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

mbwm20191010_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 15, 2019

____________________

 

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))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock

MBWM

The Nasdaq Stock Market LLC

 

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 15, 2019, Mercantile Bank Corporation issued a press release announcing earnings and other financial results for the quarter ended September 30, 2019. 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 15, 2019, reporting financial results and earnings for the quarter ended September 30, 2019.

     

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 15, 2019

 

3

 

 

Exhibit Index

 

 

Exhibit Number                         Description

 

99.1 Press release of Mercantile Bank Corporation dated October 15, 2019, reporting financial results and earnings for the quarter ended September 30, 2019.

     

(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

ex_159950.htm

Exhibit 99.1

 

 

Mercantile Bank Corporation Reports Strong Third Quarter 2019 Results

Continued strength in core profitability and increased loan originations highlight quarter

 

GRAND RAPIDS, Mich., October 15, 2019 – Mercantile Bank Corporation (NASDAQ: MBWM) ("Mercantile") reported net income of $12.6 million, or $0.77 per diluted share, for the third quarter of 2019, compared with net income of $10.1 million, or $0.61 per diluted share, for the respective prior-year period. Net income during the first nine months of 2019 totaled $36.1 million, or $2.20 per diluted share, compared to $30.5 million, or $1.83 per diluted share, during the first nine months of 2018.

 

Bank owned life insurance claims and a gain on the sale of a former branch facility increased reported net income during the first nine months of 2019 by approximately $3.1 million, or $0.19 per diluted share. Interest income related to purchased loan accounting entries increased net income during the first nine months of 2019 by $0.9 million, or $0.05 per diluted share, and net income during the first nine months of 2018 by $2.7 million, or $0.16 per diluted share. Excluding the impacts of these transactions, diluted earnings per share increased $0.29, or 17.4 percent, during the first nine months of 2019 compared to the respective 2018 period.

 

“We are very pleased to once again report a quarter of robust operating performance, representing a continuation of the financial trends demonstrated during the first six months of the year,” said Robert B. Kaminski, Jr., President and Chief Executive Officer of Mercantile. “Our sustained strength in core profitability, solid capital position, and healthy commercial loan and residential mortgage loan pipelines give us confidence that the sound financial performance exhibited during the first three quarters of the year will continue in the fourth quarter and beyond.”

 

Third quarter highlights include:

 

 

Strong earnings performance and capital position

 

Increased fee income

 

Controlled overhead costs

 

Strong asset quality

 

Annualized net loan growth of approximately 7 percent

 

New commercial term loan originations of $153 million

 

Continued strength in commercial and residential loan pipelines

 

 

 

 

Operating Results

 

Total revenue, which consists of net interest income and noninterest income, was $38.3 million during the third quarter of 2019, up $3.7 million, or 10.8 percent, from the prior-year third quarter. Reflecting a higher level of earning assets, net interest income of $31.6 million during the third quarter of 2019 was up $1.8 million, or 5.9 percent, from the third quarter of 2018.

 

The net interest margin was 3.71 percent in the third quarter of 2019. The yield on average earning assets equaled 4.73 percent during the third quarter of 2019, up from 4.60 percent during the respective 2018 period mainly due to an increased yield on commercial loans. The improved yield on commercial loans primarily reflected the positive impact of higher interest rates on variable-rate commercial loans stemming from the Federal Open Market Committee’s (“FOMC”) raising of the targeted federal funds rate by 25 basis points in both September and December 2018. The impact of these rate increases more than offset the negative impact of lower interest rates on variable-rate commercial loans resulting from the FOMC’s lowering of the targeted federal funds rate by 25 basis points in both July and September 2019. The cost of funds equaled 1.02 percent during the third quarter of 2019, up from 0.73 percent during the prior-year third quarter mainly due to an increased cost of time deposits and a change in funding mix. Increased reliance on more costly wholesale funds during the twelve months ended September 30, 2019, most of which occurred in the fourth quarter of 2018 and January 2019, was necessitated by various funding requirements, including ongoing loan growth and seasonal deposit withdrawals by certain business customers for bonus and tax payments.

