AMES NATIONAL CORPORATION Overview
Ames National Corporation (the "Company") is a bank holding company established in 1975 that owns and operates six bank subsidiaries in centralIowa (the "Banks"). The following discussion is provided for the consolidated operations of the Company and its Banks,First National Bank ,Ames, Iowa (First National),State Bank & Trust Co. (State Bank ),Boone Bank & Trust Co. (Boone Bank ),Reliance State Bank (Reliance Bank ),United Bank & Trust NA (United Bank ) andIowa State Savings Bank (Iowa State Bank ). The purpose of this discussion is to focus on significant factors affecting the Company's financial condition and results of operations. The Company does not engage in any material business activities apart from its ownership of the Banks. Products and services offered by the Banks are for commercial and consumer purposes including loans, deposits and wealth management services. Wealth management services includes financial planning and managing trust, agencies, estates and investment brokerage accounts. The Company employs sixteen individuals to assist with financial reporting, human resources, audit, compliance, marketing, technology systems, training, real estate valuation services and the coordination of management activities, in addition to 265 full-time equivalent individuals employed by the Banks. The Company's primary competitive strategy is to utilize seasoned and competent Bank management and local decision making authority to provide customers with faster response times and more flexibility in the products and services offered. This strategy is viewed as providing an opportunity to increase revenues through creating a competitive advantage over other financial institutions. The Company also strives to remain operationally efficient to provide better profitability while enabling the Company to offer more competitive loan and deposit rates. The principal sources of Company revenues and cash flow are: (i) interest and fees earned on loans made by the Company and Banks; (ii) interest on fixed income investments held by the Banks; (iii) fees on wealth management services provided by those Banks exercising trust powers; (iv) service fees on deposit accounts maintained at the Banks; (v) gain on sale of loans; and (vi) merchant and card fees. The Company's principal expenses are: (i) interest expense on deposit accounts and other borrowings; (ii) provision for loan losses; (iii) salaries and employee benefits; (iv) data processing costs associated with maintaining the Banks' loan and deposit functions; (v) occupancy expenses for maintaining the Bank's facilities; and (vi) professional fees. The largest component contributing to the Company's net income is net interest income, which is the difference between interest earned on earning assets (primarily loans and investments) and interest paid on interest-bearing liabilities (primarily deposits and other borrowings). One of management's principal functions is to manage the spread between interest earned on earning assets and interest paid on interest bearing liabilities in an effort to maximize net interest income while maintaining an appropriate level of interest rate risk.
The Company had net income of
Net loan charge-offs totaled$615,000 and$314,000 for the three months endedSeptember 30, 2020 and 2019, respectively. The provision for loan losses totaled$542,000 and$379,000 for the three months endedSeptember 30, 2020 and 2019, respectively. 30
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The Company had net income of
The increase in earnings is primarily the result of the Acquisition, reduction in interest expense due to market rate decreases, and was partially offset by an increase in provision for loan losses. Net loan charge-offs totaled$1,111,000 and$295,000 for the nine months endedSeptember 30, 2020 and 2019, respectively. The provision for loan losses totaled$4,424,000 and$545,000 for the nine months endedSeptember 30, 2020 and 2019, respectively.
The following management discussion and analysis will provide a review of important items relating to:
? Challenges and COVID-19 Status, Risks and Uncertainties
? Key Performance Indicators and Industry Results
? Critical Accounting Policies
? Income Statement Review ? Balance Sheet Review
? Asset Quality Review and Credit Risk Management
? Liquidity and Capital Resources
? Forward-Looking Statements and Business Risks
? Non-GAAP Financial Measures
Challenges and COVID-19 Status, Risks and Uncertainties
Prior to the onset of the COVID-19 pandemic during the first quarter of 2020, management had identified certain events or circumstances that may negatively impact the Company's financial condition and results of operations in the future and detailed its efforts to position the Company to best respond to those challenges. These challenges are addressed in the Company's most recent Annual Report on Form 10-K filed onMarch 10, 2020 . The Company conducts business in theState of Iowa andIowa began to place significant restrictions on companies and individuals onMarch 9, 2020 as a result of the COVID-19 pandemic. TheState of Iowa has eased many of the restrictions related to the COVID-19 pandemic. As an organization that focuses on community banking, we are concerned about the health of our customers, employees and local communities and keep that thought at the forefront of our decisions. The Company's bank lobbies are open to the public, with business also being transacted through our drive up facilities, online, telephone or by appointment.
