SPARTA, Mich., April 21, 2021 /PRNewswire/ -- ChoiceOne
Financial Services, Inc. ("ChoiceOne", NASDAQ: COFS), the parent
company for ChoiceOne Bank, reported financial results for the
quarter ended March 31, 2021.
Significant items impacting comparable first quarter 2021 and
2020 results include the following:
- On July 1, 2020, ChoiceOne
completed the 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 merger with Community Shores
were approximately $244.0 million,
$173.9 million and $227.8 million, respectively.
- There were no merger-related expenses in the first quarter of
2021. ChoiceOne incurred tax-effected merger-related expenses
of approximately $547,000 and
$282,000, respectively ($0.07 per diluted share and $0.04 per diluted share, respectively), for the
quarters ended December 31, 2020 and
March 31, 2020.
Financial Highlights
- Net income of $6,238,000 for the
first quarter of 2021 compared to $3,254,000 in the same period in 2020.
- Diluted earnings per share of $0.80 in the first quarter of 2021 compared to
$0.45 per share in the first quarter
of the prior year.
- In the first quarter of 2021, $56.4
million of Paycheck Protection Program (PPP) loans were
forgiven resulting in $1.4 million of
fee income. In addition, ChoiceOne added 718 PPP loans to its
portfolio in the first quarter of 2021 with a balance of
$76.7 million. Fee income
related to new PPP loans amounted to $3.7
million, of which $208,000 was
recognized in the first quarter of 2021.
- Total deposits grew $165.4
million in the first quarter of 2021 and $666.6 million since the first quarter of
2020. $227.8 million of the
year over year growth was related to the merger with Community
Shores which closed on July 1,
2020.
- In an effort to deploy deposit growth ChoiceOne grew its
securities portfolio $148.7 million
in the first quarter of 2021 and $363.6
million in the twelve months ended March 31, 2021. We believe our portfolio
will provide a natural hedge for floating rate loans and
investments are sufficiently short-term to allow us to grow loans
organically as good credits become available.
ChoiceOne reported net income of $6,238,000 for
the first quarter of 2021 compared
to $3,254,000 in the same period
in 2020. Diluted earnings per share
were $0.80 in the first quarter of 2021 compared
to $0.45 per share in the first quarter of the prior
year. Excluding $282,000 in tax-effected merger
related expenses, net income for the first quarter
of 2020 was $0.49 per diluted share. The
increases in net income compared to prior periods in 2020 are
partially due to the merger with Community Shores; however,
ChoiceOne has had success growing deposits organically and
capitalizing on fee income from PPP loans.
Total assets grew $671.6 million
from March 31, 2020 to March 31, 2021. Of this growth,
$244.0 million resulted
from assets obtained in the Community Shores Merger
and $427.6 million was organic. PPP loans have
been a driver of this growth; however, only $137.5 million in PPP loans remained on
ChoiceOne's balance sheet as of March 31,
2021 following the recent round of forgiveness by the Small
Business Administration. In the first quarter of 2021,
$56.4 million PPP loans were forgiven
resulting in $1.4 million of fee
income. In addition, ChoiceOne added 718 PPP loans to the
portfolio with a balance of $76.7
million. Fee income related to new PPP loans amounted
to $3.7 million, of which
$208,000 was recognized in the first
quarter of 2021. ChoiceOne also saw deposit growth of
$165.4 million in the first
quarter of 2021 and $666.6
million since the first quarter of 2020. $227.8 million of the year over year growth
was related to the merger with Community Shores. Organic
deposit growth is partly due to how individuals and businesses have
managed funds received under the Coronavirus Aid, Relief and
Economic Security Act. In an effort to
deploy deposit growth ChoiceOne grew its securities portfolio
$148.7 million in the first quarter
of 2021 and $363.6 million
in the twelve months ended March
31, 2021. We believe our portfolio will provide a
natural hedge for floating rate loans and investments are
sufficiently short-term to allow us to grow loans organically
as good credits become available. ChoiceOne incurred
$250,000 in provision for loan losses
expense during the first quarter of 2021,
some of which was related to the impact of the COVID-19
pandemic and the remainder was related to changes in risk in
ChoiceOne's loan portfolio. The remaining credit mark on
acquired loans from the recent mergers with County Bank Corp.
and Community Shores Bank Corporation totaled $8.0 million as of March 31, 2021. Although ChoiceOne has not
seen a significant increase 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.
