Investor Relations

Press Release

ChoiceOne Financial Reports Second Quarter 2019 Results During Pending Merger

Company Release - 7/24/2019 4:04 PM ET

SPARTA, Mich., July 24, 2019 /PRNewswire/ -- ChoiceOne Financial Services, Inc. (OTC: COFS), the parent company for ChoiceOne Bank, reported financial results for the second quarter ended June 30, 2019.

Financial Highlights

  • Net income of $1,486,000 compared to $1,833,000 in the same period in 2018.
  • Diluted earnings per share of $0.41 compared to $0.50 per share in the second quarter of the prior year.
  • Excluding $350,000 in tax-effected merger expenses, net income amounted to $1,836,000 or $0.50 per diluted share.
  • Received regulatory approval from the Federal Reserve Bank of Chicago to complete pending strategic merger of ChoiceOne and County Bank Corp.
  • Stock price increased 18% from the announcement date of the pending merger.
  • Total loan interest income grew 11% in the first half of 2019 compared to 2018.
  • Total deposits grew 6% in the last twelve months.

ChoiceOne Financial Services reported net income of $1,486,000 for the second quarter of 2019 compared to $1,833,000 in the same period in 2018.  Diluted earnings per share were $0.41 in the second quarter of 2019 compared to $0.50 per share in the second quarter of the prior year.  Excluding $350,000 in tax-effected merger expenses, net income for the second quarter of 2019 amounted to $1,836,000 or $0.50 per diluted share.  Net income for the first six months of 2019 was $3,123,000 or $0.86 per diluted share, compared to $3,491,000 or $0.96 per diluted share in the first half of 2018.  Net income for the first half of 2019, when adjusted to exclude tax-effected merger expenses, was $3,696,000 or $1.02 per diluted share.

"I am pleased to report strong net income for the second quarter of 2019 while at the same time pursuing our pending strategic merger of ChoiceOne and County Bank Corp, parent company of Lakestone Bank and Trust," said Kelly Potes, President and Chief Executive Officer of ChoiceOne Financial Services, Inc.  We have received regulatory approval from the Federal Reserve Bank of Chicago to complete our merger. We are waiting to obtain shareholder approval from both financial institutions expected later this year."

Total assets grew to $658.5 million as of June 30, 2019, compared to $630.8 million as of June 30, 2018.  Net loans have remained steady from June 30, 2018 to June 30, 2019, but with higher interest rates on new loans, ChoiceOne saw total loan interest income growth of 11% in the first half of 2019 compared to the same period in 2018.  Total deposits grew $33.9 million or 6% from June 30, 2018 to June 30, 2019.  ChoiceOne experienced net recoveries during the first half of 2019. 

Total noninterest income increased $416,000 in the first half of 2019 compared to the same period in the prior year.  The positive change in the market value of equity securities was $267,000 in the first six months of 2019, compared to $49,000 in the same period in 2018.  Gains on sales of loans have picked up in the second quarter of 2019 as long-term interest rates fell.  Income from gains on sales of loans was up $186,000 in the first half of 2019 compared to the first half of 2018. 

Total noninterest expense increased $1.0 million in the first half of 2019 compared to the same period in 2018.  Much of the increase was caused by expenses related to the pending strategic merger between ChoiceOne Financial Services and County Bank Corp.  The combination will create an approximately $1.3 billion-asset bank holding company with 28 offices in West and Southeastern Michigan making it the 12th largest bank holding company in Michigan based on asset size.  The transaction is expected to close in the second half of 2019, subject to satisfaction of customary closing conditions, including receipt of approval by the shareholders of each company.  ChoiceOne Bank and Lakestone Bank & Trust are expected to consolidate in the second quarter of 2020.

"This is an exciting year for us as we merge two community banks located on opposite sides of the state," said Potes.  "Because of our separate, but similar markets, this combination will present many efficiencies and new growth opportunities in our expanded network across Michigan.  We believe the market has responded favorably to the pending transaction with our stock price increasing 18% from the date of the announcement through June 30, 2019. 

About ChoiceOne
ChoiceOne Financial Services, Inc. is a financial holding company headquartered in Sparta, Michigan and the parent corporation of ChoiceOne Bank, Member FDIC.  ChoiceOne Bank operates 14 full-service offices in parts of Kent, Muskegon, Newaygo, and Ottawa Counties in Michigan.  ChoiceOne Bank offers insurance and investment products through its subsidiary, ChoiceOne Insurance Agencies, Inc.  ChoiceOne Financial Services, Inc. common stock is quoted on the OTC under the symbol "COFS." For more information, please visit Investor Relations at ChoiceOne's website at www.choiceone.com.

Non-GAAP Financial Measures
This press release contains references to net income excluding tax-effected merger expenses, which is a financial measure that is not defined in U.S. generally accepted accounting principles ("GAAP").  Management believes this non-GAAP financial measure provides additional information that is useful to investors in helping to understand the underlying financial performance of ChoiceOne.