 

Net interest income and the net interest margin during the third quarters of 2019 and 2018, and the first nine months of the current year and prior year, were affected by purchase accounting accretion and amortization associated with fair value measurements. Increases in interest income on loans totaling $0.3 million and $0.4 million were recorded during the third quarters of 2019 and 2018, respectively, and increases of $1.1 million and $3.4 million were recorded during the first nine months of 2019 and 2018, respectively. 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 $0.7 million provision for loan losses during the third quarter of 2019 compared to a $0.4 million provision during the respective 2018 period. The provision expense recorded during both periods mainly reflected ongoing net loan growth.

 

Noninterest income during the third quarter of 2019 was $6.7 million, up $2.0 million, or nearly 42 percent, from the prior-year third quarter. The improved level of noninterest income primarily reflected increased mortgage banking activity income stemming from the success of continuing strategic initiatives designed to increase market presence, along with a higher level of refinance activity resulting from a recent decrease in residential mortgage loan interest rates. Increased credit and debit card income, service charges on accounts, and payroll processing fees also contributed to the higher level of noninterest income.

 

Noninterest expense totaled $22.0 million during the third quarter of 2019, up $0.4 million, or 1.7 percent, from the respective 2018 period. The higher level of expense primarily resulted from increased salary costs, mainly reflecting annual employee merit pay increases, higher mortgage loan originator commissions, and increased stock-based compensation expense.

 

 

 

 

“We are extremely pleased with the growth in certain key fee income categories, most notably in mortgage banking activity income,” continued Mr. Kaminski. “The significant increase in mortgage banking activity income reflects the success of ongoing strategic initiatives implemented across the organization to boost market penetration, a higher percentage of originated residential mortgage loans being sold, and enhanced refinance activity stemming from a recent decline in residential mortgage loan interest rates. We remain committed to controlling our overhead costs, in large part reflecting the administration of a sustainable business model.”

 

Balance Sheet

 

As of September 30, 2019, total assets were $3.71 billion, up $346 million, or 10.3 percent, from December 31, 2018. Total loans and interest-earning deposits increased $180 million and $134 million, respectively, over the same time period. During the twelve months ended September 30, 2019, total loans were up $236 million, or 8.7 percent. Approximately $153 million and $412 million in commercial term loans to new and existing borrowers were originated during the third quarter and first nine months of 2019, respectively, as ongoing sales and relationship-building efforts resulted in increased lending opportunities. As of September 30, 2019, unfunded commitments on commercial construction and development loans totaled approximately $91 million, which are expected to be largely funded over the next 12 to 18 months. The growth in interest-earning deposits mainly stemmed from certain deposit-gathering initiatives and an increase in wholesale funds.

 

Ray Reitsma, President of Mercantile Bank of Michigan, noted, “We are pleased with the increase in net loans during the current quarter, which equated to an annualized growth rate of about 7 percent. The net loan growth realized during the quarter reflected an increase in the commercial portfolio, most notably in the owner-occupied commercial real estate and non-owner occupied commercial real estate segments, along with growth in the residential mortgage loan portfolio. New commercial term loan originations remained strong during the quarter, representing the highest quarterly level since the second quarter of 2016. As evidenced by the solid loan growth during the quarter, our lending team continues to successfully identify new customer relationships and meet the needs of our existing customer base. We have not wavered from our commitment to grow the loan portfolio in a disciplined manner, with a continuing focus on responsible loan pricing and sound asset quality. We remain committed to maintaining the combined commercial and industrial loan and owner-occupied commercial real estate loan portfolio segments at a minimum percentage of total commercial loans. Our commercial loan and residential mortgage loan pipelines remain strong.”

 

As of September 30, 2019, commercial and industrial loans and owner-occupied commercial real estate loans combined represented approximately 58 percent of total commercial loans, a level that has remained relatively consistent and in line with internal expectations.

 

Total deposits at September 30, 2019, were $2.77 billion, up $303 million from December 31, 2018. Local deposits and brokered deposits were up $263 million and $40.2 million, respectively, during the first nine months of 2019. The growth in local deposits was mainly driven by a special time deposit campaign that was introduced mid first quarter and ended in early April, along with increases in business money market accounts and noninterest-bearing checking accounts. The growth in noninterest-bearing checking accounts primarily reflected new commercial loan relationships. Wholesale funds were $517 million, or approximately 16 percent of total funds, as of September 30, 2019, compared to $474 million, or approximately 16 percent of total funds, as of December 31, 2018.

