County Bancorp, Inc. Announces Net Income Of $3.5 Million For The Third Quarter Of 2018

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Highlights

  • Net income of $3.5 million for the third quarter of 2018
  • Diluted earnings per share of $0.50 for the third quarter of 2018
  • Loan growth of $21.4 million during the third quarter of 2018, an increase of 1.8%
  • Gross loans serviced increased $37.9 million during the third quarter of 2018, an increase of 2.1%

MANITOWOC, Wis, Oct. 22, 2018 (GLOBE NEWSWIRE) — County Bancorp, Inc. (Nasdaq: ICBK), the holding company of Investors Community Bank, an agricultural and commercial bank headquartered in Manitowoc, Wisconsin, reported net income of $3.5 million, or $0.50 diluted earnings per share, for the third quarter of 2018, compared to net income of $3.9 million, or $0.55 diluted earnings per share, for the second quarter of 2018 and $3.6 million, or $0.52 diluted earnings per share, for the third quarter of 2017.  This represents a return on average assets of 0.94% for the quarter ended September 30, 2018, compared to 1.04% for the quarter ended June 30, 2018 and 1.11% for the quarter ended September 30, 2017.

“Our financial performance this quarter was solid,” said Timothy J. Schneider, President of County Bancorp, Inc. and CEO of Investors Community Bank.  “We are starting to see some positive traction on asset repricing as reflected in the 0.21% asset yield improvement from the quarter ended June 30, 2018.  The deposit market remains competitive, with interest-bearing liability yields increasing 0.19% compared to the quarter ended June 30, 2018.  During the third quarter of 2018, we had solid loan growth of $21.4 million in on-balance sheet and $16.5 million in sold and serviced loans.”

“We expect loan growth to be balanced with our ability to grow core deposits which grew by $15.1 million during the third quarter of 2018,” stated Schneider.  “Brokered deposits, national deposits, and FHLB advances decreased by $22.6 million in that same timeframe. Our provisions for loan losses increased in the third quarter compared to the second quarter due to specific reserves on a newly added impaired agricultural loan, in addition to an increase in substandard rated credits that are not considered impaired.  This was partially offset by continued principal pay downs on impaired loans.” 

Schneider added, “We believe we are managing this challenging agriculture economy well, and we are encouraged by the announcement of a pending revision to the North American Free Trade Agreement among the U.S., Canada and Mexico, which included a pledge to curb protection for Canada’s dairy industry.  Long term, we feel this revised agreement, called the United States Mexico Canada Agreement, will have a positive impact on overall dairy prices. We continue to be diligent in monitoring our classified agricultural credits and remain committed to working through this cycle in agriculture.” 

Loans and Total Assets

Total assets at September 30, 2018 were $1.5 billion, an increase of $117.9 million, or 8.4%, and $155.6 million, or 11.5%, over total assets as of December 31, 2017 and September 30, 2017, respectively.  Total loans were $1.2 billion at September 30, 2018, which represents a $54.0 million, or 4.6%, and $76.3 million, or 6.8%, increase over total loans at December 31, 2017 and September 30, 2017, respectively.  Loan growth in the third quarter of 2018 was $21.4 million, an increase of 1.8%, from June 30, 2018.

In addition to on-balance sheet loan growth, participated loans that we continue to service totaled $644.0 million at September 30, 2018, which is an increase of $43.4 million, or 7.2%, and $50.7 million, or 8.5%, over participated loans that we continue to service at December 31, 2017 and September 30, 2017, respectively.  During the third quarter, participated loans that we continue to service increased $16.5 million, or 2.6%, over loans sold and serviced as of June 30, 2018.

Deposits

Total deposits at September 30, 2018 were $1.2 billion, an increase of $98.7 million, or 8.9%, and $142.7 million, or 13.4%, over total deposits as of December 31, 2017 and September 30, 2017, respectively.  Core deposit (demand deposits, money market accounts, and certificates of deposit) increased $15.1 million during the third quarter and $33.2 million during the first nine months of 2018. We continue to supplement our deposit needs with wholesale deposits, which include brokered deposits and national certificates of deposit.  Brokered deposits and national certificates of deposit at September 30, 2018 were $490.7 million, which was a decrease of $16.8 million, or 3.3%, from June 30, 2018, but was an increase of $65.7 million, or 15.5%, from December 31, 2017, and an increase of $63.3 million, or 14.8%, from September 30, 2017.

