County Bancorp, Inc. Announces First Quarter Earnings

Thursday, 22. April 2021 22:01

Consistent improvement in credit trends and solid loan sales led to strong first quarter in 2021

Highlights

  • Net income of $3.9 million for the first quarter of 2021 or $0.62 per diluted share
  • Cost of funds decreased by 19 basis points sequentially to 1.23%, a decline of 79 basis points year-over-year
  • Loans sold with servicing retained increased $29.3 million since December 31, 2020 and $94.3 million since March 31, 2020
  • $32.6 million of second round of PPP loans were closed during the quarter of 2021 which generated $1.5 million in deferred fee income
  • Watch and worse rated credit improved by $25.5 million during the first quarter of 2021

MANITOWOC, Wis., April 22, 2021 (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 first quarter of 2021. Net income was $3.9 million, or $0.62 per diluted share, for the first quarter of 2021, compared to net loss of $5.2 million, or $0.78 diluted loss per share, for the first quarter of 2020. The net loss for the first quarter of 2020 included a $5.0 million goodwill impairment charge, or $0.77 loss per diluted share.

Tim Schneider, President of County Bancorp, Inc., noted, “I’m highly encouraged by our strong start to the year, and based on positive movements in credit migration and overall improvements in watch and worse rated credits, we continue to expect this to be a strong fiscal year for County Bancorp. We expect to see continued improvement in our overall credit metrics as the dairy market continues to rebound and we conduct our annual credit review of our dairy loan portfolio in the second quarter of 2021. Additionally, shortly after quarter-end, we received a settlement on a nonperforming hotel loan, resulting in a loan loss recovery for that credit in the second quarter of 2021.

Schneider continued, “We also demonstrated our faith in Country Bancorp's long-term value by extending our share repurchase program and purchasing more than 100,000 shares during the first quarter. I am confident that we have the right strategy to maintain our momentum and deliver consistent long-term growth. We look forward to partnering and growing with our commercial, agricultural, and consumer customers in 2021 and beyond.”

Loans and Securities

  • Total loans increased sequentially by $15.4 million, or 1.5%, to $1.0 billion during the first quarter of 2021. The increase in total loans was primarily due to $32.6 million of second round Paycheck Protection Program (“PPP”) loans originated during the quarter, which was partially offset by the forgiveness of $24.1 million of first round PPP loans by the Small Business Administration (“SBA”). The following table sets forth the total PPP loans at the dates indicated:
  March 31, 2021  December 31, 2020 
  # of Loans  Balance  Deferred Fee Income  # of Loans  Balance  Deferred Fee Income 
                   
  (dollars in thousands) 
PPP 1oans - Round 1  127  $13,674  $301   456  $37,790  $1,191 
PPP loans - Round 2  461   32,595   1,479          
Total PPP loans  588  $46,269  $1,780   456  $37,790  $1,191 
% of Total loans      4.57%          3.79%    
  • As of March 31, 2021, there were five customer relationships with loans in payment deferral associated with COVID-19 customer support programs totaling $6.1 million, or 0.6% of total loans, which is a decrease of $16.8 million, or 63.5%, since December 31, 2020.
  • Loan participations the Company continued to service were $841.9 million as of March 31, 2021, an increase of $29.3 million, or 3.6%, compared to December 31, 2020, and an increase of $94.3 million, or 12.6%, compared to March 31, 2020.
  • During the first quarter of 2021, investments increased by $32.4 million, or 9.2%, and increased $139.1 million, or 56.5%, since March 31, 2020. There were no security sales during the first quarter of 2021.

Deposits

  • Total deposits as of March 31, 2021 were $1.1 billion, an increase of $57.7 million, or 5.5%, from December 31, 2020, and an increase of $78.6 million, or 7.7% since March 31, 2020.
  • Client deposits (demand deposits, NOW accounts, savings accounts, money market accounts, and certificates of deposit) decreased slightly by $2.8 million, or 0.3%, from December 31, 2020 to $913.2 million, which was expected due to seasonal attrition. Year-over-year, client deposits increased $121.5 million, or 15.3%, since March 31, 2020.
  • The Company increased its brokered deposits and national certificate of deposits by $60.5 million, or 48.5%, during the first quarter of 2021 in order to facilitate investment purchases. Despite the additional brokered deposits in the first quarter, wholesale funding decreased $49.9 million, or 18.8%, since March 31, 2020.

