EX-99.1 2 ex_432588.htm EXHIBIT 99.1

ex_432588.htm

Exhibit 99.1

Mercantile Bank Corporation Announces Robust Third Quarter 2022 Results

Significant increase in net interest income, solid loan growth, and ongoing strength in asset quality metrics highlight quarter

GRAND RAPIDS, Mich., October 18, 2022 – Mercantile Bank Corporation (NASDAQ: MBWM) ("Mercantile") reported net income of $16.0 million, or $1.01 per diluted share, for the third quarter of 2022, compared with net income of $15.1 million, or $0.95 per diluted share, for the respective prior-year period. Net income during the first nine months of 2022 totaled $39.3 million, or $2.48 per diluted share, compared to $47.4 million, or $2.95 per diluted share, during the first nine months of 2021.

“We are very pleased with our third quarter operating results,” said Robert B. Kaminski, Jr., President and Chief Executive Officer of Mercantile. “Substantial growth in net interest income, primarily reflecting an improved net interest margin, continued loan growth, increases in certain key fee income categories and a manageable overhead cost structure, have more than offset a significantly reduced level of mortgage banking income stemming from unfavorable market conditions. Our continuing efforts to meet the credit needs of existing clients and attract new loan relationships, while adhering to our underwriting standards, have been successful as evidenced by the significant growth in commercial loans and residential mortgage loans and persistent strength in asset quality metrics. We take pride in our role as a trusted consultant and assisting our customers in dealing with the challenges posed by the current economic environment and associated operating conditions, including elevated inflation levels, supply chain disruptions, increasing interest rates, and staffing issues.”

Third quarter highlights include:

● Significant increase in net interest income reflecting net interest margin expansion and loan growth

● Notable increases in several key fee income categories

● Substantial commercial loan and residential mortgage loan growth

● Sustained strength in commercial loan pipeline

● Ongoing low level of nonperforming assets, no loan charge-offs, and no loans placed on nonaccrual status

● Strong capital position

Operating Results

Total revenue, which consists of net interest income and noninterest income, was $49.6 million during the third quarter of 2022, compared to $46.7 million during the prior-year third quarter. Net interest income during the current-year third quarter was $42.4 million, up $11.3 million, or approximately 36 percent, from $31.1 million during the respective 2021 period, reflecting continued earning asset growth and net interest margin expansion. Noninterest income totaled $7.3 million during the third quarter of 2022, down from $15.6 million during the third quarter of 2021 mainly due to decreased mortgage banking income and interest rate swap income, which more than offset noteworthy increases in several key fee income categories.

The net interest margin was 3.56 percent in the third quarter of 2022, up from 2.88 percent in the second quarter of 2022 and 2.71 percent in the prior-year third quarter. The yield on average earning assets was 4.04 percent during the current-year third quarter, up from 3.32 percent during the second quarter of 2022 and 3.13 percent during the third quarter of 2021. The increased yield on average earning assets primarily resulted from a higher yield on loans, a change in earning asset mix, comprised of a decrease in lower-yielding interest-earning deposits and an increase in higher-yielding loans as a percentage of earning assets, and an increased yield on other interest-earning assets. The yield on loans was 4.56 percent during the third quarter of 2022, up from 3.97 percent during the second quarter of 2022 and 4.07 percent during the prior-year third quarter mainly due to higher interest rates on variable-rate commercial loans stemming from the Federal Open Market Committee (“FOMC”) significantly raising the targeted federal funds rate in an effort to curb elevated inflation levels. The FOMC increased the targeted federal funds rate by 300 basis points during the period of March 2022 through September 2022. The increase in loan yield during the third quarter of 2022 compared to the respective 2021 period was achieved despite a significant reduction in Paycheck Protection Program net loan fee accretion. As of September 30, 2022, approximately 64 percent of the commercial loan portfolio consisted of variable-rate loans.

The cost of funds was 0.48 percent in the third quarter of 2022, up from 0.42 percent in the prior-year third quarter primarily due to higher costs of trust preferred securities and deposits, reflecting the impact of the rising interest rate environment, and the issuance of $90.0 million in subordinated notes in December of 2021 and January of 2022. Subordinated note issuance proceeds of $85.0 million were injected into Mercantile Bank as an increase to equity capital to support anticipated loan growth. The cost of funds during the current-year third quarter increased slightly from the second quarter of 2022.

