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

mbwm20171016_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): October 17, 2017

 


 

Mercantile Bank Corporation

(Exact name of registrant as specified in its charter)

         
Michigan   000-26719   38-3360865
(State or other jurisdiction   (Commission File   (IRS Employer
of incorporation)   Number)   Identification Number)
         
310 Leonard Street NW, Grand Rapids, Michigan   49504
         (Address of principal executive offices)   (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 October 17, 2017, Mercantile Bank Corporation issued a press release announcing earnings and other financial results for the quarter ended September 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 October 17, 2017, reporting financial results and earnings for the quarter ended September 30, 2017.

 

2

 

 

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: October 17, 2017

 

3

 

 

Exhibit Index

   
   
Exhibit Number   Description
     
     99.1    Press release of Mercantile Bank Corporation dated October 17, 2017, reporting financial results and earnings for the quarter ended September 30, 2017.

 

 

(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

ex_96639.htm

Exhibit 99.1

 

 

 

Mercantile Bank Corporation Reports Strong Third Quarter 2017 Results

Continued strength in core profitability highlights quarter

 

GRAND RAPIDS, Mich., October 17, 2017 – Mercantile Bank Corporation (NASDAQ: MBWM) ("Mercantile") reported net income of $8.3 million, or $0.51 per diluted share, for the third quarter of 2017, compared with net income of $7.8 million, or $0.48 per diluted share, for the respective prior-year period. Net income during the first nine months of 2017 totaled $23.3 million, or $1.41 per diluted share, compared to $23.8 million, or $1.46 per diluted share, during the first nine months of 2016. Excluding the impacts of certain noncore transactions, including a Bank-owned life insurance death benefit claim in the first quarter of 2017, the repurchase of trust preferred securities at a discount in the first quarter of 2016, and accelerated discount accretion on called U.S. Government agency bonds during the first nine months of 2016, diluted earnings per share during the first nine months of 2017 and 2016 equaled $1.34 and $1.27, respectively.

 

“We are very pleased to report another quarter of strong operating performance,” said Robert B. Kaminski, Jr., President and Chief Executive Officer of Mercantile. “Our sustained strength in core profitability and strong capital position provide us with a high degree of optimism that the fourth quarter of 2017 will produce operating results similar to those achieved during the first three quarters of the year and position us well for sustainable growth opportunities into 2018.”

 

The third quarter was highlighted by:

 

 

Robust earnings performance and capital position

 

Healthy net interest margin

 

Continued expense control

 

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 $128 million

 

Continued strength in commercial and mortgage loan pipelines

 

Increased cash dividend

 

Operating Results

 

Total revenue, which consists of net interest income and noninterest income, was $33.2 million during the third quarter of 2017, up $1.5 million or 4.8 percent from the prior-year third quarter. Net interest income during the third quarter of 2017 was $28.6 million, up $2.2 million or 8.3 percent from the third quarter of 2016, reflecting a higher level of earning assets and an increased net interest margin.

 

 

 

 

The net interest margin was 3.83 percent in the third quarter of 2017, up from 3.76 percent in the prior-year third quarter. The increase in the net interest margin primarily resulted from a higher yield on loans, mainly reflecting the positive impact of higher interest rates on variable-rate commercial loans stemming from the 25 basis point increases in the targeted federal funds rate in December of 2016 and March and June of 2017 and a higher level of purchased credit-impaired commercial loan income. The cost of funds equaled 0.58 percent during the third quarter of 2017, up from 0.46 percent during the respective 2016 period mainly due to increased costs of certain non-time deposit accounts and borrowed funds.

 

Net interest income and the net interest margin during the third quarter of 2017 and the prior-year third quarter were affected by purchased accounting accretion and amortization entries associated with the fair value measurements recorded effective June 1, 2014. Increases in interest income on loans totaling $1.8 million and $1.0 million were recorded during the third 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 third quarter and prior-year third 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 $1.0 million provision for loan losses during the third quarter of 2017 compared to a $0.6 million provision during the respective 2016 period. The provision expense recorded during the third quarter of 2017 primarily reflects an increased allocation related to the economic conditions environmental factor. Ongoing loan growth also necessitated a portion of the provision expense incurred during the current-year third quarter and accounted for a substantial portion of the provision expense recorded during the third quarter of 2016.