Shareholders’ Equity

  • During the first quarter of 2021, the Company repurchased 109,862 shares of its common stock, totaling $2.5 million, at a weighted average price of $22.87 per share.
  • Book value per share decreased to $25.99 per share on March 31, 2021 from $26.42 on December 31, 2020, due primarily to a $6.4 million unrealized loss on our securities portfolio in the first quarter of 2021.

Net Interest Income and Margin

  • Net interest margin for the quarter ended March 31, 2021 was 2.95%, which declined 11 basis points compared to the sequential quarter and increased 21 basis points year-over-year. The following table shows the accretive effect the SBA PPP loans had on net interest margin for the periods indicated.
  For the Three Months Ended 
  March 31,
2021
  December 31,
2020
 
Net interest margin excluding PPP loans  2.74%  2.49%
Accretion related to PPP loans:        
Yield on PPP loans  (0.06)%  (0.13)%
Yield on PPP loan SBA fees  0.29%  0.81%
Interest expense on PPP Liquidity Facility
programs
  (0.02)%  (0.11)%
Total accretion related to PPP loans  0.21%  0.57%
Total net interest margin  2.95%  3.06%
  • Net interest margin was positively impacted by approximately 15 basis points during the first quarter of 2021, due to the recovery of $0.5 million in interest income related to a nonaccrual loan participation.
  • Loan interest income (including fees) decreased $1.2 million sequentially primarily due to fewer PPP loans forgiven by the SBA in the first quarter of 2021 compared to the fourth quarter of 2020, which resulted in fewer origination fees being recognized as interest income. During the first quarter of 2021, $24.1 million of PPP loans were forgiven compared to $60.6 million during the fourth quarter of 2020. Year-over-year, loan interest income decreased $1.1 million primarily due to lower yields on the previously mentioned PPP loans and decrease the in federal funds target rates.
  • Total rates paid on interest-bearing deposits decreased by 22 basis points to 0.91% for the three months ended March 31, 2021, compared to the three months ended December 31, 2020, and decreased 92 basis points compared to the three months ended March 31, 2020. The decrease was primarily due to the Company’s renewed focus on gathering lower-cost transactional deposits versus higher cost time deposits and the market-driven drop in the federal funds rates.

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

  Three Months Ended March 31, 2021 v.
Three Months Ended December 31, 2020
  Three Months Ended March 31, 2021 v.
Three Months Ended March 31, 2020
 
  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 $246  $(37) $209  $1,003  $(105) $898 
Loans (excluding PPP)  5   271   276   (752)  (1,351)  (2,103)
PPP loans - round 1  (1,610)  37   (1,573)  (678)  1,639   961 
PPP loans - round 2  1,213   (1,130)  83   1,213   (1,130)  83 
Total loans  (392)  (822)  (1,214)  (217)  (842)  (1,059)
Federal funds sold and
interest-bearing
deposits with banks
  (4)  (1)  (5)  (92)  (128)  (220)
Total interest income  (150)  (860)  (1,010)  694   (1,075)  (381)
Interest Expense:                        
Savings, NOW, money
market and interest
checking
 $(16) $13  $(3) $750  $(1,144) $(394)
Time deposits  (38)  (371)  (409)  (854)  (1,030)  (1,884)
Other borrowings  (24)  (5)  (29)  38   (1)  37 
FHLB advances  (15)  3   (12)  68   (27)  41 
Junior subordinated
debentures
     (1)  (1)  355   45   400 
Total interest expense $(93) $(361) $(454) $357  $(2,157) $(1,800)
Net interest income $(57) $(499) $(556) $337  $1,082  $1,419 

