EX-99.1 2 ex_501606.htm EXHIBIT 99.1

Exhibit 99.1

Mercantile Bank Corporation Announces Strong First Quarter Results

Substantial increase in net interest income and sustained strength in

asset quality metrics highlight quarter

GRAND RAPIDS, Mich., April 18, 2023 – Mercantile Bank Corporation (NASDAQ: MBWM) ("Mercantile") reported net income of $21.0 million, or $1.31 per diluted share, for the first quarter of 2023, compared with net income of $11.5 million, or $0.73 per diluted share, for the respective prior-year period.

“We are very pleased with our first quarter operating results,” said Robert B. Kaminski, Jr., President and Chief Executive Officer of Mercantile. “Our strong performance resulted from a significant increase in net interest income due to a higher net interest margin and loan growth. Asset quality metrics remained pristine during the first three months of 2023, and we believe our strong capital position will enable us to effectively absorb potential impacts of weakened economic conditions resulting from the Federal Open Market Committee’s actions to curb elevated inflation levels. Of particular note concerning deposit trends, much focus has been placed on the deposit characteristics of all banks in light of two large financial institutions failing in March 2023. We have analyzed our deposit base, and our first quarter reflected normal seasonal trends, including typical withdrawals in January for the payment of taxes, bonuses and partnership distributions. As always, we remain in close communication with our clients to help them interpret national-level events, and to remind them of our strong financial condition, capital position and operating performance. We believe our multiple sources of liquidity position us to meet funding needs as they arise. Our team’s commitment to meeting the banking needs of our current customers and identifying opportunities to forge mutually beneficial relationships with new clients is unwavering.”

First quarter highlights include:

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

| ● | Ongoing strength in commercial loan pipeline

| ● | Continuing low levels of nonperforming assets and loan charge-offs

| ● | Strong capital position

| ● | Stable deposit base

| ● | Paid cash dividend of $0.33 per share of common stock, an increase of over 3 percent from the regular cash dividend paid during the fourth quarter of 2022

Operating Results

Total revenue, which consists of net interest income and noninterest income, was $55.3 million during the first quarter of 2023, up $15.2 million, or 37.8 percent, from $40.1 million during the prior-year first quarter. Net interest income during the first quarter of 2023 was $48.4 million, up $17.5 million, or 56.7 percent, from $30.9 million during the respective 2022 period, mainly reflecting increased yields on earning assets and loan growth. Noninterest income totaled $7.0 million during the first quarter of 2023, down from $9.3 million during the first quarter of 2022 primarily due to decreased mortgage banking income, which more than offset increases in other fee income categories.

The net interest margin was 4.28 percent in the first quarter of 2023, up from 2.57 percent in the prior-year first quarter. The yield on average earning assets was 5.35 percent during the first three months of 2023, an increase from 2.99 percent during the respective 2022 period. The higher yield on average earning assets primarily resulted from an increased 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, along with increased yields on securities and interest-earning deposits, reflecting the increasing interest rate environment, also contributed to the higher yield on average earning assets. The yield on loans was 5.90 percent during the first quarter of 2023, up from 3.87 percent during the first quarter of 2022 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 475 basis points during the period of March 2022 through March 2023. As of March 31, 2023, approximately 64 percent of the commercial loan portfolio consisted of variable-rate loans.

The cost of funds was 1.07 percent in the first quarter of 2023, up from 0.42 percent in the first quarter of 2022 primarily due to higher costs of deposits and borrowed funds, reflecting the impact of the rising interest rate environment.

Mercantile recorded provisions for credit losses of $0.6 million and $0.1 million during the first quarters of 2023 and 2022, respectively. Both periods recorded provision expenses mainly reflected allocations necessitated by loan growth; the recording of net loan recoveries and ongoing strong loan quality metrics during the periods in large part mitigated additional reserves associated with the loan growth.

Noninterest income during the first quarter of 2023 was $7.0 million, compared to $9.3 million during the respective 2022 period. The lower level of noninterest income primarily stemmed from decreased mortgage banking income, service charges on accounts, and interest rate swap income, which more than offset growth in credit and debit card income and payroll servicing fees. Higher residential mortgage loan rates in the rising interest rate environment negatively affected mortgage banking income in the first quarter of 2023. The decline in service charges on accounts reflected increased earnings credit rates in response to the increasing interest rate environment, while the decrease in interest rate swap income mainly reflected a lower volume of transactions.

