Form 8-K MERCANTILE BANK CORP For: Jan 16

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

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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):  January 16, 2018

 

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Mercantile Bank Corporation

(Exact name of registrant as specified in its charter)

 

Michigan	000-26719	38-3360865
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification Number)

 

310 Leonard Street NW, Grand Rapids, Michigan	49504
(Address of principal executive offices)	(Zip Code)
Registrant's telephone number, including area code	616-406-3000

 

               

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.         ☐

 

 

Item 2.02

Results of Operations and Financial Condition.

 

Earnings Release

 

On January 16, 2018, Mercantile Bank Corporation issued a press release announcing earnings and other financial results for the quarter and year ended December 31, 2017. A copy of the press release is furnished as Exhibit 99.1 to this report and incorporated here by reference.

 

In accordance with General Instruction B.2 of Form 8-K, the information in this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

 

 

Item 9.01

Financial Statements and Exhibits.

 

(d) Exhibits.

 

Exhibit Number		Description
99.1		Press release of Mercantile Bank Corporation dated January 16, 2018, reporting financial results and earnings for the quarter and year ended December 31, 2017.

                   

 

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: January 16, 2018

 

 

Exhibit Index

 

 

Exhibit Number		Description
99.1		Press release of Mercantile Bank Corporation dated January 16, 2018, reporting financial results and earnings for the quarter and year ended December 31, 2017.

Exhibit 99.1

 

 

 

Mercantile Bank Corporation Announces Strong Fourth Quarter and

Full Year 2017 Results

Solid core profitability and loan growth of nearly 8 percent highlight 2017

 

GRAND RAPIDS, Mich., January 16, 2018 – Mercantile Bank Corporation (NASDAQ: MBWM) ("Mercantile") reported net income of $8.0 million, or $0.48 per diluted share, for the fourth quarter of 2017, compared with net income of $8.1 million, or $0.49 per diluted share, for the respective prior-year period. For the full year 2017, Mercantile reported net income of $31.3 million, or $1.90 per diluted share, compared with net income of $31.9 million, or $1.96 per diluted share, for the full year 2016.

 

Excluding the impacts of certain noncore transactions, diluted earnings per share during 2017 and 2016 equaled $1.89 and $1.76, respectively. These transactions included a Bank-owned life insurance death benefit claim in the first quarter of 2017, the revaluation of Mercantile’s net deferred tax asset in response to the Tax Cuts and Jobs Act becoming law in December of 2017, the repurchase of trust preferred securities at a discount in the first quarter of 2016, and accelerated purchase discount accretion on called U.S. Government agency bonds during 2016.

 

The fourth quarter and full year were highlighted by:

 

●

Strong core earnings and capital position

●

Stable and robust net interest margin

●

Solid growth in various fee income categories

●

Controlled overhead costs

●

Strong asset quality, as depicted by low levels of nonperforming assets and loans in the 30- to 89-days delinquent category

●

Total loan growth of $180 million, or nearly 8 percent, during the full year

●

New commercial term loan originations of approximately $119 million during the fourth quarter and $529 million during the full year

●

Sustained strength in commercial loan pipeline

●

Announced first quarter 2018 regular cash dividend of $0.22 per common share, an increase of approximately 16 percent from the $0.19 regular cash dividend paid during the fourth quarter of 2017

 

“Our strong 2017 financial results reflect the success of various ongoing strategic initiatives,” said Robert B. Kaminski, Jr., President and Chief Executive Officer of Mercantile. “Our focus on net interest margin maintenance, enhanced fee generation, and overhead cost control played a key role in our demonstrated solid operating performance throughout all of 2017. We are very pleased with the level of loan growth during the year, which was achieved in a disciplined manner and in spite of competitive pressures, and our continuing strong asset quality. Based on our overall financial strength and current loan pipeline and prospects, we are well-positioned to participate in the economic strength of our markets during 2018.”

