County Bancorp, Inc. - FORM 10-Q

Attached files

file	filename
EX-31.1 - EX-31.1 - County Bancorp, Inc.	icbk-ex311_8.htm
EX-31.2 - EX-31.2 - County Bancorp, Inc.	icbk-ex312_7.htm
EX-32.1 - EX-32.1 - County Bancorp, Inc.	icbk-ex321_9.htm
EX-32.2 - EX-32.2 - County Bancorp, Inc.	icbk-ex322_6.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2016

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to __________

Commission File Number: 001-36808

COUNTY BANCORP, INC.

(Exact Name of Registrant as Specified in its Charter)

Wisconsin	39-1850431
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

860 North Rapids Road Manitowoc, WI	54221
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (920) 686-9998

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	o	Accelerated filer	o

Non-accelerated filer	o (Do not check if a smaller reporting company)	Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of May 12, 2016, the registrant had 5,786,701 shares of common stock, $0.01 par value per share, outstanding.

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Consolidated Balance Sheets	1
	Consolidated Statements of Operations	2
	Consolidated Statements of Comprehensive Income	3
	Consolidated Statements of Shareholders’ Equity	4
	Consolidated Statements of Cash Flows	5
	Notes to Unaudited Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	32
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 3.	Defaults Upon Senior Securities	33
Item 4.	Mine Safety Disclosures	33
Item 5.	Other Information	33
Item 6.	Exhibits	34
Signatures		35
Exhibit Index		36

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

COUNTY BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

March 31, 2016 and December 31, 2015

(Unaudited)

	March 31, 2016			December 31, 2015
	(dollars in thousands)
ASSETS
Cash and cash equivalents	$	19,814		$	14,907
Securities available-for-sale, at fair value		79,692			83,281
FHLB Stock, at cost		3,724			3,507
Loans held for sale		3,980			9,201
Loans, net of allowance for loan losses of $11,218 as of March 31, 2016; $10,405 as of December 31, 2015		764,630			737,784
Premises and equipment, net		8,171			7,165
Loan servicing rights		8,294			8,145
Other real estate owned, net		2,947			2,872
Cash surrender value of bank owned life insurance		11,228			11,155
Deferred tax asset, net		2,185			2,048
Accrued interest receivable and other assets		4,892			4,824
Total assets	$	909,557		$	884,889

LIABILITIES
Deposits:
Noninterest-bearing	$	63,276		$	70,914
Interest-bearing		629,905			601,312
Total deposits		693,181			672,226
Other borrowings		3,407			3,945
Advances from FHLB		83,445			66,445
Subordinated debentures		12,372			12,372
Accrued interest payable and other liabilities		7,774			7,877
Total liabilities		800,179			762,865

Small Business Lending Fund redeemable preferred stock-variable rate, noncumulative, nonparticipating, $1,000 stated value; 15,000 shares authorized; no shares issued at March 31, 2016; 15,000 shares issued, $15,000 redemption amount at December 31, 2015	$	—		$	15,000

SHAREHOLDERS' EQUITY
Preferred stock-variable rate, non-cumulative, nonparticipating, $1,000 stated value; 15,000 shares authorized; 8,000 shares issued at March 31, 2016 and December 31, 2015		8,000			8,000
Common stock - $0.01 par value; 50,000,000 authorized; 6,208,309 shares issued and 5,786,701 shares outstanding at March 31, 2016 and 6,192,609 shares issued and 5,771,001 shares outstanding at December 31, 2015		19			19
Surplus		34,878			34,717
Retained earnings		70,610			68,825
Treasury stock, at cost, 421,608 shares at March 31, 2016 and December 31, 2015		(4,758	)		(4,758	)
Accumulated other comprehensive income		629			221
Total shareholders' equity		109,378			107,024
Total liabilities and shareholders' equity	$	909,557		$	884,889

See accompanying notes to consolidated financial statements

COUNTY BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended March 31, 2016 and 2015

