EX-99.1 2 exhibit991-q42021earningsr.htm EX-99.1 2021 Q4 EARNINGS RELEASE Document


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For Immediate Release

Level One Bancorp, Inc. reports fourth quarter 2021 net income of $7.1 million,
representing $0.85 diluted earnings per common share

Farmington Hills, MI – January 28, 2022 – 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
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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.

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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
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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.

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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: On January 19, 2022, Level One’s Board of Directors declared a quarterly cash dividend of $46.88 per share on its 7.50% Non-Cumulative Perpetual Preferred Stock, Series B. Holders of depositary shares will receive $0.4688 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
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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.

Media Contact:Investor Relations Contact:
Nicole RansomPeter Root
(248) 538-2183(248) 538-2186
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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)20212021202120212020
Earnings Summary
Interest income$21,040 $22,322 $21,737 $21,551 $22,181 
Interest expense1,729 1,807 2,121 2,394 3,075 
Net interest income19,311 20,515 19,616 19,157 19,106 
Provision expense (recovery) for loan losses(341)(1,189)540 265 1,538 
Noninterest income4,727 6,041 4,326 7,278 8,110 
Noninterest expense16,123 15,989 14,588 15,139 15,461 
Income before income taxes8,256 11,756 8,814 11,031 10,217 
Income tax provision1,181 2,291 1,835 2,072 1,844 
Net income$7,075 $9,465 $6,979 $8,959 $8,373 
Preferred stock dividends469 468 469 469 479 
Net income available to common shareholders6,606 8,997 6,510 8,490 7,894 
Net income allocated to participating securities100 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 share0.85 1.16 0.84 1.10 1.02 
Book value per common share28.02 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-sale397,551 389,528 376,453 346,266 302,732 
Total loans1,652,771 1,719,717 1,775,243 1,861,691 1,723,537 
Total deposits2,040,082 2,066,992 2,031,808 2,093,965 1,963,312 
Total liabilities2,275,778 2,309,949 2,281,114 2,355,539 2,227,655 
Total shareholders' equity240,091 233,934 225,409 217,187 215,327 
Total common shareholders' equity216,719 210,562 202,037 193,815 191,955 
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 ratio6.96 5.08 7.02 4.50 4.90 
Total shareholders' equity to total assets9.54 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 assets10.37 9.82 9.66 9.63 9.30 
Tier 1 capital to risk-weighted assets11.75 11.19 11.09 11.11 10.80 
Total capital to risk-weighted assets14.76 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 assets0.46 0.48 0.55 0.60 0.77 
Nonaccrual loans as a percent of total loans0.68 0.71 0.77 0.83 1.09 
Allowance for loan losses as a percentage of total loans1.30 1.26 1.30 1.21 1.29 
Allowance for loan losses as a percentage of nonaccrual loans189.79 179.11 168.64 146.95 118.50 
Allowance for loan losses as a percentage of nonaccrual loans, excluding allowance allocated to loans accounted for under ASC 310-30184.58 173.58 163.76 142.62 114.95 
(1) See section entitled "GAAP Reconciliation of Non-GAAP Financial Measures" below.
(2) Presented on a tax equivalent basis using a 21% tax rate.
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Consolidated Balance Sheets
As of
December 31,September 30,December 31,
(Dollars in thousands)202120212020
Assets(Unaudited)(Unaudited)
Cash and cash equivalents$330,146 $293,824 $264,071 
Securities available-for-sale397,551 389,528 302,732 
Other investments14,398 14,398 14,398 
Mortgage loans held for sale, at fair value12,902 15,351 43,482 
Loans:
Originated loans1,486,969 1,537,145 1,498,458 
Acquired loans165,802 182,572 225,079 
Total loans1,652,771 1,719,717 1,723,537 
Less: Allowance for loan losses(21,425)(21,731)(22,297)
Net loans1,631,346 1,697,986 1,701,240 
Premises and equipment, net14,903 15,170 15,834 
Goodwill35,554 35,554 35,554 
Mortgage servicing rights, net5,604 5,051 3,361 
Other intangible assets, net2,528 2,695 3,196 
Other real estate owned201 — — 
Bank-owned life insurance29,960 29,774 18,200 
Income tax benefit4,829 4,041 3,686 
Interest receivable and other assets35,947 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 deposits240,781 179,814 127,920 
Money market and savings deposits576,718 631,551 619,900 
Time deposits425,801 463,748 596,815 
Total deposits2,040,082 2,066,992 1,963,312 
Borrowings178,682 182,058 185,684 
Subordinated notes29,694 29,668 44,592 
Other liabilities27,320 31,231 34,067 
Total liabilities2,275,778 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, 202023,372 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, 202088,851 86,926 87,615 
Retained earnings124,923 118,781 96,158 
Accumulated other comprehensive income, net of tax2,945 4,855 8,182 
Total shareholders' equity240,091 233,934 215,327 
Total liabilities and shareholders' equity$2,515,869 $2,543,883 $2,442,982 

