SOURCE: Mackinac Financial Corporation

Mackinac Financial Corporation

November 03, 2016 14:59 ET

Mackinac Financial Corporation Reports Nine Month and Third Quarter Results Following Second Acquisition of 2016

MANISTIQUE, MI--(Marketwired - Nov 3, 2016) - Mackinac Financial Corporation (NASDAQ: MFNC) (the "Corporation"), the bank holding company for mBank, today announced third quarter 2016 net income of $1.778 million, or $.28 per share, compared to net income available to common shareholders of $1.018 million, or $.16 per share for the third quarter of 2015. In connection with the acquisitions of Niagara Bancorporation, Inc. ("Niagara") and First National Bank of Eagle River ("Eagle River"), the Corporation had total GAAP pre-tax transaction related expenses for the third quarter of $.359 million that reduced net income by $.237 million or $.04 per share, on an after tax basis. The adjusted net income for the third quarter of 2016 (exclusive of all transaction related expenses) is $2.015 million, or $.32 per share. 

Operating results for the first nine months of 2016, including transaction related expenses from both Niagara and Eagle River, totaled $2.785 million or $.45 per share compared to $4.003 million or $.64 per share for the same period in 2015. Year-to-date transaction related expenses, largely associated with the early termination of the Eagle River data processing system, totaled $2.928 million with an after-tax impact of $1.932 million on earnings equating to $.31 per share. Adjusted net income for the first nine months of 2016 for the Corporation is $4.718 million, or $.76 per share. 

Total assets of the Corporation at September 30, 2016 were $959.121 million, compared to $754.972 million at September 30, 2015. Shareholders' equity at September 30, 2016 totaled $78.285 million, compared to $76.091 million on September 30, 2015. The book value per share equated to $12.50 on September 30, 2016 compared to $12.18 per share a year ago. Quarter-end tangible book value was $11.23 per and share and market price was $11.49, or 102% of tangible book value. Weighted average shares outstanding totaled 6,226,371 for the first nine months of 2016 compared to 6,247,416 for the same period in 2015.

mBank, the Corporation's subsidiary bank, recorded nine-month adjusted net income of $5.611 million compared to $5.003 million in 2015. Inclusive of $2.512 million of transaction related expenses at the bank ($1.658 million after tax), net income was $3.953 million for the first nine months of 2016. 

Key highlights for the first nine months of 2016 results include:

  • The 2016 acquisitions of Niagara and Eagle River added approximately $194 million in assets, $115 million in loan balances and $163 million in core deposits to the Corporation. Since September 30, 2014 (which is inclusive of the Peninsula Financial Corporation acquisition in December 2014 and organic growth) the company has grown assets approximately $345 million from $613.943 million to the current $959.121 million, an increase of 56%.

  • Healthy new loan production of $206.8 million through September 2016 compared to $175.4 million through September 2015.

  • Total interest income of $27.398 million through September 2016 compared to $25.117 million for the same period in 2015. 

  • Margin remains solid, at 4.21% through disciplined pricing of loan and deposit products. Net interest income increased from $21.755 million in 2015 to $23.980 million in 2016, a 10% increase.

  • Credit quality remains strong with a Texas Ratio of 10.55% compared to 13.41% one year ago, and nonperforming assets of $7.938 million, or .83% of total assets, compared with $10.324 million, or 1.37% of total assets, for the same period in 2015.

  • Increased contribution from secondary mortgage market activity. Income from this source in the 2016 nine-month period totaled $1.118 million compared to $.750 million in the 2015 nine-month period. 

  • Gains on sold SBA (Small Business Administration) loan premiums through September 2016 was $.717 million compared to $.440 million for the same period of 2015.

Loans and Nonperforming Assets

Total loans at September 30, 2016 were $756.804 million, a $136.898 million increase from $619.906 million at September 30, 2015. The Corporation is up $138.410 million, or 22.3%, from year-end 2015 total loans of $618.394 million. In addition to the aforementioned balance sheet totals, the company services $233.356 million of sold mortgage loans and $43.160 million of sold SBA and USDA loans. Total loans under management now total $1.033 billion. 

