ICBK County Bancorp Inc

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 fourth quarter and year ended December 31, 2020. Net income was $4.5 million, or $0.70 per diluted share, for the fourth quarter of 2020, compared to net income of $3.3 million, or $0.47 per diluted share, for the fourth quarter of 2019. For the year ended December 31, 2020, net income was $5.5 million, or $0.79 per diluted share, compared to net income of $16.5 million, or $2.36 per diluted share, for the year ended December 31, 2019. The net income for the year ended December 31, 2020 included a $5.0 million goodwill impairment charge, or $0.77 loss per diluted share, in the first quarter of 2020. Excluding that charge, net income for the year ended December 31, 2020 would have been $10.1 million, or $1.56 per diluted share.  

Tim Schneider, President of County Bancorp, Inc., noted, “I am very proud of what our team accomplished in a challenging year. We transformed the funding side of our balance sheet with 10% growth in client deposits and a 53% reduction in wholesale deposits in 2020. We continued to have strong growth in loans sold and serviced, which has expanded our noninterest income. Additionally, our adverse classified asset ratio improved in the quarter due to sales of OREO properties, and we saw payment deferrals associated with COVID-19 drop to less than 2% of total loans.”

Schneider continued, “As we look to 2021, improvements in milk prices continue to bolster our clients’ cash flows and we expect to see continued improvement in our overall credit metrics. Our strong performance through a challenging 2020 reinforces our faith in our long-term prospects and ability to grow our business, as evidenced by our repurchase of 570,842 shares of our common stock in 2020, including 107,437 shares during the fourth quarter. We believe we have the right strategy to maintain the momentum as we shift our attention to long-term growth in 2021. We look forward to partnering and growing with our commercial, agricultural and consumer customers in 2021 and beyond.”

Loans and Securities

• Total loans decreased $79.6 million, or 7.4%, during the fourth quarter of 2020, to $1.0 billion, and decreased $39.5 million, or 3.8%, since December 31, 2019, primarily due to $60.6 million of Paycheck Protection Program (“PPP”) loans being forgiven by the Small Business Administration (“SBA”) during the fourth quarter of 2020. This represented 61.6% of PPP loans originated in 2020 and as of December 31, 2020, the Company had $37.8 million of PPP loans remaining in the loan portfolio, and $1.2 million of SBA origination fees were deferred on the balance sheet until the remaining loans are forgiven.
• Loan participations the Company continued to service were $812.6 million as of December 31, 2020, an increase of $14.7 million, or 1.9%, compared to September 30, 2020, and an increase of $60.8 million, or 8.1%, compared to December 31, 2019.
• As of December 31, 2020, there were 24 customer relationships with loans in payment deferral associated with COVID-19 customer support programs totaling $16.8 million, or 1.7% of total loans, which is a decrease of $83.7 million, or 83.3%, since September 30, 2020.
• During the fourth quarter of 2020, investments increased by $54.4 million, or 18.2%, and increased $194.1 million, or 122.3%, since December 31, 2019. For the year ended December 31, 2020 purchases totaling $247.2 million were offset in part by $34.5 million in security sales and $25.7 million in maturities. Gain on sale of securities during 2020 was $0.7 million.

Deposits

• Total deposits as of December 31, 2020 were $1.0 billion, a decrease of $9.3 million, or 0.9%, from September 30, 2020, and a decrease $60.6 million, or 5.5%, since December 31, 2019.
• Client deposits (demand deposits, NOW accounts, savings accounts, money market accounts, and certificates of deposit) increased $18.4 million, or 2.1%, from September 30, 2020, to $916.0 million, and increased $80.4 million, or 9.6%, since December 31, 2019.
• The Company continued to decrease its reliance on brokered deposits and national certificate of deposits by $27.8 million, or 18.2%, to $124.8 million during the fourth quarter of 2020, and decreased by $141.0 million, or 53.1%, since December 31, 2019.

Common Stock Share Repurchase

• During the fourth quarter of 2020, the Company repurchased 107,437 shares of its common stock at a weighted average price of $22.64 per share.
• For the year ended December 31, 2020, the Company repurchased 570,842 shares of its common stock at a weighted average price of $21.89 per share.

