EX-99.1 2 exhibit991-q12018earningsr.htm EXHIBIT 99.1 Q1 2018 EARNINGS RELEASE Exhibit


levelonebankerv3image1.gif
 
For Immediate Release

Level One Bancorp, Inc. reports first quarter 2018 net income of $3.2 million, representing $0.47 of earnings per diluted average share

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


Farmington Hills, MI – May 15, 2018 – Level One Bancorp, Inc. (“Level One”) (Nasdaq: LEVL) today reported net income of $3.2 million, or $0.47 per diluted share, in the first quarter of 2018. This compares with net income of $933 thousand, or $0.14 per diluted share, in the preceding quarter and $2.8 million, or $0.42 per diluted share, in the first quarter of 2017.

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".

First Dividend Payout: On March 15, 2018, the Company’s Board of Directors declared a quarterly cash dividend of $0.03 per share. This dividend was paid out on April 16, 2018, to stockholders of record at the close of business on March 31, 2018.

First Quarter Financial Highlights

•
Net income was $3.2 million, or $0.47 per diluted share, for the three months ended March 31, 2018
•
Pre-tax income increased 17.23% to $3.8 million, compared to $3.3 million in the preceding quarter
•
Net interest margin was 4.03% compared to 4.01% in the preceding quarter and 4.34% in the first quarter of 2017
•
Annualized return on average assets was 1.00%, compared to 0.96% in the first quarter of 2017
•
Annualized return on average equity was 11.64%, compared to 11.28% in the first quarter of 2017
•
Total assets increased 11.19% to $1.30 billion at March 31, 2018, compared to $1.17 billion at March 31, 2017
•
Total deposits increased 15.08% to $1.11 billion at March 31, 2018, compared to $966.9 million at March 31, 2017
•
Total loans increased 9.40% to $1.05 billion at March 31, 2018, compared to $961.0 million at March 31, 2017
•
Book value per share increased 7.63% to $16.78 per share compared to $15.59 per share at March 31, 2017
•
Tangible book value per share increased 9.12% to $15.27 per share compared to $13.99 per share at March 31, 2017

Balance Sheet Review

Level One's total assets were $1.30 billion at March 31, 2018, a decrease of $662 thousand, or 0.05%, from December 31, 2017, and up $130.9 million, or 11.19%, from $1.17 billion at March 31, 2017.





The investment securities portfolio was $160.3 million at March 31, 2018, an increase of $9.4 million or 6.21%, from $151.0 million at December 31, 2017, and up $51.9 million, or 47.8%, from $108.5 million at March 31, 2017. The portfolio is mainly comprised of securities issued by state and political subdivisions, collaterized mortgage obligations, mortgage-backed securities and U.S. Treasury securities.

Total loans were $1.05 billion at March 31, 2018, an increase of $16.4 million, or 1.59%, from $1.03 billion at December 31, 2017, and up $90.4 million, or 9.40%, from $961.0 million at March 31, 2017. The growth in total loans compared to December 31, 2017 and March 31, 2017 was primarily due to growth in our commercial real estate and residential real estate loan portfolios.

Total deposits were $1.11 billion at March 31, 2018, an increase of $145.8 million, or 15.08%, compared to $966.9 million at March 31, 2017. Total deposits decreased $7.7 million, or 0.69%, compared to $1.12 billion at December 31, 2017. Total deposit composition at March 31, 2018 consisted of 33% of demand deposit accounts, 25% of savings and money market accounts and 42% of time deposits.

Operating Results

Level One's net interest income before the provision for loan loss increased $123 thousand, or 1.02%, to $12.1 million in the first quarter of 2018, compared to $12.0 million in the preceding quarter, and increased $383 thousand, or 3.26%, compared to $11.7 million in the first quarter of 2017.

Level One’s net interest margin was 4.03% in the first quarter of 2018, compared to 4.01% in the preceding quarter and 4.34% in the first quarter of 2017.

Total revenues (net interest income before provision for loan losses, plus noninterest income) increased $101 thousand, or 0.75%, to $13.5 million in the first quarter 2018, compared to $13.4 million in the preceding quarter, and increased $375 thousand, or 2.86%, compared to $13.1 million in the first quarter of 2017.

Level One’s first quarter noninterest expenses were $9.1 million, compared to $9.2 million in the preceding quarter and $8.7 million in the first quarter of 2017. The efficiency ratio, which is a measure of operating expenses as a percentage of net interest income and noninterest income, for the first quarter of 2018 was 67.7%, compared to 68.6% for the preceding quarter and 66.1% in the first quarter of 2017.

