U.S. Markets closed

County Bancorp, Inc. Announces Record Net Income of $14.3 Million for the Year 2018

County Bancorp, Inc. Announces Record Net Income of $14.3 Million for the Year 2018

Highlights

  • Net income of $2.8 million for the fourth quarter of 2018 and $14.3 million for the year 2018
  • Diluted earnings per share of $0.40 for the fourth quarter of 2018 and $2.04 for the year 2018
  • Book value per share of $21.48 as of December 31, 2018, an increase of $1.55, or 7.8%, since December 31, 2017
  • Gross loans serviced increased $20.7 million during the fourth quarter of 2018, an increase of 1.1%, and $119.4 million during the year 2018, an increase of 6.8%
  • Core deposit growth of $36.3 million during the fourth quarter of 2018, an increase of 5.1%, and $69.3 million during the year 2018, an increase of 10.1%

MANITOWOC, Wis., Feb. 11, 2019 (GLOBE NEWSWIRE) -- County Bancorp, Inc. ( ICBK ), the holding company of Investors Community Bank (the “Bank”), an agricultural and commercial community bank headquartered in Manitowoc, Wisconsin, reported net income of $2.8 million, or $0.41 diluted earnings per share, for the fourth quarter of 2018, compared to net income of $3.5 million, or $0.50 diluted earnings per share, for the third quarter of 2018 and $2.1 million, or $0.30 diluted earnings per share, for the fourth quarter of 2017.  Net income for the year ended December 31, 2018 was $14.3 million, or $2.04 diluted earnings per share, compared to $10.4 million for the year ended December 31, 2017, or $1.49 diluted earnings per share, an increase of 36.7%.  This represents a return on average assets of 0.96% for the year ended December 31, 2018, compared to 0.80% for the year ended December 31, 2017.

“We are very pleased that we continue to produce solid year-over-year earnings, even with the challenges in the dairy sector,” stated Tim Schneider, President of County Bancorp, Inc. and CEO of the Bank.

“With the dairy challenges and a flattening to inverted yield curve, we are going to take 2019 to manage our growth and work on the right side of our balance sheet.  We plan to reduce our overall credit exposure during the first half of 2019 and continue to focus on core deposit generation.  This will allow us to work aggressively to reduce our wholesale funding during 2019.  We anticipate another challenging year on the credit side with our classified assets continuing to increase.  We still believe that our classified asset levels are protected overall by the use of Farm Service Agency guarantees on many of our agricultural credits.”

Loans and Total Assets

Total assets at December 31, 2018 were $1.5 billion, an increase of $5.9 million, or 0.4%, and $123.8 million, or 8.9%, over total assets as of September 30, 2018 and December 31, 2017, respectively.  Total loans were $1.2 billion at December 31, 2018, which represents a $58.3 million, or 5.1%, increase over total loans at December 31, 2017.  Loan growth in the fourth quarter of 2018 was $4.4 million, an increase of 0.4%, from September 30, 2018.

In addition to on-balance sheet loan growth, participated loans that we continue to service totaled $661.3 million at December 31, 2018, which is an increase of $60.1 million, or 10.1%, over participated loans that we continued to service at December 31, 2017.  During the fourth quarter of 2018, participated loans that we continue to service increased $16.4 million, or 2.5%, over loans sold and serviced as of September 30, 2018.

Deposits

Total deposits at December 31, 2018 were $1.2 billion, an increase of $14.6 million, or 1.2%, and $113.3 million, or 10.2%, over total deposits as of September 30, 2018 and December 31, 2017, respectively.  Core deposit (demand deposits, money market accounts, and certificates of deposit) increased $69.3 million, or 10.1%, since December 31, 2017, and increased $36.3, or 5.1%, in the fourth quarter of 2018.  We continue to supplement our deposit needs with wholesale deposits, which include brokered deposits and national certificates of deposit.  Brokered deposits and national certificates of deposit at December 31, 2018 were $468.9 million, which was a decrease of $21.8 million, or 4.4%, from September 30, 2018, but was an increase of $43.9 million, or 10.3%, from December 31, 2017.