Noninterest expense totaled $28.6 million during the first quarter of 2023, compared to $25.7 million during the prior-year first quarter. Overhead costs during the first quarter of 2023 included a $0.4 million write-down of a former branch facility. Excluding this transaction, noninterest expense increased $2.5 million in the first quarter of 2023 compared to the respective 2022 period. The higher noninterest expense mainly resulted from increased compensation costs, including a $1.4 million bonus accrual and salary increases, which outweighed reductions in residential mortgage lender commissions and incentives. No bonus accrual was recorded during the first quarter of 2022. The higher level of salary costs primarily stemmed from annual merit pay increases and market adjustments. The decreased residential mortgage lender commissions and incentives mainly resulted from reduced loan production. The increase in overhead costs during the first quarter of 2023 also resulted from higher levels of Federal Deposit Insurance Corporation deposit insurance premiums, reflecting a higher industry-wide assessment rate, and interest rate swap reserves and collateral interest costs.

Mr. Kaminski commented, “The substantial increase in net interest income during the first quarter of 2023 compared to the respective 2022 period primarily reflected a significantly improved net interest margin and strong loan growth. Any further FOMC interest rate hikes should allow for additional net interest income expansion in light of our current balance sheet composition. Overhead cost control remains an important strategic initiative, and we are continually reviewing and monitoring our operating expenses to ascertain further opportunities to improve efficiency while not compromising the excellent service we provide to customers.”

Balance Sheet

As of March 31, 2023, total assets were $4.90 billion, up $23.3 million from December 31, 2022. Total loans increased $48.9 million, or an annualized 5.1 percent, during the first quarter of 2023. Residential mortgage loans and commercial loans were up $40.0 million and $8.6 million, respectively, during the first three months of 2023. Commercial loans increased despite the full payoffs and partial paydowns of certain larger relationships, which aggregated approximately $65 million. The payoffs and paydowns primarily stemmed from customers selling businesses and assets and using excess cash flows generated within their operations to make unscheduled principal and line of credit reductions.

As of March 31, 2023, unfunded commitments on commercial construction and development loans, which are anticipated to be funded over the next 12 to 18 months, and residential construction loans, which are expected to be largely funded over the next 12 months, totaled $285 million and $58.0 million, respectively.

Ray Reitsma, President of Mercantile Bank, noted, “During the first quarter of 2023, commercial loan growth was again hampered by full and partial payoffs, which totaled approximately $65 million. The payoffs in large part resulted from customers’ sales of businesses and assets and use of excess cash flows to reduce debt. We believe our robust commercial loan pipeline and credit availability for commercial construction and development loans provide opportunities for portfolio growth in the future. As part of our efforts to meet commercial loan growth objectives, we will continue to emphasize sound underwriting practices and parameters. The residential mortgage loan portfolio, as it did all throughout 2022, grew during the first three months of 2023 despite the negative impact of increased interest rates on market opportunities.”

Commercial and industrial loans and owner-occupied commercial real estate loans together represented approximately 57 percent of total commercial loans as of March 31, 2023, a level that has remained relatively consistent with prior periods and in line with our expectations.

Total deposits, consisting entirely of local deposits, were $3.60 billion at March 31, 2023, representing a decline of $115 million, or 3.1 percent, from December 31, 2022. The reduction in local deposits primarily reflected a customary level of customers’ tax and bonus payments and partnership distributions, as well as transfers to the sweep account product. Wholesale funds were $378 million, or approximately 9 percent of total funds, at March 31, 2023, compared to $308 million, or approximately 7 percent of total funds, at December 31, 2022.

Asset Quality

Nonperforming assets totaled $8.4 million and $7.7 million at March 31, 2023, and December 31, 2022, respectively, representing 0.2 percent of total assets as of the respective dates, and $1.6 million, or less than 0.1 percent of total assets, at March 31, 2022. The transfer of a former branch facility into other real estate owned mainly accounted for the increase in nonperforming assets during the first three months of 2023, while the increase in nonperforming assets during the twelve months ended March 31, 2023 was primarily due to the placing of one large commercial loan relationship on nonaccrual during the fourth quarter of 2022. The relationship, which was designated as a troubled debt restructuring in the second quarter of 2022, accounted for nearly 63 percent of total nonperforming assets as of March 31, 2023.

During the first quarter of 2023, loan charge-offs and recoveries of prior period loan charge-offs both equaled approximately $0.1 million, providing for a negligible level of net loan recoveries.

Mr. Reitsma commented, “Our sustained strength in asset quality metrics, including ongoing low levels of nonperforming assets, past due loans, and loan charge-offs, reflects our persistent emphasis on proper loan underwriting and our borrowers’ demonstrated ability to meet the challenges posed by the current operating environment. As part of our standard risk management program, we will continue to closely monitor our loan portfolio for any signs of a systemic decline in credit quality and will seek to swiftly implement curative measures to mitigate the impact of any identified credit issues on our overall financial condition.”