Level One's income tax provision was $642 thousand, or 16.9% of pretax income, during the three months ended March 31, 2018, as compared to $2.3 million, or 71.3% of pretax income, in the preceding quarter and $1.5 million, or 35.2% of pretax income, in the first quarter of 2017. The decease in tax expense during the three months ended March 31, 2018, as compared to first quarter 2017 and fourth quarter of 2017, is a result of the change in tax rates due to the enactment of the Tax Cuts and Jobs Act ("TCJA"). The increase in tax expense during the fourth quarter of 2017, as compared to first quarter 2017, was a result of the Company recognizing a $1.3 million tax expense as a result of the TCJA, of which the expense recorded is primarily attributable to the remeasurement of net deferred tax assets.

Asset Quality

Level One's asset quality remained solid during the first quarter of 2018. Total nonperforming assets, consisting of nonaccrual loans and other real estate owned (OREO), were $13.0 million, or 1.23% of total loans, at March 31, 2018, a decrease of $1.7 million from nonperforming assets of $14.7 million, or 1.42% of total loans at December 31, 2017, and a decrease of $3.4 million from nonperforming assets of $16.3 million, or 1.70% of total loans at March 31, 2017. Nonperforming assets as a percentage of total assets were 1.00% at March 31, 2018, compared to 1.13% at December 31, 2017, and 1.40% at March 31, 2017.





Nonaccrual loans decreased by $1.0 million, or 7.63%, to $13.0 million at March 31, 2018, compared to $14.0 million at December 31, 2017. In addition, we had $263 thousand in loans 90 days or more past due and still accruing at March 31, 2018, compared to $440 thousand at December 31, 2017.

Performing troubled debt restructured loans that were not included in nonaccrual loans at March 31, 2018 were $2.4 million, compared to $1.2 million in the preceding quarter. 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 charge offs in the first quarter of 2018 were $755 thousand, or 0.29% of average loans on an annualized basis, compared to $873 thousand, or 0.35% of average loans on an annualized basis for the preceding quarter and $48 thousand, or 0.02% of average loans on an annualized basis at March 31, 2017.

Level One's first quarter provision for loan losses was $554 thousand, compared to $956 thousand in the preceding quarter and $198 thousand in the first quarter of 2017. The allowance for loan losses was $11.5 million, or 1.09% of total loans at March 31, 2018, compared to $11.7 million, or 1.13% of total loans at December 31, 2017, and $11.2 million, or 1.17% of total loans at March 31, 2017. As of March 31, 2018, the allowance for loan losses as a percentage of nonperforming loans was 88.67%, compared to 83.38% at December 31, 2017, and 71.04% at March 31, 2017.

Capital

Total shareholders’ equity was $110.5 million at March 31, 2018, an increase of $2.6 million, or 2.37%, compared with $108.0 million at December 31, 2017 and increased $10.9 million, or 10.97%, from $99.6 million at March 31, 2017.

The tier 1 leverage, common equity tier 1, and total capital ratios were 8.15%, 9.47%, and 11.87%, respectively, at March 31, 2018, compared to 7.92%, 9.10%, and 11.55% at December 31, 2017 and 9.02%, 10.18%, and 11.28% at March 31, 2017, respectively.

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 $1.30 billion as of March 31, 2018. It operates twelve banking centers throughout Southeast Michigan and West Michigan. 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, 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
 
 
 
 
 
2018
 
2017
 
2017
(Dollars in thousands, except per share data)
1st Qtr
 
4th Qtr
 
1st Qtr
Earnings Summary
 
 
 
 
 
Interest income
$
14,774

 
$
14,378

 
$
13,447

Interest expense
2,647

 
2,374

 
1,703

Net interest income
12,127

 
12,004

 
11,744

Provision for loan losses
554

 
956

 
198

Noninterest income
1,372

 
1,394

 
1,380

Noninterest expense
9,135

 
9,193

 
8,677

Income before income taxes
3,810

 
3,250

 
4,249

Income tax provision
642

 
2,317

 
1,497

Net income
3,168

 
933

 
2,752

 
 
 
 
 
 
Per Share Data
 
 
 
 
 
