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| 8-K - CHOICEONE FINANCIAL SERVICES INC | choice8k_072613.htm |
EXHIBIT 99.1
News Release
| Contact: | Tom Lampen, ChoiceOne Bank (616) 887-2337 tlampen@choiceone.com |
ChoiceOne Financial Announces Record Earnings For Second Quarter 2013
Sparta, Michigan – July 26, 2013 – ChoiceOne Financial Services, Inc. (OTCBB:COFS), parent company for ChoiceOne Bank, reported net income of $1,312,000 for the second quarter of 2013 compared to $1,021,000 in the same period in 2012. Earnings per share were $0.40 for the second quarter of 2013 compared to $0.31 for the second quarter in the prior year. Net income for the first six months of 2013 was $2,547,000 or $0.77 per share, compared to $2,036,000 or $0.62 per share in the first half of 2012.
“I am very pleased to report our earnings for this quarter,” said James Bosserd, President and Chief Executive Officer of ChoiceOne Financial Services, Inc. “ChoiceOne experienced record earnings for both the second quarter and first six months of 2013. Our loan portfolio experienced continued growth during the quarter along with our residential mortgage loan activity which continued to reflect the impact of low rates and the reported housing recovery. Our total assets declined during the quarter due to a reduction in our total deposits. As a local community bank, we continued to help local borrowers refinance their mortgages to reduce their monthly payment or purchase a new home. Our local deposits help to fund loan growth and investments in our communities.”
The increases in net income in both the second quarter and first six months of 2013 compared to the same periods in 2012 were due to higher net interest income and a lower provision for loan losses, which was partially offset by higher noninterest expense.
Net interest income increased $158,000 in the second quarter of 2013 and $166,000 in the first six months of 2013 compared to the same periods in 2012. Average earning assets increased $4.9 million in the first half of 2013 compared to the same period in 2012. The average balance of loans increased $1.7 million as average residential mortgage loans were $2.0 million higher in the first half of 2013 than in the same period in 2012. The average balance of securities was $8.9 million higher as securities were purchased during 2012 to provide growth in earning assets. ChoiceOne’s net interest spread increased 10 basis points in the first six months of 2013 compared to the same period in 2012. The interest spread increase was caused by reductions in rates paid on funding sources that were greater than reductions in rates earned on loans and investment securities.
The provision for loan losses was $0 in the second quarter and $300,000 in the first six months of 2013, compared to $650,000 and $1,475,000, respectively, in the same periods in 2012. The lower provision in the second quarter and first half of 2013 was due to lower net charge-offs experienced in 2013 than in the same periods in the prior year. Net charge-offs were $17,000 in the second quarter of 2013 and $288,000 in the first half of 2013, compared to $377,000 and $1,079,000, respectively, in the same periods in the prior year. ChoiceOne’s allowance for loan losses was 1.86% of total loans as of June 30, 2013, compared to 1.88% as of both March 31, 2013 and December 31, 2012. Total nonperforming loans were $6.2 million as of June 30, 2013, compared to $6.9 million as of March 31, 2013, and $6.8 million as of December 31, 2012. Nonperforming loans included $4.7 million of loans classified as troubled debt restructurings as of June 30, 2013, of which $3.9 million were current as to payments and performing according to their new terms.
Noninterest income was $20,000 lower in the second quarter of 2013 and $17,000 lower in the first six months of 2013 than in the same periods in 2012. Customer service charges increased $128,000 and $186,000 in the second quarter and first six months of 2013, respectively, compared to the same periods in the prior year as a result of growth in overdraft and debit card fee income. Gains on sales of loans grew $95,000 in the second quarter and $214,000 in the first half of 2013 compared to the same periods in 2012 as mortgage refinancing activity continued to be stimulated by low interest rates for long-term fixed rate mortgage loans. An increase in rates late in the second
quarter of 2013 caused mortgage originations to adjust to market movements and may cause gains on sales of loans to be lower in the second half of 2013. Gains on sales of securities declined $64,000 in the second quarter and $210,000 in the first six months of 2013 compared to the same periods in 2012 due to a lower level of sales activity and rising rates, which eliminated some of the potential for gains. Net losses on sales of other assets increased $164,000 in the second quarter and $61,000 in the first half of 2013 compared to the same periods in the prior year as a result of more write-downs of foreclosed properties. Other noninterest income was lower in the first six months of 2013 compared to the first half of 2012 due to a death benefit received on bank-owned life insurance in the first quarter of 2012.