Non-GAAP financial measures have inherent limitations. Readers should be aware of these limitations and should be cautious with respect to the use of such measures. To compensate for these limitations, we use non-GAAP measures as comparative tools, together with GAAP measures, to assist in the evaluation of our operating performance or financial condition. Also, we ensure that these measures are calculated using the appropriate GAAP or regulatory components in their entirety and that they are computed in a manner intended to facilitate consistent period-to-period comparisons. ChoiceOne's method of calculating these non-GAAP financial measures may differ from methods used by other companies. These non-GAAP financial measures should not be considered in isolation or as a substitute for those financial measures prepared in accordance with GAAP or in-effect regulatory requirements.

Where non-GAAP financial measures are used, the most directly comparable GAAP or regulatory financial measure, as well as the reconciliation to the most directly comparable GAAP or regulatory financial measure, can be found in this news release.  See Non-GAAP Reconciliation.

Forward-Looking Statements
This press release contains forward-looking statements. Words such as "anticipates," "believes," "estimates," "expects," "forecasts," "intends," "is likely," "plans," "predicts," "projects," "may," "could," "look forward," "continue", "future" and variations of such words and similar expressions are intended to identify such forward-looking statements. Examples of forward-looking statements include, but are not limited to, statements regarding the outlook and expectations of ChoiceOne and County with respect to their planned merger, the strategic benefits and financial benefits of the merger, including the expected impact of the transaction on the combined company's future financial performance (including anticipated accretion to earnings per share, cost savings, the tangible book value earn-back period and other operating and return metrics), and the timing of the closing of the transaction. These statements reflect current beliefs as to the expected outcomes of future events and are not guarantees of future performance. These statements involve certain risks, uncertainties and assumptions ("risk factors") that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. Therefore, actual results and outcomes may materially differ from what may be expressed, implied or forecasted in such forward-looking statements. Furthermore, neither ChoiceOne nor County undertake any obligation to update, amend, or clarify forward-looking statements, whether as a result of new information, future events, or otherwise. Such risks, uncertainties and assumptions, include, among others, the following:

  • the failure of either ChoiceOne or County to obtain shareholder approval, or to satisfy any of the other closing conditions to the transaction on a timely basis or at all;
  • the occurrence of any event, change or other circumstances that could give rise to the right of one or both of the parties to terminate the merger agreement;
  • the possibility that the anticipated benefits of the transaction, including anticipated cost savings and strategic gains, are not realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of the strength of the economy, competitive factors in the areas where ChoiceOne and County do business, or as a result of other unexpected factors or events;
  • the impact of purchase accounting with respect to the transaction, or any change in the assumptions used regarding the assets purchased and liabilities assumed to determine their fair value;
  • diversion of management's attention from ongoing business operations and opportunities;
  • potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement or completion of the transaction; and
  • the outcome of any legal proceedings that may be instituted against ChoiceOne or County;

Additional risk factors include, but are not limited to, the risk factors described in Item 1A in ChoiceOne Financial Services, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2018.

Important Additional Information and Where to Find It
This communication is being made in respect of the proposed merger transaction between ChoiceOne and County. In connection with the proposed merger, ChoiceOne has filed with the SEC a Registration Statement on Form S-4 that includes a Joint Proxy Statement of ChoiceOne and County and a Prospectus of ChoiceOne, as well as other relevant documents regarding the proposed transaction. A definitive Joint Proxy Statement/Prospectus will be sent to ChoiceOne and County shareholders at the appropriate time. INVESTORS ARE URGED TO READ THE REGISTRATION STATEMENT AND THE JOINT PROXY STATEMENT/PROSPECTUS REGARDING THE MERGER AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY CONTAIN IMPORTANT INFORMATION.

This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.

A free copy of the Joint Proxy Statement/Prospectus, as well as other filings containing information about ChoiceOne and County, may be obtained at the SEC's Internet site http://www.sec.gov. You may also obtain these documents, free of charge, from ChoiceOne by accessing ChoiceOne's website at http://www.choiceone.com (which website is not incorporated herein by reference) or from County by accessing County's website at http://www.lakestonebank.com (which website is not incorporated herein by reference). Copies of the Joint Proxy Statement/Prospectus may also be obtained, free of charge, by directing a request to ChoiceOne, 109 East Division Street, Post Office Box 186, Sparta, 49345, Attention: Mr. Thomas L. Lampen, or by calling 616-887-7366, or to County, 83 West Nepessing Street, Post Office Box 250, Lapeer, Michigan 48446, Attention Mr. Joseph H. Black, or by calling 810-664-2977.

Participants in Solicitation
ChoiceOne and County and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from ChoiceOne and County shareholders in respect of the transaction described in the Joint Proxy Statement/Prospectus. Additional information regarding the interests of those participants and other persons who may be deemed participants in the transaction may be obtained by reading the Joint Proxy Statement/Prospectus regarding the proposed merger. Free copies of this document may be obtained as described in the preceding paragraph.

