SPARTA, Mich., Jan. 30, 2021 /PRNewswire/ -- ChoiceOne
Financial Services, Inc. ("ChoiceOne", NASDAQ:COFS), the parent
company for ChoiceOne Bank reported financial results for the
quarter and year ended December 31, 2020.
Significant items impacting comparable fourth quarter and
year end 2020 and 2019 results include the following:
- On October 1, 2019, ChoiceOne
completed the merger (the "County Merger") of County Bank Corp.,
the former parent company of Lakestone Bank & Trust, with and
into ChoiceOne with ChoiceOne surviving the merger. Lakestone
Bank & Trust was consolidated with and into ChoiceOne Bank
effective May 15, 2020. The
total assets, loans and deposits acquired in the County Merger were
approximately $712 million,
$424 million and $568 million, respectively.
- On July 1, 2020, ChoiceOne
completed the merger (the "Community Shores Merger") of Community
Shores Bank Corporation, the former parent company of Community
Shores Bank, with and into ChoiceOne with ChoiceOne surviving the
merger. Community Shores Bank was consolidated with and into
ChoiceOne Bank effective October 16,
2020. The total assets, loans and deposits acquired in the
Community Shores Merger were approximately $244 million, $174
million and $228 million,
respectively.
- ChoiceOne incurred tax-effected merger-related expenses of
approximately $547,000 and
$2,714,000, respectively
($0.07 per diluted share and
$0.36 per diluted share,
respectively), for the quarter and year ended December 31, 2020.
- As the third quarter of 2020 was the first quarter which
included the full effect of the County Merger and the Community
Shores Merger we have included financial results for the third
quarter of 2020 below for comparison.
Financial Highlights
- Net income of $4,100,000 in the
fourth quarter of 2020 compared to $3,829,000 in the third quarter of 2020 and
3,027,000 in the fourth quarter of 2019.
- Diluted earnings per share of $0.52 in the fourth quarter of 2020 compared to
$0.49 per share in the third quarter
of 2020 and $0.42 in the fourth
quarter of 2019.
- Excluding $547,000 in
tax-effected merger-related expenses, net income in the fourth
quarter of 2020 was $4,647,000 or
$0.59 per diluted share, compared to
$3,602,000 in the fourth quarter of
2019 adjusted for tax-effected merger-related expenses.
- Total deposits grew $88.2 million
and $520.0 million in the fourth
quarter and year ended December 31,
2020, respectively. Excluding deposits acquired in the
Community Shores Merger, total deposits grew $292.0 million for the year ended December 31, 2020.
- ChoiceOne incurred $1,000,000 in
provision for loan losses expense during the fourth quarter of 2020
and $4,000,000 for the year ended
December 31, 2020, much of which was
related to the impact of the COVID-19 pandemic.
ChoiceOne reported net income of $4,100,000 for
the fourth quarter of 2020 compared to $3,829,000 in the third quarter of 2020 and
$3,027,000 in the fourth quarter
of 2019. Diluted earnings per share were $0.52 in the fourth quarter of 2020 compared
to $0.49 per share in the third quarter of 2020 and
$0.42 in the fourth quarter of
2019. Excluding $547,000 and $575,000 in tax-effected merger-related expenses,
respectively, net income for the fourth quarter
of 2020 amounted to $4,647,000 or $0.59
per diluted share, compared to $3,602,000 or $0.50 per diluted share in the same period
in 2019. Net income for the year ended December
31, 2020 was $15,613,000 or $2.07 per
diluted share, compared to $7,171,000 or $1.58 per diluted share for the year ended
December 31, 2019. Excluding
$2,714,000 and $1,769,000 in tax-effected merger-related
expenses, respectively, net income for the year ended
December 31, 2020
was $18,327,000 or $2.43 per diluted share, compared
to $8,940,000 or $1.97 per diluted share in the same period
in the prior year. The increases in net income in 2020 as
compared to prior periods in 2019 are largely due to the County
Merger and the Community Shores Merger.
"ChoiceOne is pleased to report continued strong net income for
the fourth quarter and the full year of 2020," said ChoiceOne CEO
Kelly Potes. "During the fourth
quarter, we were able to realize the success and scale of our
mergers. Our increased scale, expert teams, technology and our
ability to remain nimble during the COVID-19 pandemic, allowed us
to meet the demands and opportunities presented during 2020.
