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Section 1: 8-K (FORM 8-K)

mbwm20170714_8k.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of Report (date of earliest event reported): July 18, 2017

 


 Mercantile Bank Corporation

(Exact name of registrant as specified in its charter)

 

Michigan

(State or other jurisdiction 

of incorporation) 

000-26719

(Commission File

Number)

38-3360865

(IRS Employer

Identification Number)

                                                      

310 Leonard Street NW, Grand Rapids, Michigan

(Address of principal executive offices)

49504

(Zip Code)

   
Registrant's telephone number, including area code 616-406-3000

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     

 

 
 

 

 

Item 2.02     Results of Operations and Financial Condition.

 

Earnings Release

 

On July 18, 2017, Mercantile Bank Corporation issued a press release announcing earnings and other financial results for the quarter ended June 30, 2017. A copy of the press release is furnished as Exhibit 99.1 to this report and incorporated here by reference.

 

In accordance with General Instruction B.2 of Form 8-K, the information in this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

 

 

Item 9.01     Financial Statements and Exhibits.

 

(d) Exhibits.

 

Exhibit Number 

Description

 

 

         99.1

Press release of Mercantile Bank Corporation dated July 18, 2017, reporting financial results and earnings for the quarter ended June 30, 2017.

          

 

 

 

Signatures

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

Mercantile Bank Corporation

 

 

 

 

 

 

By:

/s/ Charles E. Christmas

 

 

 

Charles E. Christmas

 

 

 

Executive Vice President,

Chief Financial Officer and Treasurer

 

 

Date: July 18, 2017

 

 

 

 

Exhibit Index

 

 

Exhibit Number

Description

 

 

         99.1

Press release of Mercantile Bank Corporation dated July 18, 2017, reporting financial results and earnings for the quarter ended June 30, 2017.

    

(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

ex99-1.htm

Exhibit 99.1

 

Mercantile Bank Corporation Reports Strong Second Quarter 2017 Results

Annualized loan growth of 14 percent and continued strength in core profitability highlight quarter

 

GRAND RAPIDS, Mich., July 18, 2017 – Mercantile Bank Corporation (NASDAQ: MBWM) ("Mercantile") reported net income of $7.3 million, or $0.45 per diluted share, for the second quarter of 2017, compared with net income of $7.4 million, or $0.46 per diluted share, for the respective prior-year period. Net income during the first six months of 2017 totaled $15.0 million, or $0.91 per diluted share, compared to $16.0 million, or $0.98 per diluted share, during the first six months of 2016.

 

“We are very pleased to close the first half of 2017 with a solid quarter that reflects the ongoing success of our strategic initiatives,” said Robert B. Kaminski, Jr., President and Chief Executive Officer of Mercantile. “Our sound financial condition and anticipated new loan fundings make us confident that the strong performance achieved during the first six months of the year can continue throughout the last half of the year.”

 

The second quarter was highlighted by:

 

 

Strong earnings performance and capital position

 

Robust net interest margin

 

Strong asset quality, as reflected by low levels of nonperforming assets and loans in the 30- to 89-days delinquent category

 

New commercial term loan originations of approximately $152 million

 

Continued strength in commercial loan pipeline

 

A bank owned life insurance death benefits claim in the first quarter of 2017 increased reported net income during the first six months of 2017 by approximately $1.1 million, or $0.06 per diluted share, while the repurchase of $11.0 million in trust preferred securities at a 27 percent discount in the first quarter of 2016 increased reported net income during the first six months of 2016 by approximately $1.8 million, or $0.11 per diluted share. Excluding the impacts of these transactions, diluted earnings per share during the first six months of 2017 and 2016 equaled $0.85 and $0.87, respectively.

 

 
 

 

 

Operating Results

 

Total revenue, which consists of net interest income and noninterest income, was $31.2 million during the second quarter of 2017, up $0.1 million or 0.2 percent from the prior-year second quarter. Net interest income during the second quarter of 2017 was $27.2 million, up $0.1 million or 0.3 percent from the second quarter of 2016.