The persistence of a significant volume of excess on-balance sheet liquidity, which initially surfaced in the second quarter of 2020 as a result of the COVID-19 environment, negatively impacted the yield on average earning assets by 10 basis points and 51 basis points during the third quarters of 2022 and 2021, respectively, and the net interest margin by 7 basis points and 44 basis points during the respective periods. The excess funds, consisting almost entirely of low-yielding deposits with the Federal Reserve Bank of Chicago, are mainly a product of local deposit growth and Paycheck Protection Program loan forgiveness activities.

Mercantile recorded a provision for credit losses of $2.9 million during the third quarter of 2022, compared to a provision expense of $1.9 million during the third quarter of 2021. The provision expense recorded during the current-year third quarter mainly reflected allocations necessitated by commercial loan and residential mortgage loan growth, an increased specific reserve for a distressed commercial loan relationship, and a decline in forecasted economic conditions. The provision expense recorded during the prior-year third quarter primarily reflected allocations associated with commercial loan growth. Mercantile’s adoption of Accounting Standards Update No. 2016-13, Measurement of Credit Losses on Financial Instruments, on January 1, 2022, resulted in a $0.4 million one-time reduction to the allowance for credit losses.

Noninterest income during the third quarter of 2022 was $7.3 million, compared to $15.6 million during the respective 2021 period. The lower level of noninterest income almost entirely stemmed from decreased mortgage banking income and interest rate swap income, which more than offset growth in several key fee income revenue streams, including service charges on accounts, credit and debit card income, and payroll servicing fees. Ongoing strength in purchase residential mortgage loan originations during the third quarter of 2022 partially mitigated the negative impacts of higher interest rates, lower refinance activity, a reduced sold percentage, and a decreased gain on sale rate on mortgage banking income during the period when compared to the prior-year third quarter. The residential mortgage loan sold percentage declined from approximately 69 percent during the third quarter of 2021 to about 36 percent during the current-year third quarter, in large part reflecting customers’ preferences for adjustable-rate loans in the current interest rate environment and construction loans representing a higher percentage of overall mortgage loan production.

Noninterest expense totaled $26.8 million during the third quarter of 2022, compared to $26.2 million during the prior-year third quarter. The slight growth in noninterest expense mainly resulted from increased salary costs, reflecting a larger bonus accrual and annual employee merit pay increases, which more than offset higher residential mortgage loan deferred salary costs as well as decreased residential mortgage lender commissions and associated incentives.

Mr. Kaminski commented, “Our net interest income increased substantially during the third quarter and first nine months of 2022 as a result of net interest margin expansion and loan growth, and we believe our balance sheet structure will provide for additional growth in net interest income in future periods as the FOMC is expected to continue to raise interest rates in an effort to curb inflation. We are pleased that the increase in net interest income, coupled with loan growth and increases in several key fee income categories, have outweighed the significant reduction in mortgage banking income resulting from various headwinds, including higher residential mortgage loan interest rates and the associated lower level of refinance activity. We remain focused on growing in a disciplined manner and are continually examining our operating costs to help identify further opportunities to augment efficiency.”

Balance Sheet

As of September 30, 2022, total assets were $5.02 billion, down $241 million from December 31, 2021. Total loans increased $427 million during the first nine months of 2022, reflecting growth in core commercial loans of $232 million and residential mortgage loans of $233 million, which more than offset a reduction in Paycheck Protection Program loans of $37.5 million. Core commercial loans and residential mortgage loans grew $73.6 million and $81.8 million, respectively, during the third quarter of 2022. The increases in core commercial loans during the third quarter and first nine months of 2022 equated to annualized growth rates of nearly 10 percent and 11 percent, respectively. As of September 30, 2022, unfunded commitments on commercial construction and development loans, which are expected to be funded over the next 12 to 18 months, and residential construction loans, which are anticipated to be largely funded over the next 12 months, totaled $169 million and $84.0 million, respectively. Interest-earning deposits decreased $695 million during the first nine months of 2022 as excess overnight funds were used to fund loan growth and wholesale fund maturities, as well as securities purchases. In addition, a customer’s withdrawal of a majority of funds that were deposited in late 2021 following the sale of a business, as well as other fund withdrawals by customers to make routine tax payments, contributed to the reduced level of interest-earning deposits.