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

  For the Three Months Ended 
  March 31, 2021  December 31, 2020  March 31, 2020 
  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 $372,235  $2,187   2.38% $322,706  $1,978   2.44% $196,353  $1,289   2.63%
Loans excluding PPP
loans (2)
  969,429   10,479   4.38%  968,575   10,203   4.19%  1,028,637   12,582   4.89%
PPP loans - Round 1 (2)  27,252   961   14.30%  71,505   2,534   14.10%         
PPP loans - Round 2 (2)  16,857   83   2.01%                  
Total loans (2)  1,013,538   11,523   4.61%  1,040,080   12,737   4.87%  1,028,637   12,582   4.89%
Interest bearing deposits due
from other banks
  19,949   5   0.10%  37,385   10   0.11%  60,825   225   1.48%
Total interest-earning assets $1,405,722  $13,715   3.96% $1,400,171  $14,725   4.18% $1,285,815  $14,096   4.39%
Allowance for loan losses  (14,932)          (18,535)          (15,330)        
Other assets  90,109           87,785           84,461         
Total assets $1,480,899          $1,469,421          $1,354,946         
                                     
Liabilities                                    
Savings, NOW, money market,
interest checking
 $477,159  $380   0.32% $421,969  $383   0.36% $334,740  $774   0.92%
Time deposits  442,626   1,690   1.55%  450,193   2,099   1.85%  613,753   3,574   2.33%
Total interest-bearing deposits $919,785  $2,070   0.91% $872,162  $2,482   1.13% $948,493  $4,348   1.83%
Other borrowings  51,220   48   0.38%  75,341   77   0.41%  1,259   11   3.49%
FHLB advances  116,311   273   0.95%  96,191   285   1.18%  56,708   233   1.65%
Junior subordinated debentures  67,123   1,106   6.68%  67,055   1,107   6.57%  44,871   706   6.29%
Total interest-bearing
liabilities
 $1,154,439  $3,497   1.23% $1,110,749  $3,951   1.42% $1,051,331  $5,297   2.02%
Non-interest-bearing deposits  138,814           168,765           113,351         
Other liabilities  15,190           18,758           16,877         
Total liabilities $1,308,443          $1,298,272          $1,181,559         
                                     
Shareholders' equity  172,456           171,149           173,387         
Total liabilities and equity $1,480,899          $1,469,421          $1,354,946         
                                     
Net interest income     $10,218          $10,774          $8,799     
Interest rate spread (3)          2.73%          2.76%          2.37%
Net interest margin (4)          2.95%          3.06%          2.74%
Ratio of interest-earning assets to
interest-bearing liabilities
  1.22           1.26           1.22         

(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.

Provision for Loan Losses

  • Provision for loan losses increased by $0.7 million, or 153.2%, to $0.2 million for the three months ended March 31, 2021, compared to the three months ended December 31, 2020. The provision for the first quarter is comprised of $0.1 million related to loan grown and a $0.4 million net increase in specific impairments related to one agriculture customer, which was partially offset by a $0.3 million improvement in economic qualitative factor related to the industries we have deemed high risk due in the COVID-19 pandemic.
  • Year-over-over, provision for loan losses decreased $2.0 million, or 89.1%, compared to the three months ended March 31, 2020. The reduction was primarily the result of the $2.0 million qualitative factor for industries that were deemed to be high-risk due to the COVID-19 pandemic for the three months ended March 31, 2020, due to the economic uncertainty at that time. As of March 31, 2021, only $0.5 million of this qualitative factor remained.

