EX-99.1 2 exhibit991-q32018earningsr.htm THIRD QUARTER 2018 EARNINGS RELEASE Exhibit


levelonebankerv3image1a03.gif
 
For Immediate Release

Level One Bancorp, Inc. reports third quarter 2018 net income of $3.3 million, representing $0.41 of earnings per diluted share

Loan growth of 13.69% in the last twelve months and the size of the mortgage team doubled


Farmington Hills, MI – October 30, 2018 – Level One Bancorp, Inc. (“Level One”) (Nasdaq: LEVL) today reported net income of $3.3 million, or $0.41 per diluted share, in the third quarter of 2018. This compares with net income of $4.0 million, or $0.53 per diluted share, in the preceding quarter and $2.8 million, or $0.43 per diluted share, in the third quarter of 2017.

Patrick J. Fehring, President and Chief Executive Officer, commented, "Our total loans increased 13.69% in the past twelve months. In addition, our noninterest income increased 32.51% over the second quarter as a result of the previously announced expansion of our mortgage banking activities. However, as a result of this expansion, our noninterest expense increased due to the increase in salaries and benefits expense from the expansion. We remain committed to providing shareholder returns with a strategy of quality growth."

Third Quarter 2018 Financial Highlights

•
Net income was $3.3 million, or $0.41 per diluted share, for the third quarter of 2018
•
Net interest margin, on a fully taxable equivalent ("FTE") basis, was 3.97%, compared to 3.99% in the preceding quarter and 4.07% in the third quarter of 2017
•
Annualized return on average assets was 0.95%, compared to 0.94% in the third quarter of 2017
•
Annualized return on average equity was 8.95%, compared to 10.58% in the third quarter of 2017
•
Total assets increased 14.16% to $1.45 billion at September 30, 2018, compared to $1.27 billion at September 30, 2017
•
Total loans increased 13.69% to $1.11 billion at September 30, 2018, compared to $980.7 million at September 30, 2017
•
Total deposits increased 5.65% to $1.13 billion at September 30, 2018, compared to $1.07 billion at September 30, 2017
•
Book value per share increased 12.13% to $18.77 per share compared to $16.74 per share at September 30, 2017
•
Tangible book value per share increased 15.44% to $17.50 per share compared to $15.16 per share at September 30, 2017

Balance Sheet Review

Level One's total assets were $1.45 billion at September 30, 2018, an increase of $123.4 million, or 9.32%, from $1.32 billion at June 30, 2018, and up $179.4 million, or 14.16%, from $1.27 billion at September 30, 2017.

The investment securities portfolio was $199.1 million at September 30, 2018, an increase of $3.1 million, or 1.53%, from $196.0 million at June 30, 2018, and up $57.4 million, or 40.47%, from $141.7 million at September 30, 2017.





Total loans were $1.11 billion at September 30, 2018, an increase of $69.2 million, or 6.62%, from $1.05 billion at June 30, 2018, and up $134.3 million, or 13.69%, from $980.7 million at September 30, 2017. The growth in total loans compared to September 30, 2017 was primarily due to growth in our commercial real estate and residential real estate loan portfolios.

Total deposits were $1.13 billion at September 30, 2018, an increase of $65.1 million, or 6.11%, from $1.07 billion at June 30, 2018, and up $60.4 million, or 5.65%, from $1.07 billion at September 30, 2017. Total deposit composition at September 30, 2018 consisted of 38.10% of demand deposit accounts, 21.09% of savings and money market accounts and 40.81% of time deposits.

Operating Results

Level One's net interest income increased $654 thousand, or 5.27%, to $13.1 million in the third quarter of 2018, compared to $12.4 million in the preceding quarter, and increased $1.4 million, or 11.91%, compared to $11.7 million in the third quarter of 2017, primarily as a result of increased income on originated loans, partially offset by increased expense on deposits.

Level One’s net interest margin, on a FTE basis, was 3.97% in the third quarter of 2018, compared to 3.99% in the preceding quarter and 4.07% in the third quarter of 2017, primarily as a result of higher cost of funds.