 

Noninterest income during the third quarter of 2017 was $4.6 million, down $0.7 million or 12.9 percent from the $5.3 million recorded during the third quarter of 2016. Growth in several fee income categories, including credit and debit card fees, mortgage banking activity income, and payroll processing revenue, was more than offset by a decline in other income, which was elevated in the third quarter of 2016 as a result of certain noncore transactions, including the reimbursement of medical insurance premiums charged in prior years and payments received on purchased credit-impaired loans that had been charged-off prior to the merger with Firstbank Corporation.

 

Noninterest expense totaled $20.2 million during the third quarter of 2017, up $0.5 million or 2.8 percent from the respective 2016 period primarily due to increased salary and benefit costs and general operating expenses. The increase in salary and benefit costs primarily reflects annual employee merit increases and the hiring of additional staff, while increases in other operating expenses generally reflect costs associated with recent expansion initiatives.

 

Mr. Kaminski continued: “As expected, our net interest margin benefitted from the recent increases in short-term interest rates stemming from the Federal Open Market Committee’s decision to continue its tightening path. Although our cost of funds has trended upward over the past few quarters, its impact on our net interest margin has been surpassed by an increasing yield on earning assets, primarily reflecting higher interest rates on variable-rate commercial loans resulting from the recent rate hikes and increased purchased credit-impaired commercial loan income. Based on our balance sheet structure, we expect any additional tightening by the Federal Open Market Committee to positively impact our net interest margin. We remain focused on identifying opportunities to enhance revenue and have been proactively adding proven revenue producers to our sales team. We have also implemented expansion and other strategic initiatives in a cost-conscious manner.”

 

 

 

 

Balance Sheet

 

As of September 30, 2017, total assets were $3.25 billion, up $172 million or 5.6 percent from December 31, 2016; total loans increased $176 million, or 7.4 percent, to $2.55 billion over the same time period, representing an annualized growth rate of approximately 10 percent. During the twelve months ended September 30, 2017, total assets were up $191 million or 6.2 percent, and total loans were up $148 million or 6.1 percent. Approximately $410 million in commercial term loans to new and existing borrowers were originated during the first nine months of 2017, including about $128 million during the third quarter, as continuing sales and relationship building efforts presented additional lending opportunities. As of September 30, 2017, unfunded commitments on commercial construction and development loans totaled approximately $163 million, up from $111 million as of June 30, 2017; the commitments are expected to be largely funded over the next 12 to 18 months.

 

Raymond Reitsma, President of Mercantile Bank of Michigan, noted: “We are pleased with the loan growth achieved during the first nine months of 2017, along with the relatively consistent dollar volume of new commercial term loans originated during each quarter. Although competitive pressures remain in our markets, we have not wavered from our ongoing commitment to grow the loan portfolio in a controlled manner, focusing on an appropriate balance between credit risk and pricing. Based on the strength of our loan pipeline and expected draws on construction and development lines of credit, we are confident that a solid level of commercial loans will be funded in future periods. We are also very pleased to report that the success of strategic initiatives designed to increase our residential mortgage loan market penetration continued during the third quarter. Our residential mortgage portfolio grew nearly seven percent during the quarter, marking the sixth consecutive quarter of growth in the portfolio.”

 

Commercial and industrial loans and owner-occupied commercial real estate (“CRE”) loans combined represented approximately 49 percent of total loans as of September 30, 2017. Non-owner occupied CRE loans equaled about 32 percent of total loans as of September 30, 2017.

 

As of September 30, 2017, total deposits were $2.49 billion, up $114 million and $160 million from December 31, 2016 and September 30, 2016, respectively. Local deposits were up $85.6 million since year-end 2016 and $146 million over the past twelve months. Growth in local deposits was mainly driven by new commercial loan relationships and the success of various deposit account specials. Wholesale funds were $325 million, or approximately 11 percent of total funds, as of September 30, 2017, compared to about 9 percent as of December 31, 2016 and 10 percent as of September 30, 2016.

