8-K
MERCANTILE BANK CORP (MBWM)
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<br><br> <br>of incorporation) | (Commission File<br><br> <br>Number) | (IRS Employer<br><br> <br>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. ☐
I tem 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
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. |
ex_181858.htm
Exhibit 99.1
Mercantile Bank Corporation Reports S trong **** F irst Quarter 20 20 Results
Continued strength in core profitability and solid commercial loan growth highlight quarter
GRAND RAPIDS, Mich., April 21 , 20 20 – 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 |
O perating 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.”
B alance 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.
A sset 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 |
| rkaminski@mercbank.com | cchristmas@mercbank.com |
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 |
Image Exhibit
Exhibit 99.2