 

 

 

 

Asset Quality

 

Nonperforming assets at September 30, 2019, were $2.9 million, or 0.1 percent of total assets, compared to $5.0 million, or 0.2 percent of total assets, at December 31, 2018. 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. During the third quarter of 2019, loan charge-offs totaled $0.5 million while recoveries of prior period loan charge-offs equaled $0.2 million, providing for net loan charge-offs of $0.3 million, or an annualized 0.05 percent of average total loans. During the first nine months of 2019, loan charge-offs totaled $0.8 million while recoveries of prior period loan charge-offs equaled $0.4 million, providing for net loan charge-offs of $0.4 million, or an annualized 0.02 percent of average total loans.

 

Capital Position

 

Shareholders’ equity totaled $407 million as of September 30, 2019, an increase of $32.0 million from year-end 2018. The Bank’s capital position remains above “well-capitalized” with a total risk-based capital ratio of 12.5 percent as of September 30, 2019, compared to 12.3 percent at December 31, 2018. At September 30, 2019, the Bank had approximately $84 million in excess of the 10.0 percent minimum regulatory threshold required to be considered a “well-capitalized” institution. Mercantile reported 16,332,660 total shares outstanding at September 30, 2019.

 

As part of a $20 million common stock repurchase program announced in May 2019 and instituted in conjunction with the completion of its existing program that was introduced in January 2015 and later expanded in April 2016, Mercantile repurchased approximately 112,000 shares for $3.5 million, or a weighted average all-in cost per share of $31.36, during the third quarter of 2019. During the period of January 2015 through September 2019, Mercantile repurchased approximately 1,390,000 shares for $32.6 million, or a weighted average all-in cost per share of $23.47, under the original and new programs on a combined basis.

 

Mr. Kaminski concluded, “As a result of our strong financial performance during the first three quarters of 2019, we are well positioned to meet our profitability and growth objectives for the year. The cash dividend program, which includes providing shareholders with a competitive dividend yield on a consistent basis, furthers our commitment to enhancing total shareholder value. We have been able to successfully gain new clients and retain existing customers through our market-leading products and services as well as an emphasis on developing mutually-beneficial relationships. We are excited about the opportunities we believe are available to us to expand our presence in our markets, and we are confident that the demonstrated solid operating performance during the first nine months of the year will continue during the fourth quarter and subsequent periods.”

 

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 $3.7 billion and operates 46 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

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

   

SEPTEMBER 30,

   

DECEMBER 31,

   

SEPTEMBER 30,

 
   

2019

   

2018

   

2018

 

ASSETS

                       

Cash and due from banks

  $ 84,275,000     $ 64,872,000     $ 51,824,000  

Interest-earning deposits

    144,263,000       10,482,000       28,193,000  

Total cash and cash equivalents

    228,538,000       75,354,000       80,017,000  
                         

Securities available for sale

    345,533,000       337,366,000       326,531,000  

Federal Home Loan Bank stock

    18,002,000       16,022,000       11,072,000  
                         

Loans

    2,933,013,000       2,753,085,000       2,697,417,000  

Allowance for loan losses

    (24,414,000 )     (22,380,000 )     (21,692,000 )

Loans, net

    2,908,599,000       2,730,705,000       2,675,725,000  
                         

Premises and equipment, net

    54,585,000       48,321,000       48,104,000  

Bank owned life insurance

    67,993,000       69,647,000       69,628,000  

Goodwill

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

Core deposit intangible, net

    4,237,000       5,561,000       6,038,000  

Other assets

    33,420,000       31,458,000       33,518,000  
                         

Total assets

  $ 3,710,380,000     $ 3,363,907,000     $ 3,300,106,000  
                         
                         

LIABILITIES AND SHAREHOLDERS' EQUITY

                       

Deposits:

                       

Noninterest-bearing

  $ 967,189,000     $ 889,784,000     $ 879,442,000  

Interest-bearing

    1,799,902,000       1,573,924,000       1,629,368,000  

Total deposits

    2,767,091,000       2,463,708,000       2,508,810,000  
                         

Securities sold under agreements to repurchase

    103,990,000       103,519,000       112,378,000  

Federal Home Loan Bank advances

    364,000,000       350,000,000       240,000,000  

Subordinated debentures

    46,710,000       46,199,000       46,029,000  

Accrued interest and other liabilities

    21,389,000       25,232,000       13,424,000  

Total liabilities

    3,303,180,000       2,988,658,000       2,920,641,000  
                         

SHAREHOLDERS' EQUITY

                       