 

Asset Quality

 

Nonperforming assets at September 30, 2017 were $10.6 million, or 0.3 percent of total assets, compared to $7.2 million, or 0.2 percent of total assets, at June 30, 2017, and $6.4 million, or 0.2 percent of total assets, at December 31, 2016. The transfer of a Bank-owned parcel of real estate, which is no longer being considered for use as a bank facility, from fixed assets to other real estate owned accounted for nearly 50 percent of the $3.3 million increase in nonperforming assets during the third quarter of 2017. The parcel of real estate is expected to be sold in the next six months for an amount that approximates current book value. 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 $0.1 million during the third quarter of 2017, or an annualized 0.02 percent of average loans, and $1.1 million, or an annualized 0.06 percent of average loans, during the first nine months of 2017.

 

 

 

 

Capital Position

 

Shareholders’ equity totaled $363 million as of September 30, 2017, an increase of $21.7 million from year-end 2016. The Bank’s capital position remains above “well-capitalized” with a total risk-based capital ratio of 12.5 percent as of September 30, 2017, compared to 13.1 percent at December 31, 2016. At September 30, 2017, the Bank had approximately $74 million in excess of the 10.0 percent minimum regulatory threshold required to be considered a “well-capitalized” institution. Mercantile reported 16,490,279 total shares outstanding at September 30, 2017.

 

No shares were repurchased during the first nine 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: “We are excited about Mercantile’s future and expect the solid operating results achieved during the first nine months of the year to extend into the fourth quarter. Our strong overall financial condition, including sustained strength in core profitability and a healthy balance sheet, affords us the ability to meet growth objectives and fulfill our ongoing commitment to enhance shareholder value. As depicted by loan and deposit growth, our relationship-based approach to banking continues to be well-received by businesses and individuals 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 $3.3 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

 

         

Third Quarter 2017 Results

           

MERCANTILE BANK CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

   

SEPTEMBER 30,

   

DECEMBER 31,

   

SEPTEMBER 30,

 
   

2017

   

2016

   

2016

 

ASSETS

                       

Cash and due from banks

  $ 53,941,000     $ 50,200,000     $ 55,882,000  

Interest-earning deposits

    123,110,000       133,396,000       85,848,000  

Total cash and cash equivalents

    177,051,000       183,596,000       141,730,000  
                         

Securities available for sale

    330,090,000       328,060,000       325,443,000  

Federal Home Loan Bank stock

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

Loans

    2,554,272,000       2,378,620,000       2,406,377,000  

Allowance for loan losses

    (19,193,000 )     (17,961,000 )     (17,526,000 )

Loans, net

    2,535,079,000       2,360,659,000       2,388,851,000  
                         

Premises and equipment, net

    45,606,000       45,456,000       45,212,000  

Bank owned life insurance

    66,858,000       67,198,000       66,876,000  

Goodwill

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

Core deposit intangible

    8,156,000       9,957,000       10,592,000  

Other assets

    31,306,000       30,146,000       27,761,000  
                         

Total assets

  $ 3,254,655,000     $ 3,082,571,000     $ 3,063,964,000  
                         
                         

LIABILITIES AND SHAREHOLDERS' EQUITY

                       

Deposits:

                       

Noninterest-bearing

  $ 826,038,000     $ 810,600,000     $ 731,663,000  

Interest-bearing

    1,663,005,000       1,564,385,000       1,597,774,000  

Total deposits

    2,489,043,000       2,374,985,000       2,329,437,000  
                         

Securities sold under agreements to repurchase

    122,280,000       131,710,000       146,843,000  

Federal Home Loan Bank advances

    220,000,000       175,000,000       178,000,000  

Subordinated debentures

    45,347,000       44,835,000       44,665,000  

Accrued interest and other liabilities

    15,439,000       15,230,000       15,548,000  

Total liabilities

    2,892,109,000       2,741,760,000       2,714,493,000  
                         

SHAREHOLDERS' EQUITY

                       

Common stock

    309,033,000       305,488,000       304,027,000  

Retained earnings

    55,258,000       40,904,000       43,655,000  

Accumulated other comprehensive income/(loss)

    (1,745,000 )     (5,581,000 )     1,789,000  

Total shareholders' equity

    362,546,000       340,811,000       349,471,000  
                         

Total liabilities and shareholders' equity

  $ 3,254,655,000     $ 3,082,571,000     $ 3,063,964,000  

 

 

 

 

Mercantile Bank Corporation

 

 

