Level One Bancorp, Inc. Reports Double Digit Loan and Deposit Growth Year Over Year, Coupled With a 21% Reduction in Nonaccrual Loans in 2019

Company Release - 7/30/2019 7:30 AM ET

FARMINGTON HILLS, Mich., July 30, 2019 (GLOBE NEWSWIRE) -- Level One Bancorp, Inc. (“Level One”) (Nasdaq: LEVL) today reported financial results for the second quarter of 2019, which included net income of $3.6 million, or $0.45 per diluted share. This compares to net income of $3.5 million, or $0.44 per diluted share, in the preceding quarter and $4.0 million, or $0.53 per diluted share, in the second quarter of 2018.

Patrick J. Fehring, President and Chief Executive Officer of Level One, commented "We are pleased to announce a solid second quarter with earnings of $3.6 million, or fully diluted earnings per share of $0.45.  Our earnings were driven by quarter over quarter increases of 3.9% in loans and 6.8% in deposits, and year over year increases of 11.5% in loans and 15.4% in deposits. In addition, our noninterest income increased by $2.0 million, or 139%, from the second quarter of 2018, primarily due to the doubling of our mortgage originators in the third quarter of 2018.  Finally, our asset quality improved as nonaccrual loans declined by $2.1 million during the quarter."

He added, "Offsetting these improvements, there was a $310 thousand increase in the provision for unfunded commitments (rolling up to other noninterest expense) due to a change in assumptions within the calculation. We continue to focus on our strategic priorities to ensure a strong organization for our shareholders, team members, and clients."

Second Quarter 2019 Financial Highlights

  • Net income was $3.6 million, or $0.45 per diluted share, for the second quarter of 2019
  • Net interest margin, on a fully taxable equivalent ("FTE") basis, was 3.50%, compared to 3.76% in the preceding quarter and 3.99% in the second quarter of 2018
  • Noninterest income increased 139.46% to $3.5 million in the second quarter of 2019, compared to $1.5 million in the second quarter of 2018, primarily due to higher mortgage banking activities income
  • Total assets increased 13.79% to $1.51 billion at June 30, 2019, compared to $1.32 billion at June 30, 2018
  • Total loans increased 11.54% to $1.17 billion at June 30, 2019, compared to $1.05 billion at June 30, 2018
  • Total deposits increased 15.42% to $1.23 billion at June 30, 2019, compared to $1.07 billion at June 30, 2018
  • Book value per share increased 13.83% to $21.07 per share at June 30, 2019, compared to $18.51 per share at June 30, 2018
  • Tangible book value per share increased 14.97% to $19.81 per share at June 30, 2019, compared to $17.23 per share at June 30, 2018

Balance Sheet Review

Level One's total assets were $1.51 billion at June 30, 2019, an increase of $89.2 million, or 6.30%, from $1.42 billion at December 31, 2018, and up $182.5 million, or 13.79%, from $1.32 billion at June 30, 2018. The increase in total assets from December 31, 2018 was primarily due to an increase in originated loans, mortgage loans held for sale, securities available for sale, and cash and cash equivalents.

The investment securities portfolio was $218.1 million at June 30, 2019, an increase of $13.8 million, or 6.80%, from $204.3 million at December 31, 2018, and up $22.1 million, or 11.27%, from $196.0 million at June 30, 2018. The increase in the investment securities portfolio year to date and during the twelve months ended June 30, 2019 reflects our plan to increase the investment securities portfolio in line with total assets.

Total loans were $1.17 billion at June 30, 2019, an increase of $39.9 million, or 3.54%, from $1.13 billion at December 31, 2018, and up $120.7 million, or 11.54%, from $1.05 billion at June 30, 2018. The growth in total loans compared to December 31, 2018 and June 30, 2018 was primarily due to growth in our commercial loan portfolio and residential real estate loan portfolio.

