| | 24,542 |
|
| Provision expense (benefit) for loan losses | 429 |
| | 422 |
| | (710 | ) | | 851 |
| | (156 | ) |
| Net interest income after provision for loan losses | 12,012 |
| | 12,296 |
| | 13,125 |
| | 24,308 |
| | 24,698 |
|
| Noninterest income | |
| | | | | | | | |
| Service charges on deposits | 662 |
| | 625 |
| | 618 |
| | 1,287 |
| | 1,260 |
|
| Net gain (loss) on sales of securities | 7 |
| | (7 | ) | | — |
| | — |
| | — |
|
| Mortgage banking activities | 2,316 |
| | 1,120 |
| | 404 |
| | 3,436 |
| | 640 |
|
| Net gain on sale of commercial loans | — |
| | — |
| | 11 |
| | — |
| | 11 |
|
| Other charges and fees | 492 |
| | 548 |
| | 419 |
| | 1,040 |
| | 913 |
|
| Total noninterest income | 3,477 |
| | 2,286 |
| | 1,452 |
| | 5,763 |
| | 2,824 |
|
| Noninterest expense | |
| | | | | | | | |
| Salary and employee benefits | 7,193 |
| | 6,913 |
| | 6,169 |
| | 14,106 |
| | 12,125 |
|
| Occupancy and equipment expense | 1,168 |
| | 1,204 |
| | 1,074 |
| | 2,372 |
| | 2,120 |
|
| Professional service fees | 385 |
| | 362 |
| | 471 |
| | 747 |
| | 737 |
|
| Marketing expense | 288 |
| | 176 |
| | 291 |
| | 464 |
| | 433 |
|
| Printing and supplies expense | 104 |
| | 68 |
| | 112 |
| | 172 |
| | 216 |
|
| Data processing expense | 606 |
| | 595 |
| | 511 |
| | 1201 |
| | 947 |
|
| Other expense | 1,423 |
| | 1,050 |
| | 1,077 |
| | 2,473 |
| | 2,262 |
|
| Total noninterest expense | 11,167 |
| | 10,368 |
| | 9,705 |
| | 21,535 |
| | 18,840 |
|
| Income before income taxes | 4,322 |
| | 4,214 |
| | 4,872 |
| | 8,536 |
| | 8,682 |
|
| Income tax provision | 767 |
| | 747 |
| | 860 |
| | 1,514 |
| | 1,502 |
|
| Net income | $ | 3,555 |
| | $ | 3,467 |
| | $ | 4,012 |
| | $ | 7,022 |
| | $ | 7,180 |
|
| Earnings per common share: | |
| | | | | | | | |
| Basic earnings per common share | $ | 0.46 |
| | $ | 0.45 |
| | $ | 0.54 |
| | $ | 0.91 |
| | $ | 1.02 |
|
| Diluted earnings per common share | $ | 0.45 |
| | $ | 0.44 |
| | $ | 0.53 |
| | $ | 0.89 |
| | $ | 1.00 |
|
| Cash dividends declared per common share | $ | 0.04 |
| | $ | 0.04 |
| | $ | 0.03 |
| | $ | 0.08 |
| | $ | 0.06 |
|
| Weighted average common shares outstanding—basic | 7,741 |
| | 7,752 |
| | 7,456 |
| | 7,746 |
| | 7,050 |
|
| Weighted average common shares outstanding—diluted | 7,856 |
| | 7,869 |
| | 7,613 |
| | 7,862 |
| | 7,211 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Interest Income and Net Interest Margin | | | | | | | | | |
| (Unaudited) | For the three months ended |
| | June 30, 2019 | | March 31, 2019 | | June 30, 2018 |
| (Dollars in thousands) | Average Balance | Interest (1) | Average Rate (2) | | Average Balance | Interest (1) | Average Rate (2) | | Average Balance | Interest (1) | Average Rate (2) |
| Interest-earning assets: | | | | | | | | | | | |
Gross loans (3) | $ | 1,164,871 |
| $ | 15,762 |
| 5.43 | % | | $ | 1,125,213 |
| $ | 15,651 |
| 5.64 | % | | $ | 1,045,715 |
| $ | 14,126 |
| 5.42 | % |
Investment securities (4): | | | | | | | | | | | |
| Taxable | 143,841 |
