Document


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): July 30, 2018
LEVEL ONE BANCORP, INC.
(Exact name of registrant as specified in its charter)
Commission File Number: 001-38458
Michigan
(State or other jurisdiction of
incorporation or organization)
 
71-1015624
(I.R.S. Employer
Identification No.)
32991 Hamilton Court
Farmington Hills, MI
(Address of principal executive offices)
 
48334
(Zip code)
(248) 737-0300
(Registrant's telephone number, including area code)
N/A
(Former Name or Former Address, if Changed Since Last Report.)

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):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b– 2 of the Securities Exchange Act of 1934 (§ 240.12b–2 of this chapter).
Emerging growth company    þ
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. o




Item 2.02.    Results of Operations and Financial Condition

On July 30, 2018, Level One Bancorp, Inc. issued a press release announcing its financial results for the second quarter of 2018. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.

Item 9.01.     Financial Statements and Exhibits.
Exhibit No.
 
Description
99.1
 




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.
Date: July 30, 2018
 
 
 
LEVEL ONE BANCORP, INC.
 
 
 
 
By:
/s/ David C. Walker
 
Name:
David C. Walker
 
Title:
Executive Vice President and Chief Financial Officer


Exhibit


http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12377203&doc=3
 
For Immediate Release

Level One Bancorp, Inc. reports second quarter 2018 net income of $4.0 million, representing $0.53 of earnings per diluted average share

Successful completion of initial public offering in April 2018 resulted in net proceeds of $29.0 million, after deducting underwriting commissions and offering expenses


Farmington Hills, MI – July 30, 2018 – Level One Bancorp, Inc. (“Level One”) (Nasdaq: LEVL) today reported net income of $4.0 million, or $0.53 per diluted share, in the second quarter of 2018. This compares with net income of $3.2 million, or $0.47 per diluted share, in the preceding quarter and $3.3 million, or $0.50 per diluted share, in the second quarter of 2017.

Patrick J. Fehring, President and Chief Executive Officer, commented, "We are pleased to report a solid second quarter with earnings of $4.0 million, or $0.53 per diluted share. These earnings represent year over year loan growth of 11.70% and reflect our strong credit quality. We are committed to providing shareholder returns with a strategy of quality growth."

Second Quarter Financial Highlights

Net income was $4.0 million, or $0.53 per diluted share, for the second quarter of 2018
Net interest margin was 3.99%, compared to 4.03% in the preceding quarter and 4.32% in the second quarter of 2017
Annualized return on average assets was 1.23%, compared to 1.12% in the second quarter of 2017
Annualized return on average equity was 11.93%, compared to 12.98% in the second quarter of 2017
Total assets increased 9.89% to $1.32 billion at June 30, 2018, compared to $1.20 billion at June 30, 2017
Total deposits increased 7.55% to $1.07 billion at June 30, 2018, compared to $990.5 million at June 30, 2017
Total loans increased 11.70% to $1.05 billion at June 30, 2018, compared to $936.2 million at June 30, 2017
Book value per share increased 13.56% to $18.51 per share compared to $16.30 per share at June 30, 2017
Tangible book value per share increased 17.13% to $17.23 per share compared to $14.71 per share at June 30, 2017

Balance Sheet Review

Level One's total assets were $1.32 billion at June 30, 2018, an increase of $22.3 million, or 1.71%, from March 31, 2018, and up $119.1 million, or 9.89%, from $1.20 billion at June 30, 2017.

The investment securities portfolio was $196.0 million at June 30, 2018, an increase of $35.7 million, or 22.26%, from $160.3 million at March 31, 2018, and up $80.5 million, or 69.6%, from $115.6 million at June 30, 2017.

Total loans were $1.05 billion at June 30, 2018, a decrease of $5.6 million, or 0.53%, from $1.05 billion at March 31, 2018, and up $109.6 million, or 11.70%, from $936.2 million at June 30, 2017. The growth in total loans compared to June 30, 2017 was primarily due to growth in our commercial and industrial and commercial real estate loan portfolios.