Total noninterest income was $5.6 million in the
first quarter of 2021 compared to $4.1
million in the first quarter of 2020 which
represented an increase of $1.5
million. While increased scale was a factor, most of
the increase was related to a difference in the change in the
market value of equity securities from a negative $389,000 in the first quarter of 2020 to a
positive $608,000 in the first
quarter of 2021. The stock market dipped sharply in
March 2020 related to the COVID-19
pandemic which affected securities held by ChoiceOne. Since
that time ChoiceOne has seen the value of equity investments
held climb to pre-pandemic levels. Mortgage activity
continued to remain strong as lower interest rates
encouraged refinancing activity.
Total noninterest expense increased $2.1 million in the first quarter of 2021
compared to the first quarter of 2020. Much of the
increase was caused by the increase in scale related to the
merger with Community Shores. Total noninterest
expenses declined by $1.2
million in the first quarter of 2021 compared to the prior
quarter due in part to a lack of merger-related expenses in the
first quarter of 2021.
"I am pleased to report strong net income for the first quarter
of 2021," said Chief Executive Officer of ChoiceOne Kelly
Potes. "I am particularly pleased with the organic deposit growth,
and our PPP loans processed. As a community bank, our scale and
agility has allowed us to efficiently process PPP loans for our
small businesses helping them to maintain thousands of jobs in
Michigan."
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 certain 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, 2020.
Condensed Balance
Sheets
(Unaudited)
|
(In
thousands)
|
|
3/31/2021
|
|
|
12/31/2020
|
|
|
3/31/2020
|
|
Cash and Cash
Equivalents
|
|
$
|
135,328
|
|
|
$
|
79,519
|
|
|
$
|
45,471
|
|
Securities
|
|
|
734,435
|
|
|
|
585,687
|
|
|
|
370,836
|
|
Loans Held For
Sale
|
|
|
18,736
|
|
|
|
12,921
|
|
|
|
7,385
|
|
Loans to Other
Financial Institutions
|
|
|
7,312
|
|
|
|
35,209
|
|
|
|
39,421
|
|
Loans, Net of
Allowance For Loan Losses
|
|
|
1,027,343
|
|
|
|
1,062,075
|
|
|
|
806,787
|
|
Premises and
Equipment
|
|
|
30,262
|
|
|
|
29,489
|
|
|
|
24,087
|
|
Cash Surrender Value
of Life Insurance Policies
|
|
|
32,938
|
|
|
|
32,751
|
|
|
|
32,171
|
|
Goodwill
|
|
|
59,946
|
|
|
|
60,506
|
|
|
|
52,593
|
|
Core Deposit
Intangible
|
|
|
4,961
|
|
|
|
5,269
|
|
|
|
5,653
|
|
Other
Assets
|
|
|
18,869
|
|
|
|
15,916
|
|
|
|
14,086
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
2,070,130
|
|
|
$
|
1,919,342
|
|
|
$
|
1,398,490
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing
Deposits
|
|
$
|
515,552
|
|
|
$
|
477,654
|
|
|
$
|
283,434
|
|
Interest-bearing
Deposits
|
|
|
1,324,412
|
|
|
|
1,196,924
|
|
|
|
889,965
|
|
Borrowings
|
|
|
6,599
|
|
|
|
9,327
|
|
|
|
23,188
|
|
Other
Liabilities
|
|
|
4,902
|
|
|
|
8,169
|
|
|
|
6,101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities
|
|
|
1,851,465
|
|
|
|
1,692,074
|
|
|
|
1,202,688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
Equity
|
|
|
218,665
|
|
|
|
227,268
|
|
|
|
195,802
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and
Shareholders' Equity
|
|
$
|
2,070,130
|
|
|
$
|
1,919,342
|
|
|
$
|
1,398,490
|
|
Condensed
Statements of Income
(Unaudited)
|
|
|
Three Months
Ended
|
|
(In Thousands, Except
Per Share Data)
|
|
3/31/2021
|
|
|
12/31/2020
|
|
|
3/31/2020
|
|
Interest
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, including
fees
|
|
$
|
12,683
|
|
|
$
|
12,764
|
