SOURCE: Mackinac Financial Corporation

Mackinac Financial Corporation

August 02, 2012 13:00 ET

Mackinac Financial Corporation Reports Strong Second Quarter 2012 Results and Records a $3 Million Valuation Adjustment to Deferred Tax Assets

MANISTIQUE, MI--(Marketwire - Aug 2, 2012) -  Mackinac Financial Corporation (NASDAQ: MFNC), the bank holding company for mBank (the "Bank"), today announced second quarter 2012 income of $4.141 million or $1.21 per share compared to net income of $.603 million, or $.18 per share for the second quarter of 2011. The 2012 YTD and 2nd quarter results include a $3 million valuation adjustment to deferred tax assets, which equates to $.88 per share.

Operating results excluding the deferred tax asset for the first six months of 2012 totaled $1.639 million or $.48 per share compared to $.859 million or $.25 per share for the same period in 2011. The Corporation's subsidiary mBank recorded net income of $2.248 million, excluding the valuation adjustment to deferred taxes, for the first six months of this year compared to $1.439 million for the same period in 2011.

Some highlights for the first six months of 2012 results include:

  • Improved credit quality with a Texas Ratio of 13.59% compared to 23.38% one year ago, with nonperforming loans of $5.375 million, a $4.066 million reduction from a year earlier

  • Reduced credit related charges in 2012 at $.403 million compared to $.748 million in the 2011 six month period

  • Improved net interest margin at 4.23% compared to 3.85% for the first six months of 2011

  • Six month Secondary mortgage loan income of $.524 million, compared to $.199 million in the same period of 2011

  • Continued success in SBA/USDA lending initiatives, with $.620 million in sold guarantees to the secondary market. The Corporation continues to be a state leader in supporting small businesses with these programs ranking 9th in the state in total dollars for all banks for newly originated SBA 7(a) loans for the third quarter 2012 Michigan SBA results. The Corporation, under this program, originated 21 loans totaling $9.6 million.

  • Growth in core deposits of $9.2 million

Loans and Nonperforming Assets

Total loans at June 30, 2012 were $419.453 million, a 6.24% increase from the $394.812 million at June 30, 2011 and up $18.207 million from year-end 2011 total loans of $401.246 million. The Corporation had total loan production for all loan types of $101 million in the first six months of this year. Comprising the total production were $54 million in commercial loans, and $47 million in retail, $44 million of which were mortgages. The Upper Peninsula continues to drive a large majority of the new originations, totaling $66 million, with Southeast Michigan production of $18 million, and the Northern Lower Peninsula with $17 million. Commenting on loan growth, Kelly W. George, President and CEO of mBank, stated, "We are very pleased with the level of loan activity we are seeing in all our markets. The activity is all encompassing, including new home purchases and refinances, as well as small business expansion for various needs. Actual loan outstandings would have been greater, but the Corporation experienced unexpected large loan pay downs as a result of excess cash flow from strong commercial credits, and has also begun to experience tougher competition in the marketplace with respect to rate conditions. This has led to several relationships exiting because of pricing reasons. However, given our balance sheet and funding structure, we felt it was prudent to not try to retain these loans."

Nonperforming loans totaled $5.375 million, 1.28% of total loans at June 30, 2012 compared to $9.441 million, or 2.39% of total loans at June 30, 2011 and down $2.618 million from December 31, 2011. Nonperforming assets were reduced by $5.354 million from a year ago and stood at 1.70% of total assets. Total loan delinquencies resided at .82% or $3.448 million, almost solely made up of non-accrual commercial loans. George, commenting on credit quality, stated, "We are pleased with our continued reduction in the level of nonperforming assets and the overall payment performance on our total loan portfolio which has been good for several years now since coming out of the severe economic conditions from the 2008 downturn. Our current level of nonperforming assets is manageable and our associated costs are now more in line with a normal business climate with the reductions we have seen this year. We will remain diligent and timely in our recognition and disposal methods for our remaining nonperforming assets in terms of any future deterioration and in the event any new issues arise in subsequent quarters."