Total deposits were $1.07 billion at June 30, 2018, a decrease of $47.4 million, or 4.26%, from $1.11 billion at March 31, 2018, and up $74.7 million, or 7.55%, from $990.5 million at June 30, 2017. Total deposit composition at June 30, 2018 consisted of 35.42% of demand deposit accounts, 23.24% of savings and money market accounts and 41.34% of time deposits.

Operating Results

Level One's net interest income before the provision for loan losses increased $288 thousand, or 2.37%, to $12.4 million in the second quarter of 2018, compared to $12.1 million in the preceding quarter, and increased $309 thousand, or 2.55%, compared to $12.1 million in the second quarter of 2017, primarily as a result of increased income on originated loans.

Level One’s net interest margin was 3.99% in the second quarter of 2018, compared to 4.03% in the preceding quarter and 4.32% in the second quarter of 2017, primarily as a result of higher cost of funds.

Level One's second quarter 2018 noninterest income increased $80 thousand, or 5.83%, to $1.5 million in the second quarter of 2018, compared to $1.4 million in the preceding quarter, and decreased $332 thousand, or 18.61%, compared to $1.8 million in the second quarter of 2017. The change in noninterest income compared to the prior period was primarily due to an increase in net gain on sale of residential mortgage loans. The change in noninterest income compared to the second quarter of 2017 was impacted by decreases in other charges and fees and service charges on deposits as well as a decrease in net gain on sales of securities.

Level One’s second quarter 2018 noninterest expenses were $9.7 million, compared to $9.1 million in the preceding quarter and $8.9 million in the second quarter of 2017, primarily as a result of increased salary and employee benefits. 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 2018 was 69.99%, compared to 67.67% for the preceding quarter and 63.72% in the second quarter of 2017.

Level One's income tax provision was $860 thousand, or 17.65% of pretax income, in the second quarter of 2018, as compared to $642 thousand, or 16.85% of pretax income, in the preceding quarter and $1.7 million, or 33.19% of pretax income, in the second quarter of 2017. The decrease in tax expense during the three months ended June 30, 2018, as compared to the second quarter of 2017, is primarily a result of the change in tax rates from 35% to 21% due to the enactment of the Tax Cuts and Jobs Act.

Asset Quality

Level One's asset quality remained solid during the second quarter of 2018. Total nonperforming loans were $11.3 million, or 1.08% of total loans, at June 30, 2018, a decrease of $1.7 million from nonperforming loans of $13.0 million, or 1.23% of total loans, at March 31, 2018, and an increase of $1.6 million from nonperforming loans of $9.7 million, or 1.04% of total loans, at June 30, 2017. Level One had no other real estate owned assets at June 30, 2018 or March 31, 2018, compared to $268 thousand at June 30, 2017. Nonperforming assets, consisting of nonaccrual loans and other real estate owned, as a percentage of total assets were 0.85% at June 30, 2018, compared to 1.00% at March 31, 2018, and 0.83% at June 30, 2017.

In addition, we had $259 thousand in loans 90 days or more past due and still accruing at June 30, 2018, compared to $263 thousand at March 31, 2018 and $662 thousand at June 30, 2017.

Performing troubled debt restructured loans that were not included in nonaccrual loans at June 30, 2018 were $2.5 million, compared to $2.4 million in the preceding quarter and $1.2 million at June 30, 2017. 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 recoveries in the second quarter of 2018 were $669 thousand, or 0.26% of average loans on an annualized basis, compared to $755 thousand of net charge offs, or 0.29% of average loans on an annualized basis, for the preceding quarter and $96 thousand of net recoveries, or 0.04% of average loans on an annualized basis at June 30, 2017.

Level One's second quarter provision for loan losses was a provision benefit of $710 thousand, compared to a provision expense of $554 thousand in the preceding quarter and a provision expense of $68 thousand in the second quarter of 2017. The allowance for loan losses was $11.5 million, or 1.10% of total loans, at June 30, 2018, compared to $11.5 million, or 1.09% of total loans, at March 31, 2018, and $11.4 million, or 1.22% of total loans, at June 30, 2017. As of June 30, 2018, the allowance for loan losses as a percentage of nonperforming loans was 101.67%, compared to 88.67% at March 31, 2018, and 117.36% at June 30, 2017.

