Market Overview

Level One Bancorp, Inc. reports first quarter 2018 net income of $3.2 million, representing $0.47 of earnings per diluted average share

Share:

FARMINGTON HILLS, Mich., May 15, 2018 (GLOBE NEWSWIRE) -- Level One Bancorp, Inc. ("Level One") (NASDAQ:LEVL) today reported net income of $3.2 million, or $0.47 per diluted share, in the first quarter of 2018. This compares with net income of $933 thousand, or $0.14 per diluted share, in the preceding quarter and $2.8 million, or $0.42 per diluted share, in the first quarter of 2017.

Recent Developments

Initial Public Offering: On April 24, 2018, Level One completed its initial public offering.  In the offering, Level One sold 1,150,765 shares, including 180,000 shares of common stock pursuant to the exercise in full by the underwriters of their option to purchase additional shares, at an initial public offering price of $28.00 per share. The selling shareholders sold an additional 229,235 shares of common stock in the offering at the initial public offering price. Level One did not receive any proceeds from the sale of shares of common stock sold by the selling shareholders in the offering.  The shares began trading on the Nasdaq Global Select Market on Friday, April 20, 2018, under the symbol "LEVL".

First Dividend Payout: On March 15, 2018, the Company's Board of Directors declared a quarterly cash dividend of $0.03 per share. This dividend was paid out on April 16, 2018, to stockholders of record at the close of business on March 31, 2018.

First Quarter Financial Highlights

  • Net income was $3.2 million, or $0.47 per diluted share, for the three months ended March 31, 2018
  • Pre-tax income increased 17.23% to $3.8 million, compared to $3.3 million in the preceding quarter
  • Net interest margin was 4.03% compared to 4.01% in the preceding quarter and 4.34% in the first quarter of 2017
  • Annualized return on average assets was 1.00%, compared to 0.96% in the first quarter of 2017
  • Annualized return on average equity was 11.64%, compared to 11.28% in the first quarter of 2017
  • Total assets increased 11.19% to $1.30 billion at March 31, 2018, compared to $1.17 billion at March 31, 2017
  • Total deposits increased 15.08% to $1.11 billion at March 31, 2018, compared to $966.9 million at March 31, 2017
  • Total loans increased 9.40% to $1.05 billion at March 31, 2018, compared to $961.0 million at March 31, 2017
  • Book value per share increased 7.63% to $16.78 per share compared to $15.59 per share at March 31, 2017
  • Tangible book value per share increased 9.12% to $15.27 per share compared to $13.99 per share at March 31, 2017

Balance Sheet Review

Level One's total assets were $1.30 billion at March 31, 2018, a decrease of $662 thousand, or 0.05%, from December 31, 2017, and up $130.9 million, or 11.19%, from $1.17 billion at March 31, 2017.

The investment securities portfolio was $160.3 million at March 31, 2018, an increase of $9.4 million or 6.21%, from $151.0 million at December 31, 2017, and up $51.9 million, or 47.8%, from $108.5 million at March 31, 2017. The portfolio is mainly comprised of securities issued by state and political subdivisions, collaterized mortgage obligations, mortgage-backed securities and U.S. Treasury securities.

Total loans were $1.05 billion at March 31, 2018, an increase of $16.4 million, or 1.59%, from $1.03 billion at December 31, 2017, and up $90.4 million, or 9.40%, from $961.0 million at March 31, 2017. The growth in total loans compared to December 31, 2017 and March 31, 2017 was primarily due to growth in our commercial real estate and residential real estate loan portfolios.

Total deposits were $1.11 billion at March 31, 2018, an increase of $145.8 million, or 15.08%, compared to $966.9 million at March 31, 2017. Total deposits decreased $7.7 million, or 0.69%, compared to $1.12 billion at December 31, 2017. Total deposit composition at March 31, 2018 consisted of 33% of demand deposit accounts, 25% of savings and money market accounts and 42% of time deposits.

Operating Results

Level One's net interest income before the provision for loan loss increased $123 thousand, or 1.02%, to $12.1 million in the first quarter of 2018, compared to $12.0 million in the preceding quarter, and increased $383 thousand, or 3.26%, compared to $11.7 million in the first quarter of 2017.

Level One's net interest margin was 4.03% in the first quarter of 2018, compared to 4.01% in the preceding quarter and 4.34% in the first quarter of 2017.

Total revenues (net interest income before provision for loan losses, plus noninterest income) increased $101 thousand, or 0.75%, to $13.5 million in the first quarter 2018, compared to $13.4 million in the preceding quarter, and increased $375 thousand, or 2.86%, compared to $13.1 million in the first quarter of 2017.

