ICBK - County Bancorp Inc. Announces Net Income of $3.8 Million for the First Quarter of 2019

Highlights

• Net income of $3.8 million for the first quarter of 2019
• Diluted earnings per share of $0.54 for the first quarter of 2019
• Book value per share of $22.36 as of March 31, 2019, an increase of $0.86, or 4.0%, since December 31, 2018
• Brokered and national deposits decreased $52.2 million during the first quarter of 2019, a reduction of 11.1% since December 31, 2018

MANITOWOC, Wis., April 18, 2019 (GLOBE NEWSWIRE) -- County Bancorp, Inc. (the “Company”; Nasdaq: ICBK), the holding company of Investors Community Bank (the “Bank”), an agricultural and commercial community bank headquartered in Manitowoc, Wisconsin, reported net income of $3.8 million, or $0.54 diluted earnings per share, for the first quarter of 2019, compared to net income of $2.8 million, or $0.40 diluted earnings per share, for the fourth quarter of 2018 and $4.1 million, or $0.58 diluted earnings per share, for the first quarter of 2018.  This represents an annualized return on average assets of 1.00% for the three months ended March 31, 2019, compared to 1.15% for the three months ended March 31, 2018.

“We are very pleased that we continue to produce solid quarterly earnings, even with the challenges in the dairy sector,” stated Tim Schneider, President of the Company and CEO of the Bank. 

“As we previously announced, we are committed to reducing our wholesale funding which we were able to make significant progress towards in the first quarter through loan participations.  Our core deposit strategies had modest impact on this shift in the first quarter, but we feel longer term our strategies to grow core deposits will be impactful.  Although we saw reduction in our classified assets ratio which was due to completed collection efforts, loan payoffs, and credits which were upgraded through our annual review process, we still have a large portion of our agricultural portfolio remaining to fully review through the credit underwriting process.”

Loans and Total Assets

Total assets at March 31, 2019 were $1.5 billion, a decrease of $29.4 million, or 1.9%, and an increase of $31.1 million, or 2.1%, over total assets as of December 31, 2018 and March 31, 2018, respectively.  Total loans were $1.2 billion at March 31, 2019, which represents a $24.3 million, or 2.0%, decrease over total loans at December 31, 2018, and an $18.4 million, or 1.6%, increase over total loans at March 31, 2018.

During the first quarter of 2019, participated loans that we continue to service increased to $675.3 million at March 31, 2019, which is an increase of $14.0 million, or 2.1%, and $63.9 million, or 10.5%, over participated loans that we serviced at December 31, 2018 and March 31, 2018, respectively.

Deposits

Total deposits at March 31, 2019 were $1.2 billion, a decrease of $47.1 million, or 3.8%, and an increase of $3.8 million, or 0.3%, over total deposits as of December 31, 2018 and March 31, 2018, respectively.  Client deposits (demand deposits, money market accounts, and certificates of deposit) increased $5.2 million, or 0.7%, since December 31, 2018, and increased $89.4 million, or 13.3%, since March 31, 2018. 

Due to the increases in loan participations and client deposit growth, we were able to decrease our reliance on brokered deposits and national certificates of deposit by $52.2 million, or 11.1%, from December 31, 2018, to $416.7 million at March 31, 2019.  This also represents a decrease or $85.5 million, or 17.0%, from March 31, 2018. 

During the first quarter of 2019, we supplemented a portion of our deposit needs with FHLB borrowings.  At March 31, 2019, borrowings from the FHLB totaled $100.4 million, which was an increase of $11.0 million, or 12.3%, from December 31, 2018, but was a decrease of $20.1 million, or 16.7%, from March 31, 2018.

Net Interest Income and Margin

Net interest income was $10.6 million for the three months ended March 31, 2019, which was a $0.1 million, or 1.7%, decrease from the three months ended December 31, 2018, and a $0.3 million, or 2.8%, increase from the three months ended March 31, 2018.  The primary reason for the first quarter decline in net interest income compared to the preceding quarter was the increase in loan participations that resulted in lower average loan balances during the period.

Net interest margin was 2.94% for the three months ended March 31, 2019, which was an increase from 2.91% for the three months ended December 31, 2018, and a decrease from 3.01% for the three months ended March 31, 2018.  A slight improvement in net interest margin was realized over the linked quarter because while loan yields remained steady, interest rates on deposits due from other banks outpaced the increase in cost of funds.  Year-over-year first quarter net interest margin decreased by seven 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 fifty-one basis point increase in cost of funds, which was partially offset by a forty-seven basis point improvement in loan yields.

