County Bancorp, Inc. Announces Net Income of $3.7 Million for the Second Quarter of 2019

Highlights

• Net income of $3.7 million for the second quarter of 2019; $7.5 million for the six months ended June 30, 2019
• Diluted earnings per share of $0.53 for the second quarter of 2019; $1.07 for the six months ended June 30, 2019
• Book value per share of $23.03 as of June 30, 2019, an increase of $0.67, or 3.0%, since March 31, 2019, and an increase of $1.53, or 7.1%, since December 31, 2018
• Client deposits (demand deposits, money market accounts, and certificates of deposit) increased $39.6 million, or 5.2%, since March 31, 2019, and increased $96.3 million, or 13.7%, since June 30, 2018.
• Brokered and national deposits decreased $62.9 million during the first half of 2019, a reduction of 13.4% since December 31, 2018

MANITOWOC, Wis., July 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 $3.7 million, or $0.53 diluted earnings per share, for the second quarter of 2019, compared to net income of $3.8 million, or $0.54 diluted earnings per share, for the first quarter of 2019 and $3.9 million, or $0.55 diluted earnings per share, for the second quarter of 2018.  This represents an annualized return on average assets of 1.00% for the three and six months ended June 30, 2019, compared to 1.04% and 1.10% for the three and six months ended June 30, 2018, respectively.

"We are very pleased with our most recent quarter and first half earnings, even though we still face some credit challenges in our agricultural portfolio due to the recent prolonged low milk price cycle," stated Tim Schneider, President of the Company and CEO of the Bank.  "We are starting to see an improved milk price environment: the 12-month forward-looking average for class III milk increased from $16.00 to $17.04 per hundredweight on the Chicago Mercantile Exchange from March 31 to June 30, 2019. These improvements are encouraging, but it is going to take some time to see an impact on our overall classified assets."

Schneider continued, "As previously announced, we are committed to reducing our wholesale funding, and we were able to make significant progress toward that in the first half of 2019, primarily through selling loan participations. We are also very pleased with our client deposit growth year-over-year and during this quarter."

Loans and Total Assets

Total assets at June 30, 2019 were $1.5 billion, a decrease of $6.7 million, or 0.5%, and a decrease of $34.2 million, or 2.3%, over total assets as of March 31, 2019 and June 30, 2018, respectively.  Total loans were $1.1 billion at June 30, 2019, which represents a $35.1 million, or 3.0%, decrease over total loans at March 31, 2019, and a decrease of $33.7 million, or 2.9%, over total loans at June 30, 2018.

We continued to focus on participating loans off balance sheet during the second quarter of 2019.  During the second quarter of 2019, participated loans that the Company continued to service increased to $695.6 million at June 30, 2019 which was an increase of $20.4 million, or 3.0%, and $67.2 million, or 10.7%, over participated loans that the Company serviced at March 31, 2019 and June 30, 2018, respectively.

Deposits

Total deposits at June 30, 2019 were $1.2 billion, an increase of $28.9 million, or 2.5%, and a decrease of $5.3 million, or 0.4%, over total deposits as of March 31, 2019 and June 30, 2018, respectively.  Client deposits (demand deposits, money market accounts, and certificates of deposit) increased $39.6 million, or 5.2%, since March 31, 2019, and increased $96.3 million, or 13.7%, since June 30, 2018. 

Due to the increases in loan participations and client deposit growth, the Company decreased its reliance on brokered deposits and national certificates of deposit to $406.0 million at June 30, 2019.  This represents a decrease of $10.7 million, or 2.6%, from March 31, 2019, and a decrease of $101.5 million, or 20.0%, from June 30, 2018. 

During the second quarter of 2019, the Company also paid off a portion of its FHLB borrowings.  At June 30, 2019, borrowings from the FHLB totaled $59.4 million, which was a decrease of $41.0 million, or 40.8%, from March 31, 2019, and a decrease of $48.8 million, or 45.1%, from June 30, 2018.

Net Interest Income and Margin

Net interest income was $10.4 million for the three months ended June 30, 2019, which was a $0.1 million, or 1.2%, decrease from the three months ended March 31, 2019, and a $0.1 million, or 0.9%, increase from the three months ended June 30, 2018.  The primary reason for the second 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.

For the six months ended June 30, 2019, net interest income improved 1.9% to $21.0 million from $20.6 million for the six months ended June 30, 2018.

Net interest margin was 2.92% for the three months ended June 30, 2019, which was a decrease from 2.94% for the three months ended March 31, 2019, and an increase from 2.87% for the three months ended June 30, 2018.  A slight decline in net interest margin was realized over the linked quarter because while loan yields improved 12 basis points, the average loan balance declined by 2.6% and interest rates on deposits increased 10 basis points on a steady average balance.  Year-over-year second quarter net interest margin increased by five basis points primarily due to a 42 basis point improvement in loan yields, which was partially offset by a 42 basis point increase in cost of funds.