Level One's first quarter noninterest expenses were $9.1 million, compared to $9.2 million in the preceding quarter and $8.7 million in the first quarter of 2017. The efficiency ratio, which is a measure of operating expenses as a percentage of net interest income and noninterest income, for the first quarter of 2018 was 67.7%, compared to 68.6% for the preceding quarter and 66.1% in the first quarter of 2017.

Level One's income tax provision was $642 thousand, or 16.9% of pretax income, during the three months ended March 31, 2018, as compared to $2.3 million, or 71.3% of pretax income, in the preceding quarter and $1.5 million, or 35.2% of pretax income, in the first quarter of 2017. The decrease in tax expense during the three months ended March 31, 2018, as compared to first quarter 2017 and fourth quarter of 2017, is a result of the change in tax rates due to the enactment of the Tax Cuts and Jobs Act ("TCJA"). The increase in tax expense during the fourth quarter of 2017, as compared to first quarter 2017, was a result of the Company recognizing a $1.3 million tax expense as a result of the TCJA, of which the expense recorded is primarily attributable to the remeasurement of net deferred tax assets.

Asset Quality

Level One's asset quality remained solid during the first quarter of 2018. Total nonperforming assets, consisting of nonaccrual loans and other real estate owned (OREO), were $13.0 million, or 1.23% of total loans, at March 31, 2018, a decrease of $1.7 million from nonperforming assets of $14.7 million, or 1.42% of total loans at December 31, 2017, and a decrease of $3.4 million from nonperforming assets of $16.3 million, or 1.70% of total loans at March 31, 2017. Nonperforming assets as a percentage of total assets were 1.00% at March 31, 2018, compared to 1.13% at December 31, 2017, and 1.40% at March 31, 2017.

Nonaccrual loans decreased by $1.0 million, or 7.63%, to $13.0 million at March 31, 2018, compared to $14.0 million at December 31, 2017. In addition, we had $263 thousand in loans 90 days or more past due and still accruing at March 31, 2018, compared to $440 thousand at December 31, 2017.

Performing troubled debt restructured loans that were not included in nonaccrual loans at March 31, 2018 were $2.4 million, compared to $1.2 million in the preceding quarter. Borrowers who are in financial difficulty and who have been granted concessions that may include interest rate reductions, forbearance agreements, and principal deferral or reduction, are categorized as troubled debt restructured loans.

Net charge offs in the first quarter of 2018 were $755 thousand, or 0.29% of average loans on an annualized basis, compared to $873 thousand, or 0.35% of average loans on an annualized basis for the preceding quarter and $48 thousand, or 0.02% of average loans on an annualized basis at March 31, 2017.

Level One's first quarter provision for loan losses was $554 thousand, compared to $956 thousand in the preceding quarter and $198 thousand in the first quarter of 2017. The allowance for loan losses was $11.5 million, or 1.09% of total loans at March 31, 2018, compared to $11.7 million, or 1.13% of total loans at December 31, 2017, and $11.2 million, or 1.17% of total loans at March 31, 2017. As of March 31, 2018, the allowance for loan losses as a percentage of nonperforming loans was 88.67%, compared to 83.38% at December 31, 2017, and 71.04% at March 31, 2017.

Capital

Total shareholders' equity was $110.5 million at March 31, 2018, an increase of $2.6 million, or 2.37%, compared with $108.0 million at December 31, 2017 and increased $10.9 million, or 10.97%, from $99.6 million at March 31, 2017.

The tier 1 leverage, common equity tier 1, and total capital ratios were 8.15%, 9.47%, and 11.87%, respectively, at March 31, 2018, compared to 7.92%, 9.10%, and 11.55% at December 31, 2017 and 9.02%, 10.18%, and 11.28% at March 31, 2017, respectively.

About Level One Bancorp, Inc.

Level One Bancorp, Inc. is the holding company for Level One Bank, a full-service commercial and consumer bank headquartered in Michigan with assets of approximately $1.30 billion as of March 31, 2018. It operates twelve banking centers throughout Southeast Michigan and West Michigan.  For more information, visit www.levelonebank.com

Forward-Looking Statements

This release contains forward-looking statements that reflect management's current views of future events and operations. These forward-looking statements are based on the information currently available to the Company as of the date of this release. It is important to note that these forward-looking statements are not guarantees of future performance and involve risk and uncertainties, including, but not limited to, the ability of the Company to implement its strategy and expand its lending operations, as well as other risks described in the Company's filings with the Securities and Exchange Commission. The Company does not undertake any obligation to update or revise any forward-looking statements to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.