Ray Reitsma, President of Mercantile Bank, noted, “Our ongoing efforts to expand the loan portfolio were once again successful and provided for solid growth in commercial loans and residential mortgage loans during the third quarter of 2022. The growth in commercial loans during the third quarter and first nine months of 2022 occurred in spite of payoffs of certain larger relationships aggregating approximately $34 million and $158 million during the respective timeframes. The payoffs stemmed from customers’ sales of businesses and assets and the refinancing of debt with U.S. government agencies, with about $27 million of the payoffs during the year-to-date period being related to customers that were enduring financial difficulties. Increases in commercial and industrial loans represented approximately one-third and one-half of the growth in commercial loans during the third quarter and first nine months of the current year, respectively, affording our sales team additional opportunities to market treasury management products and enhance commercial banking-related income. We are pleased with the level of residential mortgage loan production, especially when considering the ongoing headwinds that have limited market opportunities. We believe the continuing strength of our commercial loan pipeline and solid levels of credit availability on commercial construction and development loans and residential mortgage construction loans provide momentum as we conclude 2022 and head into 2023.”

Commercial and industrial loans and owner-occupied commercial real estate loans together represented approximately 59 percent of total commercial loans as of September 30, 2022, a level that has remained relatively consistent with prior periods and in line with our expectations.

Total deposits at September 30, 2022, were $3.85 billion, down $237 million, or 5.8 percent, from December 31, 2021. Local deposits and brokered deposits decreased $213 million and $23.9 million, respectively, during the first nine months of 2022. The decline in local deposits primarily reflected the previously mentioned customer withdrawal of funds and customers’ normal tax payment levels. Wholesale funds were $338 million, or approximately 8 percent of total funds, at September 30, 2022, compared to $398 million, or approximately 9 percent of total funds, at December 31, 2021.

Asset Quality

Nonperforming assets totaled $1.4 million, $2.5 million, and $2.9 million at September 30, 2022, December 31, 2021, and September 30, 2021, respectively, with each dollar amount representing less than 0.1 percent of total assets as of the respective dates. The level of past due loans remains nominal. During the third quarter of 2022, no loan charge-offs were recorded, while recoveries of prior period loan charge-offs were $0.2 million, providing for net loan recoveries of $0.2 million, or an annualized 0.03 percent of average total loans.

Mr. Reitsma commented, “Our unwavering focus on sound loan underwriting has enabled us to once again report strong asset quality metrics. As our borrowers continue to operate in an economic environment full of challenges, including elevated levels of inflation, unfavorable labor market conditions, and ongoing supply chain issues, we remain committed to diligently monitoring our loan portfolio for any signals of deterioration and quickly implementing corrective measures to alleviate the impact of any identified credit weakness on our overall financial condition.”

Capital Position

Shareholders’ equity totaled $416 million as of September 30, 2022, down from $457 million at year-end 2021 mainly due to a $68.7 million increase in the after-tax net unrealized holding loss on securities available for sale resulting from higher market interest rates. Mercantile Bank’s capital position remains “well-capitalized” with a total risk-based capital ratio of 13.4 percent as of September 30, 2022, compared to 13.6 percent at December 31, 2021. At September 30, 2022, Mercantile Bank had approximately $150 million in excess of the 10.0 percent minimum regulatory threshold required to be considered a “well-capitalized” institution. Mercantile reported 15,866,243 total shares outstanding at September 30, 2022.

Mr. Kaminski concluded, “Our sustained financial strength has allowed us to continue our regular cash dividend program and provide shareholders with competitive returns on their investments while supporting the ongoing growth in our loan portfolio. In light of our strong overall financial condition, including solid capital levels, outstanding asset quality metrics, robust operating performance, including the possibility of augmenting net interest income from probable further FOMC rate hikes, and considerable loan origination opportunities, we believe we are well positioned to withstand the negative impacts associated with a likely weakened economic environment. We remain focused on being a consistent and profitable performer.”