New loan production totaled $206.777 million with the Upper Peninsula region contributing $127.880 million, the Northern Lower Peninsula $38.479 million, Southeast Michigan $34.099 million and the newly acquired Wisconsin markets $6.319 million. Commercial loan production accounted for $114.842 million of the nine month total, with consumer loans, primarily 1-4 family mortgages, of $91.935 million. Commenting on new loan production and overall lending activities, Kelly W. George, President and CEO of mBank, stated, "We are very pleased with the new loan opportunities and production in all our markets which is up over $31 million from the prior year. Our net loan balances did not quite increase commensurate with production as we experienced some loan portfolio runoff early in the year due, in part, to customers shopping rates that we would not match. The strategic acquisitions of both Eagle River and Niagara have, however, provided loan balance growth and scale as expected. We have a healthy loan pipeline for the remainder of the year for both commercial and mortgage business. As noted in our totals, we are also excited about the momentum in our newly acquired markets in Wisconsin and the new loan generation potential they carry."

Nonperforming loans totaled $4.669 million, .62% of total loans at September 30, 2016, down $3.359 million from September 30, 2015 balances of $8.028 million. Total loan delinquencies greater than 30 days resided at a nominal .65%, or $4.975 million. Mr. George, commenting on credit quality, stated, "Our credit quality risk metrics and overall loan portfolio payment performance remains strong with no systemic issues within any segments of the portfolio. The pick-up in retail segment loans from our two acquisitions this year has also provided increased granularity and better overall diversity for the entire loan portfolio on a macro level. Our credit due diligence and purchase accounting marks on the acquired loan portfolios of Eagle River and Niagara have proven accurate as well, and they are providing accretion at anticipated levels post-closing."

Margin Analysis

In the first nine months of 2016 net interest income and net interest margin were $23.980 million and 4.21%, and $21.755 million and 4.29%, in the first nine months of 2015. The increase in net interest income was largely due to the Niagara and Eagle River acquisitions. The Corporation also had increased net interest contribution due to the accretive attributes associated with the purchase accounting adjustments related to the three acquisitions completed in the past two years. Mr. George stated, "We have been successful in maintaining our strong net interest margin within this historically low interest rate cycle through the use of continued targeted funding strategies and disciplined loan pricing in efforts to mitigate longer term interest rate risk. We continue to look for any loan and investment opportunities that fit our balance sheet structure but will not take unnecessary risk or extend durations in order to enhance short term yields. While we acquired some excess liquidity through the acquisitions and experienced summer seasonal increases in our deposit portfolio, we have been able to normalize the cash position and put those dollars to work funding good loan opportunities. Further, we remain predominantly asset sensitive within our balance sheet structure and expect that upward movements of short term interest rates will be beneficial for future earnings."

Deposits

Total deposits of $807.180 million at September 30, 2016 increased by $184.846 million (including approximately $163 million from the Niagara and Eagle River acquisitions) from deposits of $622.334 million on September 30, 2015 and increased $196.857 million from year end deposits of $610.323 million. Mr. George, commenting on core deposits and overall liquidity, stated. "We proactively review our short and long term funding needs and pricing levels within the different segments of our deposit products in order to best manage our net interest margin while still offering competitive products to our clientele. We will also utilize alternative funding sources such as internet CDs and smaller levels of wholesale deposits when deemed necessary to structure different liabilities to match asset growth durations, and cover any potential short term funding gaps that could arise to protect our balance sheet in various interest rate change scenarios. Through the acquisitions, we have augmented our core deposit base to where our utilization of non-core sources has decreased as a percent of our total assets."

Noninterest Income/Expense

Noninterest income, at $3.012 million in the first nine months of 2016, increased $.265 million from $2.747 million in the first nine months of 2015. The primary reason for the improvement was increased year over year activity in the secondary mortgage market as well as SBA gains. Income from sold secondary mortgages totaled $1.118 million compared to $.750 million in the 2015 nine-month period while SBA gains were $.717 million compared to $.440 million in 2015. Noninterest expense, at $22.376 million in the first nine months of 2015, increased $4.806 million from the first nine months of 2015. The 2016 increase from the first nine months of 2015 was largely attributable to the acquisition costs including the aforementioned termination fee. There were also customary increases in salaries and benefits for new staff, along with increased occupancy expense due to the acquired branch offices. Consistent with management's operating diligence projections prior to both acquisitions, the Corporation has reached the attained levels of overall efficiencies as management looks to grow market presence heading into 2017. Management remains diligent in monitoring and controlling the Corporation's overall expense base, which continues to reside at or below peer levels.

Assets and Capital

Total assets of the Corporation at September 30, 2016 were $959.121 million, up $204.149 million from the $754.972 million reported at September 30, 2015, with approximately $194 million attributable to the acquisitions in 2016, and up from the $739.269 million of total assets at year-end 2015. The Corporation is "adequately" capitalized and the Bank is "well-capitalized" with Total Capital to Risk Weighted Assets at the Corporation of 8.81% and 11.61% at the Bank.

Paul D. Tobias, Chairman and Chief Executive Officer of the Corporation, added, "Overall, we are pleased with the execution of our plan through the first three quarters of 2016. Even with a very competitive market for good loans and the stagnant interest rate environment, we have continued to add accretive scale. Our entry into the Wisconsin markets provides a larger platform for continued organic growth and adds complementary markets to our Upper Peninsula footprint. We have maintained our key core operating metrics and have positioned the company in a way that will allow us to take advantage of any future strategic opportunities that present themselves. We are looking forward to a solid finish to the year now that the integration of both Niagara and Eagle River is complete."

Mackinac Financial Corporation is a registered bank holding company formed under the Bank Holding Company Act of 1956 with assets in excess of $950 million and whose common stock is traded on the NASDAQ stock market as "MFNC." The principal subsidiary of the Corporation is mBank. Headquartered in Manistique, Michigan, mBank has 23 branch locations; twelve in the Upper Peninsula, three in the Northern Lower Peninsula, in Oakland County, Michigan and seven in Northern Wisconsin. The Company's banking services include commercial lending and treasury management products and services geared toward small to mid-sized businesses, as well as a full array of personal and business deposit products and consumer loans.

Forward-Looking Statements

This release contains certain forward-looking statements. Words such as "anticipates," "believes," "estimates," "expects," "intends," "should," "will," and variations of such words and similar expressions are intended to identify forward-looking statements: as defined by the Private Securities Litigation Reform Act of 1995. These statements reflect management's current beliefs as to expected outcomes of future events and are not guarantees of future performance. These statements involve certain risks, uncertainties and assumptions that are difficult to predict with regard to timing, extent, likelihood, and degree of occurrence. Therefore, actual results and outcomes may materially differ from what may be expressed or forecasted in such forward-looking statements. Factors that could cause a difference include among others: changes in the national and local economies or market conditions; changes in interest rates and banking regulations; the impact of competition from traditional or new sources; and the possibility that anticipated cost savings and revenue enhancements from mergers and acquisitions, bank consolidations, and other sources may not be fully realized at all or within specified time frames as well as other risks and uncertainties including but not limited to those detailed from time to time in filings of the Company with the Securities and Exchange Commission. These and other factors may cause decisions and actual results to differ materially from current expectations. Mackinac Financial Corporation undertakes no obligation to revise, update, or clarify forward-looking statements to reflect events or conditions after the date of this release.

 
MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
 
  As of and For the     As of and For the     As of and For the  
  Period Ending     Year Ending     Period Ending  
  September 30,     December 31,     September 30,  
(Dollars in thousands, except per share data) 2016     2015     2015  
  (Unaudited)           (Unaudited)  
Selected Financial Condition Data (at end of period):                      
Assets $ 959,121     $ 739,269     $ 754,972  
Loans   756,804       618,394       619,906  
Investment securities   88,886       53,728       54,432  
Deposits   807,180       610,323       622,334  
Borrowings   67,730       45,754       49,593  
Shareholders' equity   78,285       76,602       76,091  
                       
                       
Selected Statements of Income Data nine months and year ended):                      
Net interest income $ 23,980     $ 29,120     $ 21,755  
Income before taxes   4,266       7,929       6,077  
Net income   2,785       5,596       4,003  
Income per common share - Basic   .45       .90       .64  
Income per common share - Diluted   .45       .89       .64  
Weighted average shares outstanding   6,226,900       6,247,416       6,247,416  
Weighted average shares outstanding- Diluted   6,255,803       6,278,817       6,278,817  
                       
Three Months Ended:                      
Net interest income $ 8,696     $ 7,365     $ 7,235  
Income before taxes   2,700       1,852       1,544  
Net income   1,778       1,593       1,018  
Income per common share - Basic   .29       .26       .16  
Income per common share - Diluted   .28       .26       .16  
Weighted average shares outstanding   6,238,756       6,225,614       6,238,963  
Weighted average shares outstanding- Diluted   6,284,359       6,257,180       6,278,009  
                       
Selected Financial Ratios and Other Data:                      
Performance Ratios:                      
Net interest margin   4.21 %     4.30 %     4.29 %
Return on average assets   .45       .76       .72  
Return on average equity   4.75       7.41       7.09  
                       
Average total assets $ 834,378     $ 738,688     $ 740,593  
Average total shareholders' equity   78,264       75,545       75,436  
Average loans to average deposits ratio   98.84 %     100.52 %     100.08 %
                       
                       
Common Share Data at end of period:                      
Market price per common share $ 11.49     $ 11.49     $ 10.10  
Book value per common share   12.50       12.32       12.18  
Tangible book value per share   11.23       11.54       11.39  
Dividends paid per share, annualized   .400       .400       .400  
Common shares outstanding   6,263,371       6,217,620       6,249,595  
                       
Other Data at end of period:                      
Allowance for loan losses $ 4,862     $ 5,004     $ 5,779  
Non-performing assets $ 7,938     $ 4,863     $ 10,324  
Allowance for loan losses to total loans   .64 %     .81 %     .93 %
Non-performing assets to total assets   .83 %     .66 %     1.37 %
Texas ratio   10.55 %     6.34 %     13.41 %
                       
Number of:                      
  Branch locations   23       17       17  
  FTE Employees   218       173       173  
                         
                         
                         
MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES  
CONSOLIDATED BALANCE SHEETS  
   
  September 30     December 31,     September 30  
  2016     2015     2015  
  (Unaudited)           (Unaudited)  
ASSETS                      
                       
Cash and due from banks $ 46,200     $ 25,005     $ 28,581  
Federal funds sold   2,415       3       10,000  
  Cash and cash equivalents   48,615       25,008       38,581  
                       
Interest-bearing deposits in other financial institutions   14,047       5,089       5,089  
Securities available for sale   88,886       53,728       54,432  
Federal Home Loan Bank stock   2,926       2,169       2,169  
                       
Loans:                      
  Commercial   513,266       450,275       446,327  
  Mortgage   222,840       152,272       156,764  
  Consumer   20,698       15,847       16,815  
    Total Loans   756,804       618,394       619,906  
      Allowance for loan losses   (4,862 )     (5,004 )     (5,779 )
  Net loans   751,942       613,390       614,127  
                       
Premises and equipment   16,028       12,524       12,670  
Other real estate held for sale   3,269       2,324       2,296  
Deferred tax asset   9,287       9,213       9,326  
Deposit based intangibles   2,235       1,076       1,106  
Goodwill   5,694       3,805       3,805  
Other assets   16,192       10,943       11,371  
                       
TOTAL ASSETS $ 959,121     $ 739,269     $ 754,972  
                       
LIABILITIES AND SHAREHOLDERS' EQUITY                      
                       
LIABILITIES:                      
  Deposits:                      
  Noninterest bearing deposits $ 163,278     $ 122,775     $ 114,769  
  NOW, money market, interest checking   287,097       202,784       213,737  
  Savings   60,322       30,882       31,742  
  CDs < $250,000   150,170       124,084       129,715  
  CDs > $250,000   9,015       8,532       27,272  
  Brokered   137,298       121,266       105,099  
    Total deposits   807,180       610,323       622,334  
                       
  Borrowings   67,730       45,754       -  
  Fed funds purchased   -       -       49,593  
  Other liabilities   5,926       6,590       6,954  
    Total liabilities   880,836       662,667       678,881  
                       
SHAREHOLDERS' EQUITY:                      
  Preferred stock - No par value:                      
    Authorized 500,000 shares, Issued and outstanding - none   -       -       -  
  Common stock and additional paid in capital - No par value                      
    Authorized - 18,000,000 shares                      
    Issued and outstanding - 6,226,246; 6,217,620; and 6,239,250 shares respectively   61,433       61,133       61,320  
    Retained earnings   16,115       15,221       14,229  
    Accumulated other comprehensive income                      
      Unrealized gains on available for sale securities   786       297       591  
      Minimum pension liability   (49 )     (49 )     (49 )
                       
  Total shareholders' equity   78,285       76,602       76,091  
                       
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 959,121     $ 739,269     $ 754,972  
                       
                       
                       
MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
 
  Three Months Ended   Nine Months Ended
  September 30,   September 30,
  2016     2015   2016     2015
  (Unaudited)   (Unaudited)
INTEREST INCOME:                          
  Interest and fees on loans:                          
    Taxable $ 9,441     $ 8,019   $ 26,085     $ 23,986
    Tax-exempt   19       3     34       9
  Interest on securities:                          
    Taxable   387       282     953       845
    Tax-exempt   57       35     114       129
  Other interest income   91       46     212       148
    Total interest income   9,995       8,385     27,398       25,117
                           