Common stock

    304,065,000       308,005,000       312,544,000  

Retained earnings

    98,876,000       75,483,000       80,275,000  

Accumulated other comprehensive income/(loss)

    4,259,000       (8,239,000 )     (13,354,000 )

Total shareholders' equity

    407,200,000       375,249,000       379,465,000  
                         

Total liabilities and shareholders' equity

  $ 3,710,380,000     $ 3,363,907,000     $ 3,300,106,000  

 

 

 

 

MERCANTILE BANK CORPORATION

CONSOLIDATED REPORTS OF INCOME

(Unaudited)

 

   

THREE MONTHS ENDED

   

THREE MONTHS ENDED

   

NINE MONTHS ENDED

   

NINE MONTHS ENDED

 
   

September 30, 2019

   

September 30, 2018

   

September 30, 2019

   

September 30, 2018

 

INTEREST INCOME

                               

Loans, including fees

  $ 37,005,000     $ 32,918,000     $ 109,559,000     $ 97,087,000  

Investment securities

    2,660,000       2,255,000       7,587,000       6,628,000  

Other interest-earning assets

    651,000       313,000       1,627,000       1,071,000  

Total interest income

    40,316,000       35,486,000       118,773,000       104,786,000  
                                 

INTEREST EXPENSE

                               

Deposits

    5,573,000       3,574,000       15,906,000       9,921,000  

Short-term borrowings

    71,000       63,000       244,000       181,000  

Federal Home Loan Bank advances

    2,257,000       1,201,000       6,751,000       3,134,000  

Other borrowed money

    810,000       808,000       2,506,000       2,286,000  

Total interest expense

    8,711,000       5,646,000       25,407,000       15,522,000  
                                 

Net interest income

    31,605,000       29,840,000       93,366,000       89,264,000  
                                 

Provision for loan losses

    700,000       400,000       2,450,000       1,100,000  
                                 

Net interest income after provision for loan losses

    30,905,000       29,440,000       90,916,000       88,164,000  
                                 

NONINTEREST INCOME

                               

Service charges on accounts

    1,185,000       1,127,000       3,406,000       3,259,000  

Credit and debit card income

    1,547,000       1,378,000       4,397,000       3,955,000  

Mortgage banking income

    2,889,000       1,235,000       5,291,000       3,115,000  

Payroll services

    367,000       328,000       1,227,000       1,128,000  

Earnings on bank owned life insurance

    330,000       318,000       3,567,000       969,000  

Other income

    358,000       322,000       1,755,000       1,213,000  

Total noninterest income

    6,676,000       4,708,000       19,643,000       13,639,000  
                                 

NONINTEREST EXPENSE

                               

Salaries and benefits

    13,680,000       12,932,000       39,982,000       38,027,000  

Occupancy

    1,697,000       1,648,000       5,089,000       5,049,000  

Furniture and equipment

    629,000       659,000       1,885,000       1,789,000  

Data processing costs

    2,342,000       2,150,000       6,854,000       6,415,000  

Other expense

    3,679,000       4,261,000       12,134,000       12,931,000  

Total noninterest expense

    22,027,000       21,650,000       65,944,000       64,211,000  
                                 

Income before federal income tax expense

    15,554,000       12,498,000       44,615,000       37,592,000  
                                 

Federal income tax expense

    2,954,000       2,375,000       8,476,000       7,142,000  
                                 

Net Income

  $ 12,600,000     $ 10,123,000     $ 36,139,000     $ 30,450,000  
                                 

Basic earnings per share

  $ 0.77     $ 0.61     $ 2.20     $ 1.83  

Diluted earnings per share

  $ 0.77     $ 0.61     $ 2.20     $ 1.83  
                                 

Average basic shares outstanding

    16,390,203       16,611,411       16,415,843       16,602,701  

Average diluted shares outstanding

    16,393,078       16,619,295       16,420,845       16,610,544  

 

 

 

 

MERCANTILE BANK CORPORATION

CONSOLIDATED FINANCIAL HIGHLIGHTS

(Unaudited)

 

   

Quarterly

   

Year-To-Date

 
(dollars in thousands except per share data)   2019     2019     2019     2018     2018              
   

3rd Qtr

   

2nd Qtr

   