                     

Third Quarter 2017 Results

                         

MERCANTILE BANK CORPORATION

CONSOLIDATED REPORTS OF INCOME

(Unaudited)

 

   

THREE MONTHS ENDED

   

THREE MONTHS ENDED

   

NINE MONTHS ENDED

   

NINE MONTHS ENDED

 
   

September 30, 2017

   

September 30, 2016

   

September 30, 2017

   

September 30, 2016

 

INTEREST INCOME

                               

Loans, including fees

  $ 30,746,000     $ 27,553,000     $ 86,406,000     $ 81,219,000  

Investment securities

    1,906,000       2,033,000       5,594,000       7,283,000  

Other interest-earning assets

    382,000       120,000       641,000       240,000  

Total interest income

    33,034,000       29,706,000       92,641,000       88,742,000  
                                 

INTEREST EXPENSE

                               

Deposits

    2,652,000       1,924,000       6,543,000       5,608,000  

Short-term borrowings

    45,000       62,000       142,000       154,000  

Federal Home Loan Bank advances

    1,033,000       670,000       2,690,000       1,595,000  

Other borrowed money

    660,000       600,000       1,920,000       1,952,000  

Total interest expense

    4,390,000       3,256,000       11,295,000       9,309,000  
                                 

Net interest income

    28,644,000       26,450,000       81,346,000       79,433,000  
                                 

Provision for loan losses

    1,000,000       600,000       2,350,000       2,300,000  
                                 

Net interest income after provision for loan losses

    27,644,000       25,850,000       78,996,000       77,133,000  
                                 

NONINTEREST INCOME

                               

Service charges on accounts

    1,076,000       1,140,000       3,148,000       3,178,000  

Credit and debit card income

    1,215,000       1,090,000       3,497,000       3,185,000  

Mortgage banking income

    1,326,000       1,236,000       3,233,000       2,578,000  

Earnings on bank owned life insurance

    328,000       349,000       2,394,000       933,000  

Other income

    660,000       1,469,000       2,226,000       6,560,000  

Total noninterest income

    4,605,000       5,284,000       14,498,000       16,434,000  
                                 

NONINTEREST EXPENSE

                               

Salaries and benefits

    11,636,000       11,162,000       33,796,000       32,959,000  

Occupancy

    1,598,000       1,515,000       4,707,000       4,600,000  

Furniture and equipment

    543,000       531,000       1,625,000       1,579,000  

Data processing costs

    2,071,000       1,987,000       6,155,000       5,949,000  

FDIC insurance costs

    250,000       351,000       708,000       1,108,000  

Other expense

    4,112,000       4,117,000       12,877,000       12,530,000  

Total noninterest expense

    20,210,000       19,663,000       59,868,000       58,725,000  
                                 

Income before federal income tax expense

    12,039,000       11,471,000       33,626,000       34,842,000  
                                 

Federal income tax expense

    3,702,000       3,626,000       10,331,000       11,014,000  
                                 

Net Income

  $ 8,337,000     $ 7,845,000     $ 23,295,000     $ 23,828,000  
                                 

Basic earnings per share

  $ 0.51     $ 0.48     $ 1.41     $ 1.46  

Diluted earnings per share

  $ 0.51     $ 0.48     $ 1.41     $ 1.46  
                                 

Average basic shares outstanding

    16,483,492       16,282,804       16,463,245       16,271,848  

Average diluted shares outstanding

    16,494,540       16,307,350       16,474,534       16,294,093  

 

 

 

 

Mercantile Bank Corporation

 

 

                       

Third Quarter 2017 Results

                           

MERCANTILE BANK CORPORATION

CONSOLIDATED FINANCIAL HIGHLIGHTS

(Unaudited)

 

   

Quarterly

   

Year-To-Date

 
(dollars in thousands except per share data)   2017     2017     2017     2016     2016                  
   

3rd Qtr

   

2nd Qtr

   

1st Qtr

   

4th Qtr

   

3rd Qtr

   

2017

   

2016

 

EARNINGS

                                                       

Net interest income

  $ 28,644       27,193       25,509       26,435       26,450       81,346       79,433  

Provision for loan losses

  $ 1,000       750       600       600       600       2,350       2,300  

Noninterest income

  $ 4,605       4,042       5,851       4,604       5,284       14,498       16,434  

