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8-K - CHOICEONE FORM 8-K (EARNINGS RELEASE) - CHOICEONE FINANCIAL SERVICES INCchoice8k_043014.htm

EXHIBIT 99.1

 

 

 

News Release

 

Contact: Tom Lampen, ChoiceOne Bank
(616) 887-2337
tlampen@choiceone.com

 

ChoiceOne Financial Announces Earnings For First Quarter Of 2014

 

Sparta, Michigan – April 30, 2014 – ChoiceOne Financial Services, Inc. (OTCBB:COFS), the parent company for ChoiceOne Bank, reported net income of $1,248,000 for the first quarter of 2014 compared to $1,235,000 in the same period in 2013. Earnings per share were $0.38 for the first quarter of 2014 compared to $0.37 for the first quarter in the prior year.

 

“I am pleased to report our earnings for the first quarter of 2014,” said James Bosserd, President and Chief Executive Officer of ChoiceOne Financial Services, Inc. “Our net income in the first quarter of 2014 increased 1 percent over the same quarter in 2013. Although gains on sales of loans declined significantly due to less refinancing activity, our other noninterest income categories improved in the first quarter of 2014 to partially offset the impact of lower mortgage volume. Our total noninterest expense declined slightly even with the effect of weather related expenses. Loan and collection expense decreased significantly as a result of lower levels of foreclosed properties. Loans and checking and savings deposits grew in the first quarter of 2014, in spite of the weather that limited some client activity early in the quarter.”

 

The increase in net income in the first quarter of 2014 compared to the same quarter in 2013 was due to a lower provision for loan losses and lower noninterest expense. This was partially offset by lower net interest income and noninterest income in the first quarter of 2014 compared to the same period in 2013.

 

Net interest income decreased $74,000 in the first quarter of 2014 compared to the same period in the prior year. Average earning assets were $13.8 million higher in the first quarter of 2014 than in the same quarter in 2013. Growth in the average balance of total loans resulted from an increase in average commercial loans of $14.2 million, which was partially offset by a decrease in the average balance of consumer loans of $1.2 million while residential mortgage loans declined $6.1 million. The average balance of securities was $7.4 million higher in the first quarter of 2014 compared to the same period in the prior year as securities were purchased in 2013 and early 2014 to provide growth in earning assets. ChoiceOne’s net interest spread declined from 3.98% in the first quarter of 2013 to 3.82% in the first quarter of 2014. This decrease in the net interest spread was caused by a reduction in the average rate earned on interest-earning assets of 26 basis points, while the reduction in the average rate paid on interest-bearing liabilities was only 10 basis points.

 

The provision for loan losses was $100,000 in the first quarter of 2014, compared to $300,000 in the first quarter of 2013. The decrease in the provision was due to lower net charge-offs of $240,000 experienced in the first quarter of 2014, compared to $271,000 in the same quarter in the prior year and was based on an internal analysis of potential losses in the bank’s loan portfolio. ChoiceOne’s allowance for loan losses was 1.43 percent of total loans as of March 31, 2014, compared to 1.50 percent as of December 31, 2013. Total nonperforming loans were $8.1 million as of March 31, 2014, compared to $7.7 million as of December 31, 2013. The increase in nonperforming loans during the first quarter of 2014 was due to an increase of $1,410,000 in nonaccrual loans, which was partially offset by a $1,143,000 decline in troubled debt restructurings. Nonperforming loans included $3.4 million of loans classified as troubled debt restructurings as of March 31, 2014, of which $3.0 million was current as to payments and performing according to their new terms.

 

Noninterest income was $125,000 lower in the first quarter of 2014 than in the first quarter of 2013. Customer service charges increased $21,000 in the first quarter of 2014 compared to the same period in the prior year as a result of growth in debit card fee income. Insurance and investment commission income grew $82,000 in the first quarter of 2014 compared to the first quarter in the prior year as a result of increased sales of investment products and growth

 

 

in investment advisory fees. Gains on sales of loans declined $347,000 in the first quarter of 2013 compared to the same quarter in 2013. Longer term mortgage rates rose in the second and third quarters of 2013, which caused a reduction in mortgage refinancing that began in the third quarter of 2013 and has continued into early 2014. Gains on sales of securities were $42,000 higher in the first quarter of 2014 compared to the first quarter of 2013 due to more securities sales in the current year. Net losses on sales of other assets improved $68,000 in the first quarter of 2014 compared to the same period in the prior year as a result of less write-downs of foreclosed properties.