 

The net interest margin was 3.85 percent in the second quarter of 2017, up from 3.73 percent in the linked quarter, but down from 4.01 percent in the prior-year second quarter. The increase in the net interest margin in the current-year second quarter relative to the first quarter of 2017 primarily resulted from a higher yield on loans and an improved earning asset mix. The increased yield on loans mainly reflected the positive impact of increased interest rates on variable-rate commercial loans stemming from a 25 basis point increase in the targeted federal funds rate in March of 2017 and again in June of 2017 and a higher level of purchased credit-impaired commercial loan income. The change in earning asset mix primarily reflected loan growth and a reduction in interest-earning deposit balances. Higher-yielding average loans represented 86.5 percent of average earning assets during the second quarter of 2017, up from 85.6 percent during the linked quarter, while lower-yielding average interest-earning deposit balances represented 1.6 percent of average earning assets during the current-year second quarter, down from 2.2 percent during the linked quarter.

 

The decline in the net interest margin during the second quarter of 2017 compared to the prior-year second quarter reflects a decreased yield on average earning assets, primarily reflecting a lower yield on securities, and an increased cost of funds, mainly reflecting higher costs of certain non-time deposit accounts and borrowed funds. The decreased yield on securities was mainly due to the absence of accelerated discount accretion on called U.S. Government agency bonds being recorded as interest income. Approximately $1.5 million in accelerated discount accretion was recorded as interest income during the second quarter of 2016, positively impacting the net interest margin by 22 basis points; no accelerated discount accretion was recorded during the second quarter of 2017. The negative impact of the decreased yield on securities was somewhat mitigated by an increased loan yield, which primarily stemmed from increased interest rates on variable-rate commercial loans resulting from the aforementioned rate hikes and the 25 basis point rate hike in December of 2016, along with a higher level of purchased credit-impaired commercial loan income.

 

Net interest income and the net interest margin during the second quarter of 2017 and the prior-year second quarter were affected by purchase accounting accretion and amortization entries associated with the fair value measurements recorded effective June 1, 2014. Increases in interest income on loans totaling $1.3 million and $0.9 million were recorded during the second quarters of 2017 and 2016, respectively. An increase in interest expense on subordinated debentures totaling $0.2 million was recorded during both the current-year second quarter and prior-year second quarter. Purchased loan accretion amounts vary from period to period as a result of periodic cash flow re-estimations, loan payoffs, and payment performance.

 

Mercantile recorded a $0.8 million provision for loan losses during the second quarter of 2017 compared to a $1.1 million provision during the respective 2016 period. The provision expense recorded during both periods primarily reflects loan growth.

 

Noninterest income during the second quarter of 2017 was $4.0 million, down slightly from the $4.1 million in noninterest income recorded during the second quarter of 2016. The decrease in noninterest income mainly reflects lower other income and service charges on accounts, mitigating higher credit and debit card fees, payroll processing revenue, mortgage banking activity income, and bank owned life insurance income.

 

 
 

 

 

Noninterest expense totaled $19.9 million during the second quarter of 2017, up $0.7 million or 3.6 percent from the respective 2016 period, generally reflecting expected increases in various overhead costs stemming from recent growth initiatives.

 

Mr. Kaminski continued: “We are very pleased with the sustained strength and relative stability of our net interest margin, which in addition to benefitting as expected from the recent rate hikes initiated by the Federal Open Market Committee, also received a boost from increased purchased credit-impaired commercial loan income. In light of our balance sheet structure, our net interest margin should benefit from any further rate hikes. We continue to seek opportunities to enhance fee income and remain dedicated to meeting growth and expansion objectives in a cost-conscious manner.”   

 

Balance Sheet

 

As of June 30, 2017, total assets were $3.14 billion, up $60.8 million or 2.0 percent from December 31, 2016. Total loans increased $149 million or 6.2 percent, while interest-earning deposits decreased $84.6 million or 63.4 percent, over the same time period. Interest-earning deposit balances declined as a result of these funds being used to meet loan funding requirements, as well as deposit withdrawals stemming from certain commercial customers making tax payments. Approximately $152 million in commercial term loans to new and existing borrowers were originated during the second quarter of 2017, as continuing sales and relationship building efforts resulted in additional lending opportunities. As of June 30, 2017, unfunded commitments on commercial construction and development loans totaled approximately $111 million, which are expected to be largely funded over the next 12 to 18 months.