Net Interest Income and Margin

• Net interest margin for the quarter ended December 31, 2020 was 3.06%, which was an increase of 66 basis points compared to the sequential quarter and an increase of 17 basis points year-over-year. The SBA PPP origination fees of $3.1 million that were recognized during the fourth quarter of 2020 in connection with the PPP loans that were forgiven accounted for 57 basis points of the total margin increase. The issuance of subordinated debt during 2020 adversely affected net interest margin by 4 and 38 basis points for the quarter ended December 31, 2020 compared to the quarters ended September 30, 2020 and December 31, 2019, respectively.
• Interest income on investment securities increased $0.5 million and $0.9 million, quarter-to-quarter and year-over-year, respectively, due to shifting balances from interest-bearing deposits with banks to investment securities with higher yields.
• Loan interest income (including fees) increased $1.1 million compared to the sequential quarter primarily due to the previously mentioned SBA PPP loan origination fees. Year-over-year, loan interest income decreased $1.0 million primarily due to lower yields on the previously mentioned PPP loans.
• Interest expense on savings, NOW, money market, and interest checking accounts decreased, despite an increase in average balance, by 10 basis points in the sequential quarter and 73 basis points year-over year due to the market-driven drop in the federal funds rates.
• Interest expense on time deposits decreased quarter-over-quarter due in part to the Company’s continued focus on decreasing reliance on time deposit balances for funding and a decline in the federal funds rate. Rates paid on time deposits decreased by 10 and 52 basis points in the sequential quarter and year-over-year, respectively, which also contributed to the overall decrease in the cost of funds.
• The Company issued $22.4 million of subordinated debt during 2020 to strengthen the Company’s capital structure. The issuance resulted in an increase in interest expense on subordinated debt year of 38 basis points year-over-year.   

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

	Three Months Ended December 31, 2020 v.Three Months Ended September 30, 2020												Three Months Ended December 31, 2020 v.Three Months Ended December 31, 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	$	405			$	79			$	484			$	990			$	(118	)		$	872
Loans		(438	)			1,581				1,143				(253	)			(701	)			(954	)
Federal funds sold and interest-bearing deposits with banks		(22	)			14				(8	)			(172	)			(260	)			(432	)
Total interest income		(55	)			1,674				1,619				565				(1,079	)			(514	)
Interest Expense:
Savings, NOW, money market and interest checking	$	18			$	(104	)		$	(86	)		$	422			$	(915	)		$	(493	)
Time deposits		(234	)			(111	)			(345	)			(1,071	)			(736	)			(1,807	)
Other borrowings		(35	)			(46	)			(81	)			69				(1	)			68
FHLB advances		27				(40	)			(13	)			95				(26	)			69
Junior subordinated debentures		19				6				25				368				45				413
Total interest expense	$	(205	)		$	(295	)		$	(500	)		$	(117	)		$	(1,633	)		$	(1,750	)
Net interest income	$	150			$	1,969			$	2,119			$	682			$	554			$	1,236