Level One's noninterest income increased $472 thousand, or 32.51%, to $1.9 million in the third quarter of 2018, compared to $1.5 million in the preceding quarter, and decreased $17 thousand, or 0.88%, compared to $1.9 million in the third quarter of 2017. The change in noninterest income compared to the preceding quarter was primarily due to an increase in mortgage banking activities as a result of the expansion of the mortgage team.

Level One’s noninterest expenses increased $749 thousand, or 7.72%, to $10.5 million in the third quarter of 2018, compared to $9.7 million in the preceding quarter, and increased $1.1 million, or 12.04%, compared to $9.3 million in the third quarter of 2017, predominantly as a result of increased salary and employee benefits. This increase is due to doubling the size of the mortgage division during the third quarter. The efficiency ratio, which is a measure of operating expenses as a percentage of net interest income and noninterest income, for the third quarter of 2018 was 69.73%, compared to 69.99% for the preceding quarter and 68.51% in the third quarter of 2017.

Level One's income tax provision was $665 thousand, or 16.96% of pretax income, in the third quarter of 2018, as compared to $860 thousand, or 17.65% of pretax income, in the preceding quarter and $1.3 million, or 30.75% of pretax income, in the third quarter of 2017. The decrease in tax expense during the three months ended September 30, 2018, as compared to the third quarter of 2017, is primarily a result of the change in federal corporate income tax rates from 35% to 21% due to the enactment of the Tax Cuts and Jobs Act in December 2017.

Asset Quality

Level One's asset quality remained solid during the third quarter of 2018. Total nonperforming loans were $12.9 million, or 1.15% of total loans, at September 30, 2018, an increase of $1.6 million from nonperforming loans of $11.3 million, or 1.08% of total loans, at June 30, 2018, and a decrease of $2.8 million from nonperforming loans of $15.6 million, or 1.59% of total loans, at September 30, 2017. Level One had no other real estate owned assets at September 30, 2018 or June 30, 2018, compared to $384 thousand at September 30, 2017. Nonperforming assets, consisting of nonaccrual loans and other real estate owned, as a percentage of total assets were 0.89% at September 30, 2018, compared to 0.85% at June 30, 2018, and 1.26% at September 30, 2017.

In addition, we had $354 thousand in loans 90 days or more past due and still accruing at September 30, 2018, compared to $259 thousand at June 30, 2018 and $486 thousand at September 30, 2017.





Performing troubled debt restructured loans that were not included in nonaccrual loans at September 30, 2018 were $2.5 million, compared to $2.5 million in the preceding quarter and $2.3 million at September 30, 2017. 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 third quarter of 2018 were $194 thousand, or 0.07% of average loans on an annualized basis, compared to $669 thousand of net recoveries, or 0.26% of average loans on an annualized basis, for the preceding quarter and $32 thousand of net recoveries, or 0.01% of average loans on an annualized basis, for the quarter ended September 30, 2017.

Level One's third quarter provision for loan losses was a provision expense of $619 thousand, compared to a provision benefit of $710 thousand in the preceding quarter and a provision expense of $194 thousand in the third quarter of 2017. The change in provision for loan losses was primarily due to a large recovery in the second quarter of 2018. The allowance for loan losses was $11.9 million, or 1.07% of total loans, at September 30, 2018, compared to $11.5 million, or 1.10% of total loans, at June 30, 2018, and $11.6 million, or 1.19% of total loans, at September 30, 2017. As of September 30, 2018, the allowance for loan losses as a percentage of nonperforming loans was 92.36%, compared to 101.67% at June 30, 2018, and 74.38% at September 30, 2017.

Capital

Total shareholders’ equity was $145.5 million at September 30, 2018, an increase of $2.0 million, or 1.40%, compared with $143.4 million at June 30, 2018 and an increase of $38.5 million, or 35.96%, from $107.0 million at September 30, 2017, primarily as the result of our initial public offering of 1,150,765 shares of common stock in April 2018.

