SPARTA, Mich., April 27, 2020 /PRNewswire/ -- ChoiceOne
Financial Services, Inc. (NASDAQ: COFS) ("ChoiceOne"), the parent
company for ChoiceOne Bank and Lakestone Bank & Trust,
reported financial results for the quarter ended
March 31, 2020. On October 1,
2019, ChoiceOne completed the merger (the "Merger") of
County Bank Corp. ("County"), the former parent company of
Lakestone Bank & Trust, with and into ChoiceOne with ChoiceOne
surviving the Merger. Accordingly, the reported consolidated
financial results for periods on or after October 1, 2019, including the quarter ended
March 31, 2020, include financial results
for ChoiceOne Bank and Lakestone Bank & Trust.
"As we work through the challenges our Michigan families, businesses and communities
face due to the global coronavirus COVID-19 pandemic, we
have taken serious measures to keep our customers and employees
safe," said ChoiceOne CEO Kelly
Potes. "Specifically, all branch offices are open by
appointment only, with a strong emphasis on utilizing our online
and mobile banking options. We recognize the hardship many of
our customers are facing and, as of April
24, 2020, ChoiceOne had deferred over 290 consumer loan
payments and 300 commercial loan payments. As an SBA lender,
ChoiceOne proactively worked with our small business customers
across Michigan to process 504
Paycheck Protection Program loans in principal amounts over
$91.6 million as of April 24, 2020. Our strong capital and
liquidity – along with our new size and scale following the Merger
– are valuable assets that will serve us as we move forward during
these unpredictable and unprecedented times."
Significant items impacting comparable
first quarter of
2020 and 2019 results
include the following:
- Total assets, loans and deposits acquired in the Merger were
approximately $712 million,
$424 million and $574 million, respectively.
- Merger-related expenses, after
tax, of approximately $282,000 ($0.04 per diluted share) for the quarter
ended March 31, 2020.
First Quarter of 2020 Financial Highlights
- Net income of $3,254,000 in
the first quarter of 2020 compared to net income of $1,637,000 in the same period in 2019.
- Diluted earnings per share of $0.45 in the first quarter of 2020 compared to
$0.45 per share in the first quarter
of the prior year.
- Excluding $282,000 in
Merger-related expenses, after tax, net income in the first quarter
of 2020 was $3,536,000 or
$0.49 per diluted share.
- Total deposits grew $18.9 million
in the first quarter of 2020.
- Net loans grew $8.8 million in
the first quarter of 2020.
- Gains on sales of loans increased $1.2
million in the first quarter of 2020 as compared to the
fourth quarter of 2019.
- $775,000 of provision expense was
added during the first quarter of 2020, the majority of which was
due to qualitative factors related to the effect of the COVID-19
pandemic.
ChoiceOne reported net income of $3,254,000 for the first quarter of
2020, compared to $3,027,000 in
the fourth quarter of 2019 and $1,637,000 in the first
quarter of 2019. Diluted earnings per share were $0.45 in the first quarter of
2020 compared to $0.44 per share in the fourth quarter of
2019 and $0.45 per share in the
first quarter of 2019. Excluding $282,000 in Merger-related expenses, after tax,
net income for the first quarter of 2020 amounted to $3,536,000 or $0.49
per diluted share.
"Despite the early effects of the COVID-19 pandemic, our company
reported strong net income for the first quarter of 2020," said
Potes. "We will maintain the strength and resilience we have built
over the last 120 years with our fervent commitment to serve
our shareholders, customers, and communities during these unusual
and challenging times."