Noninterest expense

  $ 20,210       19,882       19,776       18,394       19,663       59,868       58,725  

Net income before federal income tax expense

  $ 12,039       10,603       10,984       12,045       11,471       33,626       34,842  

Net income

  $ 8,337       7,343       7,615       8,085       7,845       23,295       23,828  

Basic earnings per share

  $ 0.51       0.45       0.46       0.49       0.48       1.41       1.46  

Diluted earnings per share

  $ 0.51       0.45       0.46       0.49       0.48       1.41       1.46  

Average basic shares outstanding

    16,483,492       16,471,060       16,434,647       16,352,359       16,282,804       16,463,245       16,271,848  

Average diluted shares outstanding

    16,494,540       16,485,356       16,449,210       16,374,117       16,307,350       16,474,534       16,294,093  
                                                         

PERFORMANCE RATIOS

                                                       

Return on average assets

    1.03 %     0.96 %     1.02 %     1.05 %     1.02 %     1.00 %     1.07 %

Return on average equity

    9.21 %     8.39 %     8.99 %     9.35 %     9.00 %     8.87 %     9.32 %

Net interest margin (fully tax-equivalent)

    3.83 %     3.85 %     3.73 %     3.72 %     3.76 %     3.80 %     3.89 %

Efficiency ratio

    60.78 %     63.65 %     63.06 %     59.26 %     61.96 %     62.46 %     61.26 %

Full-time equivalent employees

    634       643       617       616       612       634       612  
                                                         

YIELD ON ASSETS / COST OF FUNDS

                                                       

Yield on loans

    4.81 %     4.69 %     4.54 %     4.65 %     4.57 %     4.68 %     4.63 %

Yield on securities

    2.50 %     2.44 %     2.35 %     2.27 %     2.71 %     2.43 %     3.07 %

Yield on other interest-earning assets

    1.28 %     0.99 %     0.81 %     0.51 %     0.51 %     1.14 %     0.52 %

Yield on total earning assets

    4.41 %     4.37 %     4.20 %     4.18 %     4.22 %     4.32 %     4.34 %

Yield on total assets

    4.10 %     4.05 %     3.88 %     3.87 %     3.90 %     4.01 %     4.02 %

Cost of deposits

    0.43 %     0.35 %     0.33 %     0.33 %     0.33 %     0.37 %     0.33 %

Cost of borrowed funds

    1.75 %     1.69 %     1.53 %     1.45 %     1.41 %     1.66 %     1.45 %

Cost of interest-bearing liabilities

    0.85 %     0.77 %     0.68 %     0.68 %     0.66 %     0.77 %     0.65 %

Cost of funds (total earning assets)

    0.58 %     0.52 %     0.47 %     0.46 %     0.46 %     0.52 %     0.45 %

Cost of funds (total assets)

    0.54 %     0.48 %     0.43 %     0.42 %     0.42 %     0.49 %     0.42 %
                                                         

PURCHASE ACCOUNTING ADJUSTMENTS

                                                 

Loan portfolio - increase interest income

  $ 1,757       1,336       832       1,672       1,002       3,925       3,253  

Trust preferred - increase interest expense

  $ 171       171       171       171       171       513       513  

Core deposit intangible - increase overhead

  $ 556       609       636       636       636       1,801       2,039  
                                                         

MORTGAGE BANKING ACTIVITY

                                                       

Total mortgage loans originated

  $ 61,962       60,371       38,365       46,727       52,340       160,698       116,345  

Purchase mortgage loans originated

  $ 41,254       39,115       21,523       21,962       25,542       101,892       56,289  

Refinance mortgage loans originated

  $ 20,708       21,256       16,842       24,765       26,798       58,806       60,056  

Total mortgage loans sold

  $ 33,858       29,371       18,463       30,081       35,826       81,692       80,977  

Net gain on sale of mortgage loans

  $ 1,131       1,012       732       993       1,079       2,875       2,404  
                                                         

CAPITAL

                                                       