 

 

Operating Results

 

Total revenue, which consists of net interest income and noninterest income, was $32.9 million during the fourth quarter of 2017, up $1.9 million, or 6.0 percent, from the prior-year fourth quarter. Net interest income during the fourth quarter of 2017 was $28.4 million, up $2.0 million, or 7.4 percent, from the fourth quarter of 2016, reflecting a higher level of earning assets and an increased net interest margin. Total revenue was $129 million during the full year 2017, up $1.8 million, or 1.5 percent, from 2016. Net interest income was $110 million in 2017, up $3.9 million, or 3.7 percent, from the prior year, reflecting a higher level of earning assets.

 

The net interest margin was 3.76 percent in the fourth quarter of 2017, up from 3.72 percent in the prior-year fourth quarter. The increase in the net interest margin primarily resulted from a higher yield on loans, mainly reflecting the positive impact of higher interest rates on variable-rate commercial loans stemming from the Federal Open Market Committee (“FOMC”) hiking the targeted federal funds rate by 25 basis points in December of 2016 and March, June, and December of 2017. The cost of funds equaled 0.59 percent during the fourth quarter of 2017, up from 0.46 percent during the respective 2016 period mainly due to increased costs of certain non-time deposit accounts, time deposits, and borrowed funds.

 

The net interest margin was 3.79 percent in 2017, down from 3.86 percent in 2016 due to an increased cost of funds, which more than offset a slight increase in the yield on average earning assets. The cost of funds equaled 0.54 percent during 2017, up from 0.45 percent during 2016 primarily due to higher costs of certain non-time deposits, time deposits, and borrowed funds. The improved yield on average earning assets mainly resulted from an increased yield on loans, primarily reflecting higher interest rates on variable-rate commercial loans stemming from the previously-mentioned FOMC rate hikes, which more than offset a decreased yield on securities, mainly reflecting a decreased level of accelerated purchase discount accretion on called U.S. Government agency bonds. A change in earning asset mix also contributed to the increased yield on average earning assets; average loans represented 85.2 percent of average earning assets during 2017, up from 84.9 percent during 2016. The accelerated discount accretion totaled $2.2 million during 2016, positively impacting the net interest margin by eight basis points. A nominal level of accelerated discount accretion on called U.S. Government agency bonds was recorded as interest income during 2017.

 

Net interest income and the net interest margin during 2017 and 2016 were also affected by purchase accounting accretion and amortization entries associated with the fair value measurements recorded effective June 1, 2014. Increases in interest income on loans totaling $4.6 million and $4.9 million were recorded during 2017 and 2016, respectively. An increase in interest expense on subordinated debentures totaling $0.7 million was recorded during both 2017 and 2016. Purchased loan accretion amounts vary from period to period as a result of periodic cash flow re-estimations, loan payoffs, and payment performance.

 

Mercantile recorded a $0.6 million provision for loan losses during both the fourth quarter of 2017 and the prior-year fourth quarter. During 2017, Mercantile recorded a provision for loan losses of $3.0 million, compared to a provision of $2.9 million during 2016. The provision expense recorded during the 2017 and 2016 periods primarily reflects ongoing loan growth and periodic adjustments to loan loss reserve environmental factors.

 

 

Noninterest income during the fourth quarter of 2017 was $4.5 million, down $0.1 million, or 2.2 percent, from the prior-year fourth quarter. Growth in credit and debit card fees and payroll processing revenue was more than offset by a decline in other income, which was elevated in the fourth quarter of 2016 mainly as a result of payments received on certain purchased credit-impaired loans. Noninterest income for 2017 was $19.0 million, down $2.0 million, or 9.7 percent, from 2016. Core noninterest income revenue streams, including treasury management income, credit and debit card interchange fees, mortgage banking activity income, payroll processing revenue, and customer service fees, increased $1.2 million, or 8.5 percent, on a combined basis in 2017 compared to the prior year. The increase in mortgage banking activity income primarily reflects the positive impact of strategic initiatives that were implemented in the latter half of 2016 and throughout 2017, including the hiring of additional loan originators, introduction of new and enhanced products, loan programs and increased marketing efforts. Noninterest income during both periods benefitted from certain noncore transactions, including a Bank-owned life insurance death benefit claim in 2017 and a gain associated with a trust preferred securities repurchase transaction in 2016.

