County Bancorp, Inc. Announces Second Quarter 2020 Financial Results

Company Release - 7/23/2020 4:01 PM ET

Execution on strategic priorities and stabilizing milk prices drove strong client deposit growth and improved sequential results

Highlights

  • Net income of $2.7 million, or $0.40 per diluted share, for the second quarter 2020
  • Net interest income increased $88,000 during the second quarter of 2020 due to reduction in cost of funds
  • Provision for loan losses decreased $1.1 million to $1.1 million in the second quarter of 2020
  • Loans increased $75.1 million during the second quarter of 2020 primarily due to $106.0 million in Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) loan applications approved
  • Average loans sold and serviced increased $8.8 million, and loan fees as a percentage of average loans sold and serviced increased 0.04% to 1.02% during the second quarter 2020
  • Client deposits (demand deposits, NOW, savings, money market accounts, and certificates of deposit) increased $101.9 million, or 12.9%, during the second quarter of 2020
  • Independent director Andrew Steimle selected as Chairman of the Board
  • Capital ratios remain strong with a Total Risk-Based Capital ratio of 20.2% and Tier 1 Leverage of 12.5%

MANITOWOC, Wis., July 23, 2020 (GLOBE NEWSWIRE) -- County Bancorp, Inc. (the “Company”; Nasdaq: ICBK), the holding company of Investors Community Bank (the “Bank”), a community bank headquartered in Manitowoc, Wisconsin, today reported financial results for the second quarter of 2020.  Net income was $2.7 million, or $0.40 per diluted share, for the second quarter of 2020, compared to net income of $3.7 million, or $0.53 per diluted share, for the second quarter of 2019.  For the six months ended June 30, 2020, there was a net loss of $2.5 million, or a $0.40 loss per diluted share, compared to net income of $7.5 million, or $0.53 per share, for the six months ended June 30, 2019.  The 2020 net loss included a $5.0 million goodwill impairment charge, or $0.76 diluted loss per share.  The Company concluded goodwill was impaired after an estimate of the fair value of the Company considering the uncertainty related to COVID-19 and its potential impact on future earnings, as well as comparable bank valuations.  Excluding that charge, net income for the six months ended June 30, 2020 would have been $2.5 million, or $0.36 per diluted share. 

Tim Schneider, President of County Bancorp, Inc., noted, “I am very pleased with how well our team has worked through the current COVID-19 environment to fulfill our mission as we partner with our local communities and businesses.  With the vast majority of our employees working remotely, we were able to approve $106 million in SBA PPP loans to support our loyal and new customers and more than 14,000 jobs through this crisis.  By executing against our strategic initiatives, we grew our client deposits this quarter expect to invest our excess liquidity during the second half of 2020 as we see increasing signs of stability and health in our operating environment.” 

Schneider continued, “Overall, credit quality has held up well.  However, we believe it will take some time to see the total impact of COVID-19 on overall credit quality and our provisions for loan losses.  While we still have some customers asking for payment deferral related to COVID-19, which now totals $200 million, we witnessed a considerable rebound and stabilization of milk prices during the month of June, which we believe will benefit our agricultural borrowers. More specifically, class III milk prices (cwt) rebounded from the April and May lows of $12 to $13, to $16 to $21 in both June and in the futures for the remainder of 2020.”

Schneider concluded, “Lastly, we successfully raised $17.4 million in subordinated notes at the end of the second quarter 2020.  This opportunistic capital raise reinforces County Bancorp’s value proposition and allows us to take advantage of additional market opportunities for our customers and communities.  As part of our balanced capital allocation approach, we continue to monitor additional pathways to enhance shareholder value. We are pleased with the attractive pricing we received in the fixed income markets and the ability to strengthen our capital structure as we continue to execute against our short- and long-term strategic priorities.  This capital raise allows us to keep our capital ratios strong and will enable us to continue our current dividend payout and common stock buyback plan.  Of note, during the second quarter, we purchased 122,000 shares of common stock.  We are also very proud to rejoin the Russell 2000 and Russell 3000 Indexes during the second quarter of 2020.  This membership is an important milestone for us as we continue to execute our mission and serve our customers and communities. We believe our inclusion will positively impact the liquidity in our stock and create an opportunity to increase our exposure and share our compelling story with a broader investment audience.”