Capital Position

Shareholders’ equity totaled $467 million as of March 31, 2023, an increase of $26.0 million from year-end 2022. Mercantile Bank maintains a “well-capitalized” position, with its total risk-based capital ratio at 13.8 percent as of March 31, 2023, compared to 13.7 percent on December 31, 2022. At March 31, 2023, Mercantile Bank had approximately $175 million in excess of the 10 percent minimum regulatory threshold required to be categorized as a “well-capitalized” institution.

All of Mercantile’s investments are categorized as available-for-sale. The net unrealized loss on investments totaled $71.2 million as of March 31, 2023, providing for an after-tax effect reduction to equity capital of $56.3 million. Although unrealized gains and losses on investments are not factored into regulatory capital ratio calculations, our excess capital over the minimum regulatory requirement to be considered a “well-capitalized” institution would approximate $125 million on an adjusted basis.

Mercantile reported 16,001,448 total shares outstanding at March 31, 2023.

Mr. Kaminski concluded, “Our ongoing financial strength has allowed us to continue our regular cash dividend program and provide shareholders with competitive dividend yields. We remain steadfast in our commitment to function as a consistent and profitable performer and believe our strong capital levels, asset quality metrics, and earnings performance have positioned us to successfully meet future challenges that could arise as a result of the uncertainty surrounding the current economic and operating environments. The recent bank failures have heightened concerns about the banking industry in general, most notably in regard to the stability of deposit bases and the adequacy of liquidity levels. We believe Mercantile’s deposit base reflects the stability of many of our larger, longstanding, full banking relationship clients, and that our overall liquidity position remains sufficient to meet funding needs.”

Investor Presentation

Mercantile has prepared presentation materials that management intends to use during its previously announced first quarter 2023 conference call on Tuesday, April 18, 2023, at 10:00 a.m. Eastern Time, and from time to time thereafter in presentations about the company’s operations and performance. These materials are available for viewing in the Investor Relations section of Mercantile’s website at www.mercbank.com, and have also been furnished to the U.S. Securities and Exchange Commission concurrently with this press release.

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 $4.9 billion and operates 45 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 or recession; significant declines in the value of commercial real estate; market volatility; demand for products and services; climate impacts; labor markets; the degree of competition by traditional and nontraditional financial services companies; changes in banking regulation or actions by bank regulators; changes in tax laws and other laws and regulations applicable to us; 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; the transition from LIBOR to SOFR; changes in the national and local economies; unstable political and economic environments; disease outbreaks, such as the COVID-19 pandemic or similar public health threats, and measures implemented to combat them; 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
First Quarter 2023 Results
MERCANTILE BANK CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)