Capital

Total shareholders’ equity was $143.4 million at June 30, 2018, an increase of $32.9 million, or 29.79%, compared with $110.5 million at March 31, 2018 and increased $39.2 million, or 37.66%, from $104.2 million at June 30, 2017, primarily as the result of our initial public offering.

Recent Developments

Initial Public Offering: On April 24, 2018, Level One completed its initial public offering.  In the offering, Level One sold 1,150,765 shares, including 180,000 shares of common stock pursuant to the exercise in full by the underwriters of their option to purchase additional shares, at an initial public offering price of $28.00 per share. The selling shareholders sold an additional 229,235 shares of common stock in the offering at the initial public offering price. Level One did not receive any proceeds from the sale of shares of common stock sold by the selling shareholders in the offering.  The shares began trading on the Nasdaq Global Select Market on Friday, April 20, 2018, under the symbol "LEVL".

Second Quarter Dividend: On June 21, 2018, Level One’s Board of Directors declared a quarterly cash dividend of $0.03 per share. This dividend was paid out on July 15, 2018, to stockholders of record at the close of business on June 30, 2018.

Expansion of Mortgage Division: On July 9, 2018, Level One announced it was doubling the size of its mortgage division with the addition of new mortgage loan officers and support staff.

“We are excited to welcome a team of 30 successful residential mortgage team members to Level One Bank.  This strategic action was a great opportunity for Level One to expand our mortgage business with a proven team.  We expect the addition of this team will increase our presence in the residential marketplace and add to our fee revenue in future quarters,” commented Level One Bank President and Chief Executive Officer, Patrick J. Fehring.

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 $1.32 billion as of June 30, 2018. It operates eleven 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, auto, 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 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.

Media Contact:
Investor Relations Contact:
Nicole Ransom
Peter Root
(248) 538-2183
(248) 538-2186





Summary Consolidated Financial Information
 
 
 
 
 
 
(Unaudited)
As of or for the quarter ended,
(Dollars in thousands, except per share data)
June 30,
2018
 
March 31,
2018
 
December 31,
2017
 
September 30,
2017
 
June 30,
2017
Earnings Summary
 
 
 
 
 
 
 
 
 
Interest income
$
15,380

 
$
14,774

 
$
14,378

 
$
13,752

 
$
14,034

Interest expense
2,965

 
2,647

 
2,374

 
2,075

 
1,928

Net interest income
12,415

 
12,127

 
12,004

 
11,677

 
12,106

Provision for loan losses
(710
)
 
554

 
956

 
194

 
68

Noninterest income
1,452

 
1,372

 
1,395

 
1,942

 
1,784

Noninterest expense
9,705

 
9,135

 
9,193

 
9,331

 
8,851

Income before income taxes
4,872

 
3,810

 
3,250

 
4,094

 
4,971

Income tax provision
860

 
642

 
2,317

 
1,259

 
1,650

Net income
$
4,012

 
$
3,168

 
$
933

 
$
2,835

 
$
3,321

Per Share Data


 
 
 
 
 
 
 
 
Basic earnings per common share
$
0.54

 
$
0.48

 
$
0.15

 
$
0.44

 
$
0.52

Diluted earnings per common share
0.53

 
0.47

 
0.14

 
0.43

 
0.50

Book value per common share
18.51

 
16.78

 
16.78

 
16.74

 
16.30

Tangible book value per share (1)
17.23

 
15.27

 
15.21

 
15.16

 
14.71

Shares outstanding (in thousands)
7,749

 
6,585

 
6,435

 
6,392

 
6,392

Average basic common shares (in thousands)
7,456

 
6,539

 
6,403

 
6,392

 
6,391

Average diluted common shares (in thousands)
7,613

 
6,699

 
6,630

 
6,610

 
6,606

Selected Period End Balances
 
 
 
 
 
 
 
 
 
Total assets
$
1,322,913

 
$
1,300,629

 
$
1,301,291

 
$
1,266,919

 
$
1,203,853

Securities available-for-sale
196,047

 
160,349

 
150,969

 
141,700

 
115,581

Total loans
1,045,789

 
1,051,354

 
1,034,923

 
980,721

 
936,218

Total deposits
1,065,216

 
1,112,644

 
1,120,382

 
1,069,874

 
990,470

Total liabilities
1,179,468

 
1,190,106

 
1,193,331

 
1,159,934

 
1,099,647

Total shareholders' equity
143,445

 
110,523

 
107,960

 
106,985

 
104,206

Tangible shareholders' equity (1)
133,501

 
100,524

 
97,906

 
96,872

 
94,035

Performance and Capital Ratios
 
 
 
