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

mbwm20200417_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): April 21, 2020

____________________

 

Mercantile Bank Corporation

(Exact name of registrant as specified in its charter)

 

          

Michigan 000-26719 38-3360865 

(State or other jurisdiction

of incorporation)

(Commission File

Number)

(IRS Employer

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 April 21, 2020, Mercantile Bank Corporation (the “Company”) issued a press release announcing earnings and other financial results for the quarter ended March 31, 2020. A copy of the press release is furnished as Exhibit 99.1 to this report and incorporated here by reference.

 

Item 7.01           Regulation FD Disclosure.

 

The Company has prepared presentation materials (the “Investor Presentation”) that management intends to use during its previously announced First Quarter 2020 conference call on Tuesday, April 21, 2020 at 10:00 am Eastern Time, and from time to time thereafter in presentations about the Company’s operations and performance. The Investor Presentation also contains information relating to Mercantile’s COVID-19 response plan. The Company may use the Investor Presentation, possibly with modifications, in presentations to current and potential investors, analysts, lenders, business partners, acquisition candidates, customers, employees and others with an interest in the Company and its business.

 

A copy of the Investor Presentation is furnished as Exhibit 99.2 to this report and incorporated here by reference. The Investor Presentation is also available on the Company's website at www.mercbank.com. Materials on the Company’s website are not part of or incorporated by reference into this report.

 

In accordance with General Instruction B.2 of Form 8-K, the information in this Current Report on Form 8-K, including Exhibits 99.1 and 99.2, 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 April 21, 2020, reporting financial results and earnings for the quarter ended March 31, 2020.
   
99.2 Mercantile Bank Corporation Investor Presentation dated April 21, 2020.

 

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: April 21, 2020

 

3

 

Exhibit Index

 

Exhibit Number                          Description

 

99.1 Press release of Mercantile Bank Corporation dated April 21, 2020, reporting financial results and earnings for the quarter ended March 31, 2020.
   
99.2 Mercantile Bank Corporation Investor Presentation dated April 21, 2020.

 

 
(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

ex_181858.htm

Exhibit 99.1

 

 

Mercantile Bank Corporation Reports Strong First Quarter 2020 Results

Continued strength in core profitability and solid commercial loan growth highlight quarter

 

GRAND RAPIDS, Mich., April 21, 2020 – Mercantile Bank Corporation (NASDAQ: MBWM) ("Mercantile") reported net income of $10.7 million, or $0.65 per diluted share, for the first quarter of 2020, compared with net income of $11.8 million, or $0.72 per diluted share, for the respective prior-year period. Proceeds from a bank owned life insurance claim and a gain on the sale of a former branch facility increased net income in the prior-year period by $1.8 million, or $0.11 per diluted share. Excluding the impacts of these transactions, diluted earnings per share increased $0.04, or approximately 7 percent, during the current-year first quarter compared to the prior-year first quarter.

 

“We are very pleased with our first quarter 2020 financial performance, which depicts the ongoing success of certain strategic initiatives,” said Robert B. Kaminski, Jr., President and Chief Executive Officer of Mercantile. “Our robust financial results reflect solid growth in the commercial loan portfolio, increased fee income, managed overhead costs, and sound asset quality.”

 

First quarter highlights include:

 

 

Robust earnings and capital position

 

Solid growth in key fee income categories

 

Controlled overhead costs

 

Strong asset quality

 

Annualized net commercial loan growth of approximately 5 percent

 

Residential mortgage loan originations up nearly 200 percent compared to the respective 2019 period

 

Continued strength in commercial loan and residential loan pipelines

 

Operating Results

 

Total revenue, which consists of net interest income and noninterest income, was $36.9 million during the first quarter of 2020, compared to $37.3 million during the prior-year first quarter. Net interest income during the first quarter of 2020 was $30.3 million, down $0.3 million, or 1.1 percent, from the first quarter of 2019, reflecting a decreased net interest margin, which more than offset the positive impact of earning asset growth.