Recent Developments

Third Quarter Dividend: On September 20, 2018, Level One’s Board of Directors declared a quarterly cash dividend of $0.03 per share. This dividend was paid out on October 15, 2018, to stockholders of record at the close of business on September 30, 2018.

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 $1.45 billion as of September 30, 2018. It operates eleven 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, auto, 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.

Media Contact:
Investor Relations Contact:
Nicole Ransom
Peter Root
(248) 538-2183
(248) 538-2186




Summary Consolidated Financial Information
 
 
 
 
(Unaudited)
As of or for the quarter ended,
(Dollars in thousands, except per share data)
September 30,
2018
 
June 30,
2018
 
March 31,
2018
 
December 31,
2017
 
September 30,
2017
Earnings Summary
 
 
 
 
 
 
 
 
 
Interest income
$
16,629

 
$
15,380

 
$
14,774

 
$
14,378

 
$
13,752

Interest expense
3,560

 
2,965

 
2,647

 
2,374

 
2,074

Net interest income
13,069

 
12,415

 
12,127

 
12,004

 
11,678

Provision for loan losses
619

 
(710
)
 
554

 
956

 
194

Noninterest income
1,924

 
1,452

 
1,372

 
1,395

 
1,941

Noninterest expense
10,454

 
9,705

 
9,135

 
9,193

 
9,331

Income before income taxes
3,920

 
4,872

 
3,810

 
3,250

 
4,094

Income tax provision
665

 
860

 
642

 
2,317

 
1,259

Net income
3,255

 
$
4,012

 
$
3,168

 
$
933

 
$
2,835

Per Share Data
 
 


 
 
 
 
 
 
Basic earnings per common share
$
0.42

 
$
0.54

 
$
0.48

 
$
0.15

 
$
0.44

Diluted earnings per common share
0.41

 
0.53

 
0.47

 
0.14

 
0.43

Book value per common share
18.77

 
18.51

 
16.78

 
16.78

 
16.74

Tangible book value per share (1)
17.50

 
17.23

 
15.27

 
15.21

 
15.16

Shares outstanding (in thousands)
7,749

 
7,749

 
6,585

 
6,435

 
6,392

Average basic common shares (in thousands)
7,749

 
7,456

 
6,539

 
6,403

 
6,392

Average diluted common shares (in thousands)
7,901

 
7,613

 
6,699

 
6,630

 
6,610

Selected Period End Balances
 
 
 
 
 
 
 
 
 
Total assets
1,446,269

 
$
1,322,913

 
$
1,300,629

 
$
1,301,291

 
$
1,266,919

Securities available-for-sale
199,051

 
196,047

 
160,349

 
150,969

 
141,700

Total loans
1,114,999

 
1,045,789

 
1,051,354

 
1,034,923

 
980,721

Total deposits
1,130,311

 
1,065,216

 
1,112,644

 
1,120,382

 
1,069,874

Total liabilities
1,300,810

 
1,179,468

 
1,190,106

 
1,193,331

 
1,159,934

Total shareholders' equity
145,459

 
143,445

 
110,523

 
107,960

 
106,985

Tangible shareholders' equity (1)
135,570

 
133,501

 
100,524

 
97,906

 
96,872

Performance and Capital Ratios
 
 
 
 
 
 
 
 
 
Return on average assets (annualized)
0.95
%
 
1.23
 %
 
1.00
%
 
0.29
%
 
0.94
 %
Return on average equity (annualized)
8.95

 
11.97

 
11.64

 
3.40

 
10.58

Net interest margin (fully taxable equivalent) (2)
3.97

 
3.99

 
4.03

 
4.01

 
4.07

Efficiency ratio (noninterest expense/net interest income plus noninterest income)
69.73

