LEVL - Level One Bancorp Inc. reports fourth quarter 2018 net income of $4.0 million representing $0.50 of earnings per diluted share
Loan growth of 8.85% in the last twelve months and the size of the mortgage team doubled
FARMINGTON HILLS, Mich., Jan. 30, 2019 (GLOBE NEWSWIRE) -- Level One Bancorp, Inc. (“Level One”) (Nasdaq: LEVL) today reported financial results for the fourth quarter of 2018, which included net income of $4.0 million, or $0.50 per diluted share. This compares to net income of $3.3 million, or $0.41 per diluted share, in the preceding quarter and $933 thousand, or $0.14 per diluted share, in the fourth quarter of 2017. For the twelve months ended December 31, 2018, Level One's net income was $14.4 million, or $1.91 per diluted share. This compares to net income of $9.8 million, or $1.49 per diluted share, for the twelve months ended December 31, 2017.
Patrick J. Fehring, President and Chief Executive Officer, commented “We are pleased to announce a strong year with fourth quarter diluted earnings per share of $0.50 and full year diluted earnings per share of $1.91. Our fourth quarter net income of $4.0 million represented a 21.4% increase in earnings quarter over quarter, and our full year net income of $14.4 million represented a 46.2% increase in earnings year over year. Fourth quarter earnings were aided by a decline of 0.7% in non-interest expenses from the previous quarter. The solid 2018 earnings were driven by strong loan growth of approximately 9% and a continuing increase in noninterest income resulting from our previously announced expansion of our residential mortgage loan operations. Earlier this month, we also announced the approval by our board of directors of a share buyback program as a further avenue for enhancing shareholder value while also maintaining strong capital levels.”
He continued, “2018 was an exciting year, marked with the completion of our initial public offering. Looking ahead to 2019 with a strong local economy and a solid loan pipeline, we are seeing good opportunities for quality growth in our markets, thereby enhancing shareholder value.”
Fourth Quarter 2018 Financial Highlights
- Net income of $4.0 million, or $0.50 per diluted share, for the fourth quarter of 2018
- Net interest margin, on a fully taxable equivalent ("FTE") basis, was 3.73%, compared to 3.97% in the preceding quarter and 4.00% in the fourth quarter of 2017
- Annualized return on average assets was 1.11%, compared to 0.29% in the fourth quarter of 2017
- Annualized return on average equity was 10.69%, compared to 3.40% in the fourth quarter of 2017
- Total assets increased 8.83% to $1.42 billion at December 31, 2018, compared to $1.30 billion at December 31, 2017
- Total loans increased 8.85% to $1.13 billion at December 31, 2018, compared to $1.03 billion at December 31, 2017
- Total deposits increased 1.27% to $1.13 billion at December 31, 2018, compared to $1.12 billion at December 31, 2017
- Book value per share increased 16.69% to $19.58 per share compared to $16.78 per share at December 31, 2017
- Tangible book value per share increased 20.38% to $18.31 per share compared to $15.21 per share at December 31, 2017
Full Year 2018 Financial Highlights
- Net income of $14.4 million, or $1.91 per diluted share, for the twelve months ended December 31, 2018
- Net interest margin, on a FTE basis, was 3.92%, compared to 4.18% in 2017
- Annualized return on average assets was 1.07%, compared to 0.82% in 2017
- Annualized return on average equity was 10.68%, compared to 9.45% in 2017
Balance Sheet Review
Level One's total assets were $1.42 billion at December 31, 2018, a decrease of $30.1 million, or 2.08%, from $1.45 billion at September 30, 2018, and up $114.9 million, or 8.83%, from $1.30 billion at December 31, 2017. The decrease in total assets from third quarter of 2018 was primarily due to a decrease in cash balances held with the Federal Reserve Bank.
The investment securities portfolio was $204.3 million at December 31, 2018, an increase of $5.2 million, or 2.62%, from $199.1 million at September 30, 2018, and up $53.3 million, or 35.30%, from $151.0 million at December 31, 2017.
Total loans were $1.13 billion at December 31, 2018, an increase of $11.6 million, or 1.04 %, from $1.11 billion at September 30, 2018, and up $91.6 million, or 8.85%, from $1.03 billion at December 31, 2017. The growth in total loans compared to December 31, 2017 was primarily due to growth in our commercial real estate and residential real estate loan portfolios.
Total deposits were $1.13 billion at December 31, 2018, an increase of $4.3 million, or 0.38%, from $1.13 billion at September 30, 2018, and up $14.3 million, or 1.27%, from $1.12 billion at December 31, 2017. Total deposit composition at December 31, 2018 consisted of 31.92% of demand deposit accounts, 25.35% of savings and money market accounts and 42.73% of time deposits.