1st Qtr

   

4th Qtr

   

3rd Qtr

   

2019

   

2018

 

EARNINGS

                                                       

Net interest income

  $ 31,605       31,116       30,645       30,818       29,840       93,366       89,264  

Provision for loan losses

  $ 700       900       850       0       400       2,450       1,100  

Noninterest income

  $ 6,676       6,334       6,632       5,370       4,708       19,643       13,639  

Noninterest expense

  $ 22,027       22,087       21,830       21,958       21,650       65,944       64,211  

Net income before federal income tax expense

  $ 15,554       14,463       14,597       14,230       12,498       44,615       37,592  

Net income

  $ 12,600       11,715       11,824       11,573       10,123       36,139       30,450  

Basic earnings per share

  $ 0.77       0.71       0.72       0.70       0.61       2.20       1.83  

Diluted earnings per share

  $ 0.77       0.71       0.72       0.70       0.61       2.20       1.83  

Average basic shares outstanding

    16,390,203       16,428,187       16,429,571       16,594,412       16,611,411       16,415,843       16,602,701  

Average diluted shares outstanding

    16,393,078       16,434,714       16,435,176       16,600,108       16,619,295       16,420,845       16,610,544  
                                                         

PERFORMANCE RATIOS

                                                       

Return on average assets

    1.38 %     1.33 %     1.39 %     1.39 %     1.22 %     1.37 %     1.25 %

Return on average equity

    12.39 %     12.08 %     12.75 %     12.40 %     10.64 %     12.40 %     10.97 %

Net interest margin (fully tax-equivalent)

    3.71 %     3.79 %     3.88 %     3.98 %     3.87 %     3.79 %     3.95 %

Efficiency ratio

    57.54 %     58.98 %     58.56 %     60.68 %     62.67 %     58.40 %     62.40 %

Full-time equivalent employees

    624       652       631       630       637       624       637  
                                                         

YIELD ON ASSETS / COST OF FUNDS

                                                       

Yield on loans

    5.06 %     5.18 %     5.21 %     5.08 %     4.91 %     5.15 %     4.99 %

Yield on securities

    2.99 %     2.85 %     2.82 %     2.80 %     2.70 %     2.89 %     2.65 %

Yield on other interest-earning assets

    2.15 %     2.38 %     2.40 %     2.20 %     1.98 %     2.32 %     1.73 %

Yield on total earning assets

    4.73 %     4.85 %     4.89 %     4.80 %     4.60 %     4.82 %     4.63 %

Yield on total assets

    4.42 %     4.53 %     4.56 %     4.46 %     4.28 %     4.50 %     4.31 %

Cost of deposits

    0.83 %     0.85 %     0.77 %     0.63 %     0.56 %     0.82 %     0.53 %

Cost of borrowed funds

    2.35 %     2.40 %     2.43 %     2.22 %     2.14 %     2.39 %     2.00 %

Cost of interest-bearing liabilities

    1.52 %     1.55 %     1.47 %     1.26 %     1.11 %     1.52 %     1.02 %

Cost of funds (total earning assets)

    1.02 %     1.06 %     1.01 %     0.82 %     0.73 %     1.03 %     0.68 %

Cost of funds (total assets)

    0.95 %     0.99 %     0.94 %     0.76 %     0.68 %     0.96 %     0.64 %
                                                         

PURCHASE ACCOUNTING ADJUSTMENTS

                                                 

Loan portfolio - increase interest income

  $ 327       569       211       603       386       1,107       3,434  

Trust preferred - increase interest expense

  $ 171       171       171       171       171       513       513  

Core deposit intangible - increase overhead

  $ 397       450       477       477       477       1,324       1,563  
                                                         

MORTGAGE BANKING ACTIVITY

                                                       

Total mortgage loans originated

  $ 132,852       80,205       44,932       44,448       66,829       257,989       169,798  

Purchase mortgage loans originated

  $ 61,839       41,986       29,891       29,729       47,704       133,716       114,080  

Refinance mortgage loans originated

  $ 71,013       38,219       15,041       14,719       19,125       124,273       55,718  

Total mortgage loans sold

  $ 104,890       49,396       21,502       21,805       30,713       175,788       74,640  

Net gain on sale of mortgage loans

  $ 2,886       1,419       698       829       1,116       5,003       2,696  
                                                         

CAPITAL

                                                       