SUMMARY CONSOLIDATED FINANCIAL INFORMATION          
   2018    2017    2017  
(Dollars in thousands, except per share data) 1st Qtr   4th Qtr   1st Qtr  
Earnings Summary            
Interest income $   14,774   $   14,378   $   13,447  
Interest expense     2,647       2,374       1,703  
Net interest income     12,127       12,004       11,744  
Provision for loan losses     554       956       198  
Noninterest income     1,372       1,394       1,380  
Noninterest expense     9,135       9,193       8,677  
Income before income taxes     3,810       3,250       4,249  
Income tax provision     642       2,317       1,497  
Net income     3,168       933       2,752  
             
Per Share Data            
Basic earnings per common share $   0.48   $   0.15   $   0.43  
Diluted earnings per common share     0.47       0.14       0.42  
Book value per common share     16.78       16.78       15.59  
Tangible book value per share (1)     15.27       15.21       13.99  
Shares outstanding (in thousands)     6,585       6,435       6,387  
Average basic common shares (in thousands)     6,539       6,403       6,368  
Average diluted common shares (in thousands)     6,699       6,630       6,603  
             
Selected Period End Balances            
Total assets     1,300,629   $   1,301,291   $   1,169,759  
Securities available-for-sale     160,349       150,969       108,497  
Total loans     1,051,354       1,034,923       960,990  
Total deposits     1,112,644       1,120,382       966,858  
Total liabilities     1,190,106       1,193,331       1,070,160  
Total shareholders' equity     110,523       107,960       99,599  
Tangible shareholders' equity (1)     100,524       97,906       89,369  
             
Performance and Capital Ratios            
Return on average assets     1.00       0.29       0.96 %
Return on average equity     11.64       3.40       11.28  
Net interest margin (fully taxable equivalent) (2)     4.03       4.01       4.34  
Total shareholders' equity to total assets     8.50       8.30       8.51  
Tangible equity to tangible assets (1)     7.79       7.58       7.71  
Common equity tier 1 capital     9.47       9.10       8.92  
Tier 1 leverage ratio     8.15       7.92       7.89  
Tier 1 risk-based capital     9.47       9.10       8.92  
Total risk-based capital     11.87       11.55       11.48  
             
Asset Quality Ratios:            
Net charge-offs (recoveries) to average loans     0.29       0.35       0.02 %
Nonperforming assets as a percentage of total assets     1.00       1.13       1.40  
Nonperforming loans as a percent of total loans     1.23       1.36       1.65  
Allowance for loan losses as a percentage of period-end loans     1.09       1.13       1.17  
Allowance for loan losses as a percentage of nonperforming loans     88.67       83.38       71.04  
Allowance for loan losses as a percentage of nonperforming loans, excluding allowance allocated to loans accounted for under ASC 310-30     80.36       75.68       65.70  
                   
(1) See section entitled "GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures" below.
(2) Presented on a tax equivalent basis using a 35% tax rate for 2017 time periods and 21% tax rate for Q1 2018.
 


GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures

Some of the financial measures included in this earnings release are not measures of financial performance recognized by GAAP. These non-GAAP financial measures include tangible shareholders' equity, tangible book value per share and the ratio of tangible shareholders' equity to tangible assets. Our management uses these non-GAAP financial measures in its analysis of our performance, and we believe financial analysts and others frequently use these measures, and other similar measures, to evaluate capital adequacy. We calculate: (i) tangible shareholders' equity as total shareholders' equity less core deposit intangibles and goodwill; (ii) tangible book value per share as tangible shareholders' equity divided by shares of common stock outstanding; and (iii) tangible assets as total assets, less core deposit intangibles, less goodwill.

The following presents these non-GAAP financial measures along with their most directly comparable financial measure calculated in accordance with GAAP:

Level One Bancorp, Inc.          
Reconciliation of Non-GAAP Financial Measures        
(Unaudited)          
  2018   2017   2017
(Dollars in thousands, except per share data) 1st Qtr   4th Qtr   1st Qtr
           
Total shareholders' equity $ 110,523     $ 107,960     $ 99,599  
Less:          
Goodwill 9,387     9,387     9,387  
Core deposit intangibles 612     667     843  
Tangible shareholders' equity $ 100,524     $ 97,906     $ 89,369  
           