Operating Results
Level One's net interest income decreased $256 thousand, or 1.96%, to $12.8 million in the fourth quarter of 2018, compared to $13.1 million in the preceding quarter, primarily as a result of higher costs of funds, and increased $812 thousand, or 6.77%, compared to $12.0 million in the fourth 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 3.73% in the fourth quarter of 2018, compared to 3.97% in the preceding quarter and 4.00% in the fourth quarter of 2017, primarily as a result of higher cost of funds, as well as a decline in average loan yield from the third quarter to the fourth quarter of 2018.
Level One's noninterest income increased $383 thousand, or 19.91%, to $2.3 million in the fourth quarter of 2018, compared to $1.9 million in the preceding quarter, and increased $910 thousand, or 65.14%, compared to $1.4 million in the fourth 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 as well as an increase in interest rate swap fee income, included in other charges and fees.
Level One’s noninterest expenses decreased $70 thousand, or 0.67%, to $10.4 million in the fourth quarter of 2018, compared to $10.5 million in the preceding quarter, and increased $1.2 million, or 12.97%, compared to $9.2 million in the fourth quarter of 2017. The increase in noninterest expenses year over year was predominantly a result of increased salary and employee benefits due to the doubling in size of the mortgage division during the third quarter of 2018. The efficiency ratio, which is a measure of operating expenses as a percentage of net interest income and noninterest income, for the fourth quarter of 2018 was 68.68%, compared to 69.73% for the preceding quarter and 68.61% in the fourth quarter of 2017.
Level One's income tax provision was $836 thousand, or 17.46% of pretax income, in the fourth quarter of 2018, as compared to $665 thousand, or 16.96% of pretax income, in the preceding quarter and $2.3 million, or 71.29% of pretax income, in the fourth quarter of 2017. The decrease in tax expense during the fourth quarter of 2018, as compared to the fourth quarter of 2017, is primarily due to the change in federal corporate income tax rates from 35% to 21% and the recording of a $1.3 million deferred tax asset impairment in the fourth quarter of 2017 as a result of the enactment of the Tax Cuts and Jobs Act in December 2017.
Asset Quality
Nonperforming loans were $18.4 million, or 1.64% of total loans, at December 31, 2018, an increase of $5.5 million from nonperforming loans of $12.9 million, or 1.15% of total loans, at September 30, 2018, and an increase of $4.4 million from nonperforming loans of $14.0 million, or 1.36% of total loans, at December 31, 2017. The increase in nonperforming loans is primarily due to a large loan relationship of $7.2 million moving to nonaccrual, partially offset by the payoff of $2.9 million on a nonaccrual loan relationship during the fourth quarter 2018. Level One had no other real estate owned assets at December 31, 2018 or September 30, 2018, compared to $652 thousand at December 31, 2017. Nonperforming assets, consisting of nonaccrual loans and other real estate owned, as a percentage of total assets were 1.30% at December 31, 2018, compared to 0.89% at September 30, 2018, and 1.13% at December 31, 2017.
In addition, we had $243 thousand in loans 90 days or more past due and still accruing at December 31, 2018, compared to $354 thousand at September 30, 2018 and $440 thousand at December 31, 2017.
Performing troubled debt restructured loans that were not included in nonaccrual loans at December 31, 2018 were $931 thousand, compared to $2.5 million in the preceding quarter and $1.2 million at December 31, 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 fourth quarter of 2018 were $274 thousand, or 0.10% of average loans on an annualized basis, compared to $194 thousand of net chargeoffs, or 0.07% of average loans on an annualized basis, for the preceding quarter and $873 thousand of net chargeoffs, or 0.35% of average loans on an annualized basis, for the quarter ended December 31, 2017.
Level One's fourth quarter provision for loan losses was a provision benefit of $51 thousand, compared to a provision expense of $619 thousand in the preceding quarter and a provision expense of $956 thousand in the fourth quarter of 2017. The change in provision for loan losses was primarily due to lower charge offs than the specific reserve on a loan that paid off during the fourth quarter of 2018. The allowance for loan losses was $11.6 million, or 1.03% of total loans, at December 31, 2018, compared to $11.9 million, or 1.07% of total loans, at September 30, 2018, and $11.7 million, or 1.13% of total loans, at December 31, 2017. As of December 31, 2018, the allowance for loan losses as a percentage of nonperforming loans was 62.70%, compared to 92.36% at September 30, 2018, and 83.38% at December 31, 2017.
Capital
Total shareholders’ equity was $151.8 million at December 31, 2018, an increase of $6.3 million, or 4.33%, compared with $145.5 million at September 30, 2018, primarily as a result of increased retained earnings and decreased accumulated other comprehensive loss, and an increase of $43.8 million, or 40.57%, from $108.0 million at December 31, 2017, primarily as a result of our initial public offering of 1,150,765 shares of common stock in April of 2018.
Recent Developments
Fourth Quarter Dividend: On December 20, 2018, Level One’s Board of Directors declared a quarterly cash dividend of $0.03 per share. This dividend was paid out on January 15, 2019, to stockholders of record at the close of business on December 31, 2018.