 
 
 
 
 
 
Return on average assets (annualized)
1.23
 %
 
1.00
%
 
0.29
%
 
0.94
 %
 
1.12
 %
Return on average equity (annualized)
11.97

 
11.64

 
3.40

 
10.58

 
13.02

Net interest margin (fully taxable equivalent) (2)
3.99

 
4.03

 
4.01

 
4.05

 
4.32

Total shareholders' equity to total assets
10.84

 
8.50

 
8.30

 
8.44

 
8.66

Tangible equity to tangible assets (1)
10.17

 
7.79

 
7.58

 
7.71

 
7.88

Common equity tier 1 capital (3)
12.36

 
9.47

 
9.10

 
9.33

 
9.50

Tier 1 leverage ratio (3)
10.83

 
8.15

 
7.92

 
8.14

 
7.98

Tier 1 risk-based capital (3)
12.36

 
9.47

 
9.10

 
9.33

 
9.50

Total risk-based capital (3)
13.38

 
11.87

 
11.55

 
11.86

 
12.15

Asset Quality Ratios:
 
 
 
 
 
 
 
 
 
Net charge-offs (recoveries) to average loans
(0.26
)%
 
0.29
%
 
0.35
%
 
(0.01
)%
 
(0.04
)%
Nonperforming assets as a percentage of total assets
0.85

 
1.00

 
1.13

 
1.26

 
0.83

Nonperforming loans as a percent of total loans
1.08

 
1.23

 
1.36

 
1.59

 
1.04

Allowance for loan losses as a percentage of period-end loans
1.10

 
1.09

 
1.13

 
1.19

 
1.22

Allowance for loan losses as a percentage of nonperforming loans
101.67

 
88.67

 
83.38

 
74.38

 
117.36

Allowance for loan losses as a percentage of nonperforming loans, excluding allowance allocated to loans accounted for under ASC 310-30
92.93

 
80.36

 
75.68

 
66.62

 
104.87

(1) See section entitled "GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures" below.
(2) Presented on a tax equivalent basis using a 35% tax rate for 2017 time periods and 21% tax rate for 2018 time periods.
(3) Capital ratios for June 30, 2018 are Level One Bank capital ratios.







GAAP Reconciliation and Management Explanation 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:

Reconciliation of Non-GAAP Financial Measures
 
 
 
 
 
 
(Unaudited)
As of
(Dollars in thousands, except per share data)
June 30,
2018
 
March 31,
2018
 
December 31,
2017
 
September 30,
2017
 
June 30,
2017
 
 
 


 


 
 
 


Total shareholders' equity
$
143,445

 
$
110,523

 
$
107,960

 
$
106,985

 
$
104,206

Less:
 
 
 
 
 
 
 
 
 
Goodwill
9,387

 
9,387

 
9,387

 
9,387

 
9,387

Core deposit intangibles
557

 
612

 
667

 
726

 
784

Tangible shareholders' equity
$
133,501

 
$
100,524

 
$
97,906

 
$
96,872

 
$
94,035

 
 
 
 
 
 
 
 
 
 
Shares outstanding (in thousands)
7,749

 
6,585

 
6,435

 
6,392

 
6,392

Tangible book value per share
$
17.23

 
$
15.27

 
$
15.21

 
$
15.16

 
$
14.71

 
 
 
 
 
 
 
 
 
 
Total assets
$
1,322,913

 
$
1,300,629

 
$
1,301,291

 
$
1,266,919

 
$
1,203,853

Less:
 
 
 
 
 
 
 
 
 
Goodwill
9,387

 
9,387

 
9,387

 
9,387

 
9,387

Core deposit intangibles
557

 
612

 
667

 
726

 
784

Tangible assets
$
1,312,969

 
$
1,290,630

 
$
1,291,237

 
$
1,256,806

 
$
1,193,682

 
 