 

Noninterest expense totaled $19.8 million during the fourth quarter of 2017, up $1.5 million, or 7.9 percent, from the prior-year fourth quarter. Noninterest expense during 2017 was $79.7 million, an increase of $2.6 million, or 3.4 percent, from the $77.1 million expensed during 2016. The higher level of expense in the 2017 periods primarily resulted from expected increases in various operating expenses stemming from recent expansion initiatives and increased salary expense, mainly reflecting annual employee merit pay increases, the hiring of additional staff, a larger bonus accrual, and greater stock-based compensation expense. A significant portion of the increased salary expense resulting from staff additions reflects the opening of the southeast Michigan office.

 

Mr. Kaminski continued, “Our net interest margin remained relatively steady during 2017, ranging from 3.73 percent to 3.85 percent on a quarterly basis. The increase in our loan yield, which helped offset the impact of an increased cost of funds on our net interest margin, primarily reflects the positive impact of the recent Federal Open Market Committee rate hikes, which outweighed the negative impacts stemming from persistent competitive pressures and the ongoing relatively low interest rate environment. In light of our current balance sheet structure, we anticipate that potential additional rate hikes will benefit our net interest income. We are pleased with the growth in our core noninterest income revenue streams, and we will continue our efforts to enhance fee income in future periods.”    

 

Balance Sheet

 

As of December 31, 2017, total assets were $3.29 billion, up $204 million, or 6.6 percent, from December 31, 2016. Total loans increased $180 million, or 7.6 percent, to $2.56 billion over the same time period. Approximately $119 million and $529 million in commercial term loans to new and existing borrowers were originated during the fourth quarter and full year of 2017, respectively, as ongoing sales and relationship-building efforts resulted in increased lending opportunities. As of December 31, 2017, unfunded commitments on commercial construction and development loans totaled approximately $154 million, which are expected to be largely funded over the next 12 to 18 months.

 

 

Raymond Reitsma, President of Mercantile Bank of Michigan, noted, “We are very pleased with our new commercial term loan originations during 2017. Although the commercial loan portfolio slightly contracted during the fourth quarter of 2017, we were still able to produce net loan growth during the quarter as a result of growth in the residential mortgage portfolio. The reduction in commercial loans stemmed from an unusually high level of payoffs, primarily reflecting situations whereby we remained committed to margin and credit quality preservation. The solid growth in the commercial and industrial, owner-occupied commercial real estate, and non-owner occupied commercial real estate portfolios during 2017 reflects the ongoing efforts of our lending team to identify new lending opportunities and meet the needs of existing customers, while growth in the residential mortgage portfolio during the year depicts the success of strategic initiatives focused on increasing our market presence. Based on the strength of our current loan pipelines and additional lending opportunities reported by commercial lenders, we are confident that we can grow the commercial and residential loan portfolios in future periods.”

 

Commercial and industrial loans and owner-occupied commercial real estate (“CRE”) loans combined represented approximately 58 percent of total commercial loans as of December 31, 2017. Non-owner occupied CRE loans equaled about 36 percent of total commercial loans as of December 31, 2017.

 

As of December 31, 2017, total deposits were $2.52 billion, up $147 million from December 31, 2016. Local deposits were up $121 million since year-end 2016. Growth in local deposits was mainly driven by new commercial loan relationships and the success of various deposit account initiatives. Wholesale funds were $323 million, or approximately 11 percent of total funds, as of December 31, 2017, compared to $251 million, or about 9 percent of total funds, as of December 31, 2016.

 

Asset Quality

 

Nonperforming assets at December 31, 2017 were $9.4 million, or 0.3 percent of total assets, compared to $6.4 million, or 0.2 percent of total assets, at December 31, 2016. The transfer of a Bank-owned parcel of real estate, which is no longer being considered for use as a bank facility, from fixed assets to other real estate owned accounted for nearly 55 percent of the $3.0 million increase in nonperforming assets during 2017. The parcel of real estate is expected to be sold in the next six months for an amount that approximates current book value. 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.