 

 

 

The net interest margin was 3.63 percent in the first quarter of 2020, compared to 3.88 percent in the first quarter of 2019. The yield on average earning assets was 4.54 percent during the first quarter of 2020, down from 4.89 percent during the prior-year first quarter primarily due to a decreased yield on commercial loans, which equaled 4.76 percent in the current-year first quarter compared to 5.32 percent in the respective 2019 period. The decreased yield on commercial loans primarily reflected reduced interest rates on variable-rate commercial loans resulting from the Federal Open Market Committee significantly lowering the targeted federal funds rate by 225 basis points during the second half of 2019 and first three months of 2020.

 

The negative impact of the decreased yield on commercial loans on the yield on average earning assets was partially mitigated by an improved yield on securities, which equaled 4.73 percent and 2.82 percent during the first quarters of 2020 and 2019, respectively. The increased yield on securities mainly reflected the recording of $1.8 million in accelerated discount accretion on called U.S. Government agency bonds as interest income during the first three months of 2020. No accelerated discount accretion was recorded during the first three months of 2019. The accelerated discount accretion recorded during the first quarter of 2020 positively impacted the net interest margin by 22 basis points. As part of Mercantile’s interest rate risk management program, U.S. Government agency bonds are periodically purchased at discounts during rising interest rate environments; if these bonds are called during decreasing interest rate environments, the remaining unaccreted discount amounts are immediately recognized as interest income. The cost of funds declined from 1.01 percent during the first quarter of 2019 to 0.91 percent during the current-year first quarter primarily due to lower rates paid on deposit accounts, reflecting the declining interest rate environment.

 

Mercantile recorded provision expense of $0.8 million and $0.9 million during the first quarters of 2020 and 2019, respectively. The provision expense recorded during the first quarter of 2020 was primarily comprised of an increased allocation related to the economic conditions environmental factor; in addition, the provision expense also reflected ongoing net loan growth. The provision expense recorded during the first three months of 2019 mainly reflected ongoing net loan growth.

 

Noninterest income was $6.6 million during both the first quarter of 2020 and the prior-year first quarter. Noninterest income during the first quarter of 2019 included a bank owned life insurance claim of $1.3 million and a gain on the sale of a former branch facility of $0.6 million. Excluding the impacts of these transactions, noninterest income increased $1.8 million, or 38.1 percent, during the current-year first quarter compared to the respective 2019 period. The improved level of noninterest income primarily reflected increased mortgage banking activity income stemming from the ongoing success of strategic initiatives that were designed to increase market presence and a decrease in residential mortgage loan interest rates, which spurred a significant increase in refinance activity. Increased service charges on accounts, payroll processing fees, and credit and debit card income also contributed to the higher level of noninterest income.

 

Noninterest expense totaled $22.9 million during the first quarter of 2020, up $1.1 million, or 5.1 percent, from the prior-year first quarter. The higher level of expense primarily resulted from increased salary costs, mainly reflecting higher residential mortgage loan originator commissions and employee merit pay increases. In addition, higher occupancy and furniture costs, mainly reflecting increased depreciation expense associated with an expansion of Mercantile’s main office, and data processing costs, primarily depicting growth in transaction volume and new product offerings, contributed to the increased level of noninterest expense.

 

 

 

Mr. Kaminski commented, “We are pleased to once again report increases in key noninterest income revenue streams, and we remain focused on meeting growth objectives in a cost conscious manner. The noteworthy increase in mortgage banking activity income reflects a substantial increase in refinance activity stemming from the decline in residential mortgage loan interest rates, an increase in the percentage of originated loans being sold, and the continuing success of various initiatives that were implemented to increase market share, including the hiring of proven mortgage loan originators in our markets.”

 

Balance Sheet

 

As of March 31, 2020, total assets were $3.66 billion, up $24.5 million, or 0.7 percent, from December 31, 2019. Total loans increased $44.9 million, or 1.6 percent, during the first three months of 2020, and $102 million, or 3.6 percent, during the twelve months ended March 31, 2020. As of March 31, 2020, unfunded commitments on commercial construction and development loans totaled approximately $77 million, which are expected to be largely funded over the next 12 to 18 months.