 
69.99

 
67.67

 
68.61

 
68.51

Total shareholders' equity to total assets
10.06

 
10.84

 
8.50

 
8.30

 
8.44

Tangible equity to tangible assets (1)
9.44

 
10.17

 
7.79

 
7.58

 
7.71

Common equity tier 1 capital
11.75

 
12.11

 
9.47

 
9.10

 
9.33

Tier 1 leverage ratio
10.31

 
10.60

 
8.15

 
7.92

 
8.14

Tier 1 risk-based capital
11.75

 
12.11

 
9.47

 
9.10

 
9.33

Total risk-based capital
14.00

 
14.44

 
11.87

 
11.55

 
11.86

Asset Quality Ratios:
 
 
 
 
 
 
 
 
 
Net charge-offs (recoveries) to average loans
0.07
%
 
(0.26
)%
 
0.29
%
 
0.35
%
 
(0.01
)%
Nonperforming assets as a percentage of total assets
0.89

 
0.85

 
1.00

 
1.13

 
1.26

Nonperforming loans as a percent of total loans
1.15

 
1.08

 
1.23

 
1.36

 
1.59

Allowance for loan losses as a percentage of period-end loans
1.07

 
1.10

 
1.09

 
1.13

 
1.19

Allowance for loan losses as a percentage of nonperforming loans
92.36

 
101.67

 
88.67

 
83.38

 
74.38

Allowance for loan losses as a percentage of nonperforming loans, excluding allowance allocated to loans accounted for under ASC 310-30
84.72

 
92.93

 
80.36

 
75.68

 
66.62

(1) See section entitled "GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures" below.
(2) Presented on a tax equivalent basis using a 35% tax rate for 2017 time periods and 21% tax rate for 2018 time periods.







GAAP Reconciliation and Management Explanation 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:

Reconciliation of Non-GAAP Financial Measures
 
 
 
 
(Unaudited)
As of
(Dollars in thousands, except per share data)
September 30,
2018
 
June 30,
2018
 
March 31,
2018
 
December 31,
2017
 
September 30,
2017
 
 
 
 
 


 


 
 
Total shareholders' equity
$
145,459

 
$
143,445

 
$
110,523

 
$
107,960

 
$
106,985

Less:
 
 
 
 
 
 
 
 
 
Goodwill
9,387

 
9,387

 
9,387

 
9,387

 
9,387

Core deposit intangibles
502

 
557

 
612

 
667

 
726

Tangible shareholders' equity
$
135,570

 
$
133,501

 
$
100,524

 
$
97,906

 
$
96,872

 
 
 
 
 
 
 
 
 
 
Shares outstanding (in thousands)
7,749

 
7,749

 
6,585

 
6,435

 
6,392

Tangible book value per share
$
17.50

 
$
17.23

 
$
15.27

 
$
15.21

 
$
15.16

 
 
 
 
 
 
 
 
 
 
Total assets
$
1,446,269

 
$
1,322,913

 
$
1,300,629

 
$
1,301,291

 
$
1,266,919

Less:
 
 
 
 
 
 
 
 
 
Goodwill
9,387

 
9,387

 
9,387

 
9,387

 
9,387

Core deposit intangibles
502

 
557

 
612

 
667

 
726

Tangible assets
$
1,436,380

 
$
1,312,969

 
$
1,290,630

 
$
1,291,237

 
$
1,256,806

 
 
 
 
 
 
 
 
 
 
Tangible equity to tangible assets
9.44
%
 
10.17
%
 
7.79
%
 
7.58
%
 
7.71
%















Consolidated Balance Sheets
 
 
 
 
 
 
 
(Unaudited)
As of
 
September 30,
 
June 30,
 
December 31,
 
September 30,
(Dollars in thousands, except share data)
2018
 
2018
 
2017
 
2017
Assets
 
 
 
 
 
 
 
Cash and cash equivalents
$
77,837

 
$
34,767

 
$
63,661

 
$
92,750

Securities available-for-sale
199,051

 
196,047

 
150,969

 
141,700

Federal Home Loan Bank stock
8,325

 
8,303

 
8,303

 
8,303

Mortgage loans held for sale, at fair value
9,392

 
3,991

 
4,548

 
4,459

Loans:
 
 
 
 
 
 
 