| 980 |
| 2.73 |
| | 141,282 |
| 936 |
| 2.69 |
| | 114,957 |
| 667 |
| 2.33 |
|
| Tax-exempt | 87,287 |
| 595 |
| 3.26 |
| | 80,760 |
| 545 |
| 3.17 |
| | 58,976 |
| 380 |
| 3.10 |
|
| Interest earning cash balances | 32,606 |
| 206 |
| 2.53 |
| | 28,076 |
| 176 |
| 2.54 |
| | 25,828 |
| 119 |
| 1.85 |
|
| Federal Home Loan Bank Stock | 8,325 |
| 114 |
| 5.49 |
| | 8,325 |
| 134 |
| 6.53 |
| | 8,303 |
| 88 |
| 4.25 |
|
| Total interest-earning assets | $ | 1,436,930 |
| $ | 17,657 |
| 4.96 | % | | $ | 1,383,656 |
| $ | 17,442 |
| 5.14 | % | | $ | 1,253,779 |
| $ | 15,380 |
| 4.94 | % |
| Non-earning assets: | | | | | | | | | | | |
| Cash and due from banks | 24,347 |
| | | | 24,794 |
| | | | 17,800 |
| | |
| Premises and equipment | 13,239 |
| | | | 13,289 |
| | | | 12,621 |
| | |
| Goodwill | 9,387 |
| | | | 9,387 |
| | | | 9,387 |
| | |
| Other intangible assets, net | 376 |
| | | | 425 |
| | | | 589 |
| | |
| Bank-owned life insurance | 11,948 |
| | | | 11,893 |
| | | | 11,650 |
| | |
| Allowance for loan losses | (12,039 | ) | | | | (11,563 | ) | | | | (11,473 | ) | | |
| Other non-earning assets | 16,804 |
| | | | 11,841 |
| | | | 7,839 |
| | |
| Total assets | $ | 1,500,992 |
| | | | $ | 1,443,722 |
| | | | $ | 1,302,192 |
| | |
| Interest-bearing liabilities: | | | | | | | | | | | |
| Interest-bearing demand deposits | $ | 56,434 |
| $ | 69 |
| 0.49 | % | | $ | 53,299 |
| $ | 48 |
| 0.37 | % | | $ | 64,394 |
| $ | 48 |
| 0.30 | % |
| Money market and savings deposits | 295,371 |
| 1,125 |
| 1.53 |
| | 306,496 |
| 1,094 |
| 1.45 |
| | 276,496 |
| 678 |
| 0.98 |
|
| Time deposits | 582,874 |
| 3,423 |
| 2.36 |
| | 544,130 |
| 2,979 |
| 2.22 |
| | 445,894 |
| 1,761 |
| 1.58 |
|
| Borrowings | 59,272 |
| 346 |
| 2.33 |
| | 55,814 |
| 353 |
| 2.57 |
| | 48,604 |
| 225 |
| 1.86 |
|
| Subordinated notes | 14,910 |
| 253 |
| 6.78 |
| | 14,896 |
| 250 |
| 6.81 |
| | 14,859 |
| 253 |
| 6.83 |
|
| Total interest-bearing liabilities | $ | 1,008,861 |
| $ | 5,216 |
| 2.07 | % | | $ | 974,635 |
| $ | 4,724 |
| 1.97 | % | | $ | 850,247 |
| $ | 2,965 |
| 1.40 | % |
| Noninterest-bearing liabilities and shareholders' equity: | | | | | | | | | | | |
| Noninterest bearing demand deposits | 315,530 |
| | | | 300,680 |
| | | | 306,547 |
| | |
| Other liabilities | 17,144 |
| | | | 14,136 |
| | | | 10,923 |
| | |
| Shareholders' equity | 159,457 |
| | | | 154,271 |
| | | | 134,475 |
| | |
| Total liabilities and shareholders' equity | $ | 1,500,992 |
| | | | $ | 1,443,722 |
| | | | $ | 1,302,192 |
| | |
| Net interest income | | $ | 12,441 |
| | | | $ | 12,718 |
| | | | $ | 12,415 |
| |
| Interest spread | | | 2.89 | % | | | | 3.17 | % | | | | 3.54 | % |
Net interest margin (5) | | | 3.47 |
| | | | 3.73 |
| | | | 3.97 |
|
| Tax equivalent effect | | | 0.03 |
| | | | 0.03 |
| | | | 0.02 |
|
| Net interest margin on a fully tax equivalent basis | | | 3.50 | % | | | | 3.76 | % | | | | 3.99 | % |
(1) Interest income is shown on actual basis and does not include taxable equivalent adjustments.