 

Ray Reitsma, President of Mercantile Bank of Michigan, noted, “We are pleased with the net commercial loan growth achieved during the first three months of 2020, and we remain committed to growing the portfolio in a disciplined manner with a continuing emphasis on sound underwriting and risk-based pricing. Based on our current loan pipeline, we believe we will fund additional commercial loans in future periods. While we continue to devote resources to identify and attract new client relationships and meet the typical credit needs of our existing customers, much of our attention has now been diverted to help customers work through the challenges they are confronted with as a result of the COVID-19 pandemic. In addition to implementing commercial loan and retail loan payment deferral programs, we are actively participating in the Small Business Administration’s Paycheck Protection Program.”

 

As of March 31, 2020, commercial and industrial loans and owner-occupied commercial real estate loans combined represented approximately 59 percent of total commercial loans, a level that has remained relatively consistent and in line with internal expectations.

 

Total deposits at March 31, 2020 were $2.65 billion, down $45.0 million, or 1.7 percent, from December 31, 2019. Brokered deposits and local deposits were down $32.5 million and $12.5 million, respectively, during the first three months of 2020. The decline in local deposits in large part reflects the maturity of certain certificates of deposit that were not renewed during the first quarter of 2020. Mercantile did not aggressively seek to renew these certificates of deposit, which were opened as part of a special time deposit campaign that was introduced mid-first quarter 2019 and ended in early April 2019, due to its excess liquidity position. Wholesale funds were $495 million, or approximately 16 percent of total funds, as of March 31, 2020, compared to $487 million, or approximately 15 percent of total funds, as of December 31, 2019.

 

Asset Quality

 

Nonperforming assets at March 31, 2020, were $3.7 million, or 0.1 percent of total assets, compared to $2.7 million, or 0.1 percent of total assets, at December 31, 2019, and $4.5 million, or 0.1 percent of total assets, at March 31, 2019. 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 first three months of 2020. During the first quarter of 2020, loan charge-offs were nominal, while recoveries of prior period loan charge-offs equaled $0.2 million, providing for net loan recoveries of nearly $0.2 million, or an annualized 0.03 percent of average total loans.

 

 

 

Capital Position

 

Shareholders’ equity totaled $418 million as of March 31, 2020, an increase of $1.8 million from year-end 2019. The Bank’s capital position remains above “well-capitalized” with a total risk-based capital ratio of 12.9 percent as of March 31, 2020, compared to 13.0 percent at December 31, 2019. At March 31, 2020, the Bank had approximately $94 million in excess of the 10.0 percent minimum regulatory threshold required to be considered a “well-capitalized” institution. Mercantile reported 16,205,207 total shares outstanding at March 31, 2020.

 

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 222,000 shares for $6.3 million, or a weighted average all-in cost per share of $28.25, during the first quarter of 2020. During the period of January 2015 through March 2020, Mercantile repurchased approximately 1,612,000 shares for $38.9 million, or a weighted average all-in cost per share of $24.13, under the original and new programs on a combined basis. Mercantile has elected to curtail stock repurchases to preserve capital for lending and other purposes while management assesses the potential impacts of the COVID-19 pandemic. Management has the ability to reinstate the buyback program as circumstances warrant.

 

Mr. Kaminski concluded, “The COVID-19 pandemic has presented the world with some great challenges. Our pandemic response plan, which is designed to accommodate evolving information and guidance provided by government agencies and health officials, focuses on protecting our employees and customers and doing our part to help stop the spread of the virus. In addition, the plan includes flexibility to ensure we are able to satisfactorily meet our customers’ banking needs. We entered this period of uncertainty from a position of financial strength, including a strong capital position, sound asset quality, and sufficient liquidity. These sources of financial strength and our commitment to community have allowed us to offer loan payment deferrals to many commercial and retail customers and to participate in the Small Business Administration’s Paycheck Protection Program.”

 

Investor Presentation

 

Mercantile has prepared presentation materials (the “Investor Presentation”) that management intends to use during its previously announced First Quarter 2020 conference call on Tuesday, April 21, 2020 at 10:00 Eastern Time, and from time to time thereafter in presentations about the Company’s operations and performance. The Investor Presentation also contains more detailed information relating to Mercantile’s COVID-19 pandemic response plan. These materials have been furnished to the U.S. Securities and Exchange Commission concurrently with this press release, and are also available on Mercantile’s website at www.mercbank.com.