The onset of the COVID-19 pandemic has significantly heightened the level of challenges, risks and uncertainties facing the Company and its operations, including the following:
? As the economic slowdown continues to evolve due to the pandemic, some of the
Company's customers may experience decreased revenues, which may correlate to
an inability to make timely loan payments or maintain payrolls. This, in turn,
could adversely impact the revenues and earnings of the Company by, among
other things, requiring further increases in the allowance for loan losses and
increases in the level of charge-offs in the loan portfolio. As detailed
herein, the Company recognized a significant increase in provision expense
during the nine months ended
to the economic slowdown. Management anticipates additional increases in the
allowance if the effects of the COVID-19 pandemic continue to negatively
impact the loan portfolio.
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? The
0.5 percent on
reaching a current range of 0.0 - 0.25 percent.
? Local and the
economic challenges to our consumer and commercial customers due to the
economic effects of the COVID-19 pandemic. Higher levels of unemployment may
adversely impact the revenues and earnings of the Company.
? The Company anticipates a slowdown in demand for its products and services,
including in the demand for traditional loans, although the timing of the
recovery is uncertain.
?
determined to not be impaired as of
may be impaired if the effects of the economic slowdown negatively impacts our
net income and fair value, particularly of our most recent acquisition. An
impairment of goodwill would decrease the Company's earnings during the period
in which the impairment is recorded.
? The uncertain economic conditions has created significant volatility and
disruption in the financial markets, and these conditions may require the
Company to recognize an elevated level of other than temporary impairments on
securities held in the Company's investment portfolio as issuers of these
securities are negatively impacted by the economic slowdown. Declines in fair
value of securities held in the portfolio could also reduce the unrealized
gains reported as part of the Company's other comprehensive income.
? Market interest rates have declined significantly and these reductions,especially if prolonged, could adversely affect the Company's net interest
income, net interest margin and earnings.
? Dividends in the future may be reduced or eliminated if the COVID-19 pandemic
has an adverse effect on net income, an unanticipated increase in deposits or
other unidentified risks that may negatively affect the Company's capital
ratios.
We have taken numerous steps in response to the COVID-19 pandemic, including the following:
? We have been actively working with loan customers to evaluate prudent loan
modification terms. As of
8.1%, of loans were in payment deferral status under COVID-19 related
modifications. COVID-19 related modifications primarily involve a delay of
principal and/or interest payments for up to six months.
? We had 942 PPP loans with an aggregate outstanding balance of
of
forgiveness with the SBA. When the borrower applies for loan forgiveness, the
Bank has 60 days to submit the application to the SBA. The SBA then has 90
days to approve the loan forgiveness. We began receiving forgiveness payments
from the SBA in
2021
? We have successfully deployed a modified working environment to emphasize the
safety of our teams and continuity of our business processes. We do not
anticipate significant challenges to our ability to maintain our systems and
controls in light of the measures we have taken to prevent the spread of
COVID-19. No material operational or internal control challenges or risks have
been identified to date.
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Certain industries are widely expected to be particularly impacted by shutdowns, capacity restrictions, quarantines and social distancing in response to COVID-19 and efforts to contain it. As ofSeptember 30, 2020 approximately 8.4% of our loan portfolio is associated with the hospitality and entertainment industries. Because of the significant uncertainties related to the duration of the COVID-19 pandemic and its potential effects on our customers, and on the national and local economy as a whole, there can be no assurances as to how the crisis may ultimately affect the Company's loan portfolio.
