ChoiceOne Financial Reports Second Quarter 2020 Results
ChoiceOne Financial Services (NASDAQ:COFS) reported a strong financial performance for Q2 2020, with net income reaching $4.43 million, up from $1.49 million in Q2 2019. Diluted earnings per share (EPS) rose to $0.61 from $0.41. Excluding merger-related expenses, adjusted net income stood at $4.89 million or $0.67 per share. Total deposits surged 13.2% to $155.4 million, fueled by government stimulus and Paycheck Protection Program loans. Despite increased loan loss provisions due to COVID-19 impacts, ChoiceOne anticipates growth opportunities through recent mergers.
- Net income increased to $4.43 million in Q2 2020, up from $1.49 million in Q2 2019.
- Diluted EPS rose to $0.61 compared to $0.41 in the previous year.
- Loans grew by $100 million, with interest income related to loans increasing by 5.7%.
- Total deposits increased by $155.4 million or 13.2% in Q2 2020.
- Total assets reached $1.5 billion, a rise from $1.4 billion in Q1 2020.
- Added $1 million in provision for loan losses in Q2 2020 due to COVID-19.
- Total noninterest expenses increased by $1.73 million, attributed to mergers.
SPARTA, Mich., July 28, 2020 /PRNewswire/ -- ChoiceOne Financial Services, Inc. (NASDAQ:COFS), the parent company for ChoiceOne Bank and, as of July 1, 2020, Community Shores Bank, reported financial results for the quarter ended June 30, 2020. The reported results for the second quarter of 2020 do not include the financial results for Community Shores Bank Corporation, which was merged with and into ChoiceOne on July 1, 2020.
As we continue to work through the challenges that many of our Michigan families, businesses and communities face due to the coronavirus pandemic, we have serious measures in place to keep our customers and employees safe," said ChoiceOne CEO Kelly Potes. "Our branch offices are open, but we are continuing to emphasize using our online and mobile banking options. We are encouraging any of our customers who are facing a hardship to contact us immediately. ChoiceOne has deferred numerous mortgage and consumer loan and commercial loan payments. As an SBA lender, we continue to proactively work with our small business customers across West and Southeast Michigan to process their Paycheck Protection Program loans. Our strong capital and liquidity – along with our increased size and scale – continue to be valuable assets as we move forward during these challenging times for our customers."
Financial Highlights
- Net income of
$4,431,000 in the second quarter of 2020 compared to$1,487,000 in the same period in 2019. - Diluted earnings per share of
$0.61 compared to$0.41 per share in the second quarter of the prior year. - Excluding
$462,000 in tax-effected merger expenses, net income in the second quarter of 2020 was$4,893,000 or$0.67 per diluted share. - Loans, net of allowance for loan losses grew
$100.0 million and interest income related to loans grew5.7% in the second quarter of 2020 compared to the first quarter of 2020. Growth in loans and related fee income were boosted by loans originated as part of the Paycheck Protection Program. - ChoiceOne added
$1,000,000 in provision for loan losses expense during the second quarter of 2020 and$1,775,000 in the first six months of 2020, much of which was related to the impact of COVID-19. - Total deposits grew
$155.4 million or13.2% in the second quarter of 2020.
ChoiceOne reported net income of
"As we face these unprecedented times in our world and here at ChoiceOne, I am gratified and humbled to report very strong net income for the second quarter of 2020," said Potes. "We completed the consolidation of Lakestone Bank & Trust into ChoiceOne Bank in May and expect to consolidate Community Shores Bank into ChoiceOne Bank later this year."
Total assets grew to
Total noninterest income increased
Total noninterest expense increased
"These are certainly unusual times for our country, our state and our banks," said Potes. "We believe our recent mergers have given us the increased size and scale to move through these unprecedented times with the ability to continue our pursuit for efficiencies and new growth opportunities in our expanded network across West and Southest Michigan."
About ChoiceOne
ChoiceOne Financial Services, Inc. is a financial holding company headquartered in Sparta, Michigan and the parent corporation of ChoiceOne Bank and Community Shores Bank. Members FDIC. ChoiceOne Bank operates 29 offices in parts of Kent, Lapeer, Macomb, Muskegon, Newaygo, Ottawa, and St. Clair counties. Community Shores Bank operates 4 offices in Muskegon and Ottawa counties. ChoiceOne Bank offers insurance and investment products through its subsidiary, ChoiceOne Insurance Agencies, Inc. For more information, please visit Investor Relations at ChoiceOne's website at choiceone.com.