Manistique Papers Inc. Bankruptcy and Community Partnership Lending

As noted in our 2011 annual report, mBank was very close to consummating the sale of Manistique Papers Inc. out of a Chapter 11 bankruptcy process where it had played the lead role in facilitating since August of 2011 when mBank stepped in as the Senior Lender through a variety of transactions to purchase legacy debt of the corporation and provide new working capital funding to prevent the liquidation and closure of this 91 year old paper mill and the loss of approximately 150 jobs. We are very pleased to announce that in May of this year, though the collective efforts of various parties, we were able to close a sale to The Watermill Group, a private equity firm located in Boston Mass., to become the new owner of the local mill and ensure its continued vital operations for our local community in Manistique. George commenting on the sale events, "We could not be happier for the outcome of this endeavor we chose to take on 10 months ago to support our second largest employer and icon of the local business community Manistique Papers and all the good people who have worked there for years. Manistique Papers will benefit greatly from The Watermill Group's financial stability, operational expertise and experience in environmental paper and we appreciate the Watermill team's creative strategies for revitalizing the mill and the commitment they've shown to the company and local community. We're pleased to be working with them going forward and look forward to a mutually rewarding banking relationship as we move into a new rewarding chapter of the paper mills legacy."

Margin Analysis

Net interest margin in the first six months of 2012 increased to $9.782 million, 4.23%, compared to $8.319 million, or 3.85%, in the same period in 2011. The interest margin increase was largely due to decreased funding costs. George, commenting on margin items, stated, "We expect some margin pressure in future periods with this prolonged low interest rate environment, which limits investment options and provides for a highly competitive commercial loan procurement market for all banks centered on pricing options. We are continually seeing added pressure from existing borrowers and new credit opportunities for longer fixed rate terms and lower variable rate floors as we continue to look to structure our balance sheet with properly matched liabilities to manage our growth with diligence towards limiting longer term interest rate risk given the continued uncertainty of where interest rates will move in the next 12-24 months." 

Deposits

Total deposits of $425.381 million at June 30, 2012 increased 6.43% from deposits of $399.667 million on June 30, 2011. Total deposits on June 30, 2012 deposits were up $20.592 million from year-end 2011 deposits of $404.789 million. The overall increase in deposits for the six months of 2012 is comprised of an increase in noncore deposits of $11.383 million and increased core deposits of $9.209 million. George, commenting on core deposits, stated, "In 2012 we have continued to experience a good growth rate on core deposits though lower than in previous years which is partially due to our reduced rates on transactional accounts to manage our net interest margin where we have seen a small exit from primarily rate only driven clients. We have supplemented our deposit growth with noncore deposits to manage interest rate risk in this prolonged low interest rate cycle, along with the need to align our funding costs with rates and maturities on loans as noted previously."

Noninterest Income/Expense

Noninterest income, at $1.911 million in the first six months of 2012, decreased $.014 million from the same period in 2011 of $1.925 million with the largest drivers of this income coming from the secondary market mortgage activities and gains from SBA/USDA loan sales. Income from secondary mortgage activities totaled $.524 million in 2012 compared to $.199 million in 2011. SBA/USDA loan sale gains were behind 2011 with year to date gains of $.620 million compared to 2011 gains of $1.186 million.

Noninterest expense, at $8.041 million in the first six months of 2012, increased $.253 million, or 3.25% from the same period in 2011. The Corporation continues to look for ways to control costs and remains below peer levels in terms of salary and benefits as a percentage of total assets at 1.58%. 

Assets and Capital

Total assets of the Corporation at June 30, 2012 were $524.366 million, up 6.50% from the $492.373 million reported at June 30, 2011 and up 5.23% from the $498.311 million of total assets at year-end 2011. 

Total shareholders' equity at June 30, 2012 totaled $60.352 million, compared to $54.784 million on June 30, 2011, an increase of $5.568 million, or 10.16%. Book value of common shareholders' equity was $14.43 per share at June 30, 2012 compared to $12.86 per share at June 30, 2011 and compared to $46.148 million, or $12.97 per share on December 31, 2011. The Corporation and the Bank are both "well-capitalized" with Tier 1 Capital at the Corporation of 10.16% and 9.52% at the Bank.