Due to our deposit growth in 2018, we have been able to decrease our FHLB borrowings by $13.0 million, or 12.7%, since September 30, 2018, and by $32.1 million, or 26.4%, since December 31, 2017.

Net Interest Income and Margin

Net interest income improved to $10.7 million for the three months ended December 31, 2018, which was a $0.1 million, or 1.3%, and $0.5 million, or 5.5%, increase from the three months ended September 30, 2018 and the three months ended December 31, 2017, respectively, primarily due to growth in loans and securities available for sale.

For the year ended December 31, 2018, net interest income improved 8.0% to $42.0 million from $38.9 million for the year ended December 31, 2017.  The increase was primarily due to loan growth and purchases of securities available for sale, which was partially offset by interest expense on subordinated debt issued in 2018 and increased rates paid on deposit accounts.

Net interest margin was 2.91% for the three months ended December 31, 2018, which was an increase from 2.89% for the three months ended September 30, 2018, and a decrease from 3.06% for the three months ended December 31, 2017.  Despite asset yields improving over the linked quarter, only a slight improvement was realized in net interest margin due to continued increased deposits costs.  Year-over-year fourth quarter net interest margin decreased by fifteen basis points primarily due to interest expense related to the $30.0 million of junior subordinated debentures that were issued during the second quarter of 2018 and a forty-eight basis point increase in cost of funds, which was partially offset by a forty basis point improvement in loan yields.

For the year ended December 31, 2018, net interest margin decreased to 2.91% from 3.11% for the year ended December 31, 2017.  Yields on interest earning assets increased by 0.22% between the two years while the cost of interest bearing liabilities increased by 0.47% between the same periods.

Non-Interest Income and Expense

Non-interest income for the three months ended December 31, 2018 increased by $0.2 million, or 7.6%, to $2.3 million compared to the three months ended September 30, 2018, primarily the result of increased loan servicing rights and fees related to increased volume in loans being serviced.

Non-interest income for the three months ended December 31, 2018 increased $0.3 million, or 16.3%, to $2.3 million compared to $2.0 million for the three months ended December 31, 2017.  For the year ended December 31, 2018, non-interest income increased $1.2 million, or 15.4%, to $8.8 million from the year ended December 31, 2017.  Both the quarterly and annual increases are directly related to increases in loan servicing fees which was the result of higher volumes of loans being serviced.

Non-interest expense for the three months ended December 31, 2018 increased by $0.5 million, or 7.3%, to $7.5 million compared to the three months ended September 30, 2018, and increased $0.4 million, or 5.2% compared to the three months ended December 31, 2017.  The increase was primarily due $0.7 million write-downs on two OREO properties, which was partially offset by a decrease in employee compensation in benefits related to a one-time employment contract payment of $0.2 million that took place in the third quarter.

For the year ended December 31, 2018, non-interest expense increased $2.3 million, or 8.8%, to $28.3 million compared to the year ended December 31, 2017.  The increase is primarily made up of a $1.3 million related to increases in employee compensation and benefits in connection with eight new positions, a $0.4 million increase in occupancy expenses related to relocating our corporate headquarters, and a $0.5 million increase in information processing related to technology investments and implementations made throughout 2018.

The effective tax rate for the year ended December 31, 2018 was 26.2% compared to 42.8% for the year ended December 31, 2017.  The decline in effective tax rate resulted in a $2.7 million decrease in income tax expense year-over-year, and was the result of the tax reform that was enacted on December 22, 2017.

Asset Quality

Non-performing assets as a percent of total assets decreased to 1.94% at December 31, 2018, from 2.36% at September 30, 2018, but increased from 1.15% at December 31, 2017.  At December 31, 2018, non-performing assets were $29.6 million, down from $35.7 million at September 30, 2018, but up from $16.1 million at December 31, 2017.  During the fourth quarter of 2018, non-performing loans decreased $4.9 million due $1.2 million in charge-offs and $3.7 million in loan payments and collection of collateral.  During the fourth quarter, two OREO properties were written-down and one Farm Service Agency guarantee payment was received, resulting in a decrease of $1.7 million in OREO during the quarter ended December 31, 2018.  This decrease was partially offset by the inclusion of $0.4 million of Bank-owned property adjacent to our Stevens Point branch that is now considered classified as OREO due to the Bank’s five-year holding period.