Share Buyback Program: On January 23, 2019, Level One announced that its Board of Directors approved a repurchase program under which Level One is authorized to repurchase, from time to time as Level One deems appropriate, shares of Level One’s common stock with an aggregate purchase price of up to $5 million. The repurchase program began on January 23, 2019, and expires on December 31, 2020. The repurchase program does not obligate Level One to repurchase any dollar amount or number of shares, and the program may be extended, modified, suspended or discontinued at any time.
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 $1.42 billion as of December 31, 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.
| Summary Consolidated Financial Information |
| (Unaudited) |
| As of or for the three months ended, |
| (Dollars in thousands, except per share data) |
| December 31, 2018 |
| September 30, 2018 |
| June 30, 2018 |
| March 31, 2018 |
| December 31, 2017 |
| Earnings Summary |
| Interest income |
| $ |
| 17,041 |
| $ |
| 16,629 |
| $ |
| 15,380 |
| $ |
| 14,774 |
| $ |
| 14,374 |
| Interest expense |
| 4,228 |
| 3,560 |
| 2,965 |
| 2,647 |
| 2,373 |
| Net interest income |
| 12,813 |
| 13,069 |
| 12,415 |
| 12,127 |
| 12,001 |
| Provision (benefit) for loan losses |
| (51 |
| ) |
| 619 |
| (710 |
| ) |
| 554 |
| 956 |
| Noninterest income |
| 2,307 |
| 1,924 |
| 1,452 |
| 1,372 |
| 1,397 |
| Noninterest expense |
| 10,384 |
| 10,454 |
| 9,705 |
| 9,135 |
| 9,192 |
| Income before income taxes |
| 4,787 |
| 3,920 |
| 4,872 |
| 3,810 |
| 3,250 |
| Income tax provision |
| 836 |
| 665 |
| 860 |
| 642 |
| 2,317 |
| Net income |
| $ |
| 3,951 |
| $ |
| 3,255 |
| $ |
| 4,012 |
| $ |
| 3,168 |
| $ |
| 933 |
| Per Share Data |
| Basic earnings per common share |
| $ |
| 0.51 |
| $ |
| 0.42 |
| $ |
| 0.54 |
| $ |
| 0.48 |
| $ |
| 0.15 |
| Diluted earnings per common share |
| 0.50 |
| 0.41 |
| 0.53 |
| 0.47 |
| 0.14 |
| Book value per common share |
| 19.58 |
| 18.77 |
| 18.51 |
| 16.78 |
| 16.78 |
| Tangible book value per share (1) |
| 18.31 |
| 17.50 |
| 17.23 |
| 15.27 |
| 15.21 |
| Shares outstanding (in thousands) |
| 7,750 |
| 7,749 |
| 7,749 |
| 6,585 |
| 6,435 |
| Average basic common shares (in thousands) |
| 7,750 |
| 7,749 |
| 7,456 |
| 6,539 |
| 6,403 |
| Average diluted common shares (in thousands) |
| 7,893 |
| 7,901 |
| 7,613 |
| 6,699 |
| 6,630 |
| Selected Period End Balances |
| Total assets |
| $ |
| 1,416,215 |
| $ |
| 1,446,269 |
| $ |
| 1,322,913 |
| $ |
| 1,300,629 |
| $ |
| 1,301,291 |
| Securities available-for-sale |
| 204,258 |
| 199,051 |
| 196,047 |
| 160,349 |
| 150,969 |
| Total loans |
| 1,126,565 |
| 1,114,999 |
| 1,045,789 |
| 1,051,354 |
| 1,034,923 |
| Total deposits |
| 1,134,635 |
| 1,130,311 |
| 1,065,216 |
| 1,112,644 |
| 1,120,382 |
| Total liabilities |
| 1,264,455 |
| 1,300,810 |
| 1,179,468 |
| 1,190,106 |
| 1,193,331 |
| Total shareholders' equity |
| 151,760 |
| 145,459 |
| 143,445 |
| 110,523 |
| 107,960 |
| Tangible shareholders' equity (1) |
| 141,926 |
| 135,570 |
| 133,501 |
| 100,524 |
| 97,906 |
| Performance and Capital Ratios |
| Return on average assets (annualized) |
| 1.11 |
| % |
| 0.95 |
| % |
| 1.23 |
| % |
| 1.00 |
| % |
| 0.29 |
| % |
| Return on average equity (annualized) |
| 10.69 |
| 8.95 |
| 11.97 |
| 11.64 |
| 3.40 |