 

Net loan charge-offs were $0.3 million during the fourth quarter of 2017, or an annualized 0.05 percent of average loans, and $0.2 million, or an annualized 0.03 percent of average loans, during the prior-year fourth quarter. Net loan charge-offs totaled $1.4 million during 2017, or 0.06 percent of average loans, and $0.6 million, or 0.03 percent of average loans, during 2016.

 

Capital Position

 

Shareholders’ equity totaled $366 million as of December 31, 2017, an increase of $25.1 million from year-end 2016. The Bank’s capital position remains above “well-capitalized” with a total risk-based capital ratio of 12.6 percent as of December 31, 2017, compared to 13.1 percent at December 31, 2016. At December 31, 2017, the Bank had approximately $77 million in excess of the 10.0 percent minimum regulatory threshold required to be considered a “well-capitalized” institution. Mercantile reported 16,592,125 total shares outstanding at December 31, 2017.

 

 

No shares were repurchased during 2017 as part of the $20 million stock repurchase program that was announced in January of 2015. Future share repurchases totaling $15.5 million can be made under the program, which was expanded by $15 million in early 2016.

 

Mr. Kaminski concluded, “Our strong financial performance during 2017 positions us to meet growth objectives and further build shareholder value. As evidenced by our ongoing cash dividend program, including the announcement of an increased first quarter 2018 regular cash dividend earlier today, we remain committed to enhancing shareholder value. Our relationship-based banking approach, which focuses on meeting customers’ needs through the efficient delivery of a wide-range of products and services, continues to be successful as depicted by the solid growth in deposits and loans during the year. We are excited about Mercantile’s future and are confident that our demonstrated robust operating performance will continue in the current year.”

 

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 $3.2 billion and operates 49 banking offices. Mercantile Bank Corporation’s common stock is listed on the NASDAQ Global Select Market under the symbol “MBWM.”

 

Forward-Looking Statements

 

This news release contains comments or information that constitute forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995) that are based on current expectations that involve a number of risks and uncertainties. Actual results may differ materially from the results expressed in forward-looking statements. Factors that might cause such a difference include changes in interest rates and interest rate relationships; demand for products and services; the degree of competition by traditional and nontraditional competitors; changes in banking regulation or actions by bank regulators; changes in tax laws; changes in prices, levies, and assessments; the impact of technological advances; governmental and regulatory policy changes; the outcomes of contingencies; trends in customer behavior as well as their ability to repay loans; changes in local real estate values; changes in the national and local economies; and other factors, including risk factors, disclosed from time to time in filings made by Mercantile with the Securities and Exchange Commission. Mercantile undertakes no obligation to update or clarify forward-looking statements, whether as a result of new information, future events or otherwise.

 

FOR FURTHER INFORMATION:

 

Robert B. Kaminski, Jr.	Charles Christmas
President and CEO	Executive Vice President and CFO
616-726-1502	616-726-1202
[email protected]	[email protected]

 

 

Mercantile Bank Corporation

Fourth Quarter 2017 Results

MERCANTILE BANK CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

		DECEMBER 31,				DECEMBER 31,				DECEMBER 31,
		2017				2016				2015
ASSETS
Cash and due from banks		$	55,127,000			$	50,200,000			$	42,829,000
Interest-earning deposits			144,974,000				133,396,000				46,463,000
Federal fund sold			0				0				599,000
Total cash and cash equivalents			200,101,000				183,596,000				89,891,000
Securities available for sale			335,744,000				328,060,000				346,992,000
Federal Home Loan Bank stock			11,036,000				8,026,000				7,567,000
Loans			2,558,552,000				2,378,620,000				2,277,727,000
Allowance for loan losses			(19,501,000	)			(17,961,000	)			(15,681,000	)
Loans, net			2,539,051,000				2,360,659,000				2,262,046,000
Premises and equipment, net			46,034,000				45,456,000				46,862,000
Bank owned life insurance			68,689,000				67,198,000				58,971,000
Goodwill			49,473,000				49,473,000				49,473,000
Core deposit intangible			7,600,000				9,957,000				12,631,000
Other assets			28,976,000				30,146,000				29,123,000
Total assets		$	3,286,704,000			$	3,082,571,000			$	2,903,556,000
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing		$	866,380,000			$	810,600,000			$	674,568,000
Interest-bearing			1,655,985,000				1,564,385,000				1,600,814,000
Total deposits			2,522,365,000				2,374,985,000				2,275,382,000
Securities sold under agreements to repurchase			118,748,000				131,710,000				154,771,000
Federal Home Loan Bank advances			220,000,000				175,000,000				68,000,000
Subordinated debentures			45,517,000				44,835,000				55,154,000
Accrued interest and other liabilities			14,204,000				15,230,000				16,445,000
Total liabilities			2,920,834,000				2,741,760,000				2,569,752,000
SHAREHOLDERS' EQUITY
Common stock			309,772,000				305,488,000				304,819,000
Retained earnings			60,132,000				40,904,000				27,722,000
Accumulated other comprehensive income/(loss)			(4,034,000	)			(5,581,000	)			1,263,000
Total shareholders' equity			365,870,000				340,811,000				333,804,000
Total liabilities and shareholders' equity		$	3,286,704,000			$	3,082,571,000			$	2,903,556,000