 
 
 
 
 
 
 
 
Tangible equity to tangible assets
10.17
%
 
7.79
%
 
7.58
%
 
7.71
%
 
7.88
%
















Consolidated Balance Sheets
 
 
 
 
 
 
 
(Unaudited)
As of
 
June 30,
 
March 31,
 
December 31,
 
June 30,
(Dollars in thousands, except share data)
2018
 
2018
 
2017
 
2017
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
Cash and cash equivalents
$
34,767

 
$
39,882

 
$
63,661

 
$
103,444

Securities available-for-sale
196,047

 
160,349

 
150,969

 
115,581

Federal Home Loan Bank stock
8,303

 
8,303

 
8,303

 
8,303

Mortgage loans held for sale, at fair value
3,991

 
1,871

 
4,548

 
3,566

Loans:
 
 
 
 
 
 
 
Originated loans
946,724

 
946,179

 
920,895

 
803,573

Acquired loans
99,065

 
105,175

 
114,028

 
132,645

Total loans
1,045,789

 
1,051,354

 
1,034,923

 
936,218

Less: Allowance for loan losses
(11,465)

 
(11,506)

 
(11,713)

 
(11,404)

Net loans
1,034,324

 
1,039,848

 
1,023,210

 
924,814

Premises and equipment, net
13,144

 
13,282

 
13,435

 
13,752

Goodwill
9,387

 
9,387

 
9,387

 
9,387

Other intangible assets, net
557

 
612

 
667

 
784

Bank-owned life insurance
11,703

 
11,622

 
11,542

 
11,376

Income tax benefit
2,510

 
3,026

 
3,102

 
3,565

Other assets
8,180

 
12,447

 
12,467

 
9,281

Total assets
$
1,322,913

 
$
1,300,629

 
$
1,301,291

 
$
1,203,853

Liabilities
 

 
 
 
 
 
 
Deposits:
 

 
 
 
 
 
 
Noninterest-bearing demand deposits
$
320,213

 
$
298,917

 
$
324,923

 
$
326,472

Interest-bearing demand deposits
57,060

 
68,479

 
62,644

 
60,162

Money market and savings deposits
247,542

 
278,042

 
289,363

 
244,001

Time deposits
440,401

 
467,206

 
443,452

 
359,835

Total deposits
1,065,216

 
1,112,644

 
1,120,382

 
990,470

Borrowings
86,594

 
52,783

 
47,833

 
82,005

Subordinated notes
14,867

 
14,853

 
14,844

 
14,815

Other liabilities
12,791

 
9,826

 
10,272

 
12,357

Total liabilities
1,179,468

 
1,190,106

 
1,193,331

 
1,099,647

Shareholders' equity
 

 
 
 
 
 
 
Common stock:
 

 
 
 
 
 
 
Authorized - 20,000,000 shares at 6/30/18, 3/31/2018, 12/31/2017 and 6/30/2017
 

 
 
 
 
 
 
Issued and outstanding - 7,748,641 shares at 6/30/2018, 6,584,676 shares at 3/31/2018, 6,435,461 shares at 12/31/2017 and 6,392,041 shares at 6/30/2017
90,201

 
60,886

 
59,511

 
58,755

Retained earnings
56,383

 
52,568

 
49,232

 
45,464

Accumulated other comprehensive loss, net of tax
(3,139)

 
(2,931)

 
(783)

 
(13)

Total shareholders' equity
143,445

 
110,523

 
107,960

 
104,206

Total liabilities and shareholders' equity
$
1,322,913

 
$
1,300,629

 
$
1,301,291

 
$
1,203,853









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)
2018
 
2018
 
2017
 
2018
 
2017
Interest income
 
 
 
 
 
 
 
 
 
Originated loans, including fees
$
11,833

 
$
11,178

 
$
9,739

 
$
23,011

 
$
19,093

Acquired loans, including fees
2,293

 
2,426

 
3,438

 
4,719

 
6,831

Securities:
 
 
 
 
 

 
 