Investor Presentation

Mercantile has prepared presentation materials that management intends to use during its previously announced third quarter 2022 conference call on Tuesday, October 18, 2022, at 10:00 a.m. Eastern Time, and from time to time thereafter in presentations about the Company’s operations and performance. These materials have been furnished to the U.S. Securities and Exchange Commission concurrently with this press release, and are also available on Mercantile’s website at www.mercbank.com.

About Mercantile Bank Corporation

Based in Grand Rapids, Michigan, Mercantile Bank Corporation is the bank holding company for Mercantile Bank. Mercantile provides banking services to businesses, individuals and governmental units, and differentiates itself on the basis of service quality and the expertise of its banking staff. Mercantile has assets of approximately $5.0 billion and operates 46 banking offices. Mercantile Bank Corporation’s common stock is listed on the NASDAQ Global Select Market under the symbol “MBWM.” For more information about Mercantile, visit www.mercbank.com, and follow us on Facebook, Instagram and Twitter @MercBank and on LinkedIn at www.linkedin.com/company/merc-bank.

Forward-Looking Statements

This news release contains statements or information that may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: “anticipate,” “intend,” “plan,” “goal,” “seek,” “believe,” “project,” “estimate,” “expect,” “strategy,” “future,” “likely,” “may,” “should,” “will,” and similar references to future periods. Any such statements are based on current expectations that involve a number of risks and uncertainties. Actual results may differ materially from the results expressed in forward-looking statements. Factors that might cause such a difference include changes in interest rates and interest rate relationships; increasing rates of inflation and slower growth rates; significant declines in the value of commercial real estate; market volatility; demand for products and services; the degree of competition by traditional and nontraditional financial services companies; changes in banking regulation or actions by bank regulators; changes in tax laws; changes in prices, levies, and assessments; the impact of technological advances; potential cyber-attacks, information security breaches and other criminal activities; litigation liabilities; governmental and regulatory policy changes; the outcomes of existing or future contingencies; trends in customer behavior as well as their ability to repay loans; changes in local real estate values; damage to our reputation resulting from adverse publicity, regulatory actions, litigation, operational failures, and the failure to meet client expectations and other facts; changes in the method of determining Libor and the phase-out of Libor; changes in the national and local economies, including the ongoing disruption to financial markets and other economic activity caused by the COVID-19 pandemic and unstable political and economic environments; and other factors, including those expressed as risk factors, disclosed from time to time in filings made by Mercantile with the Securities and Exchange Commission. Mercantile undertakes no obligation to update or clarify forward-looking statements, whether as a result of new information, future events or otherwise. Investors are cautioned not to place undue reliance on any forward-looking statements contained herein.

FOR FURTHER INFORMATION:

	Robert B. Kaminski, Jr.		Charles Christmas
	President and CEO		Executive Vice President and CFO
	616-726-1502		616-726-1202
	rkaminski@mercbank.com		cchristmas@mercbank.com