 

 

Mercantile Bank Corporation

Fourth Quarter 2017 Results

MERCANTILE BANK CORPORATION

CONSOLIDATED REPORTS OF INCOME

(Unaudited)

 

		THREE MONTHS ENDED				THREE MONTHS ENDED				TWELVE MONTHS ENDED				TWELVE MONTHS ENDED
		December 31, 2017				December 31, 2016				December 31, 2017				December 31, 2016
INTEREST INCOME
Loans, including fees		$	30,411,000			$	27,830,000			$	116,816,000			$	109,049,000
Investment securities			2,036,000				1,724,000				7,631,000				9,007,000
Other interest-earning assets			455,000				161,000				1,096,000				401,000
Total interest income			32,902,000				29,715,000				125,543,000				118,457,000
INTEREST EXPENSE
Deposits			2,819,000				1,940,000				9,362,000				7,549,000
Short-term borrowings			48,000				57,000				190,000				211,000
Federal Home Loan Bank advances			966,000				668,000				3,657,000				2,263,000
Other borrowed money			667,000				615,000				2,586,000				2,567,000
Total interest expense			4,500,000				3,280,000				15,795,000				12,590,000
Net interest income			28,402,000				26,435,000				109,748,000				105,867,000
Provision for loan losses			600,000				600,000				2,950,000				2,900,000
Net interest income after provision for loan losses			27,802,000				25,835,000				106,798,000				102,967,000
NONINTEREST INCOME
Service charges on accounts			1,085,000				1,075,000				4,233,000				4,253,000
Credit and debit card income			1,263,000				1,093,000				4,760,000				4,278,000
Mortgage banking income			1,188,000				1,288,000				4,421,000				3,866,000
Earnings on bank owned life insurance			337,000				331,000				2,731,000				1,264,000
Other income			630,000				817,000				2,856,000				7,377,000
Total noninterest income			4,503,000				4,604,000				19,001,000				21,038,000
NONINTEREST EXPENSE
Salaries and benefits			11,601,000				10,565,000				45,397,000				43,524,000
Occupancy			1,479,000				1,463,000				6,186,000				6,063,000
Furniture and equipment			543,000				541,000				2,168,000				2,119,000
Data processing costs			2,067,000				1,990,000				8,222,000				7,939,000
FDIC insurance costs			252,000				128,000				960,000				1,236,000
Other expense			3,906,000				3,707,000				16,783,000				16,237,000
Total noninterest expense			19,848,000				18,394,000				79,716,000				77,118,000
Income before federal income tax expense			12,457,000				12,045,000				46,083,000				46,887,000
Federal income tax expense			4,478,000				3,960,000				14,809,000				14,974,000
Net Income		$	7,979,000			$	8,085,000			$	31,274,000			$	31,913,000
Basic earnings per share		$	0.48			$	0.49			$	1.90			$	1.96
Diluted earnings per share		$	0.48			$	0.49			$	1.90			$	1.96
Average basic shares outstanding			16,525,625				16,352,359				16,478,968				16,292,086
Average diluted shares outstanding			16,536,225				16,374,117				16,489,070				16,310,730

 

 