 

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 $3.6 billion and operates 40 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 may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any such comments 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, including the significant disruption to financial market and other economic activity caused by the outbreak of COVID-19; 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 and CEO  Executive Vice President and CFO
  616-726-1502 616-726-1202
  [email protected]   [email protected]

                      

 

 

MERCANTILE BANK CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

   

MARCH 31,

   

DECEMBER 31,

   

MARCH 31,

 
   

2020

   

2019

   

2019

 
                         

ASSETS

                       

Cash and due from banks

  $ 49,781,000     $ 53,262,000     $ 46,322,000  

Interest-earning deposits

    186,938,000       180,469,000       168,572,000  

Total cash and cash equivalents

    236,719,000       233,731,000       214,894,000  
                         

Securities available for sale

    312,147,000       334,655,000       337,876,000  

Federal Home Loan Bank stock

    18,002,000       18,002,000       18,002,000  
                         

Loans

    2,901,543,000       2,856,667,000       2,799,639,000  

Allowance for loan losses

    (24,828,000 )     (23,889,000 )     (23,135,000 )

Loans, net

    2,876,715,000       2,832,778,000       2,776,504,000  
                         

Premises and equipment, net

    59,143,000       57,327,000       50,109,000  

Bank owned life insurance

    70,613,000       70,297,000       69,789,000  

Goodwill

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

Core deposit intangible, net

    3,443,000       3,840,000       5,084,000  

Other assets

    31,132,000       32,812,000       30,023,000  
                         

Total assets

  $ 3,657,387,000     $ 3,632,915,000     $ 3,551,754,000  
                         
                         

LIABILITIES AND SHAREHOLDERS' EQUITY

                       

Deposits:

                       

Noninterest-bearing

  $ 956,290,000     $ 924,916,000     $ 857,734,000  

Interest-bearing

    1,689,126,000       1,765,468,000       1,753,240,000  

Total deposits

    2,645,416,000       2,690,384,000       2,610,974,000  
                         

Securities sold under agreements to repurchase

    133,270,000       102,675,000       111,235,000  

Federal Home Loan Bank advances

    394,000,000       354,000,000       384,000,000  

Subordinated debentures

    47,051,000       46,881,000       46,369,000  

Accrued interest and other liabilities

    19,261,000       22,414,000       15,447,000  

Total liabilities

    3,238,998,000       3,216,354,000       3,168,025,000  
                         

SHAREHOLDERS' EQUITY

                       

Common stock

    299,584,000       305,035,000       305,346,000  

Retained earnings

    114,012,000       107,831,000       83,107,000  

Accumulated other comprehensive income/(loss)

    4,793,000       3,695,000       (4,724,000 )

Total shareholders' equity

    418,389,000       416,561,000       383,729,000  
                         

Total liabilities and shareholders' equity

  $ 3,657,387,000     $ 3,632,915,000     $ 3,551,754,000  

 

 

 

MERCANTILE BANK CORPORATION

CONSOLIDATED REPORTS OF INCOME

(Unaudited)

           

   

THREE MONTHS ENDED

   

THREE MONTHS ENDED

 
   

March 31, 2020

   

March 31, 2019

 
                 

INTEREST INCOME

               

Loans, including fees

  $ 33,442,000     $ 35,789,000  

Investment securities

    4,017,000       2,441,000  

Other interest-earning assets

    475,000       407,000  

Total interest income

    37,934,000       38,637,000  
                 

INTEREST EXPENSE

               

Deposits

    4,641,000       4,804,000  

Short-term borrowings

    40,000       104,000  

Federal Home Loan Bank advances

    2,212,000       2,234,000  

Other borrowed money

    724,000       850,000  

Total interest expense

    7,617,000       7,992,000  
                 

Net interest income

    30,317,000       30,645,000  
                 

Provision for loan losses

    750,000       850,000  
                 

Net interest income after provision for loan losses

    29,567,000       29,795,000  
                 

NONINTEREST INCOME

               