| Net interest margin (fully taxable equivalent) (2) |
| 3.73 |
| 3.97 |
| 3.99 |
| 4.03 |
| 4.00 |
| Efficiency ratio (noninterest expense/net interest income plus noninterest income) |
| 68.68 |
| 69.73 |
| 69.99 |
| 67.67 |
| 68.61 |
| Total shareholders' equity to total assets |
| 10.72 |
| 10.06 |
| 10.84 |
| 8.50 |
| 8.30 |
| Tangible equity to tangible assets (1) |
| 10.09 |
| 9.44 |
| 10.17 |
| 7.79 |
| 7.58 |
| Common equity tier 1 to risk-weighted assets |
| 11.82 |
| 11.75 |
| 12.11 |
| 9.47 |
| 9.10 |
| Tier 1 capital to risk-weighted assets |
| 11.82 |
| 11.75 |
| 12.11 |
| 9.47 |
| 9.10 |
| Total capital to risk-weighted assets |
| 14.00 |
| 13.99 |
| 14.44 |
| 11.87 |
| 11.55 |
| Tier 1 capital to average assets (leverage ratio) |
| 10.21 |
| 10.31 |
| 10.60 |
| 8.15 |
| 7.92 |
| Asset Quality Ratios: |
| Net charge-offs (recoveries) to average loans |
| 0.10 |
| % |
| 0.07 |
| % |
| (0.26 |
| )% |
| 0.29 |
| % |
| 0.35 |
| % |
| Nonperforming assets as a percentage of total assets |
| 1.30 |
| 0.89 |
| 0.85 |
| 1.00 |
| 1.13 |
| Nonperforming loans as a percent of total loans |
| 1.64 |
| 1.15 |
| 1.08 |
| 1.23 |
| 1.36 |
| Allowance for loan losses as a percentage of period-end loans |
| 1.03 |
| 1.07 |
| 1.10 |
| 1.09 |
| 1.13 |
| Allowance for loan losses as a percentage of nonperforming loans |
| 62.70 |
| 92.36 |
| 101.67 |
| 88.67 |
| 83.38 |
| Allowance for loan losses as a percentage of nonperforming loans, excluding allowance allocated to loans accounted for under ASC 310-30 |
| 57.71 |
| 84.72 |
| 92.93 |
| 80.36 |
| 75.68 |
| (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 the 2017 time period 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) |
| December 31, 2018 |
| September 30, 2018 |
| June 30, 2018 |
| March 31, 2018 |
| December 31, 2017 |
| Total shareholders' equity |
| $ |
| 151,760 |
| $ |
| 145,459 |
| $ |
| 143,445 |
| $ |
| 110,523 |
| $ |
| 107,960 |
| Less: |
| Goodwill |
| 9,387 |
| 9,387 |
| 9,387 |
| 9,387 |
| 9,387 |
| Core deposit intangibles |
| 447 |
| 502 |
| 557 |
| 612 |
| 667 |
| Tangible shareholders' equity |
| $ |
| 141,926 |
| $ |
| 135,570 |
| $ |
| 133,501 |
| $ |
| 100,524 |
| $ |
| 97,906 |
| Shares outstanding (in thousands) |
| 7,750 |
| 7,749 |
| 7,749 |
| 6,585 |
| 6,435 |
| Tangible book value per share |
| $ |
| 18.31 |
| $ |
| 17.50 |
| $ |
| 17.23 |
| $ |
| 15.27 |
| $ |
| 15.21 |
| Total assets |
| $ |
| 1,416,215 |
| $ |
| 1,446,269 |
| $ |
| 1,322,913 |
| $ |
| 1,300,629 |
| $ |
| 1,301,291 |
| Less: |
| Goodwill |
| 9,387 |
| 9,387 |
| 9,387 |
| 9,387 |
| 9,387 |
| Core deposit intangibles |
| 447 |
| 502 |
| 557 |
| 612 |
| 667 |
| Tangible assets |
| $ |
| 1,406,381 |
| $ |
| 1,436,380 |
| $ |
| 1,312,969 |
| $ |
| 1,290,630 |
| $ |
| 1,291,237 |
| Tangible equity to tangible assets |
| 10.09 |
| % |
| 9.44 |
| % |
| 10.17 |
| % |
| 7.79 |
| % |
| 7.58 |
| % |
| Consolidated Balance Sheets |
| (Unaudited) |
| As of |
| December 31, |
| September 30, |
| December 31, |
| (Dollars in thousands) |
| 2018 |
| 2018 |
| 2017 |
| Assets |
| Cash and cash equivalents |
| $ |
| 33,296 |
| $ |
| 77,837 |
| $ |
| 63,661 |
| Securities available-for-sale |
| 204,258 |
| 199,051 |
| 150,969 |
| Federal Home Loan Bank stock |
| 8,325 |
| 8,325 |
| 8,303 |
| Mortgage loans held for sale, at fair value |
| 5,595 |