Non-Interest Income

  • Total non-interest income for the three months ended March 31, 2021 decreased $0.6 million, or 14.8%, to $3.7 million from the three months ended December 31, 2020, but increased $1.0 million, or 36.5% from the three months ended March 31, 2020.
  • Loan servicing fees increased quarter-over-quarter and year-over-year primarily due a six basis point increase in weighted average servicing fees and an increase in loans serviced. The average loans serviced on March 31, 2021 increased by $22.0 million and $77.6 million compared to December 31, 2020 and March 31, 2020, respectively.
  • Loan servicing right income for the three months ended March 31, 2021 decreased $0.7 million, or 60.8% to $0.5 million from $1.2 million for the three months ended December 31, 2020, primarily due to the pay-down of 20 loans totaling $12.3 million.
  • Crop insurance commission decreased in the sequential quarter by $0.2 million, or 41.8%, due to the annual profit-sharing payment that is received from insurance companies that was received in the fourth quarter of 2020.
  For the Three Months Ended 
  March 31,
2021
  December 31,
2020
  September 30,
2020
  June 30,
2020
  March 31,
2020
 
                
  (dollars in thousands) 
Non-Interest Income                    
Service charges $119  $108  $108  $139  $113 
Crop insurance commission  301   517   271   229   229 
Gain on sale of residential
loans, net
  93   219   17   4   38 
Loan servicing fees  2,158   1,974   2,054   1,923   1,831 
Gain on sale of service-retained
loans, net
  1,587   1,828   1,268   1,041   505 
Loan servicing right pay-down
losses
  (1,119)  (635)  (551)  (766)  (216)
Total loan servicing right
income
  468   1,193   717   275   289 
Income on OREO               
Gain on sale of securities        101   570    
Referral fees  319   64   110   121   17 
Other  254   283   294   240   203 
Total non-interest income $3,712  $4,358  $3,672  $3,501  $2,720 


  For the Three Months Ended 
  March 31,
2021
  December 31,
2020
  September 30,
2020
  June 30,
2020
  March 31,
2020
 
                
  (dollars in thousands) 
Loan servicing rights, end of period $18,864  $18,396  $17,203  $16,486  $16,211 
Loans serviced, end of period  841,893   812,560   797,819   762,058   747,553 
Loan servicing rights as a % of loans
serviced
  2.24%  2.26%  2.16%  2.16%  2.17%
                     
Total loan servicing fees $2,158  $1,974  $2,054  $1,923  $1,831 
Average loans serviced  827,227   805,190   779,939   754,806   749,646 
Annualized loan servicing fees as a
% of average loans serviced
  1.04%  0.98%  1.05%  1.02%  0.98%

Non-Interest Expense

  • Total non-interest expense for the three months ended March 31, 2021 decreased $0.7 million, or 13.1%, to $8.8 million from the three months ended December 31, 2020, and decreased $6.3 million, or 41.6% from the three months ended March 31, 2020.
  • Employee compensation and benefits expense decreased for the three months ended March 31, 2021 by $1.1 million to $5.6 million compared to the three months ended December 31, 2020. The change was primarily the result of an additional accrual of $1.6 million that took place during the fourth quarter of 2020 for incentive compensation related to 2020 financial results, which was partially offset by 2021 merit increases and payroll taxes that reset at the beginning of each year.
  • Professional fees increased during the first quarter of 2021 by $0.2 million, or 37.8%, to $0.8 million compared to the fourth quarter of 2020 due primarily to a nonrecurring technology strategy project.
  For the Three Months Ended 
  March 31,
2021
  December 31,
2020
  September 30,
2020
  June 30,
2020
  March 31,
2020
 
                
  (dollars in thousands, except per share data) 
Non-Interest Expense                    
Employee compensation and
benefits
 $5,582  $6,687  $4,766  $4,594  $5,260 
Occupancy  279   297   321   305   354 
Information processing  661   656   641   663   670 
Professional fees  802   582   555   480   401 
Business development  307   136   305   333   366 
OREO expenses  23   20   47   44   116 
Writedown of OREO     148         1,360 
Net loss (gain) on sale of OREO  17   (326)  9      4 
Depreciation and amortization  257   289   295   303   301 
Goodwill impairment              5,038 
Other  836   1,005   728   743   1,148 
Total non-interest expense $8,764  $9,494  $7,667  $7,465  $15,018 

