Level One Bancorp, Inc. reports fourth quarter 2021 net income of $7.1 million, representing $0.85 diluted earnings per common share
01/28/2022 - 04:15 PM
FARMINGTON HILLS, Mich., Jan. 28, 2022 (GLOBE NEWSWIRE) -- Level One Bancorp, Inc. (“Level One”) (Nasdaq: LEVL) today reported its financial results for the fourth quarter of 2021, which included net income of $7.1 million , or $0.85 diluted earnings per common share. This compares to net income of $8.4 million , or $1.02 diluted earnings per common share, in the fourth quarter of 2020.
Patrick J. Fehring, Chief Executive Officer of Level One, commented, "We closed out 2021 with solid fourth quarter earnings of $7.1 million while generating record net income for 2021 of $32.5 million , a 59.10% increase over 2020 net income. During 2021 we provided over $234.3 million through the SBA Paycheck Protection Program (“PPP”) in lending support of our business clients. Level One Bank continues to benefit from the new relationships formed through the SBA PPP program. Additionally, we increased total loans net of PPP loans by 9.97% , increased deposits by 3.91% , and reduced our non-performing assets by $7.3 million or 38.93% from December 31, 2020. Most importantly, we are proud of the unwavering commitment of our entire Level One Team to our clients and the communities we serve."
Fourth Quarter 2021 Highlights
Total loans decreased 3.89% to $1.65 billion at December 31, 2021, compared to $1.72 billion at September 30, 2021 Total loans, excluding a decrease of $71.1 million of PPP loans, increased $4.2 million , or 1.07% annualized, during the fourth quarter of 2021 Total assets decreased 1.10% to $2.52 billion at December 31, 2021, compared to $2.54 billion at September 30, 2021 Total deposits decreased 1.30% to $2.04 billion at December 31, 2021, compared to $2.07 billion at September 30, 2021 Book value per common share increased 1.67% to $28.02 per common share at December 31, 2021, compared to $27.56 per common share at September 30, 2021 Tangible book value per common share increased 2.19% to $22.37 per common share at December 31, 2021, compared to $21.89 per common share at September 30, 2021 Net income of $7.1 million decreased 25.25% from $9.5 million in the preceding quarter Diluted earnings per common share of $0.85 decreased 26.72% compared to $1.16 in the preceding quarter, and 16.67% compared to $1.02 in the fourth quarter of 2020. Net interest margin, on a fully taxable equivalent ("FTE") basis, was 3.22% , compared to 3.47% in the preceding quarter and 3.27% in the fourth quarter of 2020 Noninterest income decreased $1.3 million to $4.7 million in the fourth quarter of 2021, compared to $6.0 million in the preceding quarter Noninterest expense increased $134 thousand to $16.1 million in the fourth quarter of 2021, compared to $16.0 million in the preceding quarter, and included $609 thousand in merger related expenses Provision for loan loss increased $848 thousand to a $341 thousand recovery of provision in the fourth quarter of 2021, compared to a $1.2 million recovery of provision in the preceding quarter Net Interest Income and Net Interest Margin
Level One's net interest income decreased $1.2 million , or 5.87% , to $19.3 million in the fourth quarter of 2021, compared to $20.5 million in the preceding quarter, and increased $205 thousand , or 1.07% , compared to $19.1 million in the fourth quarter of 2020. The decrease in net interest income compared to the preceding quarter was primarily due to a decrease of $1.4 million of interest income on loans as a result of lower average loan balances and fewer PPP loans forgiven. The increase in net interest income year over year was primarily due to an increase of $432 thousand of interest on investment securities due to increased volumes of investment securities and decreases in interest expense on deposits of $1.1 million due to lower interest rates paid as a result of revised internal deposit rates and interest expense on subordinated notes of $241 thousand due to the redemption of $15.0 million in subordinated notes. This was partially offset by a decrease of $1.6 million of interest income on loans.
Level One’s net interest margin, on a FTE basis, was 3.22% in the fourth quarter of 2021, compared to 3.47% in the preceding quarter and 3.27% in the fourth quarter of 2020. The decrease in the net interest margin compared to the preceding quarter was primarily a result of a decrease in average loan yields of 14 basis points to 4.46% in the fourth quarter of 2021 compared to 4.60% in the preceding quarter. The decrease in average loan yields was primarily due to a shift in the loan mix as a result of pay downs on commercial loans with significant increases in residential loan balances and fewer PPP loans forgiven.