Loans and Securities

Total loans increased $75.1 million, or 7.4%, during the second quarter of 2020 and decreased $60.3 million, or 5.3%, year-over-year to $1.1 billion.  The increase in total loans in the second quarter of 2020 was due primarily to SBA PPP loans totaling $106.0 million as of June 30, 2020.  The decrease in total loans year-over-year was the result of a continued focus on long-term liquidity.  Loan participations the Company continued to service were $762.1 million at June 30, 2020, an increase of $14.5 million, or 1.9%, compared to the first quarter of 2020, and an increase of $66.4 million, or 9.5%, year-over-year.

During the second quarter of 2020, investments decreased $19.2 million, or 7.8%, compared to March 31, 2020 due in part to the sale of $27.8 million of securities that resulted in a gain of $0.6 million.

Deposits

Total deposits at June 30, 2020 were $1.1 billion, an increase of $53.1 million, or 5.2%, from March 31, 2020 and decreased $132.1 million, or 11.0%, year-over-year.  Client deposits (demand deposits, NOW accounts, savings accounts, money market accounts, and certificates of deposit) increased $101.9 million, or 12.9%, from March 31, 2020 and increased $94.4 million, or 11.8%, year-over-year.  The increase in client deposits from the prior quarter-end was partially driven by customers who participated in the SBA PPP program.  Deposits related to those customers totaled approximately $58 million as of June 30, 2020. 

During the second quarter of 2020, the Company took advantage of the Federal Reserve Bank’s Paycheck Protection Program Liquidity Facility (“PPPLF”) and funded $99.7 million of SBA PPP loans through borrowings under the PPPLF at an interest rate of 0.35%.   The Company’s overall focus remains on funding loan growth with client deposits; however, these borrowings helped bolster the Company’s overall liquidity.  Due to the increases in loan participations and client deposit growth discussed above, the Company decreased its dependence on brokered deposits and national certificates of deposit to $179.5 million at June 30, 2020.  This represents a decrease of $226.5 million, or 55.8%, from June 30, 2019.   

Net Interest Income and Margin

  • Net interest margin decreased both quarter-to-quarter and year-over-year due primarily to the SBA PPP loans that were funded during the second quarter of 2020 at annual yield of 1.0% and the repricing of loans in the declining rate environment. 
  • Interest income on investment securities increased both quarter-to-quarter and year-over-year due to shifting balances from interest-bearing deposits with banks to investment securities.
  • Loan interest income decreased in the both linked and year-over-year periods as a result of the lower yields on the previously mentioned PPP loans and the shift from loans held on balance sheet to loans sold and serviced.
  • Interest expense on savings, NOW, money market, and interest checking accounts decreased despite the increase in average balance both in the linked quarter and year-over year due to the market-driven drop in interest rates which contributed to an overall lower cost of funds.
  • Interest expense on time deposits decreased in the linked quarter due to the Company’s continued focus on shifting away from brokered time deposit balances for funding. Year-over-year, time deposits also decreased due to the Company’s shift away from wholesale funding.

The table below presents the effects of changing rates and volumes on net interest income for the periods indicated.

  Three Months Ended June 30, 2020 v.
Three Months Ended March 31, 2020
  Three Months Ended June 30, 2020 v.
Three Months Ended June 30, 2019
 
  Increase (Decrease)
Due to Change in Average
  Increase (Decrease)
Due to Change in Average
 
  Volume  Rate  Net  Volume  Rate  Net 
    
  (dollars in thousands) 
Interest Income:                        
Investment securities $238  $(82) $156  $323  $(138) $185 
Loans  1,044   (1,495)  (451)  (987)  (2,366)  (3,353)
Federal funds sold and
  interest-bearing
  deposits with banks
  13   (127)  (114)  (54)  (299)  (353)
Total interest income  1,295   (1,704)  (409)  (718)  (2,803)  (3,521)
Interest Expense:                        
Savings, NOW, money market
  and interest checking
 $126  $(375) $(249) $344  $(1,135) $(791)
Time deposits  (347)  (30)  (377)  (1,254)  88   (1,166)
Other borrowings  3      3   1      1 
FHLB advances  132   (37)  95   393   (466)  (73)
Junior subordinated
  debentures
  3   28   31   5   48   53 
Total interest expense $(83) $(414) $(497) $(511) $(1,465) $(1,976)
Net interest income $1,378  $(1,290) $88  $(207) $(1,338) $(1,545)
                         

The following table sets forth average balances, average yields and rates, and income and expenses for the period indicated.

