County Bancorp (ICBK) 24 Jan 202019 Q4 Earnings call transcript

Good morning, and welcome to the County Bancorp, Incorporated Earnings Release for December 31, 2019 Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. Please note, this event is being recorded.

I would now like to turn the conference over to Tim Schneider, President of County Bancorp. sir. ahead, go Please

Welcome XXXX. earnings everyone. fourth for quarter of to morning, call our the Good

ask to a will we the your that We presentation. you we'll will own presentation through and we manually. on be the on We move which had announce little as in advance glitch slides the through slides

As forward-looking like X Slide presentation. I'd statements to end we with of a year on disclaimer have reminder, on a the of the start use our review.

these quarterly the back headwinds, into into a set goals increase throughout They get our our I the want we strategic in step we XXXX. we Before uncertainty XXXX XXXX was efforts assets behind a sheet. prices, deleverage main assets challenging take results, faced and lower X. classified classified and navigate profitability, interest year balance going to we lot reduce of included a There on reflect as three milk on To had in and Slide rate environment.

to We off Thanks all servicing in to by loans of these ability proud with I'm sheet to loans year of three have our team, XXXX. say XX%. our our we asset spread reduced ratio a profitability to and classified driven accomplished record sell of rights. partly hard the associated servicing balance had the work We've from XX%

end. $XXX almost our doubling $XXX by by year-over-year wholesale million we funding year our Finally reduced goal of million

in by should by signed we the in is unfortunate USMCA create XX% one the are waiting final opportunity to process Ag shifting Phase region funding Wisconsin and we wildfires in environment, reduction both agreed from done; implemented. issues is for Weather also parties exports. of but of about are and very trade Canada. funding which being just for also wholesale dairy the Oceana all The ratification mix current deal China year-over-year The XX% our remain optimistic our and to the

milk improved our combined remain Lastly, client performance. feed which prices dairy-Ag impact should costs with low positively

side, seen do at pockets see the as from commercial that but we of on the issue have We not major some stress this time. trade wars a

going We on now move Slide to X. quality are to asset

We CME ago milk $XX.XX. by III encouraged level prices A XX-month forward be continue of the year Class prices. averaged milk to current

are a We now $XX.XX averaging hundred.

Ag show classified charts, we clear embark hope the correlation reduced coverage the prices on show been process. a between As few assets year over rising as on XXXX years this has review there in we to end in the credit will and overall We improvement ratio. continue last milk XXXX

that $X one Ag classified split of $X.X disappointed classified both into the payoff as commercial who totaling sales. as one loan classified of but several were on customers OREO by well totaled was our We one this commercial million nonaccrual, offset million, and customer

our call the over turn walk to I'll Now through financials. Glen to

Tim. you, Thank

funding Moving to 'XX we to mix income use as sheet continue maintain starting focus fourth the of continuing on side sheet. the are quarter while allowed conference Slide to on This we in us our has sales with our continue also the to balance servicing X, fourth more now call, participation right profitability our attached. of quarter improving deleveraging to balance by XXXX initiative

funding in serviced $XX.X sold growth This by with by wholesale continue million client this to combined $XX.X reduce million and us $XX.X loans increased quarter. million allowed quarter. We deposit this

deposits pleased $XX.X in but were deposits. we our funding client with still and really change up client $XXX.X now is are focused Wholesale very mix, we noted, on million down the million are Tim XXXX. As growing in funding

Our a client represents funding deposit XX% of XX% year ago. total now compared to

in wholesale reducing will off XXXX. our funding believe We on overall focus level

other like brokered look to brokered to our CDs We for rate tax are about of really and as years. primary a at advances from year, X.XX% offered. growth and tool and currently like bonds We X.X. one management and X.XX% compared future that's we're utilize year would tool. month cost few call liquidity to the X.XX% three the corporate wholesale going lower three in one at currently Now the to FHLB actually three interest year have optionality with

Slide to net off The moving quarter income continued interest decreased activity impacted loan nonaccrual QX Turning this Fed our overall balance on also as loan in side as participations sheet. cut due the loan yields. rate X, balances to well our

the market. cut accounts to rates bearing products to However, able savings, immediate and we as were all money an with deposit off to interest continue on such impact NOW,

and from interest a had income CDs positive during with also the national reduction deposits of impacts brokered We net quarter.

