ICBK - 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. (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 $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     

(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 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.

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

               

(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.

(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.