Texas Capital Bancshares Announces Operating Results for Q3 2007

Texas Capital Bancshares, Inc. (NASDAQ: TCBI), the parent company of Texas Capital Bank, announced earnings and operating results for the third quarter of 2007. EPS increased 10% for the quarter Net income increased 10% Loans held for investment grew 30% Total deposits grew 19% "We are pleased to report another very solid quarter highlighted by record growth in loans," said Jody Grant, chairman and CEO. "This extraordinary loan growth, plus our success in controlling our growth in non-interest expenses, has significantly contributed to the growth in earnings per share. These results reflect the underlying strength and diversity of the Texas economy, which have more than offset any weakness in a particular sector." FINANCIAL SUMMARY (dollars and shares in thousands)         Q3 2007 Q3 2006 % Change QUARTERLY OPERATING RESULTS Net Income(1) $ 8,844 $ 8,037 10 % Diluted EPS(1) $ .33 $ .30 10 % ROA(1) .88 % .94 % ROE(1) 12.73 % 13.83 % Diluted Shares 26,767 26,412   BALANCE SHEET Total Assets(1) $ 4,077,290 $ 3,463,009 18 % Demand Deposits 471,109 467,750 1 % Total Deposits 3,295,707 2,776,648 19 % Loans Held for Investment 3,296,039 2,543,059 30 % Total Loans(1) 3,414,260 2,694,314 27 % Stockholders’ Equity 284,209 239,792 19 % (1) From continuing operations DETAILED FINANCIALS Texas Capital Bancshares, Inc. reported net income from continuing operations of $8.8 million for the third quarter of 2007 compared to $8.0 million for the third quarter of 2006. On a fully diluted basis, earnings per share from continuing operations were $.33 for the three months ended September 30, 2007, compared to $.30 for the same quarter last year, an increase of 10 percent. Results of discontinued operations were net losses of $602,000 and $167,000 for the third quarters 2007 and 2006, respectively. The discussion below relates only to continuing operations. Return on average equity was 12.73 percent and return on average assets was .88 percent for the third quarter of 2007, compared to 13.83 and .94 percent, respectively, for the third quarter of 2006. Net interest income was $36.8 million for the third quarter of 2007, compared to $30.1 million for the third quarter of 2006. The increase was due to an increase in average earning assets of $635.9 million over levels reported in the third quarter of 2006. The increase in average earning assets included a $716.4 million increase in average loans held for investment offset by a slight decrease in average loans held for sale and a decrease of $75.0 million in average securities. The net interest margin in the third quarter of 2007 was 3.86 percent, a 6 basis point increase from the third quarter of 2006 and a 3 basis point increase from the second quarter of 2007. Average total deposits increased by $390.1 million from the third quarter of 2006 and increased by $244.2 million from the second quarter of 2007. For the same periods, the average balance of demand deposits increased by 1 percent to $469.6 million from $464.6 million during the third quarter of 2006 and increased $11.5 million, or 3 percent, from the second quarter of 2007. Average interest bearing liabilities increased $555.9 million from the third quarter of 2006, which included a $130.5 million increase in other borrowings. Key measures of credit quality remained favorable. In the third quarter of 2007, net charge-offs were $59,000, compared to net recoveries of $445,000 in the third quarter of 2006 and net charge-offs of $27,000 in the second quarter of 2007. For the year-to-date, the Company has realized a net recovery of $300,000, and for the most recent 12-months, net charge-offs were $538,000. Non-accrual loans were $8.7 million, or .26 percent of loans at the end of the third quarter of 2007, compared to $6.4 million, or .25 percent of loans at the end of third