Shares outstanding (in thousands)   6,585       6,435       6,387  
Tangible book value per share $ 15.27     $ 15.21     $ 13.99  
           
Total assets $ 1,300,629     $ 1,301,291     $ 1,169,759  
Less:          
Goodwill 9,387     9,387     9,387  
Core deposit intangibles 612     667     843  
Tangible assets $ 1,290,630     $ 1,291,237     $ 1,159,529  
           
Tangible equity to tangible assets 7.79 %   7.58 %   7.71 %
                 


Level One Bancorp, Inc.          
Consolidated Balance Sheets
(Unaudited)          
  March 31,   December 31,   March 31,
(Dollars in thousands, except share data) 2018   2017   2017
           
Assets          
Cash and cash equivalents $ 39,882     $ 63,661     $ 52,895  
Securities available-for-sale 160,349     150,969     108,497  
Federal Home Loan Bank stock 8,303     8,303     8,303  
Mortgage loans held for sale, at fair value 1,871     4,548     1,346  
Loans:          
Originated loans 946,179     920,895     818,101  
Acquired loans 105,175     114,028     142,889  
Total loans 1,051,354     1,034,923     960,990  
Less: Allowance for loan losses (11,506 )   (11,713 )   (11,239 )
    Net loans 1,039,848     1,023,210     949,751  
Premises and equipment, net 13,282     13,435     15,568  
Goodwill 9,387     9,387     9,387  
Other intangible assets, net 612     667     843  
Bank-owned life insurance 11,622     11,542     11,294  
Income tax benefit 3,026     3,102     3,836  
Other assets 12,447     12,467     8,039  
Total assets $ 1,300,629     $ 1,301,291     $ 1,169,759  
Liabilities          
Deposits:          
Noninterest-bearing demand deposits $ 298,917     $ 324,923     $ 271,216  
Interest-bearing demand deposits 68,479     62,644     56,981  
Money market and savings deposits 278,042     289,363     294,730  
Time deposits 467,206     443,452     343,931  
Total deposits 1,112,644     1,120,382     966,858  
Borrowings 52,783     47,833     70,861  
Subordinated notes 14,853     14,844     24,300  
Other liabilities 9,826     10,272     8,141  
Total liabilities 1,190,106     1,193,331     1,070,160  
Shareholders' equity          
Common stock:          
Authorized - 20,000,000 shares at 3/31/2018, 12/31/2017 and 3/31/2017          
Issued and outstanding - 6,584,676 shares at 3/31/2018, 6,435,461 shares at 12/31/2017 and 6,387,209 shares at 3/31/2017 60,886     59,511     58,503  
Retained earnings 52,568     49,232     42,143  
Accumulated other comprehensive loss, net of tax (2,931 )   (783 )   (1,047 )
Total shareholders' equity 110,523     107,960     99,599  
Total liabilities and shareholders' equity $ 1,300,629     $ 1,301,291     $ 1,169,759  
 


Level One Bancorp, Inc.      
Consolidated Statements of Income          
(Unaudited)          
  Three months ended March 31,
(In thousands, except per share data) 2018   2017
Interest income          
Originated loans, including fees $ 11,178   $ 9,354
Acquired loans, including fees 2,426   3,393
Securities:      
Taxable 574   414
Tax-exempt 351   171
Federal funds sold and other 245   115
Total interest income 14,774   13,447
Interest Expense      
Deposits 2,178   1,277
Borrowed funds 219   176
Subordinated notes 250   250
Total interest expense 2,647   1,703
Net interest income 12,127   11,744
Provision for loan losses 554   198
Net interest income after provision for loan losses 11,573   11,546
Noninterest income      
Service charges on deposits 642   580
Net gain on sale of residential mortgage loans 236   299
Net gain on sale of commercial loans -   146
Other charges and fees 494   355
Total noninterest income 1,372   1,380
Noninterest expense      
Salary and employee benefits 5,956   5,271
Occupancy and equipment expense 1,046   1,012
Professional service fees 266   540
Marketing expense 142   247
Printing and supplies expense 104   113
Data processing expense 436   413
Other expense 1,185   1,081
Total noninterest expense 9,135   8,677
Income before income taxes 3,810   4,249
Income tax provision 642   1,497
Net income $ 3,168   $ 2,752
Earnings per common share:      
Basic $ 0.48   $ 0.43
Diluted $ 0.47   $ 0.42
Average common shares outstanding - basic 6,539   6,368
Average common shares outstanding - diluted 6,699   6,603
       