Total deposits were $1.23 billion at June 30, 2019, an increase of $94.8 million, or 8.36%, from $1.13 billion at December 31, 2018, and up $164.2 million, or 15.42%, from $1.07 billion at June 30, 2018.  The increase in deposits compared to December 31, 2018 and June 30, 2018 was primarily due to growth in our money market, savings and time deposits. Total deposit composition at June 30, 2019 consisted of 29.96% of demand deposit accounts, 25.66% of savings and money market accounts and 44.38% of time deposits.

Operating Results

Level One's net interest income decreased $277 thousand, or 2.18%, to $12.4 million in the second quarter of 2019, compared to $12.7 million in the preceding quarter, primarily as a result of higher costs of funds, partially offset by interest income on the higher balances of originated loans.  Net interest income remained relatively flat as compared to the second quarter of 2018.

Level One’s net interest margin, on a FTE basis, was 3.50% in the second quarter of 2019, compared to 3.76% in the preceding quarter and 3.99% in the second quarter of 2018. This decrease in the net interest margin compared to the preceding quarter was primarily as a result of higher cost of funds and lower average loan yield quarter over quarter. The decrease in net interest margin year over year was primarily due to higher cost of funds as the federal funds rate rose 50 basis points.

Level One's noninterest income increased $1.2 million, or 52.10%, to $3.5 million in the second quarter of 2019, compared to $2.3 million in the preceding quarter, and increased $2.0 million, or 139.46%, compared to $1.5 million in the second quarter of 2018. The increase in noninterest income compared to the preceding quarter was primarily due to an increase in mortgage banking activity income as a result of increased volume of mortgage loans sold as well as an increase in volume of loans held for sale. The increase in noninterest income year over year was attributable to the same factors mentioned in the quarter to quarter analysis above, as well as an increase in the volume of our mortgage banking derivatives which is included in mortgage banking activities income. The increase in the mortgage banking activities income year over year was predominantly as a result of the doubling of our mortgage team in third quarter 2018.

Level One's noninterest expense increased $799 thousand, or 7.71%, to $11.2 million in the second quarter of 2019, compared to $10.4 million in the preceding quarter, and increased $1.5 million, or 15.06%, compared to $9.7 million in the second quarter of 2018.  The increase in noninterest expenses quarter over quarter as well as year over year was primarily a result of increased salary and employee benefits due to the overall growth in team member headcount and a $310 thousand increase in the provision for unfunded commitment due to a change in the assumptions within the calculation, which resulted in a better representation of our line of credit utilization. The efficiency ratio, which is a measure of operating expenses as a percentage of net interest income and noninterest income, for the second quarter of 2019 was 70.15%, compared to 69.10% for the preceding quarter and 69.99% in the second quarter of 2018.

Level One's income tax provision was $767 thousand, or 17.75% of pretax income, in the second quarter of 2019, as compared to $747 thousand, or 17.73% of pretax income, in the preceding quarter and $860 thousand, or 17.65% of pretax income, in the second quarter of 2018.

Asset Quality

Nonaccrual loans were $14.5 million, or 1.25% of total loans, at June 30, 2019, a decrease of $3.9 million from nonaccrual loans of $18.4 million, or 1.64% of total loans, at December 31, 2018, and an increase of $3.2 million from nonaccrual loans of $11.3 million, or 1.08% of total loans, at June 30, 2018. The decrease in nonaccrual loans compared to December 31, 2018 is primarily due to the pay-off of a large loan relationship on nonaccrual status during the first quarter 2019. The increase in nonaccrual loans compared to second quarter 2018 was primarily due to four commercial loan relationships totaling $9.0 million moving to nonaccrual status, partially offset by pay-offs of three commercial loan relationships totaling $5.7 million.

Level One had $373 thousand of other real estate owned assets at June 30, 2019, compared to no other real estate owned assets at December 31, 2018 and June 30, 2018. Nonperforming assets, consisting of nonaccrual loans and other real estate owned, as a percentage of total assets were 0.99% at June 30, 2019, compared to 1.30% at December 31, 2018, and 0.85% at June 30, 2018.

