LEVL - Level One Bancorp Inc. reports second quarter 2018 net income of $4.0 million representing $0.53 of earnings per diluted average share

Successful completion of initial public offering in April 2018 resulted in net proceeds of $29.0 million, after deducting underwriting commissions and offering expenses

FARMINGTON HILLS, Mich., July 30, 2018 (GLOBE NEWSWIRE) -- Level One Bancorp, Inc. (“Level One”) (Nasdaq: LEVL) today reported net income of $4.0 million, or $0.53 per diluted share, in the second quarter of 2018. This compares with net income of $3.2 million, or $0.47 per diluted share, in the preceding quarter and $3.3 million, or $0.50 per diluted share, in the second quarter of 2017.

Patrick J. Fehring, President and Chief Executive Officer, commented, "We are pleased to report a solid second quarter with earnings of $4.0 million, or $0.53 per diluted share. These earnings represent year over year loan growth of 11.70% and reflect our strong credit quality. We are committed to providing shareholder returns with a strategy of quality growth."

Second Quarter Financial Highlights

-         Net income was $4.0 million, or $0.53 per diluted share, for the second quarter of 2018
-         Net interest margin was 3.99%, compared to 4.03% in the preceding quarter and 4.32% in the second quarter of
           2017
-         Annualized return on average assets was 1.23%, compared to 1.12% in the second quarter of 2017
-         Annualized return on average equity was 11.93%, compared to 12.98% in the second quarter of 2017
-         Total assets increased 9.89% to $1.32 billion at June 30, 2018, compared to $1.20 billion at June 30, 2017
-         Total deposits increased 7.55% to $1.07 billion at June 30, 2018, compared to $990.5 million at June 30, 2017
-         Total loans increased 11.70% to $1.05 billion at June 30, 2018, compared to $936.2 million at June 30, 2017
-         Book value per share increased 13.56% to $18.51 per share compared to $16.30 per share at June 30, 2017
-         Tangible book value per share increased 17.13% to $17.23 per share compared to $14.71 per share at June 30, 2017

Balance Sheet Review

Level One's total assets were $1.32 billion at June 30, 2018, an increase of $22.3 million, or 1.71%, from March 31, 2018, and up $119.1 million, or 9.89%, from $1.20 billion at June 30, 2017.

The investment securities portfolio was $196.0 million at June 30, 2018, an increase of $35.7 million, or 22.26%, from $160.3 million at March 31, 2018, and up $80.5 million, or 69.6%, from $115.6 million at June 30, 2017.

Total loans were $1.05 billion at June 30, 2018, a decrease of $5.6 million, or 0.53%, from $1.05 billion at March 31, 2018, and up $109.6 million, or 11.70%, from $936.2 million at June 30, 2017. The growth in total loans compared to June 30, 2017 was primarily due to growth in our commercial and industrial and commercial real estate loan portfolios.

Total deposits were $1.07 billion at June 30, 2018, a decrease of $47.4 million, or 4.26%, from $1.11 billion at March 31, 2018, and up $74.7 million, or 7.55%, from $990.5 million at June 30, 2017. Total deposit composition at June 30, 2018 consisted of 35.42% of demand deposit accounts, 23.24% of savings and money market accounts and 41.34% of time deposits.

Operating Results

Level One's net interest income before the provision for loan losses increased $288 thousand, or 2.37%, to $12.4 million in the second quarter of 2018, compared to $12.1 million in the preceding quarter, and increased $309 thousand, or 2.55%, compared to $12.1 million in the second quarter of 2017, primarily as a result of increased income on originated loans.

Level One’s net interest margin was 3.99% in the second quarter of 2018, compared to 4.03% in the preceding quarter and 4.32% in the second quarter of 2017, primarily as a result of higher cost of funds.

Level One's second quarter 2018 noninterest income increased $80 thousand, or 5.83%, to $1.5 million in the second quarter of 2018, compared to $1.4 million in the preceding quarter, and decreased $332 thousand, or 18.61%, compared to $1.8 million in the second quarter of 2017. The change in noninterest income compared to the prior period was primarily due to an increase in net gain on sale of residential mortgage loans. The change in noninterest income compared to the second quarter of 2017 was impacted by decreases in other charges and fees and service charges on deposits as well as a decrease in net gain on sales of securities.

Level One’s second quarter 2018 noninterest expenses were $9.7 million, compared to $9.1 million in the preceding quarter and $8.9 million in the second quarter of 2017, primarily as a result of increased salary and employee benefits. 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 2018 was 69.99%, compared to 67.67% for the preceding quarter and 63.72% in the second quarter of 2017.