 

Raymond Reitsma, President of Mercantile Bank of Michigan, noted: “Our lenders’ continuing focus on identifying and fostering new customer relationships and serving our existing customer base is depicted by the strong loan growth achieved during the second quarter of 2017. Our relationship-based approach to banking continues to be well received by clients in our markets. We remain committed to growing the loan portfolio in a disciplined manner, including an emphasis on both loan pricing and quality. Based on our current loan pipeline, we are quite confident that we can continue to grow the commercial loan portfolio in future periods. We are also pleased to report that our residential mortgage loan portfolio grew for the fourth consecutive quarter, reflecting the ongoing success of strategic initiatives that were implemented to increase market penetration.”

 

Commercial and industrial loans and owner-occupied commercial real estate (“CRE”) loans combined represented approximately 50 percent of total loans as of June 30, 2017. Non-owner occupied CRE loans equaled about 31 percent of total loans as of June 30, 2017.

 

As of June 30, 2017, total deposits were $2.37 billion, down $4.3 million from December 31, 2016, but up $91.0 million from June 30, 2016. Local deposits were down $21.7 million since year-end 2016, but up $94.0 million over the past twelve months. The reduction in local deposits was mainly due to certain commercial customers making tax payments, while the growth in deposits was primarily driven by new commercial loan relationships. Wholesale funds were $339 million, or approximately 12 percent of total funds, as of June 30, 2017, compared to $251 million as of December 31, 2016 and $275 million as of June 30, 2016.

 

 
 

 

 

Asset Quality

 

Nonperforming assets at June 30, 2017 were $7.2 million, or 0.2 percent of total assets, compared to $7.8 million, or 0.3 percent of total assets, at March 31, 2017, and $6.4 million, or 0.2 percent of total assets, at December 31, 2016. The level of past due loans remains nominal, and loan relationships on the internal watch list have remained relatively consistent in number and dollar volume. Net loan charge-offs were $0.7 million during the second quarter of 2017, or an annualized 0.12 percent of average loans, compared with net loan charge-offs of $0.3 million in both the linked quarter and prior-year second quarter (annualized 0.05 percent and 0.04 percent of average loans, respectively).

 

Capital Position

 

Shareholders’ equity totaled $357 million as of June 30, 2017, an increase of $16.7 million from year-end 2016. The Bank’s capital position remains above “well-capitalized” with a total risk-based capital ratio of 12.7 percent as of June 30, 2017, compared to 13.1 percent at December 31, 2016. At June 30, 2017, the Bank had approximately $76 million in excess of the 10.0 percent minimum regulatory threshold required to be considered a “well-capitalized” institution. Mercantile reported 16,480,852 total shares outstanding at June 30, 2017.

 

No shares were repurchased during the first six months of 2017 as part of the $20 million stock repurchase program that was announced in January of 2015. Future share repurchases totaling $15.5 million can be made under the program, which was expanded by $15 million in early 2016.

 

Mr. Kaminski concluded: “Our strong financial performance during the first six months of 2017 positions us to meet growth and profitability objectives and further enhance shareholder value. Our commitment to increasing shareholder value is also depicted by our cash dividend program, including the announcement of an increased third quarter dividend earlier today. We continue to be successful in gaining new clients by using a value-added approach and offering a wide-range of products and services, and we are excited about the opportunities that are available to us as we seek out potential customers in our markets.”

 

About Mercantile Bank Corporation

 

Based in Grand Rapids, Michigan, Mercantile Bank Corporation is the bank holding company for Mercantile Bank of Michigan.  Mercantile provides banking services to businesses, individuals and governmental units, and differentiates itself on the basis of service quality and the expertise of its banking staff. Mercantile has assets of approximately $3.1 billion and operates 49 banking offices. Mercantile Bank Corporation’s common stock is listed on the NASDAQ Global Select Market under the symbol “MBWM.”