  For the Three Months Ended 
  June 30, 2020  March 31, 2020  June 30, 2019 
  Average
Balance (1)
  Income/
Expense
  Yields/
Rates
  Average
Balance (1)
  Income/
Expense
 Yields/
Rates
  Average
Balance (1)
  Income/
Expense
  Yields/
Rates
 
    
  (dollars in thousands) 
Assets                                 
Investment securities $237,082  $1,444  2.44% $196,353  $1,289  2.63% $176,237  $1,259  2.86%
Loans (2)  1,098,327   12,131  4.42%  1,028,637   12,582  4.89%  1,177,071   15,484  5.26%
Interest bearing deposits due from
  other banks
  64,142   111  0.69%  60,825   225  1.48%  73,769   465  2.52%
Total interest-earning assets $1,399,551  $13,686  3.91% $1,285,815  $14,096  4.39% $1,427,077  $17,208  4.82%
Allowance for loan losses  (17,844)         (15,330)         (17,782)       
Other assets  85,716          84,461          76,806        
Total assets $1,467,423         $1,354,946         $1,486,101        
                                  
Liabilities                                 
Savings, NOW, money market,
  interest checking
 $379,991  $525  0.55% $334,740  $774  0.92% $315,940  $1,316  1.67%
Time deposits  553,616   3,196  2.31%  613,753   3,574  2.33%  770,554   4,363  2.26%
Total interest-bearing deposits $933,607  $3,721  1.59% $948,493  $4,348  1.83% $1,086,494  $5,679  2.09%
Other borrowings  66,910   15  0.09%  1,259   11  3.49%  1,204   13  4.47%
FHLB advances  103,916   328  1.26%  56,708   233  1.65%  78,653   401  2.04%
Junior subordinated debentures  45,090   737  6.53%  44,871   706  6.29%  44,762   683  6.11%
Total interest-bearing liabilities $1,149,523  $4,800  1.67% $1,051,331  $5,298  2.02% $1,211,113  $6,776  2.24%
Non-interest bearing deposits  134,271          113,351          102,432        
Other liabilities  16,749          16,877          12,154        
Total liabilities $1,300,543         $1,181,559         $1,325,699        
                                  
Shareholders' equity  166,880          173,387          160,402        
Total liabilities and equity $1,467,423         $1,354,946         $1,486,101        
                                  
Net interest income     $8,886         $8,798         $10,432    
Interest rate spread (3)         2.24%         2.37%         2.59%
Net interest margin (4)         2.54%         2.74%         2.92%
Ratio of interest-earning assets to
  interest-bearing liabilities
  1.22          1.22          1.18        

(1) Average balances are calculated on amortized cost.
(2) Includes loan fee income, nonaccruing loan balances, and interest received on such loans.
(3) Interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.
(4) Net interest margin represents net interest income divided by average total interest-earning assets.

Non-Interest Income

  • Loan servicing income increased in the linked quarter due primarily to a 0.03% increase in loan servicing fees as a percent of average loans serviced during the second quarter. Year-over-year, loan servicing fees increased due primarily to a 0.10% increase in loan servicing fees as a percent of average loans serviced and an increase in loans serviced.
  • Loan servicing right origination decreased in the linked quarter and year-over-year; however, loan servicing rights as a percent of loans serviced increased to 2.14% at June 30, 2020 from 1.38% at June 30, 2019.
  • $27.8 million of securities were sold during the second quarter of 2020 which resulted in a $0.6 million gain.
  For the Three Months Ended 
  June 30,
2020
  March 31,
2020
  December 31,
2019
  September 30,
2019
  June 30,
2019
 
    
  (dollars in thousands) 
Non-Interest Income                    
Service charges $368  $342  $549  $348  $407 
Gain on sale of loans, net  4   38   34   87   26 
Loan servicing fees  1,923   1,831   1,778   1,677   1,563 
Loan servicing right origination  275   289   1,146   1,741   346 
Income on OREO  3      54   10   40 
Gain on sale of securities  570            341 
Other  237   203   161   171   164 
Total non-interest income $3,380  $2,703  $3,722  $4,034  $2,887 


  For the Three Months Ended 
  June 30, 2020  March 31, 2020  December 31, 2019  September 30, 2019  June 30, 2019 
    
  (dollars in thousands) 
Loan servicing rights, end of period $16,486  $16,211  $12,509  $11,362  $9,621 
Loans serviced, end of period  762,058   747,553   751,738   736,823   695,629 
Loan servicing rights as a % of loans serviced  2.16%  2.17%  1.66%  1.54%  1.38%
                     
