A message from our Chairman, Ronald T. Barnes:
May 9, 2013
The disciplined focus of Midwest BankCentre on three factors – income growth, smart expense management and strong loan quality – have yielded strong first quarter 2013 results.
Consolidated Net Income. For the first quarter ending March 31, 2013, consolidated net income totaled $2.228 million. This 16.6% increase equals $317,000 over last year’s first quarter net income of $ 1.911 million. Key net income contributors included:
$1.154 million in first quarter 2013 mortgage revenue, up from $1.002 million in 2012;
Strong expense control, keeping non-interest expenses flat year-over-year; and
The strength of our loan quality, which eliminated the need to boost our loan loss reserves.
Our ongoing challenge remains prolonged low interest rates, which continue their downward push on our margins. Net interest income in the quarter declined by 5.1% (equal to $392,000) compared to 2012.
Loan Volume. First quarter 2013 loans and leases, net of unearned income and reserves, increased by a modest 0.3% – or $1.8 million – to $713.2 million. Mortgage loans held in the Bank’s loan portfolio increased 41.6% to generate $31.7 million. Commercial loans decreased by 4.1% or $24.6 million. All other consumer loans decreased 10.4%, equal to $5.3 million.
Two factors remain unchanged year-to-year:
The stagnant economy translates to sluggish demand for business loans. Many business owners are reluctant to take on the debt associated with new initiatives at this time.
Competition for high quality loans remains intense. We continue to encounter extreme pricing pressure and, in some cases, relaxed loan underwriting standards. We believe our bank is ahead long-term because of our vigilance and consistency in loan underwriting.
Loan Quality. Our loan quality metrics remain strong compared with our peer banks. We enjoy a healthy surplus in our loan loss reserves, requiring no further contributions year-to-date. That factor contributed a major expense savings over first quarter 2012, when our loan loss provision expense was $575,000. As of March 31, 2013, our loan loss reserve totals 1.99% of total loans, up from 1.78% a year prior. Non-performing loans stand at 1.58% of total loans versus 1.45% in 2012. Our current reserve covers 1.2 times our total non-performing loans.
Mortgage Banking. Our Mortgage Banking team generated year-over-year revenue growth of 15.1% (equal to $152,000) in first quarter 2013. Total mortgage banking revenue in the quarter was $ 1.154 million, up from $ 1.002 million from the prior year. We are encouraged by continued strengthening of mortgage loan originations for new home purchases, a good sign for home builders. The singular bright spot of low interest rates is their positive effect on home mortgage refinancing demand.
Deposits. Total deposits at March 31, 2013 grew by 8.5% to $ 913.8 million, rising by $71.4 million over 2012. Demand deposits, our least costly deposits, inched upward by 1% (equal to $1.7 million) from first quarter 2012. Melissa Jones and the Pagedale Branch team she leads are pleased to report solid deposit trends at our newest location, which opened last November. The community has welcomed our delivery of a full complement of banking products and services in a very personal and professional way.
Capital Position. Midwest BankCentre’s capital position remains one of our core strengths. We ended March 31, 2013 at the very healthy level of $ 123.5 million. This $2.8 million gain over first quarter 2012 places our total risk-based capital ratio at 15.11%, slightly stronger than 15.07% a year earlier.
Update on Security Incident. You may have read or heard news of a computer security breach affecting some of our home loan customers. On April 8, Midwest BankCentre learned of an indirect security breach of its website, affecting 109 home loan applicants. We immediately reported the breach of our website to the Secret Service and FBI, and both commenced investigations into the incident. We hired a forensic firm to investigate the website breach, and to investigate the security of our core banking system. We reached out to the loan applicants affected by the breach to notify them and offer free LifeLock identity theft protection, ultimately reaching and helping those affected. We also worked with the media right away to inform the public of the breach and have posted frequent updates on our website, where we provided phone numbers for contacting staff members who were ready to answer questions and help with solutions. We are pleased to have been able to respond quickly and put helpful safeguards in place for those affected. The FBI, Secret Service, and forensic investigations are ongoing, and we will provide updates on these investigations as they become available.
12-Plus Years of Strength & Stability. Our Midwest BankCentre team continues to take pride in maintaining our Bauer 5 Star rating for bank strength and stability. It remains an honor to receive this coveted rating, the highest available measure of financial strength and stability, for a total of 49 consecutive quarters (more than 12 years). This acknowledgement is a high tribute to all of our team members.
I am pleased to report the Board of Directors has declared a regular dividend of $0.35 per share payable June 1, 2013 to shareholders of record May 1, 2013.
On behalf of our Midwest BankCentre management team, we are grateful for your continued support and confidence.Sincerely,
MIDWEST BANKCENTRE, INC.
Rated Superior for Strength and
Ronald T. Barnes