Adverse classified asset ratio (a non-GAAP measure, as calculated on page 10) increased to 57.12% at December 31, 2018 from 51.89% and 51.57% at September 30, 2018 and December 31, 2017, respectively, as the result of the strained agricultural economy and the four-year sustained low prices of class III milk.

A provision for loan losses of $1.6 million was recorded for the three months ended December 31, 2018 compared to a provision of $0.9 million and $12 thousand for the three months ended September 30, 2018 and December 31, 2017, respectively.  The increased provision is directly related to an increase in historical loss history from the $1.2 million charge-offs that occurred during the fourth quarter.

For the year ended December 31, 2018, the provision for loan losses was $3.2 million compared to $2.3 million for the year ended December 31, 2017.  The increase in provision expense year-over-year was primarily the result of an increase of substandard loans totaling $37.7 million between December 31, 2017 and December 31, 2018.

Conference Call

County Bancorp, Inc. will host an earnings call on today, February 11, 2019, at 11:30 a.m., CST, conducted by Tim Schneider, President, and Glen L. Stiteley, CFO.  Shareholders, analysts, and other interested parties are invited to join the call via telephone by dialing (888) 317-6016 or visiting County Bancorp’s website at http://www.investorscommunitybank.com and then clicking on the link “Investor Relations.”  Investors should visit County Bancorp’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 February 11, 2020, by visiting the County Bancorp’s website at http://www.investorscommunitybank.com and clicking on the link “Investor Relations.”

About County Bancorp, Inc.

County Bancorp, Inc., a Wisconsin corporation and registered bank holding company founded in May 1996, and our 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 we have developed is providing financial services to agricultural businesses statewide, with a primary focus on dairy-related lending.  We also serve business and retail customers throughout Wisconsin, with a focus on northeastern and central Wisconsin.  Our customers are served from our full-service locations in Manitowoc, Appleton, Green Bay, and Stevens Point and our 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 our control. We caution 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 County Bancorp, Inc.’s most recent annual report on Form 10-K and subsequent filings with the Securities and Exchange Commission.  Any forward-looking statements presented herein are made only as of the date of this press release, and we do 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)
December
31,
2018
September
30,
2018
June 30,
2018
March 31,
2018
December
31,
2017
(dollars in thousands, except per share data)
Period-End Balance Sheet:
Assets
Cash and cash equivalents $ 61,087 $ 49,996 $ 81,044 $ 90,676 $ 66,771
Securities available for sale, at fair value 195,945 190,185 187,505 141,360 126,030
Loans held for sale 2,949 13,770 11,468 6,407 6,575
Agricultural loans 724,508 714,310 702,426 698,106 686,430
Commercial loans 415,672 417,146 407,609 406,096 407,036
Multi-family real estate loans 62,321 66,403 65,713 54,514 49,133
Residential real estate loans 4,522 4,965 5,437 5,512 6,005
Installment and consumer other 272 113 339 297 347
Total loans 1,207,295 1,202,937 1,181,524 1,164,525 1,148,951
Allowance for loan losses (16,505 ) (16,143 ) (15,129 ) (14,612 ) (13,247 )
Net loans 1,190,790 1,186,794 1,166,395 1,149,913 1,135,704
Other assets 70,057 74,223 72,465 71,901 61,965
Total Assets $ 1,520,828 $ 1,514,968 $ 1,518,877 $ 1,460,257 $ 1,397,045
Liabilities and Shareholders' Equity
Demand deposits $ 121,436 $ 103,862 $ 95,459 $ 101,167 $ 125,584
NOW accounts and interest checking 51,779 46,811 51,674 48,212 51,613
Savings 5,770 6,616 6,833 6,189 6,751
Money market accounts 218,929 208,233 204,332 199,834 199,118
Time deposits 356,484 352,531 344,619 314,766 302,004
Brokered deposits 308,504 317,291 323,561 319,692 282,616
National time deposits 160,445 173,440 183,953 182,530 142,391
Total deposits 1,223,347 1,208,784 1,210,431 1,172,390 1,110,077
FHLB advances 89,400 102,400 108,200 120,500 121,500
Subordinated debentures 44,703 44,663 44,725 15,540 15,523
Other liabilities 11,293 11,134 9,439 9,013 8,959
Total Liabilities 1,368,743 1,366,981 1,372,795 1,317,443 1,256,059
Shareholders' equity 152,085 147,987 146,082 142,814 140,986
Total Liabilities and Shareholders'
Equity
$ 1,520,828 $ 1,514,968 $ 1,518,877 $ 1,460,257 $ 1,397,045
Stock Price Information:
High - Quarter-to-date $ 26.00 $ 28.20 $ 29.26 $ 33.76 $ 33.94
Low - Quarter-to-date $ 17.37 $ 24.29 $ 25.72 $ 26.61 $ 27.77
Market price - Quarter-end $ 17.37 $ 25.10 $ 27.50 $ 29.21 $ 29.76
Book value per share $ 21.48 $ 20.91 $ 20.63 $ 20.17 $ 19.93
Tangible book value per share (1) $ 20.65 $ 20.07 $ 19.77 $ 19.29 $ 19.04
Common shares outstanding 6,709,480 6,694,230 6,693,447 6,684,923 6,673,381