In addition, we had $331 thousand of loans 90 days or more past due and still accruing at June 30, 2019, compared to $243 thousand at December 31, 2018 and $259 thousand at June 30, 2018, all of which consisted of purchase credit impaired loans.

Performing troubled debt restructured loans that were not included in nonaccrual loans at June 30, 2019 were $921 thousand, compared to $931 thousand at December 31, 2018 and $2.5 million at June 30, 2018. The decrease in performing trouble debt restructurings year over year was due to one commercial loan relationship totaling $1.5 million moving to nonaccrual. Borrowers who are in financial difficulty and who have been granted concessions that may include interest rate reductions, forbearance agreements, and principal deferral or reduction, are categorized as troubled debt restructured loans.

Net chargeoffs in the second quarter of 2019 were $36 thousand, or 0.01% of average loans on an annualized basis, compared to $28 thousand of net chargeoffs, or 0.01% of average loans on an annualized basis, for the preceding quarter and $669 thousand of net recoveries, or 0.26% of average loans on an annualized basis, for the quarter ended June 30, 2018.

Level One's second quarter of 2019 provision for loan losses was a provision expense of $429 thousand, compared to a provision expense of $422 thousand in the preceding quarter and a provision benefit of $710 thousand in the second quarter of 2018. The increase in the provision expense year over year was primarily due to a $700 thousand recovery in the second quarter of 2018. The allowance for loan losses was $12.4 million, or 1.06% of total loans, at June 30, 2019, compared to $11.6 million, or 1.03% of total loans, at December 31, 2018, and $11.5 million, or 1.10% of total loans, at June 30, 2018. As of June 30, 2019, the allowance for loan losses as a percentage of nonaccrual loans was 84.94%, compared to 62.70% at December 31, 2018, and 101.67% at June 30, 2018.

Capital

Total shareholders’ equity was $162.9 million at June 30, 2019, an increase of $11.1 million, or 7.32%, compared with $151.8 million at December 31, 2018, primarily as a result of increased retained earnings and accumulated other comprehensive income.  Total shareholders' equity increased $19.4 million, or 13.54%, from $143.4 million at June 30, 2018 as a result of the same factors previously mentioned.

Recent Developments

Second Quarter Dividend: On June 20, 2019, Level One’s Board of Directors declared a quarterly cash dividend of $0.04 per share. This dividend was paid out on July 15, 2019, to stockholders of record at the close of business on June 30, 2019.

About Level One Bancorp, Inc.

Level One Bancorp, Inc. is the holding company for Level One Bank, a full-service commercial and consumer bank headquartered in Michigan with assets of approximately $1.51 billion as of June 30, 2019. It operates twelve banking centers throughout southeast Michigan and west Michigan. Level One Bank's success has been recognized both locally and nationally as the U.S. Small Business Administration's (SBA) "Community Lender of the Year" and "Export Finance Lender of the Year" and one of S&P Global's Top 10 "Best-Performing Community Banks" in the nation. Level One's commercial division provides a menu of products including lines of credit, term loans, leases, commercial mortgages, SBA loans, export-import financing, and a full suite of treasury management and private banking services. The consumer division offers personal savings and checking accounts and a complete array of consumer loan products including residential mortgages, home equity loans, auto loans, and credit card services. Level One Bank offers a variety of online banking services and a robust mobile banking application for individuals and businesses.  Level One Bank offers the sophistication of a big bank, the heart of a community bank, and the spirit of an entrepreneur. For more information, visit www.levelonebank.com.

Forward-Looking Statements

This release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect management’s current views of future events and operations. These forward-looking statements are based on the information currently available to the Company as of the date of this release. It is important to note that these forward-looking statements are not guarantees of future performance and involve risk and uncertainties, including, but not limited to, the ability of the Company to implement its strategy and expand its lending operations, changes in interest rates and other general economic, business and political conditions, including changes in the financial markets, as well as other risks described in the Company's filings with the Securities and Exchange Commission. The Company does not undertake any obligation to update or revise any forward-looking statements to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.