Weighted average shares outstanding totaled 3,419,736 for both periods. The common stock warrants outstanding of 379,310 shares were slightly dilutive for the 2012 second quarter by $.04 per share and for the six month period at $.05 per share.

Paul D. Tobias, Chairman and Chief Executive Officer, concluded, "We are pleased with our 2012 year to date operating results. Our loan production has been steady and we have a good pipeline of portfolio loans and SBA/USDA opportunities. Loan portfolio expansion will be challenging but we expect continued growth. Our credit quality is strong and we expect increased noninterest revenue, mainly from SBA/USDA loan sales later this year."

"Looking forward, we are excited about our rights offering and the pending investment from the Steinhardt family. We expect to complete these transactions within the next few weeks and issue approximately 2.2 million shares with net proceeds of roughly $12.0 million. This will provide the funding necessary to pursue several initial strategic alternatives. This new capitalization and the access to the capital and the funding that accompany an association with the Steinhardt's will be significant catalysts in the execution of our long-term strategic plan for franchise growth and increasing shareholder value."

Mackinac Financial Corporation is a registered bank holding company formed under the Bank Holding Company Act of 1956 with assets in excess of $520 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 11 branch locations; seven in the Upper Peninsula, three in the Northern Lower Peninsula and one in Oakland County, Michigan. 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, branch closings 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         
                   

(Dollars in thousands, except per share data)
  June 30,
2012
    December 31,
2011
    June 30,
2011
 
    (Unaudited)           (Unaudited)  
Selected Financial Condition Data (at end of period):                        
Assets   $ 524,366     $ 498,311     $ 492,373  
Loans     419,453       401,246       394,812  
Investment securities     39,054       38,727       38,613  
Deposits     425,381       404,789       399,667  
Borrowings     35,997       35,997       36,069  
Common Shareholders' Equity     49,352       44,342       43,973  
Shareholders' equity     60,352       55,263       54,784  
                         
                         
Selected Statements of Income Data (six months and year ended):                        
Net interest income   $ 9,782     $ 17,929     $ 8,319  
Income before taxes and preferred dividend     3,007       3,316       1,856  
Net income     4,639       1,452       859  
Income per common share - Basic     1.36       .42       .25  
Income per common share - Diluted     1.31       .41       .25  
Weighted average shares outstanding     3,419,736       3,419,736       3,419,736  
Weighted average shares outstanding- Diluted     3,532,640       3,500,204       3,504,567  
                         
Three Months Ended:                        
Net interest income   $ 5,019       4,901       4,178  
Income before taxes and preferred dividend     1,967       105       1,197  
Net income     4,141       (114 )     603  
Income per common share - Basic     1.21       (.03 )     .18  
Income per common share - Diluted     1.17       (.03 )     .17  
Weighted average shares outstanding     3,419,736       3,419,736       3,419,736  
Weighted average shares outstanding- Diluted     3,539,908       3,480,347       3,509,810  
                         
Selected Financial Ratios and Other Data:                        
Performance Ratios:                        
Net interest margin     4.23 %     4.06 %     3.85 %
Efficiency ratio     66.98       68.43       71.47  
Return on average assets     2.20       .30       .36  
Return on average common equity     24.99       3.30       4.00  
Return on average equity     20.07       2.66       3.21  
                         
Average total assets   $ 507,546     $ 489,539     $ 486,714  
Average common shareholders' equity     44,706       43,940       43,255  
Average total shareholders' equity     55,666       54,561       54,005  
Average loans to average deposits ratio     100.12 %     98.05 %     96.19 %
                         
                         
Common Share Data at end of period:                        
Market price per common share   $ 5.99     $ 5.42     $ 6.00  
Book value per common share   $ 14.43     $ 12.97     $ 12.86  
Common shares outstanding     3,419,736       3,419,736       3,419,736  
                         