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

December
31,
2018
September
30,
2018
June 30,
2018
March 31,
2018
December
31,
2017
(dollars in thousands)
Loans by risk category:
Sound/Acceptable/Satisfactory/
Low Satisfactory
$ 908,172 $ 901,643 $ 896,509 $ 891,062 $ 873,801
Watch 171,670 171,890 186,399 185,179 183,022
Special Mention 6,566 11,036 4,783 5,636 8,902
Substandard Performing 65,501 61,851 46,751 45,261 50,224
Substandard Impaired 55,386 56,517 47,082 37,387 33,002
Total loans 1,207,295 1,202,937 1,181,524 1,164,525 1,148,951
Loan sold with servicing retained 661,257 644,879 628,435 611,358 600,666
Total loans and loans sold with
servicing retained
$ 1,868,552 $ 1,847,816 $ 1,809,959 $ 1,775,883 $ 1,749,617
Non-Performing Assets:
Nonaccrual loans $ 22,983 $ 27,881 $ 26,305 $ 17,746 $ 11,559
Other real estate owned (2) 6,568 7,851 8,607 8,982 4,565
Total non-performing assets $ 29,551 $ 35,732 $ 34,912 $ 26,728 $ 16,124
Performing TDRs not on nonaccrual $ 18,258 $ 11,863 $ 11,173 $ 10,488 $ 9,019
Non-performing assets as a % of total loans 2.45 % 2.97 % 2.95 % 2.30 % 1.40 %
Non-performing assets as a % of total assets 1.94 % 2.36 % 2.30 % 1.83 % 1.15 %
Adverse classified asset ratio (1) 57.12 % 51.89 % 47.34 % 53.44 % 51.57 %
Allowance for loan losses as a % of
nonaccrual loans
71.81 % 57.90 % 57.51 % 82.34 % 114.60 %
Allowance for loan losses as a % of total
loans
1.37 % 1.34 % 1.28 % 1.25 % 1.15 %
Net charge-offs (recoveries) quarter-to-date $ 1,210 $ (21 ) $ 16 $ (1,268 ) $ 390
Provision for loan loss quarter-to-date $ 1,572 $ 993 $ 533 $ 97 $ 12

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

(2)For the quarters ending December 31, 2017 through September 30, 2018, does not include $0.4 million of bank property transferred from premises and equipment, which is not considered a non-performing asset.  As of December 31, 2018, that bank property is considered classified due to the length of the holding period.