Due to our deposit growth in 2018, we have been able to decrease our FHLB borrowings by $19.1 million, or 15.7%, since December 31, 2017, and by $25.9 million, or 20.2%, since September 30, 2017.

Net Interest Income and Margin

Net interest income improved to $10.6 million for the three months ended September 30, 2018, which is a $0.3 million and $0.6 million increase from the three months ended June 30, 2018 and the three months ended September 30, 2017, respectively, primarily due to growth in loans and securities available for sale.

For the nine months ended September 30, 2018, net interest income improved 8.7% to $31.2 million from $28.7 million for the nine months ended September 30, 2017.

Net interest margin was to 2.89% for the three months ended September 30, 2018, which is an increase from 2.87% for the three months ended June 30, 2018, and a decrease from 3.17% for the three months ended September 30, 2017.  Despite asset yields improving over the linked quarter, only a slight improvement was realized in net interest margin due to continued increased deposits costs and the addition of $30 million of junior subordinated debentures during the second quarter of 2018.  Year-over-year net interest margin decreased by twenty basis points primarily due to interest expense related to the $30.0 million of junior subordinated debentures that were issued during the second quarter of 2018, which was partially offset by a twenty-nine basis point improvement in loan yields.

Yields on interest bearing assets increased by 0.21% between the third quarter of 2018 and the second quarter of 2018 while the cost of interest bearing liabilities increased by 0.19% between the same periods.  For the nine months ended September 30, 2018, yields on interest bearing assets increased by 0.18%, and the cost of interest bearing liabilities increased by 0.44% compared to the nine months ended September 30, 2017.

Non-Interest Income and Expense

Non-interest income for the three months ended September 30, 2018 decreased by $0.1 million, or 6.9%, to $2.2 million compared to the three months ended June 30, 2018, primarily the result of decreased loan servicing rights related to the pay-downs of loans being serviced.

Non-interest income for the three months ended September 30, 2018 increased $0.1 million, or 3.4%, to $2.2 million compared to $2.1 million for the three months ended September 30, 2017.  For the nine months ended September 30, 2018, non-interest income increased $0.9 million, or 15.1%, to $6.5 million from the nine months ended September 30, 2017.  Both the quarterly and year-to-date increases are directly related to increases in loan servicing fees which was the result of higher volumes of loans being serviced.

Non-interest expense for the three months ended September 30, 2018 increased by $0.1 million, or 1.2%, to $7.0 million compared to the three months ended June 30, 2018, primarily due to a one time employment contract payment of $0.2 million which was partially offset by fewer OREO writedowns and expenses.

Non-interest expense for the quarter ended September 30, 2018 increased $0.7 million, or 11.6%, to $7.0 million from $6.3 million for the quarter ended September 30, 2017.  For the nine months ended September 30, 2018, non-interest expense increased $1.9 million, or 10.2%, to $20.7 million compared to the nine months ended September 30, 2017.  These increases were primarily related to increases in employee compensation and benefits in connection with six new positions, which was partially offset by decreases in professional fees.  In addition, increased occupancy and information processing expenses are directly related to the purchase of our new corporate headquarters in 2018. 

Asset Quality

Non-performing assets as a percent of total assets increased to 2.36% at September 30, 2018, from 2.30% at June 30, 2018 and 1.43% at September 30, 2017.  At September 30, 2018, non-performing assets were $35.7 million, up from $34.9 million at June 30, 2018 and $19.4 million at September 30, 2017.  During the third quarter of 2018, non-performing loans increased $1.6 million due to two agricultural relationships and two commercial relationships being put on non-accrual status.  Total impairment on these non-performing loans totaled $99,000 and was included in the allowance for loan losses.  One property was sold out of OREO and one Farm Service Agency guarantee was received resulting in a decrease of $0.8 million in OREO during the quarter ended September 30, 2018.