Originated loans
1,022,119

 
946,724

 
920,895

 
857,104

Acquired loans
92,880

 
99,065

 
114,028

 
123,617

Total loans
1,114,999

 
1,045,789

 
1,034,923

 
980,721

Less: Allowance for loan losses
(11,890)

 
(11,465)

 
(11,713)

 
(11,630)

Net loans
1,103,109

 
1,034,324

 
1,023,210

 
969,091

Premises and equipment, net
13,506

 
13,144

 
13,435

 
13,758

Goodwill
9,387

 
9,387

 
9,387

 
9,387

Other intangible assets, net
502

 
557

 
667

 
726

Bank-owned life insurance
11,785

 
11,703

 
11,542

 
11,460

Income tax benefit
3,201

 
2,510

 
3,102

 
3,780

Other assets
10,174

 
8,180

 
12,467

 
11,505

Total assets
$
1,446,269

 
$
1,322,913

 
$
1,301,291

 
$
1,266,919

Liabilities
 
 
 

 
 
 
 
Deposits:
 
 
 

 
 
 
 
Noninterest-bearing demand deposits
$
380,369

 
$
320,213

 
$
324,923

 
$
318,610

Interest-bearing demand deposits
50,226

 
57,060

 
62,644

 
57,798

Money market and savings deposits
238,351

 
247,542

 
289,363

 
267,075

Time deposits
461,365

 
440,401

 
443,452

 
426,391

Total deposits
1,130,311

 
1,065,216

 
1,120,382

 
1,069,874

Borrowings
146,483

 
86,594

 
47,833

 
62,896

Subordinated notes
14,882

 
14,867

 
14,844

 
14,830

Other liabilities
9,134

 
12,791

 
10,272

 
12,334

Total liabilities
1,300,810

 
1,179,468

 
1,193,331

 
1,159,934

Shareholders' equity
 
 
 

 
 
 
 
Common stock:
 
 
 

 
 
 
 
Authorized - 20,000,000 shares
 
 
 

 
 
 
 
Issued and outstanding - 7,749,216 shares at 9/30/2018, 7,748,641 shares at 6/30/2018, 6,435,461 shares at 12/31/2017 and 6,392,041 shares at 9/30/2017
90,411

 
90,201

 
59,511

 
58,922

Retained earnings
59,173

 
56,383

 
49,232

 
48,299

Accumulated other comprehensive loss, net of tax
(4,125)

 
(3,139)

 
(783)

 
(236)

Total shareholders' equity
145,459

 
143,445

 
107,960

 
106,985

Total liabilities and shareholders' equity
$
1,446,269

 
$
1,322,913

 
$
1,301,291

 
$
1,266,919








Consolidated Statements of Income
 
 
 
 
 
 
 
 
 
(Unaudited)
 
 
 
 
 
 
 
 
 
 
Three months ended
 
Nine months ended
 
September 30,
 
June 30,
 
September 30,
 
September 30,
 
September 30,
(In thousands, except per share data)
2018
 
2018
 
2017
 
2018
 
2017
Interest income
 
 
 
 
 
 
 
 
 
Originated loans, including fees
$
12,653

 
$
11,833

 
$
10,172

 
$
35,664

 
$
29,265

Acquired loans, including fees
2,454

 
2,293

 
2,610

 
7,173

 
9,441

Securities:


 
 
 





 


Taxable
816

 
667

 
422

 
2,057

 
1,238

Tax-exempt
450

 
380

 
260

 
1,181

 
641

Federal funds sold and other
256

 
207

 
288

 
708

 
648

Total interest income
16,629

 
15,380

 
13,752

 
46,783

 
41,233

Interest Expense
 

 
 

 
 

 
 

 
 

Deposits
2,802

 
2,487

 
1,604

 
7,467

 
4,332

Borrowed funds
502

 
225

 
214

 
946

 
614

Subordinated notes
256

 
253

 
256

 
759

 
759

Total interest expense
3,560

 
2,965

 
2,074

 
9,172

 
5,705

Net interest income
13,069

 
12,415

 
11,678

 
37,611

 
35,528

Provision expense (benefit) for loan losses
619

 
(710
)
 