 
Taxable
667

 
574

 
402

 
1,241

 
816

Tax-exempt
380

 
351

 
210

 
731

 
381

Federal funds sold and other
207

 
245

 
245

 
452

 
360

Total interest income
15,380

 
14,774

 
14,034

 
30,154

 
27,481

Interest Expense
 

 
 
 
 
 
 

 
 
Deposits
2,487

 
2,178

 
1,451

 
4,665

 
2,728

Borrowed funds
225

 
219

 
224

 
444

 
400

Subordinated notes
253

 
250

 
253

 
503

 
503

Total interest expense
2,965

 
2,647

 
1,928

 
5,612

 
3,631

Net interest income
12,415

 
12,127

 
12,106

 
24,542

 
23,850

Provision for loan losses
(710
)
 
554

 
68

 
(156
)
 
266

Net interest income after provision for loan losses
13,125

 
11,573

 
12,038

 
24,698

 
23,584

Noninterest income
 

 
 
 
 
 
 

 
 
Service charges on deposits
618

 
642

 
718

 
1,260

 
1,298

Net gain on sale of securities

 

 
58

 

 
58

Net gain on sale of residential mortgage loans
404

 
236

 
413

 
640

 
712

Net gain on sale of commercial loans
11

 

 

 
11

 
146

Other charges and fees
419

 
494

 
595

 
913

 
950

Total noninterest income
1,452

 
1,372

 
1,784

 
2,824

 
3,164

Noninterest expense
 

 
 
 
 
 
 

 
 
Salary and employee benefits
6,169

 
5,956

 
5,319

 
12,125

 
10,590

Occupancy and equipment expense
1,074

 
1,046

 
1,012

 
2,120

 
2,024

Professional service fees
471

 
266

 
540

 
737

 
1,080

Marketing expense
291

 
142

 
232

 
433

 
479

Printing and supplies expense
112

 
104

 
121

 
216

 
234

Data processing expense
511

 
436

 
479

 
947

 
892

Other expense
1,077

 
1,185

 
1,148

 
2,262

 
2,229

Total noninterest expense
9,705

 
9,135

 
8,851

 
18,840

 
17,528

Income before income taxes
4,872

 
3,810

 
4,971

 
8,682

 
9,220

Income tax provision
860

 
642

 
1,650

 
1,502

 
3,147

Net income
$
4,012

 
$
3,168

 
$
3,321

 
$
7,180

 
$
6,073

Earnings per common share:
 
 
 
 
 
 
 
 
 
Basic
$
0.54

 
$
0.48

 
$
0.52

 
$
1.02

 
$
0.95

Diluted
$
0.53

 
$
0.47

 
$
0.50

 
$
1.00

 
$
0.92

Average common shares outstanding - basic
7,456

 
6,539

 
6,391

 
7,050

 
6,380

Average common shares outstanding - diluted
7,613

 
6,699

 
6,606

 
7,211

 
6,597






Net Interest Income and Net Interest Margin
 
 
 
 
 
 
 
 
 
(Unaudited)
For the three months ended,
 
June 30, 2018
 
March 31, 2018
 
June 30, 2017
(Dollars in thousands)
Average Balance
Interest (1)
Average Rate (2)
 
Average Balance
Interest (1)
Average Rate (2)
 
Average Balance
Interest (1)
Average Rate (2)
Interest-earning assets:
 
 
 
 
 
 
 
 
 
 
 
Gross loans (3)
$
1,045,715

$
14,126

5.42
%
 
$
1,037,045

$
13,604

5.32
%
 
$
954,665

$
13,177

5.54
%
Investment securities (4):



 
 
 
 
 
 
 
 
Taxable
114,957

667

2.33

 
102,135

574

2.28

 
79,488

402

2.03

Tax-exempt
58,976

380

3.10

 
54,996

351

3.16

 
33,892

210

3.66

Interest earning cash balances
25,828

119

1.85

 
27,090

106

1.59

 
59,377

161

1.09

Federal Home Loan Bank Stock
8,303

88

4.25

 
8,303

139

6.78

 
8,303

84

4.06

Total interest-earning assets
1,253,779

15,380

4.94
%
 
1,229,569

14,774

4.90
%
 
1,135,725

14,034

4.99
%
Non-earning assets:
 
 
 
 
 
 
 
 
 
 
 