|  | MARCH 31, |  |  | DECEMBER 31, |  |  | MARCH 31, |
|  | 2023 |  |  | 2022 |  |  | 2022 |
ASSETS |  |  |  |  |  |  |  |  |  |  |  |
Cash and due from banks |  | $ | 47,151,000 |  |  | $ | 61,894,000 |  |  | $ | 71,480,000 |
Interest-earning deposits |  |  | 10,787,000 |  |  |  | 34,878,000 |  |  |  | 698,724,000 |
Total cash and cash equivalents |  |  | 57,938,000 |  |  |  | 96,772,000 |  |  |  | 770,204,000 |
Securities available for sale |  |  | 619,973,000 |  |  |  | 602,936,000 |  |  |  | 605,661,000 |
Federal Home Loan Bank stock |  |  | 17,721,000 |  |  |  | 17,721,000 |  |  |  | 17,721,000 |
Mortgage loans held for sale |  |  | 3,821,000 |  |  |  | 3,565,000 |  |  |  | 14,746,000 |
Loans |  |  | 3,965,528,000 |  |  |  | 3,916,619,000 |  |  |  | 3,555,790,000 |
Allowance for credit losses |  |  | (42,877,000 | ) |  |  | (42,246,000 | ) |  |  | (35,153,000 | )
Loans, net |  |  | 3,922,651,000 |  |  |  | 3,874,373,000 |  |  |  | 3,520,637,000 |
Premises and equipment, net |  |  | 51,510,000 |  |  |  | 51,476,000 |  |  |  | 56,078,000 |
Bank owned life insurance |  |  | 81,113,000 |  |  |  | 80,727,000 |  |  |  | 75,508,000 |
Goodwill |  |  | 49,473,000 |  |  |  | 49,473,000 |  |  |  | 49,473,000 |
Core deposit intangible, net |  |  | 424,000 |  |  |  | 583,000 |  |  |  | 1,112,000 |
Other assets |  |  | 91,250,000 |  |  |  | 94,993,000 |  |  |  | 64,759,000 |
Total assets |  | $ | 4,895,874,000 |  |  | $ | 4,872,619,000 |  |  | $ | 5,175,899,000 |
LIABILITIES AND SHAREHOLDERS' EQUITY |  |  |  |  |  |  |  |  |  |  |  |
Deposits: |  |  |  |  |  |  |  |  |  |  |  |
Noninterest-bearing |  | $ | 1,376,782,000 |  |  | $ | 1,604,750,000 |  |  | $ | 1,686,203,000 |
Interest-bearing |  |  | 2,221,236,000 |  |  |  | 2,108,061,000 |  |  |  | 2,290,048,000 |
Total deposits |  |  | 3,598,018,000 |  |  |  | 3,712,811,000 |  |  |  | 3,976,251,000 |
Securities sold under agreements to repurchase |  |  | 227,453,000 |  |  |  | 194,340,000 |  |  |  | 204,271,000 |
Federal funds purchased |  |  | 17,207,000 |  |  |  | 0 |  |  |  | 0 |
Federal Home Loan Bank advances |  |  | 377,910,000 |  |  |  | 308,263,000 |  |  |  | 382,263,000 |
Subordinated debentures |  |  | 49,130,000 |  |  |  | 48,958,000 |  |  |  | 48,415,000 |
Subordinated notes |  |  | 88,714,000 |  |  |  | 88,628,000 |  |  |  | 88,428,000 |
Accrued interest and other liabilities |  |  | 70,070,000 |  |  |  | 78,211,000 |  |  |  | 39,800,000 |
Total liabilities |  |  | 4,428,502,000 |  |  |  | 4,431,211,000 |  |  |  | 4,739,428,000 |
SHAREHOLDERS' EQUITY |  |  |  |  |  |  |  |  |  |  |  |
Common stock |  |  | 291,516,000 |  |  |  | 290,436,000 |  |  |  | 286,831,000 |
Retained earnings |  |  | 232,123,000 |  |  |  | 216,313,000 |  |  |  | 181,532,000 |
Accumulated other comprehensive income/(loss) |  |  | (56,267,000 | ) |  |  | (65,341,000 | ) |  |  | (31,892,000 | )
Total shareholders' equity |  |  | 467,372,000 |  |  |  | 441,408,000 |  |  |  | 436,471,000 |
Total liabilities and shareholders' equity |  | $ | 4,895,874,000 |  |  | $ | 4,872,619,000 |  |  | $ | 5,175,899,000 |

Mercantile Bank Corporation
First Quarter 2023 Results
MERCANTILE BANK CORPORATION
CONSOLIDATED REPORTS OF INCOME
(Unaudited)

|  | THREE MONTHS ENDED |  |  | THREE MONTHS ENDED |
|  | March 31, 2023 |  |  | March 31, 2022 |
INTEREST INCOME |  |  |  |  |  |  |  |
Loans, including fees |  | $ | 57,154,000 |  |  | $ | 33,251,000 |
Investment securities |  |  | 3,007,000 |  |  |  | 2,265,000 |
Interest-earning deposits |  |  | 324,000 |  |  |  | 366,000 |
Total interest income |  |  | 60,485,000 |  |  |  | 35,882,000 |
INTEREST EXPENSE |  |  |  |  |  |  |  |
Deposits |  |  | 7,907,000 |  |  |  | 1,825,000 |
Short-term borrowings |  |  | 459,000 |  |  |  | 50,000 |
Federal Home Loan Bank advances |  |  | 1,794,000 |  |  |  | 1,864,000 |
Other borrowed money |  |  | 1,941,000 |  |  |  | 1,258,000 |
Total interest expense |  |  | 12,101,000 |  |  |  | 4,997,000 |
Net interest income |  |  | 48,384,000 |  |  |  | 30,885,000 |
Provision for credit losses |  |  | 600,000 |  |  |  | 100,000 |
Net interest income after provision for credit losses |  |  | 47,784,000 |  |  |  | 30,785,000 |
NONINTEREST INCOME |  |  |  |  |  |  |  |
Service charges on accounts |  |  | 976,000 |  |  |  | 1,416,000 |
Credit and debit card income |  |  | 2,060,000 |  |  |  | 1,881,000 |
Mortgage banking income |  |  | 1,216,000 |  |  |  | 3,281,000 |
Interest rate swap income |  |  | 1,037,000 |  |  |  | 1,351,000 |
Payroll services |  |  | 746,000 |  |  |  | 638,000 |
Earnings on bank owned life insurance |  |  | 401,000 |  |  |  | 287,000 |
Other income |  |  | 515,000 |  |  |  | 423,000 |
Total noninterest income |  |  | 6,951,000 |  |  |  | 9,277,000 |
NONINTEREST EXPENSE |  |  |  |  |  |  |  |
Salaries and benefits |  |  | 16,682,000 |  |  |  | 15,510,000 |
Occupancy |  |  | 2,289,000 |  |  |  | 2,104,000 |
Furniture and equipment |  |  | 822,000 |  |  |  | 934,000 |
Data processing costs |  |  | 3,162,000 |  |  |  | 2,973,000 |
Other expense |  |  | 5,644,000 |  |  |  | 4,221,000 |
Total noninterest expense |  |  | 28,599,000 |  |  |  | 25,742,000 |
Income before federal income tax expense |  |  | 26,136,000 |  |  |  | 14,320,000 |
Federal income tax expense |  |  | 5,162,000 |  |  |  | 2,828,000 |
Net Income |  | $ | 20,974,000 |  |  | $ | 11,492,000 |
Basic earnings per share |  | $ | 1.31 |  |  | $ | 0.73 |
Diluted earnings per share |  | $ | 1.31 |  |  | $ | 0.73 |
Average basic shares outstanding |  |  | 15,996,138 |  |  |  | 15,840,801 |
Average diluted shares outstanding |  |  | 15,996,138 |  |  |  | 15,841,037 |