Total assets grew $11.8 million in the first quarter of
2020, mostly attributable to loan and securities growth. Net
loans grew $8.8 million in the first
quarter of 2020. Despite loan and securities growth, interest
income was negatively impacted in the first quarter of 2020 by
reductions in the Federal Funds interest rate of 50 basis points on
March 3, 2020, and 100 basis points
on March 16, 2020, which triggered
rate declines on many variable loans in ChoiceOne's
portfolio. The first quarter of 2020 interest income on
loans included $50,000 of accretion of the discount recorded
on the Lakestone Bank & Trust loans acquired in the
Merger. ChoiceOne saw deposit growth of $18.9 million in the first quarter of
2020. The interest cost of deposits and other funding
decreased by $152,000 in the
first quarter of 2020 compared to the fourth quarter of 2019 due to
reductions in interest rates. Although there were no material
increases in delinquencies or net charge-offs in the first quarter
of 2020, ChoiceOne increased the provision for loan losses by
$775,000 in anticipation of an
expected increase in levels of delinquencies and loan losses
related to the impact of the COVID-19 pandemic. ChoiceOne is
deferring payment on loans to borrowers affected by the COVID-19
pandemic and providing our small business customers with Paycheck
Protection Program (PPP) loans.
Total noninterest income
increased $485,000 in the first quarter of 2020
compared to the fourth quarter of 2019. Gains on sales of
loans increased due to lower interest rates encouraging refinancing
activity. Depositor service charges declined in the
first quarter of 2020 compared to the fourth quarter of 2019 due to
the "stay safe, stay home" executive order in Michigan beginning March 16, 2020. The market reaction to
COVID-19 also caused a decline in stock prices for equities held by
ChoiceOne during the first quarter of 2020.
Total noninterest expense decreased $587,000 in the first quarter of 2020
compared to the fourth quarter of 2019. Decreases were
due to retirements known during the Merger and other employee
benefit savings caused by economies of scale. Professional
fees also decreased in the first quarter of 2020 compared to the
fourth quarter of 2019 relating to the timing of billings related
to the Merger and audits.
"We are looking forward to consolidating Lakestone Bank
& Trust with and into ChoiceOne Bank in May
2020," said Potes. "In addition, our pending acquisition
of Community Shores Bank Corporation, parent company of Community
Shores Bank, is expected to close in the second half of 2020.
Combining three community banks into ChoiceOne is a great
accomplishment and will allow us to serve customers across our
great state in West and Southeastern
Michigan."
ChoiceOne and Community Shores Bank Corporation ("Community
Shores") previously announced the execution of a definitive
merger agreement pursuant to which Community Shores will be merged
with and into ChoiceOne, with ChoiceOne surviving the merger.
The transaction is expected to close in the second
half of 2020, subject to the satisfaction of customary closing
conditions, including receipt of shareholder approval from
Community Shores shareholders and receipt of regulatory
approvals. ChoiceOne believes that combining with
Community Shores is a natural geographical and cultural
fit, as it will allow ChoiceOne to extend its footprint
in Muskegon and Ottawa counties and enhance the commitment
that both Community Shores and ChoiceOne have to
their Michigan customers and communities.
Following completion of the transaction with Community
Shores, ChoiceOne will be an approximate $1.6 billion asset bank holding company with
33 offices in West and Southeastern
Michigan.
About ChoiceOne
ChoiceOne Financial Services, Inc. is a financial holding company
headquartered in Sparta, Michigan
and the parent corporation of ChoiceOne Bank and Lakestone Bank
& Trust. Member FDIC. Lakestone Bank & Trust operates
15 offices in parts of Lapeer,
Macomb and St. Clair counties. ChoiceOne
Bank operates 14 offices in parts of Kent, Ottawa,
Muskegon, and Newaygo 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 excluding
merger expenses, after tax, 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 report 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 related to
risks and uncertainties related to, and the impact of, the global
coronavirus (COVID-19) pandemic on the businesses, financial
condition and results of operations of our company and our
customers and statements regarding the outlook and
expectations of ChoiceOne and Community Shores 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 Community Shores
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 impact of the global coronavirus (COVID-19) pandemic;
- the failure to obtain necessary regulatory approvals when
expected or at all (and the risk that such approvals may result in
the imposition of conditions that could adversely affect the
combined company or the expected benefits of the transaction);
- the failure of Community Shores 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 Community
Shores 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 Community
Shores.
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.