Total assets grew $90.1 million in
the fourth quarter of 2020 and $533.7
million in the year ended December
31, 2020. Gross loans declined slightly in the
fourth quarter due to the forgiveness of $23.4 million in Paycheck Protection Program
(PPP) loans during the quarter, which provided $1.2 million in fee income for the fourth
quarter of 2020. PPP fee income for the year ended
December 31, 2020 was $3.0 million with $1.9 million remaining in deferred fees from PPP
loans originated in 2020. ChoiceOne incurred $1,000,000 in provision for loan losses expense
during the fourth quarter and $4,000,000 in the year ended December 31, 2020, much of which was related to
the impact of the COVID-19 pandemic. The remaining credit
mark on loans acquired from Lakestone Bank & Trust and
Community Shores Bank totaled $9.5
million as of December 31,
2020. Although ChoiceOne has not seen significant increases
in charge-offs or delinquencies as a result of the COVID-19
pandemic, management is continuing to monitor deferrals and
economic indicators which may signify the need for increased
provision for loan losses expense. ChoiceOne grew the
securities balance $182.9 million or
45.4% during the fourth quarter of 2020, most of which was
purchased in December. This led to an increase in securities
interest income of $173,000 in the
fourth quarter or 8.2% compared to the third quarter in 2020, with
the growth in the securities balance expected to have a larger
impact in 2021. Deposits grew by 5.6% or $88.2 million during the fourth quarter of
2020. Excluding deposits acquired in the Community Shores
Merger, deposits grew by $292.0
million for the year ended December
31, 2020. A portion of this growth was related to
the stimulus package included in the CARES Act as well as funds on
deposit from PPP loans that were not fully utilized as
of December 31, 2020.
Total noninterest income decreased $638,000 in the
fourth quarter of 2020 compared to the third quarter of 2020 but
increased $13.5 million in the
year ended December 31, 2020 compared
to the year ended December 31,
2019. This was largely due to gains on sales of loans which
increased $9.4 million during
2020. Gains on sales of securities were $1.3 million higher in 2020 compared to
2019 as a result of a restructuring of ChoiceOne's
securities portfolio in the second quarter of 2020. Although
customer service charges increased overall, they declined as a
percentage of deposits due to the effect of the COVID-19
pandemic on customer activity levels.
Total noninterest expense declined by $781,000 in the fourth quarter of 2020 compared
to the third quarter of 2020 but increased $22.4 million for the year ended
December 31, 2020 compared to the
year ended December 31,
2019. Much of the increase was due to
growth and expenses related to the consolidation of
ChoiceOne Bank and Lakestone Bank & Trust in May 2020, the Community Shores Merger in
July 2020, and the consolidation of
ChoiceOne Bank and Community Shores Bank in October 2020.
Other contributing factors to the higher level of noninterest
expense in 2020 were amortization of the core deposit intangible
and increased costs related to higher mortgage volume levels in
2020 compared to the prior year.
"ChoiceOne is well positioned to grow our community bank
franchise across our expanded network," said Potes. "We continue to
keep the safety and security of our customers, employees and those
in our communities at the forefront of our growth."
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
34 offices in parts of Kent,
Lapeer, Macomb, Muskegon, Newaygo, Ottawa, and St.
Clair 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 Reports on Form 10-Q for the
quarters ended March 31, 2020,
June 30, 2020 and September 30, 2020.