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Consolidated Statements of Income
Three months endedTwelve months ended
December 31,September 30,December 31,December 31,December 31,
(In thousands, except per share data)20212021202020212020
Interest income(Unaudited)(Unaudited)(Unaudited)(Unaudited)
Originated loans, including fees$16,770 $17,796 $17,439 $68,555 $62,069 
Acquired loans, including fees2,277 2,651 3,234 10,809 14,421 
Securities:
Taxable1,141 1,054 747 4,036 2,677 
Tax-exempt630 630 592 2,510 2,486 
Federal funds sold and other222 191 169 740 986 
Total interest income21,040 22,322 22,181 86,650 82,639 
Interest Expense 
Deposits870 965 1,954 4,313 10,993 
Borrowed funds466 468 487 1,875 2,353 
Subordinated notes393 374 634 1,863 2,537 
Total interest expense1,729 1,807 3,075 8,051 15,883 
Net interest income19,311 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 losses19,652 21,704 17,568 79,324 54,884 
Noninterest income 
Service charges on deposits875 859 648 3,311 2,446 
Net gain on sales of securities1 — — 21 1,862 
Mortgage banking activities3,105 4,216 6,810 15,843 22,190 
Other charges and fees746 966 652 3,197 3,216 
Total noninterest income4,727 6,041 8,110 22,372 29,714 
Noninterest expense 
Salary and employee benefits9,528 10,551 10,214 39,353 38,304 
Occupancy and equipment expense1,660 1,680 1,776 6,631 6,549 
Professional service fees1,278 847 794 3,542 2,935 
Acquisition and due diligence fees— — — — 1,654 
FDIC premium expense249 244 397 1,027 1,119
Marketing expense446 428 247 1,288 956 
Loan processing expense228 231 245 983935 
Data processing expense916 928 859 4,125 3,460 
Core deposit premium amortization167 167 192 668768 
Other expense1,651 913 737 4,2223,552 
Total noninterest expense16,123 15,989 15,461 61,83960,232 
Income before income taxes8,256 11,756 10,217 39,85724,366 
Income tax provision1,181 2,291 1,844 7,379 3,953 
Net income7,075 9,465 8,373 32,478 20,413 
Preferred stock dividends469 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—basic7,565 7,519 7,642 7,536 7,627 
Weighted average common shares outstanding—diluted7,706 7,638 7,695 7,650 7,686 