Important Additional Information and Where to Find
It
This communication is being made in respect of the proposed merger
transaction between ChoiceOne and Community Shores. In
connection with the proposed merger, ChoiceOne has filed with the
Securities and Exchange Commission ("SEC") a Registration Statement
on Form S-4 that includes a preliminary Proxy Statement of
Community Shores and a Prospectus of ChoiceOne, as well as other
relevant documents regarding the proposed transaction. A
definitive Proxy Statement/Prospectus will be sent to Community
Shores shareholders. INVESTORS ARE URGED TO READ THE
REGISTRATION STATEMENT AND THE 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 WILL 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 definitive Proxy Statement/Prospectus, once
available, as well as other filings containing information about
ChoiceOne and Community Shores, may be obtained at the SEC's
Internet site http://www.sec.gov. You will also be able to
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 Community Shores by
accessing Community Shores' website at
http://www.communityshores.com (which website is not incorporated
herein by reference). Copies of the definitive Proxy
Statement/Prospectus once available can also be obtained, free of
charge, by directing a request to ChoiceOne, 109 East Division
Street, Post Office Box 186, Sparta,
Michigan 49345, Attention: Mr. Thomas L. Lampen, or by calling 616-887-7366, or
to Community Shores, 1030 West Norton Avenue Muskegon, Michigan 49441, Attention: Ms.
Heather Brolick, or by calling
231-780-1845.
Participants in Solicitation
Community Shores and certain of its directors and executive
officers may be deemed to be participants in the solicitation of
proxies from Community Shores shareholders in respect of the
transaction described in the 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 Proxy
Statement/Prospectus regarding the proposed merger. Free
copies of this document may be obtained as described in the
preceding paragraph.
Condensed Balance
Sheets
(Unaudited)
|
|
(In
thousands)
|
3/31/2020*
|
|
12/31/2019*
|
|
3/31/2019
|
Cash and Cash
Equivalents
|
$
45,471
|
|
$
59,558
|
|
$
16,296
|
Securities
|
370,377
|
|
348,888
|
|
174,855
|
Loans Held For
Sale
|
7,385
|
|
3,095
|
|
1,524
|
Loans to Other
Financial Institutions
|
39,421
|
|
51,048
|
|
28,119
|
Loans, Net of
Allowance For Loan Losses
|
806,787
|
|
797,991
|
|
397,314
|
Premises and
Equipment
|
23,933
|
|
24,265
|
|
16,125
|
Cash Surrender Value
of Life Insurance Policies
|
32,171
|
|
31,979
|
|
14,995
|
Goodwill
|
52,593
|
|
52,870
|
|
13,728
|
Core Deposit
Intangible
|
5,652
|
|
6,006
|
|
-
|
Other
Assets
|
14,174
|
|
10,428
|
|
7,464
|
|
|
|
|
|
|
Total
Assets
|
$
1,397,964
|
|
$
1,386,128
|
|
$
670,420
|
|
|
|
|
|
|
Noninterest-bearing
Deposits
|
$
283,567
|
|
$
287,460
|
|
$
155,047
|
Interest-bearing
Deposits
|
889,965
|
|
867,142
|
|
409,404
|
Borrowings
|
23,189
|
|
33,198
|
|
20,225
|
Other
Liabilities
|
6,147
|
|
6,189
|
|
3,042
|
|
|
|
|
|
|
Total
Liabilities
|
1,202,868
|
|
1,193,989
|
|
587,718
|
|
|
|
|
|
|
Shareholders'
Equity
|
195,096
|
|
192,139
|
|
82,702
|
|
|
|
|
|
|
Total Liabilities
and Shareholders' Equity
|
$
1,397,964
|
|
$
1,386,128
|
|
$
670,420
|
|
|
|
|
|
|
* Includes impact of
the County Bank Corp. merger which occurred on October 1,
2019.
|
|
Condensed
Statements of Income
(Unaudited)
|
|
|
Three Months
Ended
|
(In Thousands, Except
Per Share Data)
|
3/31/2020*
|
|
12/31/2019*
|
|
3/31/2019
|
Interest
Income
|
|
|
|
|
|
Loans, including fees
|
$
10,243
|
|
$
10,713
|
|
$
5,280
|
Securities and other
|
2,418
|
|
2,168
|
|
1,197
|
Total Interest
Income
|
12,661
|
|
12,881
|
|
6,477
|
|
|
|
|
|
|
Interest
Expense
|
|
|
|
|
|
Deposits
|
1,385
|
|
1,440
|
|
851
|
Borrowings
|
138
|
|
235
|
|
130
|
Total Interest
Expense
|
1,523
|
|
1,675
|
|
981
|
|
|
|
|
|
|
Net Interest
Income
|
11,138
|
|
11,206
|
|
5,496
|
Provision for Loan
Losses
|
775
|
|
-
|
|
-
|
|
|
|
|
|
|
Net Interest Income
After Provision for Loan Losses
|
10,363
|
|
11,206
|
|
5,496
|
|
|
|
|
|
|
Noninterest
Income
|
|
|
|
|
|
Customer service charges
|
1,845
|
|
2,002
|
|
1,033
|
Insurance and investment
commissions
|
126
|
|
85
|
|
63
|
Gains on sales of loans
|
1,743
|
|
578
|
|
246
|
Gains on sales of
securities
|
2
|
|
-
|
|
1
|
Trust
income
|
170
|
|
-
|
|
-
|
Earnings on life insurance
policies
|
192
|
|
483
|
|
96
|
Change
in market value of equity securities
|
(389)
|
|
(119)
|
|
187
|
Other income
|
243
|
|
418
|
|
132
|
Total Noninterest
Income
|
3,932
|
|
3,447
|
|
1,758
|
|
|
|
|
|
|
Noninterest
Expense
|
|
|
|
|
|
Salaries and benefits
|
5,128
|
|
5,486
|
|
2,777
|
Occupancy and equipment
|
1,270
|
|
1,290
|
|
771
|
Data processing
|
1,484
|
|
1,396
|
|
556
|
Professional fees
|
762
|
|
1,081
|
|
517
|
Other expenses
|
1,772
|
|
1,750
|
|
713
|
Total Noninterest
Expense
|
10,416
|
|
11,003
|
|
5,334
|
|
|
|
|
|
|
Income Before Income
Tax
|
3,879
|
|
3,650
|
|
1,920
|
Income Tax
Expense
|
625
|
|
623
|
|
283
|
|
|
|
|
|
|
Net Income
|
$
3,254
|
|
$
3,027
|
|
$
1,637
|
|
|
|
|
|
|
Basic Earnings Per
Share
|
$
0.45
|
|
$
0.44
|
|
$
0.45
|
Diluted Earnings Per
Share
|
$
0.45
|
|
$
0.44
|
|
$
0.45
|
|
|
|
|
|
|
* Includes impact of
the County Bank Corp. merger which occurred on October 1,
2019.
|
|
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.
|
|
|
|
|
|
|
|
|
|
Quarter
Ended
|
|
|
(In Thousands, Except
Per Share Data)
|
3/31/2020
|
|
3/31/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income
tax
|
$
3,779
|
|
$
1,920
|
|
|
|
|
Adjustment for merger
costs
|
302
|
|
238
|
|
|
|
|
Adjusted income
before income tax
|
$
4,081
|
|
$
2,158
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
expense
|
$
607
|
|
$
283
|
|
|
|
|
Tax impact on
adjustment for merger costs
|
20
|
|
15
|
|
|
|
|
Adjusted income
tax expense
|
$
627
|
|
$
298
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
$
3,172
|
|
$
1,637
|
|
|
|
|
Adjusted net
income
|
$
3,454
|
|
$
1,860
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted basic
earnings per share
|
$
0.48
|
|
$
0.51
|
|
|
|
|
Adjusted diluted
earnings per share
|
$
0.48
|
|
$
0.51
|
|
|
|
|
|
|
|
|
|
|
|
|
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content:http://www.prnewswire.com/news-releases/choiceone-financial-reports-first-quarter-2020-results-301047873.html
SOURCE ChoiceOne Financial Services, Inc.