Key Performance Indicators and Industry Results
Certain key performance indicators for the Company and the industry are
presented in the following chart. The industry figures are compiled by the
Selected Indicators for the Company and the Industry
3 Months 9 Months Years Ended December 31,
Ended Ended 3 Months Ended
September 30, 2020 June 30, 2020 2019 2018
Company Company Industry* Company Industry* Company Industry*
Return on assets 1.21 % 0.99 % 0.94 % 0.36 % 1.14 % 1.29 % 1.23 % 1.35 %
Return on equity 11.18 % 9.27 % 9.09 % 3.53 % 9.48 % 11.40 % 10.09 % 11.98 %
Net interest margin 3.21 % 3.16 % 3.10 % 2.81 % 3.21 % 3.36 % 3.23 % 3.40 %
Efficiency ratio 54.80 % 56.30 % 56.49 % 58.69 % 58.51 % 56.63 % 55.90 % 56.27 %
Capital ratio 10.80 % 10.69 % 10.35 % 8.77 % 12.05 % 9.66 % 12.18 % 9.70 %
*Latest available data
Key performances indicators include:
? Return on Assets This ratio is calculated by dividing net income by average assets. It is used to measure how effectively the assets of the Company are being utilized in generating income. The Company's annualized return on average assets was 1.21% and 1.10% for the three months endedSeptember 30, 2020 and 2019, respectively. This ratio increase was primarily the result of a reduction in interest expense due to market rate decreases. ? Return on Equity This ratio is calculated by dividing net income by average equity. It is used to measure the net income or return the Company generated for the shareholders' equity investment in the Company. The Company's return on average equity was at 11.18% and 8.74% for the three months endedSeptember 30, 2020 and 2019, respectively. This ratio increase was primarily the result of a reduction in interest expense due to market rate decreases. 33
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Table of Contents ? Net Interest Margin The net interest margin for the three months endedSeptember 30, 2020 and 2019 was 3.21% and 3.15%, respectively. The ratio is calculated by dividing tax equivalent net interest income by average earning assets. Earning assets are primarily made up of loans and investments that earn interest. This ratio is used to measure how well the Company is able to maintain interest rates on earning assets above those of interest-bearing liabilities, which is the interest expense paid on deposits and other borrowings. ? Efficiency Ratio This ratio is calculated by dividing noninterest expense by net interest income and noninterest income. The ratio is a measure of the Company's ability to manage noninterest expenses. The Company's efficiency ratio was 54.80% and 57.80% for the three months endedSeptember 30, 2020 and 2019, respectively. The efficiency ratio has slightly improved compared to the prior quarter last year. ? Capital Ratio The average capital ratio is calculated by dividing average total equity capital by average total assets. It measures the level of average assets that are funded by shareholders' equity. Given an equal level of risk in the financial condition of two companies, the higher the capital ratio, generally the more financially sound the company. The Company's capital ratio of 10.80% as ofSeptember 30, 2020 is significantly higher than the industry average of 8.77% as ofJune 30, 2020 . Industry Results:
The FDIC Quarterly Banking Profile reported the following results for the second quarter of 2020
Quarterly Net Income Declines
Quarterly net income for the 5,066FDIC -insured commercial banks and savings institutions totaled$18.8 billion during second quarter 2020, a decline of$43.7 billion (70%) from a year ago. The decline in net income reflects a continuation of uncertain economic activity, which drove an increase in provision expenses. Slightly less than half (47.5%) of all banks reported lower net income compared to a year ago. The average return on assets ratio was 0.36% for the current quarter, down 102 basis points from a year ago.
Net Interest Margin Declines to 2.81%
Net interest income was$131.5 billion in second quarter 2020, down$7.6 billion (5.4%) from a year ago. This marks the third consecutive quarter that net interest income declined on a year-over-year basis. Most of the decline was driven by the three largest institutions, as less than half (42.2%) of all banks reported lower net interest income from a year ago. The average net interest margin (NIM) for the banking industry declined below the 3% level, or down 58 basis point from a year ago to 2.81%. This is the lowest NIM ever reported in the Quarterly Banking Profile (QBP). The NIM compression was broad-based, as it declined for all five asset size groups featured in the QBP. The decline in NIM was caused by asset yields declining at a faster rate than funding costs, as low-yielding assets grew substantially. 34
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Noninterest Income Increases Nearly 7% From a Year Ago
With almost half (47.8%) of all banks increasing their noninterest income from a year ago, the aggregate noninterest income for the banking industry rose by$4.6 billion (6.9%) to$70.8 billion . The annual increase in noninterest income was attributable to higher trading revenue, which rose by$6.7 billion (80.2%), and net gains on loan sales, which increased by$4.1 billion (110.8%).