Tangible equity to tangible assets

    9.67 %     9.82 %     9.41 %     9.68 %     9.98 %     9.67 %     9.98 %

Tier 1 leverage capital ratio

    11.08 %     11.17 %     11.16 %     11.41 %     11.76 %     11.08 %     11.76 %

Common equity risk-based capital ratio

    10.54 %     10.47 %     10.46 %     10.41 %     10.93 %     10.54 %     10.93 %

Tier 1 risk-based capital ratio

    11.88 %     11.82 %     11.84 %     11.80 %     12.35 %     11.88 %     12.35 %

Total risk-based capital ratio

    12.61 %     12.55 %     12.56 %     12.50 %     13.05 %     12.61 %     13.05 %

Tier 1 capital

  $ 395,010       388,788       379,334       373,721       382,829       395,010       382,829  

Tier 1 plus tier 2 capital

  $ 419,424       412,841       402,469       396,102       404,521       419,424       404,521  

Total risk-weighted assets

  $ 3,325,217       3,289,958       3,204,295       3,167,655       3,100,158       3,325,217       3,100,158  

Book value per common share

  $ 24.93       24.34       23.37       22.70       22.84       24.93       22.84  

Tangible book value per common share

  $ 21.64       21.05       20.05       19.37       19.50       21.64       19.50  

Cash dividend per common share

  $ 0.27       0.26       0.26       1.00       0.24       0.79       0.68  
                                                         

ASSET QUALITY

                                                       

Gross loan charge-offs

  $ 519       78       174       354       169       771       1,096  

Recoveries

  $ 180       96       79       1,042       294       355       2,187  

Net loan charge-offs (recoveries)

  $ 339       (18 )     95       (688 )     (125 )     416       (1,091 )

Net loan charge-offs to average loans

    0.05 %     (0.01% )     0.01 %     (0.10% )     (0.02% )     0.02 %     (0.06% )

Allowance for loan losses

  $ 24,414       24,053       23,135       22,380       21,692       24,414       21,692  

Allowance to originated loans

    0.88 %     0.89 %     0.89 %     0.88 %     0.88 %     0.88 %     0.88 %

Nonperforming loans

  $ 2,644       3,505       4,138       4,141       4,852       2,644       4,852  

Other real estate/repossessed assets

  $ 243       446       396       811       948       243       948  

Nonperforming loans to total loans

    0.09 %     0.12 %     0.15 %     0.15 %     0.18 %     0.09 %     0.18 %

Nonperforming assets to total assets

    0.08 %     0.11 %     0.13 %     0.15 %     0.18 %     0.08 %     0.18 %

 

 

 

 

NONPERFORMING ASSETS - COMPOSITION

                                                 

Residential real estate:

                                                       

Land development

  $ 32       33       45       0       0       32       0  

Construction

  $ 0       0       0       0       0       0       0  

Owner occupied / rental

  $ 2,576       3,225       3,404       3,555       3,908       2,576       3,908  

Commercial real estate:

                                                       

Land development

  $ 0       0       0       0       0       0       0  

Construction

  $ 0       0       0       0       0       0       0  

Owner occupied

  $ 240       642       791       1,363       1,543       240       1,543  

Non-owner occupied

  $ 26       26       62       0       0       26       0  

Non-real estate:

                                                       

Commercial assets

  $ 0       2       207       17       331       0       331  

Consumer assets

  $ 13       23       25       17       18       13       18  

Total nonperforming assets

    2,887       3,951       4,534       4,952       5,800       2,887       5,800  
                                                         

NONPERFORMING ASSETS - RECON

                                                       

Beginning balance

  $ 3,951       4,534       4,952       5,800       5,807       4,952       9,403  

Additions - originated loans/former branch

  $ 339       26       539       1,247       999       904       2,725  

Merger-related activity

  $ 57       34       0       0       5       91       51  

Return to performing status

  $ (126 )     0       0       0       0       (126 )     (175 )

Principal payments

  $ (1,014 )     (512 )     (382 )     (1,836 )     (857 )     (1,908 )     (3,192 )

Sale proceeds

  $ (253 )     (74 )     (429 )     (128 )     (147 )     (756 )     (2,253 )

Loan charge-offs

  $ (59 )     (36 )     (146 )     (57 )     (3 )     (241 )     (650 )