quarter of 2006, and $8.7 million, or .28 percent at the end of the second quarter of 2007. Loans 90 days past due and still accruing were $4.4 million at the end of the third quarter of 2007 compared to $2.6 million at the end of the third quarter of 2006. At September 30, 2007, the $4.4 million of past due loans included $1.3 million in premium finance loans. The premium finance loans are generally secured by obligations of insurance carriers to refund premiums on cancelled insurance policies. The refund of premiums from the insurance carriers can take 180 days or longer from the cancellation date. The Company recorded a $2.0 million provision for loan losses in the third quarter of 2007, compared to $750,000 in the third quarter of 2006 and $1.5 million in the second quarter of 2007. Reserve coverage of historical losses and non-performing assets remains strong. In management’s opinion, the reserve is adequate and is derived from consistent application of the methodology for establishing the adequacy of reserves for Texas Capital Bank’s loan portfolio. Non-interest income for the third quarter of 2007 increased $169,000, or 4 percent, to $4.6 million from $4.5 million in the third quarter of 2006. The increase is primarily related to a $434,000 increase in rental income on leased equipment from $1.1 million to $1.6 million related to expansion of our operating lease portfolio. Service charge income increased $309,000 and trust fee income increased $174,000. Offsetting these increases was reduced contribution from mortgage warehouse, including brokered loan fees and mark to market. Non-interest expense for the third quarter of 2007 increased $4.3 million, or 20 percent, to $25.9 million from $21.6 million in the third quarter of 2006. The increase is primarily related to a $2.8 million increase in salaries and employee benefits to $15.3 million from $12.5 million, of which $558,000 relates to an increase in FAS 123R expense. The remaining increase in salaries and employee benefits resulted from growth, including higher level of variable incentives. Expansion of the operating lease portfolio resulted in an increase of $383,000 in equipment depreciation expense to $1.3 million in the third quarter of 2007 from $928,000 in the third quarter of 2006. ABOUT TEXAS CAPITAL BANCSHARES, INC. Texas Capital Bancshares, Inc. (NASDAQ: TCBI) is the parent company of Texas Capital Bank, a commercial bank that delivers highly personalized financial services to businesses and private clients. Headquartered in Dallas, the Bank has full-service locations in Austin, Dallas, Fort Worth, Houston and San Antonio. This release contains forward-looking statements, which are subject to risks and uncertainties. A number of factors, many of which are beyond Texas Capital Bancshares’ control, could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. These risks and uncertainties include the risk of adverse impacts from general economic conditions, competition, interest rate sensitivity and exposure to regulatory and legislative changes. These and other factors that could cause results to differ materially from those described in the forward-looking statements can be found in the Form 10-K and other filings made by Texas Capital Bancshares with the Securities and Exchange Commission. TEXAS CAPITAL BANCSHARES, INC.   