sold Turning to points fee which this quarter. increased million servicing basis fourth the were to $X.X also to helped million able income loan quarter. to basis in XX increase our as serviced Slide mentioned loan our servicing this and increase $XX.X XX loans quarter spread for X, I from points We

the servicing $X.X in loan attributed quarter of loans to origination fourth Our in income. right increase also million and service sold

income. resulting income. $X.X a Turning the to quarter credits income expense to by impact positive resulted for historical in million $X.X to $X.X credit impact in to had million to Slide tax accounting positive impairment this which again The offset net $X.X net us required we a in during X, which other million million a to expense, was record

expense accomplished increased As we on as compensation incentive initiatives fourth strategic in mentioned our the quarter the alluded opening last his in we remarks. that our call, Tim

give XXXX. a coming Now what is I into look will in Tim and

Glen. Thanks

optimistic look the As we very our we year. overall to ahead feel for outlook XXXX about

X. have five XXXX strategic as We going on into initiatives see you'll Slide

technology tools serve customers. in better to analytic our going to data and are that us We investments help make

that into profitability. the already in surface officers have We client the [ph] the impact profitability and tool. system our us allows visibility only our we decisions invested corn to use at allows level of a scratched overall feel have have on pricing dive to better profitability We this into how

can and better that in we serve XXXX In so existing are we investment we clients. in make system the will an markets CRM prospective

drive to and growth additional adoption long-term deposit income and the We at digital drive fee opportunities. CRM core will use system

We concierge out banking our also will platform. roll

and Our are full focused opportunities Concierge residential, we be not including lending that mortgage, reaching. relationships bankers currently will on banking

focus We area will to hires with footprints. continue this able new one we our is on attract focused continue of two Because be additional our who lending ag nondairy including talent throughout opportunities to strength to lending. on in

to will are All opportunities. those to noninterest of loan tremendous deposits, where our opportunities, our sheet drive balance can to the especially off lenders sheet income core seeing and growth to utilize and continue as servicing relative participations push balance continuing drive income our manage we well as we

through reduce current levels ag that heal be milk We assets of our continue XXXX. hope dairy, our laser price We diligent to monitoring. continue focused into and continue of to will to flows clients classified cash

our opportunities commercial to commercial will continually to talent. We on footprint add and continue looking focus are throughout

our classified With and to of the of shareholder we allow deploy capital. ultimate goal maximizing some reduced assets milk improved us value, prices excess believe

our in We and the on to the of process increased hope both program are announcement in fronts. with have stock soon our evaluating buyback an Board common dividend

And back now some it to financials. insights turn XXXX I'll over into Glen give our to

Thanks Tim.

you'll growth with sheet anticipate on deposits. balance in on X% mark X% As Slide we client about loan growth see XX,

continue more to will earlier, on the keeping anticipating mentioned rate always to where environment funding I during look shifting we flat and interest XXXX at brokered anticipate As wholesale we is.

and certificates, continue XXXX in new and in to a We Owned will excess loan of shift repricing Bank cash through of investments Insurance look margins Life and rates. deposits expand

along increasing anticipate be about QX serviced QX that overall in about of Will QX, an number flat lines QX. service QX, growth and was loans in on X% benefits, our quarter-by-quarter you and saw. XX% this We XXXX of expense basis a of that and XX% and but more sold be in in should XX%

We expect flat. occupancy remain to

item. see spend line investments of item last we about expect website XXXX across in to three the in quarters We're a spread that $XXX,XXX making new development technology business of the and our on line

some the of professional and to solution fees be additional will hope by side, On implementation. fees Sarbanes–Oxley see to but that fees, somewhat we related offset collection reduction

as the Information continued IT CRM to by about due Tim side. up in as the $XXX,XXX processing the investment as go on upgrades will well system noted

noninterest normalized XXXX tax of by noise tax QX more credit rate in driven and expect We the XXXX. historic expense other in the

questions. And up now I'd to like to open it

from Please The go come Thank first with Nosal Piper will ahead. Instructions] Sandler. you. [Operator question Brendan

morning good guys, are Hey, how you?

are you? how Brendan, Good

thanks. Good,

loans I detail just given you more specifically that? to want a on into moved the on And we to guess, I the off today. drove milk color can I any have little migration start here guess classified nonaccrual negative kind two then prices that to provide as higher what credit, in Just surprised just was and that I see the guess quarter. dairy of

just of the was point kind credit? what on So that tipping

the with which environment feel a has expanded that they to able as should longer-term started and some will usage credit should operation that milk succeed had FSA this this that be are prices right operation we lower and do challenges more give forward. substantial Chapter and that we deal their after This particular credit loss to them thing and moving to the expect throughout accounts bankruptcy if able be then XX not they guarantee viability. good Yes, payable fail, decline in confident file price to was operation hopefully flush decided ultimately going is this has much strong particular it but any we're a

were then I signals on some perfect, there quarter. broadly, this All thank And you. right, credit more mixed guess

no charge-offs, and classified other improved, assets nonaccrual. negative classified hand, no On the then into the provision know, one on within migration hand and you

we I how on credit as just just level currents? at contemplate the more thinking are top broadly cross these So you guess us update

much there better big have you some I themselves to asked Well, some able portfolio. The about milk of holes dug the we're operations dig that to an particular future credit obviously our optimistically in and continued environment. potentially operations but think this improvement priced at outlier, a need in we think pretty We we're and about going to really is are out see think our be that point.