Noninterest expense increased $331,000 in the second quarter of 2013 and $478,000 in the first six months of 2013 compared to the same periods in 2012. Salaries and benefits expense grew $152,000 in the second quarter and $299,000 in the first half of 2013 compared to the same periods in 2012. The increase was a result of higher costs associated with salaries, incentive bonus accruals, and health insurance. Data processing expense increased $79,000 in the second quarter of 2013 and $137,000 in the first six months of 2013 compared to the same periods in the prior year due to increased operational costs associated with ATM and electronic banking expenses.
Total assets decreased $10.6 million in the second quarter of 2013 and have grown $3.2 million in the twelve months ended June 30, 2013. Cash and cash equivalents decreased $7.4 million in the second quarter of 2013 and $9.7 million in the last twelve months due to the timing of loan and deposit growth. Securities declined $2.5 million in the second quarter of 2013 and grew $1.6 million in the last twelve months as loan growth used available funds from securities maturities and deposit growth. Net loans grew $2.7 million in the second quarter of 2013 and $10.8 million in the twelve months ended June 30, 2013. The increase in net loans in the second quarter of 2013 resulted from commercial loan growth of $2.8 million. Total deposits declined $21.2 million in the second quarter of 2013 and have increased $1.7 million in the last twelve months. The decrease in total deposits in the second quarter of 2013 is consistent with seasonal decreases that have occurred in the same quarter in prior years. Noninterest-bearing demand deposits increased $1.5 million in the second quarter of 2013 while interest-bearing deposits experienced a decrease of $22.7 million.
ChoiceOne Financial Services, Inc. is a financial holding company headquartered in Sparta, Michigan and the parent corporation of ChoiceOne Bank. ChoiceOne Bank operates twelve 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.
Condensed Balance Sheets
(Unaudited)
| (In Thousands) | 6/30/2013 | 3/31/2013 | 12/31/2012 | 6/30/2012 | |||||||
| Cash and Cash Equivalents | $ | 10,341 | $ | 17,746 | $ | 19,034 | $ | 20,084 | |||
| Securities | 134,933 | 137,439 | 138,242 | 133,322 | |||||||
| Loans Held For Sale | 1,529 | 3,403 | 1,874 | 1,013 | |||||||
| Loans, Net of Allowance For Loan Losses | 309,971 | 307,235 | 305,616 | 299,216 | |||||||
| Premises and Equipment | 12,294 | 12,253 | 12,121 | 11,775 | |||||||
| Cash Surrender Value of Life Insurance Policies | 10,120 | 10,045 | 9,970 | 9,813 | |||||||
| Goodwill and Other Intangible Assets | 15,227 | 15,340 | 15,452 | 15,676 | |||||||
| Other Assets | 5,339 | 6,928 | 6,604 | 5,674 | |||||||
| Total Assets | $ | 499,754 | $ | 510,389 | $ | 508,913 | $ | 496,573 | |||
| Noninterest-bearing Deposits | $ | 97,066 | $ | 95,618 | $ | 101,861 | $ | 85,113 | |||
| Interest-bearing Demand Deposits | 126,576 | 138,562 | 127,375 | 133,758 | |||||||
| Savings Deposits | 66,547 | 68,241 | 63,406 | 50,107 | |||||||
| Local Certificates of Deposit | 114,249 | 121,755 | 130,057 | 130,216 | |||||||
| Nonlocal Certificates of Deposit | — | 1,500 | 1,500 | 3,548 | |||||||