Condensed Balance
Sheets
|
(Unaudited)
|
|
(In
thousands)
|
|
12/31/2020
|
|
|
09/30/2020
|
|
|
12/31/2019
|
|
Cash and Cash
Equivalents
|
|
$
|
79,519
|
|
|
$
|
117,883
|
|
|
$
|
59,558
|
|
Securities
|
|
|
585,714
|
|
|
|
402,777
|
|
|
|
348,888
|
|
Loans Held For
Sale
|
|
|
12,921
|
|
|
|
35,826
|
|
|
|
3,095
|
|
Loans to Other
Financial Institutions
|
|
|
35,209
|
|
|
|
55,064
|
|
|
|
51,048
|
|
Loans, Net of
Allowance For Loan Losses
|
|
|
1,062,076
|
|
|
|
1,072,111
|
|
|
|
797,991
|
|
Premises and
Equipment
|
|
|
29,913
|
|
|
|
29,927
|
|
|
|
24,265
|
|
Cash Surrender Value
of Life Insurance Policies
|
|
|
32,751
|
|
|
|
32,557
|
|
|
|
31,979
|
|
Goodwill
|
|
|
60,506
|
|
|
|
60,506
|
|
|
|
52,870
|
|
Core Deposit
Intangible
|
|
|
5,269
|
|
|
|
5,664
|
|
|
|
6,006
|
|
Other
Assets
|
|
|
15,967
|
|
|
|
16,669
|
|
|
|
10,428
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
1,919,845
|
|
|
$
|
1,828,984
|
|
|
$
|
1,386,128
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing
Deposits
|
|
$
|
477,688
|
|
|
$
|
447,548
|
|
|
$
|
287,460
|
|
Interest-bearing
Deposits
|
|
|
1,196,924
|
|
|
|
1,138,822
|
|
|
|
867,142
|
|
Borrowings
|
|
|
12,417
|
|
|
|
13,234
|
|
|
|
33,198
|
|
Other
Liabilities
|
|
|
5,524
|
|
|
|
6,454
|
|
|
|
6,189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities
|
|
|
1,692,553
|
|
|
|
1,606,058
|
|
|
|
1,193,989
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
Equity
|
|
|
227,292
|
|
|
|
222,926
|
|
|
|
192,139
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and
Shareholders' Equity
|
|
$
|
1,919,845
|
|
|
$
|
1,828,984
|
|
|
$
|
1,386,128
|
|
Condensed
Statements of Income
|
(Unaudited)
|
|
|
|
Three Months
Ended
|
|
|
Twelve Months
Ended
|
|
(In Thousands, Except
Per Share Data)
|
|
12/31/2020
|
|
|
9/30/2020
|
|
|
12/31/2019
|
|
|
12/31/2020
|
|
|
12/31/2019
|
|
Interest
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, including
fees
|
|
$
|
12,764
|
|
|
$
|
13,047
|
|
|
$
|
10,713
|
|
|
$
|
46,874
|
|
|
$
|
26,777
|
|
Securities and
other
|
|
|
2,277
|
|
|
|
2,103
|
|
|
|
2,168
|
|
|
|
8,841
|
|
|
|
5,696
|
|
Total Interest
Income
|
|
|
15,041
|
|
|
|
15,150
|
|
|
|
12,881
|
|
|
|
55,715
|
|
|
|
32,473
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
949
|
|
|
|
946
|
|
|
|
1,440
|
|
|
|
4,178
|
|
|
|
4,188
|
|
Borrowings
|
|
|
100
|
|
|
|
143
|
|
|
|
235
|
|
|
|
466
|
|
|
|
512
|
|
Total Interest
Expense
|
|
|
1,049
|
|
|
|
1,089
|
|
|
|
1,675
|
|
|
|
4,644
|
|
|
|
4,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Interest
Income
|
|
|
13,992
|
|
|
|
14,062
|
|
|
|
11,206
|
|
|
|
51,071
|
|
|
|
27,773
|
|
Provision for Loan
Losses
|
|
|
1,000
|
|
|
|
1,225
|
|
|
|
-
|
|
|
|
4,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Interest Income
After Provision for Loan Losses
|
|
|
12,992
|
|
|
|
12,837
|
|
|
|
11,206
|
|
|
|
47,071
|
|
|
|
27,773
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer service
charges
|
|
|
1,817
|
|
|
|
2,059
|
|
|
|
2,002
|
|
|
|
7,123
|
|
|
|
5,277
|
|
Insurance and
investment commissions
|
|
|
125
|
|
|
|
137
|
|
|
|
85
|
|
|
|
541
|
|
|
|
310
|
|
Gains on sales of
loans
|
|
|
2,958
|
|
|
|
3,617
|
|
|
|
578
|
|
|
|
11,314
|
|
|
|
1,951
|
|
Gains on sales of
securities
|
|
|
(0)
|
|
|
|
(35)
|
|
|
|
-
|
|
|
|
1,308
|
|
