The ICBK Story. Holding Company for:

Transcription

1 The ICBK Story Holding Company for: Q1 2018

2 Forward Looking Statements EXCEPT AS OTHERWISE INDICATED, THIS PRESENTATION SPEAKS AS OF THE DATE HEREOF.THE DELIVERY OF THIS PRESENTATION SHALL NOT, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY AFTER THE DATE HEREOF. THIS PRESENTATION CONTAINS FORWARD-LOOKING STATEMENTS. IN SOME CASES, FORWARD-LOOKING STATEMENTS CAN BE IDENTIFIED BY THE USE OF WORDS SUCH AS ESTIMATE, PROJECT, BELIEVE, INTEND, ANTICIPATE, ASSUME, PLAN, SEEK, EXPECT, MAY, SHOULD, INDICATE, WOULD, COMTEMPLATE, CONTINUE, INTEND, TARGET AND WORDS OF SIMILAR MEANING. THESE FORWARD-LOOKING STATEMENTS ARE NOT HISTORICAL FACTS, AND ARE BASED ON CURRENT EXPECTATIONS, ESTIMATES AND PROJECTIONS ABOUT COUNTY BANCORP S INDUSTRY, MANAGEMENT S BELIEFS AND CERTAIN ASSUMPTIONS MADE BY MANAGEMENT, MANY OF WHICH, BY THEIR NATURE, ARE INHERENTLY UNCERTAIN AND BEYOND COUNTY BANCORP S CONTROL. ACCORDINGLY, YOU ARE CAUTIONED THAT ANY SUCH FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND ARE SUBJECT TO CERTAIN RISKS, UNCERTAINTIES AND ASSUMPTIONS THAT ARE DIFFICULT TO PREDICT. ALTHOUGH COUNTY BANCORP BELIEVES THAT THE EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS ARE REASONABLE AS OF THE DATE MADE, EXPECTATIONS MAY PROVE TO HAVE BEEN MATERIALLY DIFFERENT FROM THE RESULTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. UNLESS REQUIRED BY LAW, COUNTY BANCORP ALSO DISCLAIMS ANY OBLIGATION TO UPDATE ANY FORWARD-LOOKING STATEMENTS. INTERESTED PARTIES SHOULD NOT PLACE UNDUE RELIANCE ON ANY FORWARD-LOOKING STATEMENT AND SHOULD CAREFULLY CONSIDER THE RISKS AND OTHER FACTORS THAT COUNTY BANCORP FACES. MARKET DATA AND OTHER STATISTICAL DATA USED IN THIS PRESENTATION HAS BEEN OBTAINED FROM INDEPENDENT INDUSTRY SOURCES AND PUBLICATIONS AS WELL AS FROM RESEARCH REPORTS PREPARED FOR OTHER PURPOSES. INDUSTRY PUBLICATIONS AND SURVEYS AND FORCASTS GENERALLY STATE THAT THE INFORMATION CONTAINED THEREIN HAS BEEN OBTAINED FROM SOURCES BELIEVED TO BE RELIABLE. COUNTY HAS NOT INDEPENDENTLY VERIFIED THE DATA OBTAINED FROM THESE SOURCES. FORWARD-LOOKING INFORMATION OBTAINED FROM THESE SOURCES IS SUBJECT TO THE SAME QUALIFICATIONS AND THE ADDITIONAL UNCERTAINTIES REGARDING THE OTHER FORWARD-LOOKING STATEMENTS IN THIS PRESENTATION. THIS PRESENTATION INCLUDES CERTAIN MEASURES THAT ARE NOT GENERALLY ACCEPTED ACCOUNTING PRINCIPLES OF THE UNITED STATES ( GAAP ). THESE NON-GAAP FINANCIAL MEASURES SHOULD BE CONSIDERED ONLY AS SUPPLEMENTAL TO, AND NOT SUPERIOR TO, FINANCIAL MEASURES PREPARED IN ACCORDANCE WITH GAAP. PLEASE REFER TO THE APPENDIX OF THIS PRESENTAION FOR A RECONCILIATION OF THE NON-GAAP FINANCIAL MEASURES INCLUDED IN THIS PRESENTATION TO THE MOST DIRECTLY COMPARABLE FINANCIAL MEASURES PREPARED IN ACCORDANCE WITH GAAP. 2

3 Company Overview County Bancorp is the holding company for Investors Community Bank based in Manitowoc, Wisconsin Founded in 1996 by four current directors to meet the financial services needs of agricultural ( Ag ) and business banking clients throughout Wisconsin The Bank s Ag banking business, which is primarily dairyrelated, extends throughout Wisconsin As of March 31, 2018 the Bank has lending relationships within 59 of 72 counties. The Bank also serves business and retail customers throughout Wisconsin with a focus on the Northeastern and Central regions of the state Total assets of $1.5 billion at March 31, 2018 loans and loans serviced over $1.8 billion WI Counties with Lending Relationships Headquarters / Full Service Banking Center Loan Production Office Key Differentiators Consistent Profitability Low Efficiency Ratio Organic Growth Dairy and Dairy-Related Lending Focus Our Guiding Principles: Soundness, Profitability, then Growth 3