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

	For the Three Months Ended
	December 31, 2020										September 30, 2020										December 31, 2019
	AverageBalance (1)				Income/Expense			Yields/Rates			AverageBalance (1)				Income/Expense			Yields/Rates			AverageBalance (1)				Income/Expense			Yields/Rates
	(dollars in thousands)
Assets
Investment securities	$	322,706			$	1,978		2.44	%		$	256,059			$	1,494		2.32	%		$	159,202			$	1,106		2.78	%
Loans (2)		1,040,080				12,737		4.87	%			1,083,383				11,594		4.26	%			1,061,432				13,691		5.16	%
Interest bearing deposits due from other banks		37,385				10		0.11	%			92,701				18		0.08	%			98,848				441		1.79	%
Total interest-earning assets	$	1,400,171			$	14,725		4.18	%		$	1,432,143			$	13,106		3.64	%		$	1,319,482			$	15,238		4.62	%
Allowance for loan losses		(18,535	)									(18,641	)									(14,868	)
Other assets		87,785										86,109										77,934
Total assets	$	1,469,421									$	1,499,611									$	1,382,548
Liabilities
Savings, NOW, money market, interest checking	$	421,969			$	383		0.36	%		$	406,888			$	469		0.46	%		$	322,629			$	876		1.09	%
Time deposits		450,193				2,099		1.85	%			499,665				2,444		1.95	%			658,864				3,905		2.37	%
Total interest-bearing deposits	$	872,162			$	2,482		1.13	%		$	906,553			$	2,913		1.28	%		$	981,493			$	4,781		1.95	%
Other borrowings		75,341				77		0.41	%			101,829				158		0.62	%			799				9		4.60	%
FHLB advances		96,191				285		1.18	%			89,622				298		1.32	%			44,400				216		1.94	%
Junior subordinated debentures		67,055				1,107		6.57	%			65,903				1,082		6.53	%			44,839				694		6.19	%
Total interest-bearing liabilities	$	1,110,749			$	3,951		1.42	%		$	1,163,907			$	4,451		1.52	%		$	1,071,531			$	5,700		2.13	%
Non-interest-bearing deposits		168,765										147,595										123,541
Other liabilities		18,758										18,314										16,749
Total liabilities	$	1,298,272									$	1,329,816									$	1,211,821
Shareholders' equity		171,149										169,795										170,727
Total liabilities and equity	$	1,469,421									$	1,499,611									$	1,382,548
Net interest income					$	10,774									$	8,655									$	9,538
Interest rate spread (3)								2.76	%									2.12	%									2.49	%
Net interest margin (4)								3.06	%									2.40	%									2.89	%
Ratio of interest-earning assets to interest-bearing liabilities		1.26										1.23										1.23

  

(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 fees decreased quarter-over-quarter primarily due a decrease servicing income spread. Loan servicing fees as a percent of average loans serviced decreased seven basis points in the fourth quarter. Year-over-year, loan servicing fees increased due primarily to a two basis point increase in loan servicing fees as a percent of average loans serviced and an increase in loans serviced.
• Loan servicing right origination increased quarter-over-quarter and year-over-year. The increase quarter-over-quarter was primarily due to the $14.7 million increase in loans sold. Loan servicing rights as a percent of loans serviced increased to 2.26% at December 31, 2020 from 2.16% at September 30, 2020. The year-over-year increase from 1.66% of loan servicing rights as a percent of loans serviced at December 31, 2019 was due in part to loans being recorded at fair value in 2020 versus amortized cost in 2019.

	For the Three Months Ended
	December 31,2020			September 30,2020			June 30,2020			March 31,2020			December 31,2019
	(dollars in thousands)
Non-Interest Income
Service charges	$	108		$	108		$	139		$	113		$	117
Crop insurance commission		517			271			229			229			432
Gain on sale of loans, net		219			17			4			38			34
Loan servicing fees		1,974			2,054			1,923			1,831			1,778
Loan servicing right origination		1,193			717			275			289			1,146
Income on OREO		—			—			3			—			54
Gain on sale of securities		—			101			570			—			—
Referral fees		64			110			121			17			20
Other		283			294			237			203			161
Total non-interest income	$	4,358		$	3,672		$	3,501		$	2,720		$	3,742

	For the Three Months Ended
	December 31, 2020				September 30, 2020				June 30,2020				March 31,2020				December 31, 2019
	(dollars in thousands)
Loan servicing rights, end of period	$	18,396			$	17,203			$	16,486			$	16,211			$	12,509
Loans serviced, end of period		812,560				797,819				762,058				747,553				751,738
Loan servicing rights as a % of loans serviced		2.26	%			2.16	%			2.16	%			2.17	%			1.66	%
Total loan servicing fees	$	1,974			$	2,054			$	1,923			$	1,831			$	1,778
Average loans serviced		805,190				779,939				754,806				749,646				744,281
Annualized loan servicing fees as a % of average loans serviced		0.98	%			1.05	%			1.02	%			0.98	%			0.96	%

Non-Interest Expense

• The increase in employee compensation and benefits expense of $1.9 million in the fourth quarter of 2020 compared to the prior quarter was primarily the result of an additional accrual of $1.6 million for incentive compensation related to 2020 financial results. The $2.2 million increase for the year ended December 31, 2020 compared to the prior year was primarily the result of a 13.9% increase in headcount.
• During the fourth quarter of 2020, three properties in other real estate owned totaling $2.0 million were sold for a gain of $0.3 million. During 2020, six properties in other real estate owned totaling $3.5 million were sold for a gain of $0.3 million.