Non-GAAP Financial Measures
This press release contains references to net income and net income per diluted share, each excluding tax-effected merger expenses, which are financial measures that are not defined in U.S. generally accepted accounting principles ("GAAP"). Management believes these non-GAAP financial measures provide 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 release may contain 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. 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, including without limitation the impact of the global coronavirus outbreak (COVID-19). Therefore, actual results and outcomes may materially differ from what may be expressed, implied or forecasted in such forward-looking statements. Furthermore, ChoiceOne undertakes no obligation to update, amend, or clarify forward-looking statements, whether as a result of new information, future events, or otherwise.
The COVID-19 pandemic is adversely affecting us and our customers, counterparties, employees, and third-party service providers. The ultimate extent of the impacts on our business, financial position, results of operations, liquidity, and prospects is uncertain.
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, 2019 and in Item 1A in ChoiceOne Financial Services, Inc.'s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.
Condensed Balance Sheets | ||||||||||||
(Unaudited) | ||||||||||||
(In thousands) | 06/30/2020 | 03/31/2020 | 06/30/2019 | |||||||||
Cash and Cash Equivalents | $ | 66,791 | $ | 45,471 | $ | 13,687 | ||||||
Securities | 381,085 | 370,936 | 169,365 | |||||||||
Loans Held For Sale | 10,860 | 7,385 | 2,194 | |||||||||
Loans to Other Financial Institutions | 49,895 | 39,421 | 28,950 | |||||||||
Loans, Net of Allowance For Loan Losses | 906,782 | 806,787 | 392,426 | |||||||||
Premises and Equipment | 23,971 | 24,087 | 15,502 | |||||||||
Cash Surrender Value of Life Insurance Policies | 32,363 | 32,171 | 15,090 | |||||||||
Goodwill | 52,593 | 52,593 | 13,728 | |||||||||
Core Deposit Intangible | 5,299 | 5,653 | - | |||||||||
Other Assets | 19,125 | 13,986 | 7,555 | |||||||||
Total Assets | $ | 1,548,764 | $ | 1,398,490 | $ | 658,497 | ||||||
Noninterest-bearing Deposits | $ | 396,625 | $ | 283,434 | $ | 149,320 | ||||||
Interest-bearing Deposits | 932,221 | 889,965 | 412,456 | |||||||||
Borrowings | 10,179 | 23,188 | 7,216 | |||||||||
Other Liabilities | 7,767 | 6,101 | 3,842 | |||||||||
Total Liabilities | 1,346,792 | 1,202,688 | 572,834 | |||||||||
Shareholders' Equity | 201,972 | 195,802 | 85,663 | |||||||||
Total Liabilities and Shareholders' Equity | $ | 1,548,764 | $ | 1,398,490 | $ | 658,497 | ||||||
Condensed Statements of Income | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||
(In Thousands, Except Per Share Data) | 06/30/2020 | 3/31/2020 | 06/30/2019 | 06/30/2020 | 06/30/2019 | |||||||||||||||
Interest Income | ||||||||||||||||||||
Loans, including fees | $ | 10,821 | $ | 10,242 | $ | 5,390 | $ | 21,063 | $ | 10,670 | ||||||||||
Securities and other | 2,042 | 2,419 | 1,164 | 4,461 | 2,361 | |||||||||||||||
Total Interest Income | 12,863 | 12,661 | 6,554 | 25,524 | 13,031 | |||||||||||||||
Interest Expense | ||||||||||||||||||||
Deposits | 898 | 1,385 | 924 | 2,283 | 1,775 | |||||||||||||||
Borrowings | 86 | 138 | 129 | 224 | 259 | |||||||||||||||