SELECTED FINANCIAL HIGHLIGHTS (UNAUDITED) (Dollars in thousands except per share data) 3rd Quarter   2nd Quarter   1st Quarter   4th Quarter   3rd Quarter 2007   2007   2007   2006   2006 CONSOLIDATED STATEMENT OF OPERATIONS Interest income $ 76,368 $ 72,419 $ 67,163 $ 66,178 $ 62,848 Interest expense   39,609       37,948       35,496       34,346       32,747   Net interest income 36,759 34,471 31,667 31,832 30,101 Provision for loan losses   2,000       1,500       1,200       1,000       750   Net interest income after provision for loan losses 34,759 32,971 30,467 30,832 29,351 Non-interest income 4,647 5,288 5,136 4,833 4,478 Non-interest expense   25,894       25,411       24,095       23,993       21,635   Income from continuing operations before income taxes 13,512 12,848 11,508 11,672 12,194 Income tax expense   4,668       4,463       3,922       3,958       4,157   Net income from continuing operations 8,844 8,385 7,586 7,714 8,037 Income (loss) from discontinued operations (after-tax)   (602 )     (180 )     36       356       (167 ) Net income $ 8,242     $ 8,205     $ 7,622     $ 8,070     $ 7,870   Diluted EPS from continuing operations $ .33 $ .31 $ .29 $ .29 $ .30 Diluted EPS $ .31 $ .31 $ .29 $ .31 $ .30   Diluted shares 26,766,788 26,711,437 26,440,556 26,373,726 26,411,834   CONSOLIDATED BALANCE SHEET DATA(1) Total assets $ 4,077,290 $ 3,943,518 $ 3,807,232 $ 3,658,505 $ 3,463,009 Loans held for investment 3,296,039 3,091,657 2,885,963 2,722,097 2,543,059 Loans held for sale 118,221 176,022 208,074 199,014 151,255 Securities 476,448 490,967 508,296 532,053 554,732 Demand deposits 471,109 495,010 507,686 513,930 467,750 Total deposits 3,295,707 3,112,560 3,086,737 3,069,330 2,776,648 Other borrowings 358,510 421,668 331,118 211,559 338,801 Long-term debt 113,406 113,406 113,406 113,406 113,406 Stockholders’ equity 284,209 270,097 263,616 253,515 239,792   End of period shares 26,243,149 26,189,562 26,101,994 26,065,124 26,031,829 Book value (excluding securities gains/losses) $ 11.00 $ 10.64 $ 10.27 $ 9.93 $ 9.50 Tangible book value $ 10.53 $ 10.01 $ 9.79 $ 9.23 $ 8.71   SELECTED FINANCIAL RATIOS From continuing operations Net interest margin 3.86 % 3.83 % 3.78 % 3.86 % 3.80 % Return on average assets .88 % .88 % .84 % .87 % .94 % Return on average equity 12.73 % 12.59 % 12.12 % 12.53 % 13.83 % Non-interest income to earning assets .48 % .58 % .61 % .58 % .56 % Efficiency ratio 62.5 % 63.9 % 65.5 % 65.4 % 62.6 % Non-interest expense to earning assets 2.70 % 2.80 % 2.86 % 2.89 % 2.71 % From consolidated Net interest margin 3.86 % 3.84 % 3.77 % 3.84 % 4.01 % Return on average assets .82 % .86 % .84 % .90 % .91 % Return on average equity 11.86 % 12.32 % 12.18 % 13.11 % 13.54 %   Tier 1 capital ratio 9.6 % 9.8 % 9.8 % 9.7 % 11.1 % Total capital ratio 10.7 % 10.9 % 11.1 % 11.2 % 11.8 % Tier 1 leverage ratio 9.4 % 9.4 % 9.5 % 9.2 % 10.2 % (1) From continuing operations TEXAS CAPITAL BANCSHARES, INC.   CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Dollars in thousands)   September 30, 2007   September 30, 2006   % Change Assets     Cash and due from banks $ 75,724 $ 113,461 (33)% Securities, available-for-sale 476,448 554,732 (14)% Loans held for sale 118,221 151,255 (22)% Loans held for sale from discontinued operations 863 31,004 (97)% Loans held for investment (net of unearned income) 3,296,039 2,543,059 30% Less: Allowance for loan losses   26,003       20,841     25% Loans held for investment, net 3,270,036 2,522,218 30% Premises and equipment, net 42,224 31,605 34% Accrued interest receivable and other assets 86,746 76,616 13% Goodwill and intangibles, net   7,891       13,122     (40)% Total assets $ 4,078,153     $ 3,494,013     17%   Liabilities and Stockholders’ Equity Liabilities: Deposits: Non-interest bearing $ 471,109 $ 467,750 1% Interest bearing 1,788,809 1,490,010 20% Interest bearing in foreign branches   1,035,789       818,888     26% Total deposits 3,295,707 2,776,648 19%   Accrued interest payable 7,312 5,188 41% Other liabilities 19,009 20,178 (6)% Federal funds purchased 216,744 181,780 19% Repurchase agreements 7,820 55,844 (86)% Other borrowings 133,946 101,177 32% Long-term debt   113,406       113,406     – Total liabilities 3,793,944 3,254,221 17%   Stockholders’ equity: Common stock, $.01 par value: Authorized shares – 100,000,000 Issued shares – 26,243,149 and 26,031,829 at September 30, 2007 and 2006, respectively 263 261 Additional paid-in capital 188,265 179,017 Retained earnings 100,232 68,093 Treasury stock (shares at cost: 84,691 and 84,274 at September 30, 2007 and 2006, respectively) (581 ) (573 ) Deferred compensation 573 573 Accumulated other comprehensive loss   (4,543 )     (7,579 )     Total stockholders’ equity   284,209       239,792     19% Total liabilities and stockholders’ equity $ 4,078,153     $ 3,494,013     17% TEXAS CAPITAL BANCSHARES, INC.   CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (In thousands except per share data)     Three Months Ended September 30     Nine Months Ended September 30 2007   2006     2007   2006 Interest income     Interest and fees on loans $ 70,719 $ 56,320 $ 198,419 $ 150,812 Securities 5,623 6,488 17,460 20,045 Federal funds sold 12 24 27 51 Deposits in other banks   14       16         44       40   Total interest income 76,368 62,848 215,950 170,948 Interest expense Deposits 32,690 28,337 93,311 70,013 Federal funds purchased 3,554 1,753 9,474 6,094 Repurchase agreements 175 665 839 3,429 Other borrowings 1,102 634 3,231 2,078 Long-term debt   2,088       1,358         6,198       3,353   Total interest expense   39,609       32,747         113,053       84,967   Net interest income 36,759 30,101 102,897 85,981 Provision for loan losses   2,000       750         4,700       3,000   Net interest income after provision for loan losses 34,759 29,351 98,197 82,981 Non-interest income Service charges on deposit accounts 1,089 780 2,935 2,441 Trust fee income 1,182 1,008 3,453 2,717 Bank owned life insurance (BOLI) income 288 255 887 833 Brokered loan fees 452 656 1,505 1,508 Equipment rental income 1,581 1,147 4,533 2,475 Other   55       632         1,758       2,234   Total non-interest income 4,647 4,478 15,071 12,208 Non-interest expense Salaries and employee benefits 15,254 12,542 44,573 36,871 Net occupancy expense 2,194 1,907 6,269 5,872 Leased equipment depreciation 1,311 928 3,722 2,095 Marketing 669 690 2,154 2,298 Legal and professional 1,799 1,590 5,202 4,402 Communications and data processing 849 843 2,519 2,268 Franchise taxes 46 58 176 223 Other   3,772       3,077         10,785       8,890   Total non-interest expense   25,894       21,635         75,400       62,919   Income from continuing operations before income taxes 13,512 12,194 37,868 32,270 Income tax expense   4,668       4,157         13,053       11,003   Income from continuing operations (after-tax) 8,844 8,037 24,815 21,267 Income (loss) from discontinued operations (after-tax)   (602 )     (167 )       (746 )     (413 ) Net income $ 8,242     $ 7,870       $ 24,069     $ 20,854     Basic earnings per share: Income from continuing operations $ .34 $ .31 $ .95 $ .82 Net income $ .31 $ .30 $ .92 $ .80   Diluted earnings per share: Income from continuing operations $ .33 $ .30 $ .93 $ .80 Net income $ .31 $ .30 $ .90 $ .79 TEXAS CAPITAL BANCSHARES, INC.   SUMMARY OF LOAN LOSS EXPERIENCE (Dollars in thousands)   3rd Quarter   2nd Quarter   1st Quarter   4th Quarter   3rd Quarter 2007   2007   2007   2006   2006   Beginning balance $ 24,062 $ 22,589 $ 21,003 $ 20,841 $ 19,646 Loans charged-off: Commercial 100 93 146 837 70 Consumer 45 3 – – – Leases   10       58       –       36       –   Total 155 154 146 873 70 Recoveries: Commercial 72 49 504 12 441 Consumer 1 – 13 – – Leases   23       78       15       23       74   Total recoveries   96       127       532       35       515   Net charge-offs (recoveries) 59 27 (386 ) 838 (445 ) Provision for loan losses   2,000       1,500       1,200       1,000       750   Ending balance $ 26,003     $ 24,062     $ 22,589     $ 21,003     $ 20,841     Reserve to loans held for investment (2) .79 % .78 % .78 % .77 % .82 % Reserve to average loans held for investment (2) .81 % .81 % .82 % .80 % .84 % Net charge-offs (recoveries) to average