A provision for loan losses of $1.0 million was recorded for the three months ended September 30, 2018 compared to a provision of $0.5 million and $33 thousand for the three months ended June 30, 2018 and September 30, 2017, respectively.  The increased provision is directly related to the $24.5 million and $48.2 million increase in substandard performing and substandard impaired loans from June 30, 2018 and September 30, 2017, respectively.

For the nine months ended September 30, 2018, the provision for loan losses was $1.6 million compared to $2.3 million for the nine months ended September 30, 2017.  The decrease in provision expense year-over-year is primarily the result of a $1.2 million recovery that took place during the first quarter of 2018.

Conference Call

County Bancorp, Inc. will host an earnings call today at 3:00 p.m., CDT; conducted by Mr. Schneider and Glen L. Stiteley, CFO.  Shareholders, analysts, and other interested parties are invited to join the call via telephone by dialing (888) 317-6016 or visiting County’s website at http://www.investorscommunitybank.com and then clicking on the link “Investor Relations.”  Investors should visit the Company’s website or call in to the dial-in number set forth above at least 10 minutes prior to the scheduled start of the call.

A replay of the earnings call will be available until October 22, 2019, by visiting the Company’s website at http://www.investorscommunitybank.com and clicking on the link “Investor Relations.”

About County Bancorp, Inc.

County Bancorp, Inc., a Wisconsin corporation and registered bank holding company founded in May 1996, and our wholly-owned subsidiary Investors Community Bank, a Wisconsin-chartered bank, are headquartered in Manitowoc, Wisconsin.  The state of Wisconsin is often referred to as “America’s Dairyland,” and one of the niches we have developed is providing financial services to agricultural businesses statewide, with a primary focus on dairy-related lending.  We also serve business and retail customers throughout Wisconsin, with a focus on northeastern and central Wisconsin.  Our customers are served from our full-service locations in Manitowoc, Appleton, Green Bay, and Stevens Point and our loan production offices in Darlington, Eau Claire, Fond du Lac, and Sheboygan.

Forward-Looking Statements

This press release includes “forward-looking statements” within the meaning of such term in the Private Securities Litigation Reform Act of 1995.  Forward-looking statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control. We caution you that the forward-looking statements presented in this press release are not a guarantee of future events, and that actual events may differ materially from those made in or suggested by the forward-looking information contained in this press release.  Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “plan,” “seek,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe” or “continue” or the negative thereof or variations thereon or similar terminology. Factors that may cause actual results to differ materially from those made or suggested by the forward-looking statements contained in this press release include those identified in County Bancorp, Inc.’s most recent annual report on Form 10-K and subsequent filings with the Securities and Exchange Commission.  Any forward-looking statements presented herein are made only as of the date of this press release, and we do not undertake any obligation to update or revise any forward-looking statements to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.

Investor Relations Contact
Glen L. Stiteley
EVP – CFO, Investors Community Bank
Phone: (920) 686-5658
Email: [email protected]      

County Bancorp, Inc.
Consolidated Financial Summary
(Unaudited)
  September 30,
2018
    June 30,
2018
    March 31,
2018
    December 31,
2017
    September 30,
2017
 
       
    (dollars in thousands, except per share data)  
Period-End Balance Sheet:                                        
  Assets                                        
  Cash and cash equivalents   $ 49,996     $ 81,044     $ 90,676     $ 66,771     $ 71,795  
  Securities available for sale, at fair value     190,185       187,505       141,360       126,030       107,242  
  Loans held for sale     13,770       11,468       6,407       6,575       2,054  
  Agricultural loans     714,310       702,426       698,106       686,430       675,856  
  Commercial loans     417,146       407,609       406,096       407,036       397,989  
  Multi-family real estate loans     66,403       65,713       54,514       49,133       45,943  
  Residential real estate loans     4,965       5,437       5,512       6,005       6,584  
  Installment and consumer other     113       339       297       347       229  
  Total loans     1,202,937       1,181,524       1,164,525       1,148,951       1,126,601  
  Allowance for loan losses     (16,143 )     (15,129 )     (14,612 )     (13,247 )     (13,625 )
  Net loans     1,186,794       1,166,395       1,149,913       1,135,704       1,112,976  
  Other assets     74,223       72,465       71,901       61,965       65,258  
  Total Assets   $ 1,514,968     $ 1,518,877     $ 1,460,257     $ 1,397,045     $ 1,359,325  
                                         