4 Proven Management Team Our core management team, which has grown County Bancorp since its inception, together with our Board of Directors, has significant ownership interest in the Company Management Name Position County Tenure Experience Background William C. Censky Timothy J. Schneider Chairman of the Board of the Company, Chairman of the Bank President and Director of the Company, Chief Executive Officer of the Bank Co-Founder of the Company in 1996 Served as an organizing board member for two additional de novo banks Co-Founder of the Company in 1996 Chief Operating Officer, Vice President, Commercial and Agricultural Lender at County Bancorp Mark R. Binversie President of the Bank, Director of the Company Co-Founder of the Company in 1996 Oversaw the Agricultural Department for Firstar Bank Manitowoc for 16 years Glen L. Stiteley Chief Financial Officer and Treasurer of the Company, Executive Vice President, Chief Financial Officer of the Bank <1 24+ Previous experience includes CFO of a NASDAQ registered community bank and McGladrey and Pullen LLP in its financial institution practice David A. Coggins Executive Vice President, Chief Banking Officer Prior experience in lending, supervision and executive management in both agricultural and commercial lending institutions Mark A. Miller Secretary of the Company, Executive Vice President, Chief Risk Officer and Counsel of the Bank Previously Chief Executive Officer of a full-service law firm from 2001 to 2009 Served as President of a farm equipment dealership from 1992 to 2008 William C. Hodgkiss Senior Vice President - Business Banking of the Bank Before joining ICB was the President and CEO of The Business Bank and its Holding Company, Fox River Valley Bancorp, Inc. Timothy S. McTigue Senior Vice President - Ag Banking of the Bank <1 25+ Prior experience in lending and management in agriculture, commercial and retail banking Susan M. Smith Executive Vice President, Chief Human Resources Officer Experience in private & public global organizations as Strategic HR Business Partner; focus on Talent Management and Organizational Leader Development Laura A. Wiegert Senior Vice President - Marketing of the Bank Extensive marketing experience focused on business development, market research, creative services and customer experience. Cyrene N. Wilke Senior Vice President Operations of the Bank Prior experience in executive administration, branch and deposit operations, credit administration and lending operations, accounting, human resources & compliance. Collectively, Management and the Board of Directors own approximately 26% of the Company 4

5 History & Performance Profitability and organic growth are hallmarks of our performance since inception Growth Since Inception We initially raised capital at a split adjusted $1.60 per share in 1996 $35 $30 $25 $20 $15 $10 $5 $0 $29.76 $29.21 $26.97 $13.02 $14.28 $16.01 $19.50 $17.16 $18.72 $19.93 $20.17 $11.55 $10.17 $8.69 $1.60 $1.71 $1.96 $2.40 $2.77 $3.37 $4.01 $4.69 $5.75 $7.08 $ $2,000 $1,750 $1,500 $1,250 $1,000 $750 $500 $250 $0 Balance Sheet Growth Deposits Loans Loans Serviced Assets Year End BV / per share Source: Company financial statements and SNL Financial. (1) Split adjusted point to point. (1) 5 ICBK Closing Stock Price Operating Revenue and ROAA Net Interest Income Non-interest Income ROAA $ % 1.09% 1.10% $44.3 $46.6 $ % 0.94% 0.98% 0.74% $31.6 $32.3 $ % 0.98% $25.4 $30.5 $30 $27.1 $ % $16.2 $15 $ % $ % 1.20% 0.90% 0.60% 0.30% 0.00%

6 Satisfied ICB customers 6

7 Strategic Summary Our strategy and growth are not dependent upon significant investment in traditional branch infrastructure Ag lending Primarily focused on the dairy industry Ag lending team comprised of experienced bankers with deep backgrounds in agriculture, all of whom grew up on farms Commercial lending Lines of Business Deposits: diversified & low all-in funding costs Target Customers Dairy farmers throughout the state of Wisconsin Small and mid-sized businesses Revenue up to $50 million Dairy supply chain businesses Commercial real estate owners and investors Differentiation Through Unique Banking Model Direct, personal relationships with our customers ( boots in the driveway approach) Unique understanding of our target market and niche lending business We are a key part of the Wisconsin ag community Highly personalized customer service coupled with an efficient, operating model Low cost operating platform Branch-lite model minimizes brick and mortar costs ultimately leading to lower operating costs Strategic use of Farm Service Agency ( FSA ) government-guaranteed loan programs to provide credit risk mitigation Robust loan sales and loan servicing business activity drives non-interest income generation 7

8 Lending and Loan Servicing Activities We are focused on continued growth and diversification of our lending business We originate more loans than we keep on our balance sheet to better serve our clients Loan sales and participations are a source of non-interest income, risk mitigation and servicing income Continue to add commercial talent to diversify our loan mix SBA preferred lender strategy We are asset sensitive and have been asset sensitive throughout the recent low interest rate cycle $2,000 $1,800 $1,600 $1,400 Total Loans (On-Balance Sheet and Serviced) On-Balance Sheet Loans Loans Serviced $1,748 $1,775 $1,605 $599 $610 $1,240 $575 CRE 25.1% Residential RE 5.2% Commercial 9.8% (1) As of March 31, 2018 Loan Composition (1) Agricultural 59.9% Dairy 49.9% Agribusiness 10.0% $1,200 $1,000 $800 $600 $400 $200 $0 $1,069 $958 $969 $890 $895 $492 $834 $751 $420 $345 $296 $400 $320 $264 $212 $1,149 $1,165 $1,030 $748 $539 $570 $594 $575 $613 $648 $

9 Commercial Loan Portfolio Continues to Grow Highlights Continue to focus on diversifying the loan portfolio, especially within key commercial loan buckets The acquisition of Fox River Valley Bancorp added more than $110 million of commercial loans in the second quarter of 2016 Loan Portfolio Composition by Type Commercial Loan Portfolio Composition Ag Real Estate 32.3% Residential Mortgage 1.9% Ag Production 27.6% Commercial 36.5% Consumer & Other (1) 1.7% Total: $1,170.9M Nonowner- Occupied CRE 33.0% Construction & