County Bancorp, Inc. Announces Record Net Income of $14.3 Million for the Year 2018

February 11, 2019

Highlights

Net income of $2.8 million for the fourth quarter of 2018 and $14.3 million for the year 2018
Diluted earnings per share of $0.40 for the fourth quarter of 2018 and $2.04 for the year 2018
Book value per share of $21.48 as of December 31, 2018, an increase of $1.55, or 7.8%, since December 31, 2017
Gross loans serviced increased $20.7 million during the fourth quarter of 2018, an increase of 1.1%, and $119.4 million during the year 2018, an increase of 6.8%
Core deposit growth of $36.3 million during the fourth quarter of 2018, an increase of 5.1%, and $69.3 million during the year 2018, an increase of 10.1%

MANITOWOC, Wis., Feb. 11, 2019 (GLOBE NEWSWIRE) — County Bancorp, Inc. (Nasdaq: ICBK), the holding company of Investors Community Bank (the “Bank”), an agricultural and commercial community bank headquartered in Manitowoc, Wisconsin, reported net income of $2.8 million, or $0.41 diluted earnings per share, for the fourth quarter of 2018, compared to net income of $3.5 million, or $0.50 diluted earnings per share, for the third quarter of 2018 and $2.1 million, or $0.30 diluted earnings per share, for the fourth quarter of 2017. Net income for the year ended December 31, 2018 was $14.3 million, or $2.04 diluted earnings per share, compared to $10.4 million for the year ended December 31, 2017, or $1.49 diluted earnings per share, an increase of 36.7%. This represents a return on average assets of 0.96% for the year ended December 31, 2018, compared to 0.80% for the year ended December 31, 2017.

“We are very pleased that we continue to produce solid year-over-year earnings, even with the challenges in the dairy sector,” stated Tim Schneider, President of County Bancorp, Inc. and CEO of the Bank.

“With the dairy challenges and a flattening to inverted yield curve, we are going to take 2019 to manage our growth and work on the right side of our balance sheet. We plan to reduce our overall credit exposure during the first half of 2019 and continue to focus on core deposit generation. This will allow us to work aggressively to reduce our wholesale funding during 2019. We anticipate another challenging year on the credit side with our classified assets continuing to increase. We still believe that our classified asset levels are protected overall by the use of Farm Service Agency guarantees on many of our agricultural credits.”

Loans and Total Assets

Total assets at December 31, 2018 were $1.5 billion, an increase of $5.9 million, or 0.4%, and $123.8 million, or 8.9%, over total assets as of September 30, 2018 and December 31, 2017, respectively. Total loans were $1.2 billion at December 31, 2018, which represents a $58.3 million, or 5.1%, increase over total loans at December 31, 2017. Loan growth in the fourth quarter of 2018 was $4.4 million, an increase of 0.4%, from September 30, 2018.

In addition to on-balance sheet loan growth, participated loans that we continue to service totaled $661.3 million at December 31, 2018, which is an increase of $60.1 million, or 10.1%, over participated loans that we continued to service at December 31, 2017. During the fourth quarter of 2018, participated loans that we continue to service increased $16.4 million, or 2.5%, over loans sold and serviced as of September 30, 2018.

Deposits

Total deposits at December 31, 2018 were $1.2 billion, an increase of $14.6 million, or 1.2%, and $113.3 million, or 10.2%, over total deposits as of September 30, 2018 and December 31, 2017, respectively. Core deposit (demand deposits, money market accounts, and certificates of deposit) increased $69.3 million, or 10.1%, since December 31, 2017, and increased $36.3, or 5.1%, in the fourth quarter 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 December 31, 2018 were $468.9 million, which was a decrease of $21.8 million, or 4.4%, from September 30, 2018, but was an increase of $43.9 million, or 10.3%, from December 31, 2017.

Due to our deposit growth in 2018, we have been able to decrease our FHLB borrowings by $13.0 million, or 12.7%, since September 30, 2018, and by $32.1 million, or 26.4%, since December 31, 2017.

Net Interest Income and Margin

Net interest income improved to $10.7 million for the three months ended December 31, 2018, which was a $0.1 million, or 1.3%, and $0.5 million, or 5.5%, increase from the three months ended September 30, 2018 and the three months ended December 31, 2017, respectively, primarily due to growth in loans and securities available for sale.

For the year ended December 31, 2018, net interest income improved 8.0% to $42.0 million from $38.9 million for the year ended December 31, 2017. The increase was primarily due to loan growth and purchases of securities available for sale, which was partially offset by interest expense on subordinated debt issued in 2018 and increased rates paid on deposit accounts.

Net interest margin was 2.91% for the three months ended December 31, 2018, which was an increase from 2.89% for the three months ended September 30, 2018, and a decrease from 3.06% for the three months ended December 31, 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. Year-over-year fourth quarter net interest margin decreased by fifteen 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 and a forty-eight basis point increase in cost of funds, which was partially offset by a forty basis point improvement in loan yields.

For the year ended December 31, 2018, net interest margin decreased to 2.91% from 3.11% for the year ended December 31, 2017. Yields on interest earning assets increased by 0.22% between the two years while the cost of interest bearing liabilities increased by 0.47% between the same periods.

Non-Interest Income and Expense

Non-interest income for the three months ended December 31, 2018 increased by $0.2 million, or 7.6%, to $2.3 million compared to the three months ended September 30, 2018, primarily the result of increased loan servicing rights and fees related to increased volume in loans being serviced.

Non-interest income for the three months ended December 31, 2018 increased $0.3 million, or 16.3%, to $2.3 million compared to $2.0 million for the three months ended December 31, 2017. For the year ended December 31, 2018, non-interest income increased $1.2 million, or 15.4%, to $8.8 million from the year ended December 31, 2017. Both the quarterly and annual 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 December 31, 2018 increased by $0.5 million, or 7.3%, to $7.5 million compared to the three months ended September 30, 2018, and increased $0.4 million, or 5.2% compared to the three months ended December 31, 2017. The increase was primarily due $0.7 million write-downs on two OREO properties, which was partially offset by a decrease in employee compensation in benefits related to a one-time employment contract payment of $0.2 million that took place in the third quarter.

For the year ended December 31, 2018, non-interest expense increased $2.3 million, or 8.8%, to $28.3 million compared to the year ended December 31, 2017. The increase is primarily made up of a $1.3 million related to increases in employee compensation and benefits in connection with eight new positions, a $0.4 million increase in occupancy expenses related to relocating our corporate headquarters, and a $0.5 million increase in information processing related to technology investments and implementations made throughout 2018.

The effective tax rate for the year ended December 31, 2018 was 26.2% compared to 42.8% for the year ended December 31, 2017. The decline in effective tax rate resulted in a $2.7 million decrease in income tax expense year-over-year, and was the result of the tax reform that was enacted on December 22, 2017.

Asset Quality

Non-performing assets as a percent of total assets decreased to 1.94% at December 31, 2018, from 2.36% at September 30, 2018, but increased from 1.15% at December 31, 2017. At December 31, 2018, non-performing assets were $29.6 million, down from $35.7 million at September 30, 2018, but up from $16.1 million at December 31, 2017. During the fourth quarter of 2018, non-performing loans decreased $4.9 million due $1.2 million in charge-offs and $3.7 million in loan payments and collection of collateral. During the fourth quarter, two OREO properties were written-down and one Farm Service Agency guarantee payment was received, resulting in a decrease of $1.7 million in OREO during the quarter ended December 31, 2018. This decrease was partially offset by the inclusion of $0.4 million of Bank-owned property adjacent to our Stevens Point branch that is now considered classified as OREO due to the Bank’s five-year holding period.

Adverse classified asset ratio (a non-GAAP measure, as calculated on page 10) increased to 57.12% at December 31, 2018 from 51.89% and 51.57% at September 30, 2018 and December 31, 2017, respectively, as the result of the strained agricultural economy and the four-year sustained low prices of class III milk.

A provision for loan losses of $1.6 million was recorded for the three months ended December 31, 2018 compared to a provision of $0.9 million and $12 thousand for the three months ended September 30, 2018 and December 31, 2017, respectively. The increased provision is directly related to an increase in historical loss history from the $1.2 million charge-offs that occurred during the fourth quarter.

For the year ended December 31, 2018, the provision for loan losses was $3.2 million compared to $2.3 million for the year ended December 31, 2017. The increase in provision expense year-over-year was primarily the result of an increase of substandard loans totaling $37.7 million between December 31, 2017 and December 31, 2018.

Conference Call

County Bancorp, Inc. will host an earnings call on today, February 11, 2019, at 11:30 a.m., CST, conducted by Tim Schneider, President, 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 Bancorp’s website at http://www.investorscommunitybank.com and then clicking on the link “Investor Relations.” Investors should visit County Bancorp’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 February 11, 2020, by visiting the County Bancorp’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)	December 31, 2018			September 30, 2018			June 30, 2018			March 31, 2018			December 31, 2017

	(dollars in thousands, except per share data)
Period-End Balance Sheet:
Assets
Cash and cash equivalents	$	61,087		$	49,996		$	81,044		$	90,676		$	66,771
Securities available for sale, at fair value		195,945			190,185			187,505			141,360			126,030
Loans held for sale		2,949			13,770			11,468			6,407			6,575
Agricultural loans		724,508			714,310			702,426			698,106			686,430
Commercial loans		415,672			417,146			407,609			406,096			407,036
Multi-family real estate loans		62,321			66,403			65,713			54,514			49,133
Residential real estate loans		4,522			4,965			5,437			5,512			6,005
Installment and consumer other		272			113			339			297			347
Total loans		1,207,295			1,202,937			1,181,524			1,164,525			1,148,951
Allowance for loan losses		(16,505	)		(16,143	)		(15,129	)		(14,612	)		(13,247	)
Net loans		1,190,790			1,186,794			1,166,395			1,149,913			1,135,704
Other assets		70,057			74,223			72,465			71,901			61,965
Total Assets	$	1,520,828		$	1,514,968		$	1,518,877		$	1,460,257		$	1,397,045

Liabilities and Shareholders’ Equity
Demand deposits	$	121,436		$	103,862		$	95,459		$	101,167		$	125,584
NOW accounts and interest checking		51,779			46,811			51,674			48,212			51,613
Savings		5,770			6,616			6,833			6,189			6,751
Money market accounts		218,929			208,233			204,332			199,834			199,118
Time deposits		356,484			352,531			344,619			314,766			302,004
Brokered deposits		308,504			317,291			323,561			319,692			282,616
National time deposits		160,445			173,440			183,953			182,530			142,391
Total deposits		1,223,347			1,208,784			1,210,431			1,172,390			1,110,077
FHLB advances		89,400			102,400			108,200			120,500			121,500
Subordinated debentures		44,703			44,663			44,725			15,540			15,523
Other liabilities		11,293			11,134			9,439			9,013			8,959
Total Liabilities		1,368,743			1,366,981			1,372,795			1,317,443			1,256,059

Shareholders’ equity		152,085			147,987			146,082			142,814			140,986
Total Liabilities and Shareholders’ Equity	$	1,520,828		$	1,514,968		$	1,518,877		$	1,460,257		$	1,397,045

Stock Price Information:
High – Quarter-to-date	$	26.00		$	28.20		$	29.26		$	33.76		$	33.94
Low – Quarter-to-date	$	17.37		$	24.29		$	25.72		$	26.61		$	27.77
Market price – Quarter-end	$	17.37		$	25.10		$	27.50		$	29.21		$	29.76
Book value per share	$	21.48		$	20.91		$	20.63		$	20.17		$	19.93
Tangible book value per share ⁽¹⁾	$	20.65		$	20.07		$	19.77		$	19.29		$	19.04
Common shares outstanding		6,709,480			6,694,230			6,693,447			6,684,923			6,673,381

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

	December 31, 2018			September 30, 2018			June 30, 2018			March 31, 2018			December 31, 2017

	(dollars in thousands)
Loans by risk category:
Sound/Acceptable/Satisfactory/ Low Satisfactory	$	908,172		$	901,643		$	896,509		$	891,062		$	873,801
Watch		171,670			171,890			186,399			185,179			183,022
Special Mention		6,566			11,036			4,783			5,636			8,902
Substandard Performing		65,501			61,851			46,751			45,261			50,224
Substandard Impaired		55,386			56,517			47,082			37,387			33,002
Total loans		1,207,295			1,202,937			1,181,524			1,164,525			1,148,951
Loan sold with servicing retained		661,257			644,879			628,435			611,358			600,666
Total loans and loans sold with servicing retained	$	1,868,552		$	1,847,816		$	1,809,959		$	1,775,883		$	1,749,617

Non-Performing Assets:
Nonaccrual loans	$	22,983		$	27,881		$	26,305		$	17,746		$	11,559
Other real estate owned⁽²⁾		6,568			7,851			8,607			8,982			4,565
Total non-performing assets	$	29,551		$	35,732		$	34,912		$	26,728		$	16,124

Performing TDRs not on nonaccrual	$	18,258		$	11,863		$	11,173		$	10,488		$	9,019

Non-performing assets as a % of total loans		2.45	%		2.97	%		2.95	%		2.30	%		1.40	%
Non-performing assets as a % of total assets		1.94	%		2.36	%		2.30	%		1.83	%		1.15	%
Adverse classified asset ratio ⁽¹⁾		57.12	%		51.89	%		47.34	%		53.44	%		51.57	%
Allowance for loan losses as a % of nonaccrual loans		71.81	%		57.90	%		57.51	%		82.34	%		114.60	%
Allowance for loan losses as a % of total loans		1.37	%		1.34	%		1.28	%		1.25	%		1.15	%
Net charge-offs (recoveries) quarter-to-date	$	1,210		$	(21	)	$	16		$	(1,268	)	$	390
Provision for loan loss quarter-to-date	$	1,572		$	993		$	533		$	97		$	12

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

(2)For the quarters ending December 31, 2017 through September 30, 2018, does not include $0.4 million of bank property transferred from premises and equipment, which is not considered a non-performing asset. As of December 31, 2018, that bank property is considered classified due to the length of the holding period.

	For the Three Months Ended														For the Year Ended
	December 31, 2018			September 30, 2018			June 30, 2018			March 31, 2018		December 31, 2017			December 31, 2018			December 31, 2017

	(dollars in thousands, except per share data)
Selected Income Statement Data:
Interest and Dividend Income
Loans, including fees	$	15,536		$	15,113		$	14,366		$	13,691	$	13,443		$	58,706		$	50,395
Taxable securities		1,168			945			982			632		462			3,727			1,808
Tax-exempt securities		183			344			14			157		88			698			350
Federal funds sold and other		223			249			401			213		256			1,086			499
Total interest and dividend income		17,110			16,651			15,763			14,693		14,249			64,217			53,052

Interest Expense
Deposits		5,273			4,980			4,600			3,796		3,464			18,649			11,815
FHLB advances and other borrowed funds		427			411			487			484		481			1,809			1,837
Subordinated debentures		667			656			338			143		135			1,804			515
Total interest expense		6,367			6,047			5,425			4,423		4,080			22,262			14,167
Net interest income		10,743			10,604			10,338			10,270		10,169			41,955			38,885
Provision for loan losses		1,572			993			533			97		12			3,195			2,330
Net interest income after provision for loan losses		9,171			9,611			9,805			10,173		10,157			38,760			36,555

Non-Interest Income
Services charges		470			394			445			365		332			1,674			1,406
Gain on sale of loans, net		54			41			45			32		22			172			118
Loan servicing fees		1,553			1,521			1,486			1,452		1,483			6,012			5,799
Loan servicing rights		7			(46	)		127			10		(37	)		98			(315	)
Income on OREO		83			96			45			32		16			256			73
Other		153			151			168			149		178			621			572
Total non-interest income		2,320			2,157			2,316			2,040		1,994			8,833			7,653

Non-Interest Expense
Employee compensation and benefits		4,059			4,394			4,114			4,218		3,702			16,785			15,437
Occupancy		245			332			278			204		135			1,059			654
Information processing		641			529			529			465		423			2,164			1,632
Professional fees		497			351			359			315		406			1,522			1,657
Business development		259			258			260			299		210			1,076			941
OREO expenses		106			46			152			140		17			444			174
Writedown of OREO		688			81			104			–		820			873			905
Net loss (gain) on OREO		(54	)		(28	)		(149	)		–		10			(231	)		(353	)
Depreciation and amortization		408			302			324			314		319			1,348			1,307
Other		689			758			966			830		1,123			3,243			3,638
Total non-interest expense		7,538			7,023			6,937			6,785		7,165			28,283			25,992
Income before income taxes		3,953			4,745			5,184			5,428		4,986			19,310			18,216
Income tax expense		1,123			1,228			1,334			1,374		2,855			5,059			7,791
NET INCOME	$	2,830		$	3,517		$	3,850		$	4,054	$	2,131		$	14,251		$	10,425

Basic	$	0.41		$	0.51		$	0.56		$	0.59	$	0.31		$	2.06		$	1.52
Diluted	$	0.40		$	0.50		$	0.55		$	0.58	$	0.30		$	2.04		$	1.49
Dividends declared	$	0.07		$	0.07		$	0.07		$	0.07	$	0.06		$	0.28		$	0.24

	For the Three Months Ended															For the Year Ended
	December 31, 2018			September 30, 2018			June 30, 2018			March 31, 2018			December 31, 2017			December 31, 2018			December 31, 2017

	(dollars in thousands, except share data)
Other Data:
Return on average assets		0.75	%		0.94	%		1.04	%		1.15	%		0.62	%		0.96	%		0.80	%
Return on average shareholders’ equity		7.58	%		9.51	%		10.63	%		11.62	%		6.05	%		9.50	%		7.58	%
Return on average common shareholders’ equity⁽¹⁾		7.70	%		9.75	%		10.96	%		12.04	%		6.12	%		9.74	%		7.77	%
Efficiency ratio ⁽¹⁾		52.85	%		54.62	%		55.18	%		55.12	%		52.11	%		54.42	%		54.63	%
Tangible common equity to tangible assets ⁽¹⁾		9.14	%		8.90	%		8.75	%		8.87	%		9.13	%		9.14	%		9.13	%

Common Share Data:
Net income from continuing operations	$	2,830		$	3,517		$	3,850		$	4,054		$	2,131		$	14,251		$	10,425
Less: Preferred stock dividends		111			106			99			97			96			413			353
Income available to common shareholders	$	2,719		$	3,411		$	3,751		$	3,957		$	2,035		$	13,838		$	10,072

Average number of common shares issued		7,184,946			7,167,276			7,163,362			7,152,970			7,150,424			7,177,212			7,110,099
Less: Weighted average treasury shares		443,694			443,140			442,102			439,833			437,901			442,206			433,976
Less: Weighted average non- vested restricted units awards		28,701			29,537			30,692			34,976			41,217			30,955			40,740
Weighted average number of common shares outstanding		6,712,551			6,694,599			6,690,568			6,678,161			6,671,306			6,704,051			6,635,383
Effect of dilutive options		45,116			63,346			79,368			90,804			97,633			68,876			111,463
Weighted average number of common shares outstanding used to calculate diluted earnings per common share		6,757,667			6,757,945			6,769,936			6,768,965			6,768,939			6,772,927			6,746,846

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

	For the Three Months Ended															For the Year Ended
Non-GAAP Financial Measures:	December 31, 2018			September 30, 2018			June 30, 2018			March 31, 2018			December 31, 2017			December 31, 2018			December 31, 2017