Mercantile Bank Corporation
First Quarter 2023 Results
MERCANTILE BANK CORPORATION
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Unaudited)

|  | Quarterly |
(dollars in thousands except per share data) |  | 2023 |  |  | 2022 |  |  | 2022 |  |  | 2022 |  |  | 2022 |
|  | 1st Qtr |  |  | 4th Qtr |  |  | 3rd Qtr |  |  | 2nd Qtr |  |  | 1st Qtr |
EARNINGS |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net interest income |  | $ | 48,384 |  |  |  | 50,657 |  |  |  | 42,376 |  |  |  | 34,326 |  |  |  | 30,885 |
Provision for credit losses |  | $ | 600 |  |  |  | 3,050 |  |  |  | 2,900 |  |  |  | 500 |  |  |  | 100 |
Noninterest income |  | $ | 6,951 |  |  |  | 7,805 |  |  |  | 7,253 |  |  |  | 7,741 |  |  |  | 9,277 |
Noninterest expense |  | $ | 28,599 |  |  |  | 28,541 |  |  |  | 26,756 |  |  |  | 26,942 |  |  |  | 25,742 |
Net income before federal income tax expense |  | $ | 26,136 |  |  |  | 26,871 |  |  |  | 19,973 |  |  |  | 14,625 |  |  |  | 14,320 |
Net income |  | $ | 20,974 |  |  |  | 21,803 |  |  |  | 16,030 |  |  |  | 11,737 |  |  |  | 11,492 |
Basic earnings per share |  | $ | 1.31 |  |  |  | 1.37 |  |  |  | 1.01 |  |  |  | 0.74 |  |  |  | 0.73 |
Diluted earnings per share |  | $ | 1.31 |  |  |  | 1.37 |  |  |  | 1.01 |  |  |  | 0.74 |  |  |  | 0.73 |
Average basic shares outstanding |  |  | 15,996,138 |  |  |  | 15,887,983 |  |  |  | 15,861,551 |  |  |  | 15,848,681 |  |  |  | 15,840,801 |
Average diluted shares outstanding |  |  | 15,996,138 |  |  |  | 15,887,983 |  |  |  | 15,861,551 |  |  |  | 15,848,681 |  |  |  | 15,841,037 |
PERFORMANCE RATIOS |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Return on average assets |  |  | 1.75 | % |  |  | 1.75 | % |  |  | 1.27 | % |  |  | 0.93 | % |  |  | 0.90 | %
Return on average equity |  |  | 18.76 | % |  |  | 20.26 | % |  |  | 14.79 | % |  |  | 10.98 | % |  |  | 10.36 | %
Net interest margin (fully tax-equivalent) |  |  | 4.28 | % |  |  | 4.30 | % |  |  | 3.56 | % |  |  | 2.88 | % |  |  | 2.57 | %
Efficiency ratio |  |  | 51.69 | % |  |  | 48.82 | % |  |  | 53.91 | % |  |  | 64.05 | % |  |  | 64.10 | %
Full-time equivalent employees |  |  | 633 |  |  |  | 630 |  |  |  | 635 |  |  |  | 651 |  |  |  | 630 |
YIELD ON ASSETS / COST OF FUNDS |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Yield on loans |  |  | 5.90 | % |  |  | 5.49 | % |  |  | 4.56 | % |  |  | 3.97 | % |  |  | 3.87 | %
Yield on securities |  |  | 1.95 | % |  |  | 1.91 | % |  |  | 1.79 | % |  |  | 1.68 | % |  |  | 1.52 | %
Yield on other interest-earning assets |  |  | 4.18 | % |  |  | 3.60 | % |  |  | 2.15 | % |  |  | 0.76 | % |  |  | 0.19 | %
Yield on total earning assets |  |  | 5.35 | % |  |  | 4.95 | % |  |  | 4.04 | % |  |  | 3.32 | % |  |  | 2.99 | %
Yield on total assets |  |  | 5.06 | % |  |  | 4.68 | % |  |  | 3.80 | % |  |  | 3.13 | % |  |  | 2.82 | %
Cost of deposits |  |  | 0.87 | % |  |  | 0.42 | % |  |  | 0.24 | % |  |  | 0.19 | % |  |  | 0.19 | %
Cost of borrowed funds |  |  | 2.51 | % |  |  | 2.13 | % |  |  | 1.99 | % |  |  | 1.90 | % |  |  | 1.82 | %
Cost of interest-bearing liabilities |  |  | 1.72 | % |  |  | 1.10 | % |  |  | 0.81 | % |  |  | 0.72 | % |  |  | 0.66 | %