9

Net Interest Income and Net Interest Margin
(Unaudited)For the three months endedFor the twelve months ended
December 31,September 30,December 31,December 31,December 31,
(Dollars in thousands)20212021202020212020
Average Balance Sheets:
Gross loans(1)
$1,696,073 $1,763,214 $1,832,912 $1,791,671 $1,730,470 
Investment securities: (2)
Taxable289,146 265,885 182,522 254,913 138,837 
Tax-exempt104,945 104,063 92,792 103,609 96,020 
Interest earning cash balances297,926 221,261 213,502 218,931 194,545 
Other investments14,398 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 assets146,046 151,077 138,989 145,990 135,229 
Total assets$2,548,534 $2,519,898 $2,475,115 $2,529,512 $2,308,004 
Interest-bearing demand deposits215,685 156,977 123,201 162,405 115,249 
Money market and savings deposits586,464 624,190 611,162 613,883 496,827 
Time deposits455,439 489,261 601,900 519,447 573,823 
Borrowings182,080 181,911 187,399 183,503 279,949 
Subordinated notes29,677 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 deposits811,394 774,926 659,333 754,376 574,537 
Other liabilities30,404 31,012 32,990 31,466 30,787 
Shareholders' equity237,391 231,964 214,561 228,056 192,342 
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 loans4.46 %4.60 %4.49 %4.43 %4.42 %
Investment securities:
Taxable1.57 %1.57 %1.63 %1.58 %1.93 %
Tax-exempt2.97 %2.99 %3.14 %3.02 %3.19 %
Interest earning cash balances0.15 %0.15 %0.11 %0.13 %0.24 %
Other investments3.00 %2.95 %2.98 %3.13 %4.07 %
Total interest earning assets3.50 %3.76 %3.80 %3.66 %3.83 %
Interest-bearing liabilities
Interest-bearing demand deposits0.14 %0.14 %0.19 %0.14 %0.28 %
Money market and savings deposits0.16 %0.17 %0.35 %0.19 %0.56 %
Time deposits0.49 %0.53 %0.89 %0.56 %1.38 %
Borrowings1.02 %1.02 %1.03 %1.02 %0.84 %
Subordinated notes5.25 %5.00 %5.66 %5.12 %5.70 %
Total interest-bearing liabilities0.47 %0.48 %0.78 %0.53 %1.05 %
Interest Spread3.03 %3.28 %3.02 %3.13 %2.78 %
Net interest margin(4)
3.19 %3.44 %3.25 %3.30 %3.07 %
Tax equivalent effect0.03 %0.03 %0.02 %0.03 %0.03 %
Net interest margin on a fully tax equivalent basis3.22 %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.

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Loan Composition
As of
December 31,September 30,June 30,March 31,December 31,
(Dollars in thousands)20212021202120212020
Commercial real estate:(Unaudited)(Unaudited)(Unaudited)(Unaudited)
Non-owner occupied$467,364 $479,633 $477,715 $449,690 $445,810 
Owner-occupied283,400 295,228 301,615 300,175 275,022 
Total commercial real estate750,764 774,861 779,330 749,865 720,832 
Commercial and industrial460,530 540,546 642,606 794,096 685,504 
Residential real estate440,640 403,517 352,513 316,089 315,476 
Consumer837 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)20212021202120212020
Nonaccrual loans(Unaudited)(Unaudited)(Unaudited)(Unaudited)
Commercial real estate$4,246 $3,768 $4,536 $4,542 $7,320 
Commercial and industrial4,208 4,746 5,247 6,822 7,490 
Residential real estate2,819 3,610 3,931 3,987 3,991 
Consumer16 9 10 13 15 
Total nonaccrual loans11,289 12,133 13,724 15,364 18,816 
Other real estate owned201 — — — — 
Total nonperforming assets11,490 12,133 13,724 15,364 18,816 
Performing troubled debt restructurings
Commercial and industrial334 336 336 335 546 
Residential real estate365 426 429 430 432 
Total performing troubled debt restructurings699 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 

















11

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)20212021202120212020
(Unaudited)(Unaudited)(Unaudited)(Unaudited)
Total shareholders' equity$240,091 $233,934 $225,409 $217,187 $215,327 
Less:
Preferred stock23,372 23,372 23,372 23,372 23,372 
Total common shareholders' equity216,719 210,562 202,037 193,815 191,955 
Less:
Goodwill35,554 35,554 35,554 35,554 35,554 
Mortgage servicing rights, net5,604 5,051 4,599 4,346 3,361 
Other intangible assets, net2,528 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:
Goodwill35,554 35,554 35,554 35,554 35,554 
Mortgage servicing rights, net5,604 5,051 4,599 4,346 3,361 
Other intangible assets, net2,528 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 assets7.00 %6.69 %6.46 %5.96 %6.24 %



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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)20212021202120212020
(Unaudited)(Unaudited)(Unaudited)(Unaudited)
Total loans$1,652,771 $1,719,717 $1,775,243 $1,861,691 $1,723,537 
Less:
PPP loans76,505 147,645 259,303 405,770 290,135 
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 loans1.30 %1.26 %1.30 %1.21 %1.29 %
Allowance for loan loss as a percentage of total loans, excluding PPP loans1.36 %1.38 %1.53 %1.55 %1.56 %
13