MERCANTILE BANK CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

		SEPTEMBER 30,				DECEMBER 31,				SEPTEMBER 30,
		2022				2021				2021
ASSETS
Cash and due from banks		$	63,105,000			$	59,405,000			$	83,804,000
Interest-earning deposits			220,909,000				915,755,000				741,557,000
Total cash and cash equivalents			284,014,000				975,160,000				825,361,000
Securities available for sale			582,999,000				592,743,000				559,564,000
Federal Home Loan Bank stock			17,721,000				18,002,000				18,002,000
Mortgage loans held for sale			14,411,000				16,117,000				47,247,000
Loans			3,880,958,000				3,453,459,000				3,313,709,000
Allowance for credit losses			(39,120,000	)			(35,363,000	)			(37,423,000	)
Loans, net			3,841,838,000				3,418,096,000				3,276,286,000
Premises and equipment, net			52,117,000				57,298,000				57,465,000
Bank owned life insurance			75,880,000				75,242,000				72,963,000
Goodwill			49,473,000				49,473,000				49,473,000
Core deposit intangible, net			741,000				1,351,000				1,589,000
Other assets			97,740,000				54,267,000				56,462,000
Total assets		$	5,016,934,000			$	5,257,749,000			$	4,964,412,000
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing		$	1,716,904,000			$	1,677,952,000			$	1,647,380,000
Interest-bearing			2,129,181,000				2,405,241,000				2,221,611,000
Total deposits			3,846,085,000				4,083,193,000				3,868,991,000
Securities sold under agreements to repurchase			198,605,000				197,463,000				175,850,000
Federal Home Loan Bank advances			338,263,000				374,000,000				394,000,000
Subordinated debentures			48,787,000				48,244,000				48,074,000
Subordinated notes			88,542,000				73,646,000				0
Accrued interest and other liabilities			80,391,000				24,644,000				25,219,000
Total liabilities			4,600,673,000				4,801,190,000				4,512,134,000
SHAREHOLDERS' EQUITY
Common stock			289,219,000				285,752,000				285,033,000
Retained earnings			199,505,000				174,536,000				167,541,000
Accumulated other comprehensive income/(loss)			(72,463,000	)			(3,729,000	)			(296,000	)
Total shareholders' equity			416,261,000				456,559,000				452,278,000
Total liabilities and shareholders' equity		$	5,016,934,000			$	5,257,749,000			$	4,964,412,000

MERCANTILE BANK CORPORATION

CONSOLIDATED REPORTS OF INCOME

(Unaudited)

		THREE MONTHS ENDED				THREE MONTHS ENDED				NINE MONTHS ENDED				NINE MONTHS ENDED
		September 30, 2022				September 30, 2021				September 30, 2022				September 30, 2021
INTEREST INCOME
Loans, including fees		$	43,807,000			$	33,656,000			$	113,061,000			$	100,430,000
Investment securities			2,702,000				1,941,000				7,496,000				5,375,000
Other interest-earning assets			1,620,000				291,000				3,004,000				642,000
Total interest income			48,129,000				35,888,000				123,561,000				106,447,000
INTEREST EXPENSE
Deposits			2,299,000				2,184,000				5,997,000				7,247,000
Short-term borrowings			53,000				46,000				153,000				122,000
Federal Home Loan Bank advances			1,755,000				2,072,000				5,530,000				6,149,000
Other borrowed money			1,646,000				462,000				4,294,000				1,401,000
Total interest expense			5,753,000				4,764,000				15,974,000				14,919,000
Net interest income			42,376,000				31,124,000				107,587,000				91,528,000
Provision for credit losses			2,900,000				1,900,000				3,500,000				(900,000	)
Net interest income after provision for credit losses			39,476,000				29,224,000				104,087,000				92,428,000
NONINTEREST INCOME
Service charges on accounts			1,579,000				1,324,000				4,489,000				3,687,000
Credit and debit card income			2,086,000				1,947,000				6,101,000				5,545,000
Mortgage banking income			1,764,000				6,554,000				6,991,000				23,049,000
Interest rate swap income			566,000				3,938,000				2,347,000				6,086,000
Payroll services			533,000				412,000				1,635,000				1,374,000
Earnings on bank owned life insurance			238,000				298,000				1,310,000				872,000
Gain on sale of branch			0				0				0				1,058,000
Other income			487,000				1,095,000				1,399,000				1,916,000
Total noninterest income			7,253,000				15,568,000				24,272,000				43,587,000
NONINTEREST EXPENSE
Salaries and benefits			16,656,000				15,975,000				47,842,000				47,255,000
Occupancy			2,001,000				2,030,000				6,168,000				6,021,000
Furniture and equipment			953,000				929,000				2,822,000				2,719,000
Data processing costs			3,139,000				2,746,000				9,203,000				8,138,000
Charitable foundation contribution			4,000				0				509,000				0
Other expense			4,003,000				4,530,000				12,896,000				13,386,000
Total noninterest expense			26,756,000				26,210,000				79,440,000				77,519,000
Income before federal income tax expense			19,973,000				18,582,000				48,919,000				58,496,000
Federal income tax expense			3,943,000				3,531,000				9,659,000				11,114,000
Net Income		$	16,030,000			$	15,051,000			$	39,260,000			$	47,382,000
Basic earnings per share		$	1.01			$	0.95			$	2.48			$	2.95
Diluted earnings per share		$	1.01			$	0.95			$	2.48			$	2.95
Average basic shares outstanding			15,861,551				15,859,955				15,850,422				16,084,806
Average diluted shares outstanding			15,861,551				15,860,314				15,850,439				16,085,274