INTEREST EXPENSE:                          
  Deposits   870       843     2,410       2,467
  Borrowings   429       307     1,008       895
    Total interest expense   1,299       1,150     3,418       3,362
                           
Net interest income   8,696       7,235     23,980       21,755
Provision for loan losses   200       350     350       855
Net interest income after provision for loan losses   8,496       6,885     23,630       20,900
                           
OTHER INCOME:                          
  Deposit service fees   259       196     723       624
  Income from loans sold on the secondary market   512       301     1,118       750
  SBA/USDA loan sale gains   551       40     717       440
  Mortgage servicing income   (12 )     9     (74 )     239
  Net security gains   40       133     149       402
  Other   139       94     379       292
    Total other income   1,489       773     3,012       2,747
                           
OTHER EXPENSE:                          
  Salaries and employee benefits   3,687       3,139     10,592       9,102
  Occupancy   680       602     1,960       1,804
  Furniture and equipment   440       370     1,248       1,159
  Data processing   440       327     1,118       1,041
  Advertising   157       153     494       399
  Professional service fees   309       348     807       928
  Loan and deposit   152       136     434       399
  Writedowns and losses on other real estate held for sale   60       104     62       141
  FDIC insurance assessment   131       135     356       383
  Telephone   140       108     374       346
  Transaction related expenses   359       -     2,928       -
  Other   730       692     2,003       1,868
    Total other expenses   7,285       6,114     22,376       17,570
                           
Income before provision for income taxes   2,700       1,544     4,266       6,077
Provision for income taxes   922       526     1,481       2,074
                           
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS   1,778       1,018     2,785       4,003
                           
                           
INCOME PER COMMON SHARE:                          
  Basic $ .29     $ .16   $ .45     $ .64
  Diluted $ .28     $ .16   $ .45     $ .64
                             
                             
                             
MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES  
LOAN PORTFOLIO AND CREDIT QUALITY  
   
(Dollars in thousands)  
   
Loan Portfolio Balances (at end of period):  
                 
  September 30,     December 31,     September 30,  
  2016     2015     2015  
  (Unaudited)     (Unaudited)     (Unaudited)  
  Commercial Loans:                      
  Real estate - operators of nonresidential buildings $ 110,252     $ 102,620     $ 102,897  
  Hospitality and tourism   53,182       41,300       41,156  
  Lessors of residential buildings   23,939       25,930       25,911  
  Gasoline stations and convenience stores   20,286       21,647       17,077  
  Commercial construction   14,343       15,330       15,498  
  Real estate agents and managers   9,962       11,225       9,785  
  Other   281,302       232,223       234,003  
    Total Commercial Loans   513,266       450,275       446,327  
                       
  1-4 family residential real estate   211,072       140,502       144,807  
  Consumer   20,698       15,847       16,815  
  Consumer construction   11,768       11,770       11,957  
                       
    Total Loans $ 756,804     $ 618,394     $ 619,906  
                       
Credit Quality (at end of period):  
                 
  September 30     December 31,     September 30  
  2016     2015     2015  
  (Unaudited)     (Unaudited)     (Unaudited)  
    Nonperforming Assets:                      
    Nonaccrual loans $ 4,498     $ 2,353     $ 7,226  
    Loans past due 90 days or more   32       32       -  
    Restructured loans   139       154       802  
      Total nonperforming loans   4,669       2,539       8,028  
    Other real estate owned   3,269       2,324       2,296  
      Total nonperforming assets $ 7,938     $ 4,863     $ 10,324  
    Nonperforming loans as a % of loans   .62 %     .41 %     1.30 %
    Nonperforming assets as a % of assets   .83 %     .66 %     1.37 %
    Reserve for Loan Losses:                      
    At period end $ 4,862     $ 5,004     $ 5,779  
    As a % of average loans   .71 %     .83 %     .95 %
    As a % of nonperforming loans   104.13 %     197.09 %     71.99 %
    As a % of nonaccrual loans   108.09 %     212.66 %     79.98 %
    Texas Ratio   10.55 %     6.34 %     13.41 %
                       
    Charge-off Information (year to date):                      
      Average loans $ 680,027     $ 602,904     $ 607,284  
      Net charge-offs (recoveries) $ 492     $ 1,340     $ 216  
      Charge-offs as a % of average loans, annualized   .10 %     .22 %     .05 %
                             