Total loan servicing fees $1,923  $1,831  $1,778  $1,677  $1,563 
Average loans serviced  754,806   749,646   744,281   716,226   685,449 
Annualized loan servicing fees as a
  % of average loans serviced
  1.02%  0.98%  0.96%  0.94%  0.91%

Non-Interest Expense

  • The decrease in employee compensation and benefits expense in the linked quarter was the result of an increase in deferred loan costs (which is comprised primarily of salary expenses) associated with the PPP loans that were capitalized during the second quarter.  The year-over-year increase in employee compensation and benefits expense was mainly the result of a 7.1% increase in headcount.
  • Goodwill was considered impaired and fully written-off in the first quarter 2020.
  • There was no write-down of OREO properties in the second quarter of 2020 compared to writedowns in the linked quarter and year-over-year.
  • The decrease in other non-interest expense in the linked quarter was primarily is the result of a loss of $0.3 million recognized on the sale-leaseback of the Manitowoc branch in the first quarter and reduced travel and education expenses as a result of the COVID-19 pandemic.
  For the Three Months Ended 
  June 30,
2020
  March 31,
2020
  December 31,
2019
  September 30,
2019
  June 30,
2019
 
    
  (dollars in thousands, except per share data) 
Non-Interest Expense                    
Employee compensation and
  benefits
 $4,594  $5,260  $5,696  $4,735  $4,199 
Occupancy  305   354   417   313   283 
Information processing  663   670   645   683   591 
Professional fees  480   401   371   483   417 
Business development  333   366   335   351   347 
OREO expenses  44   116   59   57   121 
Writedown of OREO     1,360   376      250 
Net loss (gain) on sale of OREO     4   (231)  160   9 
Depreciation and amortization  303   301   319   319   328 
Goodwill impairment     5,038          
Other  743   1,148   2,278   567   901 
Total non-interest expense $7,465  $15,018  $10,265  $7,668  $7,446 

Asset Quality

  • The increase in substandard loans and the adverse classified asset ratio in the linked quarter were primarily due to the downgrade of four agricultural customers and a single hotel customer.
  June 30,
2020
  March 31,
2020
  December 31,
2019
  September 30,
2019
  June 30,
2019
 
    
  (dollars in thousands) 
Loans by risk category(1):                    
Sound/Acceptable/Satisfactory/
  Low Satisfactory
 $798,945  $706,247  $724,444  $771,567  $837,094 
Watch  198,044   219,459   216,098   202,615   175,995 
Special Mention  1,856   15,036   9,239   9,346   25,254 
Substandard Performing  47,741   34,179   49,774   71,133   83,992 
Substandard Impaired  40,938   37,515   36,218   26,106   25,497 
Total loans $1,087,524  $1,012,436  $1,035,773  $1,080,767  $1,147,832 
Adverse classified asset ratio (2)  41.73%  32.35%  39.85%  45.67%  53.21%

(1) Troubled debt restructurings are presented in their internal risk rating category rather than reclassified to substandard impaired.  Prior quarters have been reclassified to reflect this change.
(2) This is a non-GAAP financial measure.  A reconciliation to GAAP is included at the end of this earnings release.

Non-Performing Assets

  • Non-performing assets increased in the linked quarter by $2.8 million, or 7.9%, sequentially.  Year-over-year, non-performing assets increased $9.3 million, or 32.3%, due to a $5.8 million increase in non-accrual agricultural loans and a $9.6 million increase in non-accrual commercial loans, which were partially offset by a $6.1 million decrease in OREO properties.
  • A provision for loan losses of $1.1 million was recorded for the three months ended June 30, 2020 compared to a provision of $0.9 million for the three months ended June 30, 2019.  The increase in provision was the result of the increase in substandard impaired loans.
  June 30,
2020
  March 31,
2020
  December 31,
2019
  September 30,
2019
  June 30,
2019
 
    
  (dollars in thousands) 
Non-Performing Assets:                    
Nonaccrual loans $35,456  $32,051  $30,968  $20,776  $20,096 
Other real estate owned  2,629   3,247   5,521   7,252   8,693 
Total non-performing assets $38,085  $35,298  $36,489  $28,028  $28,789 
                     
Performing TDRs not on
  nonaccrual
 $21,986  $21,853  $21,784  $28,520  $28,892 
                     
Non-performing assets as a % of total
  loans
  3.50%  3.49%  3.52%  2.59%  2.51%
Non-performing assets as a % of total
  assets
  2.52%  2.61%  2.65%  1.98%  1.94%
Allowance for loan losses as a % of
  total loans
  1.71%  1.73%  1.47%  1.39%  1.42%
Net charge-offs (recoveries) quarter-
  to-date
 $120  $(62) $(253) $39  $2,111 

Corporate Updates

At the annual organizational meeting of the Company’s and the Bank’s boards of directors, Chair William Censky informed the boards that he did not wish to seek re-election as chair of the Company and the Bank. Censky, who is one of the Company's co-founders, has served as chair since the Company's inception in 1996 and will remain a director on the boards of directors of both the Company and the Bank.

According to Timothy Schneider, CEO of Investors Community Bank and President of County Bancorp, Inc., "We are grateful for Bill's leadership and strategic contributions over the past 23 years. His focus on excellence as well as his unwavering support for the bank, its employees and our communities has been vital to our success."

On July 21, 2020, the respective boards appointed current independent director Andrew Steimle as the new chair of the boards of directors of both the Company and the Bank. Steimle has served on both boards of directors since April 2008. He is a business and real estate attorney practicing in Wisconsin and is a founding partner of Steimle Birschbach LLC.  Additionally, the Company’s board of directors appointed director Kathi P. Seifert as Chair of the Nominating and Governance Committee and director Vicki L. Leinbach as Chair of the Compensation Committee.

Conference Call

The Company will host an earnings call tomorrow, July 24, 2020, at 8:30 a.m., CDT, conducted by Timothy J. Schneider, President, and Glen L. Stiteley, CFO.  The earnings call will be broadcast over the Internet on the Company’s website at Investors.ICBK.com.  In addition, you may listen to the Company’s earnings call via telephone by dialing (844) 835-9984.  Investors should visit the Company’s website or call in to the dial-in number set forth above at least 10 minutes prior to the scheduled start of the call.  

A replay of the earnings call will be available until July 24, 2021, by visiting the Company’s website at Investors.ICBK.com/QuarterlyResults.

About County Bancorp, Inc.

County Bancorp, Inc., a Wisconsin corporation and registered bank holding company founded in May 1996, and its wholly-owned subsidiary Investors Community Bank, a Wisconsin-chartered bank, are headquartered in Manitowoc, Wisconsin.  The state of Wisconsin is often referred to as “America’s Dairyland,” and one of the niches it has developed is providing financial services to agricultural businesses statewide, with a primary focus on dairy-related lending.  It also serves business and retail customers throughout Wisconsin, with a focus on northeastern and central Wisconsin.  Its customers are served from its full-service locations in Manitowoc, Appleton, Green Bay, and Stevens Point and its loan production offices in Darlington, Eau Claire, Fond du Lac, and Sheboygan.

Forward-Looking Statements

This press release includes "forward-looking statements” within the meaning of such term in the Private Securities Litigation Reform Act of 1995.  Forward-looking statements are subject to known and unknown risks and uncertainties, many of which may be beyond the Company’s control. The Company cautions you that the forward-looking statements presented in this press release are not a guarantee of future events, and that actual events may differ materially from those made in or suggested by the forward-looking information contained in this press release.  Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "plan," "seek," "will," "expect," "intend," "estimate," "anticipate," "believe" or "continue" or the negative thereof or variations thereon or similar terminology. Factors that may cause actual results to differ materially from those made or suggested by the forward-looking statements contained in this press release include those identified in the Company’s most recent annual report on Form 10-K and subsequent filings with the Securities and Exchange Commission, including the effects of the COVID-19 pandemic and its potential effects on the economic environment, our customers and our operations, as well as, any changes to federal, state, or local government laws, regulations, or orders in connection with the pandemic.  Any forward-looking statements presented herein are made only as of the date of this press release, and the Company does not undertake any obligation to update or revise any forward-looking statements to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.