(2) Average rates and yields are presented on an annual basis and includes a taxable equivalent adjustment to interest income of $115 thousand, $83 thousand, and $76 thousand on tax-exempt securities for the three months ended June 30, 2019, March 31, 2019, and June 30, 2018, respectively, using a federal income tax rate of 21%.
(3) Includes nonaccrual loans.
(4) For presentation in this table, average balances and the corresponding average rates for investment securities are based upon historical cost, adjusted for amortization of premiums and accretion of discounts.
(5) Net interest margin represents net interest income divided by average total interest-earning assets.
|
| | | | | | | | | | | | | | | | | |
| | | | | | |
| | For the six months ended |
| | June 30, 2019 | | June 30, 2018 |
| (Dollars in thousands) | Average Balance | Interest (1) | Average Rate (2) | | Average Balance | Interest (1) | Average Rate (2) |
| Interest-earning assets: | | | | | | | |
Gross loans (3) | $ | 1,145,151 |
| $ | 31,413 |
| 5.53 | % | | $ | 1,041,404 |
| $ | 27,730 |
| 5.37 | % |
Investment securities (4): | | | | | | | |
| Taxable | 142,569 |
| 1,916 |
| 2.71 |
| | 108,581 |
| 1,241 |
| 2.31 |
|
| Tax-exempt | 84,041 |
| 1,140 |
| 3.28 |
| | 56,997 |
| 731 |
| 3.12 |
|
| Interest earning cash balances | 30,353 |
| 382 |
| 2.54 |
| | 26,455 |
| 225 |
| 1.71 |
|
| Federal Home Loan Bank Stock | 8,325 |
| 248 |
| 6.01 |
| | 8,303 |
| 227 |
| 5.51 |
|
| Total interest-earning assets | $ | 1,410,439 |
| $ | 35,099 |
| 5.05 | % | | $ | 1,241,740 |
| $ | 30,154 |
| 4.92 | % |
| Non-earning assets: | | | | | | | |
| Cash and due from banks | 24,570 |
| | | | 18,163 |
| | |
| Premises and equipment | 13,264 |
| | | | 12,990 |
| | |
| Goodwill | 9,387 |
| | | | 9,387 |
| | |
| Other intangible assets, net | 401 |
| | | | 616 |
| | |
| Bank-owned life insurance | 11,921 |
| | | | 11,610 |
| | |
| Allowance for loan losses | (11,802 | ) | | | | (11,646 | ) | | |
| Other non-earning assets | 14,335 |
| | | | 10,006 |
| | |
| Total assets | $ | 1,472,515 |
| | | | $ | 1,292,866 |
| | |
| Interest-bearing liabilities: | | | | | | | |
| Interest-bearing demand deposits | $ | 54,875 |
| $ | 117 |
| 0.43 | % | | $ | 63,950 |
| $ | 99 |
| 0.31 | % |
| Money market and savings deposits | 300,903 |
| 2,219 |
| 1.49 |
| | 275,105 |
| 1,226 |
| 0.90 |
|
| Time deposits | 563,609 |
| 6,402 |
| 2.29 |
| | 451,195 |
| 3,340 |
| 1.49 |
|
| Borrowings | 57,553 |
| 699 |
| 2.45 |
| | 52,689 |
| 444 |
| 1.70 |
|
| Subordinated notes | 14,903 |
| 503 |
| 6.79 |
| | 14,852 |
| 503 |
| 6.83 |
|
| Total interest-bearing liabilities | $ | 991,843 |
| $ | 9,940 |
| 2.02 | % | | $ | 857,791 |
| $ | 5,612 |
| 1.32 | % |
| Noninterest-bearing liabilities and shareholders' equity: | | | | | | | |
| Noninterest bearing demand deposits | 308,146 |
| | | | 302,635 |
| | |
| Other liabilities | 15,648 |
| | | | 9,933 |
| | |
| Shareholders' equity | 156,878 |
| | | | 122,507 |
| | |
| Total liabilities and shareholders' equity | $ | 1,472,515 |
| | | | $ | 1,292,866 |
| | |
| Net interest income | | $ | 25,159 |
| | | | $ | 24,542 |
| |
| Interest spread | | | 3.03 | % | | | | 3.60 | % |
Net interest margin (5) | | | 3.60 |
| | | | 3.99 |
|
| Tax equivalent effect | | | 0.03 |
| | | | 0.02 |
|
| Net interest margin on a fully tax equivalent basis | | | 3.63 | % | | | | 4.01 | % |
(1) Interest income is shown on actual basis and does not include taxable equivalent adjustments.