Mercantile Bank Corporation

Fourth Quarter 2017 Results

MERCANTILE BANK CORPORATION

CONSOLIDATED FINANCIAL HIGHLIGHTS

(Unaudited)

 

		Quarterly																				Year-To-Date
(dollars in thousands except per share data)		2017				2017				2017				2017				2016
		4th Qtr				3rd Qtr				2nd Qtr				1st Qtr				4th Qtr				2017				2016
EARNINGS
Net interest income		$	28,402				28,644				27,193				25,509				26,435				109,748				105,867
Provision for loan losses		$	600				1,000				750				600				600				2,950				2,900
Noninterest income		$	4,503				4,605				4,042				5,851				4,604				19,001				21,038
Noninterest expense		$	19,848				20,210				19,882				19,776				18,394				79,716				77,118
Net income before federal income tax expense		$	12,457				12,039				10,603				10,984				12,045				46,083				46,887
Net income		$	7,979				8,337				7,343				7,615				8,085				31,274				31,913
Basic earnings per share		$	0.48				0.51				0.45				0.46				0.49				1.90				1.96
Diluted earnings per share		$	0.48				0.51				0.45				0.46				0.49				1.90				1.96
Average basic shares outstanding			16,525,625				16,483,492				16,471,060				16,434,647				16,352,359				16,478,968				16,292,086
Average diluted shares outstanding			16,536,225				16,494,540				16,485,356				16,449,210				16,374,117				16,489,070				16,310,730
PERFORMANCE RATIOS
Return on average assets			0.97	%			1.03	%			0.96	%			1.02	%			1.05	%			1.00	%			1.07	%
Return on average equity			8.70	%			9.21	%			8.39	%			8.99	%			9.35	%			8.82	%			9.35	%
Net interest margin (fully tax-equivalent)			3.76	%			3.83	%			3.85	%			3.73	%			3.72	%			3.79	%			3.86	%
Efficiency ratio			60.32	%			60.78	%			63.65	%			63.06	%			59.26	%			61.92	%			60.77	%
Full-time equivalent employees			641				634				643				617				616				641				616
YIELD ON ASSETS / COST OF FUNDS
Yield on loans			4.76	%			4.81	%			4.69	%			4.54	%			4.65	%			4.70	%			4.65	%
Yield on securities			2.60	%			2.50	%			2.44	%			2.35	%			2.27	%			2.47	%			2.87	%
Yield on other interest-earning assets			1.29	%			1.28	%			0.99	%			0.81	%			0.51	%			1.21	%			0.51	%
Yield on total earning assets			4.35	%			4.41	%			4.37	%			4.20	%			4.18	%			4.33	%			4.31	%
Yield on total assets			4.04	%			4.10	%			4.05	%			3.88	%			3.87	%			4.02	%			3.99	%
Cost of deposits			0.45	%			0.43	%			0.35	%			0.33	%			0.33	%			0.39	%			0.33	%
Cost of borrowed funds			1.74	%			1.75	%			1.69	%			1.53	%			1.45	%			1.68	%			1.45	%
Cost of interest-bearing liabilities			0.88	%			0.85	%			0.77	%			0.68	%			0.68	%			0.80	%			0.66	%
Cost of funds (total earning assets)			0.59	%			0.58	%			0.52	%			0.47	%			0.46	%			0.54	%			0.45	%
Cost of funds (total assets)			0.55	%			0.54	%			0.48	%			0.43	%			0.42	%			0.50	%			0.42	%
PURCHASE ACCOUNTING ADJUSTMENTS
Loan portfolio - increase interest income		$	683				1,757				1,336				832				1,672				4,608				4,925
Trust preferred - increase interest expense		$	171				171				171				171				171				684				684
Core deposit intangible - increase overhead		$	556				556				609				636				636				2,357				2,675
MORTGAGE BANKING ACTIVITY
Total mortgage loans originated		$	62,526				61,962				60,371				38,365				46,727				223,224				163,072
Purchase mortgage loans originated		$	33,958				41,254				39,115				21,523				21,962				135,850				78,251
Refinance mortgage loans originated		$	28,568				20,708				21,256				16,842				24,765				87,374				84,821
Total mortgage loans sold		$	26,254				33,858				29,371				18,463				30,081				107,946				111,058
Net gain on sale of mortgage loans		$	1,051				1,131				1,012				732				993				3,926				3,397