Noninterest Income
Level One's noninterest income decreased $1.3 million , or 21.75% , to $4.7 million in the fourth quarter of 2021, compared to $6.0 million in the preceding quarter, and decreased $3.4 million , or 41.71% , compared to $8.1 million in the fourth quarter of 2020. The decrease in noninterest income compared to the preceding quarter was primarily attributable to a decrease of $1.1 million in mortgage banking activities and a decrease of $220 thousand in other charges and fees. The decrease in the mortgage banking activities income compared to the preceding quarter was primarily due to $2.4 million fewer residential loan originations held for sale and $10.2 million fewer residential loans sold as well as smaller margins on loans sold. The decrease in other charges and fees compared to the preceding quarter was primarily due to no interest rate swap fees and fewer tax credits as a result of legislation enacted in response to the COVID-19 pandemic recognized during the preceding quarter.
The decrease in noninterest income in the fourth quarter of 2021 compared to the same period in 2020 was primarily due to a decrease of $3.7 million in mortgage banking activities. This was partially offset by an increase of $227 thousand in service charges on deposits. The decrease in mortgage banking activities compared to the fourth quarter of 2020 was primarily due to $41.6 million fewer residential loan originations held for sale and $51.2 million fewer residential loans sold. The higher volumes in the fourth quarter of 2020 were primarily as a result of the significant decrease in interest rates during 2020 while interest rates have remained relatively stable in 2021. The increase in service charges on deposits was primarily due to higher transaction volumes and deposit balances.
Noninterest Expense
Level One's noninterest expense increased $134 thousand , or 0.84% , to $16.1 million in the fourth quarter of 2021, compared to $16.0 million in the preceding quarter, and increased $662 thousand , or 4.28% , compared to $15.5 million in the fourth quarter of 2020. The increase in noninterest expense compared to the preceding quarter was primarily attributable to increases of $738 thousand in other expenses and $431 thousand in professional service fees partially offset by a decrease of $1.0 million in salary and employee benefits. The increase in other expenses compared to the third quarter of 2021 was primarily due to increases of $569 thousand in fraud losses and $123 thousand in provision for unfunded commitments. The increase in professional service fees was primarily due to increases of $185 thousand in other professional fees and $153 thousand in legal fees as a result of the merger, as well as a $105 thousand increase in audit fees. The decrease in salary and employee benefits compared to the preceding quarter was primarily due to decreases of $414 thousand in mortgage commissions and $100 thousand in incentive compensation along with an increase of $342 thousand in deferred loan costs.
The increase in noninterest expense in the fourth quarter of 2021 compared to the same period in 2020 was mainly attributable to increases of $914 thousand in other expenses, $484 thousand in professional service fees, and $199 thousand in marketing expense. These increases were partially offset by decreases of $686 thousand in salary and employee benefits and $148 thousand in FDIC premium expense. The increase in other expenses compared to the fourth quarter of 2020 was primarily due to increases of $573 thousand in fraud losses and $197 thousand in captive insurance reserves. The increase in professional service fees was primarily due to increases of $312 thousand in legal fees and $196 thousand in other professional fees as a result of merger related costs. The increase in marketing expense was primarily due to general marketing and advertising for the bank. The decrease in salary and employee benefits compared to the fourth quarter of 2020 was primarily due to a decrease of $634 thousand in incentive compensation and an increase of $452 thousand in deferred loan costs partially offset by an increase of $444 thousand in salaries expense. The decrease in FDIC premium expense was primarily due to an improvement in our capital ratios and income levels.
The efficiency ratio, which is a measure of operating expenses as a percentage of net interest income and noninterest income, was 67.07% for the fourth quarter of 2021, compared to 60.21% for the preceding quarter and 56.81% in the fourth quarter of 2020.
Income Tax Expense
Level One's income tax provision was $1.2 million , or 14.30% of pretax income, in the fourth quarter of 2021, as compared to $2.3 million , or 19.49% of pretax income, in the preceding quarter and $1.8 million , or 18.05% of pretax income, in the fourth quarter of 2020.
Loan Portfolio
Total loans were $1.65 billion at December 31, 2021, a decrease of $66.9 million , or 3.89% , from $1.72 billion at September 30, 2021, and down $70.8 million , or 4.11% , from $1.72 billion at December 31, 2020. The decrease in total loans compared to September 30, 2021 was primarily due to $71.1 million of PPP loans forgiven by the SBA during the fourth quarter partially offset by a net increase of $4.2 million , or 1.07% annualized growth, in the remainder of the loan portfolio. The decrease in total loans compared to December 31, 2020, was primarily due to a $213.6 million net decrease in PPP loans (originated and forgiven) which was partially offset by a net increase of $142.9 million in the remainder of the loan portfolio.