Summary Consolidated Financial Information                   
(Unaudited)As of or for the three months ended
 June 30,
 March 31,
 December 31,
 September 30,
 June 30,
(Dollars in thousands, except per share data)2019
 2019
 2018
 2018
 2018
Earnings Summary                   
Interest income$17,657  $17,442  $17,041  $16,629  $15,380 
Interest expense5,216  4,724  4,228  3,560  2,965 
Net interest income12,441  12,718  12,813  13,069  12,415 
Provision (benefit) for loan losses429  422  (51) 619  (710)
Noninterest income3,477  2,286  2,307  1,924  1,452 
Noninterest expense11,167  10,368  10,384  10,454  9,705 
Income before income taxes4,322  4,214  4,787  3,920  4,872 
Income tax provision767  747  836  665  860 
Net income$3,555  $3,467  $3,951  $3,255  $4,012 
Per Share Data         
Basic earnings per common share$0.46  $0.45  $0.51  $0.42  $0.54 
Diluted earnings per common share0.45  0.44  0.50  0.41  0.53 
Book value per common share21.07  20.15  19.58  18.77  18.51 
Tangible book value per share (1)19.81  18.88  18.31  17.50  17.23 
Shares outstanding (in thousands)7,728  7,749  7,750  7,749  7,749 
Average basic common shares (in thousands)7,741  7,752  7,750  7,749  7,456 
Average diluted common shares (in thousands)7,856  7,869  7,893  7,901  7,613 
Selected Period End Balances         
Total assets$1,505,376  $1,456,552  $1,416,215  $1,446,269  $1,322,913 
Securities available-for-sale218,145  226,874  204,258  199,051  196,047 
Total loans1,166,501  1,131,097  1,126,565  1,114,999  1,045,789 
Total deposits1,229,445  1,151,463  1,134,635  1,130,311  1,065,216 
Total liabilities1,342,509  1,300,433  1,264,455  1,300,810  1,179,468 
Total shareholders' equity162,867  156,119  151,760  145,459  143,445 
Tangible shareholders' equity (1)153,121  146,337  141,926  135,570  133,501 
Performance and Capital Ratios         
Return on average assets (annualized)0.95% 0.96% 1.11% 0.95% 1.23%
Return on average equity (annualized)8.92  8.99  10.69  8.95  11.97 
Net interest margin (fully taxable equivalent)(2)3.50  3.76  3.73  3.97  3.99 
Efficiency ratio (noninterest expense/net interest income plus noninterest income)70.15  69.10  68.68  69.73  69.99 
Dividend payout ratio8.69  6.72  5.87  7.13  5.78 
Total shareholders' equity to total assets10.82  10.72  10.72  10.06  10.84 
Tangible equity to tangible assets (1)10.24  10.11  10.09  9.44  10.17 
Common equity tier 1 to risk-weighted assets11.64  11.78  11.82  11.75  12.11 
Tier 1 capital to risk-weighted assets11.64  11.78  11.82  11.75  12.11 
Total capital to risk-weighted assets13.79  13.95  14.00  13.99  14.44 
Tier 1 capital to average assets (leverage ratio)10.01  10.19  10.21  10.31  10.60 
Asset Quality Ratios:         
Net charge-offs (recoveries) to average loans0.01% 0.01% 0.10% 0.07% (0.26)%
Nonperforming assets as a percentage of total assets0.99  1.17  1.30  0.89  0.85 
Nonaccrual loans as a percent of total loans1.25  1.47  1.64  1.15  1.08 
Allowance for loan losses as a percentage of period-end loans1.06  1.06  1.03  1.07  1.10 
Allowance for loan losses as a percentage of nonaccrual loans84.94  71.85  62.70  92.36  101.67 
Allowance for loan losses as a percentage of nonaccrual loans, excluding allowance allocated to loans accounted for under ASC 310-3079.41  66.33  57.71  84.72  92.93 
(1) See section entitled "GAAP Reconciliation of Non-GAAP Financial Measures" below.              
(2) Presented on a tax equivalent basis using a 21% tax rate.              

