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.
![(PRNewsfoto/ChoiceOne Financial Services, I) (PRNewsfoto/ChoiceOne Financial Services, I)](https://mma.prnewswire.com/media/1169029/ChoiceOne_Financial_Services_Logo.jpg)
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 grew 5.7% 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 or 13.2% in the second quarter of 2020.
ChoiceOne reported net income of $4,431,000 for the
second quarter of 2020 compared to $1,487,000 in the same
period in 2019. Diluted earnings per share were $0.61 in the
second quarter of 2020 compared to $0.41 per share in the
second quarter of the prior year. Excluding $462,000 in
tax-effected merger expenses, net income for the second quarter of
2020 amounted to $4,893,000 or $0.67 per diluted share.
Net income for the first six months of 2020
was $7,685,000 or $1.06 per diluted share, compared
to $3,123,000 or $0.86 per
diluted share in the first half of 2019. Net income for
the first half of 2020, when adjusted to
exclude $744,000 of tax-effected merger expenses,
was $8,429,000 or $1.16 per diluted share. The
increases in net income as compared to prior periods in 2019 are
largely due to ChoiceOne's merger with County Bank Corp., which was
completed on October 1, 2019.
The total assets, loans and deposits acquired in the merger with
County Bank Corp were approximately $712
Million, $424 million and
$568 million, respectively.
"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 $1.5 billion as of June 30, 2020, compared to $1.4 billion as
of March 31, 2020. Net loans grew
$100.0 million in
the second quarter of 2020 and interest income
related to loans grew 5.7% in the second quarter
of 2020 compared to the first quarter of 2020.
Growth in loans and related fee income was boosted by loans
originated in the Paycheck Protection Program. ChoiceOne added
$1,000,000 in provision for loan
losses expense during the second quarter and $1,775,000 in the first six months of 2020,
much of which was related to the impact of COVID-19. Although
ChoiceOne has not seen significant increases in charge-offs or
delinquencies, we are continuing to monitor deferrals and economic
indicators which may signify the need for increased provision for
loan losses expense. Total deposits grew $155.4 million or 13.2% in
the second quarter of 2020. A portion of this
growth is related to the stimulus package included in the CARES Act
as well as funds on deposit from the Paycheck Protection Program
loans that were not fully utilized as of June 30, 2020.
Total noninterest income increased $2,820,000 in the second
quarter of 2020 compared to the first quarter of 2020. Gains
on sales of loans increased due to lower interest rates encouraging
refinancing activity. Gains on sales of securities were
higher in the second quarter of 2020 compared to the prior
quarter as a result of a restructuring of ChoiceOne's
securities portfolio. The change in the market value of
equity securities was positive in the second quarter of 2020
compared to a negative balance in the first quarter of 2020 as
declines that occurred in the first quarter were reversed in the
second quarter. Customer service charges declined in the
second quarter of 2020 compared to the prior quarter due to the
effect of the COVID-19 pandemic on customer activity levels.
Total noninterest expense increased $1,734,000 in the
second quarter of 2020 compared to the first quarter of 2020.
Much of the increase was caused by expenses related to the
consolidation of ChoiceOne Bank and Lakestone Bank & Trust
in May 2020 and the merger between
ChoiceOne and Community Shores Bank Corporation completed on
July 1, 2020. The combined
organization will be the 12th largest bank holding company in
Michigan based on asset size, with
approximately $1.7 billion in assets
as of June 30, 2020 and 33 offices
across West and Southwest Michigan. ChoiceOne Bank and
Community Shores Bank are expected to be consolidated in the fourth
quarter of 2020 and the consolidated bank will operate under
the ChoiceOne name.
"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.