	For the Three Months Ended
	December 31,2020				September 30,2020			June 30,2020			March 31,2020			December 31,2019
	(dollars in thousands, except per share data)
Non-Interest Expense
Employee compensation and benefits	$	6,687			$	4,766		$	4,594		$	5,260		$	5,696
Occupancy		297				321			305			354			417
Information processing		656				641			663			670			645
Professional fees		582				555			480			401			371
Business development		136				305			333			366			335
OREO expenses		20				47			44			116			59
Writedown of OREO		148				—			—			1,360			376
Net loss (gain) on sale of OREO		(326	)			9			—			4			(231	)
Depreciation and amortization		289				295			303			301			319
Goodwill impairment		—				—			—			5,038			—
Other		1,005				728			743			1,148			2,278
Total non-interest expense	$	9,494			$	7,667		$	7,465		$	15,018		$	10,265

Asset Quality

• The decrease in substandard loans and the adverse classified asset ratio in the quarter were primarily due to the charge-off of $3.4 million of commercial loans.

	December 31,2020				September 30,2020				June 30,2020				March 31,2020				December 31,2019
	(dollars in thousands)
Loans by risk category(1):
Sound/Acceptable/Satisfactory/Low Satisfactory	$	716,313			$	800,451			$	798,945			$	706,247			$	724,444
Watch		190,101				185,254				198,044				219,459				216,098
Special Mention		2,501				1,851				1,856				15,036				9,239
Substandard Performing		40,420				41,577				47,741				34,179				49,774
Substandard Impaired		46,950				46,793				40,938				37,515				36,218
Total loans	$	996,285			$	1,075,926			$	1,087,524			$	1,012,436			$	1,035,773
Adverse classified asset ratio (2)		39.43	%			42.64	%			41.73	%			32.35	%			39.85	%

(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

• A recovery of loan loss provisions of $0.5 million was recorded for the three months ended December 31, 2020 compared to a provision of $0.1 million for the three months ended September 30, 2020. The decrease in the provision relative to the previous quarter was driven by a reduction of qualitative risk factors related to industries at risk due to COVID-19, which was partially offset by general reserve increases due to actual loss rates incurred.
• Non-performing assets decreased in the quarter by $1.7 million, or 3.9%, sequentially compared to the third quarter of 2020. Year-over-year, non-performing assets increased $6.2 million, or 17.0%, due to a $8.7 million increase in non-accrual agricultural loans from one customer and a $2.0 million increase in non-accrual commercial loans, which were partially offset by a $4.4 million decrease in OREO properties.

	December 31,2020				September 30,2020				June 30,2020				March 31,2020				December 31,2019
	(dollars in thousands)
Non-Performing Assets:
Nonaccrual loans	$	41,624			$	41,351			$	35,456			$	32,051			$	30,968
Other real estate owned		1,077				3,064				2,629				3,247				5,521
Total non-performing assets	$	42,701			$	44,415			$	38,085			$	35,298			$	36,489
Performing TDRs not on nonaccrual	$	18,592			$	19,036			$	21,986			$	21,853			$	21,784
Non-performing assets as a % of total loans		4.29	%			4.13	%			3.50	%			3.49	%			3.52	%
Non-performing assets as a % of total assets		2.90	%			2.98	%			2.52	%			2.61	%			2.65	%
Allowance for loan losses as a % of total loans		1.49	%			1.73	%			1.71	%			1.73	%			1.47	%
Net charge-offs (recoveries) quarter-to-date	$	3,386			$	(1	)		$	120			$	(62	)		$	(253	)

Conference Call

The Company will host an earnings call tomorrow, January 22, 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 January 22, 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 ContactGlen L. StiteleyEVP - CFO, Investors Community BankPhone: (920) 686-5658 Email: gstiteley@icbk.com        