(Unaudited)

	March 31, 2016		March 31, 2015
	(dollars in thousands except per share data)
INTEREST AND DIVIDEND INCOME
Loans, including fees	$	8,730	$	7,628
Taxable securities		240		229
Tax-exempt securities		109		106
Federal funds sold and other		39		18
Total interest and dividend income		9,118		7,981

INTEREST EXPENSE
Deposits		1,812		1,478
FHLB advances and other borrowed funds		303		218
Subordinated debentures		66		120
Total interest expense		2,181		1,816
Net interest income		6,937		6,165
Provision for loan losses		812		(602	)
Net interest income after provision for loan losses		6,125		6,767
NON-INTEREST INCOME
Services charges		277		220
Gain on sale of loans, net		100		93
Loan servicing fees		1,447		1,253
Other		113		309
Total non-interest income		1,937		1,875
NON-INTEREST EXPENSE
Employee compensation and benefits		3,001		2,720
Occupancy		93		81
Write-down of other real estate owned		84		182
Other		1,413		1,635
Total non-interest expense		4,591		4,618
Income before income taxes		3,471		4,024
Income tax expense		1,295		1,498
NET INCOME	$	2,176	$	2,526

NET INCOME PER SHARE:
Basic	$	0.36	$	0.44
Diluted	$	0.35	$	0.43
Dividends paid per share	$	0.05	$	0.04

See accompanying notes to consolidated financial statements.

COUNTY BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Three Months Ended March 31, 2016 and 2015

(Unaudited)

	March 31, 2016			March 31, 2015
	(dollars in thousands)
Net income	$	2,176		$	2,526
Other comprehensive income:
Unrealized gains on securities available-for-sale		669			479
Income tax benefit		(261	)		(188	)
Total other comprehensive income		408			291
Comprehensive income	$	2,584		$	2,817

See accompanying notes to consolidated financial statements.

COUNTY BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

For the Three Months Ended March 31, 2016 and 2015

(Unaudited)

	Preferred Stock		Common Stock		Surplus		Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Income		Total Shareholders' Equity
	(dollars in thousands)
Balance at December 31, 2014	$	8,000	$	5	$	16,970	$	59,254		$	(4,572	)	$	386	$	80,043
Net income		—		—		—		2,526			—			—		2,526
Other comprehensive income		—		—		—		—			—			291		291
Stock compensation expense, net of tax		—		—		53		—			—			—		53
Cash dividends declared on common stock		—		—		—		(229	)		—			—		(229	)
Cash dividends declared on preferred stock		—		—		—		(80	)		—			—		(80	)
Cash dividends declared on SBLF preferred stock		—		—		—		(38	)		—			—		(38	)
Proceeds from sale of common stock (1,220,750 shares)		—		13		16,965		—			—			—		16,978
Balance at March 31, 2015	$	8,000	$	18	$	33,988	$	61,433		$	(4,572	)	$	677	$	99,544

Balance at December 31, 2015	$	8,000	$	19	$	34,717	$	68,825		$	(4,758	)	$	221	$	107,024
Net income		—		—		—		2,176			—			—		2,176
Other comprehensive income		—		—		—		—			—			408		408
Stock compensation expense, net of tax		—		—		128		—			—			—		128
Cash dividends declared on common stock		—		—		—		(289	)		—			—		(289	)
Cash dividends declared on preferred stock		—		—		—		(81	)		—			—		(81	)
Cash dividends declared on SBLF preferred stock		—		—		—		(21	)		—			—		(21	)
Proceeds from exercise of common stock options (1,943 shares)		—		—		33		—			—			—		33
Balance at March 31, 2016	$	8,000	$	19	$	34,878	$	70,610		$	(4,758	)	$	629	$	109,378

See accompanying notes to consolidated financial statements.