Other Data at end of period:                        
Allowance for loan losses   $ 5,083     $ 5,251     $ 6,155  
Non-performing assets   $ 8,893     $ 11,155     $ 14,247  
Allowance for loan losses to total loans     1.21 %     1.31 %     1.56 %
Non-performing assets to total assets     1.70 %     2.24 %     2.89 %
Texas ratio     13.59 %     18.43 %     23.38 %
                         
Number of:                        
  Branch locations     11       11       12  
  FTE Employees     120       116       113  
                   
                   
MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
         
                   
    June 30,     December 31,     June 30,  
    2012     2011     2011  
    (Unaudited)           (Unaudited)  
ASSETS                        
                         
Cash and due from banks   $ 33,248     $ 20,071     $ 22,294  
Federal funds sold     -       13,999       12,000  
  Cash and cash equivalents     33,248       34,070       34,294  
                         
Interest-bearing deposits in other financial institutions     10       10       10  
Securities available for sale     39,054       38,727       38,613  
Federal Home Loan Bank stock     3,060       3,060       3,060  
                         
Loans:                        
  Commercial     319,398       311,215       305,752  
  Mortgage     90,260       83,106       83,194  
  Consumer     9,795       6,925       5,866  
    Total Loans     419,453       401,246       394,812  
      Allowance for loan losses     (5,083 )     (5,251 )     (6,155 )
  Net loans     414,370       395,995       388,657  
                         
Premises and equipment     10,134       9,627       9,623  
Other real estate held for sale     3,518       3,162       4,806  
Deferred Tax Asset     10,271       8,427       8,444  
Other assets     10,701       5,233       4,866  
                         
TOTAL ASSETS   $ 524,366     $ 498,311     $ 492,373  
                         
LIABILITIES AND SHAREHOLDERS' EQUITY                        
                         
LIABILITIES:                        
Deposits:                        
  Noninterest bearing deposits   $ 59,872     $ 51,273     $ 49,769  
  NOW, money market, interest checking     143,795       152,563       149,448  
  Savings     14,248       14,203       16,526  
  CDs < $100,000     140,018       130,685       114,215  
  CDs > $100,000     25,975       23,229       23,102  
  Brokered     41,473       32,836       46,607  
    Total deposits     425,381       404,789       399,667  
                           
  Borrowings     35,997       35,997       36,069  
  Other liabilities     2,636       2,262       1,853  
    Total liabilities     464,014       443,048       437,589  
                         
SHAREHOLDERS' EQUITY:                        
  Preferred stock - No par value:                        
    Authorized 500,000 shares, Issued and outstanding - 11,000 shares     11,000       10,921       10,811  
  Common stock and additional paid in capital - No par value                        
    Authorized - 18,000,000 shares                        
    Issued and outstanding - 3,419,736 shares     43,525       43,525       43,525  
    Retained earnings     5,131       492       (102 )
    Accumulated other comprehensive income     696       325       550  
                             
      Total shareholders' equity     60,352       55,263       54,784  
                         
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $ 524,366     $ 498,311     $ 492,373  
 
 
MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
 
           
    Three Months Ended     Six Months Ended
    June 30,     June 30,
    2012     2011     2012     2011
    (Unaudited)     (Unaudited)
INTEREST INCOME:                              
  Interest and fees on loans:                              
    Taxable   $ 5,873     $ 5,198     $ 11,453     $ 10,334
    Tax-exempt     30       37       62       79
  Interest on securities:                              
    Taxable     238       292       502       574
    Tax-exempt     7       7       14       14
  Other interest income     30       30       55       63
    Total interest income     6,178       5,564       12,086       11,064
                               
INTEREST EXPENSE:                              
  Deposits     992       1,231       1,975       2,449
  Borrowings     167       155       329       296
    Total interest expense     1,159       1,386       2,304       2,745
                               
Net interest income     5,019       4,178       9,782       8,319
Provision for loan losses     150       600       645       600
Net interest income after provision for loan losses     4,869       3,578       9,137       7,719
                               
OTHER INCOME:                              
  Deposit service fees     189       219       383       436
  Income from secondary market loans sold     226       120       524       199
  SBA/USDA loan sale gains     620       950       620       1,186
  Mortgage servicing income     115       -       200       -
  Other     155       59       184       104
    Total other income     1,305       1,348       1,911       1,925
                               