  Liabilities and Shareholders’ Equity                                        
  Demand deposits   $ 103,862     $ 95,459     $ 101,167     $ 125,584     $ 118,815  
  NOW accounts and interest checking     46,811       51,674       48,212       51,613       46,178  
  Savings     6,616       6,833       6,189       6,751       6,402  
  Money market accounts     208,233       204,332       199,834       199,118       169,612  
  Time deposits     352,531       344,619       314,766       301,760       297,617  
  Brokered deposits     317,291       323,561       319,692       282,616       281,205  
  National time deposits     173,440       183,953       182,530       142,635       146,265  
  Total deposits     1,208,784       1,210,431       1,172,390       1,110,077       1,066,094  
  FHLB advances     102,400       108,200       120,500       121,500       128,300  
  Subordinated debentures     44,663       44,725       15,540       15,523       15,506  
  Other liabilities     11,134       9,439       9,013       8,959       9,696  
  Total Liabilities     1,366,981       1,372,795       1,317,443       1,256,059       1,219,596  
                                         
  Shareholders’ equity     147,987       146,082       142,814       140,986       139,729  
  Total Liabilities and Shareholders’
  Equity
  $ 1,514,968     $ 1,518,877     $ 1,460,257     $ 1,397,045     $ 1,359,325  
                                         
Stock Price Information:                                        
  High – Year-to-date   $ 33.76     $ 33.76     $ 33.76     $ 35.89     $ 35.89  
  Low – Year-to-date   $ 24.29     $ 25.72     $ 26.61     $ 22.73     $ 22.73  
  Market price – Quarter-end   $ 25.10     $ 27.50     $ 29.21     $ 29.76     $ 30.05  
  Book value per share   $ 20.91     $ 20.63     $ 20.17     $ 19.93     $ 19.79  
  Tangible book value per share (1)   $ 20.07     $ 19.77     $ 19.29     $ 19.04     $ 18.87  
  Average diluted shares of common stock
  quarter-to-date
    6,757,945       6,769,936       6,768,965       6,768,939       6,757,648  
  Common shares outstanding     6,694,230       6,693,447       6,684,923       6,673,381       6,657,601  

(1) This is a non-GAAP financial measure.  A reconciliation to GAAP is included below.

    September 30,
2018
    June 30,
2018
    March 31,
2018
    December 31,
2017
    September 30,
2017
 
       
    (dollars in thousands)  
Loans by risk category:                                        
  Sound/Acceptable/Satisfactory/
  Low Satisfactory
  $ 901,643     $ 896,509     $ 891,062     $ 873,801     $ 871,513  
  Watch     171,890       186,399       185,179       183,022       161,425  
  Special Mention     11,036       4,783       5,636       8,902       23,456  
  Substandard Performing     61,851       46,751       45,261       50,224       56,247  
  Substandard Impaired     56,517       47,082       37,387       33,002       13,960  
  Total loans   $ 1,202,937     $ 1,181,524     $ 1,164,525     $ 1,148,951     $ 1,126,601  
                                         
Non-Performing Assets:                                        
  Nonaccrual loans   $ 27,881     $ 26,305     $ 17,746     $ 11,559     $ 12,862  
  Other real estate owned (2)     7,851       8,607       8,982       4,565       6,576  
  Total non-performing assets   $ 35,732     $ 34,912     $ 26,728     $ 16,124     $ 19,438  
                                         
Restructured loans not on nonaccrual   $ 11,863     $ 11,173     $ 10,488     $ 9,019     $ 8,087  
                                         
Non-performing assets as a % of total assets     2.36 %     2.30 %     1.83 %     1.15 %     1.43 %
Allowance for loan losses as a % of
  nonaccrual loans
    57.90 %     57.51 %     82.34 %     114.60 %     105.93 %
Allowance for loan losses as a % of total
  loans
    1.34 %     1.28 %     1.25 %     1.15 %     1.21 %
Net charge-offs (recoveries) quarter-to-date   $ (21 )   $ 16     $ (1,268 )   $ 390     $ (89 )
Provision for loan loss quarter-to-date   $ 993     $ 533     $ 97     $ 12     $ 33  

(2) Does not include $0.4 million of bank property transferred from premises and equipment which is not considered a non-performing asset.