Investment Securities
The investment securities portfolio grew $8.1 million , or 2.06% , to $397.6 million at December 31, 2021, from $389.5 million at September 30, 2021, and up $94.9 million , or 31.32% , from $302.7 million at December 31, 2020. The increase in the investment securities portfolio compared to September 30, 2021 was primarily due to the purchase of $20.6 million of investment securities using excess cash balances generated by payoffs of PPP loans, partially offset in part by $12.6 million of sales, calls, or maturity of investment securities, principal pay downs, amortization and accretion, and fair market value adjustments. The increase in investment securities compared to December 31, 2020, was primarily due to the purchase of $135.9 million of securities between the two dates using excess cash balances generated by the payoffs and forgiveness of PPP loans, partially offset by $41.1 million of sales, calls, or maturity of investment securities, principal pay downs, amortization and accretion, and fair market value adjustments.
Deposits
Total deposits were $2.04 billion at December 31, 2021, a decrease of $26.9 million , or 1.30% , from $2.07 billion at September 30, 2021, and up $76.8 million , or 3.91% , from $1.96 billion at December 31, 2020. The decrease in deposits compared to September 30, 2021 was primarily due to runoff related to deposit pricing opportunities. The growth in deposits compared to December 31, 2020 was primarily due to organic deposit growth as a result of increased customer liquidity and new customer growth. Total deposit composition at December 31, 2021 consisted of 50.86% of demand deposit accounts, 28.27% of savings and money market accounts and 20.87% of time deposits.
Borrowings
Total debt outstanding was $208.4 million at December 31, 2021, a decrease of $3.3 million , or 1.58% , from $211.7 million at September 30, 2021, and down $21.9 million , or 9.51% , from $230.3 million at December 31, 2020. The decrease in total borrowings compared to September 30, 2021 was primarily due to a decrease of $3.0 million in FHLB borrowings. The decrease in total borrowings compared to December 31, 2020 was primarily due to a decrease of $6.0 million in FHLB borrowings as well as the redemption of $15.0 million of subordinated notes. The Company would have paid approximately $721 thousand in interest in 2021 on the redeemed subordinated notes.
Asset Quality
Nonaccrual loans were $11.3 million , or 0.68% of total loans, at December 31, 2021, a decrease of $844 thousand from nonaccrual loans of $12.1 million , or 0.71% of total loans, at September 30, 2021, and a decrease of $7.5 million from nonaccrual loans of $18.8 million , or 1.09% of total loans, at December 31, 2020. The decrease in nonaccrual loans compared to December 31, 2020 was primarily due to pay offs of four commercial loan relationships totaling $5.4 million , paydowns on four commercial loan relationships totaling $3.9 million , and one $759 thousand residential loan relationship moving back to accruing. This was partially offset by two commercial loan relationships moving to nonaccrual status totaling $2.6 million .
Nonperforming assets, consisting of nonaccrual loans and other real estate owned, as a percentage of total assets were 0.46% at December 31, 2021, compared to 0.48% at September 30, 2021, and 0.77% at December 31, 2020.
Performing troubled debt restructured loans, which are not reported as nonaccrual loans but rather as part of impaired loans, were $699 thousand at December 31, 2021 compared to $762 thousand at September 30, 2021, and $978 thousand at December 31, 2020. Loans to 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. In accordance with bank regulatory guidance, troubled debt restructurings do not include short-term modifications made on a good-faith basis in response to the COVID-19 pandemic to borrowers who were current prior to any relief. As of December 31, 2021, there were no loans that remained on a COVID-related deferral compared to $1.1 million as of September 30, 2021.
Net recoveries in the fourth quarter of 2021 were $35 thousand , or 0.01% of average loans on an annualized basis, compared to $224 thousand of net charge-offs, or 0.05% of average loans on an annualized basis for the preceding quarter and $496 thousand of net charge-offs, or 0.11% of average loans on an annualized basis, in the fourth quarter of 2020.
Level One's provision for loan losses in the fourth quarter of 2021 was a provision recovery of $341 thousand , compared to provision recovery of $1.2 million in the preceding quarter and provision expense of $1.5 million in the fourth quarter of 2020. The decrease in the provision recovery quarter over quarter was primarily due to an increase of $1.2 million in general reserve expense as a result of a reduction in qualitative factors within the allowance for loan loss model as a result of improved credit quality during the preceding quarter, partially offset by a decrease in net charge-offs of $261 thousand . The decrease in the provision expense in the fourth quarter of 2021 compared to the same period in 2020 was primarily due to a decrease in general reserves of $2.0 million resulting from a decrease in qualitative factors and a decrease of $532 thousand in net charge-offs. This was partially offset by a $445 thousand increase in specific reserves. The Company will continue to evaluate the fluid situation in regard to the COVID-19 pandemic and will take further action to appropriately record additional provision for loan losses or decrease the level of the provision for loan losses should there be any indications of significant changes in the credit quality of our portfolio as a result of the COVID-19 pandemic.