Valuation write-downs

  $ (8 )     (21 )     0       (74 )     (4 )     (29 )     (109 )

Ending balance

  $ 2,887       3,951       4,534       4,952       5,800       2,887       5,800  
                                                         

LOAN PORTFOLIO COMPOSITION

                                                       

Commercial:

                                                       

Commercial & industrial

  $ 882,747       881,196       839,207       822,723       818,113       882,747       818,113  

Land development & construction

  $ 48,418       45,158       45,892       44,885       39,396       48,418       39,396  

Owner occupied comm'l R/E

  $ 567,267       556,868       551,517       548,619       542,730       567,267       542,730  

Non-owner occupied comm'l R/E

  $ 883,079       852,844       835,679       816,282       811,767       883,079       811,767  

Multi-family & residential rental

  $ 126,855       128,489       127,903       127,597       94,101       126,855       94,101  

Total commercial

  $ 2,508,366       2,464,555       2,400,198       2,360,106       2,306,107       2,508,366       2,306,107  

Retail:

                                                       

1-4 family mortgages

  $ 346,095       335,618       316,315       307,540       301,765       346,095       301,765  

Home equity & other consumer

  $ 78,552       81,320       83,126       85,439       89,545       78,552       89,545  

Total retail

  $ 424,647       416,938       399,441       392,979       391,310       424,647       391,310  

Total loans

  $ 2,933,013       2,881,493       2,799,639       2,753,085       2,697,417       2,933,013       2,697,417  
                                                         

END OF PERIOD BALANCES

                                                       

Loans

  $ 2,933,013       2,881,493       2,799,639       2,753,085       2,697,417       2,933,013       2,697,417  

Securities

  $ 363,535       365,926       355,878       353,388       337,603       363,535       337,603  

Other interest-earning assets

  $ 144,263       92,750       168,572       10,482       28,193       144,263       28,193  

Total earning assets (before allowance)

  $ 3,440,811       3,340,169       3,324,089       3,116,955       3,063,213       3,440,811       3,063,213  

Total assets

  $ 3,710,380       3,576,139       3,551,754       3,363,907       3,300,106       3,710,380       3,300,106  

Noninterest-bearing deposits

  $ 967,189       918,581       857,734       889,784       879,442       967,189       879,442  

Interest-bearing deposits

  $ 1,799,902       1,700,628       1,753,240       1,573,924       1,629,368       1,799,902       1,629,368  

Total deposits

  $ 2,767,091       2,619,209       2,610,974       2,463,708       2,508,810       2,767,091       2,508,810  

Total borrowed funds

  $ 517,523       543,098       544,566       513,220       401,575       517,523       401,575  

Total interest-bearing liabilities

  $ 2,317,425       2,243,726       2,297,806       2,087,144       2,030,943       2,317,425       2,030,943  

Shareholders' equity

  $ 407,200       400,117       383,729       375,249       379,465       407,200       379,465  
                                                         

AVERAGE BALANCES

                                                       

Loans

  $ 2,903,161       2,848,343       2,787,430       2,706,617       2,658,092       2,846,735       2,602,718  

Securities

  $ 363,394       357,718       354,459       343,597       342,593       358,557       343,983  

Other interest-earning assets

  $ 118,314       94,616       67,915       30,564       61,810       93,800       82,700  

Total earning assets (before allowance)

  $ 3,384,869       3,300,677       3,209,804       3,080,778       3,062,495       3,299,092       3,029,401  

Total assets

  $ 3,622,168       3,529,598       3,441,774       3,312,648       3,295,129       3,531,841       3,259,153  

Noninterest-bearing deposits

  $ 930,851       875,645       852,247       905,065       893,181       886,536       849,337  

Interest-bearing deposits

  $ 1,741,563       1,719,433       1,668,563       1,579,632       1,628,346       1,710,120       1,651,186  

Total deposits

  $ 2,672,414       2,595,078       2,520,810       2,484,697       2,521,527       2,596,656       2,500,523  

Total borrowed funds

  $ 529,590       530,802       532,864       434,365       383,830       531,073       375,307  

Total interest-bearing liabilities

  $ 2,271,153       2,250,235       2,201,427       2,013,997       2,012,176       2,241,193       2,026,493  

Shareholders' equity

  $ 403,350       389,133       376,103       370,175       377,574       389,628       371,005  

 

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