Service charges on accounts

    1,222,000       1,077,000  

Credit and debit card income

    1,361,000       1,337,000  

Mortgage banking income

    2,627,000       1,057,000  

Payroll services

    577,000       505,000  

Earnings on bank owned life insurance

    336,000       1,630,000  

Other income

    427,000       1,026,000  

Total noninterest income

    6,550,000       6,632,000  
                 

NONINTEREST EXPENSE

               

Salaries and benefits

    13,528,000       13,015,000  

Occupancy

    2,059,000       1,762,000  

Furniture and equipment

    778,000       635,000  

Data processing costs

    2,483,000       2,216,000  

Other expense

    4,092,000       4,202,000  

Total noninterest expense

    22,940,000       21,830,000  
                 

Income before federal income tax expense

    13,177,000       14,597,000  
                 

Federal income tax expense

    2,504,000       2,773,000  
                 

Net Income

  $ 10,673,000     $ 11,824,000  
                 

Basic earnings per share

  $ 0.65     $ 0.72  

Diluted earnings per share

  $ 0.65     $ 0.72  
                 

Average basic shares outstanding

    16,350,281       16,429,571  

Average diluted shares outstanding

    16,351,559       16,435,176  

 

 

 

MERCANTILE BANK CORPORATION

CONSOLIDATED FINANCIAL HIGHLIGHTS

(Unaudited)

 

   

Quarterly

 

(dollars in thousands except per share data)

 

2020

   

2019

   

2019

   

2019

   

2019

 
   

1st Qtr

   

4th Qtr

   

3rd Qtr

   

2nd Qtr

   

1st Qtr

 

EARNINGS

                                       

Net interest income

  $ 30,317       31,168       31,605       31,116       30,645  

Provision for loan losses

  $ 750       (700 )     700       900       850  

Noninterest income

  $ 6,550       7,312       6,676       6,334       6,632  

Noninterest expense

  $ 22,940       23,335       22,027       22,087       21,830  

Net income before federal income tax expense

  $ 13,177       15,845       15,554       14,463       14,597  

Net income

  $ 10,673       13,317       12,600       11,715       11,824  

Basic earnings per share

  $ 0.65       0.81       0.77       0.71       0.72  

Diluted earnings per share

  $ 0.65       0.81       0.77       0.71       0.72  

Average basic shares outstanding

    16,350,281       16,373,458       16,390,203       16,428,187       16,429,571  

Average diluted shares outstanding

    16,351,559       16,375,740       16,393,078       16,434,714       16,435,176  
                                         

PERFORMANCE RATIOS

                                       

Return on average assets

    1.19 %     1.45 %     1.38 %     1.33 %     1.39 %

Return on average equity

    10.20 %     12.87 %     12.39 %     12.08 %     12.75 %

Net interest margin (fully tax-equivalent)

    3.63 %     3.63 %     3.71 %     3.79 %     3.88 %

Efficiency ratio

    62.22 %     60.64 %     57.54 %     58.98 %     58.56 %

Full-time equivalent employees

    626       619       624       652       631  
                                         

YIELD ON ASSETS / COST OF FUNDS

                                       

Yield on loans

    4.69 %     5.01 %     5.06 %     5.18 %     5.21 %

Yield on securities

    4.73 %     2.90 %     2.99 %     2.85 %     2.82 %

Yield on other interest-earning assets

    1.22 %     1.65 %     2.15 %     2.38 %     2.40 %

Yield on total earning assets

    4.54 %     4.61 %     4.73 %     4.85 %     4.89 %

Yield on total assets

    4.23 %     4.31 %     4.42 %     4.53 %     4.56 %

Cost of deposits

    0.70 %     0.79 %     0.83 %     0.85 %     0.77 %

Cost of borrowed funds

    2.31 %     2.36 %     2.35 %     2.40 %     2.43 %

Cost of interest-bearing liabilities

    1.36 %     1.47 %     1.52 %     1.55 %     1.47 %

Cost of funds (total earning assets)