Tangible equity to tangible assets

    9.54 %     9.70 %     9.77 %     9.31 %     9.63 %     9.54 %     9.63 %

Tier 1 leverage capital ratio

    11.18 %     11.49 %     11.53 %     11.17 %     11.28 %     11.18 %     11.28 %

Common equity risk-based capital ratio

    10.54 %     10.65 %     10.83 %     10.88 %     10.83 %     10.54 %     10.83 %

Tier 1 risk-based capital ratio

    12.01 %     12.15 %     12.39 %     12.47 %     12.40 %     12.01 %     12.40 %

Total risk-based capital ratio

    12.66 %     12.79 %     13.05 %     13.13 %     13.05 %     12.66 %     13.05 %

Tier 1 capital

  $ 354,087       347,754       341,708       336,316       337,054       354,087       337,054  

Tier 1 plus tier 2 capital

  $ 373,280       366,048       359,984       354,278       354,580       373,280       354,580  

Total risk-weighted assets

  $ 2,949,011       2,861,605       2,757,616       2,697,727       2,718,012       2,949,011       2,718,012  

Book value per common share

  $ 21.99       21.69       21.13       20.76       21.44       21.99       21.44  

Tangible book value per common share

  $ 18.49       18.16       17.56       17.14       17.76       18.49       17.76  

Cash dividend per common share

  $ 0.19       0.18       0.18       0.67       0.17       0.55       0.49  
                                                         

ASSET QUALITY

                                                       

Gross loan charge-offs

  $ 709       1,150       456       970       363       2,315       1,235  

Recoveries

  $ 607       419       171       805       179       1,197       780  

Net loan charge-offs (recoveries)

  $ 102       731       285       165       184       1,118       455  

Net loan charge-offs to average loans

    0.02 %     0.12 %     0.05 %     0.03 %     0.03 %     0.06 %     0.03 %

Allowance for loan losses

  $ 19,193       18,295       18,276       17,961       17,526       19,193       17,526  

Allowance to originated loans

    0.88 %     0.86 %     0.92 %     0.95 %     0.93 %     0.88 %     0.93 %

Nonperforming loans

  $ 8,231       6,450       7,292       5,939       4,669       8,231       4,669  

Other real estate/repossessed assets

  $ 2,327       789       495       469       790       2,327       790  

Nonperforming loans to total loans

    0.32 %     0.26 %     0.30 %     0.25 %     0.19 %     0.32 %     0.19 %

Nonperforming assets to total assets

    0.32 %     0.23 %     0.26 %     0.21 %     0.18 %     0.32 %     0.18 %
                                                         

NONPERFORMING ASSETS - COMPOSITION

                                                 

Residential real estate:

                                                       

Land development

  $ 0       0       0       16       23       0       23  

Construction

  $ 0       0       0       0       0       0       0  

Owner occupied / rental

  $ 3,648       3,367       2,972       2,883       2,945       3,648       2,945  

Commercial real estate:

                                                       

Land development

  $ 50       65       80       95       110       50       110  

Construction

  $ 0       0       0       0       0       0       0  

Owner occupied

  $ 4,627       1,313       1,221       610       1,597       4,627       1,597  

Non-owner occupied

  $ 84       400       421       488       691       84       691  

Non-real estate:

                                                       

Commercial assets

  $ 2,126       2,081       3,076       2,293       65       2,126       65  

Consumer assets

  $ 23       13       17       23       28       23       28  

Total nonperforming assets

    10,558       7,239       7,787       6,408       5,459       10,558       5,459  
                                                         

NONPERFORMING ASSETS - RECON

                                                       

Beginning balance

  $ 7,239       7,787       6,408       5,459       5,983       6,408       6,737  

Additions - originated loans

  $ 4,789       1,774       2,987       2,953       1,172       9,550       3,391  

Merger-related activity

  $ 210       16       0       33       0       226       0  

Return to performing status

  $ (120 )     0       (113 )     (13 )     0       (233 )     0  

Principal payments

  $ (1,089 )     (1,168 )     (1,289 )     (1,386 )     (1,509 )     (3,546 )     (2,778 )

Sale proceeds

  $ (373 )     (147 )     (56 )     (308 )     (76 )     (576 )     (1,120 )

Loan charge-offs

  $ (91 )     (953 )     (135 )     (263 )     (101 )     (1,179 )     (718 )

Valuation write-downs

  $ (7 )     (70 )     (15 )     (67 )     (10 )     (92 )     (53 )