CAPITAL
Tangible equity to tangible assets			9.56	%			9.54	%			9.70	%			9.77	%			9.31	%			9.56	%			9.31	%
Tier 1 leverage capital ratio			11.28	%			11.18	%			11.49	%			11.53	%			11.17	%			11.28	%			11.17	%
Common equity risk-based capital ratio			10.76	%			10.54	%			10.65	%			10.83	%			10.88	%			10.76	%			10.88	%
Tier 1 risk-based capital ratio			12.23	%			12.01	%			12.15	%			12.39	%			12.47	%			12.23	%			12.47	%
Total risk-based capital ratio			12.89	%			12.66	%			12.79	%			13.05	%			13.13	%			12.89	%			13.13	%
Tier 1 capital		$	360,533				354,087				347,754				341,708				336,316				360,533				336,316
Tier 1 plus tier 2 capital		$	380,035				373,280				366,048				359,984				354,278				380,035				354,278
Total risk-weighted assets		$	2,948,013				2,949,011				2,861,605				2,757,616				2,697,727				2,948,013				2,697,727
Book value per common share		$	22.05				21.99				21.69				21.13				20.76				22.05				20.76
Tangible book value per common share		$	18.61				18.49				18.16				17.56				17.14				18.61				17.14
Cash dividend per common share		$	0.19				0.19				0.18				0.18				0.67				0.74				1.16
ASSET QUALITY
Gross loan charge-offs		$	920				709				1,150				456				970				3,235				2,205
Recoveries		$	628				607				419				171				805				1,825				1,585
Net loan charge-offs (recoveries)		$	292				102				731				285				165				1,410				620
Net loan charge-offs to average loans			0.05	%			0.02	%			0.12	%			0.05	%			0.03	%			0.06	%			0.03	%
Allowance for loan losses		$	19,501				19,193				18,295				18,276				17,961				19,501				17,961
Allowance to originated loans			0.88	%			0.88	%			0.86	%			0.92	%			0.95	%			0.88	%			0.95	%
Nonperforming loans		$	7,143				8,231				6,450				7,292				5,939				7,143				5,939
Other real estate/repossessed assets		$	2,260				2,327				789				495				469				2,260				469
Nonperforming loans to total loans			0.28	%			0.32	%			0.26	%			0.30	%			0.25	%			0.28	%			0.25	%
Nonperforming assets to total assets			0.29	%			0.32	%			0.23	%			0.26	%			0.21	%			0.29	%			0.21	%
NONPERFORMING ASSETS - COMPOSITION
Residential real estate:
Land development		$	0				0				0				0				16				0				16
Construction		$	0				0				0				0				0				0				0
Owner occupied / rental		$	3,574				3,648				3,367				2,972				2,883				3,574				2,883
Commercial real estate:
Land development		$	35				50				65				80				95				35				95
Construction		$	0				0				0				0				0				0				0
Owner occupied		$	4,272				4,627				1,313				1,221				610				4,272				610
Non-owner occupied		$	36				84				400				421				488				36				488
Non-real estate:
Commercial assets		$	1,444				2,126				2,081				3,076				2,293				1,444				2,293
Consumer assets		$	42				23				13				17				23				42				23
Total nonperforming assets			9,403				10,558				7,239				7,787				6,408				9,403				6,408
NONPERFORMING ASSETS - RECON
Beginning balance		$	10,558				7,239				7,787				6,408				5,459				6,408				6,737
Additions - originated loans		$	402				4,789				1,774				2,987				2,953				9,952				6,344
Merger-related activity		$	0				210				16				0				33				226				33
Return to performing status		$	0				(120	)			0				(113	)			(13	)			(233	)			(13	)
Principal payments		$	(688	)			(1,089	)			(1,168	)			(1,289	)			(1,386	)			(4,234	)			(4,164	)
Sale proceeds		$	(101	)			(373	)			(147	)			(56	)			(308	)			(677	)			(1,428	)
Loan charge-offs		$	(754	)			(91	)			(953	)			(135	)			(263	)			(1,933	)			(981	)
Valuation write-downs		$	(14	)			(7	)			(70	)			(15	)			(67	)			(106	)			(120	)
Ending balance		$	9,403				10,558				7,239				7,787				6,408				9,403				6,408