GAAP Reconciliation of Non-GAAP Financial Measures

Some of the financial measures included in this earnings release are not measures of financial performance recognized by GAAP. These non-GAAP financial measures include tangible shareholders' equity, tangible book value per share, and the ratio of tangible shareholders' equity to tangible assets. Our management uses these non-GAAP financial measures in its analysis of our performance, and we believe financial analysts and others frequently use these measures, and other similar measures, to evaluate capital adequacy. We calculate: (i) tangible shareholders' equity as total shareholders' equity less core deposit intangibles and goodwill; (ii) tangible book value per share as tangible shareholders' equity divided by shares of common stock outstanding; and (iii) tangible assets as total assets, less core deposit intangibles and goodwill.

The following presents these non-GAAP financial measures along with their most directly comparable financial measure calculated in accordance with GAAP:

                    
 As of
(Dollars in thousands, except per share data)
June 30,
2019

 March 31,
2019
 December 31,
2019
 September 30,
2018
  
June 30,
2018
 
 
 (Unaudited) (Unaudited)   (Unaudited) (Unaudited)
Total shareholders' equity$162,867  $156,119  $151,760  $145,459  $143,445 
Less:         
Goodwill9,387  9,387  9,387  9,387  9,387 
Core deposit intangibles359  395  447  502  557 
Tangible shareholders' equity$153,121  $146,337  $141,926  $135,570  $133,501 
          
Shares outstanding (in thousands)7,728  7,749  7,750  7,749  7,749 
Tangible book value per share$19.81  $18.88  $18.31  $17.5  $17.23 
          
Total assets$1,505,376  $1,456,552  $1,416,215  $1,446,269  $1,322,913 
Less:         
Goodwill9,387  9,387  9,387  9,387  9,387 
Core deposit intangibles359  395  447  502  557 
Tangible assets$1,495,630  $1,446,770  $1,406,381  $1,436,380  $1,312,969 
          
Tangible equity to tangible assets10.24% 10.11% 10.09% 9.44% 10.17%


Consolidated Balance Sheets      
 As of 
 June 30, December 31, June 30, 
(Dollars in thousands)2019 2018 2018 
Assets(Unaudited)   (Unaudited)
Cash and cash equivalents$50,120 $33,296 $34,767 
Securities available-for-sale 218,145  204,258  196,047 
Federal Home Loan Bank stock 8,325  8,325  8,303 
Mortgage loans held for sale, at fair value 22,822  5,595  3,991 
Loans:      
Originated loans 1,088,395  1,041,898  946,724 
Acquired loans 78,106  84,667  99,065 
Total loans 1,166,501  1,126,565  1,045,789 
Less: Allowance for loan losses (12,353)
 (11,566 (11,465
Net loans 1,154,148  1,114,999  1,034,324 
Premises and equipment, net 13,188  13,242  13,144 
Goodwill 9,387  9,387  9,387 
Other intangible assets, net 359  447  557 
Bank-owned life insurance 11,992  11,866  11,703 
Income tax benefit 791  2,467  2,510 
Other assets 16,099  12,333  8,180 
Total assets$1,505,376 $1,416,215 $1,322,913 
Liabilities      
Deposits:      
Noninterest-bearing demand deposits$317,747 $309,384 $320,213 
Interest-bearing demand deposits 50,605  52,804  57,060 
Money market and savings deposits 315,477  287,575  247,542 
Time deposits 545,616  484,872  440,401 
Total deposits 1,229,445  1,134,635  1,065,216 
Borrowings 76,934  99,574  86,594 
Subordinated notes 14,920  14,891  14,867 
Other liabilities 21,210  15,355  12,791 
Total liabilities 1,342,509  1,264,455  1,179,468 
Shareholders' equity      
Common stock, no par value per share:      
Authorized - 20,000,000 shares      
Issued and outstanding - 7,728,280 shares at June 30, 2019, 7,750,216 shares at December 31, 2018, and 7,748,641 shares at June 30, 2018 89,442  90,621  90,201 
Retained earnings 69,295  62,891  56,383 
Accumulated other comprehensive income (loss), net of tax 4,130  (1,752 (3,139
Total shareholders' equity 162,867  151,760  143,445 
Total liabilities and shareholders' equity$1,505,376 $1,416,215 $1,322,913 