(2) Average rates and yields are presented on an annual basis and includes a taxable equivalent adjustment to interest income of $226 thousand and $150
thousand on tax-exempt securities for the six months ended June 30, 2019 and June 30, 2018, respectively, using the statutory tax rate of 21%.
(3) Includes nonaccrual loans.
(4) For presentation in this table, average balances and the corresponding average rates for investment securities are based upon historical cost, adjusted for
amortization of premiums and accretion of discounts.
(5) Net interest margin represents net interest income divided by average total interest-earning assets.
|
| | | | | | | | | | | | | | | | | | | |
| Loan Composition | | | | | | | | | |
| (Unaudited) | As of |
| | June 30, | | March 31, | | December 31, | | September 30, | | June 30, |
| (Dollars in thousands) | 2019 | | 2019 | | 2018 | | 2018 | | 2018 |
| Commercial real estate: | | | | | | | | | |
| Non-owner occupied | $ | 364,504 |
| | $ | 361,066 |
| | $ | 367,671 |
| | $ | 362,450 |
| | $ | 361,341 |
|
| Owner-occupied | 193,500 |
| | 187,001 |
| | 194,422 |
| | 190,131 |
| | 172,615 |
|
| Total commercial real estate | 558,004 |
| | 548,067 |
| | 562,093 |
| | 552,581 |
| | 533,956 |
|
| Commercial and industrial | 420,812 |
| | 401,588 |
| | 383,455 |
| | 397,060 |
| | 363,239 |
|
| Residential real estate | 186,737 |
| | 180,386 |
| | 180,018 |
| | 164,356 |
| | 147,763 |
|
| Consumer | 948 |
| | 1,056 |
| | 999 |
| | 1,002 |
| | 831 |
|
| Total loans | $ | 1,166,501 |
| | $ | 1,131,097 |
| | $ | 1,126,565 |
| | $ | 1,114,999 |
| | $ | 1,045,789 |
|
|
| | | | | | | | | | | | | | | | | | | |
| Impaired Assets | | | | | | | | | |
| (Unaudited) | As of |
| | June 30, | | March 31, | | December 31, | | September 30, | | June 30, |
| (Dollars in thousands) | 2019 | | 2019 | | 2018 | | 2018 | | 2018 |
| Nonaccrual loans | | | | | | | | | |
| Commercial real estate | $ | 2,979 |
| | $ | 2,694 |
| | $ | 5,927 |
| | $ | 4,559 |
| | $ | 2,557 |
|
| Commercial and industrial | 9,559 |
| | 10,495 |
| | 9,605 |
| | 5,763 |
| | 5,983 |
|
| Residential real estate | 2,006 |
| | 3,456 |
| | 2,915 |
| | 2,546 |
| | 2,737 |
|
| Consumer | — |
| | — |
| | — |
| | 5 |
| | — |
|
| Total nonaccrual loans | 14,544 |
| | 16,645 |
| | 18,447 |
| | 12,873 |
| | 11,277 |
|
| Other real estate owned | 373 |
| | 373 |
| | — |
| | — |
| | — |
|
| Total nonperforming assets | 14,917 |
| | 17,018 |
| | 18,447 |
| | 12,873 |
| | 11,277 |
|
| Performing troubled debt restructurings |
| | | | | | | | |
| Commercial real estate | — |
| | — |
| | — |
| | 1,511 |
| | 1,517 |
|
| Commercial and industrial | 558 |
| | 562 |
| | 568 |
| | 574 |
| | 578 |
|
| Residential real estate | 363 |
| | 363 |
| | 363 |
| | 365 |
| | 364 |
|
| Total performing troubled debt restructurings | 921 |
| | 925 |
| | 931 |
| | 2,450 |
| | 2,459 |
|
| Total impaired assets | $ | 15,838 |
| | $ | 17,943 |
| | $ | 19,378 |
| | $ | 15,323 |
| | $ | 13,736 |
|
| | | | | | | | | | |
| Loans 90 days or more past due and still accruing | $ | 331 |
| | $ | 453 |
| | $ | 243 |
| | $ | 354 |
| | $ | 259 |
|