Noninterest Expense Increases 6.2% From Second Quarter 2019
Noninterest expense rose to$122.3 billion in the second quarter, up$7.2 billion (6.2%) from a year ago. More than half (58.6%) of all banks reported year-over-year increases in noninterest expense. The annual increase in noninterest expense was attributable to higher salary and employee benefits (up$2.7 billion , or 4.8%) and goodwill impairment charges (up$2.5 billion ). The average assets per employee increased from$8.8 million in second quarter 2019 to$10.2 million in second quarter 2020. Noninterest expense as a percentage of average assets declined by 16 basis points from a year ago to 2.37%, the lowest level ever reported in the QBP.
Provisions for Credit Losses
The continuation of weak economic activity and the recent implementation of the current expected credit losses (CECL) accounting methodology resulted in provisions for credit losses to increase by$49.1 billion (382.2%) or from$12.8 billion in second quarter 2019 to$61.9 billion this quarter. Quarter over quarter, provisions for credit losses rose by$9.2 billion (17.4%). During the second quarter, 253 banks used the CECL accounting standard. CECL adopters reported$56.3 billion in provisions for credit losses in second quarter, up 419.2% from a year ago, and non-CECL adopters reported$5.6 billion , up 207.3%. Almost two out of every three banks (61.2%) reported yearly increases in provision for credit losses.
Average Net Charge-Off Rate Increases by 7 Basis Points From a Year Ago
The average net charge-off rate increased by 7 basis points from a year ago to 0.57%. Net charge-offs increased by$2.8 billion (22.2%) from a year ago, the largest percentage increase since first quarter 2010. The annual increase in total net chargeoffs was attributable to the commercial and industrial (C&I) loan portfolio, in which charge-offs increased by$2.4 billion (128.5%). The C&I net charge-off rate rose by 31 basis points from a year ago to 0.64%, but remains well below the post-crisis high of 2.72% reported in fourth quarter 2009.
Noncurrent Loan Rate Increases to 1.08%
The average noncurrent rate increased by 15 basis points from the previous quarter to 1.08%. Noncurrent loan balances (90 days or more past due or in nonaccrual status) totaled$118.3 billion in the second quarter, an increase of$15.9 billion (15.5%) from the previous quarter. Less than half (41.6%) of all banks reported quarterly increases in noncurrent loan balances. The increase in noncurrent loan balances was led by 1-4 family residential mortgage loans (up$7.6 billion , or 19.5%) and C&I loan portfolio (up$6.1 billion , or 29%). The rise in noncurrent loan balances for 1-4 family residential mortgage loans reflectsGinnie Mae (GNMA) loans, which are guaranteed by theU.S. government, that have been brought back on banks' books. The noncurrent rate for 1-4 family residential mortgage loans increased by 33 basis points to 2.09%, and for C&I the noncurrent rate rose by 18 basis points to 1.01%. 35
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Total Assets Expand 4.4% From the
The banking industry reported total assets of$21.1 trillion in the second quarter, an increase of$884.6 billion (4.4%) from first quarter 2020. Cash and balances due from depository institutions increased by$478 billion (19.9%) to$2.9 trillion or 13.7% of total assets. Banks increased their securities holdings by$307.2 billion (7.3%), the largest quarterly dollar increase ever reported in the QBP. Most of this growth was attributable toU.S. Treasury securities, which rose by$173 billion (26.3%), and mortgage backed securities, which increased by$105.4 billion (4.1%).
Loan Balances Increase Modestly From the
Total loan and lease balances increased by$33.9 billion (0.3%) from the previous quarter, led by C&I loan portfolio, which rose by$146.5 billion (5.8%). The rise in C&I loan portfolio was attributable to the implementation of theSmall Business Administration -guaranteed Paycheck Protection Program (PPP), with$482.2 billion in PPP loans on banks' balance sheets at the end of the quarter. The increase in total loan and lease balances was partially offset by consumer loans, which includes credit cards (down$67.1 billion , or 3.8%).
Deposits Expand by More Than
Total deposit balances increased by$1.2 trillion (7.5%) from the previous quarter. Noninterest-bearing account balances rose by$637 billion (17.7%) and interest-bearing account balances rose by$575.3 billion (5.4%). Nondeposit liabilities declined by$330.9 billion (14%) from the previous quarter. The decline in nondeposit liabilities was attributable to lowerFederal Home Loan Bank advances, which fell by$234.1 billion (38.2%). Over the past 12 months, total deposits rose by$2.9 trillion (20.8%), led by the increase of$2.4 trillion in the last two quarters.
