ChoiceOne Financial Reports Third Quarter 2020 Results
ChoiceOne Financial Reports Third Quarter 2020 Results |
[28-October-2020] |
SPARTA, Mich., Oct. 28, 2020 /PRNewswire/ -- ChoiceOne Financial Services, Inc. ("ChoiceOne", NASDAQ:COFS), the parent company for ChoiceOne Bank reported financial results for the quarter ended September 30, 2020. Significant items impacting comparable third quarter and year to date 2020 and 2019 results include the following:
Financial Highlights
ChoiceOne reported net income of $3,829,000 for the third quarter of 2020 compared to $1,021,000 in the same period in 2019. Diluted earnings per share were $0.49 in the third quarter of 2020 compared to $0.28 per share in the third quarter of the prior year. Excluding $1,423,000 in tax-effected merger-related expenses, net income for the third quarter of 2020 amounted to $5,252,000 or $0.67 per diluted share, compared to $1,642,000 or $0.45 per diluted share in the same period in 2019 when adjusted for tax-effected merger-related expenses. Net income for the first nine months of 2020 was $11,513,000 or $1.55 per diluted share, compared to $4,144,000 or $1.14 per diluted share in the first nine months of 2019. Net income for the first nine months of 2020, when adjusted to exclude $2,167,000 of tax-effected merger-related expenses, was $13,680,000 or $1.84 per diluted share, compared to $5,338,000 or $1.46 per diluted share in the same period in the prior year when adjusted for tax-effected merger-related expenses. The increases in net income as compared to prior periods in 2019 are largely due to the County Merger and the Community Shores Merger. Higher levels of gains on sales of loans in 2020 compared to the prior year also contributed to net income growth. "ChoiceOne is pleased and grateful to report strong net income for the third quarter of 2020, particularly in light of the COVID-19 pandemic," said ChoiceOne CEO Kelly Potes. "We experienced significant gains on sales of mortgages offset by a large provision for loan losses expense mostly related to the pandemic. At the same time, our expert teams completed two bank consolidations in 2020 – the consolidation of Lakestone Bank & Trust with and into ChoiceOne Bank in May and the consolidation of Community Shores Bank with and into ChoiceOne Bank in October." Total assets grew to $1.8 billion as of September 30, 2020, compared to $1.5 billion as of June 30, 2020. Gross loans, excluding loans obtained in the Community Shores Merger, increased $32.7 million in the third quarter of 2020. Interest and fee income related to loans grew $18.0 million or 112% in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019. Growth in loan interest and related fee income was boosted by loans originated in the Paycheck Protection Program, the County Merger, and the Community Shores Merger. Accretion from loans acquired through the Paycheck Protection Program totaled $988,000 and $1,802,000 in the three and nine months ended September 30, 2020, respectively. Accretion from loans acquired in the County Merger and Community Shores Merger was $331,000 and $471,000 in the three and nine months ended September 30, 2020, respectively. ChoiceOne incurred $1,225,000 in provision for loan losses expense during the third quarter and $3,000,000 in the first nine months of 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 $9.1 million as of September 30, 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. Excluding deposits obtained in the Community Shores Merger, total deposits grew $30.8 million in the third 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 Paycheck Protection Program loans that were not fully utilized as of September 30, 2020. Total noninterest income increased $11.3 million in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019. This was largely due to gains on sales of loans which increased $7.0 million during the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 due to lower interest rates encouraging refinancing activity. Gains on sales of securities were $1.3 million higher in the first nine months of 2020 compared to the first nine months of 2019 as a result of a restructuring of ChoiceOne's securities portfolio in the second quarter of 2020. These gains were offset by the negative change in the market value of equity securities of $184,000 during the first nine months of 2020. Although customer service charges increased overall, they have declined as a percentage of deposits due to the effect of the COVID-19 pandemic on customer activity levels. Total noninterest expense increased $19.6 million in the first nine months of 2020 compared to the first nine months of 2019. Much of the increase was caused by expenses related to the consolidation of ChoiceOne Bank and Lakestone Bank & Trust in May 2020 and the Community Shores Merger. 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. "While we work through the issues related to the COVID-19 pandemic, our recent mergers have presented us with significant scale to move through these unprecedented times," said Potes. "We expect to continue to grow our community bank franchise throughout our expanded network across West and Southeast Michigan, keeping the safety and security of our customers, employees and those in our communities at the forefront of our growth." About ChoiceOne Non-GAAP Financial Measures 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 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 and June 30, 2020.
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Company Codes: OTC-PINK:COFS, NASDAQ-NMS:COFS |
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