Consolidated Statements of Income         
(Unaudited)Three months ended
 Six months ended
 June 30, March 31,  June 30, June 30,  June 30,
(In thousands, except per share data)2019 2019 2018 2019 2018
Interest income         
Originated loans, including fees$14,125  $13,894  $11,833 $28,019 $23,011 
Acquired loans, including fees1,637  1,757  2,293 3,394 4,719 
Securities:         
Taxable980  936  667 1,916 1,241 
Tax-exempt595  545  380 1,140 731 
Federal funds sold and other320  310  207 630 452 
Total interest income17,657  17,442  15,380 35,099 30,154 
Interest Expense         
Deposits4,617  4,121  2,487 8,738 4,665 
Borrowed funds346  353  225 699 444 
Subordinated notes253  250  253 503 503 
Total interest expense5,216  4,724  2,965 9,940 5,612 
Net interest income12,441  12,718  12,415 25,159 24,542 
Provision expense (benefit) for loan losses429  422  (710) 851 (156)
Net interest income after provision for loan losses12,012  12,296  13,125 24,308 24,698 
Noninterest income         
Service charges on deposits662  625  618 1,287 1,260 
Net gain (loss) on sales of securities7  (7)    
Mortgage banking activities2,316  1,120  404 3,436 640 
Net gain on sale of commercial loans    11  11 
Other charges and fees492  548  419 1,040 913 
Total noninterest income3,477  2,286  1,452 5,763 2,824 
Noninterest expense         
Salary and employee benefits7,193  6,913  6,169 14,106 12,125 
Occupancy and equipment expense1,168  1,204  1,074 2,372 2,120 
Professional service fees385  362  471 747 737 
Marketing expense288  176  291 464 433 
Printing and supplies expense104  68  112 172 216 
Data processing expense606  595  511 1201 947 
Other expense1,423  1,050  1,077 2,473 2,262 
Total noninterest expense11,167  10,368  9,705 21,535 18,840 
Income before income taxes4,322  4,214  4,872 8,536 8,682 
Income tax provision767  747  860 1,514 1,502 
Net income$3,555  $3,467  $4,012 $7,022  $7,180 
Earnings per common share:         
Basic earnings per common share$0.46  $0.45  $0.54 $0.91  $1.02 
Diluted earnings per common share$0.45  $0.44  $0.53 $0.89  $1.00 
Cash dividends declared per common share$0.04  $0.04  $0.03 $0.08 $0.06 
Weighted average common shares outstanding—basic 7,741   7,752   7,456  7,746  7,050 
Weighted average common shares outstanding—diluted  7,856   7,869   7,613  7,862  7,211 

  