The allowance for loan losses was $21.4 million , or 1.30% of total loans, at December 31, 2021, compared to $21.7 million , or 1.26% of total loans, at September 30, 2021, and $22.3 million , or 1.29% of total loans, at December 31, 2020. Excluding PPP loans of $76.5 million , $147.6 million , and $290.1 million as of these dates, respectively, the allowance for loan losses as a percentage of total loans was 1.36% as of December 31, 2021, compared to 1.38% as of September 30, 2021 and 1.56% as of December 31, 2020 (see section entitled "GAAP Reconciliation of Non-GAAP Financial Measures" for further details). The allowance for loan losses as a percentage of total loans excluding PPP loans decreased compared to December 31, 2020 as a result of a reduction in qualitative factors within the allowance for loan loss model as a result of improved credit quality. As of December 31, 2021, the allowance for loan losses as a percentage of nonaccrual loans was 189.79% , compared to 179.11% at September 30, 2021, and 118.50% at December 31, 2020.
Capital
Total shareholders’ equity was $240.1 million at December 31, 2021, an increase of $6.2 million , or 2.63% , compared with $233.9 million at September 30, 2021, and increased $24.8 million , or 11.50% , from $215.3 million at December 31, 2020. The increase in shareholders' equity quarter over quarter and year over year was primarily as a result of an increase in retained earnings.
Recent Developments
Fourth Quarter Common Stock Dividend : On December 15, 2021, Level One’s Board of Directors declared a quarterly cash dividend of $0.06 per share. This dividend was paid on January 15, 2022, to stockholders of record at the close of business on December 31, 2021.
First Quarter Preferred Stock Dividend: $46.88 per share on its 7.50% Non-Cumulative Perpetual Preferred Stock, Series B. Holders of depositary shares will receive $0.46 88 per depositary share. The dividend is payable on February 15, 2022, to shareholders of record at the close of business on January 31, 2022.
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 $2.52 billion as of December 31, 2021. It operates sixteen banking centers throughout Metro Detroit, Ann Arbor, Grand Rapids, and Jackson and provides a variety of commercial, small business, and consumer banking services. 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," one of American Banker Magazine's "Top 200 Community Banks in the Nation," one of Metro Detroit's "Best & Brightest Companies to Work For" and more. Level One Bank’s business banking division provides a broad spectrum of products including lines of credit, term loans, leases, commercial mortgages, SBA loans, MEDC loans, export-import financing, and a full suite of treasury management services. The consumer banking division offers a range of personal checking, savings and CD products and a complete array of consumer loan products including residential mortgages, new construction and renovation loans, home equity lines of credit, auto loans, and credit card services. Level One Bank offers a variety of digital banking services including online banking, robust mobile banking apps, online account opening and online loan applications 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. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "will," "propose," "may," "plan," "seek," "expect," "intend," "estimate," "anticipate," "believe," "continue," "annualized" or similar terminology. 