Asset Quality

  • During the first quarter of 2021, watch rated loans decreased by $24.3 million, or 12.8%, and $53.6 million, or 24.4%, compared to December 31, 2020 and March 31, 2020, respectively, primarily as the result of eight dairy customers upgraded to a low satisfactory rating. This improvement in asset quality is expected to continue in the second quarter of 2021 as we complete the annual review process.
  • Special mention loans decreased $1.9 million, or 75.5%, compared to December 31, 2020 due mainly to the migration of one agricultural customer to substandard performing.
  • Substandard performing loans decreased by $1.5 million, or 3.6%, to $39.0 million at March 31, 2021 compared to December 31, 2020 due to impairment of two customer relationships; one customer filed for bankruptcy, and one customer on a workout plan was more than 90 days past due at quarter end. These two migrations to substandard impaired were offset in part by the special mention migration discussed above.

The following table presents loan balances by credit grade for the periods indicated:

  March 31,
2021
  December 31,
2020
  September 30,
2020
  June 30,
2020
  March 31,
2020
 
                
  (dollars in thousands) 
Loans by risk category:                    
Sound/Acceptable/Satisfactory/
Low Satisfactory
 $757,160  $716,313  $800,451  $798,945  $706,247 
Watch  165,823   190,101   185,254   198,044   219,459 
Special Mention  605   2,501   1,851   1,856   15,036 
Substandard Performing  38,961   40,420   41,577   47,741   34,179 
Substandard Impaired  49,115   46,950   46,793   40,938   37,515 
Total loans $1,011,664  $996,285  $1,075,926  $1,087,524  $1,012,436 
Adverse classified asset ratio (1)  39.61%  39.43%  42.64%  41.73%  32.35%

(1)   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 first quarter by $2.0 million, or 4.7%, compared to the fourth quarter of 2020 due to two agricultural customers being placed on non-accrual status. It is anticipated that during the second quarter of 2021, approximately $7.0 million of agricultural loans will be restored to accrual status as a result of the completion of the annual credit review of the dairy portfolio.
  • Non-accrual loans increased $2.3 million, or 5.6%, as of March 31, 2021 compared to December 31, 2020, due to the previously discussed customer bankruptcy.
  • Performing TDRs not on non-accrual decreased $5.1 million, or 27.4%, to $13.5 million on March 31, 2021 from December 31, 2020. The decrease is primarily due to one agriculture customer that was re-underwritten and was no longer a TDR due to improved performance and financial trends.
  March 31,
2021
  December 31,
2020
  September 30,
2020
  June 30,
2020
  March 31,
2020
 
                
  (dollars in thousands) 
Non-Performing Assets:                    
Nonaccrual loans $43,973  $41,624  $41,351  $35,456  $32,051 
Other real estate owned  739   1,077   3,064   2,629   3,247 
Total non-performing assets $44,712  $42,701  $44,415  $38,085  $35,298 
                     
Performing TDRs not on
nonaccrual
 $13,495  $18,592  $19,036  $21,986  $21,853 
                     
Non-performing assets as a % of total
loans
  4.42%  4.29%  4.13%  3.50%  3.49%
Non-performing assets as a % of total
assets
  3.00%  2.90%  2.98%  2.52%  2.61%
Allowance for loan losses as a % of
total loans
  1.49%  1.49%  1.73%  1.71%  1.73%
Net charge-offs (recoveries) quarter-
to-date
 $(32) $3,386  $(1) $120  $(62)

Conference Call

The Company will host an earnings call tomorrow, April 23, 2021, at 8:30 a.m., CDT, conducted by Timothy J. Schneider, President; Glen L. Stiteley, Chief Financial Officer; David C. Coggins, Chief Banking Officer; John R. Fillingim, Chief Credit Officer; and Matthew R. Lemke, Chief Retail and Deposit Officer. 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 April 23, 2022, 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)
 March 31,
2021
  December 31,
2020
  September 30,
2020
  June 30,
2020
  March 31,
2020
 