 

Forward-Looking Statements

 

This news release contains comments or information that constitute forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995) that are based on current expectations that involve a number of risks and uncertainties. Actual results may differ materially from the results expressed in forward-looking statements. Factors that might cause such a difference include changes in interest rates and interest rate relationships; demand for products and services; the degree of competition by traditional and nontraditional competitors; changes in banking regulation or actions by bank regulators; changes in tax laws; changes in prices, levies, and assessments; the impact of technological advances; governmental and regulatory policy changes; the outcomes of contingencies; trends in customer behavior as well as their ability to repay loans; changes in local real estate values; changes in the national and local economies; and other factors, including risk factors, disclosed from time to time in filings made by Mercantile with the Securities and Exchange Commission. Mercantile undertakes no obligation to update or clarify forward-looking statements, whether as a result of new information, future events or otherwise.

 

 

FOR FURTHER INFORMATION:

 

Robert B. Kaminski, Jr.

Charles Christmas

President & CEO

Executive Vice President & CFO

616-726-1502 616-726-1202
[email protected] [email protected]
 
 
 

 

 

Mercantile Bank Corporation

Second Quarter 2017 Results

MERCANTILE BANK CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

   

JUNE 30,

   

DECEMBER 31,

   

JUNE 30,

 
   

2017

   

2016

   

2016

 

ASSETS

                       

Cash and due from banks

  $ 52,847,000     $ 50,200,000     $ 60,087,000  

Interest-earning deposits

    48,762,000       133,396,000       46,896,000  

Total cash and cash equivalents

    101,609,000       183,596,000       106,983,000  
                         

Securities available for sale

    322,258,000       328,060,000       323,452,000  

Federal Home Loan Bank stock

    11,036,000       8,026,000       8,026,000  
                         

Loans

    2,527,281,000       2,378,620,000       2,379,940,000  

Allowance for loan losses

    (18,295,000 )     (17,961,000 )     (17,110,000 )

Loans, net

    2,508,986,000       2,360,659,000       2,362,830,000  
                         

Premises and equipment, net

    45,999,000       45,456,000       45,558,000  

Bank owned life insurance

    66,535,000       67,198,000       66,537,000  

Goodwill

    49,473,000       49,473,000       49,473,000  

Core deposit intangible

    8,712,000       9,957,000       11,228,000  

Other assets

    28,728,000       30,146,000       25,849,000  
                         

Total assets

  $ 3,143,336,000     $ 3,082,571,000     $ 2,999,936,000  
                         
                         

LIABILITIES AND SHAREHOLDERS' EQUITY

                       

Deposits:

                       

Noninterest-bearing

  $ 800,718,000     $ 810,600,000     $ 733,573,000  

Interest-bearing

    1,570,003,000       1,564,385,000       1,546,145,000  

Total deposits

    2,370,721,000       2,374,985,000       2,279,718,000  
                         

Securities sold under agreements to repurchase

    110,920,000       131,710,000       136,690,000  

Federal Home Loan Bank advances

    245,000,000       175,000,000       178,000,000  

Subordinated debentures

    45,176,000       44,835,000       44,494,000  

Accrued interest and other liabilities

    14,020,000       15,230,000       16,457,000  

Total liabilities

    2,785,837,000       2,741,760,000       2,655,359,000  
                         

SHAREHOLDERS' EQUITY

                       

Common stock

    308,343,000       305,488,000       303,336,000  

Retained earnings

    50,012,000       40,904,000       38,553,000  

Accumulated other comprehensive income/(loss)

    (856,000 )     (5,581,000 )     2,688,000  

Total shareholders' equity

    357,499,000       340,811,000       344,577,000  
                         

Total liabilities and shareholders' equity

  $ 3,143,336,000     $ 3,082,571,000     $ 2,999,936,000  

 

 
 

 

 

Mercantile Bank Corporation

Second Quarter 2017 Results

MERCANTILE BANK CORPORATION

CONSOLIDATED REPORTS OF INCOME

(Unaudited)

 

   

THREE MONTHS ENDED

   

THREE MONTHS ENDED

   

SIX MONTHS ENDED

   

SIX MONTHS ENDED

 
   

June 30, 2017

   

June 30, 2016

   

June 30, 2017

   

June 30, 2016

 

INTEREST INCOME

                               