Basic earnings per common share
$
0.48

 
$
0.15

 
$
0.43

Diluted earnings per common share
0.47

 
0.14

 
0.42

Book value per common share
16.79

 
16.78

 
15.59

Tangible book value per share (1)
15.27

 
15.21

 
13.99

Shares outstanding (in thousands)
6,585

 
6,435

 
6,387

Average basic common shares (in thousands)
6,539

 
6,403

 
6,368

Average diluted common shares (in thousands)
6,699

 
6,630

 
6,603

 
 
 
 
 
 
Selected Period End Balances
 
 
 
 
 
Total assets
$
1,300,629

 
$
1,301,291

 
$
1,169,759

Securities available-for-sale
160,349

 
150,969

 
108,497

Total loans
1,051,354

 
1,034,923

 
960,990

Total deposits
1,112,644

 
1,120,382

 
966,858

Total liabilities
1,190,106

 
1,193,331

 
1,070,160

Total shareholders' equity
110,523

 
107,960

 
99,599

Tangible shareholders' equity (1)
100,524

 
97,906

 
89,369

 
 
 
 
 
 
Performance and Capital Ratios
 
 
 
 
 
Return on average assets
1.00
%
 
0.29
%
 
0.96
%
Return on average equity
11.64

 
3.40

 
11.28

Net interest margin (fully taxable equivalent) (2)
4.03

 
4.01

 
4.34

Total shareholders' equity to total assets
8.50

 
8.30

 
8.51

Tangible equity to tangible assets (1)
7.79

 
7.58

 
7.71

Common equity tier 1 capital
9.47

 
9.10

 
8.92

Tier 1 leverage ratio
8.15

 
7.92

 
7.89

Tier 1 risk-based capital
9.47

 
9.10

 
8.92

Total risk-based capital
11.87

 
11.55

 
11.48

 
 
 
 
 
 
Asset Quality Ratios:
 
 
 
 
 
Net charge-offs to average loans
0.29
%
 
0.35
%
 
0.02
%
Nonperforming assets as a percentage of total assets
1.00

 
1.13

 
1.40

Nonperforming loans as a percent of total loans
1.23

 
1.36

 
1.65

Allowance for loan losses as a percentage of period-end loans
1.09

 
1.13

 
1.17

Allowance for loan losses as a percentage of nonperforming loans
88.67

 
83.38

 
71.04

Allowance for loan losses as a percentage of nonperforming loans, excluding allowance allocated to loans accounted for under ASC 310-30
80.36

 
75.68

 
65.70

(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 Q1 2018.






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, less goodwill.

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

Level One Bancorp, Inc.
 
 
 
 
 
Reconciliation of Non-GAAP Financial Measures
 
 
 
 
(Unaudited)
 
 
 
 
 
 
2018
 
2017
 
2017
(Dollars in thousands, except per share data)
1st Qtr
 
4th Qtr
 
1st Qtr
 
 
 
 
 
 
Total shareholders' equity
$
110,523

 
$
107,960

 
$
99,599

Less:
 
 
 
 
 
Goodwill
9,387

 
9,387

 
9,387

Core deposit intangibles
612

 
667

 
843

Tangible shareholders' equity
$
100,524

 
$
97,906

 
$
89,369

 
 
 
 
 
 
Shares outstanding (in thousands)
6,585

 
6,435

 
6,387

Tangible book value per share
$
15.27

 
$
15.21

 
$
13.99

 
 
 
 
 
 
Total assets
$
1,300,629

 
$
1,301,291

 
$
1,169,759

Less:
 
 
 
 
 
Goodwill
9,387

 
9,387

 
9,387

Core deposit intangibles
612

 
667

 
843

Tangible assets
$
1,290,630

 
$
1,291,237

 
$
1,159,529

 
 
 
 
 
 
Tangible equity to tangible assets
7.79
%
 
7.58
%
 
7.71
%















Level One Bancorp, Inc.
 