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 effects of the COVID-19 pandemic, including its effects on the economic environment, our customers and our operations, as well as any changes to federal, state or local government laws, regulations or orders in connection with the pandemic, 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, changes in benchmark interest rates used to price loans and deposits in connection with the transition from LIBOR, and changes in tax laws, regulations and guidance, 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, December 31, September 30, June 30, March 31, December 31, (Dollars in thousands, except per share data) 2021 2021 2021 2021 2020 Earnings Summary Interest income $ 21,040 $ 22,322 $ 21,737 $ 21,551 $ 22,181 Interest expense 1,729 1,807 2,121 2,394 3,075 Net interest income 19,311 20,515 19,616 19,157 19,106 Provision expense (recovery) for loan losses (341 ) (1,189 ) 540 265 1,538 Noninterest income 4,727 6,041 4,326 7,278 8,110 Noninterest expense 16,123 15,989 14,588 15,139 15,461 Income before income taxes 8,256 11,756 8,814 11,031 10,217 Income tax provision 1,181 2,291 1,835 2,072 1,844 Net income $ 7,075 $ 9,465 $ 6,979 $ 8,959 $ 8,373 Preferred stock dividends 469 468 469 469 479 Net income available to common shareholders 6,606 8,997 6,510 8,490 7,894 Net income allocated to participating securities 100 138 92 111 65 Net income attributable to common shareholders $ 6,506 $ 8,859 $ 6,418 $ 8,379 $ 7,829 Per Share Data Basic earnings per common share $ 0.86 $ 1.19 $ 0.85 $ 1.11 $ 1.02 Diluted earnings per common share 0.85 1.16 0.84 1.10 1.02 Book value per common share 28.02 27.56 26.48 25.40 25.14 Tangible book value per common share (1) 22.37 21.89 20.84 19.78 19.63 Preferred shares outstanding (in thousands) 10 10 10 10 10 Common shares outstanding (in thousands) 7,734 7,640 7,629 7,630 7,634 Average basic common shares (in thousands) 7,565 7,519 7,520 7,528 7,642 Average diluted common shares (in thousands) 7,706 7,638 7,633 7,612 7,695 Selected Period End Balances Total assets $ 2,515,869 $ 2,543,883 $ 2,506,523 $ 2,572,726 $ 2,442,982 Securities available-for-sale 397,551 389,528 376,453 346,266 302,732 Total loans 1,652,771 1,719,717 1,775,243 1,861,691 1,723,537 Total deposits 2,040,082 2,066,992 2,031,808 2,093,965 1,963,312 Total liabilities 2,275,778 2,309,949 2,281,114 2,355,539 2,227,655 Total shareholders' equity 240,091 233,934 225,409 217,187 215,327 Total common shareholders' equity 216,719 210,562 202,037 193,815 191,955 Tangible common shareholders' equity (1) 173,033 167,262 159,022 150,887 149,844 Performance and Capital Ratios Return on average assets (annualized) 1.11 % 1.50 % 1.09 % 1.44 % 1.35 % Return on average equity (annualized) 11.92 16.32 12.52 16.31 15.61 Net interest margin (fully taxable equivalent)(2) 3.22 3.47 3.30 3.33 3.27 Efficiency ratio (noninterest expense/net interest income plus noninterest income) 67.07 60.21 60.93 57.27 56.81 Dividend payout ratio 6.96 5.08 7.02 4.50 4.90 Total shareholders' equity to total assets 9.54 9.20 8.99 8.44 8.81 Tangible common equity to tangible assets (1) 7.00 6.69 6.46 5.96 6.24 Common equity tier 1 to risk-weighted assets 10.37 9.82 9.66 9.63 9.30 Tier 1 capital to risk-weighted assets 11.75 11.19 11.09 11.11 10.80 Total capital to risk-weighted assets 14.76 14.19 14.15 15.18 14.91 Tier 1 capital to average assets (leverage ratio) 7.93 7.68 7.24 7.15 6.93 Asset Quality Ratios: Net charge-offs (recoveries) to average loans (0.01 )% 0.05 % (0.01 )% — % 0.11 % Nonperforming assets as a percentage of total assets 0.46 0.48 0.55 0.60 0.77 Nonaccrual loans as a percent of total loans 0.68 0.71 0.77 0.83 1.09 Allowance for loan losses as a percentage of total loans 1.30 1.26 1.30 1.21 1.29 Allowance for loan losses as a percentage of nonaccrual loans 189.79 179.11 168.64 146.95 118.50 Allowance for loan losses as a percentage of nonaccrual loans, excluding allowance allocated to loans accounted for under ASC 310-30 184.58 173.58 163.76 142.62 114.95
(1) See section entitled "GAAP Reconciliation of Non-GAAP Financial Measures" below.(2) Presented on a tax equivalent basis using a 21% tax rate.