Cost of funds (total earning assets) |  |  | 1.07 | % |  |  | 0.65 | % |  |  | 0.48 | % |  |  | 0.44 | % |  |  | 0.42 | %
Cost of funds (total assets) |  |  | 1.01 | % |  |  | 0.61 | % |  |  | 0.45 | % |  |  | 0.41 | % |  |  | 0.39 | %
MORTGAGE BANKING ACTIVITY |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Total mortgage loans originated |  | $ | 71,991 |  |  |  | 90,794 |  |  |  | 163,902 |  |  |  | 190,896 |  |  |  | 168,187 |
Purchase mortgage loans originated |  | $ | 56,728 |  |  |  | 79,604 |  |  |  | 140,898 |  |  |  | 157,423 |  |  |  | 101,409 |
Refinance mortgage loans originated |  | $ | 15,263 |  |  |  | 11,190 |  |  |  | 23,004 |  |  |  | 33,473 |  |  |  | 66,778 |
Total saleable mortgage loans |  | $ | 24,904 |  |  |  | 29,948 |  |  |  | 59,740 |  |  |  | 52,328 |  |  |  | 75,747 |
Income on sale of mortgage loans |  | $ | 950 |  |  |  | 1,401 |  |  |  | 1,779 |  |  |  | 1,751 |  |  |  | 3,204 |
CAPITAL |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Tangible equity to tangible assets |  |  | 8.61 | % |  |  | 8.12 | % |  |  | 7.37 | % |  |  | 7.56 | % |  |  | 7.53 | %
Tier 1 leverage capital ratio |  |  | 10.66 | % |  |  | 10.09 | % |  |  | 9.63 | % |  |  | 9.31 | % |  |  | 9.04 | %
Common equity risk-based capital ratio |  |  | 10.28 | % |  |  | 10.08 | % |  |  | 9.80 | % |  |  | 9.84 | % |  |  | 10.02 | %
Tier 1 risk-based capital ratio |  |  | 11.30 | % |  |  | 11.12 | % |  |  | 10.84 | % |  |  | 10.91 | % |  |  | 11.13 | %
Total risk-based capital ratio |  |  | 14.15 | % |  |  | 14.00 | % |  |  | 13.69 | % |  |  | 13.78 | % |  |  | 14.09 | %
Tier 1 capital |  | $ | 520,918 |  |  |  | 503,855 |  |  |  | 485,499 |  |  |  | 473,065 |  |  |  | 464,396 |
Tier 1 plus tier 2 capital |  | $ | 652,509 |  |  |  | 634,729 |  |  |  | 613,161 |  |  |  | 597,495 |  |  |  | 587,976 |
Total risk-weighted assets |  | $ | 4,611,570 |  |  |  | 4,533,091 |  |  |  | 4,479,176 |  |  |  | 4,337,040 |  |  |  | 4,173,590 |
Book value per common share |  | $ | 29.21 |  |  |  | 27.60 |  |  |  | 26.24 |  |  |  | 27.05 |  |  |  | 27.55 |
Tangible book value per common share |  | $ | 26.09 |  |  |  | 24.47 |  |  |  | 23.07 |  |  |  | 23.87 |  |  |  | 24.36 |
Cash dividend per common share |  | $ | 0.33 |  |  |  | 0.32 |  |  |  | 0.32 |  |  |  | 0.31 |  |  |  | 0.31 |
ASSET QUALITY |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Gross loan charge-offs |  | $ | 106 |  |  |  | 72 |  |  |  | 0 |  |  |  | 15 |  |  |  | 205 |
Recoveries |  | $ | 137 |  |  |  | 149 |  |  |  | 246 |  |  |  | 336 |  |  |  | 294 |
Net loan charge-offs (recoveries) |  | $ | (31 | ) |  |  | (77 | ) |  |  | (246 | ) |  |  | (321 | ) |  |  | (89 | )
Net loan charge-offs (recoveries) to average loans |  |  | (0.01% | ) |  |  | (0.01% | ) |  |  | (0.03% | ) |  |  | (0.04% | ) |  |  | (0.01% | )
Allowance for credit losses |  | $ | 42,877 |  |  |  | 42,246 |  |  |  | 39,120 |  |  |  | 35,974 |  |  |  | 35,153 |
Allowance to loans |  |  | 1.08 | % |  |  | 1.08 | % |  |  | 1.01 | % |  |  | 0.97 | % |  |  | 0.99 | %
Nonperforming loans |  | $ | 7,782 |  |  |  | 7,728 |  |  |  | 1,416 |  |  |  | 1,787 |  |  |  | 1,612 |