For the six months ended June 30, 2019, net interest margin improved slightly to 2.93% from 2.91% for the six months ended June 30, 2018, primarily as a result of a 45 basis point improvement in loan yields that was partially offset by a 46 basis point increase in cost of funds.

Non-Interest Income and Expense

Non-interest income for the three months ended June 30, 2019 increased by $0.1 million, or 5.0%, to $2.9 million compared to the three months ended March 31, 2019.  During the second quarter, the Company continued to reduce the valuation allowance on its loan servicing rights portfolio, which resulted in an increase of $0.1 million of loan servicing rights for the quarter.  The reduction of the valuation allowance is expected to continue throughout the remaining quarters of 2019.

Non-interest income for the three months ended June 30, 2019 increased $0.6 million, or 24.7%, compared to $2.3 million for the three months ended June 30, 2018.  The year-over-year increase was primarily due to the reduction of the valuation allowance discussed above, increases in loan servicing fees and rights which were the result of higher volumes of loans being serviced, and a $0.3 million gain on the sale of securities during the second quarter of 2019.

For the six months ended June 30, 2019, non-interest income improved to $5.6 million, an increase of $1.3 million, or 29.4%, over the six months ended June 30, 2018.  The increase was primarily the result of the reduction in the valuation allowance on the loan servicing rights portfolio and security sales discussed above, as well as the reduction of the allowance for unused commitments of $0.5 million, included in other non-interest income, in the first quarter of 2019.  The Company evaluated the need for this allowance during the first quarter of 2019 and concluded there was no sufficient evidence that represented credit loss inherent in these commitments to substantiate the necessity of this reserve and concluded to eliminate it.  The Company will continue to evaluate credit risk on these off-balance sheet commitments going forward. 

Non-interest expense for the three months ended June 30, 2019 increased by $0.1 million, or 1.9%, to $7.4 million compared to the three months ended March 31, 2019, and increased $0.5 million, or 7.3%, compared to the three months ended June 30, 2018.  Employee compensation and benefits decreased $0.3 million, or 6.3%, in the linked quarter due to lower payroll taxes resulting from social security tax limits being met during the first quarter, but was offset by a $0.3 million writedown of an agricultural OREO property.  The year-over-year increase was primarily due to a $0.3 million write-down on an OREO property during the second quarter of 2019 and small increases in information processing, professional fees, and business development.

Asset Quality

Non-performing assets as a percent of total assets decreased to 1.94% at June 30, 2019, from 2.07% at March 31, 2019, and 2.30% at June 30, 2018.  At June 30, 2019, non-performing assets were $28.8 million, a decrease of $2.1 million, or 6.8%, and $6.1 million, or 17.5%, at March 31, 2019 and June 30, 2018, respectively.  During the second quarter of 2019, $4.1 million of non-performing loans was transferred to OREO; however, two OREO properties were sold during the quarter resulting in a net increase of $3.7 million in OREO during the quarter ended June 30, 2019.

Substandard loans were $117.8 million at June 30, 2019, compared to $107.5 million at March 31, 2019 and $93.8 million at June 30, 2018.  Adverse classified asset ratio (a non-GAAP measure) increased to 53.21% at June 30, 2019 from 48.59% and 47.34% at March 31, 2019 and June 30, 2018, respectively.  The increase in substandard loans and the adverse classified ratio was the result of the prolonged strain of Wisconsin's agricultural economy; however, we are actively managing these credits, and we are optimistic about the industry's outlook as there was a 6.5% increase in the 12-month future price of class III milk from March 31, 2019 to June 30, 2019.

A provision for loan losses of $0.9 million was recorded for the three months ended June 30, 2019 compared to a provision of $0.8 million and $0.5 million for the three months ended March 31, 2019 and June 30, 2018, respectively.  For the six months ended June 30, 2019, a provision for loan losses was $1.6 million compared to $0.6 million for the six months ended June 30, 2018.  The increase in provision in the linked quarter and year-over- year was directly related the $2.1 million in net charge-offs that took place during the second quarter of 2019 which related to a commercial real estate relationship that lost its primary tenant, as well as an increase in special mention and substandard loans during the second quarter of 2019.

The allowance for loan losses was $16.3 million at June 30, 2019 compared to $16.5 million at December 31, 2018.  The $0.2 million decrease in the allowance during the first six months of 2019 was the result of a reduction in general reserves due to the decreases in total loans.

Conference Call

The Company will host an earnings call today, July 18, 2019, at 1:30 p.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 http://investors.icbk.com.  From the top menu, select "News", then "Event Calendar."  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 18, 2020, by visiting the Company's website at http://investors.icbk.com.

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.  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

(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) The quarters ending June 30, 2018 and September 30, 2018, do not include $0.4 million of bank property transferred from premises and equipment, which is not considered a non-performing asset.  For the quarter ended December 31, 2018, and all subsequent quarters, that bank property was 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.