OTHER EXPENSE:                              
  Salaries and employee benefits     2,003       1,806       3,978       3,630
  Occupancy     335       349       680       714
  Furniture and equipment     219       221       447       415
  Data processing     258       179       486       355
  Professional service fees     310       232       490       385
  Loan and deposit     338       252       479       431
  Writedowns and losses on other real estate held for sale     174       (35 )     185       432
  FDIC insurance assessment     159       255       318       540
  Telephone     57       58       112       109
  Advertising     98       111       196       199
  Other     256       301       670       578
    Total other expenses     4,207       3,729       8,041       7,788
                               
Income before provision for income taxes     1,967       1,197       3,007       1,856
Provision for income taxes     (2,335 )     402       (1,986 )     616
                               
NET INCOME     4,302       795       4,993       1,240
                               
Preferred dividend and accretion of discount     161       192       354       381
                               
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS   $ 4,141     $ 603     $ 4,639     $ 859
                               
INCOME PER COMMON SHARE:                              
  Basic   $ 1.21     $ .18     $ 1.36     $ .25
  Diluted   $ 1.17     $ .17     $ 1.31     $ .25
 
 
MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
LOAN PORTFOLIO AND CREDIT QUALITY
 
 
(Dollars in thousands)
 
Loan Portfolio Balances (at end of period):
             
    June 30,   December 31,   June 30,
    2012   2011   2011
    (Unaudited)   (Unaudited)   (Audited)
Commercial Loans:                  
Real estate - operators of nonresidential buildings   $ 83,539   $ 75,391   $ 59,587
Hospitality and tourism     36,557     33,306     33,467
Lessors of nonresidential buildings     13,358     16,499     16,316
Real estate agents and managers     12,860     10,617     14,909
Other     150,291     155,657     158,411
  Total Commercial Loans     296,605     291,470     282,690
                   
1-4 family residential real estate     84,665     77,332     79,013
Consumer     9,795     6,925     5,866
Construction                  
  Commercial     22,793     19,745     23,062
  Consumer     5,595     5,774     4,181
                   
  Total Loans   $ 419,453   $ 401,246   $ 394,812
   
Credit Quality (at end of period):  
                   
    June 30,     December 31,     June 30,  
    2012     2011     2011  
    (Unaudited)     (Unaudited)     (Unaudited)  
Nonperforming Assets :                        
Nonaccrual loans   $ 5,375     $ 5,490     $ 7,639  
Loans past due 90 days or more     -       -       -  
Restructured loans     -       2,503       1,802  
  Total nonperforming loans     5,375       7,993       9,441  
Other real estate owned     3,518       3,162       4,806  
  Total nonperforming assets   $ 8,893     $ 11,155     $ 14,247  
Nonperforming loans as a % of loans     1.28 %     1.99 %     2.39 %
Nonperforming assets as a % of assets     1.70 %     2.24 %     2.89 %
Reserve for Loan Losses:                        
At period end   $ 5,083     $ 5,251     $ 6,155  
As a % of average loans     1.23 %     1.35 %     1.62 %
As a % of nonperforming loans     94.57 %     65.69 %     65.19 %
As a % of nonaccrual loans     94.57 %     95.65 %     80.57 %
Texas Ratio     13.59 %     18.43 %     23.38 %
                         
Charge-off Information (year to date):                        
  Average loans   $ 413,467     $ 388,115     $ 379,153  
  Net charge-offs   $ 813     $ 3,662     $ 1,058  
  Charge-offs as a % of average loans     .20 %     .94 %     .28 %
                           
                           
MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
QUARTERLY FINANCIAL HIGHLIGHTS
              
                           
    QUARTER ENDED  
    (Unaudited)  
    June 30,   March 31,     December 31,     September 30,   June 30,  
    2012   2012     2011     2011   2011  
BALANCE SHEET (Dollars in thousands)                                    
                                     