MERCANTILE BANK CORPORATION

CONSOLIDATED FINANCIAL HIGHLIGHTS

(Unaudited)

		Quarterly																				Year-To-Date
(dollars in thousands except per share data)		2022				2022				2022				2021				2021
		3rd Qtr				2nd Qtr				1st Qtr				4th Qtr				3rd Qtr				2022				2021
EARNINGS
Net interest income		$	42,376				34,326				30,885				32,534				31,124				107,587				91,528
Provision for credit losses		$	2,900				500				100				(3,400	)			1,900				3,500				(900	)
Noninterest income		$	7,253				7,741				9,277				12,632				15,568				24,272				43,587
Noninterest expense		$	26,756				26,942				25,742				33,347				26,210				79,440				77,519
Net income before federal income tax expense		$	19,973				14,625				14,320				15,219				18,582				48,919				58,496
Net income		$	16,030				11,737				11,492				11,639				15,051				39,260				47,382
Basic earnings per share		$	1.01				0.74				0.73				0.74				0.95				2.48				2.95
Diluted earnings per share		$	1.01				0.74				0.73				0.74				0.95				2.48				2.95
Average basic shares outstanding			15,861,551				15,848,681				15,840,801				15,696,204				15,859,955				15,850,422				16,084,806
Average diluted shares outstanding			15,861,551				15,848,681				15,841,037				15,696,451				15,860,314				15,850,439				16,085,274
PERFORMANCE RATIOS
Return on average assets			1.27	%			0.93	%			0.90	%			0.92	%			1.23	%			1.03	%			1.34	%
Return on average equity			14.79	%			10.98	%			10.36	%			10.15	%			13.10	%			12.03	%			14.12	%
Net interest margin (fully tax-equivalent)			3.56	%			2.88	%			2.57	%			2.74	%			2.71	%			3.00	%			2.76	%
Efficiency ratio			53.91	%			64.05	%			64.10	%			73.83	%			56.13	%			60.25	%			57.37	%
Full-time equivalent employees			635				651				630				627				629				635				629
YIELD ON ASSETS / COST OF FUNDS
Yield on loans			4.56	%			3.97	%			3.87	%			4.07	%			4.07	%			4.15	%			4.06	%
Yield on securities			1.79	%			1.68	%			1.52	%			1.46	%			1.46	%			1.66	%			1.53	%
Yield on other interest-earning assets			2.15	%			0.76	%			0.19	%			0.15	%			0.16	%			0.75	%			0.13	%
Yield on total earning assets			4.04	%			3.32	%			2.99	%			3.12	%			3.13	%			3.45	%			3.21	%
Yield on total assets			3.80	%			3.13	%			2.82	%			2.94	%			2.94	%			3.25	%			3.01	%
Cost of deposits			0.24	%			0.19	%			0.19	%			0.19	%			0.23	%			0.20	%			0.26	%
Cost of borrowed funds			1.99	%			1.90	%			1.82	%			1.66	%			1.67	%			1.90	%			1.72	%
Cost of interest-bearing liabilities			0.81	%			0.72	%			0.66	%			0.63	%			0.69	%			0.73	%			0.75	%
Cost of funds (total earning assets)			0.48	%			0.44	%			0.42	%			0.38	%			0.42	%			0.45	%			0.45	%
Cost of funds (total assets)			0.45	%			0.41	%			0.39	%			0.36	%			0.39	%			0.42	%			0.42	%
MORTGAGE BANKING ACTIVITY
Total mortgage loans originated		$	163,902				190,896				168,187				210,228				259,512				522,985				742,011
Purchase mortgage loans originated		$	140,898				157,423				101,409				124,557				143,635				399,730				369,640
Refinance mortgage loans originated		$	23,004				33,473				66,778				85,671				115,877				123,255				372,371
Total saleable mortgage loans		$	59,740				52,328				75,747				129,546				177,837				187,815				513,989
Income on sale of mortgage loans		$	1,779				1,751				3,204				6,850				6,659				6,734				23,531
CAPITAL
Tangible equity to tangible assets			7.37	%			7.56	%			7.53	%			7.79	%			8.17	%			7.37	%			8.17	%