County Bancorp, Inc.Consolidated Financial Summary(Unaudited)	December 31,2020				September 30,2020				June 30,2020				March 31,2020				December 31,2019
	(dollars in thousands, except per share data)
Period-End Balance Sheet:
Assets
Cash and cash equivalents	$	19,500			$	53,283			$	127,432			$	21,545			$	129,011
Securities available-for-sale, at fair value		352,854				298,476				226,971				246,148				158,733
Loans held for sale		35,976				2,593				11,847				14,388				2,151
Agricultural loans		606,881				619,617				624,340				642,066				659,725
Commercial loans		313,265				317,782				328,368				325,310				331,723
Paycheck Protection Plan loans		37,790				98,421				103,317				—				—
Multi-family real estate loans		33,457				35,496				30,439				42,198				41,070
Residential real estate loans		4,627				4,489				975				2,753				2,888
Installment and consumer other		265				121				85				109				367
Total loans		996,285				1,075,926				1,087,524				1,012,436				1,035,773
Allowance for loan losses		(14,808	)			(18,649	)			(18,569	)			(17,547	)			(15,267	)
Net loans		981,477				1,057,277				1,068,955				994,889				1,020,506
Other assets		82,551				80,426				78,712				78,004				68,378
Total Assets	$	1,472,358			$	1,492,055			$	1,513,917			$	1,354,974			$	1,378,779
Liabilities and Shareholders' Equity
Demand deposits	$	163,202			$	158,798			$	149,963			$	117,434			$	138,489
NOW accounts and interest checking		96,624				78,026				81,656				64,873				63,781
Savings		7,367				11,900				8,369				6,566				15,708
Money market accounts		344,250				325,900				307,083				237,889				242,539
Time deposits		304,580				322,992				346,482				364,930				375,100
Brokered deposits		80,456				101,808				121,503				161,882				166,340
National time deposits		44,347				50,747				57,997				66,386				99,485
Total deposits		1,040,826				1,050,171				1,073,053				1,019,960				1,101,442
Federal Reserve Discount Window advances		47,531				99,693				99,693				—				—
FHLB advances		129,000				84,600				93,400				109,400				44,400
Subordinated debentures		67,111				67,025				61,910				44,896				44,858
Other liabilities		16,114				20,656				17,336				15,672				16,050
Total Liabilities		1,300,582				1,322,145				1,345,392				1,189,928				1,206,750
Shareholders' equity		171,776				169,910				168,525				165,046				172,029
Total Liabilities and Shareholders' Equity	$	1,472,358			$	1,492,055			$	1,513,917			$	1,354,974			$	1,378,779
Stock Price Information:
High - Quarter-to-date	$	23.72			$	22.00			$	24.67			$	27.19			$	27.98
Low - Quarter-to-date	$	18.20			$	17.04			$	17.13			$	13.55			$	18.76
Market price - Quarter-end	$	22.08			$	18.80			$	20.93			$	18.50			$	25.63
Book value per share	$	26.42			$	25.72			$	25.18			$	24.17			$	24.32
Tangible book value per share (1)	$	26.42			$	25.71			$	25.16			$	24.15			$	23.58
Common shares outstanding		6,197,965				6,294,675				6,375,150				6,496,790				6,734,132