                
  (dollars in thousands, except per share data) 
Period-End Balance Sheet:                    
Assets                    
Cash and cash equivalents $17,820  $19,500  $53,283  $127,432  $21,545 
Securities available-for-sale, at fair
value
  385,240   352,854   298,476   226,971   246,148 
Loans held for sale  5,789   35,976   2,593   11,847   14,388 
Agricultural loans  609,482   606,881   619,617   624,340   642,066 
Commercial loans  317,625   313,265   317,782   328,368   325,310 
Paycheck Protection Plan loans  46,249   37,790   98,421   103,317    
Multi-family real estate loans  33,287   33,457   35,496   30,439   42,198 
Residential real estate loans  4,776   4,627   4,489   975   2,753 
Installment and consumer other  245   265   121   85   109 
Total loans  1,011,664   996,285   1,075,926   1,087,524   1,012,436 
Allowance for loan losses  (15,082)  (14,808)  (18,649)  (18,569)  (17,547)
Net loans  996,582   981,477   1,057,277   1,068,955   994,889 
Other assets  85,897   82,551   80,426   78,712   78,004 
         Total Assets $1,491,328  $1,472,358  $1,492,055  $1,513,917  $1,354,974 
                     
Liabilities and Shareholders' Equity                    
Demand deposits $139,838  $163,202  $158,798  $149,963  $117,434 
NOW accounts and interest checking  95,591   96,624   78,026   81,656   64,873 
Savings  8,431   7,367   11,900   8,369   6,566 
Money market accounts  390,741   344,250   325,900   307,083   237,889 
Time deposits  278,591   304,580   322,992   346,482   364,930 
Brokered deposits  159,034   80,456   101,808   121,503   161,882 
National time deposits  26,302   44,347   50,747   57,997   66,386 
Total deposits  1,098,528   1,040,826   1,050,171   1,073,053   1,019,960 
Federal Reserve Discount Window
advances
  47,255   47,531   99,693   99,693    
FHLB advances  100,000   129,000   84,600   93,400   109,400 
Subordinated debentures  67,179   67,111   67,025   61,910   44,896 
Other liabilities  12,028   16,114   20,656   17,336   15,672 
         Total Liabilities  1,324,990   1,300,582   1,322,145   1,345,392   1,189,928 
                     
Shareholders' equity  166,338   171,776   169,910   168,525   165,046 
Total Liabilities and Shareholders'
Equity
 $1,491,328  $1,472,358  $1,492,055  $1,513,917  $1,354,974 
                     
Stock Price Information:                    
High - Quarter-to-date $26.46  $23.72  $22.00  $24.67  $27.19 
Low - Quarter-to-date $19.66  $18.20  $17.04  $17.13  $13.55 
Market price - Quarter-end $23.97  $22.08  $18.80  $20.93  $18.50 
Book value per share $25.99  $26.42  $25.72  $25.18  $24.17 
Tangible book value per share (1) $25.98  $26.42  $25.71  $25.16  $24.15 
Common shares outstanding  6,094,450   6,197,965   6,294,675   6,375,150   6,496,790 

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

  For the Three Months Ended 
  March 31,
2021
  December 31,
2020
  September 30,
2020
  June 30,
2020
  March 31,
2020
 
                
  (dollars in thousands, except per share data) 
Selected Income Statement Data:                    
Interest and Dividend Income                    
Loans, including fees $11,523  $12,737  $11,594  $12,009  $12,565 
Taxable securities  1,887   1,777   1,293   1,283   1,282 
Tax-exempt securities  246   201   167   162   6 
Federal funds sold and other  58   10   52   111   225 
Total interest and dividend
income
  13,714   14,725   13,106   13,565   14,078 
                     
Interest Expense                    
Deposits  2,069   2,482   2,914   3,721   4,347 
FHLB advances and other
borrowed funds
  321   362   456   343   244 
Subordinated debentures  1,106   1,107   1,082   736   706 
Total interest expense  3,496   3,951   4,452   4,800   5,297 
Net interest income  10,218   10,774   8,654   8,765   8,781 
Provision for loan losses  242   (455)  79   1,142   2,218 
Net interest income after provision
for loan losses
  9,976   11,229   8,575   7,623   6,563 
                     
