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Section 1: 10-Q (10-Q)

icbk-10q_20190930.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to __________

Commission File Number: 001-36808

 

COUNTY BANCORP, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Wisconsin

39-1850431

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

 

 

2400 South 44th Street

Manitowoc, WI

54221

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (920) 686-9998

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common stock, $0.01 par value

 

ICBK

 

Nasdaq Global Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes      No    

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

 

Accelerated filer

 

Non-accelerated filer

 

 

Smaller reporting company

 

Emerging growth company

 

 

 

 

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

As of November 7, 2019, the registrant had 6,727,908 shares of common stock, $0.01 par value per share, outstanding.

 

 


 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements

1

 

Consolidated Balance Sheets

1

 

Consolidated Statements of Operations

2

 

Consolidated Statements of Comprehensive Income

3

 

Consolidated Statements of Shareholders’ Equity

4

 

Consolidated Statements of Cash Flows

5

 

Notes to Unaudited Consolidated Financial Statements

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

27

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

43

Item 4.

Controls and Procedures

45

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

46

Item 1A.

Risk Factors

46

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

46

Item 3.

Defaults Upon Senior Securities

46

Item 4.

Mine Safety Disclosures

46

Item 5.

Other Information

46

Item 6.

Exhibits

47

Signatures

48

 

 

i


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

COUNTY BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

September 30, 2019 and December 31, 2018

 

 

 

September 30, 2019

 

 

December 31, 2018

 

 

 

(unaudited)

 

 

 

 

 

 

 

(dollars in thousands except per share data)

 

ASSETS

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

120,845

 

 

$

61,087

 

Securities available-for-sale, at fair value

 

 

154,962

 

 

 

195,945

 

FHLB Stock

 

 

1,628

 

 

 

2,978

 

Loans held for sale

 

 

4,192

 

 

 

2,949

 

Loans, net of allowance for loan losses of $15,065 as of September 30, 2019;

   $16,505 as of December 31, 2018

 

 

1,065,702

 

 

 

1,190,790

 

Premises and equipment, net

 

 

15,582

 

 

 

16,075

 

Loan servicing rights

 

 

11,362

 

 

 

9,047

 

Other real estate owned, net

 

 

7,252

 

 

 

6,568

 

Cash surrender value of bank owned life insurance

 

 

18,184

 

 

 

17,842

 

Deferred tax asset, net

 

 

933

 

 

 

4,346

 

Goodwill

 

 

5,038

 

 

 

5,038

 

Core deposit intangible, net of accumulated amortization of $1,515 as of

   September 30, 2019; $1,288 as of December 31, 2018

 

 

286

 

 

 

513

 

Accrued interest receivable and other assets

 

 

8,998

 

 

 

7,849

 

Total assets

 

$

1,414,964

 

 

$

1,521,027

 

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

Noninterest-bearing

 

$

117,224

 

 

$

121,436

 

Interest-bearing

 

 

1,025,529

 

 

 

1,101,911

 

Total deposits

 

 

1,142,753

 

 

 

1,223,347

 

Other borrowings

 

 

800

 

 

 

827

 

Advances from FHLB

 

 

44,400

 

 

 

89,400

 

Subordinated debentures

 

 

44,820

 

 

 

44,703

 

Accrued interest payable and other liabilities

 

 

13,439

 

 

 

10,466

 

Total liabilities

 

 

1,246,212

 

 

 

1,368,743

 

 

 

 

 

 

 

 

 

 

SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Preferred stock- $1,000 stated value; 15,000 shares authorized; 8,000 shares issued

 

 

8,000

 

 

 

8,000

 

Common stock - $0.01 par value; 50,000,000 authorized; 7,171,828 shares issued

   and 6,727,908 shares outstanding at September 30, 2019; 7,153,174 shares issued

   and 6,709,480 shares outstanding as of December 31, 2018

 

 

28

 

 

 

28

 

Surplus

 

 

53,781

 

 

 

53,162

 

Retained earnings

 

 

110,260

 

 

 

98,475

 

Treasury stock, at cost; 443,920 shares at September 30, 2019; 443,694 shares at

   December 31, 2018

 

 

(5,030

)

 

 

(5,030

)

Accumulated other comprehensive income (loss)

 

 

1,713

 

 

 

(2,351

)

Total shareholders' equity

 

 

168,752

 

 

 

152,284

 

Total liabilities and shareholders' equity

 

$

1,414,964

 

 

$

1,521,027

 

 

See accompanying notes to unaudited consolidated financial statements.