Equity Capital Rises From the
Equity capital totaled$2.1 trillion in the second quarter, an increase of$31.9 billion (1.5%) from the previous quarter. Retained earnings contributed$4.8 billion to equity formation in the second quarter, as net income of$18.8 billion exceeded declared dividends of$14 billion . Nine insured institutions with$1.4 billion in total assets were below the requirements for the well-capitalized category as defined for Prompt Corrective Action purposes.
One New Bank Opens in Second Quarter 2020
The number ofFDIC -insured commercial banks and savings institutions reporting declined from 5,116 to 5,066 during second quarter 2020. One new bank was added, 47 institutions were absorbed by mergers, and one bank failed. Additionally, three institutions, who did not report this quarter, sold a majority of their assets and are in process of ceasing operations. The number of institutions on theFDIC's "ProblemBank List " declined from 54 in first quarter 2020 to 52, falling to near historic lows. Total assets of problem banks increased from$44.5 billion to$48.1 billion . 36
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Table of Contents Critical Accounting Policies The discussion contained in this Item 2 and other disclosures included within this report are based, in part, on the Company's auditedDecember 31, 2019 consolidated financial statements. These statements have been prepared in accordance with accounting principles generally accepted inthe United States of America . The financial information contained in these statements is, for the most part, based on the financial effects of transactions and events that have already occurred. However, the preparation of these statements requires management to make certain estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. The Company's significant accounting policies are described in the "Notes to Consolidated Financial Statements" accompanying the Company's audited financial statements. Based on its consideration of accounting policies that involve the most complex and subjective estimates and judgments, management has identified the allowance for loan losses, the assessment of other-than-temporary impairment for investment securities and the assessment of goodwill impairment to be the Company's most critical accounting policies. Allowance for Loan Losses The allowance for loan losses is established through a provision for loan losses that is treated as an expense and charged against earnings. Loans are charged against the allowance for loan losses when management believes that collectability of the principal is unlikely. The Company has policies and procedures for evaluating the overall credit quality of its loan portfolio, including timely identification of potential problem loans. On a quarterly basis, management reviews the appropriate level for the allowance for loan losses, incorporating a variety of risk considerations, both quantitative and qualitative. Quantitative factors include the Company's historical loss experience, delinquency and charge-off trends, collateral values, known information about individual loans and other factors. Qualitative factors include various considerations regarding the general economic environment in the Company's market area. To the extent actual results differ from forecasts and management's judgment, the allowance for loan losses may be greater or lesser than future charge-offs. Due to potential changes in conditions, including the onset of the COVID-19 pandemic, it is at least reasonably possible that changes in estimates will occur in the near term and that such changes could be material to the amounts reported in the Company's financial statements. For further discussion concerning the allowance for loan losses and the process of establishing specific reserves, see the section of the Annual Report on Form 10-K entitled "Asset Quality Review and Credit Risk Management" and "Analysis of the Allowance for Loan Losses".
Fair Value and Other-Than-Temporary Impairment of
The Company's securities available-for-sale portfolio is carried at fair value
with "fair value" being defined as the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market
participants. A fair value measurement assumes that the transaction to sell the
asset or transfer the liability occurs in the principal market for the asset or
liability or, in the absence of a principal market, the most advantageous market
for the asset or liability. The price in the principal (or most advantageous)
market used to measure the fair value of the asset or liability is not adjusted
for transaction costs. An orderly transaction is a transaction that assumes
exposure to the market for a period prior to the measurement date to allow for
marketing activities that are usual and customary for transactions involving
such assets and liabilities; it is not a forced transaction. Market participants
are buyers and sellers in the principal market that are (i) independent, (ii)
knowledgeable, (iii) able to transact, and (iv) willing to transact.
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Declines in the fair value of available-for-sale securities below their cost that are deemed to be other-than-temporary are reflected in earnings as realized losses. In estimating other-than-temporary impairment losses, management considers (1) the intent to sell the investment securities and the more likely than not requirement that the Company will be required to sell the investment securities prior to recovery (2) the length of time and the extent to which the fair value has been less than cost and (3) the financial condition and near-term prospects of the issuer. Due to potential changes in conditions, including the onset of the COVID-19 pandemic, it is at least reasonably possible that changes in management's assessment of other-than-temporary impairment will occur in the near term and that such changes could be material to the amounts reported in the Company's financial statements.Goodwill Goodwill arose in connection with four acquisitions consummated in previous periods.Goodwill is tested annually for impairment or more often if conditions indicate a possible impairment. For the purposes of goodwill impairment testing, determination of the fair value of a reporting unit involves the use of significant estimates and assumptions. Impairment would arise if the fair value of a reporting unit is less than its carrying value. At September 30,2020, Company's management has completed the goodwill impairment assessment and determined goodwill was not impaired. Actual future test results may differ from the present evaluation of impairment due to changes in the conditions used in the current evaluation.Goodwill may be impaired in the future if the effects of the COVID-19 pandemic negatively impacts our net income and fair value, particularly of our most recent acquisition. An impairment of goodwill would decrease the Company's earnings during the period in which the impairment is recorded. Non-GAAP Financial Measures This report contains references to financial measures that are not defined in GAAP. Such non-GAAP financial measures include the Company's presentation of net interest income and net interest margin on a fully taxable equivalent (FTE) basis. Management believes these non-GAAP financial measures are widely used in the financial institutions industry and provide useful information to both management and investors to analyze and evaluate the Company's financial performance. Limitations associated with non-GAAP financial measures include the risks that persons might disagree as to the appropriateness of items included in these measures and that different companies might calculate these measures differently. These non-GAAP disclosures should not be considered an alternative to the Company's GAAP results. The following table reconciles the non-GAAP financial measures of net interest income and net interest margin on an FTE basis to GAAP (dollars in thousands). Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019
Reconciliation of net interest income and annualized net interest margin on an FTE basis to GAAP: Net interest income (GAAP)
$ 14,160 $ 10,814 $ 40,886 $ 32,715 Tax-equivalent adjustment (1)
237 251 732 827
Net interest income on an FTE basis
(non-GAAP) 14,397 11,065 41,618 33,542
Average interest-earning assets $ 1,796,452 $ 1,403,303 $ 1,754,519 $ 1,399,302
Net interest margin on an FTE basis
(non-GAAP) 3.21 % 3.15 % 3.16 % 3.20 %
(1) Computed on a tax-equivalent basis using an incremental federal income tax
rate of 21 percent, adjusted to reflect the effect of the tax-exempt interest
income associated with owning tax-exempt securities and loans.
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Income Statement Review for the Three Months ended
The following highlights a comparative discussion of the major components of net
income and their impact for the three months ended
AVERAGE BALANCES AND INTEREST RATES
The following two tables are used to calculate the Company's net interest
margin. The first table includes the Company's average assets and the related
income to determine the average yield on earning assets. The second table
includes the average liabilities and related expense to determine the average
rate paid on interest-bearing liabilities. The net interest margin is equal to
interest income less interest expense divided by average earning assets. Refer
to the net interest income discussion following the tables for additional
detail.
AVERAGE BALANCE SHEETS AND INTEREST RATES
Three Months Ended September 30,
2020 2019
Average Revenue/ Yield/ Average Revenue/ Yield/
balance expense rate balance expense rate
ASSETS
(dollars in thousands)
Interest-earning assets
Loans (1)
Commercial $ 154,887 $ 1,732 4.47 % $ 76,808 $ 1,062 5.53 %
Agricultural 105,568 1,580 5.99 % 78,286 989 5.05 %
Real estate 890,097 9,324 4.19 % 713,796 8,255 4.63 %
Consumer and other 17,667 229 5.18 % 15,861 207 5.22 %
Total loans (including fees) 1,168,219 12,865 4.41 % 884,751 10,513 4.75 %
Investment securities Taxable 362,553 1,987 2.19 % 277,264 1,672 2.41 % Tax-exempt (2) 164,010 1,128 2.75 % 177,431 1,197 2.70 % Total investment securities 526,563 3,115 2.37
% 454,695 2,869 2.52 %
Interest-bearing deposits with banks and federal funds sold 101,670 176 0.69 % 63,857 401 2.51 % Total interest-earning assets 1,796,452$ 16,156 3.60
% 1,403,303
Noninterest-earning assets 81,654 59,894 TOTAL ASSETS$ 1,878,106 $ 1,463,197 (1) Average loan balance includes nonaccrual loans, if any. Interest income collected on nonaccrual loans has been included. (2) Tax-exempt income has been adjusted to a tax-equivalent basis using an incremental tax rate of 21%. 39
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