   Cash and due from banks
17,800

 
 
 
18,531

 
 
 
19,238

 
 
   Premises and equipment
12,621

 
 
 
13,362

 
 
 
15,235

 
 
   Goodwill
9,387

 
 
 
9,387

 
 
 
9,387

 
 
   Other intangible assets, net
589

 
 
 
644

 
 
 
820

 
   
   Bank-owned life insurance
11,650

 
 
 
11,570

 
 
 
11,323

 
 
   Allowance for loan losses
(11,473
)
 
 
 
(11,822
)
 
 
 
(11,520
)
 
 
   Other non-earning assets
7,839

 
 
 
12,195

 
 
 
10,614

 
 
             Total assets
$
1,302,192

 
 
 
$
1,283,436

 
 
 
$
1,190,822

 
   
Interest-bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
     Interest-bearing demand deposits
$
64,394

$
48

0.30
%
 
$
63,501

$
51

0.33
%
 
$
58,081

$
39

0.27
%
     Money market and savings deposits
276,496

678

0.98

 
273,699

548

0.81

 
264,691

405

0.61

     Time deposits
445,894

1,761

1.58

 
456,555

1,579

1.40

 
359,052

1,007

1.12

     Borrowings
48,604

225

1.86

 
56,819

219

1.56

 
84,838

224

1.06

     Subordinated notes
14,859

253

6.83

 
14,844

250

6.83

 
14,806

253

6.85

             Total interest-bearing liabilities
850,247

2,965

1.40
%
 
865,418

2,647

1.24
%
 
781,468

1,928

0.99
%
Noninterest-bearing liabilities and shareholders' equity:
 
 
 
 
 
 
 
 
 
 
 
   Noninterest bearing demand deposits
306,547

 
 
 
298,681

 
 
 
297,565

 
 
   Other liabilities
10,923

 
 
 
8,931

 
 
 
9,485

 
 
   Shareholders' equity
134,475

 
 
 
110,406

 
 
 
102,304

 
 
             Total liabilities and shareholders' equity
$
1,302,192

 
 
 
$
1,283,436

 
 
 
$
1,190,822

 
 
Net interest income
 
$
12,415

 
 
 
$
12,127

 
 
 
$
12,106

 
Interest spread
 
 
3.54
%
 
 
 
3.66
%
 
 
 
4.00
%
Net interest margin (5)
 
 
3.97

 
 
 
4.00

 
 
 
4.28

Tax equivalent effect
 
 
0.02

 
 
 
0.03

 
 
 
0.04

Net interest margin on a fully tax equivalent basis
 
 
3.99

 
 
 
4.03

 
 
 
4.32


(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 $76 thousand, $78 thousand and $99 thousand on tax-exempt securities for the three months ended June 30, 2018, March 31, 2018 and June 30, 2017, respectively, using the statutory tax rate of 21% for the 2018 periods and 35% for the 2017 period.
(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, 2018
 
June 30, 2017
(Dollars in thousands)
Average Balance
Interest (1)
Average Rate (2)
 
Average Balance
Interest (1)
Average Rate (2)
Interest-earning assets:
 
 
 
 
 
 
 
Gross loans (3)
$
1,041,404

$
27,730

5.37
%
 
$
958,054

$
25,924

5.46
%
Investment securities (4):



 
 
 
 
Taxable
108,581

1,241

2.31

 
78,979

816

2.08

Tax-exempt
56,997

731

3.12

 
31,313

381

3.62

Interest earning cash balances
26,455

225

1.71

 
43,496

220

1.02

Federal Home Loan Bank Stock
8,303

227

5.51

 
8,022

140

3.52

Total interest-earning assets
1,241,740

30,154

4.92
%
 
1,119,864

27,481

4.98
%
Non-earning assets:
 
 
 
 
 
 
 
   Cash and due from banks
18,163

 
 
 
18,789

 
 
   Premises and equipment
12,990

 
 
 
15,432

 
 
   Goodwill
9,387

 
 
 
9,387

 
 
   Other intangible assets, net
616

 
 
 
849

 
 
   Company-owned life insurance
11,610

 
 
 
11,282

 
 
   Allowance for loan losses
(11,646
)
 