Other real estate/repossessed assets |  | $ | 661 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Nonperforming loans to total loans |  |  | 0.20 | % |  |  | 0.20 | % |  |  | 0.04 | % |  |  | 0.05 | % |  |  | 0.05 | %
Nonperforming assets to total assets |  |  | 0.17 | % |  |  | 0.16 | % |  |  | 0.03 | % |  |  | 0.04 | % |  |  | 0.03 | %
NONPERFORMING ASSETS - COMPOSITION |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Land development |  | $ | 8 |  |  |  | 29 |  |  |  | 30 |  |  |  | 30 |  |  |  | 31 |
Construction |  | $ | 0 |  |  |  | 124 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Owner occupied / rental |  | $ | 1,952 |  |  |  | 1,304 |  |  |  | 1,138 |  |  |  | 1,508 |  |  |  | 1,579 |
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Land development |  | $ | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Construction |  | $ | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Owner occupied |  | $ | 829 |  |  |  | 248 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Non-owner occupied |  | $ | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Non-real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial assets |  | $ | 5,654 |  |  |  | 6,023 |  |  |  | 248 |  |  |  | 248 |  |  |  | 0 |
Consumer assets |  | $ | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 1 |  |  |  | 2 |
Total nonperforming assets |  | $ | 8,443 |  |  |  | 7,728 |  |  |  | 1,416 |  |  |  | 1,787 |  |  |  | 1,612 |
NONPERFORMING ASSETS - RECON |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 7,728 |  |  |  | 1,416 |  |  |  | 1,787 |  |  |  | 1,612 |  |  |  | 2,468 |
Additions |  | $ | 1,323 |  |  |  | 6,368 |  |  |  | 0 |  |  |  | 309 |  |  |  | 93 |
Return to performing status |  | $ | (31 | ) |  |  | 0 |  |  |  | (160 | ) |  |  | 0 |  |  |  | (213 | )
Principal payments |  | $ | (515 | ) |  |  | (56 | ) |  |  | (211 | ) |  |  | (134 | ) |  |  | (641 | )
Sale proceeds |  | $ | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Loan charge-offs |  | $ | (62 | ) |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | (95 | )
Valuation write-downs |  | $ | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Ending balance |  | $ | 8,443 |  |  |  | 7,728 |  |  |  | 1,416 |  |  |  | 1,787 |  |  |  | 1,612 |
LOAN PORTFOLIO COMPOSITION |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial & industrial |  | $ | 1,173,440 |  |  |  | 1,185,083 |  |  |  | 1,213,630 |  |  |  | 1,187,650 |  |  |  | 1,153,814 |
Land development & construction |  | $ | 66,233 |  |  |  | 61,873 |  |  |  | 60,970 |  |  |  | 57,808 |  |  |  | 52,693 |
Owner occupied comm'l R/E |  | $ | 630,186 |  |  |  | 639,192 |  |  |  | 643,577 |  |  |  | 598,593 |  |  |  | 582,732 |
Non-owner occupied comm'l R/E |  | $ | 1,051,221 |  |  |  | 1,033,735 |  |  |  | 1,002,638 |  |  |  | 1,003,118 |  |  |  | 1,007,361 |
Multi-family & residential rental |  | $ | 219,339 |  |  |  | 211,948 |  |  |  | 224,247 |  |  |  | 224,591 |  |  |  | 207,962 |
Total commercial |  | $ | 3,140,419 |  |  |  | 3,131,831 |  |  |  | 3,145,062 |  |  |  | 3,071,760 |  |  |  | 3,004,562 |
Retail: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
1-4 family mortgages & home equity |  | $ | 795,009 |  |  |  | 755,035 |  |  |  | 705,442 |  |  |  | 623,599 |  |  |  | 522,556 |