 

Noninterest expense decreased $21,000 in the first quarter of 2014 compared to the first quarter in 2013. An increase in salaries and benefits expense of $68,000 in the first quarter of 2014 compared to the same period in the prior year resulted from higher costs associated with salaries and health insurance. Occupancy and equipment expense grew $47,000 in the first quarter of 2014 compared to the first quarter in the prior year due to costs related to the extended winter weather conditions in 2014 and to higher equipment depreciation expense. The increase of $39,000 in professional fees in the first quarter of 2014 compared to the same quarter in the prior year was due to higher legal fees. Loan and collection expense was $85,000 lower in the first quarter of 2014 compared to the same period in the prior year as a result of lower costs related to collection of nonperforming loans and maintenance of foreclosed properties. Other noninterest expense decreased $101,000 in the first quarter of 2014 compared to the first quarter of 2013 as a result of less purchases of supplies, lower FDIC insurance expense, and lower costs related to sales of residential mortgage loans in the secondary market.

 

Total assets increased $5.8 million in the first quarter of 2014 and $10.0 million in the twelve months ended March 31, 2014. Cash and cash equivalents declined $6.1 million in the first quarter of 2014 and $3.3 million in the last twelve months due to the timing of loan and deposit growth. Securities increased $7.2 million in the first quarter of 2014 and $9.6 million in the last twelve months as purchases were used to provide growth in earning assets. Net loans grew $4.7 million in the first quarter of 2014 and $8.6 million in the twelve months ended March 31, 2014. Growth in commercial loans and consumer loans was partially offset by a decrease in residential mortgage loans. Total deposits increased $10.3 million in the first quarter of 2014 and $2.8 million in the last twelve months. Checking and savings deposits grew $17.3 million since March 31, 2013, while certificates of deposit declined $14.5 million in the same time period. Borrowings decreased $5.7 million in the first quarter of 2014 and increased $7.9 million since March 31, 2013 as a result of changes in the balance of repurchase agreements and advances from the Federal Home Loan Bank.

 

ChoiceOne Financial Services, Inc. is a financial holding company headquartered in Sparta, Michigan and the parent corporation of ChoiceOne Bank. ChoiceOne Bank operates 12 full service offices in parts of Kent, Ottawa, Muskegon, and Newaygo Counties. ChoiceOne Bank offers insurance and investment products through its subsidiary, ChoiceOne Insurance Agencies, Inc. ChoiceOne Financial Services, Inc. common stock is quoted on the OTCBB under the symbol “COFS.” For more information, please visit Investor Relations at ChoiceOne’s website at www.choiceone.com.

 

Forward-Looking Statements
This press release contains forward-looking statements. Words such as “anticipates,” “believes,” “estimates,” “expects,” “forecasts,” “intends,” “is likely,” “plans,” “predicts,” “projects,” “may,” “could,” variations of such words and similar expressions are intended to identify such forward-looking statements. Management’s determination of the provision and allowance for loan losses, the carrying value of goodwill and loan servicing rights, and the fair value of investment securities (including whether any impairment on any investment security is temporary or other than temporary) and management’s assumptions concerning pension and other postretirement benefit plans involve judgments that are inherently forward-looking. Statements regarding future gains on sales of loans and future mortgage volume are forward-looking. These statements reflect management’s 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, ChoiceOne undertakes no obligation to update, amend, or clarify forward-looking statements, whether as a result of new information, future events, or otherwise.

 

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, 2013; changes in interest rates and interest rate relationships; demand for products and services; the degree of competition by traditional and non-traditional competitors; changes in banking laws and regulations; changes in tax laws; changes in prices, levies and

 

 

assessments; the impact of technological advances; governmental and regulatory policy changes; the outcomes of pending and future litigation and contingencies; trends in customer behavior as well as their abilities to repay loans; changes in the local and national economies; changes in market conditions; the level and timing of asset growth; various other local and global uncertainties such as acts of terrorism and military actions; and current uncertainties and fluctuations in the financial markets and stocks of financial services providers due to concerns about capital levels and credit availability and concerns about the Michigan economy in particular. These are representative of the risk factors that could cause a difference between an ultimate actual outcome and a preceding forward-looking statement.