Non-Interest Income                    
Services charges  119   108   108   139   113 
Crop insurance commission  301   517   271   229   229 
Gain on sale of residential loans, net  93   219   17   4   38 
Loan servicing fees  2,158   1,974   2,054   1,923   1,831 
Gain on sale of service-retained loans, net  1,587   1,828   1,268   1,041   505 
Loan servicing right pay-down
losses
  (1,119)  (635)  (551)  (766)  (216)
Total loan servicing right income  468   1,193   717   275   289 
Gain on sale of securities        101   570    
Referral fees (1)  319   64   110   121   17 
Other  254   283   294   240   203 
Total non-interest income  3,712   4,358   3,672   3,501   2,720 
                     
Non-Interest Expense                    
Employee compensation and
benefits
  5,582   6,687   4,766   4,594   5,260 
Occupancy  279   297   321   305   354 
Information processing  661   656   641   663   670 
Professional fees  802   582   555   480   401 
Business development  307   136   305   333   366 
OREO expenses  23   20   47   44   116 
Writedown of OREO     148         1,360 
Net loss (gain) on sale of OREO  17   (326)  9      4 
Depreciation and amortization  257   289   295   303   301 
Goodwill impairment              5,038 
Other  836   1,005   728   743   1,148 
Total non-interest expense  8,764   9,494   7,667   7,465   15,018 
Income (loss) before income taxes  4,924   6,093   4,580   3,659   (5,735)
Income tax expense (benefit)  996   1,575   1,164   926   (547)
NET INCOME (LOSS) $3,928  $4,518  $3,416  $2,733  $(5,188)
                     
Basic earnings (loss) per share $0.62  $0.70  $0.52  $0.40  $(0.79)
Diluted earnings (loss) per share $0.62  $0.70  $0.52  $0.40  $(0.78)
Dividends declared per share $0.10  $0.10  $0.07  $0.07  $0.07 

(1) Referral fees in prior quarters reclassed to non-interest income to match current classification

  For the Three Months Ended 
  March 31,
2021
  December 31,
2020
  September 30,
2020
  June 30,
2020
  March 31,
2020
 
                
  (dollars in thousands, except share data) 
Other Data:                    
Return on average assets (1)  1.06%  1.23%  0.91%  0.74%  (1.53)%
Return on average shareholders' equity (1)  9.11%  10.56%  8.05%  6.55%  (11.97)%
Return on average common shareholders'
equity (1)(2)
  9.29%  10.88%  8.25%  6.63%  (12.81)%
Efficiency ratio (1)(2)  62.79%  63.92%  62.64%  11.13%  74.92%
Equity to assets ratio  11.15%  11.67%  11.39%  11.13%  12.18%
Tangible common equity to tangible
assets (2)
  10.62%  11.12%  10.85%  10.60%  11.58%
                     
Common Share Data:                    
Net income from continuing operations $3,928  $4,518  $3,416  $2,733  $(5,188)
Less: Preferred stock dividends  81   80   80   99   108 
Income available to common shareholders $3,847  $4,438  $3,336  $2,634  $(5,296)
                     
Weighted average number of common
shares issued
  7,218,358   7,206,238   7,202,000   7,198,901   7,182,945 
Less: Weighted average treasury shares  1,080,089   957,573   882,153   759,294   518,740 
Plus: Weighted average non-vested
restricted stock units
  63,991   67,529   66,492   65,291   39,785 
Weighted average number of common
shares outstanding
  6,202,260   6,316,194   6,386,339   6,504,898   6,703,990 
Effect of dilutive options  34,465   28,025   20,915   28,511   49,072 
Weighted average number of common
shares outstanding used to calculate
diluted earnings per common share
  6,236,725   6,344,219   6,407,254   6,533,409   6,753,062 

(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 
  March 31,
2021
  December 31,
2020
  September 30,
2020
  June 30,
2020
  March 31,
2020
 
                
  (dollars in thousands) 
Return on average common shareholders'
equity reconciliation (1):
                    