loans (1) (2) .01 % .00 % (.06) % .13 % (.07) % Net charge-offs (recoveries) to average loans for last twelve months(1) (2) .02 % .00 % .06 % .08 % .05 % Provision for loan losses to average loans (1) (2) .25 % .20 % .18 % .15 % .12 %   Non-performing loans: Loans past due (90 days) (3) (4) $ 4,356 $ 1,860 $ 4,828 $ 2,142 $ 2,627 Non-accrual (4)   8,690       8,718       8,843       9,088       6,432   Total $ 13,046     $ 10,578     $ 13,671     $ 11,230     $ 9,059     Other real estate owned (4) $ 501 $ 89 $ 89 $ 882 $ 882   Reserve to non-performing loans 2.0 x 2.3 x 1.7 x 1.9 x 2.3 x Reserve to non-accrual loans 3.0 x 2.8 x 2.6 x 2.3 x 3.2 x Reserve to non-performing assets 1.9 x 2.3 x 1.6 x 1.7 x 2.1 x Non-accrual loans to loans(2) .26 % .28 % .31 % .33 % .25 % Loans past due 90 days to loans(2) .13 % .06 % .17 % .08 % .10 % Non-performing loans to loans(2) .40 % .34 % .47 % .41 % .36 % (1) Interim period ratios are annualized. (2) Excludes loans held for sale. (3) At September 30, 2007, loans past due 90 days and still accruing includes premium finance loans of $1.3 million. These loans are generally secured by obligations of insurance carriers to refund premiums on cancelled insurance policies. The refund of premiums from the insurance carriers can take 180 days or longer from the cancellation date. The total also includes $274,000 USDA guaranteed loans. (4) Non-performing assets include $2.4 million of mortgage warehouse loans. TEXAS CAPITAL BANCSHARES, INC.   CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) (Dollars in thousands)           3rd Quarter 2nd Quarter 1st Quarter 4th Quarter 3rd Quarter 2007   2007   2007   2006   2006 Interest income Interest and fees on loans $ 70,719 $ 66,526 $ 61,174 $ 59,882 $ 56,320 Securities 5,623 5,868 5,969 6,266 6,488 Federal funds sold 12 10 5 14 24 Deposits in other banks   14       15       15     16     16   Total interest income 76,368 72,419 67,163 66,178 62,848 Interest expense Deposits 32,690 29,731 30,890 29,487 28,337 Federal funds purchased 3,554 3,767 2,153 1,793 1,753 Repurchase agreements 175 270 394 587 665 Other borrowings 1,102 2,117 12 393 634 Long-term debt   2,088       2,063       2,047     2,086     1,358   Total interest expense   39,609       37,948       35,496     34,346     32,747   Net interest income 36,759 34,471 31,667 31,832 30,101 Provision for loan losses   2,000       1,500       1,200     1,000     750   Net interest income after provision for loan losses 34,759 32,971 30,467 30,832 29,351 Non-interest income Service charges on deposit accounts 1,089 953 893 865 780 Trust fee income 1,182 1,194 1,077 1,073 1,008 Bank owned life insurance (BOLI) income 288 301 298 301 255 Brokered loan fees 452 574 479 521 656 Equipment rental income 1,581 1,493 1,459 1,433 1,147 Other   55       773       930     640     632   Total non-interest income 4,647 5,288 5,136 4,833 4,478 Non-interest expense Salaries and employee benefits 15,254 14,762 14,557 13,711 12,542 Net occupancy expense 2,194 2,055 2,020 2,111 1,907 Leased equipment depreciation 1,311 1,204 1,207 1,002 928 Marketing 669 728 757 785 690 Legal and professional 1,799 1,742 1,661 2,084 1,590 Communications and data processing 849 838 832 862 843 Franchise taxes 46 89 41 58 58 Other   3,772       3,993       3,020     3,380     3,077   Total non-interest expense   25,894       25,411       24,095     23,993     21,635   Income from continuing operations before income taxes 13,512 12,848 11,508 11,672 12,194 Income tax expense   4,668       4,463       3,922     3,958     4,157   Income from continuing operations (after-tax) 8,844 8,385 7,586 7,714 8,037 Income (loss) from discontinued operations (after-tax)   (602 )     (180 )     36     356     (167 ) Net income $ 8,242     $ 8,205     $ 7,622   $ 8,070   $ 7,870   TEXAS CAPITAL BANCSHARES, INC.   