	(dollars in thousands)
Return on average common shareholders’ equity reconciliation:
Return on average shareholders’ equity		7.58	%		9.51	%		10.63	%		11.62	%		6.05	%		9.50	%		7.58	%
Effect of excluding average preferred shareholders’ equity		0.12	%		0.24	%		0.33	%		0.42	%		0.07	%		0.24	%		0.19	%
Return on average common shareholders’ equity		7.70	%		9.75	%		10.96	%		12.04	%		6.12	%		9.74	%		7.77	%

Efficiency ratio GAAP to non-GAAP reconciliation:
Non-interest expense	$	7,538		$	7,023		$	6,937		$	6,785		$	7,165		$	28,283		$	25,992
Less: net gain (loss) on sales and write-downs of OREO		(634	)		(53	)		45			–			(830	)		(642	)		(552	)
Adjusted non-interest expense (non-GAAP)	$	6,904		$	6,970		$	6,982		$	6,785		$	6,335		$	27,641		$	25,440

Net interest income	$	10,743		$	10,604		$	10,338		$	10,270		$	10,169		$	41,955		$	38,885
Non-interest income		2,320			2,157			2,316			2,040			1,994			8,833			7,653
Less: net loss (gain) on sales of securities		–			–			–			–			(6	)		–			31
Operating revenue	$	13,063		$	12,761		$	12,654		$	12,310		$	12,157		$	50,788		$	46,569
Efficiency ratio		52.85	%		54.62	%		55.18	%		55.12	%		52.11	%		54.42	%		54.63	%

	December 31, 2018			September 30, 2018			June 30, 2018			March 31, 2018			December 31, 2017

	(dollars in thousands, except per share data)
Tangible book value per share and tangible common equity to tangible assets reconciliation:
Common equity	$	144,085		$	139,987		$	138,082		$	134,814		$	132,986
Less: Goodwill		5,038			5,038			5,038			5,038			5,038
Less: Core deposit intangible, net of amortization		513			603			701			806			919
Tangible common equity (non-GAAP)	$	138,534		$	134,346		$	132,343		$	128,970		$	127,029
Common shares outstanding		6,709,480			6,694,230			6,693,447			6,684,923			6,673,381
Tangible book value per share	$	20.65		$	20.07		$	19.77		$	19.29		$	19.04

Total assets	$	1,520,828		$	1,514,968		$	1,518,877		$	1,460,257		$	1,397,045
Less: Goodwill		5,038			5,038			5,038			5,038			5,038
Less: Core deposit intangible, net of amortization		513			603			701			806			919
Tangible assets (non-GAAP)	$	1,515,277		$	1,509,327		$	1,513,138		$	1,454,413		$	1,391,088
Tangible common equity to tangible assets		9.14	%		8.90	%		8.75	%		8.87	%		9.13	%

Adverse classified asset ratio:
Substandard loans	$	120,887		$	118,368		$	93,833		$	82,648		$	83,226
Less: Non-impaired restructured loans		(5,078	)		(13,657	)		(2,081	)		(1,164	)		(1,072	)
Net substandard loans	$	115,809		$	104,711		$	91,752		$	81,484		$	82,154
Other real estate owned		6,568			7,851			8,607			8,982			4,565
Substandard unused commitments		1,625			1,191			959			2,309			799
Less: Substandard government guarantees		(7,111	)		(9,374	)		(8,356	)		(3,605	)		(4,289	)
Total adverse classified assets (non-GAAP)	$	116,891		$	104,379		$	92,962		$	89,170		$	83,229

Total equity (Bank)	$	185,458		$	180,359		$	177,911		$	149,105		$	146,937
Unrealized loss on available for sale securities		2,221			4,152			2,795			2,603			627
Allowance for loan losses		16,505			16,143			15,129			14,612			13,247
Allowance for unused commitments		475			510			522			553			564
Adjusted total equity (non-GAAP)	$	204,659		$	201,164		$	196,357		$	166,873		$	161,375
Adverse classified asset ratio		57.12	%		51.89	%		47.34	%		53.44	%		51.57	%

	For the Three Months Ended
	December 31, 2018								December 31, 2017
	Average Balance⁽¹⁾			Income/ Expense		Yields/ Rates			Average Balance⁽¹⁾			Income/ Expense		Yields/ Rates