194

 
463

 
460

Net interest income after provision for loan losses
12,450

 
13,125

 
11,484

 
37,148

 
35,068

Noninterest income
 

 
 

 
 

 
 

 
 

Service charges on deposits
655

 
618

 
607

 
1,915

 
1,905

Net gain on sale of securities
—

 
—

 
118

 
—

 
176

Mortgage banking activities
754

 
404

 
548

 
1,394

 
1,260

Net gain on sale of commercial loans
—

 
11

 
—

 
11

 
146

Other charges and fees
515

 
419

 
668

 
1,428

 
1,618

Total noninterest income
1,924

 
1,452

 
1,941

 
4,748

 
5,105

Noninterest expense
 

 
 

 
 

 
 

 
 

Salary and employee benefits
6,888

 
6,169

 
5,413

 
19,013

 
16,003

Occupancy and equipment expense
1,173

 
1,074

 
1,106

 
3,293

 
3,130

Professional service fees
494

 
471

 
603

 
1,231

 
1,683

Marketing expense
264

 
291

 
289

 
697

 
768

Printing and supplies expense
127

 
112

 
137

 
343

 
371

Data processing expense
565

 
511

 
492

 
1,512

 
1,384

Other expense
943

 
1,077

 
1,291

 
3,205

 
3,520

Total noninterest expense
10,454

 
9,705

 
9,331

 
29,294

 
26,859

Income before income taxes
3,920

 
4,872

 
4,094

 
12,602

 
13,314

Income tax provision
665

 
860

 
1,259

 
2,167

 
4,406

Net income
$
3,255

 
$
4,012

 
$
2,835

 
$
10,435

 
$
8,908

Earnings per common share:
 

 
 
 
 

 
 

 
 

Basic
$
0.42

 
$
0.54

 
$
0.44

 
$
1.44

 
$
1.40

Diluted
$
0.41

 
$
0.53

 
$
0.43

 
$
1.41

 
$
1.35

Average common shares outstanding - basic
7,749

 
7,456

 
6,392

 
7,264

 
6,383

Average common shares outstanding - diluted
7,901

 
7,613

 
6,610

 
7,414

 
6,602





Net Interest Income and Net Interest Margin
 
 
 
 
 
 
 
 
 
(Unaudited)
For the three months ended,
 
September 30, 2018
 
June 30, 2018
 
September 30, 2017
(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)
$
1,075,642

$
15,107

5.57
%
 
$
1,045,715

$
14,126

5.42
%
 
$
965,149

$
12,782

5.25
%
Investment securities (4):



 
 
 
 
 
 
 
 
Taxable
134,619

817

2.41

 
114,957

667

2.33

 
83,402

424

2.01

Tax-exempt
67,599

449

3.13

 
58,976

380

3.10

 
42,300

260

3.60

Interest earning cash balances
28,685

157

2.17

 
25,828

119

1.85

 
50,213

160

1.27

Federal Home Loan Bank Stock
8,303

99

4.73

 
8,303

88

4.25

 
8,303

126

6.02

Total interest-earning assets
$
1,314,848

$
16,629

5.04
%
 
$
1,253,779

$
15,380

4.94
%
 
$
1,149,367

$
13,752

4.79
%
Non-earning assets:
 
 
 
 
 
 
 
 
 
 
 
   Cash and due from banks
22,358

 
 
 
17,800

 
 
 
18,905

 
 
   Premises and equipment
13,465

 
 
 
12,621

 
 
 
13,846

 
 
   Goodwill
9,387

 
 
 
9,387

 
 
 
9,387

 
 
   Other intangible assets, net
533

 
 
 
589

 
 
 
761

 
   
   Bank-owned life insurance
11,732

 
 
 
11,650

 
 
 
11,406

 
 
   Allowance for loan losses
(11,591
)
 
 
 
(11,473
)
 
 
 
(11,594
)
 
 
   Other non-earning assets
7,414

 
 
 
7,839

 
 