Investor Relations Contact
Glen L. Stiteley
EVP - CFO, Investors Community Bank
Phone: (920) 686-5658
Email: gstiteley@icbk.com     

County Bancorp, Inc.
Consolidated Financial Summary
(Unaudited)
 June 30,
2020
  March 31,
2020
  December 31,
2019
  September 30,
2019
  June 30,
2019
 
    
  (dollars in thousands, except per share data) 
Period-End Balance Sheet:                    
Assets                    
Cash and cash equivalents $127,432  $21,545  $129,011  $120,845  $116,251 
Securities available for sale, at fair
  value
  226,971   246,148   158,733   154,962   158,561 
Loans held for sale  11,847   14,388   2,151   4,192   7,448 
Agricultural loans  624,340   642,066   659,725   673,742   713,602 
Commercial loans  328,368   325,310   331,723   360,132   383,542 
Paycheck Protection Plan loans  103,317             
Multi-family real estate loans  30,439   42,198   41,070   43,487   46,683 
Residential real estate loans  975   2,753   2,888   3,183   3,753 
Installment and consumer other  85   109   367   223   252 
Total loans  1,087,524   1,012,436   1,035,773   1,080,767   1,147,832 
Allowance for loan losses  (18,569)  (17,547)  (15,267)  (15,065)  (16,258)
Net loans  1,068,955   994,889   1,020,506   1,065,702   1,131,574 
Other assets  78,712   78,004   68,378   69,263   70,812 
Total Assets $1,513,917  $1,354,974  $1,378,779  $1,414,964  $1,484,646 
                     
Liabilities and Shareholders' Equity                    
Demand deposits $149,963  $117,434  $138,489  $117,224  $111,022 
NOW accounts and interest checking  81,656   64,873   63,781   56,637   54,253 
Savings  8,369   6,566   15,708   6,981   6,621 
Money market accounts  307,083   237,889   242,539   248,608   239,337 
Time deposits  346,482   364,930   375,100   388,759   387,899 
Brokered deposits  121,503   161,882   166,340   206,474   256,475 
National time deposits  57,997   66,386   99,485   118,070   149,570 
Total deposits  1,073,053   1,019,960   1,101,442   1,142,753   1,205,177 
Federal Reserve Discount Window
  advances
  99,693             
FHLB advances  93,400   109,400   44,400   44,400   59,400 
Subordinated debentures  61,910   44,896   44,858   44,820   44,781 
Other liabilities  17,336   15,672   16,050   14,239   12,564 
Total Liabilities  1,345,392   1,189,928   1,206,750   1,246,212   1,321,922 
                     
Shareholders' equity  168,525   165,046   172,029   168,752   162,724 
Total Liabilities and Shareholders'
  Equity
 $1,513,917  $1,354,974  $1,378,779  $1,414,964  $1,484,646 
                     
Stock Price Information:                    
High - Quarter-to-date $24.67  $27.19  $27.98  $20.99  $18.92 
Low - Quarter-to-date $17.13  $13.55  $18.76  $16.80  $16.24 
Market price - Quarter-end $20.93  $18.50  $25.63  $19.62  $17.09 
Book value per share $25.18  $24.17  $24.32  $23.89  $23.03 
Tangible book value per share (1) $25.16  $24.15  $23.58  $23.10  $22.23 
Common shares outstanding  6,375,150   6,496,790   6,734,132   6,727,908   6,717,908 

(1) This is a non-GAAP financial measure.  A reconciliation to GAAP is included below.

    
  For the Three Months Ended 
  June 30,
2020
  March 31,
2020
  December 31,
2019
  September 30,
2019
  June 30,
2019
 
    
  (dollars in thousands, except per share data) 
Selected Income Statement Data:                    
Interest and Dividend Income                    
Loans, including fees $12,130  $12,582  $13,691  $15,030  $15,484 
Taxable securities  1,283   1,282   1,106   1,117   1,177 
Tax-exempt securities  162   6         82 
Federal funds sold and other  111   225   442   612   465 
Total interest and dividend
  income
  13,686   14,095   15,239   16,759   17,208 
                     
Interest Expense                    
Deposits  3,721   4,347   4,781   5,574   5,678 
FHLB advances and other
  borrowed funds
  343   244   225   246   415 
Subordinated debentures  736   706   695   687   683 
Total interest expense  4,800   5,297   5,701   6,507   6,776 
Net interest income  8,886   8,798   9,538   10,252   10,432 
Provision for loan losses  1,142   2,218   (51)  (1,154)  876 
Net interest income after provision
  for loan losses
  7,744   6,580   9,589   11,406   9,556 
                     
Non-Interest Income                    
Services charges  368   342   549   348   407 
Gain on sale of loans, net  4   38   34   87   26 
Loan servicing fees  1,923   1,831   1,778   1,677   1,563 
Loan servicing right origination  275   289   1,146   1,741   346 
Income on OREO  3      54   10   40 
Gain on sale of securities  570            341 
Other  237   203   161   171   164 
Total non-interest income  3,380   2,703   3,722   4,034   2,887 
                     