	(dollars in thousands)
Assets
Investment securities	$	191,955		$	1,351		2.82	%	$	106,173		$	550		2.07	%
Loans ⁽²⁾		1,207,883			15,536		5.14	%		1,134,822			13,443		4.74	%
Interest bearing deposits due from other banks		67,153			223		1.33	%		88,742			256		1.15	%
Total interest-earning assets	$	1,466,991		$	17,110		4.67	%	$	1,329,737		$	14,249		4.29	%

Allowance for loan losses		(16,034	)							(13,474	)
Other assets		61,316								61,741
Total assets	$	1,512,273							$	1,378,004

Liabilities
Savings, NOW, money market, interest checking	$	287,420			1,043		1.45	%	$	265,309			531		0.80	%
Time deposits		820,515			4,230		2.06	%		713,718			2,933		1.64	%
Total interest-bearing deposits	$	1,107,935		$	5,273		1.90	%	$	979,027		$	3,464		1.42	%
Other borrowings		837			10		4.62	%		1,328			18		5.53	%
FHLB advances		90,509			417		1.84	%		126,261			463		1.47	%
Junior subordinated debentures		44,681			667		5.97	%		15,523			135		3.48	%
Total interest-bearing liabilities	$	1,243,962		$	6,367		2.05	%	$	1,122,139		$	4,080		1.45	%

Non-interest-bearing deposits		108,140								104,718
Other liabilities		10,913								10,242
Total liabilities	$	1,363,015							$	1,237,099

Shareholders’ equity		149,258								140,905
Total liabilities and equity	$	1,512,273							$	1,378,004

Net interest income				$	10,743							$	10,169
Interest rate spread ⁽³⁾							2.62	%							2.84	%
Net interest margin ⁽⁴⁾							2.91	%							3.06	%
Ratio of interest-earning assets to interest- bearing liabilities		1.18								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 Year Ended
	December 31, 2018								December 31, 2017
	Average Balance⁽¹⁾			Income/ Expense		Yields/ Rates			Average Balance⁽¹⁾			Income/ Expense		Yields/ Rates

	(dollars in thousands)
Assets
Investment securities	$	169,302		$	4,425		2.61	%	$	112,439		$	2,158		1.92	%
Loans ⁽²⁾		1,193,254			58,706		4.92	%		1,086,836			50,395		4.64	%
Interest bearing deposits due from other banks		77,545			1,086		1.40	%		52,786			499		0.95	%
Total interest-earning assets	$	1,440,101		$	64,217		4.46	%	$	1,252,061		$	53,052		4.24	%

Allowance for loan losses		(15,037	)							(13,550	)
Other assets		59,291								56,615
Total assets	$	1,484,355							$	1,295,126

Liabilities
Savings, NOW, money market, interest checking	$	282,746			3,398		1.20	%	$	245,851			1,643		0.67	%
Time deposits		801,892			15,251		1.90	%		661,784			10,172		1.54	%
Total interest-bearing deposits	$	1,084,638		$	18,649		1.72	%	$	907,635		$	11,815		1.30	%
Other borrowings		1,027			50		4.81	%		1,545			89		5.77	%
FHLB advances		105,218			1,759		1.67	%		127,635			1,748		1.37	%
Junior subordinated debentures		32,721			1,804		5.51	%		15,492			515		3.32	%
Total interest-bearing liabilities	$	1,223,604		$	22,262		1.82	%	$	1,052,307		$	14,167		1.35	%

Non-interest-bearing deposits		100,819								96,172
Other liabilities		9,883								9,059
Total liabilities	$	1,334,306							$	1,157,538

Shareholders’ equity		150,049								137,588
Total liabilities and equity	$	1,484,355							$	1,295,126

Net interest income				$	41,955							$	38,885
Interest rate spread ⁽³⁾							2.64	%							2.89	%
Net interest margin ⁽⁴⁾							2.91	%							3.11	%
Ratio of interest-earning assets to interest- bearing liabilities		1.18								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.

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