| 9,392 |
| 4,548 |
| Loans: |
| Originated loans |
| 1,041,898 |
| 1,022,119 |
| 920,895 |
| Acquired loans |
| 84,667 |
| 92,880 |
| 114,028 |
| Total loans |
| 1,126,565 |
| 1,114,999 |
| 1,034,923 |
| Less: Allowance for loan losses |
| (11,566 |
| ) |
| (11,890 |
| ) |
| (11,713 |
| ) |
| Net loans |
| 1,114,999 |
| 1,103,109 |
| 1,023,210 |
| Premises and equipment, net |
| 13,242 |
| 13,506 |
| 13,435 |
| Goodwill |
| 9,387 |
| 9,387 |
| 9,387 |
| Other intangible assets, net |
| 447 |
| 502 |
| 667 |
| Bank-owned life insurance |
| 11,866 |
| 11,785 |
| 11,542 |
| Income tax benefit |
| 2,467 |
| 3,201 |
| 3,102 |
| Other assets |
| 12,333 |
| 10,174 |
| 12,467 |
| Total assets |
| $ |
| 1,416,215 |
| $ |
| 1,446,269 |
| $ |
| 1,301,291 |
| Liabilities |
| Deposits: |
| Noninterest-bearing demand deposits |
| $ |
| 309,384 |
| $ |
| 380,369 |
| $ |
| 324,923 |
| Interest-bearing demand deposits |
| 52,804 |
| 50,226 |
| 62,644 |
| Money market and savings deposits |
| 287,575 |
| 238,351 |
| 289,363 |
| Time deposits |
| 484,872 |
| 461,365 |
| 443,452 |
| Total deposits |
| 1,134,635 |
| 1,130,311 |
| 1,120,382 |
| Borrowings |
| 99,574 |
| 146,483 |
| 47,833 |
| Subordinated notes |
| 14,891 |
| 14,882 |
| 14,844 |
| Other liabilities |
| 15,355 |
| 9,134 |
| 10,272 |
| Total liabilities |
| 1,264,455 |
| 1,300,810 |
| 1,193,331 |
| Shareholders' equity |
| Common stock: |
| Authorized - 20,000,000 shares |
| Issued and outstanding - 7,750,216 shares at 12/31/18, 7,749,216 shares at 9/30/2018, and 6,435,461 shares at 12/31/2017 |
| 90,621 |
| 90,411 |
| 59,511 |
| Retained earnings |
| 62,891 |
| 59,173 |
| 49,232 |
| Accumulated other comprehensive loss, net of tax |
| (1,752 |
| ) |
| (4,125 |
| ) |
| (783 |
| ) |
| Total shareholders' equity |
| 151,760 |
| 145,459 |
| 107,960 |
| Total liabilities and shareholders' equity |
| $ |
| 1,416,215 |
| $ |
| 1,446,269 |
| $ |
| 1,301,291 |
| Consolidated Statements of Income |
| (Unaudited) |
| Three months ended |
| Year ended |
| December 31, |
| September 30, |
| December 31, |
| December 31, |
| December 31, |
| (In thousands, except per share data) |
| 2018 |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
| Interest income |
| Originated loans, including fees |
| $ |
| 13,412 |
| $ |
| 12,653 |
| $ |
| 10,547 |
| $ |
| 49,076 |
| $ |
| 39,812 |
| Acquired loans, including fees |
| 2,013 |
| 2,454 |
| 2,790 |
| 9,186 |
| 12,231 |
| Securities: |
| Taxable |
| 882 |
| 816 |
| 508 |
| 2,939 |
| 1,746 |
| Tax-exempt |
| 476 |
| 450 |
| 314 |
| 1,657 |
| 955 |
| Federal funds sold and other |
| 258 |
| 256 |
| 215 |
| 966 |
| 863 |
| Total interest income |
| 17,041 |
| 16,629 |
| 14,374 |
| 63,824 |
| 55,607 |
| Interest Expense |
| Deposits |
| 3,588 |
| 2,802 |
| 1,935 |
| 11,055 |
| 6,267 |
| Borrowed funds |
| 384 |
| 502 |
| 183 |
| 1,330 |
| 797 |
| Subordinated notes |
| 256 |
| 256 |
| 255 |
| 1,015 |
| 1,014 |
| Total interest expense |
| 4,228 |
| 3,560 |
| 2,373 |
| 13,400 |
| 8,078 |
| Net interest income |
| 12,813 |
| 13,069 |
| 12,001 |
| 50,424 |
| 47,529 |
| Provision expense (benefit) for loan losses |
| (51 |
| ) |
| 619 |
| 956 |
| 412 |
| 1,416 |
| Net interest income after provision for loan losses |
| 12,864 |
| 12,450 |
| 11,045 |
| 50,012 |
| 46,113 |
| Noninterest income |
| Service charges on deposits |