Tier 1 leverage capital ratio			9.63	%			9.31	%			9.04	%			9.19	%			9.33	%			9.63	%			9.33	%
Common equity risk-based capital ratio			9.81	%			9.84	%			10.02	%			10.12	%			10.34	%			9.81	%			10.34	%
Tier 1 risk-based capital ratio			10.86	%			10.91	%			11.13	%			11.26	%			11.53	%			10.86	%			11.53	%
Total risk-based capital ratio			13.71	%			13.78	%			14.09	%			13.95	%			12.47	%			13.71	%			12.47	%
Tier 1 capital		$	485,499				473,065				464,396				456,133				448,010				485,499				448,010
Tier 1 plus tier 2 capital		$	613,161				597,495				587,976				565,143				484,594				613,161				484,594
Total risk-weighted assets		$	4,471,939				4,337,040				4,173,590				4,051,253				3,884,999				4,471,939				3,884,999
Book value per common share		$	26.24				27.05				27.55				28.82				28.78				26.24				28.78
Tangible book value per common share		$	23.07				23.87				24.36				25.61				25.53				23.07				25.53
Cash dividend per common share		$	0.32				0.31				0.31				0.30				0.30				0.94				0.88
ASSET QUALITY
Gross loan charge-offs		$	0				15				205				179				744				220				865
Recoveries		$	246				336				294				1,519				354				876				1,221
Net loan charge-offs (recoveries)		$	(246	)			(321	)			(89	)			(1,340	)			390				(656	)			(356	)
Net loan charge-offs to average loans			(0.03%	)			(0.04%	)			(0.01%	)			(0.16%	)			0.05	%			(0.02%	)			(0.01%	)
Allowance for credit losses		$	39,120				35,974				35,153				35,363				37,423				39,120				37,423
Allowance to loans			1.01	%			0.97	%			0.99	%			1.02	%			1.13	%			1.01	%			1.13	%
Nonperforming loans		$	1,416				1,787				1,612				2,468				2,766				1,416				2,766
Other real estate/repossessed assets		$	0				0				0				0				111				0				111
Nonperforming loans to total loans			0.04	%			0.05	%			0.05	%			0.07	%			0.08	%			0.04	%			0.08	%
Nonperforming assets to total assets			0.03	%			0.04	%			0.03	%			0.05	%			0.06	%			0.03	%			0.06	%
NONPERFORMING ASSETS - COMPOSITION
Residential real estate:
Land development		$	30				30				31				32				33				30				33
Construction		$	0				0				0				0				0				0				0
Owner occupied / rental		$	1,138				1,508				1,579				1,768				2,063				1,138				2,063
Commercial real estate:
Land development		$	0				0				0				0				0				0				0
Construction		$	0				0				0				0				0				0				0
Owner occupied		$	0				0				0				0				100				0				100
Non-owner occupied		$	0				0				0				0				0				0				0
Non-real estate:
Commercial assets		$	248				248				0				662				673				248				673
Consumer assets		$	0				1				2				6				8				0				8
Total nonperforming assets			1,416				1,787				1,612				2,468				2,877				1,416				2,877
NONPERFORMING ASSETS - RECON
Beginning balance		$	1,787				1,612				2,468				2,877				3,150				2,468				4,085
Additions		$	0				309				93				218				361				402				999
Return to performing status		$	(160	)			0				(213	)			0				(50	)			(373	)			(165	)
Principal payments		$	(211	)			(134	)			(641	)			(377	)			(291	)			(986	)			(1,334	)
Sale proceeds		$	0				0				0				(111	)			(209	)			0				(286	)
Loan charge-offs		$	0				0				(95	)			(139	)			0				(95	)			(88	)
Valuation write-downs		$	0				0				0				0				(84	)			0				(334	)
Ending balance		$	1,416				1,787				1,612				2,468				2,877				1,416				2,877
LOAN PORTFOLIO COMPOSITION
Commercial:
Commercial & industrial		$	1,213,630				1,187,650				1,153,814				1,137,419				1,074,394				1,213,630				1,074,394