 
 
 
 
Consolidated Balance Sheets
(Unaudited)
 
 
 
 
 
 
March 31,
 
December 31,
 
March 31,
(Dollars in thousands, except share data)
2018
 
2017
 
2017
 
 
 
 
 
 
Assets
 
 
 
 
 
Cash and cash equivalents
$
39,882

 
$
63,661

 
$
52,895

Securities available-for-sale
160,349

 
150,969

 
108,497

Federal Home Loan Bank stock
8,303

 
8,303

 
8,303

Mortgage loans held for sale, at fair value
1,871

 
4,548

 
1,346

Loans:
 
 
 
 
 
Originated loans
946,179

 
920,895

 
818,101

Acquired loans
105,175

 
114,028

 
142,889

Total loans
1,051,354

 
1,034,923

 
960,990

Less: Allowance for loan losses
(11,506)

 
(11,713)

 
(11,239)

Net loans
1,039,848

 
1,023,210

 
949,751

Premises and equipment, net
13,282

 
13,435

 
15,568

Goodwill
9,387

 
9,387

 
9,387

Other intangible assets, net
612

 
667

 
843

Bank-owned life insurance
11,622

 
11,542

 
11,294

Income tax benefit
3,026

 
3,102

 
3,836

Other assets
12,447

 
12,467

 
8,039

Total assets
$
1,300,629

 
$
1,301,291

 
$
1,169,759

Liabilities
 
 
 
 
 
Deposits:
 
 
 
 
 
Noninterest-bearing demand deposits
$
298,917

 
$
324,923

 
$
271,216

Interest-bearing demand deposits
68,479

 
62,644

 
56,981

Money market and savings deposits
278,042

 
289,363

 
294,730

Time deposits
467,206

 
443,452

 
343,931

Total deposits
1,112,644

 
1,120,382

 
966,858

Borrowings
52,783

 
47,833

 
70,861

Subordinated notes
14,853

 
14,844

 
24,300

Other liabilities
9,826

 
10,272

 
8,141

Total liabilities
1,190,106

 
1,193,331

 
1,070,160

Shareholders' equity
 
 
 
 
 
Common stock:
 
 
 
 
 
Authorized - 20,000,000 shares at 3/31/2018, 12/31/2017 and 3/31/2017
 
 
 
 
 
Issued and outstanding - 6,584,676 shares at 3/31/2018, 6,435,461 shares at 12/31/2017 and 6,387,209 shares at 3/31/2017
60,886

 
59,511

 
58,503

Retained earnings
52,568

 
49,232

 
42,143

Accumulated other comprehensive loss, net of tax
(2,931)

 
(783)

 
(1,047)

Total shareholders' equity
110,523

 
107,960

 
99,599

Total liabilities and shareholders' equity
$
1,300,629

 
$
1,301,291

 
$
1,169,759













Level One Bancorp, Inc.
 
 
 
Consolidated Statements of Income
 
 
 
(Unaudited)
 
 
 
 
Three months ended March 31,
(In thousands, except per share data)
2018
 
2017
Interest income
 
 
 
Originated loans, including fees
$
11,178

 
$
9,354

Acquired loans, including fees
2,426

 
3,393

Securities:
 
 
 
Taxable
574

 
414

Tax-exempt
351

 
171

Federal funds sold and other
245

 
115

Total interest income
14,774

 
13,447

Interest Expense
 
 
 
Deposits
2,178

 
1,277

Borrowed funds
219

 
176

Subordinated notes
250

 
250

Total interest expense
2,647

 
1,703

Net interest income
12,127

 
11,744

Provision for loan losses
554

 
198

Net interest income after provision for loan losses
11,573

 
11,546

Noninterest income
 
 
 
Service charges on deposits
642

 
580

Net gain on sale of residential mortgage loans
236

 
299

Net gain on sale of commercial loans
-

 
146

Other charges and fees
494

 
355

Total noninterest income
1,372

 
1,380

Noninterest expense
 
 
 
Salary and employee benefits
5,956

 
5,271

Occupancy and equipment expense
1,046

 
1,012

Professional service fees
266

 
540

Marketing expense
142

 
247

Printing and supplies expense
104

 
113

Data processing expense
436

 
413

Other expense
1,185

 
1,081

Total noninterest expense
9,135

 
8,677

Income before income taxes
3,810

 
4,249

Income tax provision
642

 
1,497

Net income
$
3,168

 
$
2,752

Earnings per common share:
 
 
 
Basic
$
0.48

 
$
0.43

Diluted
$
0.47

 
$
0.42

Average common shares outstanding - basic
6,539

 
6,368

Average common shares outstanding - diluted
6,699

 
6,603





Level One Bancorp, Inc.
 