Consolidated Balance Sheets As of December 31, September 30, December 31, (Dollars in thousands) 2021 2021 2020 Assets (Unaudited) (Unaudited) Cash and cash equivalents $ 330,146 $ 293,824 $ 264,071 Securities available-for-sale 397,551 389,528 302,732 Other investments 14,398 14,398 14,398 Mortgage loans held for sale, at fair value 12,902 15,351 43,482 Loans: Originated loans 1,486,969 1,537,145 1,498,458 Acquired loans 165,802 182,572 225,079 Total loans 1,652,771 1,719,717 1,723,537 Less: Allowance for loan losses (21,425 ) (21,731 ) (22,297 ) Net loans 1,631,346 1,697,986 1,701,240 Premises and equipment, net 14,903 15,170 15,834 Goodwill 35,554 35,554 35,554 Mortgage servicing rights, net 5,604 5,051 3,361 Other intangible assets, net 2,528 2,695 3,196 Other real estate owned 201 — — Bank-owned life insurance 29,960 29,774 18,200 Income tax benefit 4,829 4,041 3,686 Interest receivable and other assets 35,947 40,511 37,228 Total assets $ 2,515,869 $ 2,543,883 $ 2,442,982 Liabilities Deposits: Noninterest-bearing demand deposits $ 796,782 $ 791,879 $ 618,677 Interest-bearing demand deposits 240,781 179,814 127,920 Money market and savings deposits 576,718 631,551 619,900 Time deposits 425,801 463,748 596,815 Total deposits 2,040,082 2,066,992 1,963,312 Borrowings 178,682 182,058 185,684 Subordinated notes 29,694 29,668 44,592 Other liabilities 27,320 31,231 34,067 Total liabilities 2,275,778 2,309,949 2,227,655 Shareholders' equity Preferred stock, no par value per share; authorized-50,000 shares; issued and outstanding - 10,000 shares, with a liquidation preference of $2,500 per share, at December 31, 2021, September 30, 2021 and December 31, 2020 23,372 23,372 23,372 Common stock, no par value per share; authorized - 20,000,000 shares; issued and outstanding - 7,733,726 shares at December 31, 2021, 7,639,544 shares at September 30, 2021 and 7,633,780 shares at December 31, 2020 88,851 86,926 87,615 Retained earnings 124,923 118,781 96,158 Accumulated other comprehensive income, net of tax 2,945 4,855 8,182 Total shareholders' equity 240,091 233,934 215,327 Total liabilities and shareholders' equity $ 2,515,869 $ 2,543,883 $ 2,442,982
Consolidated Statements of Income Three months ended Twelve months ended December 31, September 30, December 31, December 31, December 31, (In thousands, except per share data) 2021 2021 2020 2021 2020 Interest income (Unaudited) (Unaudited) (Unaudited) (Unaudited) Originated loans, including fees $ 16,770 $ 17,796 $ 17,439 $ 68,555 $ 62,069 Acquired loans, including fees 2,277 2,651 3,234 10,809 14,421 Securities: Taxable 1,141 1,054 747 4,036 2,677 Tax-exempt 630 630 592 2,510 2,486 Federal funds sold and other 222 191 169 740 986 Total interest income 21,040 22,322 22,181 86,650 82,639 Interest Expense Deposits 870 965 1,954 4,313 10,993 Borrowed funds 466 468 487 1,875 2,353 Subordinated notes 393 374 634 1,863 2,537 Total interest expense 1,729 1,807 3,075 8,051 15,883 Net interest income 19,311 20,515 19,106 78,599 66,756 Provision expense (recovery) for loan losses (341 ) (1,189 ) 1,538 (725 ) 11,872 Net interest income after provision for loan losses 19,652 21,704 17,568 79,324 54,884 Noninterest income Service charges on deposits 875 859 648 3,311 2,446 Net gain on sales of securities 1 — — 21 1,862 Mortgage banking activities 3,105 4,216 6,810 15,843 22,190 Other charges and fees 746 966 652 3,197 3,216 Total noninterest income 4,727 6,041 8,110 22,372 29,714 Noninterest expense Salary and employee benefits 9,528 10,551 10,214 39,353 38,304 Occupancy and equipment expense 1,660 1,680 1,776 6,631 6,549 Professional service fees 1,278 847 794 3,542 2,935 Acquisition and due diligence fees — — — — 1,654 FDIC premium expense 249 244 397 1,027 1,119 Marketing expense 446 428 247 1,288 956 Loan processing expense 228 231 245 983 935 Data processing expense 916 928 859 4,125 3,460 Core deposit premium amortization 167 167 192 668 