LOAN PORTFOLIO COMPOSITION
Commercial:
Commercial & industrial		$	753,764				776,562				780,816				757,219				713,903				753,764				713,903
Land development & construction		$	29,872				28,575				29,027				31,924				34,828				29,872				34,828
Owner occupied comm'l R/E		$	526,327				485,347				491,633				452,382				450,464				526,327				450,464
Non-owner occupied comm'l R/E		$	791,685				805,167				783,036				768,565				748,269				791,685				748,269
Multi-family & residential rental		$	101,918				119,170				114,081				113,257				117,883				101,918				117,883
Total commercial		$	2,203,566				2,214,821				2,198,593				2,123,347				2,065,347				2,203,566				2,065,347
Retail:
1-4 family mortgages		$	254,560				236,075				220,697				205,850				195,226				254,560				195,226
Home equity & other consumer		$	100,426				103,376				107,991				112,117				118,047				100,426				118,047
Total retail		$	354,986				339,451				328,688				317,967				313,273				354,986				313,273
Total loans		$	2,558,552				2,554,272				2,527,281				2,441,314				2,378,620				2,558,552				2,378,620
END OF PERIOD BALANCES
Loans		$	2,558,552				2,554,272				2,527,281				2,441,314				2,378,620				2,558,552				2,378,620
Securities		$	346,780				341,126				333,294				341,677				336,086				346,780				336,086
Other interest-earning assets		$	144,974				123,110				48,762				12,663				133,396				144,974				133,396
Total earning assets (before allowance)		$	3,050,306				3,018,508				2,909,337				2,795,654				2,848,102				3,050,306				2,848,102
Total assets		$	3,286,704				3,254,655				3,143,336				3,018,919				3,082,571				3,286,704				3,082,571
Noninterest-bearing deposits		$	866,380				826,038				800,718				757,706				810,600				866,380				810,600
Interest-bearing deposits		$	1,655,985				1,663,005				1,570,003				1,520,310				1,564,385				1,655,985				1,564,385
Total deposits		$	2,522,365				2,489,043				2,370,721				2,278,016				2,374,985				2,522,365				2,374,985
Total borrowed funds		$	387,468				390,868				404,370				380,009				354,902				387,468				354,902
Total interest-bearing liabilities		$	2,043,453				2,053,873				1,974,373				1,900,319				1,919,287				2,043,453				1,919,287
Shareholders' equity		$	365,870				362,546				357,499				348,050				340,811				365,870				340,811
AVERAGE BALANCES
Loans		$	2,534,729				2,534,364				2,472,489				2,390,030				2,372,510				2,483,440				2,345,308
Securities		$	346,318				339,125				338,045				339,537				336,493				340,770				340,172
Other interest-earning assets		$	138,095				116,851				46,250				61,376				127,790				90,925				77,863
Total earning assets (before allowance)		$	3,019,142				2,990,340				2,856,784				2,790,943				2,836,793				2,915,135				2,763,343
Total assets		$	3,248,828				3,220,053				3,081,542				3,016,871				3,064,974				3,142,673				2,987,784
Noninterest-bearing deposits		$	849,751				805,650				785,705				766,031				773,137				802,024				715,550
Interest-bearing deposits		$	1,635,727				1,648,235				1,531,399				1,542,078				1,561,539				1,589,778				1,567,846
Total deposits		$	2,485,478				2,453,885				2,317,104				2,308,109				2,334,676				2,391,802				2,283,396
Total borrowed funds		$	384,168				393,910				400,508				352,614				366,905				382,917				347,134
Total interest-bearing liabilities		$	2,019,895				2,042,145				1,931,907				1,894,692				1,928,444				1,972,695				1,914,980
Shareholders' equity		$	363,823				359,131				351,216				343,344				343,122				354,448				341,340

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