 
 
 
 
 
 
 
 
 
 
Net Interest Income and Net Interest Margin
 
 
 
 
 
 
 
 
 
(Unaudited)
For the three months ended,
 
March 31, 2018
 
December 31, 2017
 
March 31, 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)
$
1,037,045

$
13,604

5.32
%
 
$
1,010,229

$
13,337

5.24
%
 
$
961,479

$
12,747

5.38
%
Investment securities (4):
 
 
 
 
 
 
 
 
 
 
 
Taxable
102,135

574

2.28

 
98,045

508

2.06

 
78,464

414

2.14

Tax-exempt
54,996

351

3.16

 
50,568

314

3.58

 
28,705

171

3.53

Interest earning cash balances
27,090

106

1.59

 
36,953

125

1.34

 
27,439

59

0.87

Federal Home Loan Bank Stock
8,303

139

6.78

 
8,303

94

4.49

 
7,738

56

2.95

Total interest-earning assets
1,229,569

14,774

4.90

 
1,204,098

14,378

4.74

 
1,103,825

13,447

4.94

Non-earning assets:
 
 
 
 
 
 
 
 
 
 
 
   Cash and due from banks
18,531

 
 
 
17,885

 
 
 
18,336

 
 
   Premises and equipment
13,362

 
 
 
13,620

 
 
 
15,631

 
 
   Goodwill
9,387

 
 
 
9,387

 
 
 
9,387

 
 
   Other intangible assets, net
644

 
 
 
700

 
 
 
878

 
 
   Company-owned life insurance
11,570

 
 
 
11,489

 
 
 
11,241

 
 
   Allowance for loan losses
(11,822
)
 
 
 
(11,577
)
 
 
 
(11,168
)
 
 
   Other non-earning assets
12,195

 
 
 
13,669

 
 
 
10,347

 
 
             Total assets
$
1,283,436

 
 
 
$
1,259,271

 
 
 
$
1,158,477

 
 
Interest-bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
     Interest-bearing demand deposits
$
63,501

$
51

0.33
%
 
$
61,817

$
50

0.32
%
 
$
57,464

$
39

0.27
%
     Money market and savings deposits
273,699

548

0.81

 
244,792

421

0.68

 
287,154

374

0.53

     Time deposits
456,555

1,579

1.40

 
441,090

1,465

1.32

 
317,690

864

1.10

     Subordinated Debt
14,844

250

6.83

 
14,835

255

6.85

 
14,791

250

6.86

     Borrowings
56,819

219

1.56

 
56,550

183

1.28

 
105,446

176

0.68

             Total interest-bearing liabilities
865,418

2,647

1.24

 
819,084

2,374

1.15

 
782,545

1,703

0.88

Noninterest-bearing liabilities and shareholders' equity:
 
 
 
 
 
 
 
 
0

 
 
   Noninterest bearing demand deposits
298,681

 
 
 
321,426

 
 
 
268,286

 
 
   Other liabilities
8,931

 
 
 
10,004

 
 
 
8,716

 
 
   Shareholders' equity
110,406

 
 
 
108,757

 
 
 
98,930

 
 
             Total liabilities and shareholders' equity
$
1,283,436

 
 
 
$
1,259,271

 
 
 
$
1,158,477

 
 
Net interest income
 
$
12,127

 
 
 
$
12,004

 
 
 
$
11,744

 
Interest spread
 
 
3.66

 
 
 
3.59

 
 
 
4.06

Net interest margin (5)
 
 
4.00

 
 
 
3.96

 
 
 
4.31

Tax equivalent effect
 
 
0.03

 
 
 
0.05

 
 
 
0.03

Net interest margin on a fully tax equivalent basis
 
 
4.03

 
 
 
4.01

 
 
 
4.34


(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 $78 thousand, $143 thousand and $78 thousand on tax-exempt securities for the three months ended March 31, 2018, December 31, 2017 and March 31, 2017, respectively, using the statutory tax rate of 21% for the 2018 period and 35% for the 2017 periods.
(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.





Level One Bancorp, Inc.
Loan Composition
(Unaudited)
 
 
 
 
 
 
March 31,
 
December 31,
 
March 31,
(Dollars in thousands)
2018
 
2017
 
2017
Commercial real estate
 
 
 
 
 
Non-owner occupied
$
360,014

 
$
343,420

 
$
330,207

Owner-occupied
172,608

 
168,342

 
165,982

Total commercial real estate
532,622

 
511,762

 
495,979

Commercial and industrial
371,464

 
377,686

 
347,708

Residential real estate
146,436

 
144,439

 
116,120

Consumer
832

 
1,036

 
1,183

Total loans
$
1,051,354

 
$
1,034,923

 
$
960,990