|
|
22
|
|
Trust
income
|
|
|
169
|
|
|
|
197
|
|
|
|
162
|
|
|
|
738
|
|
|
|
162
|
|
Earnings on life
insurance policies
|
|
|
195
|
|
|
|
193
|
|
|
|
483
|
|
|
|
772
|
|
|
|
773
|
|
Change in market
value of equity securities
|
|
|
29
|
|
|
|
(238)
|
|
|
|
(119)
|
|
|
|
(155)
|
|
|
|
-
|
|
Other
income
|
|
|
395
|
|
|
|
396
|
|
|
|
209
|
|
|
|
1,056
|
|
|
|
626
|
|
Total Noninterest
Income
|
|
|
5,688
|
|
|
|
6,326
|
|
|
|
3,400
|
|
|
|
22,697
|
|
|
|
9,121
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest
Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and
benefits
|
|
|
6,994
|
|
|
|
8,058
|
|
|
|
5,486
|
|
|
|
26,539
|
|
|
|
14,401
|
|
Occupancy and
equipment
|
|
|
1,598
|
|
|
|
1,556
|
|
|
|
1,290
|
|
|
|
5,783
|
|
|
|
3,557
|
|
Data
processing
|
|
|
2,128
|
|
|
|
1,585
|
|
|
|
1,396
|
|
|
|
6,765
|
|
|
|
3,210
|
|
Professional
fees
|
|
|
819
|
|
|
|
1,221
|
|
|
|
1,081
|
|
|
|
3,716
|
|
|
|
3,112
|
|
Core deposit
intangible amortization
|
|
|
396
|
|
|
|
395
|
|
|
|
277
|
|
|
|
1,498
|
|
|
|
277
|
|
Other
expenses
|
|
|
1,833
|
|
|
|
1,734
|
|
|
|
1,426
|
|
|
|
6,582
|
|
|
|
3,872
|
|
Total Noninterest
Expense
|
|
|
13,768
|
|
|
|
14,549
|
|
|
|
10,956
|
|
|
|
50,883
|
|
|
|
28,429
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before Income
Tax
|
|
|
4,912
|
|
|
|
4,614
|
|
|
|
3,650
|
|
|
|
18,885
|
|
|
|
8,465
|
|
Income Tax
Expense
|
|
|
812
|
|
|
|
785
|
|
|
|
623
|
|
|
|
3,272
|
|
|
|
1,294
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
4,100
|
|
|
$
|
3,829
|
|
|
$
|
3,027
|
|
|
$
|
15,613
|
|
|
$
|
7,171
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per
Share
|
|
$
|
0.53
|
|
|
$
|
0.49
|
|
|
$
|
0.44
|
|
|
$
|
2.08
|
|
|
$
|
1.58
|
|
Diluted Earnings Per
Share
|
|
$
|
0.52
|
|
|
$
|
0.49
|
|
|
$
|
0.44
|
|
|
$
|
2.07
|
|
|
$
|
1.58
|
|
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
|
|
|
Year
Ended
|
|
(In Thousands, Except
Per Share Data)
|
|
12/31/2020
|
|
|
12/31/2019
|
|
|
12/31/2020
|
|
|
12/31/2019
|
|
Income before income
tax
|
|
$
|
4,912
|
|
|
$
|
3,650
|
|
|
$
|
18,885
|
|
|
$
|
8,465
|
|
Adjustment for
merger-related expenses
|
|
|
692
|
|
|
|
650
|
|
|
|
3,219
|
|
|
|
2,001
|
|
Adjusted income
before income tax
|
|
$
|
5,604
|
|
|
$
|
4,300
|
|
|
$
|
22,104
|
|
|
$
|
10,466
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
expense
|
|
$
|
812
|
|
|
$
|
623
|
|
|
$
|
3,272
|
|
|
$
|
1,294
|
|
Tax impact on
adjustment for merger-related expenses
|
|
|
145
|
|
|
|
58
|
|
|
|
505
|
|
|
|
232
|
|
Adjusted income
tax expense
|
|
$
|
957
|
|
|
$
|
681
|
|
|
$
|
3,777
|
|
|
$
|
1,526
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
4,100
|
|
|
$
|
3,027
|
|
|
$
|
15,613
|
|
|
$
|
7,171
|
|
Adjusted net
income
|
|
$
|
4,647
|
|
|
$
|
3,619
|
|
|
$
|
18,327
|
|
|
$
|
8,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per
share
|
|
$
|
0.53
|
|
|
$
|
0.44
|
|
|
$
|
2.08
|
|
|
$
|
1.58
|
|
Diluted earnings per
share
|
|
$
|
0.52
|
|
|
$
|
0.44
|
|
|
$
|
2.07
|
|
|
$
|
1.58
|
|
Adjusted basic
earnings per share
|
|
$
|
0.60
|
|
|
$
|
0.50
|
|
|
$
|
2.44
|
|
|
$
|
1.97
|
|
Adjusted diluted
earnings per share
|
|
$
|
0.59
|
|
|
$
|
0.50
|
|
|
$
|
2.43
|
|
|
$
|
1.97
|
|
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SOURCE ChoiceOne Financial Services, Inc.