QUARTERLY FINANCIAL SUMMARY – UNAUDITED Consolidated Daily Average Balances, Average Yields and Rates Continuing Operations (Dollars in thousands)   3rd Quarter 2007   2nd Quarter 2007   1st Quarter 2007   4th Quarter 2006   3rd Quarter 2006 Average Balance   Revenue/ Expense (1)   Yield/ Rate   Average Balance   Revenue/ Expense (1)   Yield/ Rate   Average Balance   Revenue/ Expense (1)   Yield/ Rate   Average Balance   Revenue/ Expense (1)   Yield/ Rate   Average Balance   Revenue/ Expense (1)   Yield/ Rate Assets                     Securities – Taxable $ 432,595 $ 5,187 4.76 % $ 452,118 $ 5,435 4.82 % $ 467,219 $ 5,535 4.80 % $ 490,001 $ 5,830 4.72 % $ 507,156 $ 6,055 4.74 % Securities – Non-taxable(2) 48,173 671 5.53 % 48,291 666 5.53 % 48,549 668 5.58 % 48,573 669 5.46 % 48,595 666 5.44 % Federal funds sold 885 12 5.38 % 768 10 5.22 % 418 5 4.85 % 1,004 14 5.53 % 1,750 24 5.44 % Deposits in other banks 1,217 14 4.56 % 1,264 15 4.76 % 1,097 15 5.55 % 1,207 16 5.26 % 1,498 16 4.24 % Loans held for sale 150,031 2,618 6.92 % 191,979 3,440 7.19 % 156,400 2,791 7.24 % 155,620 2,791 7.12 % 150,225 2,747 7.25 % Loans held for investment 3,195,480 68,101 8.46 % 2,964,863 63,086 8.53 % 2,767,834 58,383 8.55 % 2,620,307 57,091 8.64 % 2,479,057 53,573 8.57 % Less reserve for loan losses   24,065     –   –     22,633     –   –     21,001     –   –     20,751     –   –     19,823     –   –   Loans, net of reserve   3,321,446     70,719   8.45 %   3,134,209     66,526   8.51 %   2,903,233     61,174   8.55 %   2,755,176     59,882   8.62 %   2,609,459     56,320   8.56 % Total earning assets 3,804,316 76,603 7.99 % 3,636,650 72,652 8.01 % 3,420,516 67,397 7.99 % 3,295,961 66,411 7.99 % 3,168,458 63,081 7.90 % Cash and other assets   188,356   205,011   231,412   225,092   217,663 Total assets $ 3,992,672 $ 3,841,661 $ 3,651,928 $ 3,521,053 $ 3,386,121   Liabilities and Stockholders’ Equity Transaction deposits $ 95,870 $ 239 0.99 % $ 93,488 $ 236 1.01 % $ 105,592 $ 282 1.08 % $ 97,428 $ 276 1.12 % $ 99,549 $ 284 1.13 % Savings deposits 848,760 9,393 4.39 % 794,668 8,792 4.44 % 821,526 9,175 4.53 % 879,452 10,063 4.54 % 769,271 8,703 4.49 % Time deposits 760,511 9,877 5.15 % 655,440 8,416 5.15 % 769,485 9,756 5.14 % 598,258 7,658 5.08 % 643,708 8,069 4.97 % Deposits in foreign branches   1,037,813     13,181   5.04 %   966,686     12,287   5.10 %   915,229     11,677   5.17 %   875,851     11,490   5.20 %   845,338     11,281   5.29 % Total interest bearing deposits 2,742,954 32,690 4.73 % 2,510,282 29,731 4.75 % 2,611,832 30,890 4.80 % 2,450,989 29,487 4.77 % 2,357,866 28,337 4.77 % Other borrowings 368,824 4,831 5.20 % 469,999 6,154 5.25 % 207,303 2,559 5.01 % 219,644 2,773 5.01 % 238,350 3,052 5.08 % Long-term debt   113,406     2,088   7.30 %   113,406     2,063   7.30 %   113,406     2,047   7.32 %   113,406     2,086   7.30 %   73,064     1,358   7.37 % Total interest bearing liabilities 3,225,184 39,609 4.87 % 3,093,687 37,948 4.92 % 2,932,541 35,496 4.91 % 2,784,039 34,346 4.89 % 2,669,280 32,747 4.87 % Demand deposits 469,610 458,096 439,071 470,701 464,645 Other liabilities 22,173 22,650 26,494 22,106 21,633 Stockholders’ equity   275,705   267,228   253,822   244,207   230,563 Total liabilities and stockholders’ equity $ 3,992,672 $ 3,841,661 $ 3,651,928 $ 3,521,053 $ 3,386,121   Net interest income $ 36,994 $ 34,704 $ 31,901 $ 32,065 $ 30,334 Net interest margin 3.86 % 3.83 % 3.78 % 3.86 % 3.80 %     Additional information from discontinued operations: Loans held for sale $ 1,259 $ 4,155 $ 12,068 $ 22,763 $ 27,422 Borrowed funds 1,259 4,155 12,068 22,763 27,422 Net interest income $ 5 $ 115 $ 46 $ 87 $ 1,972 Net interest margin – consolidated 3.86 % 3.84 % 3.77 % 3.84 % 4.01 % (1) The loan averages include loans on which the accrual of interest has been discontinued and are stated net of unearned income. (2) Taxable equivalent rates used where applicable.