Ending balance

  $ 10,558       7,239       7,787       6,408       5,459       10,558       5,459  
                                                         

LOAN PORTFOLIO COMPOSITION

                                                       

Commercial:

                                                       

Commercial & industrial

  $ 776,562       780,816       757,219       713,903       750,330       776,562       750,330  

Land development & construction

  $ 28,575       29,027       31,924       34,828       37,455       28,575       37,455  

Owner occupied comm'l R/E

  $ 485,347       491,633       452,382       450,464       440,705       485,347       440,705  

Non-owner occupied comm'l R/E

  $ 805,167       783,036       768,565       748,269       741,443       805,167       741,443  

Multi-family & residential rental

  $ 119,170       114,081       113,257       117,883       118,103       119,170       118,103  

Total commercial

  $ 2,214,821       2,198,593       2,123,347       2,065,347       2,088,036       2,214,821       2,088,036  

Retail:

                                                       

1-4 family mortgages

  $ 236,075       220,697       205,850       195,226       190,715       236,075       190,715  

Home equity & other consumer

  $ 103,376       107,991       112,117       118,047       127,626       103,376       127,626  

Total retail

  $ 339,451       328,688       317,967       313,273       318,341       339,451       318,341  

Total loans

  $ 2,554,272       2,527,281       2,441,314       2,378,620       2,406,377       2,554,272       2,406,377  
                                                         

END OF PERIOD BALANCES

                                                       

Loans

  $ 2,554,272       2,527,281       2,441,314       2,378,620       2,406,377       2,554,272       2,406,377  

Securities

  $ 341,126       333,294       341,677       336,086       333,469       341,126       333,469  

Other interest-earning assets

  $ 123,110       48,762       12,663       133,396       85,848       123,110       85,848  

Total earning assets (before allowance)

  $ 3,018,508       2,909,337       2,795,654       2,848,102       2,825,694       3,018,508       2,825,694  

Total assets

  $ 3,254,655       3,143,336       3,018,919       3,082,571       3,063,964       3,254,655       3,063,964  

Noninterest-bearing deposits

  $ 826,038       800,718       757,706       810,600       731,663       826,038       731,663  

Interest-bearing deposits

  $ 1,663,005       1,570,003       1,520,310       1,564,385       1,597,774       1,663,005       1,597,774  

Total deposits

  $ 2,489,043       2,370,721       2,278,016       2,374,985       2,329,437       2,489,043       2,329,437  

Total borrowed funds

  $ 390,868       404,370       380,009       354,902       372,917       390,868       372,917  

Total interest-bearing liabilities

  $ 2,053,873       1,974,373       1,900,319       1,919,287       1,970,691       2,053,873       1,970,691  

Shareholders' equity

  $ 362,546       357,499       348,050       340,811       349,471       362,546       349,471  
                                                         

AVERAGE BALANCES

                                                       

Loans

  $ 2,534,364       2,472,489       2,390,030       2,372,510       2,391,620       2,466,156       2,336,174  

Securities

  $ 339,125       338,045       339,537       336,493       328,993       338,901       341,407  

Other interest-earning assets

  $ 116,851       46,250       61,376       127,790       91,590       75,029       61,100  

Total earning assets (before allowance)

  $ 2,990,340       2,856,784       2,790,943       2,836,793       2,812,203       2,880,086       2,738,681  

Total assets

  $ 3,220,053       3,081,542       3,016,871       3,064,974       3,040,324       3,106,899       2,961,866  

Noninterest-bearing deposits

  $ 805,650       785,705       766,031       773,137       733,600       785,940       696,214  

Interest-bearing deposits

  $ 1,648,235       1,531,399       1,542,078       1,561,539       1,572,424       1,574,293       1,569,963  

Total deposits

  $ 2,453,885       2,317,104       2,308,109       2,334,676       2,306,024       2,360,233       2,266,177  

Total borrowed funds

  $ 393,910       400,508       352,614       366,905       373,973       382,496       340,496  

Total interest-bearing liabilities

  $ 2,042,145       1,931,907       1,894,692       1,928,444       1,946,397       1,956,789       1,910,459  

Shareholders' equity

  $ 359,131       351,216       343,344       343,122       345,944       351,288       340,742  

 

 

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