 

# # #

 

EDITORS NOTE: Media interviews with ChoiceOne Bank executives are available by calling Tom Lampen at (616) 887-2337 or tlampen@choiceone.com. Electronic versions of bank official headshots are also available.

 

 

 

Condensed Balance Sheets
(Unaudited)

 

(In Thousands)     3/31/2014   12/31/2013   3/31/2013
Cash and Cash Equivalents       $ 14,429   $ 20,479   $ 17,746
Securities         147,002     139,832     137,439
Loans Held For Sale         728     931     3,403
Loans, Net of Allowance For Loan Losses         315,881     311,231     307,235
Premises and Equipment         11,948     11,995     12,253
Cash Surrender Value of Life Insurance Policies         10,340     10,269     10,045
Goodwill and Other Intangible Assets         14,892     15,003     15,340
Other Assets         5,129     4,835     6,928
                       
     Total Assets       $ 520,349   $ 514,575   $ 510,389
                       
Noninterest-bearing Deposits       $ 107,996   $ 102,243   $ 95,618
Interest-bearing Demand Deposits         142,557     139,670     138,562
Savings Deposits         69,210     63,681     68,241
Local Certificates of Deposit         108,673     112,533     121,755
Nonlocal Certificates of Deposit                 1,500
Borrowings         26,691     32,425     18,766
Other Liabilities         2,719     2,465     4,521
                       
     Total Liabilities         457,846     453,017     448,963
                       
Shareholders’ Equity         62,503     61,558     61,426
                       
     Total Liabilities and Shareholders’ Equity       $ 520,349   $ 514,575   $ 510,389

 

 

 

 

Condensed Statements of Income
(Unaudited)

 

      Quarter Ended  
(In Thousands, Except Per Share Data)         3/31/2014   3/31/2013  
Interest Income                        
     Loans, including fees             $ 3,824   $ 4,004  
     Securities               829     809  
     Other               3     3  
Total Interest Income               4,656     4,816  
                         
Interest Expense                        
     Deposits               279     376  
     Borrowings               24     13  
Total Interest Expense               303     389  
                         
Net Interest Income               4,353     4,427  
Provision for Loan Losses               100     300  
Net Interest Income after Provision                        
     for Loan Losses               4,253     4,127  
                         
Noninterest Income                        
     Customer Service Charges               859     838  
     Insurance and Investment Commissions               231     149  
     Gains on Sales of Loans               146     493  
     Gains on Sales of Securities               65     23  
     Losses on Sales of Other Assets               (1 )   (69 )
     Other Income               271     262  
Total Noninterest Income               1,571     1,696  
                         
Noninterest Expense                        
     Salaries and Benefits               2,084     2,016  
     Occupancy and Equipment               617     570  
     Data Processing               511     500  
     Professional Fees               197     158  
     Loan and Collection Expense               26     111  
     Other Expense               706     807  
Total Noninterest Expense               4,141     4,162  
                         
Income Before Income Tax               1,683     1,661  
Income Taxes               435     426  
                         
Net Income             $ 1,248   $ 1,235  
                         
Basic Earnings Per Share             $ 0.38   $ 0.37  
Diluted Earnings Per Share             $ 0.38   $ 0.37  
                         
Performance Ratios                        
Return on Average Assets (Annualized)               0.97 %   0.98 %
Return on Average Equity (Annualized)               8.14 %   8.10 %
Net Interest Margin (Tax Equivalent) (1)               3.82 %   3.98 %
Efficiency Ratio               70.2 %   68.2 %
Net Loan Charge-offs             $ 240   $ 271  
Net Loan Charge-offs as Percentage of                        
     Average Loans (Annualized)               0.30 %   0.35 %

(1)    The presentation of net interest margin on a tax-equivalent basis is not in accordance with generally accepted accounting principles (“GAAP”), but is customary in the banking industry. This non-GAAP measure ensures comparability of net interest margin arising from both taxable and tax-exempt loans and investment securities. The tax-equivalent adjustment uses an incremental tax rate of 34%.