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

	For the Three Months Ended
	December 31,2020				September 30,2020			June 30,2020			March 31,2020				December 31,2019
	(dollars in thousands, except per share data)
Selected Income Statement Data:
Interest and Dividend Income
Loans, including fees(1)	$	12,737			$	11,594		$	12,009		$	12,565			$	13,671
Taxable securities		1,777				1,293			1,283			1,282				1,106
Tax-exempt securities		201				167			162			6				—
Federal funds sold and other		10				52			111			225				442
Total interest and dividend income		14,725				13,106			13,565			14,078				15,219
Interest Expense
Deposits		2,482				2,914			3,721			4,347				4,781
FHLB advances and other borrowed funds		362				456			343			244				225
Subordinated debentures		1,107				1,082			736			706				695
Total interest expense		3,951				4,452			4,800			5,297				5,701
Net interest income		10,774				8,654			8,765			8,781				9,518
Provision for loan losses		(455	)			79			1,142			2,218				(51	)
Net interest income after provision for loan losses		11,229				8,575			7,623			6,563				9,569
Non-Interest Income
Services charges		108				108			139			113				117
Crop insurance commission		517				271			229			229				432
Gain on sale of loans, net		219				17			4			38				34
Loan servicing fees		1,974				2,054			1,923			1,831				1,778
Loan servicing right origination		1,193				717			275			289				1,146
Income on OREO		—				—			3			—				54
Gain on sale of securities		—				101			570			—				—
Referral fees		64				110			121			17				20
Other		283				294			237			203				161
Total non-interest income		4,358				3,672			3,501			2,720				3,742
Non-Interest Expense
Employee compensation and benefits		6,687				4,766			4,594			5,260				5,696
Occupancy		297				321			305			354				417
Information processing		656				641			663			670				645
Professional fees		582				555			480			401				371
Business development		136				305			333			366				335
OREO expenses		20				47			44			116				59
Writedown of OREO		148				—			—			1,360				376
Net loss (gain) on sale of OREO		(326	)			9			—			4				(231	)
Depreciation and amortization		289				295			303			301				319
Goodwill impairment		—				—			—			5,038				—
Other		1,005				728			743			1,148				2,278
Total non-interest expense		9,494				7,667			7,465			15,018				10,265
Income before income taxes		6,093				4,580			3,659			(5,735	)			3,046
Income tax expense (benefit)		1,575				1,164			926			(547	)			(258	)
NET INCOME (LOSS)	$	4,518			$	3,416		$	2,733		$	(5,188	)		$	3,304
Basic earnings (loss) per share	$	0.70			$	0.52		$	0.40		$	(0.79	)		$	0.47
Diluted earnings (loss) per share	$	0.70			$	0.52		$	0.40		$	(0.78	)		$	0.47
Dividends declared per share	$	0.10			$	0.07		$	0.07		$	0.07			$	0.05

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

	For the Three Months Ended
	December 31,2020				September 30,2020				June 30,2020				March 31,2020				December 31,2019
	(dollars in thousands, except share data)
Other Data:
Return on average assets (1)		1.23	%			0.91	%			0.74	%			(1.53	)%			0.96	%
Return on average shareholders' equity (1)		10.56	%			8.05	%			6.55	%			(11.97	)%			7.74	%
Return on average common shareholders' equity (1)(2)		10.88	%			8.25	%			6.63	%			(12.81	)%			7.83	%
Efficiency ratio (1)(2)		63.92	%			62.64	%			63.83	%			74.92	%			67.65	%
Equity to assets ratio		11.67	%			11.39	%			11.13	%			12.18	%			12.48	%
Tangible common equity to tangible assets (2)		11.12	%			10.85	%			10.60	%			11.58	%			11.56	%
Common Share Data:
Net income from continuing operations	$	4,518			$	3,416			$	2,733			$	(5,188	)		$	3,304
Less: Preferred stock dividends		80				80				99				108				117
Income available to common shareholders	$	4,438			$	3,336			$	2,634			$	(5,296	)		$	3,187
Weighted average number of common shares issued		7,206,238				7,202,000				7,198,901				7,182,945				7,173,290
Less: Weighted average treasury shares		957,573				882,153				759,294				518,740				443,920
Plus: Weighted average non-vested restricted stock units		67,529				66,492				65,291				39,785				32,125
Weighted average number of common shares outstanding		6,316,194				6,386,339				6,504,898				6,703,990				6,761,495
Effect of dilutive options		28,025				20,915				28,511				49,072				44,630
Weighted average number of common shares outstanding used to calculate diluted earnings per common share		6,344,219				6,407,254				6,533,409				6,753,062				6,806,125

         