Total Interest Expense | 984 | 1,523 | 1,053 | 2,507 | 2,034 | |||||||||||||||
Net Interest Income | 11,879 | 11,138 | 5,501 | 23,017 | 10,997 | |||||||||||||||
Provision for Loan Losses | 1,000 | 775 | - | 1,775 | - | |||||||||||||||
Net Interest Income After Provision for Loan Losses | 10,879 | 10,363 | 5,501 | 21,242 | 10,997 | |||||||||||||||
Noninterest Income | ||||||||||||||||||||
Customer service charges | 1,402 | 1,845 | 1,148 | 3,247 | 2,181 | |||||||||||||||
Insurance and investment commissions | 153 | 126 | 74 | 279 | 137 | |||||||||||||||
Gains on sales of loans | 2,997 | 1,743 | 489 | 4,740 | 735 | |||||||||||||||
Gains on sales of securities | 1,342 | 2 | 2 | 1,344 | 3 | |||||||||||||||
Trust income | 202 | 170 | - | 372 | - | |||||||||||||||
Earnings on life insurance policies | 191 | 192 | 95 | 383 | 191 | |||||||||||||||
Change in market value of equity securities | 443 | (389) | 80 | 54 | 266 | |||||||||||||||
Other income | 22 | 243 | 141 | 265 | 273 | |||||||||||||||
Total Noninterest Income | 6,752 | 3,932 | 2,029 | 10,684 | 3,786 | |||||||||||||||
Noninterest Expense | ||||||||||||||||||||
Salaries and benefits | 6,360 | 5,128 | 2,870 | 11,488 | 5,647 | |||||||||||||||
Occupancy and equipment | 1,359 | 1,270 | 741 | 2,629 | 1,512 | |||||||||||||||
Data processing | 1,568 | 1,484 | 582 | 3,052 | 1,138 | |||||||||||||||
Professional fees | 914 | 762 | 678 | 1,676 | 1,195 | |||||||||||||||
Other expenses | 1,949 | 1,772 | 891 | 3,721 | 1,604 | |||||||||||||||
Total Noninterest Expense | 12,150 | 10,416 | 5,762 | 22,566 | 11,096 | |||||||||||||||
Income Before Income Tax | 5,481 | 3,879 | 1,768 | 9,360 | 3,687 | |||||||||||||||
Income Tax Expense | 1,050 | 625 | 281 | 1,675 | 564 | |||||||||||||||
Net Income | $ | 4,431 | $ | 3,254 | $ | 1,487 | $ | 7,685 | $ | 3,123 | ||||||||||
Basic Earnings Per Share | $ | 0.61 | $ | 0.45 | $ | 0.41 | $ | 1.06 | $ | 0.86 | ||||||||||
Diluted Earnings Per Share | $ | 0.61 | $ | 0.45 | $ | 0.41 | $ | 1.06 | $ | 0.86 | ||||||||||
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) | 06/30/2020 | 06/30/2019 | 06/30/2020 | 06/30/2019 | ||||||||||||
Income before income tax | $ | 5,481 | $ | 1,768 | $ | 9,360 | $ | 3,687 | ||||||||
Adjustment for merger costs | 517 | 350 | 819 | 588 | ||||||||||||
Adjusted income before income tax | $ | 5,998 | $ | 2,118 | $ | 10,179 | $ | 4,275 | ||||||||
Income tax expense | $ | 1,050 | $ | 281 | $ | 1,675 | $ | 564 | ||||||||
Tax impact on adjustment for merger costs | 55 | - | 75 | 15 | ||||||||||||
Adjusted income tax expense | $ | 1,105 | $ | 281 | $ | 1,750 | $ | 579 | ||||||||
Net income | $ | 4,431 | $ | 1,487 | $ | 7,685 | $ | 3,123 | ||||||||
Adjusted net income | $ | 4,893 | $ | 1,837 | $ | 8,429 | $ | 3,696 | ||||||||
Basic earnings per share | $ | 0.61 | $ | 0.41 | $ | 1.06 | $ | 0.86 | ||||||||
Diluted earnings per share | $ | 0.61 | $ | 0.41 | $ | 1.06 | $ | 0.86 | ||||||||
Adjusted basic earnings per share | $ | 0.67 | $ | 0.51 | $ | 1.16 | $ | 1.02 | ||||||||
Adjusted diluted earnings per share | $ | 0.67 | $ | 0.50 | $ | 1.16 | $ | 1.02 | ||||||||
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SOURCE ChoiceOne Financial Services, Inc.
FAQ
What were ChoiceOne Financial Services' Q2 2020 earnings results?
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