Net Interest Income and Net Interest Margin           
(Unaudited)For the three months ended 
 June 30, 2019
 March 31, 2019
 June 30, 2018
(Dollars in thousands)Average BalanceInterest (1)Average
Rate (2)
 Average BalanceInterest (1)Average
Rate (2)
 Average BalanceInterest (1)Average
Rate (2)
Interest-earning assets:           
Gross loans (3)$1,164,871 $15,762 5.43% $1,125,213 $15,651 5.64% $1,045,715 $14,126 5.42%
Investment securities (4):           
Taxable143,841 980 2.73  141,282 936 2.69  114,957 667 2.33 
Tax-exempt87,287 595 3.26  80,760 545 3.17  58,976 380 3.10 
Interest earning cash balances32,606 206 2.53  28,076 176 2.54  25,828 119 1.85 
Federal Home Loan Bank Stock8,325 114 5.49  8,325 134 6.53  8,303 88 4.25 
Total interest-earning assets$1,436,930 $17,657 4.96% $1,383,656 $17,442 5.14% $1,253,779 $15,380 4.94%
Non-earning assets:           
  Cash and due from banks24,347    24,794    17,800   
  Premises and equipment13,239    13,289    12,621   
  Goodwill9,387    9,387    9,387   
  Other intangible assets, net376    425    589   
  Bank-owned life insurance11,948    11,893    11,650   
  Allowance for loan losses(12,039)   (11,563)   (11,473)  
  Other non-earning assets16,804    11,841    7,839   
   Total assets$1,500,992    $1,443,722    $1,302,192   
Interest-bearing liabilities:           
  Interest-bearing demand deposits$56,434 $69 0.49% $53,299 $48 0.37% $64,394 $48 0.30%
  Money market and savings deposits295,371 1,125 1.53  306,496 1,094 1.45  276,496 678 0.98 
  Time deposits582,874 3,423 2.36  544,130 2,979 2.22  445,894 1,761 1.58 
  Borrowings59,272 346 2.33  55,814 353 2.57  48,604 225 1.86 
  Subordinated notes14,910 253 6.78  14,896 250 6.81  14,859 253 6.83 
  Total interest-bearing liabilities$1,008,861 $5,216 2.07% $974,635 $4,724 1.97% $850,247 $2,965 1.40%
Noninterest-bearing liabilities and shareholders' equity:           
  Noninterest bearing demand deposits315,530    300,680    306,547   
  Other liabilities17,144    14,136    10,923   
  Shareholders' equity159,457    154,271    134,475   
  Total liabilities and shareholders' equity$1,500,992    $1,443,722    $1,302,192   
Net interest income $12,441    $12,718    $12,415  
Interest spread  2.89%   3.17%   3.54%
Net interest margin (5)  3.47    3.73    3.97 
Tax equivalent effect  0.03    0.03    0.02 
Net interest margin on a fully tax equivalent basis  3.50%   3.76%   3.99%

(1) Interest income is shown on actual basis and does not include taxable equivalent adjustments.
(2) Average rates and yields are presented on an annual basis and includes a taxable equivalent adjustment to interest income of $115 thousand, $83 thousand, and $76 thousand on tax-exempt securities for the three months ended June 30, 2019, March 31, 2019, and June 30, 2018, respectively, using a federal income tax rate of 21%.
(3) Includes nonaccrual loans.
(4) For presentation in this table, average balances and the corresponding average rates for investment securities are based upon historical cost, adjusted for amortization of premiums and accretion of discounts.
(5) Net interest margin represents net interest income divided by average total interest-earning assets.