    0.91 %     0.98 %     1.02 %     1.06 %     1.01 %

Cost of funds (total assets)

    0.85 %     0.91 %     0.95 %     0.99 %     0.94 %
                                         

PURCHASE ACCOUNTING ADJUSTMENTS

                                       

Loan portfolio - increase interest income

  $ 285       316       327       569       211  

Trust preferred - increase interest expense

  $ 171       171       171       171       171  

Core deposit intangible - increase overhead

  $ 397       397       397       450       477  
                                         

MORTGAGE BANKING ACTIVITY

                                       

Total mortgage loans originated

  $ 132,859       110,611       132,852       80,205       44,932  

Purchase mortgage loans originated

  $ 46,538       49,407       61,839       41,986       29,891  

Refinance mortgage loans originated

  $ 86,321       61,204       71,013       38,219       15,041  

Mortgage loans originated with intent to sell

  $ 95,327       81,590       104,890       49,396       21,502  

Net gain on sale of mortgage loans

  $ 2,086       3,062       2,886       1,419       698  
                                         

CAPITAL

                                       

Tangible equity to tangible assets

    10.14 %     10.15 %     9.67 %     9.82 %     9.41 %

Tier 1 leverage capital ratio

    11.47 %     11.28 %     11.08 %     11.17 %     11.16 %

Common equity risk-based capital ratio

    10.92 %     11.00 %     10.53 %     10.47 %     10.46 %

Tier 1 risk-based capital ratio

    12.28 %     12.36 %     11.87 %     11.82 %     11.84 %

Total risk-based capital ratio

    13.03 %     13.09 %     12.60 %     12.55 %     12.56 %

Tier 1 capital

  $ 406,445       405,148       395,010       388,788       379,334  

Tier 1 plus tier 2 capital

  $ 431,273       429,038       419,424       412,841       402,469  

Total risk-weighted assets

  $ 3,309,336       3,276,754       3,327,723       3,289,958       3,204,295  

Book value per common share

  $ 25.82       25.36       24.93       24.34       23.37  

Tangible book value per common share

  $ 22.55       22.12       21.64       21.05       20.05  

Cash dividend per common share

  $ 0.28       0.27       0.27       0.26       0.26  
                                         

ASSET QUALITY

                                       

Gross loan charge-offs

  $ 40       112       519       78       174  

Recoveries

  $ 229       287       180       96       79  

Net loan charge-offs (recoveries)

  $ (189 )     (175 )     339       (18 )     95  

Net loan charge-offs (recoveries) to average loans

    (0.03 %)     (0.02 %)     0.05 %     (0.01 %)     0.01 %

Allowance for loan losses

  $ 24,828       23,889       24,414       24,053       23,135  

Allowance to loans

    0.86 %     0.89 %     0.88 %     0.89 %     0.89 %

Nonperforming loans

  $ 3,469       2,284       2,644       3,505       4,138  

Other real estate/repossessed assets

  $ 271       452       243       446       396  

Nonperforming loans to total loans

    0.12 %     0.08 %     0.09 %     0.12 %     0.15 %

Nonperforming assets to total assets

    0.10 %     0.08 %     0.08 %     0.11 %     0.13 %

 

 

 

NONPERFORMING ASSETS - COMPOSITION

                                       

Residential real estate:

                                       

Land development

  $ 37       34       32       33       45  

Construction

  $ 283       0       0       0       0  

Owner occupied / rental

  $ 2,922       2,364       2,576       3,225       3,404  

Commercial real estate:

                                       

Land development

  $ 43       0       0       0       0  

Construction

  $ 0       0       0       0       0  

Owner occupied

  $ 287       326       240       642       791  

Non-owner occupied

  $ 0       0       26       26       62  

Non-real estate:

                                       

Commercial assets

  $ 156       0       0       2       207  

Consumer assets

  $ 12       12       13       23       25  

Total nonperforming assets

  $ 3,740       2,736       2,887       3,951       4,534  
                                         

NONPERFORMING ASSETS - RECON

                                       