 
 
(11,345
)
 
 
   Other non-earning assets
10,006

 
 
 
10,481

 
 
             Total assets
$
1,292,866

 
 
 
$
1,174,739

 
 
Interest-bearing liabilities:
 
 
 
 
 
 
 
   Deposits:
 
 
 
 
 
 
 
     Interest-bearing demand deposits
$
63,950

$
99

0.31
%
 
$
57,774

$
78

0.27
%
     Money market and savings deposits
275,105

1,226

0.90

 
275,860

779

0.57

     Time deposits
451,195

3,340

1.49

 
338,485

1,871

1.11

     Borrowings
52,689

444

1.70

 
95,085

400

0.85

     Subordinated notes
14,852

503

6.83

 
14,799

503

6.85

             Total interest-bearing liabilities
857,791

5,612

1.32
%
 
782,003

3,631

0.94
%
Noninterest-bearing liabilities and shareholders' equity:
 
 
 
 
 
 
 
   Noninterest bearing demand deposits
302,635

 
 
 
283,007

 
 
   Other liabilities
9,933

 
 
 
9,103

 
 
   Shareholders' equity
122,507

 
 
 
100,626

 
 
             Total liabilities and shareholders' equity
$
1,292,866

 
 
 
$
1,174,739

 
 
Net interest income
 
$
24,542

 
 
 
$
23,850

 
Interest spread
 
 
3.60
%
 
 
 
4.04
%
Net interest margin (5)
 
 
3.99

 
 
 
4.29

Tax equivalent effect
 
 
0.02

 
 
 
0.03

Net interest margin on a fully tax equivalent basis
 
 
4.01

 
 
 
4.32

(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 $150 thousand and $181 thousand on tax-exempt securities for the six months ended June 30, 2018 and June 30, 2017, respectively, using the statutory tax rate of 21% for the 2018 period and 35% for the 2017 period.
(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)
2018
 
2018
 
2017
 
2017
 
2017
Commercial real estate
 
 
 
 
 
 
 
 
 
Non-owner occupied
$
361,341

 
$
360,014

 
$
343,420

 
$
312,644

 
$
322,361

Owner-occupied
172,615

 
172,608

 
168,342

 
156,690

 
159,932

Total commercial real estate
533,956

 
532,622

 
511,762

 
469,334

 
482,293

Commercial and industrial
363,239

 
371,464

 
377,686

 
380,512

 
330,114

Residential real estate
147,763

 
146,436

 
144,439

 
130,117

 
122,427

Consumer
831

 
832

 
1,036

 
758

 
1384

Total loans
$
1,045,789

 
$
1,051,354

 
$
1,034,923

 
$
980,721

 
$
936,218


Impaired Assets
(Unaudited)
As of
 
June 30,
 
March 31,
 
December 31,
 
September 30,
 
June 30,
(Dollars in thousands)
2018
 
2018
 
2017
 
2017
 
2017
Nonaccrual loans
 
 
 
 
 
 
 
 
 
Commercial real estate
$
2,557

 
$
1,946

 
$
2,257

 
$
1,998

 
$
106

Commercial and industrial
5,983

 
8,192

 
9,024

 
11,911

 
7,754

Residential real estate
2,737

 
2,838

 
2,767

 
1,727

 
1,857

Total nonaccrual loans
11,277

 
12,976

 
14,048

 
15,636

 
9,717

Other real estate owned

 

 
652

 
384

 
268

Total nonperforming assets
11,277

 
12,976

 
14,700

 
16,020

 
9,985

Performing troubled debt restructurings
 
 
 
 
 
 
 
 
 
Commercial real estate
1,517

 
1,525

 

 
287

 

Commercial and industrial
578

 
582

 
961

 
975

 
988

Residential real estate
364

 
258

 
261

 
1,049

 
247

Total performing troubled debt restructurings
2,459

 
2,365

 
1,222

 
2,311

 
1,235

Total impaired assets
$
13,736

 
$
15,341

 
$
15,922

 
$
18,331

 
$
11,220

 
 
 
 
 
 
 
 
 
 
Loans 90 days or more past due and still accruing
$
259

 
$
263

 
$
440

 
$
486

 
$
662