768 Other expense 1,651 913 737 4,222 3,552 Total noninterest expense 16,123 15,989 15,461 61,839 60,232 Income before income taxes 8,256 11,756 10,217 39,857 24,366 Income tax provision 1,181 2,291 1,844 7,379 3,953 Net income 7,075 9,465 8,373 32,478 20,413 Preferred stock dividends 469 468 479 1,875 479 Net income attributable to common shareholders $ 6,606 $ 8,997 $ 7,894 $ 30,603 $ 19,934 Earnings per common share: Basic earnings per common share $ 0.86 $ 1.19 $ 1.02 $ 4.00 $ 2.58 Diluted earnings per common share $ 0.85 $ 1.16 $ 1.02 $ 3.95 $ 2.57 Cash dividends declared per common share $ 0.06 $ 0.06 $ 0.05 $ 0.24 $ 0.20 Weighted average common shares outstanding—basic 7,565 7,519 7,642 7,536 7,627 Weighted average common shares outstanding—diluted 7,706 7,638 7,695 7,650 7,686
Net Interest Income and Net Interest Margin (Unaudited) For the three months ended For the twelve months ended December 31, September 30, December 31, December 31, December 31, (Dollars in thousands) 2021 2021 2020 2021 2020 Average Balance Sheets: Gross loans(1) $ 1,696,073 $ 1,763,214 $ 1,832,912 $ 1,791,671 $ 1,730,470 Investment securities: (2) Taxable 289,146 265,885 182,522 254,913 138,837 Tax-exempt 104,945 104,063 92,792 103,609 96,020 Interest earning cash balances 297,926 221,261 213,502 218,931 194,545 Other investments 14,398 14,398 14,398 14,398 12,903 Total interest-earning assets $ 2,402,488 $ 2,368,821 $ 2,336,126 $ 2,383,522 $ 2,172,775 Non-earning assets 146,046 151,077 138,989 145,990 135,229 Total assets $ 2,548,534 $ 2,519,898 $ 2,475,115 $ 2,529,512 $ 2,308,004 Interest-bearing demand deposits 215,685 156,977 123,201 162,405 115,249 Money market and savings deposits 586,464 624,190 611,162 613,883 496,827 Time deposits 455,439 489,261 601,900 519,447 573,823 Borrowings 182,080 181,911 187,399 183,503 279,949 Subordinated notes 29,677 29,657 44,569 36,376 44,490 Total interest-bearing liabilities $ 1,469,345 $ 1,481,996 $ 1,568,231 $ 1,515,614 $ 1,510,338 Noninterest bearing demand deposits 811,394 774,926 659,333 754,376 574,537 Other liabilities 30,404 31,012 32,990 31,466 30,787 Shareholders' equity 237,391 231,964 214,561 228,056 192,342 Total liabilities and shareholders' equity $ 2,548,534 $ 2,519,898 $ 2,475,115 $ 2,529,512 $ 2,308,004 Yields: (3) Earning Assets Gross loans 4.46 % 4.60 % 4.49 % 4.43 % 4.42 % Investment securities: Taxable 1.57 % 1.57 % 1.63 % 1.58 % 1.93 % Tax-exempt 2.97 % 2.99 % 3.14 % 3.02 % 3.19 % Interest earning cash balances 0.15 % 0.15 % 0.11 % 0.13 % 0.24 % Other investments 3.00 % 2.95 % 2.98 % 3.13 % 4.07 % Total interest earning assets 3.50 % 3.76 % 3.80 % 3.66 % 3.83 % Interest-bearing liabilities Interest-bearing demand deposits 0.14 % 0.14 % 0.19 % 0.14 % 0.28 % Money market and savings deposits 0.16 % 0.17 % 0.35 % 0.19 % 0.56 % Time deposits 0.49 % 0.53 % 0.89 % 0.56 % 1.38 % Borrowings 1.02 % 1.02 % 1.03 % 1.02 % 0.84 % Subordinated notes 5.25 % 5.00 % 5.66 % 5.12 % 5.70 % Total interest-bearing liabilities 0.47 % 0.48 % 0.78 % 0.53 % 1.05 % Interest Spread 3.03 % 3.28 % 3.02 % 3.13 % 2.78 % Net interest margin (4) 3.19 % 3.44 % 3.25 % 3.30 % 3.07 % Tax equivalent effect 0.03 % 0.03 % 0.02 % 0.03 % 0.03 % Net interest margin on a fully tax equivalent basis 3.22 % 3.47 % 3.27 % 3.33 % 3.10 %
(1) Includes nonaccrual loans.(2) 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.(3) Average rates and yields are presented on an annual basis and includes a taxable equivalent adjustment to interest income of $156 thousand , $155 thousand , and $140 thousand on tax-exempt securities for the three months ended December 31, 2021, September 30, 2021, and December 31, 2020, respectively, and $617 thousand and $574 thousand for the twelve months ended December 31, 2021 and 2020, respectively, using a federal income tax rate of 21% .(4) Net interest margin represents net interest income divided by average total interest-earning assets.