Land development & construction		$	60,970				57,808				52,693				43,240				38,380				60,970				38,380
Owner occupied comm'l R/E		$	643,577				598,593				582,732				565,758				551,762				643,577				551,762
Non-owner occupied comm'l R/E		$	1,002,638				1,003,118				1,007,361				1,027,415				998,697				1,002,638				998,697
Multi-family & residential rental		$	224,247				224,591				207,962				176,593				179,126				224,247				179,126
Total commercial		$	3,145,062				3,071,760				3,004,562				2,950,425				2,842,359				3,145,062				2,842,359
Retail:
1-4 family mortgages		$	705,442				623,599				522,556				442,546				411,618				705,442				411,618
Home equity & other consumer		$	30,454				28,441				28,672				60,488				59,732				30,454				59,732
Total retail		$	735,896				652,040				551,228				503,034				471,350				735,896				471,350
Total loans		$	3,880,958				3,723,800				3,555,790				3,453,459				3,313,709				3,880,958				3,313,709
END OF PERIOD BALANCES
Loans		$	3,880,958				3,723,800				3,555,790				3,453,459				3,313,709				3,880,958				3,313,709
Securities		$	600,720				621,359				623,382				610,745				577,566				600,720				577,566
Other interest-earning assets		$	220,909				389,938				698,724				915,755				741,557				220,909				741,557
Total earning assets (before allowance)		$	4,702,587				4,735,097				4,877,896				4,979,959				4,632,832				4,702,587				4,632,832
Total assets		$	5,016,934				5,058,555				5,175,899				5,257,749				4,964,412				5,016,934				4,964,412
Noninterest-bearing deposits		$	1,716,904				1,740,432				1,686,203				1,677,952				1,647,380				1,716,904				1,647,380
Interest-bearing deposits		$	2,129,181				2,133,461				2,290,048				2,405,241				2,221,611				2,129,181				2,221,611
Total deposits		$	3,846,085				3,873,893				3,976,251				4,083,193				3,868,991				3,846,085				3,868,991
Total borrowed funds		$	675,332				703,809				724,578				694,588				619,441				675,332				619,441
Total interest-bearing liabilities		$	2,804,513				2,837,270				3,014,626				3,099,829				2,841,052				2,804,513				2,841,052
Shareholders' equity		$	416,261				428,983				436,471				456,559				452,278				416,261				452,278
AVERAGE BALANCES
Loans		$	3,814,338				3,633,587				3,484,511				3,373,551				3,276,863				3,645,353				3,308,119
Securities		$	618,043				615,733				613,317				600,852				547,336				615,715				484,020
Other interest-earning assets		$	294,969				530,571				784,193				738,328				733,801				534,786				648,780
Total earning assets (before allowance)		$	4,727,350				4,779,891				4,882,021				4,712,731				4,558,000				4,795,854				4,440,919
Total assets		$	5,025,998				5,077,458				5,168,562				5,010,786				4,856,611				5,090,150				4,730,482
Noninterest-bearing deposits		$	1,723,609				1,706,349				1,625,453				1,708,052				1,641,158				1,685,497				1,590,969
Interest-bearing deposits		$	2,144,047				2,201,797				2,364,437				2,194,644				2,125,920				2,235,952				2,076,221
Total deposits		$	3,867,656				3,908,146				3,989,890				3,902,696				3,767,078				3,921,449				3,667,190
Total borrowed funds		$	689,091				705,774				707,478				632,036				614,061				700,713				595,105
Total interest-bearing liabilities		$	2,833,138				2,907,571				3,071,915				2,826,680				2,739,981				2,936,665				2,671,326
Shareholders' equity		$	430,093				428,873				449,863				455,084				455,902				436,204				448,516