                             
                             
MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES  
QUARTERLY FINANCIAL HIGHLIGHTS  
   
                             
  QUARTER ENDED  
  (Unaudited)  
  September 30     June 30,     March 31,     December 31,     September 30,  
  2016     2016     2016     2015     2015  
BALANCE SHEET (Dollars in thousands)                                      
                                       
Total loans $ 756,804     $ 725,635     $ 618,625     $ 618,394     $ 619,906  
Allowance for loan losses   (4,862 )     (4,733 )     (4,824 )     (5,004 )     (5,779 )
  Total loans, net   751,942       720,902       613,801       613,390       614,127  
Total assets   959,121       892,328       732,932       739,269       754,972  
Core deposits   660,867       579,606       473,761       480,525       509,466  
Noncore deposits   146,313       158,757       119,217       129,798       112,868  
  Total deposits   807,180       738,363       592,978       610,323       622,334  
Total borrowings   67,730       70,604       56,454       45,754       49,593  
Total shareholders' equity   78,285       77,081       77,395       76,602       76,091  
Total tangible equity   70,356       69,916       72,544       71,721       71,180  
Total shares outstanding   6,263,371       6,226,246       6,231,246       6,217,620       6,249,595  
Weighted average shares outstanding   6,238,756       6,227,730       6,214,083       6,225,614       6,247,416  
                                       
AVERAGE BALANCES (Dollars in thousands)                                      
                                       
Assets $ 930,353     $ 834,674     $ 737,088     $ 733,035     $ 751,153  
Loans   734,702       689,462       615,684       613,846       614,315  
Deposits   780,265       679,183       604,363       602,857       624,528  
Equity   78,027       79,481       77,284       75,871       76,362  
                                       
INCOME STATEMENT (Dollars in thousands)                                      
                                       
Net interest income $ 8,696     $ 7,996     $ 7,288     $ 7,365     $ 7,235  
Provision for loan losses   200       150       -       349       350  
  Net interest income after provision   8,496       7,846       7,288       7,016       6,885  
Total noninterest income   1,489       896       627       1,142       773  
Total noninterest expense   7,285       8,893       6,198       6,306       6,114  
Income before taxes   2,700       (151 )     1,717       1,852       1,544  
Provision for income taxes   922       (26 )     585       259       526  
Net income available to common shareholders $ 1,778     $ (125 )   $ 1,132     $ 1,593     $ 1,018  
Income pre-tax, pre-provision $ 2,900     $ (1 )   $ 1,717     $ 2,201     $ 1,894  
                                       
PER SHARE DATA                                      
                                       
Earnings $ .29     $ (.02 )   $ .18     $ .26     $ .16  
Book value per common share   12.50       12.38       12.42       12.32       12.18  
Tangible book value per share   11.23       11.23       11.64       11.54       11.39  
Market value, closing price   11.49       11.01       10.25       11.49       10.10  
Dividends per share   .100       .100       .100       .100       .100  
                                       
ASSET QUALITY RATIOS                                      
                                       
Nonperforming loans/total loans   .62 %     .46 %     .28 %     .50 %     1.30 %
Nonperforming assets/total assets   .83       .76       .60       .73       1.37  
Allowance for loan losses/total loans   .64       .65       .78       .81       .93  
Allowance for loan losses/ nonperforming loans   104.13       142.52       280.96       197.09       71.99  
Texas ratio (1)   10.55       9.13       5.61       6.34       13.41  
                                       
PROFITABILITY RATIOS                                      
                                       
Return on average assets   .76 %     (.06 )%     .62 %     .86 %     .54 %
Return on average equity   9.06       (.63 )     5.89       8.33       5.28  
Net interest margin   4.18       4.19       4.33       4.34       4.18  
Average loans/average deposits   94.16       101.51       101.87       101.82       98.36  
                                       
CAPITAL ADEQUACY RATIOS                                      
                                       
Tier 1 leverage ratio   7.29 %     7.68 %     9.55 %     9.81 %     9.02 %
Tier 1 capital to risk weighted assets   8.22       8.76       10.82       10.23       10.28  
Total capital to risk weighted assets   8.81       9.39       11.57       11.94       11.17  
Average equity/average assets (for the quarter)   8.39       9.52       10.49       11.19       10.19  
Tangible equity/tangible assets (at quarter end)   7.40       7.90       9.96       9.77       9.49  
                                       

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