| 641 |
| 655 |
| 638 |
| 2,556 |
| 2,543 |
| Net gain (loss) on sale of securities |
| (71 |
| ) |
| – |
| 32 |
| (71 |
| ) |
| 208 |
| Mortgage banking activities |
| 936 |
| 754 |
| 438 |
| 2,330 |
| 1,698 |
| Net gain on sale of commercial loans |
| – |
| – |
| – |
| 11 |
| 146 |
| Other charges and fees |
| 801 |
| 515 |
| 289 |
| 2,229 |
| 1,907 |
| Total noninterest income |
| 2,307 |
| 1,924 |
| 1,397 |
| 7,055 |
| 6,502 |
| Noninterest expense |
| Salary and employee benefits |
| 6,768 |
| 6,888 |
| 5,552 |
| 25,781 |
| 21,555 |
| Occupancy and equipment expense |
| 1,132 |
| 1,173 |
| 1,078 |
| 4,425 |
| 4,208 |
| Professional service fees |
| 441 |
| 494 |
| 631 |
| 1,672 |
| 2,314 |
| Marketing expense |
| 336 |
| 264 |
| 162 |
| 1,033 |
| 930 |
| Printing and supplies expense |
| 98 |
| 127 |
| 106 |
| 441 |
| 477 |
| Data processing expense |
| 634 |
| 565 |
| 528 |
| 2,146 |
| 1,912 |
| Other expense |
| 975 |
| 943 |
| 1,135 |
| 4,180 |
| 4,655 |
| Total noninterest expense |
| 10,384 |
| 10,454 |
| 9,192 |
| 39,678 |
| 36,051 |
| Income before income taxes |
| 4,787 |
| 3,920 |
| 3,250 |
| 17,389 |
| 16,564 |
| Income tax provision |
| 836 |
| 665 |
| 2,317 |
| 3,003 |
| 6,723 |
| Net income |
| $ |
| 3,951 |
| $ |
| 3,255 |
| $ |
| 933 |
| $ |
| 14,386 |
| $ |
| 9,841 |
| Earnings per common share: |
| Basic |
| $ |
| 0.51 |
| $ |
| 0.42 |
| $ |
| 0.15 |
| $ |
| 1.95 |
| $ |
| 1.54 |
| Diluted |
| $ |
| 0.50 |
| $ |
| 0.41 |
| $ |
| 0.14 |
| $ |
| 1.91 |
| $ |
| 1.49 |
| Average common shares outstanding - basic |
| 7,750 |
| 7,749 |
| 6,403 |
| 7,377 |
| 6,388 |
| Average common shares outstanding - diluted |
| 7,893 |
| 7,901 |
| 6,630 |
| 7,524 |
| 6,610 |
| Net Interest Income and Net Interest Margin |
| (Unaudited) |
| For the three months ended, |
| December 31, 2018 |
| September 30, 2018 |
| December 31, 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) |
| $ |
| 1,131,705 |
| $ |
| 15,425 |
| 5.41 |
| % |
| $ |
| 1,075,642 |
| $ |
| 15,107 |
| 5.57 |
| % |
| $ |
| 1,010,230 |
| $ |
| 13,337 |
| 5.24 |
| % |
| Investment securities (4): |
| Taxable |
| 133,817 |
| 882 |
| 2.61 |
| 134,619 |
| 817 |
| 2.41 |
| 98,045 |
| 508 |
| 2.06 |
| Tax-exempt |
| 71,025 |
| 476 |
| 3.13 |
| 67,599 |
| 449 |
| 3.13 |
| 50,568 |
| 314 |
| 3.64 |
| Interest earning cash balances |
| 27,107 |
| 164 |
| 2.39 |
| 28,685 |
| 157 |
| 2.17 |
| 36,953 |
| 125 |
| 1.34 |
| Federal Home Loan Bank Stock |
| 8,325 |
| 94 |
| 4.48 |
| 8,303 |
| 99 |
| 4.73 |
| 8,303 |
| 90 |
| 4.30 |
| Total interest-earning assets |
| $ |
| 1,371,979 |
| $ |
| 17,041 |
| 4.95 |
| % |
| $ |
| 1,314,848 |
| $ |
| 16,629 |
| 5.04 |
| % |
| $ |
| 1,204,099 |
| $ |
| 14,374 |
| 4.79 |
| % |
| Non-earning assets: |
| Cash and due from banks |
| 23,459 |
| 22,358 |
| 17,885 |
| Premises and equipment |
| 13,376 |
| 13,465 |
| 13,620 |
| Goodwill |
| 9,387 |
| 9,387 |
| 9,387 |
| Other intangible assets, net |
| 476 |
| 533 |
| 700 |
| Bank-owned life insurance |
| 11,813 |
| 11,732 |
| 11,489 |
| Allowance for loan losses |
| (11,880 |
| ) |
| (11,591 |
| ) |
| (11,577 |
| ) |
| Other non-earning assets |
| 8,665 |
| 7,414 |
| 13,668 |
| Total assets |
| $ |
| 1,427,275 |
| $ |
| 1,368,146 |
| $ |
| 1,259,271 |
| Interest-bearing liabilities: |
| Interest-bearing demand deposits |
| $ |
| 53,009 |