Non-Interest Expense                    
Employee compensation and
  benefits
  4,594   5,260   5,696   4,735   4,199 
Occupancy  305   354   417   313   283 
Information processing  663   670   645   683   591 
Professional fees  480   401   371   483   417 
Business development  333   366   335   351   347 
OREO expenses  44   116   59   57   121 
Writedown of OREO     1,360   376      250 
Net loss (gain) on sale of OREO     4   (231)  160   9 
Depreciation and amortization  303   301   319   319   328 
Goodwill impairment     5,038          
Other  743   1,148   2,278   567   901 
Total non-interest expense  7,465   15,018   10,265   7,668   7,446 
Income before income taxes  3,659   (5,735)  3,046   7,772   4,997 
Income tax expense  926   (547)  (258)  2,090   1,293 
NET INCOME (LOSS) $2,733  $(5,188) $3,304  $5,682  $3,704 
                     
Basic earnings (loss) per share $0.40  $(0.79) $0.47  $0.82  $0.53 
Diluted earnings (loss) per share $0.40  $(0.78) $0.47  $0.82  $0.53 
Dividends declared per share $0.07  $0.07  $0.05  $0.05  $0.05 


  For the Three Months Ended 
  June 30,
2020
  March 31,
2020
  December 31,
2019
  September 30,
2019
  June 30,
2019
 
    
  (dollars in thousands, except share data) 
Other Data:                    
Return on average assets(1)  0.74%  (1.53)%  0.96%  1.57%  1.00%
Return on average
  shareholders' equity(1)
  6.55%  (11.97)%  7.74%  13.73%  9.24%
Return on average common
  shareholders' equity (1)(2)
  6.63%  (12.81)%  7.83%  14.14%  9.41%
Efficiency ratio (1)(2)  63.83%  74.92%  76.32%  52.55%  55.38%
Tangible common equity to
  tangible assets (2)
  10.60%  11.58%  11.56%  11.03%  10.10%
                     
Common Share Data:                    
Net income from continuing
  operations
 $2,733  $(5,188) $3,304  $5,682  $3,704 
Less:  Preferred stock
  dividends
  99   108   117   120   118 
Income available to common
  shareholders
 $2,634  $(5,296) $3,187  $5,562  $3,586 
                     
Weighted average number of
  common shares issued
  7,198,901   7,182,945   7,173,290   7,168,785   7,159,072 
Less: Weighted average
  treasury shares
  759,294   518,740   443,920   443,920   443,920 
Plus: Weighted average non-
  vested restricted stock units
  65,291   39,785   32,125   32,125   30,483 
Weighted average number of
  common shares outstanding
  6,504,898   6,703,990   6,761,495   6,756,990   6,745,635 
Effect of dilutive options  28,511   49,072   44,630   19,160   20,731 
Weighted average number
  of common shares
  outstanding used to
  calculate diluted earnings
  per common share
  6,533,409   6,753,062   6,806,125   6,776,150   6,766,366 
                     

(1) Annualized
(2) This is a non-GAAP financial measure.  A reconciliation to GAAP is included below.

Non-GAAP Financial Measures:

   For the Three Months Ended 
  June 30,
2020
  March 31,
2020
  December 31,
2019
  September 30,
2019
  June 30,
2019
 
    
  (dollars in thousands) 
    
Return on average common
  shareholders' equity
  reconciliation(1):
                    
Return on average
  shareholders' equity
  6.55%  (11.97)%  7.74%  13.73%  9.24%
Effect of excluding average
  preferred shareholders'
  equity
  0.08%  (0.84)%  0.09%  0.41%  0.17%
Return on average common
  shareholders' equity
  6.63%  (12.81)%  7.83%  14.14%  9.41%
                     
Efficiency ratio (2):                    
Non-interest expense $7,465  $15,018  $10,265  $7,668  $7,446 
Less: goodwill impairment     (5,038)         
Less: net loss on sales
  and write-downs of OREO
     (1,364)  (145)  (160)  (259)
Adjusted non-interest
  expense (non-GAAP)
 $7,465  $8,616  $10,120  $7,508  $7,187 
                     
Net interest income $8,886  $8,798  $9,538  $10,252  $10,432 
Non-interest income  3,380   2,703   3,722   4,034   2,887 
Less: net gain on sales of
  securities
  (570)           (341)
Operating revenue $11,696  $11,501  $13,260  $14,286  $12,978 
Efficiency ratio  63.83%  74.92%  76.32%  52.55%  55.38%


  For the Three Months Ended  For the Six Months Ended 
  June 30,
2020
  June 30,
2019
  June 30,
2020
  June 30,
2019
 
    
  (dollars in thousands, except per share data) 
Adjusted diluted earnings per share(3):                
Net income (loss) from continuing operations $2,733  $3,704  $(2,454) $7,466 
Less:  preferred stock dividends  (99)  (118)  (207)  (235)
Plus: Goodwill impairment        5,038    
Adjusted income available to common shareholders
  for basic earnings per common share
 $2,634  $3,586  $2,377  $7,231 
                 
Weighted average number of common shares
  outstanding
  6,504,898   6,745,635   6,604,187   6,735,725 
Effect of dilutive options  28,511   20,731   39,548   21,170 
Weighted average number of common shares  outstanding used to calculate diluted earnings
  per common share
  6,533,409   6,766,366   6,643,735   6,756,895 
                 
Adjusted diluted earnings per share $0.40  $0.53  $0.36  $1.07 

(1) Management uses the return on average common shareholders’ equity in order to review our core operating results and our performance.
(2) In our judgment, the adjustments made to non-interest expense allow investors to better assess our operating expenses in relation to our core operating revenue by removing the volatility that is associated with certain one-time items and other discrete items that are unrelated to our core business.
(3) In our judgment, the adjustment made to diluted earnings per share allows investors to better assess our income related to core operations by removing the volatility associated with the goodwill impairment which was a one-time, non-cash expense.

Non-GAAP Financial Measures (continued):

 

 June 30,
2020
  March 31,
2020
  December 31,
2019
  September 30,
2019
  June 30,
2019
 
    
  (dollars in thousands, except per share data) 
Tangible book value per share and
  tangible common equity to tangible
  assets reconciliation(1):
                    
Common equity $160,526  $157,046  $164,029  $160,752  $154,724 
Less: Goodwill        5,038   5,038   5,038 
Less: Core deposit intangible, net of
  amortization
  125   171   225   286   354 
Tangible common equity
  (non-GAAP)
 $160,401  $156,875  $158,766  $155,428  $149,332 
Common shares outstanding  6,375,150   6,496,790   6,734,132   6,727,908   6,717,908 
Tangible book value per share $25.16  $24.15  $23.58  $23.10  $22.23 
                     
Total assets $1,513,917  $1,354,974  $1,378,779  $1,414,964  $1,484,646 
Less: Goodwill        5,038   5,038   5,038 
Less: Core deposit intangible, net of
  amortization
  125   171   225   603   701 
Tangible assets (non-GAAP) $1,513,792  $1,354,803  $1,373,516  $1,409,323  $1,478,907 
Tangible common equity to tangible
  assets
  10.60%  11.58%  11.56%  11.03%  10.10%
                     
Adverse classified asset ratio(2):                    
Substandard loans $88,680  $71,694  $85,992  $97,239  $109,489 
Other real estate owned  2,629   3,247   5,521   7,252   8,693 
Substandard unused commitments  3,230   2,840   2,849   991   1,458 
Less: Substandard government
  guarantees
  (6,336)  (7,699)  (7,892)  (7,746)  (7,821)
Total adverse classified assets
  (non-GAAP)
 $88,203  $70,082  $86,470  $97,736  $111,819 
                     
Total equity (Bank) $201,507  $204,089  $204,240  $201,967  $196,036 
Accumulated other comprehensive loss
  (gain) on available for sale securities
  (8,734)  (5,012)  (2,505)  (3,016)  (2,166)
Allowance for loan losses  18,569   17,547   15,267   15,065   16,258 
Adjusted total equity (non-GAAP) $211,342  $216,624  $217,002  $214,016  $210,128 
Adverse classified asset ratio  41.73%  32.35%  39.85%  45.67%  53.21%

(1) In our judgment, the adjustments made to book value, equity and assets allow investors to better assess our capital adequacy and net worth by removing the effect of goodwill and intangible assets that are unrelated to our core business.
(2) The adjustments made to non-performing assets allow management to better assess asset quality and monitor the amount of capital coverage necessary for non-performing assets.  


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Source: County Bancorp, Inc.

Manitowoc Phone:
(920) 686-9998

Stevens Point Phone:
(715) 254-3400

Appleton Phone:
(920) 739-2660

Green Bay Phone:
(920) 884-1166