ICBK - County Bancorp Inc. Announces Second Quarter 2020 Financial Results

July, 23 2020 04:01 PM County Bancorp Inc.

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.

Company Name:	County Bancorp Inc.
Stock Symbol:	ICBK
Market:	NASDAQ
Website:	investorscommunitybank.com

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