    For the Three Months Ended  
    September 30,
2018
    June 30,
2018
    March 31,
2018
    December 31,
2017
    September 30,
2017
 
       
    (dollars in thousands, except per share data)  
Selected Income Statement Data:                                        
  Interest and Dividend Income                                        
Loans, including fees   $ 15,113     $ 14,366     $ 13,691     $ 13,443     $ 13,070  
Taxable securities     945       982       632       462       461  
Tax-exempt securities     344       14       157       88       82  
Federal funds sold and other     249       401       213       256       102  
Total interest and dividend income     16,651       15,763       14,693       14,249       13,715  
                                         
  Interest Expense                                        
Deposits     4,980       4,600       3,796       3,464       3,108  
FHLB advances and other borrowed
  funds
    411       487       484       481       511  
Subordinated debentures     656       338       143       135       135  
Total interest expense     6,047       5,425       4,423       4,080       3,754  
Net interest income     10,604       10,338       10,270       10,169       9,961  
Provision for loan losses     993       533       97       12       33  
Net interest income after provision for
  loan losses
    9,611       9,805       10,173       10,157       9,928  
                                         
  Non-Interest Income                                        
Services charges     394       445       365       332       350  
Gain on sale of loans, net     41       45       32       22       47  
Loan servicing fees     1,521       1,486       1,452       1,483       1,469  
Loan servicing rights     (46 )     127       10       (37 )     94  
Income on OREO     96       45       32       16       20  
Other     151       168       149       178       107  
Total non-interest income     2,157       2,316       2,040       1,994       2,087  
                                         
  Non-Interest Expense                                        
Employee compensation and benefits     4,394       4,114       4,218       3,702       3,845  
Occupancy     332       278       204       135       162  
Information processing     529       529       465       423       450  
Professional fees     351       359       315       406       414  
Business development     258       260       299       210       275  
OREO expenses     46       152       140       17       50  
Writedown of OREO     81       104             820       8  
Net loss (gain) on OREO     (28 )     (149 )           10       39  
Depreciation and amortization     302       324       314       319       323  
Other     758       966       830       1,123       725  
Total non-interest expense     7,023       6,937       6,785       7,165       6,291  
  Income before income taxes     4,745       5,184       5,428       4,986       5,724  
  Income tax expense     1,228       1,334       1,374       2,855       2,120  
  NET INCOME   $ 3,517     $ 3,850     $ 4,054     $ 2,131     $ 3,604  
                                         
Other Data:                                        
  Return on average assets     0.94 %     1.04 %     1.15 %     0.62 %     1.11 %
  Return on average shareholders’ equity     9.51 %     10.63 %     11.62 %     6.05 %     10.36 %
  Return on average common shareholders’
  equity (1)
    9.75 %     10.96 %     12.04 %     6.12 %     10.72 %
  Efficiency ratio (1)     54.62 %     55.18 %     55.12 %     52.11 %     51.83 %
  Tangible common equity to tangible
  assets (1)
    8.90 %     8.75 %     8.87 %     9.13 %     9.29 %
                                         
Per Common Share Data:                                        
  Basic   $ 0.51     $ 0.56     $ 0.59     $ 0.31     $ 0.53  
  Diluted   $ 0.50     $ 0.55     $ 0.58     $ 0.30     $ 0.52  
  Dividends declared   $ 0.07     $ 0.07     $ 0.07     $ 0.06     $ 0.06  

  (1)   This is a non-GAAP financial measure.  A reconciliation to GAAP is included below.