 For the six months ended
 June 30, 2019
 June 30, 2018
(Dollars in thousands) Average Balance  Interest (1) Average Rate (2)   Average Balance  Interest (1) Average Rate (2) 
Interest-earning assets:                 
Gross loans (3)$1,145,151 $31,413 5.53% $1,041,404 $27,730 5.37%
Investment securities (4):       
Taxable142,569 1,916 2.71  108,581 1,241 2.31 
Tax-exempt84,041 1,140 3.28  56,997 731 3.12 
Interest earning cash balances30,353 382 2.54  26,455 225 1.71 
Federal Home Loan Bank Stock8,325 248 6.01  8,303 227 5.51 
Total interest-earning assets$1,410,439 $35,099 5.05% $1,241,740 $30,154 4.92%
Non-earning assets:       
  Cash and due from banks24,570    18,163   
  Premises and equipment13,264    12,990   
  Goodwill9,387    9,387   
  Other intangible assets, net401    616   
  Bank-owned life insurance11,921    11,610   
  Allowance for loan losses(11,802)   (11,646)  
  Other non-earning assets14,335    10,006   
   Total assets$1,472,515    $1,292,866   
Interest-bearing liabilities:       
  Interest-bearing demand deposits$54,875 $117 0.43% $63,950 $99 0.31%
  Money market and savings deposits300,903 2,219 1.49  275,105 1,226 0.90 
  Time deposits563,609 6,402 2.29  451,195 3,340 1.49 
  Borrowings57,553 699 2.45  52,689 444 1.70 
  Subordinated notes14,903 503 6.79  14,852 503 6.83 
  Total interest-bearing liabilities$991,843 $9,940 2.02% $857,791 $5,612 1.32%
Noninterest-bearing liabilities and shareholders' equity:       
  Noninterest bearing demand deposits308,146    302,635   
  Other liabilities15,648    9,933   
  Shareholders' equity156,878    122,507   
   Total liabilities and shareholders' equity$1,472,515    $1,292,866   
Net interest income $25,159    $24,542  
Interest spread  3.03%   3.60%
Net interest margin (5)  3.60    3.99 
Tax equivalent effect  0.03    0.02 
Net interest margin on a fully tax equivalent basis  3.63%   4.01%

(1) Interest income is shown on actual basis and does not include taxable equivalent adjustments.
(2) Average rates and yields are presented on an annual basis and includes a taxable equivalent adjustment to interest income of $226 thousand and $150
thousand on tax-exempt securities for the six months ended June 30, 2019 and June 30, 2018, respectively, using the statutory tax rate of 21%.
(3) Includes nonaccrual loans.
(4) For presentation in this table, average balances and the corresponding average rates for investment securities are based upon historical cost, adjusted for
amortization of premiums and accretion of discounts.
(5) Net interest margin represents net interest income divided by average total interest-earning assets.

Loan Composition               
(Unaudited)As of
 June 30, March 31, December 31, September 30, June 30, 
(Dollars in thousands)2019 2019 2018 2018 2018 
Commercial real estate:               
Non-owner occupied$364,504 $361,066 $367,671 $362,450 $361,341 
Owner-occupied 193,500  187,001  194,422  190,131  172,615 
Total commercial real estate 558,004  548,067  562,093  552,581  533,956 
Commercial and industrial 420,812  401,588  383,455  397,060  363,239 
Residential real estate 186,737  180,386  180,018  164,356  147,763 
Consumer 948  1,056  999  1,002  831 
Total loans$1,166,501 $1,131,097 $1,126,565 $1,114,999 $1,045,789 

 

Impaired Assets              
(Unaudited)As of
 June 30,
 
March 31,
 
December 31,
 
September 30,
 
June 30,
(Dollars in thousands)2019
 2019
 2018 2018
 2018
Nonaccrual loans              
Commercial real estate$2,979 $2,694 $5,927 $4,559 $2,557
Commercial and industrial9,559 10,495 9,605 5,763 5,983
Residential real estate2,006 3,456 2,915 2,546 2,737
Consumer   5 
Total nonaccrual loans14,544 16,645 18,447 12,873 11,277
Other real estate owned373 373   
Total nonperforming assets14,917 17,018 18,447 12,873 11,277
Performing troubled debt restructurings         
Commercial real estate   1,511 1,517
Commercial and industrial558 562 568 574 578
Residential real estate363 363 363 365 364
Total performing troubled debt restructurings921 925 931 2,450 2,459
Total impaired assets$15,838 $17,943 $19,378 $15,323 $13,736
          
Loans 90 days or more past due and still accruing$331 $453 $243 $354 $259

 

Media Contact:
Nicole Ransom
(248) 538-2183

Investor Relations Contact:
Peter Root
(248) 538-2186

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Source: Level One Bancorp, Inc.