COUNTY BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended March 31, 2016 and 2015

(Unaudited)

	March 31, 2016			March 31, 2015
	(dollars in thousands)
Cash flows from operating activities
Net income	$	2,176		$	2,526
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization of premises and equipment		177			151
Provision for loan losses		812			(602	)
Realized loss on sales of other real estate owned		—			373
Write-down of other real estate owned		84			182
Realized loss (gain) on sales of premises and equipment		(8	)		4
Increase in cash surrender value of bank owned life insurance		(72	)		(71	)
Deferred income tax expense (benefit)		(402	)		194
Stock compensation expense, net		128			53
Net amortization of securities		134			147
Net change in:
Accrued interest receivable and other assets		(69	)		(120	)
Loans held for sale		5,221			(5,262	)
Loan servicing rights		(150	)		(61	)
Accrued interest payable and other liabilities		(102	)		391
Net cash provided by (used in) operating activities		7,929			(2,095	)
Cash flows from investing activities
Proceeds from maturities, principal repayments, and call of securities available for sale		4,128			2,011
Purchases of securities available for sale		—			(1,561	)
Purchases of FHLB stock		(217	)		(218	)
Loan originations and principal collections, net		(27,817	)		13,323
Proceeds from sales of premises and equipment		13			11
Purchases of premises and equipment		(1,188	)		(54	)
Capitalized additions to other real estate owned		—			(39	)
Proceeds from sales of other real estate owned		—			1,493
Net cash provided by (used in) investing activities		(25,081	)		14,966
Cash flows from financing activities
Net decrease in demand and savings deposits		(30,117	)		(6,726	)
Net increase in certificates of deposits		51,072			9,698
Net change in other borrowings		(538	)		(18,211	)
Proceeds from FHLB advances		45,200			5,000
Repayment of FHLB advances		(28,200	)		—
Proceeds from issuance of common stock		33			16,978
Redemption of SBLF preferred stock		(15,000	)		—
Dividends paid on SBLF preferred stock		(21	)		(38	)
Dividends paid on preferred stock		(81	)		(80	)
Dividends paid on common stock		(289	)		(229	)
Net cash provided by financing activities		22,059			6,392
Net change in cash and cash equivalents		4,907			19,263
Cash and cash equivalents, beginning of period		14,907			10,480
Cash and cash equivalents, end of period	$	19,814		$	29,743

Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	2,023		$	1,853
Income taxes		650			220
Noncash investing activities:
Transfer from loans to other real estate owned	$	159		$	—
Loans charged off		—			149

See accompanying notes to consolidated financial statements.

County Bancorp, Inc. and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

NOTE 1 – BASIS OF PRESENTATION

The unaudited consolidated financial statements of County Bancorp, Inc. (the “Company”) and its subsidiaries have been prepared, in the opinion of management, to reflect all adjustments necessary for a fair presentiation of the financial position, results of operations, and cash flows for the interim period. The results of operations for the three months ended March 31, 2016 may not necessarily be indicative of the results to be expected for the entire fiscal year.

Management of the Company is required to make estimates and assumptions which affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported amounts of income and expenses during the reported periods. Actual results could differ significantly from those estimates.

These unaudited interim financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”). Certain information in footnote disclosure normally included in financial statements prepared in accordance with GAAP has been condensed or omitted pursuant to rules and regulations of the Securities and Exchange Commission (“SEC”). These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Form 10-K for the year ended December 31, 2015.

The Company qualifies as an “emerging growth company” under the Jumpstart Our Business Startups Act (the “JOBS Act”). Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”), for complying with new or revised accounting standards. As an emerging growth company, the Company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company elected to take advantage of the benefits of this extended transition period.

NOTE 2—ACQUISITION

On November 19, 2015, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among the Company, County Acquisition LLC, a wholly-owned subsidiary of the Company, and Fox River Valley Bancorp, Inc., a Wisconsin corporation (“Fox River Valley”), pursuant to which the Company will acquire Fox River Valley and its wholly-owned bank subsidiary, The Business Bank. Under the terms of the Merger Agreement, the Company will acquire 100% of Fox River Valley’s outstanding common stock for aggregate consideration of $28.9 million, subject to downward adjustment under certain circumstances.