Return on average shareholders' equity  9.11%  10.56%  8.05%  6.55%  (11.97)%
Effect of excluding average preferred
shareholders' equity
  0.18%  0.32%  0.20%  0.08%  (0.84)%
Return on average common shareholders'
equity
  9.29%  10.88%  8.25%  6.63%  (12.81)%
                     
Efficiency ratio (2):                    
Non-interest expense $8,764  $9,494  $7,667  $7,465  $15,018 
Less: goodwill impairment              (5,038)
Less: historical tax credit investment
impairment
               
Less: net loss on sales and write-downs
of OREO
  (17)  178   (9)     (1,364)
Adjusted non-interest expense
(non-GAAP)
 $8,747  $9,672  $7,658  $7,465  $8,616 
                     
Net interest income $10,218  $10,774  $8,654  $8,765  $8,781 
Non-interest income  3,712   4,358   3,672   3,501   2,720 
Less: net gain on sales of securities        (101)  (570)   
Operating revenue $13,930  $15,132  $12,225  $11,696  $11,501 
Efficiency ratio  62.79%  63.92%  62.64%  63.83%  74.92%


  For the Three Months Ended 
  March 31,
2021
  March 31,
2020
 
       
  (dollars in thousands, except per share data) 
Adjusted diluted earnings per share(3):        
Net income from continuing operations $3,928  $(5,188)
Less: preferred stock dividends  (81)  (108)
Plus: goodwill impairment     5,038 
Adjusted income available to common shareholders
for basic earnings per common share
 $3,847  $(258)
Weighted average number of common shares
outstanding
  6,202,260   6,703,990 
Effect of dilutive options  34,465   49,072 
Weighted average number of common shares
outstanding used to calculate diluted earnings
per common share
  6,236,725   6,753,062 
Adjusted diluted earnings per share $0.62  $(0.04)

(1) Management uses the return on average common shareholders’ equity 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):

  March 31,
2021
  December 31,
2020
  September 30,
2020
  June 30,
2020
  March 31,
2020
 
                
  (dollars in thousands, except per share data) 
Tangible book value per share and
tangible common equity to tangible
assets reconciliation (1):
                    
Common equity $158,338  $163,776  $161,910  $160,525  $157,046 
Less: Core deposit intangible, net of
amortization
  29   54   86   125   171 
Tangible common equity
(non-GAAP)
 $158,309  $163,722  $161,824  $160,400  $156,875 
Common shares outstanding  6,094,450   6,197,965   6,294,675   6,375,150   6,496,790 
Tangible book value per share $25.98  $26.42  $25.71  $25.16  $24.15 
                     
Total assets $1,491,328  $1,472,358  $1,492,055  $1,513,917  $1,354,974 
Less: Core deposit intangible, net of
amortization
  29   54   86   125   171 
Tangible assets (non-GAAP) $1,491,299  $1,472,304  $1,491,969  $1,513,792  $1,354,803 
Tangible common equity to tangible
assets
  10.62%  11.12%  10.85%  10.60%  11.58%
                     
Adverse classified asset ratio (2):                    
Substandard loans $88,076  $87,370  $88,370  $88,680  $71,694 
Other real estate owned  739   1,077   3,064   2,629   3,247 
Substandard unused commitments  5,091   4,049   5,124   3,230   2,840 
Less: Substandard government guarantees  (8,485)  (8,960)  (7,002)  (6,336)  (7,699)
Total adverse classified assets
(non-GAAP)
 $85,421  $83,536  $89,556  $88,203  $70,082 
                     
Total equity (Bank) $202,200  $205,743  $200,011  $201,507  $204,089 
Accumulated other comprehensive gain
on available for sale securities
  (1,652)  (8,686)  (8,640)  (8,734)  (5,012)
Allowance for loan losses  15,082   14,808   18,649   18,569   17,547 
Adjusted total equity (non-GAAP) $215,630  $211,865  $210,020  $211,342  $216,624 
Adverse classified asset ratio  39.61%  39.43%  42.64%  41.73%  32.35%

(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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