Total loans   $ 419,453   $ 414,402     $ 401,246     $ 391,903   $ 394,812  
Allowance for loan losses     (5,083 )   (5,382 )     (5,251 )     (5,838 )   (6,155 )
  Total loans, net     414,370     409,020       395,995       386,065     388,657  
Intangible assets     -     -       -       -     -  
Total assets     524,366     506,496       498,311       498,598     492,373  
Core deposits     357,933     355,186       348,724       346,843     329,958  
Noncore deposits (1)     67,448     56,902       56,065       58,215     69,709  
  Total deposits     425,381     412,088       404,789       405,058     399,667  
Total borrowings     35,997     35,997       35,997       35,997     36,069  
Common shareholders' equity     49,352     45,119       44,342       44,613     43,973  
Total shareholders' equity     60,352     56,095       55,263       55,479     54,784  
Total shares outstanding     3,419,736     3,419,736       3,419,736       3,419,736     3,419,736  
                                     
AVERAGE BALANCES (Dollars in thousands)                                    
                                     
Assets   $ 511,681   $ 503,412     $ 487,304     $ 497,333   $ 494,481  
Loans     422,887     404,048       396,197       397,665     378,250  
Deposits     452,655     409,250       390,940       403,957     401,549  
Common Equity     44,927     44,469       44,325       44,105     43,354  
Equity     55,915     55,418       55,219       54,998     54,138  
                                     
INCOME STATEMENT (Dollars in thousands)                                    
                                     
Net interest income   $ 5,019   $ 4,763     $ 4,901     $ 4,709   $ 4,178  
Provision for loan losses     150     495       1,300       400     600  
  Net interest income after provision     4,869     4,268       3,601       4,309     3,578  
Total noninterest income     1,305     606       725       1,006     1,348  
Total noninterest expense     4,207     3,834       4,221       3,960     3,729  
Income before taxes     1,967     1,040       105       1,355     1,197  
Provision for income taxes     (2,335 )   349       27       455     402  
  Net income     4,302     691       78       900     795  
Preferred dividend expense     161     193       192       193     192  
Net income (loss) available to common shareholders   $ 4,141   $ 498     $ (114 )   $ 707   $ 603  
                                     
PER SHARE DATA                                    
                                     
Earnings   $ 1.21   $ .15     $ (.03 )   $ .21   $ .18  
Book value per common share     14.43     13.19       12.97       13.05     12.86  
Market value, closing price     5.99     7.00       5.42       5.46     6.00  
                                     
ASSET QUALITY RATIOS                                    
                                     
Nonperforming loans/total loans     1.28 %   1.65 %     1.99 %     2.47 %   2.39 %
Nonperforming assets/total assets     1.70     2.04       2.24       2.99     2.89  
Allowance for loan losses/total loans     1.21     1.30       1.31       1.49     1.56  
Allowance for loan losses/nonperforming loans     94.57     78.49       65.69       60.35     65.19  
Texas ratio (2)     13.59     16.84       18.43       24.28     23.38  
                                     
PROFITABILITY RATIOS                                    
                                     
Return on average assets     3.21 %   .40 %     (.09) %     .56 %   .49 %
Return on average common equity     36.57     4.53       (1.02 )     6.35     5.58  
Return on average equity     29.39     3.62       (.82 )     5.10     4.47  
Net interest margin     4.30     4.17       4.38       4.14     3.79  
Efficiency ratio     63.61     71.01       69.04       67.39     67.84  
Average loans/average deposits     101.50     98.73       101.34       98.44     94.20  
                                     
CAPITAL ADEQUACY RATIOS                                    
                                     
Tier 1 leverage ratio     10.16 %   9.95 %     10.08 %     9.73 %   9.50 %
Tier 1 capital to risk weighted assets     12.87     11.55       11.62       11.65     11.40  
Total capital to risk weighted assets     14.12     12.80       12.87       12.97     12.66  
Average equity/average assets     10.93     11.01       11.33       11.06     10.95  
Tangible equity/tangible assets     11.51     11.01       11.33       11.06     10.95  
                                     
(1) Noncore deposits includes Internet CDs, brokered deposits and CDs greater than $100,000  
(2)Texas ratio equals nonperforming assets divided by shareholders' equity plus allowance for loan losses  
                                     

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