For the Three Months Ended For the Year Ended
December
31,
2018
September
30,
2018
June 30,
2018
March 31,
2018
December
31,
2017
December
31,
2018
December
31,
2017
(dollars in thousands, except per share data)
Selected Income Statement Data:
Interest and Dividend Income
Loans, including fees $ 15,536 $ 15,113 $ 14,366 $ 13,691 $ 13,443 $ 58,706 $ 50,395
Taxable securities 1,168 945 982 632 462 3,727 1,808
Tax-exempt securities 183 344 14 157 88 698 350
Federal funds sold and other 223 249 401 213 256 1,086 499
Total interest and dividend
income
17,110 16,651 15,763 14,693 14,249 64,217 53,052
Interest Expense
Deposits 5,273 4,980 4,600 3,796 3,464 18,649 11,815
FHLB advances and other borrowed
funds
427 411 487 484 481 1,809 1,837
Subordinated debentures 667 656 338 143 135 1,804 515
Total interest expense 6,367 6,047 5,425 4,423 4,080 22,262 14,167
Net interest income 10,743 10,604 10,338 10,270 10,169 41,955 38,885
Provision for loan losses 1,572 993 533 97 12 3,195 2,330
Net interest income after provision
for loan losses
9,171 9,611 9,805 10,173 10,157 38,760 36,555
Non-Interest Income
Services charges 470 394 445 365 332 1,674 1,406
Gain on sale of loans, net 54 41 45 32 22 172 118
Loan servicing fees 1,553 1,521 1,486 1,452 1,483 6,012 5,799
Loan servicing rights 7 (46 ) 127 10 (37 ) 98 (315 )
Income on OREO 83 96 45 32 16 256 73
Other 153 151 168 149 178 621 572
Total non-interest income 2,320 2,157 2,316 2,040 1,994 8,833 7,653
Non-Interest Expense
Employee compensation and
benefits
4,059 4,394 4,114 4,218 3,702 16,785 15,437
Occupancy 245 332 278 204 135 1,059 654
Information processing 641 529 529 465 423 2,164 1,632
Professional fees 497 351 359 315 406 1,522 1,657
Business development 259 258 260 299 210 1,076 941
OREO expenses 106 46 152 140 17 444 174
Writedown of OREO 688 81 104 - 820 873 905
Net loss (gain) on OREO (54 ) (28 ) (149 ) - 10 (231 ) (353 )
Depreciation and amortization 408 302 324 314 319 1,348 1,307
Other 689 758 966 830 1,123 3,243 3,638
Total non-interest expense 7,538 7,023 6,937 6,785 7,165 28,283 25,992
Income before income taxes 3,953 4,745 5,184 5,428 4,986 19,310 18,216
Income tax expense 1,123 1,228 1,334 1,374 2,855 5,059 7,791
NET INCOME $ 2,830 $ 3,517 $ 3,850 $ 4,054 $ 2,131 $ 14,251 $ 10,425
Basic $ 0.41 $ 0.51 $ 0.56 $ 0.59 $ 0.31 $ 2.06 $ 1.52
Diluted $ 0.40 $ 0.50 $ 0.55 $ 0.58 $ 0.30 $ 2.04 $ 1.49
Dividends declared $ 0.07 $ 0.07 $ 0.07 $ 0.07 $ 0.06 $ 0.28 $ 0.24


null
For the Three Months Ended For the Year Ended
December
31,
2018
September
30,
2018
June 30,
2018
March 31,
2018
December
31,
2017
December
31,
2018
December
31,
2017
(dollars in thousands, except share data)
Other Data:
Return on average assets 0.75 % 0.94 % 1.04 % 1.15 % 0.62 % 0.96 % 0.80 %
Return on average shareholders'
equity
7.58 % 9.51 % 10.63 % 11.62 % 6.05 % 9.50 % 7.58 %
Return on average common
shareholders' equity (1)
7.70 % 9.75 % 10.96 % 12.04 % 6.12 % 9.74 % 7.77 %
Efficiency ratio (1) 52.85 % 54.62 % 55.18 % 55.12 % 52.11 % 54.42 % 54.63 %
Tangible common equity to
tangible assets (1)
9.14 % 8.90 % 8.75 % 8.87 % 9.13 % 9.14 % 9.13 %