| $ |
| 47 |
| 0.35 |
| % |
| $ |
| 60,022 |
| $ |
| 52 |
| 0.34 |
| % |
| $ |
| 61,818 |
| $ |
| 50 |
| 0.32 |
| % |
| Money market and savings deposits |
| 259,160 |
| 759 |
| 1.16 |
| 249,595 |
| 625 |
| 0.99 |
| 244,792 |
| 421 |
| 0.68 |
| Time deposits |
| 542,047 |
| 2,782 |
| 2.04 |
| 463,373 |
| 2,125 |
| 1.82 |
| 441,090 |
| 1,464 |
| 1.32 |
| Borrowings |
| 66,491 |
| 384 |
| 2.29 |
| 95,371 |
| 502 |
| 2.09 |
| 56,550 |
| 183 |
| 1.28 |
| Subordinated notes |
| 14,888 |
| 256 |
| 6.82 |
| 14,874 |
| 256 |
| 6.83 |
| 14,835 |
| 255 |
| 6.85 |
| Total interest-bearing liabilities |
| $ |
| 935,595 |
| $ |
| 4,228 |
| 1.79 |
| % |
| $ |
| 883,235 |
| $ |
| 3,560 |
| 1.60 |
| % |
| $ |
| 819,085 |
| $ |
| 2,373 |
| 1.15 |
| % |
| Noninterest-bearing liabilities and shareholders' equity: |
| Noninterest bearing demand deposits |
| 331,867 |
| 329,459 |
| 321,426 |
| Other liabilities |
| 11,905 |
| 9,956 |
| 10,003 |
| Shareholders' equity |
| 147,908 |
| 145,496 |
| 108,757 |
| Total liabilities and shareholders' equity |
| $ |
| 1,427,275 |
| $ |
| 1,368,146 |
| $ |
| 1,259,271 |
| Net interest income |
| $ |
| 12,813 |
| $ |
| 13,069 |
| $ |
| 12,001 |
| Interest spread |
| 3.16 |
| % |
| 3.44 |
| % |
| 3.64 |
| % |
| Net interest margin (5) |
| 3.71 |
| 3.94 |
| 3.95 |
| Tax equivalent effect |
| 0.02 |
| 0.03 |
| 0.05 |
| Net interest margin on a fully tax equivalent basis |
| 3.73 |
| 3.97 |
| 4.00 |
| (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 $83 thousand, $84 thousand and $150 thousand on tax-exempt securities for the three months ended December 31, 2018, September 30, 2018 and December 31, 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 year ended, |
| December 31, 2018 |
| December 31, 2017 |
| (Dollars in thousands) |
| Average Balance |
| Interest (1) |
| Average Rate (2) |
| Average Balance |
| Interest (1) |
| Average Rate (2) |
| Interest-earning assets: |
| Gross loans (3) |
| $ |
| 1,072,794 |
| $ |
| 58,262 |
| 5.43 |
| % |
| $ |
| 973,013 |
| $ |
| 52,043 |
| 5.35 |
| % |
| Investment securities (4): |
| Taxable |
| 121,505 |
| 2,939 |
| 2.42 |
| 84,899 |
| 1,746 |
| 2.06 |
| Tax-exempt |
| 63,205 |
| 1,657 |
| 3.13 |
| 38,935 |
| 955 |
| 3.57 |
| Interest earning cash balances |
| 27,182 |
| 546 |
| 2.01 |
| 43,540 |
| 507 |
| 1.16 |
| Federal Home Loan Bank Stock |
| 8,308 |
| 420 |
| 5.06 |
| 8,163 |
| 356 |
| 4.36 |
| Total interest-earning assets |
| $ |
| 1,292,994 |
| $ |
| 63,824 |
| 4.96 |
| % |
| $ |
| 1,148,550 |
| $ |
| 55,607 |
| 4.88 |
| % |
| Non-earning assets: |
| Cash and due from banks |
| 20,556 |
| 18,590 |
| Premises and equipment |
| 13,207 |
| 14,576 |
| Goodwill |
| 9,387 |
| 9,387 |
| Other intangible assets, net |
| 560 |
| 789 |
| Company-owned life insurance |
| 11,692 |
| 11,365 |
| Allowance for loan losses |
| (11,691 |
| ) |
| (11,466 |
| ) |
| Other non-earning assets |
| 9,014 |
| 12,164 |
| Total assets |
| $ |
| 1,345,719 |
| $ |
| 1,203,955 |
| Interest-bearing liabilities: |
| Deposits: |
| Interest-bearing demand deposits |
| $ |
| 60,203 |
| $ |
| 198 |
| 0.33 |
| % |
| $ |
| 59,274 |
| $ |
| 169 |
| 0.29 |
| % |
| Money market and savings deposits |
| 264,656 |
| 2,609 |
| 0.99 |
| 259,449 |
| 1,605 |
| 0.62 |
| Time deposits |
| 477,164 |
| 8,248 |
| 1.73 |
| 373,762 |
| 4,493 |
| 1.20 |