 

 

1

 


 

COUNTY BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three and Nine Months Ended September 30, 2019 and 2018

(Unaudited)

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

(dollars in thousands except per share data)

 

INTEREST AND DIVIDEND INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans, including fees

 

$

15,030

 

 

$

15,113

 

 

$

46,015

 

 

$

43,170

 

Taxable securities

 

 

1,117

 

 

 

945

 

 

 

3,480

 

 

 

2,559

 

Tax-exempt securities

 

 

-

 

 

 

344

 

 

 

257

 

 

 

515

 

Federal funds sold and other

 

 

612

 

 

 

249

 

 

 

1,341

 

 

 

863

 

Total interest and dividend income

 

 

16,759

 

 

 

16,651

 

 

 

51,093

 

 

 

47,107

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

5,574

 

 

 

4,980

 

 

 

16,676

 

 

 

13,376

 

FHLB advances and other borrowed funds

 

 

246

 

 

 

411

 

 

 

1,125

 

 

 

1,382

 

Subordinated debentures

 

 

687

 

 

 

656

 

 

 

2,048

 

 

 

1,137

 

Total interest expense

 

 

6,507

 

 

 

6,047

 

 

 

19,849

 

 

 

15,895

 

Net interest income

 

 

10,252

 

 

 

10,604

 

 

 

31,244

 

 

 

31,212

 

Provision for loan losses

 

 

(1,154

)

 

 

993

 

 

 

474

 

 

 

1,623

 

Net interest income after provision for loan losses

 

 

11,406

 

 

 

9,611

 

 

 

30,770

 

 

 

29,589

 

NON-INTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Services charges

 

 

348

 

 

 

394

 

 

 

1,108

 

 

 

1,204

 

Gain on sale of loans, net

 

 

87

 

 

 

41

 

 

 

112

 

 

 

118

 

Loan servicing fees

 

 

3,418

 

 

 

1,475

 

 

 

7,074

 

 

 

4,550

 

Other

 

 

181

 

 

 

247

 

 

 

1,377

 

 

 

641

 

Total non-interest income

 

 

4,034

 

 

 

2,157

 

 

 

9,671

 

 

 

6,513

 

NON-INTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employee compensation and benefits

 

 

4,735

 

 

 

4,394

 

 

 

13,416

 

 

 

12,726

 

Occupancy

 

 

313

 

 

 

332

 

 

 

985

 

 

 

814

 

Information processing

 

 

683

 

 

 

529

 

 

 

1,837

 

 

 

1,523

 

Professional fees

 

 

483

 

 

 

351

 

 

 

1,299

 

 

 

1,025

 

Write-down of other real estate owned

 

 

 

 

 

81

 

 

 

250

 

 

 

185

 

Other

 

 

1,454

 

 

 

1,336

 

 

 

4,632

 

 

 

4,472

 

Total non-interest expense

 

 

7,668

 

 

 

7,023

 

 

 

22,419

 

 

 

20,745

 

Income before income taxes

 

 

7,772

 

 

 

4,745

 

 

 

18,022

 

 

 

15,357

 

Income tax expense

 

 

2,090

 

 

 

1,228

 

 

 

4,874

 

 

 

3,936

 

NET INCOME

 

$

5,682

 

 

$

3,517

 

 

$

13,148

 

 

$

11,421

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME PER SHARE:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.82

 

 

$

0.51

 

 

$

1.90

 

 

$

1.66

 

Diluted

 

$

0.82

 

 

$

0.50

 

 

$

1.89

 

 

$

1.65

 

Dividends paid per share

 

$

0.05

 

 

$

0.07

 

 

$

0.15

 

 

$

0.21

 

 

See accompanying notes to unaudited consolidated financial statements.

 

 

 

 

2

 


 

COUNTY BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Three and Nine Months Ended September 30, 2019 and 2018

(Unaudited)

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

(dollars in thousands)

 

Net income

 

$

5,682

 

 

$

3,517

 

 

$

13,148

 

 

$

11,421

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain (loss) on securities available-for-sale

 

 

1,170

 

 

 

(1,664

)

 

 

7,539

 

 

 

(4,436

)

Income tax benefit (expense)

 

 

(319

)

 

 

356

 

 

 

(2,054

)

 

 

950

 

Reclassification for realized gains on securities

 

 

 

 

 

 

 

 

(341

)

 

 

 

Income tax expense

 

 

 

 

 

 

 

 

93

 

 

 

 

Total other comprehensive income (loss) on securities

    available-for-sale

 

 

851

 

 

 

(1,308

)

 

 

5,237

 

 

 

(3,486

)

Unrealized gain (loss) on derivatives arising during the period

 

 

(474

)

 

 

181

 

 

 

(1,612

)

 

 

232

 

Income tax benefit (expense)

 

 

129

 

 

 

(49

)

 

 

439

 

 

 

(63

)

Total other comprehensive income (loss) on derivatives

 

 

(345

)

 

 

132

 

 

 

(1,173

)

 

 

169

 

Total other comprehensive income (loss)

 

 

506

 

 

 

(1,176

)

 

 

4,064

 

 

 

(3,317

)

Comprehensive income

 

$

6,188

 

 

$

2,341

 

 

$

17,212

 

 

$

8,104

 

 

See accompanying notes to unaudited consolidated financial statements.

 

 

 

3

 


 

COUNTY BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

For the Nine Months Ended September 30, 2019 and 2018

(Unaudited)

 

 

 

Preferred

Stock

 

 

Common

Stock

 

 

Surplus

 

 

Retained

Earnings

 

 

Treasury

Stock

 

 

Accumulated

Other

Comprehensive

Income (Loss)

 

 

Total

Shareholders'

Equity

 

 

 

(dollars in thousands except share data)

 

Balance at December 31, 2017

 

$

8,000

 

 

$

28

 

 

$

52,230

 

 

$

86,385

 

 

$

(5,030

)

 

$

(627

)

 

$

140,986

 

   Net income

 

 

 

 

 

 

 

 

 

 

 

4,054

 

 

 

 

 

 

 

 

 

4,054

 

   Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,885

)

 

 

(1,885

)

   Stock compensation expense

 

 

 

 

 

 

 

 

117

 

 

 

 

 

 

 

 

 

 

 

 

117

 

   Cash dividends declared on common stock

 

 

 

 

 

 

 

 

 

 

 

(468

)

 

 

 

 

 

 

 

 

(468

)

   Cash dividends declared on preferred stock

 

 

 

 

 

 

 

 

 

 

 

(97

)

 

 

 

 

 

 

 

 

(97

)

   Reclassification of par value to surplus

 

 

 

 

 

(21

)

 

 

21

 

 

 

 

 

 

 

 

 

 

 

 

 

   Reclassification of stranded tax effects of rate change

 

 

 

 

 

 

 

 

 

 

 

126

 

 

 

 

 

 

(126

)

 

 

 

   Proceeds from exercise of common stock

      options (2,952 shares)

 

 

 

 

 

 

 

 

107

 

 

 

 

 

 

 

 

 

 

 

 

107

 

Balance at March 31, 2018

 

$

8,000

 

 

$

7

 

 

$

52,475

 

 

$

90,000

 

 

$

(5,030

)

 

$

(2,638

)

 

$

142,814

 

   Net income

 

 

 

 

 

 

 

 

 

 

 

3,850

 

 

 

 

 

 

 

 

 

3,850

 

   Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(256

)

 

 

(256

)

   Stock compensation expense

 

 

 

 

 

 

 

 

142

 

 

 

 

 

 

 

 

 

 

 

 

142

 

   Cash dividends declared on common stock

 