reviews a early are XXXX seeing are are some numbers performance from solid perspective. We more for much coming through that looking already the

good should that are ORE the prices should have this if point quarter occur at additional much We overall we sales in milk So about better see maintained. pretty this occurring do it. especially that's and feeling some portfolio first we're which feel more about our some activity bucket

back. that's fantastic, from then last and step me And right, then All one I'll helpful.

cash do some that is to, which think for Just putting just to of opportunity magnitude alluded in the know, work thinking you about NIM? margin resulting can year the terms curious throughout do in some the you expansion, you what

Glen. is this Brendan,

a investment I are be – So investment of it it is It take think It bump. the well opportunities BOLI really time – February up. done probably off on we're probably the going barn investment going bit frame million. to it little great We'll to $XX been a point get just ramp the deploying opportunities but about the slowly is is to that's little the or has XX basis cash. so January bit timeframe, probably side,

All right.

course the XX? sounds maybe and first, bit NIM, over points of but basis the it XX like on slower So the net-net a at year little

Yes, that's been, there we're, portfolio, one is The from is much I mean time. headwind nonaccrual, as some of takes drain anything. estimate difficult the we're been repricing go so the to but that's obviously to CD on when see continuing probably that things thing just –

So…

Perfect, for the color. so thanks much

go The question with Rulis Jeff from D.A. ahead. next Please Davidson. comes

Thanks, good morning.

Good morning, Jeff.

Good morning, Jeff.

of basis what quarter up the point launch to following just Glen, margin? on impact on the was that, this nonaccrual

probably It is basis points. X around

In total, just X…

answer Does question? your that

effectively core absent that so pretty margin steady. move No, Yes. is

don’t had definitely out the want the an so… – difficult to those, Yes, predict impact it too, to been cuts has I to is part I best minimize definitely to so but part the is that mean that nonaccrual rate impact the

of of to and Right, that just guidance what kind operating those together expense credit, given but rate tax kind okay were overall again? moving maybe figures and following on pieces then tackling tax that the up some

noninterest was credit So to tax the impact expense. historic $X.X million

I the of QX put guess I you guess XX would guide looking be Right, there? forward what kind absent

up, From grand we're about year for that I XXX up a overall. but I noninterest expense the think we're about off think probably when back you

are expense rate guess to I both what XX similar and and tax level? tax so revert pointing a And looking expenses on bump for you to on core to I'm rate

in The tax XX% of the is probably a probably about is ton the out rate, so of XX%, have – XX.X%. the taxes range, we it don’t income, it

got you. Okay,

step will I Okay, thanks. back,

Yep.

with go from comes Terry ahead. Stephens. question McEvoy Please next The

Hey morning. guys, good

Good morning, Terry.

quarters review you guess results the be or the Ag a will year few in it end quarter review see I to first will the the take for completed?

the I in think, some kind second see conclusion but going entire mentioned will we seeing results first Ag seeing quarter think to the and picture. reviews already have and we in quarter the before that early as whole some earlier book upgrades We be final I the on we're are of the some is

deposits time trending talked buckets lower come you bit What opportunities? down. some progression little for just Glen there your cost actually costs just out in that a fourth just revising any taking up time you basis then, points. They quarter thoughts to about in on And see X of Are deposit yields stand XXXX. are quarters some where are time the of

pretty the throughout smooth so… year, it's Terry No,

And last, that then moved or at that just loan commercial dairy was to the related nonaccrual, Ag all?

continue in It happened they a it of and about kind kind revenue. Central was kind owners No, They hit quasi of manufacture that one business SBA we four similar struggle topline wasn’t. mark. of startup Wisconsin find to of just company five it the and originated loan and or had to that the years an XXX in was manufacturing for we plan a commercial to specialized was ago a

ultimately So on bit larger nonperforming. decided done hope impairment equipment, a that maybe the There's able discounted to one. pull of We into and because time this but did little a of tell. we things it and we to had the will some move still take specialized to reappraisal which out, unfortunately some have equipment,