|
|
$
|
10,075
|
|
Securities and
other
|
|
|
2,973
|
|
|
|
2,276
|
|
|
|
2,419
|
|
Total Interest
Income
|
|
|
15,656
|
|
|
|
15,040
|
|
|
|
12,494
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
880
|
|
|
|
949
|
|
|
|
1,385
|
|
Borrowings
|
|
|
88
|
|
|
|
99
|
|
|
|
138
|
|
Total Interest
Expense
|
|
|
968
|
|
|
|
1,048
|
|
|
|
1,523
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Interest
Income
|
|
|
14,688
|
|
|
|
13,992
|
|
|
|
10,971
|
|
Provision for Loan
Losses
|
|
|
250
|
|
|
|
1,000
|
|
|
|
775
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Interest Income
After Provision for Loan Losses
|
|
|
14,438
|
|
|
|
12,992
|
|
|
|
10,196
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer service
charges
|
|
|
1,920
|
|
|
|
1,946
|
|
|
|
1,845
|
|
Insurance and
investment commissions
|
|
|
273
|
|
|
|
125
|
|
|
|
126
|
|
Gains on sales of
loans
|
|
|
2,146
|
|
|
|
2,958
|
|
|
|
1,743
|
|
Gains on sales of
securities
|
|
|
1
|
|
|
|
-
|
|
|
|
2
|
|
Trust
income
|
|
|
173
|
|
|
|
169
|
|
|
|
170
|
|
Earnings on life
insurance policies
|
|
|
186
|
|
|
|
195
|
|
|
|
192
|
|
Change in market
value of equity securities
|
|
|
608
|
|
|
|
29
|
|
|
|
(389)
|
|
Other
income
|
|
|
293
|
|
|
|
266
|
|
|
|
410
|
|
Total Noninterest
Income
|
|
|
5,600
|
|
|
|
5,688
|
|
|
|
4,099
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest
Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and
benefits
|
|
|
7,168
|
|
|
|
6,994
|
|
|
|
5,128
|
|
Occupancy and
equipment
|
|
|
1,554
|
|
|
|
1,598
|
|
|
|
1,270
|
|
Data
processing
|
|
|
1,429
|
|
|
|
2,128
|
|
|
|
1,484
|
|
Professional
fees
|
|
|
729
|
|
|
|
819
|
|
|
|
762
|
|
Core deposit
intangible amortization
|
|
|
307
|
|
|
|
396
|
|
|
|
353
|
|
Other
expenses
|
|
|
1,341
|
|
|
|
1,833
|
|
|
|
1,419
|
|
Total Noninterest
Expense
|
|
|
12,528
|
|
|
|
13,768
|
|
|
|
10,416
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before Income
Tax
|
|
|
7,510
|
|
|
|
4,912
|
|
|
|
3,879
|
|
Income Tax
Expense
|
|
|
1,272
|
|
|
|
812
|
|
|
|
625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
6,238
|
|
|
$
|
4,100
|
|
|
$
|
3,254
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per
Share
|
|
$
|
0.80
|
|
|
$
|
0.53
|
|
|
$
|
0.45
|
|
Diluted Earnings Per
Share
|
|
$
|
0.80
|
|
|
$
|
0.52
|
|
|
$
|
0.45
|
|
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
|
|
(In Thousands, Except
Per Share Data)
|
|
3/31/2021
|
|
|
12/31/2020
|
|
|
3/31/2020
|
|
Income before income
tax
|
|
$
|
7,510
|
|
|
$
|
4,912
|
|
|
$
|
3,879
|
|
Adjustment for
merger-related expenses
|
|
|
-
|
|
|
|
692
|
|
|
|
302
|
|
Adjusted income
before income tax
|
|
$
|
7,510
|
|
|
$
|
5,604
|
|
|
$
|
4,181
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
expense
|
|
$
|
1,272
|
|
|
$
|
812
|
|
|
$
|
625
|
|
Tax impact on
adjustment for merger-related expenses
|
|
|
-
|
|
|
|
145
|
|
|
|
20
|
|
Adjusted income
tax expense
|
|
$
|
1,272
|
|
|
$
|
957
|
|
|
$
|
645
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
6,238
|
|
|
$
|
4,100
|
|
|
$
|
3,254
|
|
Adjusted net
income
|
|
$
|
6,238
|
|
|
$
|
4,647
|
|
|
$
|
3,536
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per
share
|
|
$
|
0.80
|
|
|
$
|
0.53
|
|
|
$
|
0.45
|
|
Diluted earnings per
share
|
|
$
|
0.80
|
|
|
$
|
0.52
|
|
|
$
|
0.45
|
|
Adjusted basic
earnings per share
|
|
$
|
0.80
|
|
|
$
|
0.60
|
|
|
$
|
0.49
|
|
Adjusted diluted
earnings per share
|
|
$
|
0.80
|
|
|
$
|
0.59
|
|
|
$
|
0.49
|
|
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SOURCE ChoiceOne Financial Services, Inc.