 

 

 

 

 

 

 

 

 

 

(469

)

 

 

 

 

 

 

 

 

(469

)

   Cash dividends declared on preferred stock

 

 

 

 

 

 

 

 

 

 

 

(99

)

 

 

 

 

 

 

 

 

(99

)

   Reclassification of par value from surplus

 

 

 

 

 

21

 

 

 

(21

)

 

 

 

 

 

 

 

 

 

 

 

 

   Proceeds from exercise of common stock

      options (9,640 shares)

 

 

 

 

 

 

 

 

100

 

 

 

 

 

 

 

 

 

 

 

 

100

 

Balance at June 30, 2018

 

$

8,000

 

 

$

28

 

 

$

52,696

 

 

$

93,282

 

 

$

(5,030

)

 

$

(2,894

)

 

$

146,082

 

   Net income

 

 

 

 

 

 

 

 

 

 

 

3,517

 

 

 

 

 

 

 

 

 

3,517

 

   Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,176

)

 

 

(1,176

)

   Stock compensation expense

 

 

 

 

 

 

 

 

91

 

 

 

 

 

 

 

 

 

 

 

 

91

 

   Cash dividends declared on common stock

 

 

 

 

 

 

 

 

 

 

 

(468

)

 

 

 

 

 

 

 

 

(468

)

   Cash dividends declared on preferred stock

 

 

 

 

 

 

 

 

 

 

 

(106

)

 

 

 

 

 

 

 

 

(106

)

   Proceeds from exercise of common stock

      options (2,375 shares)

 

 

 

 

 

 

 

 

47

 

 

 

 

 

 

 

 

 

 

 

 

47

 

Balance at September 30, 2018

 

$

8,000

 

 

$

28

 

 

$

52,834

 

 

$

96,225

 

 

$

(5,030

)

 

$

(4,070

)

 

$

147,987

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2018

 

$

8,000

 

 

$

28

 

 

$

53,162

 

 

$

98,475

 

 

$

(5,030

)

 

$

(2,351

)

 

$

152,284

 

   Net income

 

 

 

 

 

 

 

 

 

 

 

3,762

 

 

 

 

 

 

 

 

 

3,762

 

   Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,305

 

 

 

2,305

 

   Stock compensation expense

 

 

 

 

 

 

 

 

118

 

 

 

 

 

 

 

 

 

 

 

 

118

 

   Cash dividends declared on common stock

 

 

 

 

 

 

 

 

 

 

 

(335

)

 

 

 

 

 

 

 

 

(335

)

   Cash dividends declared on preferred stock

 

 

 

 

 

 

 

 

 

 

 

(117

)

 

 

 

 

 

 

 

 

(117

)

Balance at March 31, 2019

 

$

8,000

 

 

$

28

 

 

$

53,280

 

 

$

101,785

 

 

$

(5,030

)

 

$

(46

)

 

$

158,017

 

   Net income

 

 

 

 

 

 

 

 

 

 

 

3,704

 

 

 

 

 

 

 

 

 

3,704

 

   Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,253

 

 

 

1,253

 

   Stock compensation expense

 

 

 

 

 

 

 

 

144

 

 

 

 

 

 

 

 

 

 

 

 

144

 

   Cash dividends declared on common stock

 

 

 

 

 

 

 

 

 

 

 

(336

)

 

 

 

 

 

 

 

 

(336

)

   Cash dividends declared on preferred stock

 

 

 

 

 

 

 

 

 

 

 

(118

)

 

 

 

 

 

 

 

 

(118

)

   Proceeds from exercise of common stock

      options (5,000 shares)

 

 

 

 

 

 

 

 

60

 

 

 

 

 

 

 

 

 

 

 

 

60

 

Balance at June 30, 2019

 

$

8,000

 

 

$

28

 

 

$

53,484

 

 

$

105,035

 

 

$

(5,030

)

 

$

1,207

 

 

$

162,724

 

   Net income

 

 

 

 

 

 

 

 

 

 

 

5,682

 

 

 

 

 

 

 

 

 

5,682

 

   Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

506