 
14,039

 
 
             Total assets
$
1,368,146

 
 
 
$
1,302,192

 
 
 
$
1,206,117

 
   
Interest-bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
     Interest-bearing demand deposits
$
60,022

$
52

0.34
%
 
$
64,394

$
48

0.30
%
 
$
59,684

$
41

0.27
%
     Money market and savings deposits
249,595

625

0.99

 
276,496

678

0.98

 
241,819

405

0.66

     Time deposits
463,373

2,125

1.82

 
445,894

1,761

1.58

 
375,839

1,158

1.22

     Borrowings
95,371

502

2.09

 
48,604

225

1.86

 
74,892

214

1.13

     Subordinated notes
14,874

256

6.83

 
14,859

253

6.83

 
14,821

256

6.85

             Total interest-bearing liabilities
$
883,235

$
3,560

1.60
%
 
$
850,247

$
2,965

1.40
%
 
$
767,055

$
2,074

1.07
%
Noninterest-bearing liabilities and shareholders' equity:
 
 
 
 
 
 
 
 
 
 
 
   Noninterest bearing demand deposits
329,459

 
 
 
306,547

 
 
 
319,822

 
 
   Other liabilities
9,956

 
 
 
10,923

 
 
 
12,939

 
 
   Shareholders' equity
145,496

 
 
 
134,475

 
 
 
106,301

 
 
             Total liabilities and shareholders' equity
$
1,368,146

 
 
 
$
1,302,192

 
 
 
$
1,206,117

 
 
Net interest income
 
$
13,069

 
 
 
$
12,415

 
 
 
$
11,678

 
Interest spread
 
 
3.44
%
 
 
 
3.54
%
 
 
 
3.72
%
Net interest margin (5)
 
 
3.94

 
 
 
3.97

 
 
 
4.03

Tax equivalent effect
 
 
0.03

 
 
 
0.02

 
 
 
0.04

Net interest margin on a fully tax equivalent basis
 
 
3.97

 
 
 
3.99

 
 
 
4.07


(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 $84 thousand, $76 thousand and $124 thousand on tax-exempt securities for the three months ended September 30, 2018, June 30, 2018 and September 30, 2017, respectively, using a federal income tax rate of 21% for the 2018 periods and 35% for the 2017 period.
(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 nine months ended,
 
September 30, 2018
 
September 30, 2017
(Dollars in thousands)
Average Balance
Interest (1)
Average Rate (2)
 
Average Balance
Interest (1)
Average Rate (2)
Interest-earning assets:
 
 
 
 
 
 
 
Gross loans (3)
$
1,052,942

$
42,837

5.44
%
 
$
960,445

$
38,706

5.39
%
Investment securities (4):



 
 
 
 
Taxable
117,356

2,057

2.34

 
80,470

1,239

2.06

Tax-exempt
60,570

1,181

3.13

 
35,015

641

3.61

Interest earning cash balances
27,207

382

1.88

 
45,760

381

1.11

Federal Home Loan Bank Stock
8,303

326

5.25

 
8,116

266

4.38

Total interest-earning assets
$
1,266,378

$
46,783

4.96
%
 
$
1,129,806

$
41,233

4.92
%
Non-earning assets:
 
 
 
 
 
 
 
   Cash and due from banks
19,577

 
 
 
18,828

 
 
   Premises and equipment
13,150

 
 
 
14,897

 
 
   Goodwill
9,387

 
 
 
9,387

 
 
   Other intangible assets, net
588

 
 
 
819

 
 
   Company-owned life insurance
11,651

 
 
 
11,324

 
 
   Allowance for loan losses
(11,628
)
 
 
 
(11,429
)
 
 
   Other non-earning assets
9,132

 
 
 
11,681

 
 
             Total assets
$
1,318,235

 
 
 
$
1,185,313

 
 
Interest-bearing liabilities:
 
 
 
 
 
 
 
   Deposits:
 
 
 
 
 
 
 
     Interest-bearing demand deposits
$
62,626

$
151

0.32
%
 
$
58,418

$
119

0.27
%
     Money market and savings deposits
266,508

1,851

0.93

 
264,389

1,184

0.60

     Time deposits
455,299

5,465

1.60

 
351,073

3,029

1.15

     Borrowings
67,073

946

1.89

 
88,280

614

0.93

     Subordinated notes
14,859

759

6.83

 
14,806

759

6.85

             Total interest-bearing liabilities
$
866,365

$
9,172

1.42
%
 
$
776,966

$
5,705

0.98
%
Noninterest-bearing liabilities and shareholders' equity:
 
 
 
 
 
 
 
   Noninterest bearing demand deposits
311,675

 
 
 
295,413

 
 
   Other liabilities
9,941

 
 
 
10,396

 
 
   Shareholders' equity
130,254

 
 
 
102,538

 
 
             Total liabilities and shareholders' equity
$
1,318,235

 
 
 
$
1,185,313

 
 
Net interest income
 
$
37,611

 
 
 
$
35,528

 
Interest spread
 
 
3.54
%
 
 
 
3.94
%
Net interest margin (5)
 
 
3.97

 
 
 
4.20

Tax equivalent effect
 
 
0.02

 
 
 
0.04

Net interest margin on a fully tax equivalent basis
 
 
3.99

 
 
 
4.24

(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 $235 thousand and $306 thousand on tax-exempt securities for the nine months ended September 30, 2018 and September 30, 2017, respectively, using a federal income tax rate of 21% for the 2018 period and 35% for the 2017 period.
(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
 
September 30,
 
June 30,
 
March 31,
 
December 31,
 
September 30,
(Dollars in thousands)
2018
 
2018
 
2018
 
2017
 
2017
Commercial real estate
 
 
 
 
 
 
 
 
 
Non-owner occupied
$
362,450

 
$
361,341

 
$
360,014

 
$
343,420

 
$
312,644

Owner-occupied
190,131

 
172,615

 
172,608

 
168,342

 
156,690

Total commercial real estate
552,581

 
533,956

 
532,622

 
511,762

 
469,334

Commercial and industrial
397,060

 
363,239

 
371,464

 
377,686

 
380,512

Residential real estate
164,356

 
147,763

 
146,436

 
144,439

 
130,117

Consumer
1,002

 
831

 
832

 
1,036

 
758

Total loans
$
1,114,999

 
$
1,045,789

 
$
1,051,354

 
$
1,034,923

 
$
980,721


Impaired Assets
(Unaudited)
As of
 
September 30,
 
June 30,
 
March 31,
 
December 31,
 
September 30,
(Dollars in thousands)
2018
 
2018
 
2018
 
2017
 
2017
Nonaccrual loans
 
 
 
 
 
 
 
 
 
Commercial real estate
$
4,559

 
$
2,557

 
$
1,946

 
$
2,257

 
$
1,998

Commercial and industrial
5,763

 
5,983

 
8,192

 
9,024

 
11,911

Residential real estate
2,546

 
2,737

 
2,838

 
2,767

 
1,727

Consumer
5

 
—

 
—

 
—

 
—

Total nonperforming loans
12,873

 
11,277

 
12,976

 
14,048

 
15,636

Other real estate owned
—

 
—

 
—

 
652

 
384

Total nonperforming assets
12,873

 
11,277

 
12,976

 
14,700

 
16,020

Performing troubled debt restructurings

 
 
 
 
 
 
 
 
Commercial real estate
1,511

 
1,517

 
1,525

 
—

 
287

Commercial and industrial
574

 
578

 
582

 
961

 
975

Residential real estate
365

 
364

 
258

 
261

 
1,049

Total performing troubled debt restructurings
2,450

 
2,459

 
2,365

 
1,222

 
2,311

Total impaired assets
$
15,323

 
$
13,736

 
$
15,341

 
$
15,922

 
$
18,331

 
 
 
 
 
 
 
 
 
 
Loans 90 days or more past due and still accruing
$
354

 
$
259

 
$
263

 
$
440

 
$
486