Level One's income tax provision was $860 thousand, or 17.65% of pretax income, in the second quarter of 2018, as compared to $642 thousand, or 16.85% of pretax income, in the preceding quarter and $1.7 million, or 33.19% of pretax income, in the second quarter of 2017. The decrease in tax expense during the three months ended June 30, 2018, as compared to the second quarter of 2017, is primarily a result of the change in tax rates from 35% to 21% due to the enactment of the Tax Cuts and Jobs Act.

Asset Quality

Level One's asset quality remained solid during the second quarter of 2018. Total nonperforming loans were $11.3 million, or 1.08% of total loans, at June 30, 2018, a decrease of $1.7 million from nonperforming loans of $13.0 million, or 1.23% of total loans, at March 31, 2018, and an increase of $1.6 million from nonperforming loans of $9.7 million, or 1.04% of total loans, at June 30, 2017. Level One had no other real estate owned assets at June 30, 2018 or March 31, 2018, compared to $268 thousand at June 30, 2017. Nonperforming assets, consisting of nonaccrual loans and other real estate owned, as a percentage of total assets were 0.85% at June 30, 2018, compared to 1.00% at March 31, 2018, and 0.83% at June 30, 2017.

In addition, we had $259 thousand in loans 90 days or more past due and still accruing at June 30, 2018, compared to $263 thousand at March 31, 2018 and $662 thousand at June 30, 2017.

Performing troubled debt restructured loans that were not included in nonaccrual loans at June 30, 2018 were $2.5 million, compared to $2.4 million in the preceding quarter and $1.2 million at June 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 recoveries in the second quarter of 2018 were $669 thousand, or 0.26% of average loans on an annualized basis, compared to $755 thousand of net charge offs, or 0.29% of average loans on an annualized basis, for the preceding quarter and $96 thousand of net recoveries, or 0.04% of average loans on an annualized basis at June 30, 2017.

Level One's second quarter provision for loan losses was a provision benefit of  $710 thousand, compared to a provision expense of $554 thousand in the preceding quarter and a provision expense of $68 thousand in the second quarter of 2017. The allowance for loan losses was $11.5 million, or 1.10% of total loans, at June 30, 2018, compared to $11.5 million, or 1.09% of total loans, at March 31, 2018, and $11.4 million, or 1.22% of total loans, at June 30, 2017. As of June 30, 2018, the allowance for loan losses as a percentage of nonperforming loans was 101.67%, compared to 88.67% at March 31, 2018, and 117.36% at June 30, 2017.

Capital

Total shareholders’ equity was $143.4 million at June 30, 2018, an increase of $32.9 million, or 29.79%, compared with $110.5 million at March 31, 2018 and increased $39.2 million, or 37.66%, from $104.2 million at June 30, 2017, primarily as the result of our initial public offering.

Recent Developments

Initial Public Offering: On April 24, 2018, Level One completed its initial public offering.  In the offering, Level One sold 1,150,765 shares, including 180,000 shares of common stock pursuant to the exercise in full by the underwriters of their option to purchase additional shares, at an initial public offering price of $28.00 per share. The selling shareholders sold an additional 229,235 shares of common stock in the offering at the initial public offering price. Level One did not receive any proceeds from the sale of shares of common stock sold by the selling shareholders in the offering.  The shares began trading on the Nasdaq Global Select Market on Friday, April 20, 2018, under the symbol "LEVL".

Second Quarter Dividend: On June 21, 2018, Level One’s Board of Directors declared a quarterly cash dividend of $0.03 per share. This dividend was paid out on July 15, 2018, to stockholders of record at the close of business on June 30, 2018.

Expansion of Mortgage Division: On July 9, 2018, Level One announced it was doubling the size of its mortgage division with the addition of new mortgage loan officers and support staff.

“We are excited to welcome a team of 30 successful residential mortgage team members to Level One Bank.  This strategic action was a great opportunity for Level One to expand our mortgage business with a proven team.  We expect the addition of this team will increase our presence in the residential marketplace and add to our fee revenue in future quarters,” commented Level One Bank President and Chief Executive Officer, Patrick J. Fehring.

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 $1.32 billion as of June 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 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.

⁽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.
⁽³⁾ Capital ratios for June 30, 2018 are Level One Bank capital ratios.

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:

(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 $76 thousand, $78 thousand and $99 thousand on tax-exempt securities for the three months ended June 30, 2018, March 31, 2018 and June 30, 2017, respectively, using the statutory 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.

(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 $150 thousand and $181 thousand on tax-exempt securities for the six months ended June 30, 2018 and June 30, 2017, respectively, using the statutory 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.

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