Okay, thanks guys.

question Janney. with be next Please ahead. will Brian go Martin The from

guys. morning, good Hey,

Brian. Hi,

credit you guess what with I little the the I about about think kind year the just percentage a with, Hey Tim, improvement you talk you thinking prices, of provisioning can Glen, you're that going bit through I to – milk this the of or what guess, seeing kind bit, review, are how XXXX? optimism but guess the but unfold see should end it pretty sounds we provisioning maybe I your come I minimal, down picture year are a guess in given the, is on how

Glen. expected what then was be is If is or that We dollar similar amount will start this improve. obviously than more to the it to year. to see going we it Brain, think is probably upgrades

we've So overall so… we that good out feel though, things washed got pretty

Okay, in with guess there, kind is size some are this as quarter. the in in I far of chunkier where in these it the credits as credits mean me, any could move portfolio – of granular remind given just there, portfolio, Ag is pretty the things in there I that

have obviously credits. some we Well, larger

use the not in as broadly and provide As of these any operations have before, that guarantee mentioned continued the really again larger to FSA will But to I've expand, a position program we've got right very and impact we lot those slide impairment the exposure. scale. are down position from if there

you about but then got Okay most portfolio okay. do still, going are guess year this mix? to anticipate or you loan the that be are the that the the you, originations on grow to put continue the part growth this year, you of Ag in you is I And of still of just to commercial how thinking loans, front just new the

a Yes, combination. I think be will it

well opportunities recently backers also a to of couple continuing are in kind from mentioned primary so diversification see a we will the bankers have our nondairy and a help base, out Ag new we a of in hired commercial Our that one that specialist one the competitors, that's Ag's we've as of script, there standpoint. from as

you as sure us We participations manage the the fairly to should and with manage nice guarantee sheet as will your drive the as core income we model it make income. funding, growth of continued noninterest to know strong on there make some to is sales FSA well spreads but with going help can continue balance noninterest in our

about a income I this pretty Okay I think forward? it level fee I guess going of like is model am Glen, good right? item, called about quarter, and but one to it but thinking think $XXX,XXX I this out this, maybe was you this missed was thought that I

I'm are sorry, I'm follow you I'm what I Brain, sure sorry, not asking?

is that a go this the think as on to XXXX? going Just about about you rate pretty part forward, think good into to just how of the fee income level quarter's run P&L,

fee I and should the some Yes, mean there. on increase servicing see we income

growth should during what origination over million a what year, back you side this an about We X% saw rate loans origination quarter, the are that – up. off should but so from that should to should see baking originations the The kind creep side say, I continue in bit you levels a sum remain those of year, would lead the $XX there, income. usually origination right

right origination and Some [indiscernible]

our is think quarter pipeline bankers participation some looked as strong morning, not fairly slower. see quarter, a continue I that probably to I first at both but guarantees standpoint. said origination this Ag FSA as guarantee and generally hired as income, continue we've got I little We've with new from standpoint the strong third the to a pipeline FSA fourth noninterest we'll decent And and and

helpful. Got much. my you, so of takes okay. care That That's questions. Thanks

The next question Sandler. Piper with Please is a followup go from Brendan ahead. Nosal

from cost on I factors might of and a be both road? it and a trying your just boundary guys, kind from I just eventually Hey as being like how for active right level, asset in do be gauge but down be just think say the on PC it, XX% more the is and that, buyback terms perspective, might you it might ratio of how the ample that have kind regulatory of how the probably obviously weight and capital that cannot those aggressive a you feels appreciate you one actually I considered you to ton, but potential about me

is and Yes, I mean we're still in of the Glen. process this

on or fairly cautious boundary so we definitely quarter-to-quarter with will in to Board, as the of comment I comment we're don’t want a buyback when We're on to a on to much we too month-by-month that. of want evaluating much basis. watch ratio aggressive we're at to look still to process kind prices on too how we're I we things, classified the so the do don’t So – the going going be how milk it.

followup. No worries, taking for the thanks

Yep.

Ladies this over remarks. would Schneider, back to our session. closing and conference to gentlemen, concludes the like Tim question-and-answer for any turn I

of we all are for on fact as we pretty fourth us. those. three given like three well feel we major some joining that Thank you, and quarter, We initiatives the a as we felt a that from strong the especially had driving success XXXX strategic strong had all we had

are looking as in a we stay continue which decent about. year So and as as prices fairly to milk to strong solid well long forward XXXX year a we're optimistic

thank us. for So you joining all

now has presentation. conference The concluded. you attending today's Thank for

You disconnect. now may