Non-Interest Income and Expense

Non-interest income for the three months ended March 31, 2019 increased by $0.5 million, or 18.5%, to $2.8 million compared to the three months ended December 31, 2018, primarily due to the reduction of the allowance for unused commitments of $0.5 million, included in other non-interest income, in the first quarter.  The Company evaluated the need for this allowance during the first quarter and concluded there was no sufficient evidence that represented credit loss inherent in these commitments to substantiate the necessity of this reserve at March 31, 2019 and concluded to eliminate it.  The Company will continue to evaluate credit risk on these off-balance sheet commitments going forward.  During the first quarter, the Company also reduced a valuation allowance on its loan servicing rights portfolio which resulted in an increase of $0.2 million of loan servicing rights.  The reduction of the valuation allowance is expected to continue throughout the remaining quarters of 2019.

Non-interest income for the three months ended March 31, 2019 increased $0.7 million, or 34.8%, compared to $2.0 million for the three months ended March 31, 2018.  The year-over-year increase was primarily due to the elimination of the allowance for unused commitments and valuation allowance reduction discussed above and increases in loan servicing fees and rights which were the result of higher volumes of loans being serviced.

Non-interest expense for the three months ended March 31, 2019 decreased by $0.2 million, or 3.1%, to $7.3 million compared to the three months ended December 31, 2018, and increased $0.5 million, or 7.7%, compared to the three months ended March 31, 2018.  The quarter-over-quarter decrease was primarily due $0.7 million of write-downs on two OREO properties that took place during the fourth quarter of 2018, which was partially offset by a $0.3 million, or 6.3% increase in employee compensation and benefits which was primarily the result of a 24.1% increase in the premium cost of employee benefits.

Asset Quality

Non-performing assets as a percent of total assets increased to 2.07% at March 31, 2019, from 1.94% at December 31, 2018, and 1.83% at March 31, 2018.  At March 31, 2019, non-performing assets were $30.9 million, an increase of $1.3 million and $4.2 million at December 31, 2018 and March 31, 2018, respectively.  During the first quarter of 2019, non-performing loans increased by $2.9 million; however, three OREO properties were sold resulting in a decrease of $1.5 million in OREO during the quarter ended March 31, 2019.

Substandard loans were $107.5 million at March 31, 2019, compared to $120.9 million at December 31, 2018 and $82.6 million at March 31, 2018.  Adverse classified asset ratio (a non-GAAP measure) decreased to 48.59% at March 31, 2019 from 57.12% and 53.44% at December 31, 2018 and March 31, 2018, respectively.  Despite Wisconsin’s strained agricultural economy and the four-year sustained low prices of class III milk, the improvement in this ratio is the result of the active management of the substandard credits within the Bank’s loan portfolio as well as sales of OREO during the quarter.

A provision for loan losses of $0.8 million was recorded for the three months ended March 31, 2019 compared to a provision of $1.6 million and $0.1 million for the three months ended December 31, 2018 and March 31, 2018, respectively.  The decrease in provision in the linked quarter is directly related to the $24.3 million reduction in total loans and the $0.2 million of net recoveries that occurred during the first quarter of 2019.

The allowance for loan losses was $17.5 million at March 31, 2019 compared to $16.5 million at December 31, 2018.  The $1.0 million increase in the allowance during the first quarter of 2019 was the result of a $2.1 million increase in specific impairments on substandard loans which was offset in part by a $1.1 million reduction in general reserves due to the decreases in both adversely classified and total loans and improvement of qualitative factors.

Conference Call

The Company will host an earnings call today, April 18, 2019, at 1:30 p.m., CDT, conducted by Tim Schneider, President, and Glen L. Stiteley, CFO.  The earnings call will be broadcast over the Internet on the Company’s website at www.ICBK.com then clicking on the link “Investor Relations,” and selecting “News”, then “Event Calendar.”  In addition, you may listen to the Company’s earnings call via telephone by dialing (888) 317-6016.  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 April 18, 2020, by visiting the Company’s website at http://www.icbk.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 the Company’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     

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

(1) This is a non-GAAP financial measure.  A reconciliation to GAAP is included below.
(2) For the quarters ending March 31, 2018 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 March 31, 2019 and December 31, 2018, that bank property is considered classified due to the length of the holding period.

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