Loans, including fees

  $ 28,927,000     $ 26,887,000     $ 55,660,000     $ 53,666,000  

Investment securities

    1,860,000       3,197,000       3,688,000       5,250,000  

Other interest-earning assets

    116,000       63,000       259,000       120,000  

Total interest income

    30,903,000       30,147,000       59,607,000       59,036,000  
                                 

INTEREST EXPENSE

                               

Deposits

    2,023,000       1,819,000       3,891,000       3,685,000  

Short-term borrowings

    46,000       47,000       97,000       91,000  

Federal Home Loan Bank advances

    1,002,000       575,000       1,657,000       925,000  

Other borrowed money

    639,000       606,000       1,260,000       1,353,000  

Total interest expense

    3,710,000       3,047,000       6,905,000       6,054,000  
                                 

Net interest income

    27,193,000       27,100,000       52,702,000       52,982,000  
                                 

Provision for loan losses

    750,000       1,100,000       1,350,000       1,700,000  
                                 

Net interest income after provision for loan losses

    26,443,000       26,000,000       51,352,000       51,282,000  
                                 

NONINTEREST INCOME

                               

Service charges on accounts

    1,054,000       1,090,000       2,072,000       2,038,000  

Credit and debit card income

    1,176,000       1,080,000       2,282,000       2,095,000  

Mortgage banking income

    783,000       744,000       1,906,000       1,342,000  

Earnings on bank owned life insurance

    328,000       298,000       2,066,000       584,000  

Other income

    701,000       852,000       1,567,000       5,091,000  

Total noninterest income

    4,042,000       4,064,000       9,893,000       11,150,000  
                                 

NONINTEREST EXPENSE

                               

Salaries and benefits

    10,888,000       10,801,000       22,160,000       21,796,000  

Occupancy

    1,554,000       1,480,000       3,108,000       3,084,000  

Furniture and equipment

    546,000       522,000       1,081,000       1,047,000  

Data processing costs

    2,072,000       1,970,000       4,083,000       3,962,000  

FDIC insurance costs

    248,000       365,000       458,000       757,000  

Other expense

    4,574,000       4,055,000       8,768,000       8,415,000  

Total noninterest expense

    19,882,000       19,193,000       39,658,000       39,061,000  
                                 

Income before federal income tax expense

    10,603,000       10,871,000       21,587,000       23,371,000  
                                 

Federal income tax expense

    3,260,000       3,437,000       6,629,000       7,388,000  
                                 

Net Income

  $ 7,343,000     $ 7,434,000     $ 14,958,000     $ 15,983,000  
                                 

Basic earnings per share

  $ 0.45     $ 0.46     $ 0.91     $ 0.98  

Diluted earnings per share

  $ 0.45     $ 0.46     $ 0.91     $ 0.98  
                                 

Average basic shares outstanding

    16,471,060       16,240,966       16,452,954       16,266,311  

Average diluted shares outstanding

    16,485,356       16,268,839       16,467,384       16,293,250  

 

 
 

 

 

Mercantile Bank Corporation

Second Quarter 2017 Results

MERCANTILE BANK CORPORATION

CONSOLIDATED FINANCIAL HIGHLIGHTS

(Unaudited)

 

   

Quarterly

   

Year-To-Date

 

(dollars in thousands except per share data)

 

2017

   

2017

   

2016

   

2016

   

2016

                 
   

2nd Qtr

   

1st Qtr

   

4th Qtr

   

3rd Qtr

   

2nd Qtr

   

2017

   

2016

 

EARNINGS

                                                       

Net interest income

  $ 27,193       25,509       26,435       26,450       27,100       52,702       52,982  

Provision for loan losses

  $ 750       600       600       600       1,100       1,350       1,700  

Noninterest income

  $ 4,042       5,851       4,604       5,284       4,064       9,893       11,150  

Noninterest expense

  $ 19,882       19,776       18,394       19,663       19,193       39,658       39,061  

Net income before federal income tax expense

  $ 10,603       10,984       12,045       11,471       10,871       21,587       23,371  

Net income

  $ 7,343       7,615       8,085       7,845       7,434       14,958       15,983  

Basic earnings per share

  $ 0.45       0.46       0.49       0.48       0.46       0.91       0.98  

Diluted earnings per share

  $ 0.45       0.46       0.49       0.48       0.46       0.91       0.98  

Average basic shares outstanding

    16,471,060       16,434,647       16,352,359       16,282,804       16,240,966       16,452,954       16,266,311  