(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
	December 31,2020				September 30,2020				June 30,2020				March 31,2020				December 31,2019
	(dollars in thousands)
Return on average common shareholders' equity reconciliation (1):
Return on average shareholders' equity		10.56	%			8.05	%			6.55	%			(11.97	)%			7.74	%
Effect of excluding average preferred shareholders' equity		0.32	%			0.20	%			0.08	%			(0.84	)%			0.09	%
Return on average common shareholders' equity		10.88	%			8.25	%			6.63	%			(12.81	)%			7.83	%
Efficiency ratio (2):
Non-interest expense	$	9,494			$	7,667			$	7,465			$	15,018			$	10,265
Less: goodwill impairment		—				—				—				(5,038	)			—
Less: historical tax credit investment impairment		—				—				—				—				(1,149	)
Less: net loss on sales and write-downs of OREO		178				(9	)			—				(1,364	)			(145	)
Adjusted non-interest expense (non-GAAP)	$	9,672			$	7,658			$	7,465			$	8,616			$	8,971
Net interest income	$	10,774			$	8,654			$	8,765			$	8,781			$	9,518
Non-interest income		4,358				3,672				3,501				2,720				3,742
Less: net gain on sales of securities		—				(101	)			(570	)			—				—
Operating revenue	$	15,132			$	12,225			$	11,696			$	11,501			$	13,260
Efficiency ratio		63.92	%			62.64	%			63.83	%			74.92	%			67.65	%

	For the Three Months Ended								For the Year Ended
	December 31,2020				December 31,2019				December 31,2020				December 31,2019
	(dollars in thousands, except per share data)
Adjusted diluted earnings per share(3):
Net income from continuing operations	$	4,518			$	3,304			$	5,478			$	16,452
Less: preferred stock dividends		(80	)			(117	)			(367	)			(472	)
Plus: goodwill impairment		—				—				5,038				—
Adjusted income available to common shareholders for basic earnings per common share	$	4,438			$	3,187			$	10,149			$	15,980
Weighted average number of common shares outstanding		6,316,194				6,761,495				6,477,173				6,747,581
Effect of dilutive options		28,025				44,630				28,025				21,344
Weighted average number of common shares outstanding used to calculate diluted earnings per common share		6,344,219				6,806,125				6,505,198				6,768,925
Adjusted diluted earnings per share	$	0.70			$	0.47			$	1.56			$	2.36

         

(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):

	December 31,2020				September 30,2020				June 30,2020				March 31,2020				December 31,2019
	(dollars in thousands, except per share data)
Tangible book value per share and tangible common equity to tangible assets reconciliation(1):
Common equity	$	163,776			$	161,910			$	160,525			$	157,046			$	164,029
Less: Goodwill		—				—				—				—				5,038
Less: Core deposit intangible, net of amortization		54				86				125				171				225
Tangible common equity (non-GAAP)	$	163,722			$	161,824			$	160,400			$	156,875			$	158,766
Common shares outstanding		6,197,965				6,294,675				6,375,150				6,496,790				6,734,132
Tangible book value per share	$	26.42			$	25.71			$	25.16			$	24.15			$	23.58
Total assets	$	1,472,358			$	1,492,055			$	1,513,917			$	1,354,974			$	1,378,779
Less: Goodwill		—				—				—				—				5,038
Less: Core deposit intangible, net of amortization		54				86				125				171				225
Tangible assets (non-GAAP)	$	1,472,304			$	1,491,969			$	1,513,792			$	1,354,803			$	1,373,516
Tangible common equity to tangible assets		11.12	%			10.85	%			10.60	%			11.58	%			11.56	%
Adverse classified asset ratio(2):
Substandard loans	$	87,370			$	88,370			$	88,680			$	71,694			$	85,992
Other real estate owned		1,077				3,064				2,629				3,247				5,521
Substandard unused commitments		4,049				5,124				3,230				2,840				2,849
Less: Substandard government guarantees		(8,960	)			(7,002	)			(6,336	)			(7,699	)			(7,892	)
Total adverse classified assets (non-GAAP)	$	83,536			$	89,556			$	88,203			$	70,082			$	86,470
Total equity (Bank)	$	205,743			$	200,011			$	201,507			$	204,089			$	204,240
Accumulated other comprehensive loss (gain) on available for sale securities		(8,686	)			(8,640	)			(8,734	)			(5,012	)			(2,505	)
Allowance for loan losses		14,808				18,649				18,569				17,547				15,267
Adjusted total equity (non-GAAP)	$	211,865			$	210,020			$	211,342			$	216,624			$	217,002
Adverse classified asset ratio		39.43	%			42.64	%			41.73	%			32.35	%			39.85	%

           

(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.