# # #

EDITORS NOTE: Media interviews with ChoiceOne Bank executives are available by calling Tom Lampen at (616) 887-2337 or [email protected]  Electronic versions of bank official headshots are also available.

 

Condensed Balance Sheets
(Unaudited)


(In thousands)

6/30/2019


3/31/2019


12/31/2018


6/30/2018

Cash and Cash Equivalents

$   13,687


$   16,296


$    19,690


$   11,877

Securities

169,365


174,855


173,016


168,592

Loans Held For Sale

2,193


1,524


831


617

Loans to Other Financial Institutions

28,950


28,119


20,644


9,006

Loans, Net of Allowance For Loan Losses

392,427


397,314


404,400


391,239

Premises and Equipment

15,780


16,125


15,879


13,571

Cash Surrender Value of Life Insurance Policies

15,090


14,995


14,899


14,706

Goodwill and Other Intangible Assets

13,728


13,728


13,728


13,728

Other Assets

7,277


7,464


7,457


7,501









      Total Assets

$ 658,497


$ 670,420


$  670,544


$ 630,837









Noninterest-bearing Deposits

$ 149,320


$ 155,047


$  153,542


$ 147,040

Interest-bearing Deposits

412,456


409,404


423,473


380,881

Borrowings

7,216


20,225


10,033


24,251

Other Liabilities

3,842


3,042


3,019


2,397









      Total Liabilities

572,834


587,718


590,067


554,569









Shareholders' Equity

85,663


82,702


80,477


76,268









      Total Liabilities and Shareholders' Equity

$ 658,497


$ 670,420


$  670,544


$ 630,837

 

Condensed Statements of Income
(Unaudited)



Three Months Ended


Six Months Ended

(In Thousands, Except Per Share Data)

6/30/2019


6/30/2018


6/30/2019


6/30/2018

Interest Income








   Loans, including fees

$   5,390


$   4,971


$ 10,670


$   9,624

   Securities and other

1,164


1,144


2,361


2,190

Total Interest Income

6,554


6,115


13,031


11,814









Interest Expense








   Deposits

924


463


1,775


809

   Borrowings

129


82


259


128

Total Interest Expense

1,053


545


2,034


937









Net Interest Income

5,501


5,570


10,997


10,877

Provision for Loan Losses

-


-


-


35









Net Interest Income After Provision for Loan Losses

5,501


5,570


10,997


10,842









Noninterest Income








   Customer service charges

1,148


1,120


2,181


2,175

   Insurance and investment commissions

74


72


137


134

   Gains on sales of loans

489


288


735


549

   Gains on sales of securities

2


16


3


25

   Earnings on life insurance policies

95


98


191


192

   Change in market value of equity securities

80


26


267


49

   Other income

139


101


271


245

Total Noninterest Income

2,027


1,721


3,785


3,369









Noninterest Expense








   Salaries and benefits

2,870


2,779


5,647


5,528

   Occupancy and equipment

741


664


1,512


1,344

   Data processing

582


555


1,138


1,089

   Professional fees

678


311


1,195


528

   Other expenses

891


805


1,604


1,589

Total Noninterest Expense

5,762


5,114


11,096


10,078









Income Before Income Tax

1,766


2,177


3,686


4,133

Income Tax Expense

280


344


563


642









Net Income

$   1,486


$   1,833


$   3,123


$   3,491









Basic Earnings Per Share

$     0.41


$     0.51


$     0.86


$     0.97

Diluted Earnings Per Share

$     0.41


$     0.50


$     0.86


$     0.96

 

Non-GAAP Reconciliation

(Unaudited)

























In addition to analyzing the Company's results on a reported basis, management reviews the Company's results and the results on an adjusted basis. The non-GAAP measures presented in the table below reflect the adjustments of the reported U.S. GAAP results for significant items that management does not believe are reflective of the Company's current and ongoing operations.










Three Months Ended


Six Months Ended

(In Thousands, Except Per Share Data)

6/30/2019


6/30/2018


6/30/2019


6/30/2018









Income before income tax

$    1,766


$    2,177


$    3,686


$    4,133

Adjustment for County Bank Corp merger costs

350


-


588


-

Adjusted income before income tax

$    2,116


$    2,177


$    4,274


$    4,133









Income tax expense

$       280


$       344


$       563


$       642

Tax impact on adjustment for County Bank Corp merger costs

-


-


15


-

Adjusted income tax expense

$       280


$       344


$       578


$       642









Net income

$    1,486


$    1,833


$    3,123


$    3,491

Adjusted net income

$    1,836


$    1,833


$    3,696


$    3,491









Adjusted basic earnings per share

$      0.51


$      0.51


$      1.02


$      0.97

Adjusted diluted earnings per share

$      0.50


$      0.50


$      1.02


$      0.96

 

 

Cision View original content:http://www.prnewswire.com/news-releases/choiceone-financial-reports-second-quarter-2019-results-during-pending-merger-300890515.html

SOURCE ChoiceOne Financial Services, Inc.

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