Other consumer |  | $ | 30,100 |  |  |  | 29,753 |  |  |  | 30,454 |  |  |  | 28,441 |  |  |  | 28,672 |
Total retail |  | $ | 825,109 |  |  |  | 784,788 |  |  |  | 735,896 |  |  |  | 652,040 |  |  |  | 551,228 |
Total loans |  | $ | 3,965,528 |  |  |  | 3,916,619 |  |  |  | 3,880,958 |  |  |  | 3,723,800 |  |  |  | 3,555,790 |
END OF PERIOD BALANCES |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans |  | $ | 3,965,528 |  |  |  | 3,916,619 |  |  |  | 3,880,958 |  |  |  | 3,723,800 |  |  |  | 3,555,790 |
Securities |  | $ | 637,694 |  |  |  | 620,657 |  |  |  | 600,720 |  |  |  | 621,359 |  |  |  | 623,382 |
Other interest-earning assets |  | $ | 10,787 |  |  |  | 34,878 |  |  |  | 220,909 |  |  |  | 389,938 |  |  |  | 698,724 |
Total earning assets (before allowance) |  | $ | 4,614,009 |  |  |  | 4,572,154 |  |  |  | 4,702,587 |  |  |  | 4,735,097 |  |  |  | 4,877,896 |
Total assets |  | $ | 4,895,874 |  |  |  | 4,872,619 |  |  |  | 5,016,934 |  |  |  | 5,058,555 |  |  |  | 5,175,899 |
Noninterest-bearing deposits |  | $ | 1,376,782 |  |  |  | 1,604,750 |  |  |  | 1,716,904 |  |  |  | 1,740,432 |  |  |  | 1,686,203 |
Interest-bearing deposits |  | $ | 2,221,236 |  |  |  | 2,108,061 |  |  |  | 2,129,181 |  |  |  | 2,133,461 |  |  |  | 2,290,048 |
Total deposits |  | $ | 3,598,018 |  |  |  | 3,712,811 |  |  |  | 3,846,085 |  |  |  | 3,873,893 |  |  |  | 3,976,251 |
Total borrowed funds |  | $ | 761,509 |  |  |  | 641,295 |  |  |  | 675,332 |  |  |  | 703,809 |  |  |  | 724,578 |
Total interest-bearing liabilities |  | $ | 2,982,745 |  |  |  | 2,749,356 |  |  |  | 2,804,513 |  |  |  | 2,837,270 |  |  |  | 3,014,626 |
Shareholders' equity |  | $ | 467,372 |  |  |  | 441,408 |  |  |  | 416,261 |  |  |  | 428,983 |  |  |  | 436,471 |
AVERAGE BALANCES |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans |  | $ | 3,928,329 |  |  |  | 3,887,967 |  |  |  | 3,814,338 |  |  |  | 3,633,587 |  |  |  | 3,484,511 |
Securities |  | $ | 627,628 |  |  |  | 606,390 |  |  |  | 618,043 |  |  |  | 615,733 |  |  |  | 613,317 |
Other interest-earning assets |  | $ | 31,081 |  |  |  | 179,507 |  |  |  | 294,969 |  |  |  | 530,571 |  |  |  | 784,193 |
Total earning assets (before allowance) |  | $ | 4,587,038 |  |  |  | 4,673,864 |  |  |  | 4,727,350 |  |  |  | 4,779,891 |  |  |  | 4,882,021 |
Total assets |  | $ | 4,855,877 |  |  |  | 4,949,868 |  |  |  | 5,025,998 |  |  |  | 5,077,458 |  |  |  | 5,168,562 |
Noninterest-bearing deposits |  | $ | 1,491,477 |  |  |  | 1,722,632 |  |  |  | 1,723,609 |  |  |  | 1,706,349 |  |  |  | 1,625,453 |
Interest-bearing deposits |  | $ | 2,184,406 |  |  |  | 2,077,547 |  |  |  | 2,144,047 |  |  |  | 2,201,797 |  |  |  | 2,364,437 |
Total deposits |  | $ | 3,675,883 |  |  |  | 3,800,179 |  |  |  | 3,867,656 |  |  |  | 3,908,146 |  |  |  | 3,989,890 |
Total borrowed funds |  | $ | 676,724 |  |  |  | 667,864 |  |  |  | 689,091 |  |  |  | 705,774 |  |  |  | 707,478 |
Total interest-bearing liabilities |  | $ | 2,861,130 |  |  |  | 2,745,411 |  |  |  | 2,833,138 |  |  |  | 2,907,571 |  |  |  | 3,071,915 |
Shareholders' equity |  | $ | 453,524 |  |  |  | 426,897 |  |  |  | 430,093 |  |  |  | 428,873 |  |  |  | 449,863 |