     For the Three Months Ended  
Non-GAAP Financial Measures:   September 30,
2018
    June 30,
2018
    March 31,
2018
    December 31,
2017
    September 30,
2017
 
       
       
       
       
    (dollars in thousands)  
Return on average common shareholders’
  equity reconciliation:
                                       
  Return on average shareholders’ equity     9.51 %     10.63 %     11.62 %     6.05 %     10.36 %
  Effect of excluding average preferred
  shareholders’ equity
    0.24 %     0.33 %     0.42 %     0.07 %     0.36 %
  Return on average common shareholders’
  equity
    9.75 %     10.96 %     12.04 %     6.12 %     10.72 %
                                         
Efficiency ratio GAAP to non-GAAP
  reconciliation:
                                       
  Non-interest expense   $ 7,023     $ 6,937     $ 6,785     $ 7,165     $ 6,291  
  Less: net gain (loss) on sales and write-
  downs of OREO
    (53 )     45             (830 )     (47 )
  Adjusted non-interest expense
  (non-GAAP)
  $ 6,970     $ 6,982     $ 6,785     $ 6,335     $ 6,244  
                                         
  Net interest income   $ 10,604     $ 10,338     $ 10,270     $ 10,169     $ 9,961  
  Non-interest income     2,157       2,316       2,040       1,994       2,087  
  Less: net gain on sales of securities                       (6 )      
  Operating revenue   $ 12,761     $ 12,654     $ 12,310     $ 12,157     $ 12,048  
  Efficiency ratio     54.62 %     55.18 %     55.12 %     52.11 %     51.83 %
                                         
    September 30,
2018
    June 30,
2018
    March 31,
2018
    December 31,
2017
    September 30,
2017
 
    (dollars in thousands, except share and per share data)  
Tangible book value per share and
  tangible common equity to tangible
  assets reconciliation:
                                       
  Common equity   $ 139,987     $ 138,082     $ 134,814     $ 132,986     $ 131,729  
  Less: Goodwill     5,038       5,038       5,038       5,038       5,038  
  Less: Core deposit intangible, net of
  amortization
    603       701       806       919       1,038  
  Tangible common equity (non-GAAP)   $ 134,346     $ 132,343     $ 128,970     $ 127,029     $ 125,653  
  Common shares outstanding     6,694,230       6,693,447       6,684,923       6,673,381       6,657,601  
  Tangible book value per share   $ 20.07     $ 19.77     $ 19.29     $ 19.04     $ 18.87  
                                         
  Total assets   $ 1,514,968     $ 1,518,877     $ 1,460,257     $ 1,397,045     $ 1,359,325  
  Less: Goodwill     5,038       5,038       5,038       5,038       5,038  
  Less: Core deposit intangible, net of
  amortization
    603       701       806       919       1,038  
  Tangible assets (non-GAAP)   $ 1,509,327     $ 1,513,138     $ 1,454,413     $ 1,391,088     $ 1,353,249  
  Tangible common equity to tangible assets     8.90 %     8.75 %     8.87 %     9.13 %     9.29 %

    For the Three Months Ended  
    September 30, 2018     September 30, 2017  
    Average
Balance (1)
    Income/
Expense
    Yields/
Rates
    Average
Balance (1)
    Income/
Expense
    Yields/
Rates
 
       
    (dollars in thousands)  
Assets                                                
Investment securities   $ 189,448     $ 1,289       2.72 %   $ 111,306     $ 543       1.95 %
Loans (2)     1,204,122       15,113       5.02 %     1,104,259       13,070       4.73 %
Interest bearing deposits due from other
  banks
    62,560       249       1.59 %     41,187       102       0.99 %
Total interest-earning assets   $ 1,456,130     $ 16,651       4.57 %   $ 1,256,752     $ 13,715       4.37 %
                                                 
Allowance for loan losses     (15,445 )                     (13,517 )                
Other assets     58,921                       59,186                  
Total assets   $ 1,499,606                     $ 1,302,421                  
                                                 