Level One Bancorp, Inc.                      
Net Interest Income and Net Interest Margin                  
(Unaudited) For the three months ended,
  March 31, 2018   December 31, 2017   March 31, 2017
(Dollars in thousands) Average
Balance
Interest
(1)
Average
Rate (2)
  Average
Balance
Interest
(1)
Average
Rate (2)
  Average
Balance
Interest
(1)
Average
Rate (2)
Interest-earning assets:                      
Gross loans (3) $ 1,037,045   $ 13,604   5.32 %   $ 1,010,229   $ 13,337   5.24 %   $ 961,479   $ 12,747   5.38 %
Investment securities (4):                      
Taxable 102,135   574   2.28     98,045   508   2.06     78,464   414   2.14  
Tax-exempt 54,996   351   3.16     50,568   314   3.58     28,705   171   3.53  
Interest earning cash balances 27,090   106   1.59     36,953   125   1.34     27,439   59   0.87  
Federal Home Loan Bank Stock 8,303   139   6.78     8,303   94   4.49     7,738   56   2.95  
Total interest-earning assets 1,229,569   14,774   4.90     1,204,098   14,378   4.74     1,103,825   13,447   4.94  
Non-earning assets:                      
  Cash and due from banks 18,531         17,885         18,336      
  Premises and equipment 13,362         13,620         15,631      
  Goodwill 9,387         9,387         9,387      
  Other intangible assets, net 644         700         878      
  Company-owned life insurance 11,570         11,489         11,241      
  Allowance for loan losses (11,822 )       (11,577 )       (11,168 )    
  Other non-earning assets 12,195         13,669         10,347      
  Total assets $ 1,283,436         $ 1,259,271         $ 1,158,477      
Interest-bearing liabilities:                      
  Interest-bearing demand deposits $ 63,501   $ 51   0.33 %   $ 61,817   $ 50   0.32 %   $ 57,464   $ 39   0.27 %
  Money market and savings deposits 273,699   548   0.81     244,792   421   0.68     287,154   374   0.53  
  Time deposits 456,555   1,579   1.40     441,090   1,465   1.32     317,690   864   1.10  
  Subordinated Debt 14,844   250   6.83     14,835   255   6.85     14,791   250   6.86  
  Borrowings 56,819   219   1.56     56,550   183   1.28     105,446   176   0.68  
  Total interest-bearing liabilities 865,418   2,647   1.24     819,084   2,374   1.15     782,545   1,703   0.88  
Noninterest-bearing liabilities and shareholders' equity:                      
  Noninterest bearing demand deposits 298,681         321,426         268,286      
  Other liabilities 8,931         10,004         8,716      
  Shareholders' equity 110,406         108,757         98,930      
  Total liabilities and shareholders' equity $ 1,283,436         $ 1,259,271         $ 1,158,477      
Net interest income   $ 12,127         $ 12,004         $ 11,744    
Interest spread     3.66         3.59         4.06  
Net interest margin (5)     4.00         3.96         4.31  
Tax equivalent effect     0.03         0.05         0.03  
Net interest margin on a fully tax equivalent basis     4.03         4.01         4.34  
 
(1) Interest income is shown on actual basis and does not include taxable equivalent adjustments.
(2) Average rates and yields are presented on an annual basis and includes a taxable equivalent adjustment to interest income of $78 thousand, $143 thousand and $78 thousand on tax-exempt securities for the three months ended March 31, 2018, December 31, 2017 and March 31, 2017, respectively, using the statutory tax rate of 21% for the 2018 period and 35% for the 2017 periods.
(3) Includes nonaccrual loans.
(4)  For presentation in this table, average balances and the corresponding average rates for investment securities are based upon historical cost, adjusted for amortization of premiums and accretion of discounts.
(5) Net interest margin represents net interest income divided by average total interest-earning assets.
 


Level One Bancorp, Inc.
Loan Composition
(Unaudited)
         
  March 31,   December 31,   March 31,
(Dollars in thousands) 2018   2017   2017
Commercial real estate          
Non-owner occupied $ 360,014     $ 343,420     $ 330,207  
Owner-occupied   172,608       168,342       165,982  
Total commercial real estate   532,622       511,762       495,979  
Commercial and industrial   371,464       377,686       347,708  
Residential real estate   146,436       144,439       116,120  
Consumer   832       1,036       1,183  
Total loans $ 1,051,354     $ 1,034,923     $ 960,990  

 

Media Contact:
Nicole Ransom
(248) 538-2183

Investor Relations Contact:
Peter Root
(248) 538-2186

Primary Logo

View Comments and Join the Discussion!