The purpose of the merger is for strategic reasons beneficial to the Company. The acquisition is consistent with its growth plans to expand into the desirable markets of Appleton and Green Bay, Wisconsin and diversify its loan portfolio to decrease its agricultural concentration. The Company believes it is well-positioned to achieve stronger financial performance and enhance shareholder value through synergies of the combined operations.

Fox River Valley’s shareholders approved the Merger Agreement on March 17, 2016, and the merger transaction is appropriately not reflected in the Company’s March 31, 2016 financial statements. The Company received the required regulatory approvals in April 2016, and the merger is expected to close on May 13, 2016, and is subject to customary closing conditions.

NOTE 3 – EARNINGS PER SHARE

Earnings per common share ("EPS") is computed using the two-class method. Basic earnings per common share is computed by dividing net income by the weighted-average number of common shares outstanding during the applicable period. Diluted earnings per share is computed using the weighted-average number of shares determined for the basic earnings per common share plus the dilutive effect of share-based compensation using the treasury stock method.

	For the Three Months Ended
	March 31,
	2016		2015
Net income from continuing operations	$	2,176	$	2,526
Less: preferred stock dividends including SBLF		102		118
Income available to common shareholders for basic EPS	$	2,074	$	2,408

Average number of common shares issued		6,561		6,193
Less: weighted average treasury shares		422		410
Less: weighted average nonvested equity incentive plan shares		360		348
Weighted average number of common shares outstanding		5,779		5,435
Effect of dilutive options		109		120
Weighted average number of common shares outstanding used to calculate diluted earnings per common share		5,888		5,555

NOTE 4 – SECURITIES AVAILABLE-FOR-SALE

The amortized cost and fair value of securities available for sale as of March 31, 2016 and December 31, 2015 are as follows:

	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(dollars in thousands)
March 31, 2016
U.S. government and agency securities	$	2,003	$	1	$	—		$	2,004
Municipal securities		43,462		346		(7	)		43,801
Mortgage-backed securities		33,189		698		—			33,887
	$	78,654	$	1,045	$	(7	)	$	79,692
December 31, 2015
U.S. government and agency securities	$	2,003	$	—	$	—		$	2,003
Municipal securities		46,185		185		(58	)		46,312
Mortgage-backed securities		34,728		356		(118	)		34,966
	$	82,916	$	541	$	(176	)	$	83,281

The amortized cost and fair value of securities at March 31, 2016 and December 31, 2015, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized		Fair
	Cost		Value
	(dollars in thousands)
March 31, 2016
Due in one year or less	$	10,588	$	10,611
Due from one to five years		32,179		32,433
Due from five to ten years		2,698		2,761
Due after ten years		—		—
Mortgage-backed securities		33,189		33,887
	$	78,654	$	79,692
December 31, 2015
Due in one year or less	$	5,005	$	5,017
Due from one to five years		39,329		39,400
Due from five to ten years		3,854		3,898
Due after ten years		—		—
Mortgage-backed securities		34,728		34,966
	$	82,916	$	83,281

There were no security sales for the three months ended March 31, 2016 and 2015, respectively.

The following table shows the gross unrealized losses and fair value of the Company’s investments with unrealized losses that are not deemed to be other-than-temorarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2016 and December 31, 2015:

	Less Than 12 Months					12 Months or Greater					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
	(dollars in thousands)
March 31, 2016
U.S. government and agency securities	$	—	$	—		$	—	$	—		$	—	$	—
Municipal securities		3,851		(5	)		610		(2	)		4,461		(7	)
Mortgage-backed securities

County Bancorp, Inc. - FORM 10-Q - May 12, 2016

Attached files