Liabilities                                                
Savings, NOW, money market, interest
  checking
  $ 276,468       907       1.31 %   $ 224,819       387       0.69 %
Time deposits     830,168       4,073       1.96 %     679,324       2,721       1.60 %
Total interest-bearing deposits   $ 1,106,636     $ 4,980       1.80 %   $ 904,143     $ 3,108       1.38 %
Other borrowings     839       10       4.61 %     1,384       20       5.82 %
FHLB advances     92,443       401       1.74 %     136,561       491       1.44 %
Junior subordinated debentures     44,659       656       5.88 %     15,506       135       3.48 %
Total interest-bearing liabilities   $ 1,244,577     $ 6,047       1.94 %   $ 1,057,594     $ 3,754       1.42 %
                                                 
Non-interest-bearing deposits     97,947                       96,717                  
Other liabilities     9,136                       8,995                  
Total liabilities   $ 1,351,660                     $ 1,163,306                  
                                                 
Shareholders’ equity     147,946                       139,115                  
Total liabilities and equity   $ 1,499,606                     $ 1,302,421                  
                                                 
Net interest income           $ 10,604                     $ 9,961          
Interest rate spread (3)                     2.63 %                     2.95 %
Net interest margin (4)                     2.89 %                     3.17 %
Ratio of interest-earning assets to interest-
  bearing liabilities
    1.17                       1.19                  

(1) Average balances are calculated on amortized cost.
(2) Includes loan fee income, nonaccruing loan balances, and interest received on such loans.
(3) Interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.
(4) Net interest margin represents net interest income divided by average total interest-earning assets.

       
     For the Nine Months Ended  
    September 30, 2018     September 30, 2017  
    Average
Balance (1)
    Income/
Expense
    Yields/
Rates
    Average
Balance (1)
    Income/
Expense
    Yields/
Rates
 
       
    (dollars in thousands)  
Assets                                                
Investment securities   $ 161,869     $ 3,074       2.53 %   $ 114,528     $ 1,608       1.87 %
Loans (2)     1,188,541       43,170       4.84 %     1,070,840       36,952       4.60 %
Interest bearing deposits due from other
  banks
    77,190       863       1.49 %     40,800       243       0.80 %
Total interest-earning assets   $ 1,427,600     $ 47,107       4.40 %   $ 1,226,168     $ 38,803       4.22 %
                                                 
Allowance for loan losses     (14,712 )                     (13,575 )                
Other assets     55,963                       54,906                  
Total assets   $ 1,468,851                     $ 1,267,499                  
                                                 
Liabilities                                                
Savings, NOW, money market, interest
  checking
  $ 279,820       2,355       1.12 %   $ 239,365       1,113       0.62 %
Time deposits     797,459       11,021       1.84 %     644,472       7,238       1.50 %
Total interest-bearing deposits   $ 1,077,279     $ 13,376       1.66 %   $ 883,837     $ 8,351       1.26 %
Other borrowings     1,094       40       4.86 %     1,618       71       5.84 %
FHLB advances     110,009       1,342       1.63 %     128,093       1,285       1.34 %
Junior subordinated debentures     28,682       1,137       5.29 %     15,482       380       3.27 %
Total interest-bearing liabilities   $ 1,217,064     $ 15,895       1.74 %   $ 1,029,030     $ 10,087       1.30 %
                                                 
Non-interest-bearing deposits     98,393                       93,323                  
Other liabilities     8,415                       8,665                  
Total liabilities   $ 1,323,872                     $ 1,131,018                  
                                                 
Shareholders’ equity     144,979                       136,481                  
Total liabilities and equity   $ 1,468,851                     $ 1,267,499                  
                                                 
Net interest income           $ 31,212                     $ 28,716          
Interest rate spread (3)                     2.66 %                     2.92 %
Net interest margin (4)                     2.92 %                     3.12 %
Ratio of interest-earning assets to interest-
  bearing liabilities
    1.17                       1.19                  

(1) Average balances are calculated on amortized cost.
(2) Includes loan fee income, nonaccruing loan balances, and interest received on such loans.
(3) Interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.
(4) Net interest margin represents net interest income divided by average total interest-earning assets.