| Borrowings |
| 66,926 |
| 1,330 |
| 1.99 |
| 80,283 |
| 797 |
| 0.99 |
| Subordinated notes |
| 14,866 |
| 1,015 |
| 6.83 |
| 14,813 |
| 1,014 |
| 6.85 |
| Total interest-bearing liabilities |
| $ |
| 883,815 |
| $ |
| 13,400 |
| 1.52 |
| % |
| $ |
| 787,581 |
| $ |
| 8,078 |
| 1.03 |
| % |
| Noninterest-bearing liabilities and shareholders' equity: |
| Noninterest bearing demand deposits |
| 316,764 |
| 301,971 |
| Other liabilities |
| 10,436 |
| 10,297 |
| Shareholders' equity |
| 134,704 |
| 104,106 |
| Total liabilities and shareholders' equity |
| $ |
| 1,345,719 |
| $ |
| 1,203,955 |
| Net interest income |
| $ |
| 50,424 |
| $ |
| 47,529 |
| Interest spread |
| 3.44 |
| % |
| 3.85 |
| % |
| Net interest margin (5) |
| 3.90 |
| 4.14 |
| Tax equivalent effect |
| 0.02 |
| 0.04 |
| Net interest margin on a fully tax equivalent basis |
| 3.92 |
| 4.18 |
| (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 $319 thousand and $434 thousand on tax-exempt securities for the twelve months ended December 31, 2018 and December 31, 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 |
| December 31, |
| September 30, |
| June 30, |
| March 31, |
| December 31, |
| (Dollars in thousands) |
| 2018 |
| 2018 |
| 2018 |
| 2018 |
| 2017 |
| Commercial real estate |
| Non-owner occupied |
| $ |
| 367,671 |
| $ |
| 362,450 |
| $ |
| 361,341 |
| $ |
| 360,014 |
| $ |
| 343,420 |
| Owner-occupied |
| 194,422 |
| 190,131 |
| 172,615 |
| 172,608 |
| 168,342 |
| Total commercial real estate |
| 562,093 |
| 552,581 |
| 533,956 |
| 532,622 |
| 511,762 |
| Commercial and industrial |
| 383,455 |
| 397,060 |
| 363,239 |
| 371,464 |
| 377,686 |
| Residential real estate |
| 180,018 |
| 164,356 |
| 147,763 |
| 146,436 |
| 144,439 |
| Consumer |
| 999 |
| 1,002 |
| 831 |
| 832 |
| 1,036 |
| Total loans |
| $ |
| 1,126,565 |
| $ |
| 1,114,999 |
| $ |
| 1,045,789 |
| $ |
| 1,051,354 |
| $ |
| 1,034,923 |
| Impaired Assets (Unaudited) |
| As of |
| December 31, |
| September 30, |
| June 30, |
| March 31, |
| December 31, |
| (Dollars in thousands) |
| 2018 |
| 2018 |
| 2018 |
| 2018 |
| 2017 |
| Nonaccrual loans |
| Commercial real estate |
| $ |
| 5,927 |
| $ |
| 4,559 |
| $ |
| 2,557 |
| $ |
| 1,946 |
| $ |
| 2,257 |
| Commercial and industrial |
| 9,605 |
| 5,763 |
| 5,983 |
| 8,192 |
| 9,024 |
| Residential real estate |
| 2,915 |
| 2,546 |
| 2,737 |
| 2,838 |
| 2,767 |
| Consumer |
| – |
| 5 |
| – |
| – |
| – |
| Total nonperforming loans |
| 18,447 |
| 12,873 |
| 11,277 |
| 12,976 |
| 14,048 |
| Other real estate owned |
| – |
| – |
| – |
| – |
| 652 |
| Total nonperforming assets |
| 18,447 |
| 12,873 |
| 11,277 |
| 12,976 |
| 14,700 |
| Performing troubled debt restructurings |
| Commercial real estate |
| – |
| 1,511 |
| 1,517 |
| 1,525 |
| – |
| Commercial and industrial |
| 568 |
| 574 |
| 578 |
| 582 |
| 961 |
| Residential real estate |
| 363 |
| 365 |
| 364 |
| 258 |
| 261 |
| Total performing troubled debt restructurings |
| 931 |
| 2,450 |
| 2,459 |
| 2,365 |
| 1,222 |
| Total impaired assets |
| $ |
| 19,378 |
| $ |
| 15,323 |
| $ |
| 13,736 |
| $ |
| 15,341 |
| $ |
| 15,922 |
| Loans 90 days or more past due and still accruing |
| $ |
| 243 |
| $ |
| 354 |
| $ |
| 259 |
| $ |
| 263 |
| $ |
| 440 |
Media Contact: Nicole Ransom (248) 538-2183 Investor Relations Contact: Peter Root (248) 538-2186