| Borrowings | 31,577 | 18,766 | 19,992 | 30,096 | |||||||
| Other Liabilities | 3,153 | 4,521 | 4,216 | 4,353 | |||||||
| Total Liabilities | 439,168 | 448,963 | 448,407 | 437,191 | |||||||
| Shareholders’ Equity | 60,586 | 61,426 | 60,506 | 59,382 | |||||||
| Total Liabilities and Shareholders’ Equity | $ | 499,754 | $ | 510,389 | $ | 508,913 | $ | 496,573 | |||
Condensed Statements of Income
(Unaudited)
| Quarter Ended | Six Months Ended | |||||||||||
| (In Thousands, Except Per Share Data) | 6/30/2013 | 6/30/2012 | 6/30/2013 | 6/30/2012 | ||||||||
| Interest Income | ||||||||||||
| Loans, including fees | $ | 4,004 | $ | 4,165 | $ | 8,008 | $ | 8,511 | ||||
| Securities | 801 | 833 | 1,610 | 1,657 | ||||||||
| Other | 2 | 6 | 5 | 11 | ||||||||
| Total Interest Income | 4,807 | 5,004 | 9,623 | 10,179 | ||||||||
| Interest Expense | ||||||||||||
| Deposits | 338 | 532 | 714 | 1,144 | ||||||||
| Borrowings | 21 | 182 | 34 | 326 | ||||||||
| Total Interest Expense | 359 | 714 | 748 | 1,470 | ||||||||
| Net Interest Income | 4,448 | 4,290 | 8,875 | 8,709 | ||||||||
| Provision for Loan Losses | — | 650 | 300 | 1,475 | ||||||||
| Net Interest Income After Provision | ||||||||||||
| for Loan Losses | 4,448 | 3,640 | 8,575 | 7,234 | ||||||||
| Noninterest Income | ||||||||||||
| Customer service charges | 934 | 806 | 1,772 | 1,586 | ||||||||
| Gains on sales of loans | 481 | 386 | 974 | 760 | ||||||||
| Gains on sales of securities | 53 | 117 | 76 | 286 | ||||||||
| Losses on sales of other assets | (231 | ) | (67 | ) | (300 | ) | (239 | ) | ||||
| Other income | 456 | 471 | 867 | 1,013 | ||||||||
| Total Noninterest Income | 1,693 | 1,713 | 3,389 | 3,406 | ||||||||
| Noninterest Expense | ||||||||||||
| Salaries and benefits | 2,101 | 1,949 | 4,117 | 3,818 | ||||||||
| Occupancy and equipment | 592 | 545 | 1,162 | 1,137 | ||||||||
| Data processing | 513 | 434 | 1,013 | 876 | ||||||||
| FDIC insurance | 84 | 105 | 179 | 210 | ||||||||
| Other expense | 1,052 | 978 | 2,033 | 1,985 | ||||||||
| Total Noninterest Expense | 4,342 | 4,011 | 8,504 | 8,026 | ||||||||
| Income Before Income Tax | 1,799 | 1,342 | 3,460 | 2,614 | ||||||||
| Income Taxes | 487 | 321 | 913 | 578 | ||||||||
| Net Income | $ | 1,312 | $ | 1,021 | $ | 2,547 | $ | 2,036 | ||||
| Basic Earnings Per Share | $ | 0.40 | $ | 0.31 | $ | 0.77 | $ | 0.62 | ||||
| Diluted Earnings Per Share | $ | 0.40 | $ | 0.31 | $ | 0.77 | $ | 0.62 | ||||
| Performance Ratios | ||||||||||||
| Return on Average Assets (Annualized) | 1.02 | % | 0.82 | % | ||||||||
| Return on Average Equity (Annualized) | 8.31 | % | 6.94 | % | ||||||||
| Net Interest Margin (Tax Equivalent) (1) | 4.02 | % | 3.92 | % | ||||||||
| Efficiency Ratio | 69.8 | % | 67.9 | % | ||||||||
| Net Loan Charge-offs | $ | 288 | $ | 1,079 | ||||||||
| Net Loan Charge-offs as Percentage of | ||||||||||||
| Average Loans (Annualized) | 0.18 | % | 0.70 | % | ||||||||
(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%.
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 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, 2012; 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.
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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.