Beginning balance

  $ 2,736       2,887       3,951       4,534       4,952  

Additions - originated loans & former bank facilities

  $ 1,344       30       339       26       539  

Other activity

  $ (31 )     135       57       34       0  

Return to performing status

  $ (7 )     0       (126 )     0       0  

Principal payments

  $ (110 )     (232 )     (1,014 )     (512 )     (382 )

Sale proceeds

  $ (192 )     (36 )     (253 )     (74 )     (429 )

Loan charge-offs

  $ 0       (48 )     (59 )     (36 )     (146 )

Valuation write-downs

  $ 0       0       (8 )     (21 )     0  

Ending balance

  $ 3,740       2,736       2,887       3,951       4,534  
                                         

LOAN PORTFOLIO COMPOSITION

                                       

Commercial:

                                       

Commercial & industrial

  $ 873,679       846,551       882,747       881,196       839,207  

Land development & construction

  $ 62,908       56,118       48,418       45,158       45,892  

Owner occupied comm'l R/E

  $ 579,229       579,004       567,267       556,868       551,517  

Non-owner occupied comm'l R/E

  $ 823,366       835,345       883,079       852,844       835,679  

Multi-family & residential rental

  $ 133,148       124,526       126,855       128,489       127,903  

Total commercial

  $ 2,472,330       2,441,544       2,508,366       2,464,555       2,400,198  

Retail:

                                       

1-4 family mortgages

  $ 356,338       339,749       346,095       335,618       316,315  

Home equity & other consumer

  $ 72,875       75,374       78,552       81,320       83,126  

Total retail

  $ 429,213       415,123       424,647       416,938       399,441  

Total loans

  $ 2,901,543       2,856,667       2,933,013       2,881,493       2,799,639  
                                         

END OF PERIOD BALANCES

                                       

Loans

  $ 2,901,543       2,856,667       2,933,013       2,881,493       2,799,639  

Securities

  $ 330,149       352,657       363,535       365,926       355,878  

Other interest-earning assets

  $ 186,938       180,469       144,263       92,750       168,572  

Total earning assets (before allowance)

  $ 3,418,630       3,389,793       3,440,811       3,340,169       3,324,089  

Total assets

  $ 3,657,387       3,632,915       3,710,380       3,576,139       3,551,754  

Noninterest-bearing deposits

  $ 956,290       924,916       967,189       918,581       857,734  

Interest-bearing deposits

  $ 1,689,126       1,765,468       1,799,902       1,700,628       1,753,240  

Total deposits

  $ 2,645,416       2,690,384       2,767,091       2,619,209       2,610,974  

Total borrowed funds

  $ 576,996       506,301       517,523       543,098       544,566  

Total interest-bearing liabilities

  $ 2,266,122       2,271,769       2,317,425       2,243,726       2,297,806  

Shareholders' equity

  $ 418,389       416,561       407,200       400,117       383,729  
                                         

AVERAGE BALANCES

                                       

Loans

  $ 2,861,047       2,871,674       2,903,161       2,848,343       2,787,430  

Securities

  $ 344,906       362,347       363,394       357,718       354,459  

Other interest-earning assets

  $ 153,638       176,034       118,314       94,616       67,915  

Total earning assets (before allowance)

  $ 3,359,591       3,410,055       3,384,869       3,300,677       3,209,804  

Total assets

  $ 3,602,784       3,650,087       3,622,168       3,529,598       3,441,774  

Noninterest-bearing deposits

  $ 923,827       948,602       930,851       875,645       852,247  

Interest-bearing deposits

  $ 1,724,030       1,759,377       1,741,563       1,719,433       1,668,563  

Total deposits

  $ 2,647,857       2,707,979       2,672,414       2,595,078       2,520,810  

Total borrowed funds

  $ 517,961       509,932       529,590       530,802       532,864  

Total interest-bearing liabilities

  $ 2,241,991       2,269,309       2,271,153       2,250,235       2,201,427  

Shareholders' equity

  $ 419,612       410,593       403,350       389,133       376,103  

 

 
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Section 3: EX-99.2 (EXHIBIT 99.2)

Image Exhibit

 Exhibit 99.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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