Loan Composition As of December 31, September 30, June 30, March 31, December 31, (Dollars in thousands) 2021 2021 2021 2021 2020 Commercial real estate: (Unaudited) (Unaudited) (Unaudited) (Unaudited) Non-owner occupied $ 467,364 $ 479,633 $ 477,715 $ 449,690 $ 445,810 Owner-occupied 283,400 295,228 301,615 300,175 275,022 Total commercial real estate 750,764 774,861 779,330 749,865 720,832 Commercial and industrial 460,530 540,546 642,606 794,096 685,504 Residential real estate 440,640 403,517 352,513 316,089 315,476 Consumer 837 793 794 1,641 1,725 Total loans $ 1,652,771 $ 1,719,717 $ 1,775,243 $ 1,861,691 $ 1,723,537
Impaired Assets As of December 31, September 30, June 30, March 31, December 31, (Dollars in thousands) 2021 2021 2021 2021 2020 Nonaccrual loans (Unaudited) (Unaudited) (Unaudited) (Unaudited) Commercial real estate $ 4,246 $ 3,768 $ 4,536 $ 4,542 $ 7,320 Commercial and industrial 4,208 4,746 5,247 6,822 7,490 Residential real estate 2,819 3,610 3,931 3,987 3,991 Consumer 16 9 10 13 15 Total nonaccrual loans 11,289 12,133 13,724 15,364 18,816 Other real estate owned 201 — — — — Total nonperforming assets 11,490 12,133 13,724 15,364 18,816 Performing troubled debt restructurings Commercial and industrial 334 336 336 335 546 Residential real estate 365 426 429 430 432 Total performing troubled debt restructurings 699 762 765 765 978 Total impaired assets $ 12,189 $ 12,895 $ 14,489 $ 16,129 $ 19,794 Loans 90 days or more past due and still accruing $ 162 $ 162 $ 387 $ 328 $ 269
GAAP Reconciliation of Non-GAAP Financial Measures
Some of the financial measures included in this report are not measures of financial condition or performance recognized by GAAP. These non-GAAP financial measures include tangible common shareholders' equity, tangible book value per common share, the ratio of tangible common equity to tangible assets, and allowance for loan loss as a percentage of total loans, excluding PPP loans. Our management uses these non-GAAP financial measures in its analysis of our performance, and we believe that providing this information to financial analysts and investors allows them to evaluate capital adequacy, as well as better understand and evaluate the Company’s core financial results for the periods in question.
The following presents these non-GAAP financial measures along with their most directly comparable financial measure calculated in accordance with GAAP:
Tangible Common Shareholders' Equity, Tangible Common Equity to Tangible Assets Ratio and Tangible Book Value Per Common Share As of December 31, September 30, June 30, March 31, December 31, (Dollars in thousands, except per share data) 2021 2021 2021 2021 2020 (Unaudited) (Unaudited) (Unaudited) (Unaudited) Total shareholders' equity $ 240,091 $ 233,934 $ 225,409 $ 217,187 $ 215,327 Less: Preferred stock 23,372 23,372 23,372 23,372 23,372 Total common shareholders' equity 216,719 210,562 202,037 193,815 191,955 Less: Goodwill 35,554 35,554 35,554 35,554 35,554 Mortgage servicing rights, net 5,604 5,051 4,599 4,346 3,361 Other intangible assets, net 2,528 2,695 2,862 3,028 3,196 Tangible common shareholders' equity $ 173,033 $ 167,262 $ 159,022 $ 150,887 $ 149,844 Common shares outstanding (in thousands) 7,734 7,640 7,629 7,630 7,634 Tangible book value per common share $ 22.37 $ 21.89 $ 20.84 $ 19.78 $ 19.63 Total assets $ 2,515,869 $ 2,543,883 $ 2,506,523 $ 2,572,726 $ 2,442,982 Less: Goodwill 35,554 35,554 35,554 35,554 35,554 Mortgage servicing rights, net 5,604 5,051 4,599 4,346 3,361 Other intangible assets, net 2,528 2,695 2,862 3,028 3,196 Tangible assets $ 2,472,183 $ 2,500,583 $ 2,463,508 $ 2,529,798 $ 2,400,871 Tangible common equity to tangible assets 7.00 % 6.69 % 6.46 % 5.96 % 6.24 %
Allowance for Loan Loss as a Percentage of Total Loans, Excluding PPP Loans As of December 31, September 30, June 30, March 31, December 31, (Dollars in thousands, except per share data) 2021 2021 2021 2021 2020 (Unaudited) (Unaudited) (Unaudited) (Unaudited) Total loans $ 1,652,771 $ 1,719,717 $ 1,775,243 $ 1,861,691 $ 1,723,537 Less: PPP loans 76,505 147,645 259,303 405,770 290,135 Total loans, excluding PPP loans $ 1,576,266 $ 1,572,072 $ 1,515,940 $ 1,455,921 $ 1,433,402 Allowance for loan loss $ 21,425 $ 21,731 $ 23,144 $ 22,578 $ 22,297 Allowance for loan loss as a percentage of total loans 1.30 % 1.26 % 1.30 % 1.21 % 1.29 % Allowance for loan loss as a percentage of total loans, excluding PPP loans 1.36 % 1.38 % 1.53 % 1.55 % 1.56 %