Average diluted shares outstanding

    16,485,356       16,449,210       16,374,117       16,307,350       16,268,839       16,467,384       16,293,250  
                                                         

PERFORMANCE RATIOS

                                                       

Return on average assets

    0.96 %     1.02 %     1.05 %     1.02 %     1.01 %     0.99 %     1.10 %

Return on average equity

    8.39 %     8.99 %     9.35 %     9.00 %     8.79 %     8.69 %     9.48 %

Net interest margin (fully tax-equivalent)

    3.85 %     3.73 %     3.72 %     3.76 %     4.01 %     3.79 %     3.96 %

Efficiency ratio

    63.65 %     63.06 %     59.26 %     61.96 %     61.59 %     63.36 %     60.91 %

Full-time equivalent employees

    643       617       616       612       633       643       633  
                                                         

YIELD ON ASSETS / COST OF FUNDS

                                                       

Yield on loans

    4.69 %     4.54 %     4.65 %     4.57 %     4.60 %     4.62 %     4.66 %

Yield on securities

    2.44 %     2.35 %     2.27 %     2.71 %     3.99 %     2.40 %     3.24 %

Yield on other interest-earning assets

    0.99 %     0.81 %     0.51 %     0.51 %     0.51 %     0.97 %     0.53 %

Yield on total earning assets

    4.37 %     4.20 %     4.18 %     4.22 %     4.45 %     4.28 %     4.41 %

Yield on total assets

    4.05 %     3.88 %     3.87 %     3.90 %     4.12 %     3.97 %     4.08 %

Cost of deposits

    0.35 %     0.33 %     0.33 %     0.33 %     0.32 %     0.34 %     0.33 %

Cost of borrowed funds

    1.69 %     1.53 %     1.45 %     1.41 %     1.42 %     1.61 %     1.47 %

Cost of interest-bearing liabilities

    0.77 %     0.68 %     0.68 %     0.66 %     0.64 %     0.73 %     0.64 %

Cost of funds (total earning assets)

    0.52 %     0.47 %     0.46 %     0.46 %     0.44 %     0.49 %     0.45 %

Cost of funds (total assets)

    0.48 %     0.43 %     0.42 %     0.42 %     0.41 %     0.46 %     0.42 %
                                                         

PURCHASE ACCOUNTING ADJUSTMENTS

                                                       

Loan portfolio - increase interest income

  $ 1,336       832       1,672       1,002       935       2,168       2,251  

Trust preferred - increase interest expense

  $ 171       171       171       171       171       342       342  

Core deposit intangible - increase overhead

  $ 609       636       636       636       688       1,245       1,403  
                                                         

MORTGAGE BANKING ACTIVITY

                                                       

Total mortgage loans originated

  $ 60,371       38,365       46,727       52,340       39,559       98,736       64,005  

Purchase mortgage loans originated

  $ 39,115       21,523       21,962       25,542       21,995       60,638       30,747  

Refinance mortgage loans originated

  $ 21,256       16,842       24,765       26,798       17,564       38,098       33,258  

Total mortgage loans sold

  $ 29,371       18,463       30,081       35,826       26,229       47,834       45,151  

Net gain on sale of mortgage loans

  $ 1,012       732       993       1,079       791       1,744       1,325  
                                                         

CAPITAL

                                                       

Tangible equity to tangible assets

    9.70 %     9.77 %     9.31 %     9.63 %     9.66 %     9.70 %     9.66 %

Tier 1 leverage capital ratio

    11.49 %     11.53 %     11.17 %     11.28 %     11.41 %     11.49 %     11.41 %

Common equity risk-based capital ratio

    10.65 %     10.83 %     10.88 %     10.83 %     10.73 %     10.65 %     10.73 %

Tier 1 risk-based capital ratio

    12.15 %     12.39 %     12.47 %     12.40 %     12.31 %     12.15 %     12.31 %

Total risk-based capital ratio

    12.79 %     13.05 %     13.13 %     13.05 %     12.95 %     12.79 %     12.95 %

Tier 1 capital

  $ 347,754       341,708       336,316       337,054       330,710       347,754       330,710  

Tier 1 plus tier 2 capital

  $ 366,048       359,984       354,278       354,580       347,819       366,048       347,819  

Total risk-weighted assets

  $ 2,861,605       2,757,616       2,697,727       2,718,012       2,685,823       2,861,605       2,685,823  

Book value per common share

  $ 21.69       21.13       20.76       21.44       21.18       21.69       21.18  

Tangible book value per common share

  $ 18.16       17.56       17.14       17.76       17.45       18.16       17.45  

Cash dividend per common share

  $ 0.18       0.18       0.67       0.17       0.16       0.36       0.32  
                                                         

ASSET QUALITY

                                                       

Gross loan charge-offs

  $ 1,150       456       970       363       397       1,606       872  

Recoveries

  $ 419       171       805       179       145       590       601  

Net loan charge-offs (recoveries)

  $ 731       285       165       184       252       1,016       271  

Net loan charge-offs to average loans

    0.12 %     0.05 %     0.03 %     0.03 %     0.04 %     0.08 %     0.02 %

Allowance for loan losses

  $ 18,295       18,276       17,961       17,526       17,110       18,295       17,110  

Allowance to originated loans

    0.86 %     0.92 %     0.95 %     0.93 %     0.94 %     0.86 %     0.94 %

Nonperforming loans

  $ 6,450       7,292       5,939       4,669       5,168       6,450       5,168  

Other real estate/repossessed assets

  $ 789       495       469       790       815       789       815  

Nonperforming loans to total loans

    0.26 %     0.30 %     0.25 %     0.19 %     0.22 %     0.26 %     0.22 %

Nonperforming assets to total assets

    0.23 %     0.26 %     0.21 %     0.18 %     0.20 %     0.23 %     0.20 %
                                                         

NONPERFORMING ASSETS - COMPOSITION

                                                       

Residential real estate:

                                                       

Land development

  $ 0       0       16       23       42       0       42  

Construction

  $ 0       0       0       0       319       0       319  

Owner occupied / rental

  $ 3,367       2,972       2,883       2,945       2,893       3,367       2,893  

Commercial real estate:

                                                       

Land development

  $ 65       80       95       110       125       65       125  

Construction

  $ 0       0       0       0       0       0       0  

Owner occupied

  $ 1,313       1,221       610       1,597       2,263       1,313       2,263  

Non-owner occuiped

  $ 400       421       488       691       134       400       134  

Non-real estate:

                                                       

Commercial assets

  $ 2,081       3,076       2,293       65       165       2,081       165  

Consumer assets

  $ 13       17       23       28       42       13       42  

Total nonperforming assets

    7,239       7,787       6,408       5,459       5,983       7,239       5,983  
                                                         

NONPERFORMING ASSETS - RECON

                                                       

Beginning balance

  $ 7,787       6,408       5,459       5,983       6,320       6,408       6,737  

Additions - originated loans

  $ 1,774       2,987       2,953       1,172       1,096       4,761       2,219  

Merger-related activity

  $ 16       0       33       0       0       16       0  

Return to performing status

  $ 0       (113 )     (13 )     0       0       (113 )     0  

Principal payments

  $ (1,168 )     (1,289 )     (1,386 )     (1,509 )     (495 )     (2,457 )     (1,269 )

Sale proceeds

  $ (147 )     (56 )     (308 )     (76 )     (642 )     (203 )     (1,044 )

Loan charge-offs

  $ (953 )     (135 )     (263 )     (101 )     (261 )     (1,088 )     (617 )

Valuation write-downs

  $ (70 )     (15 )     (67 )     (10 )     (35 )     (85 )     (43 )

Ending balance

  $ 7,239       7,787       6,408       5,459       5,983       7,239       5,983  
                                                         

LOAN PORTFOLIO COMPOSITION

                                                       

Commercial:

                                                       

Commercial & industrial

  $ 780,816       757,219       713,903       750,330       750,136       780,816       750,136  

Land development & construction

  $ 29,027       31,924       34,828       37,455       40,529       29,027       40,529  

Owner occupied comm'l R/E

  $ 491,633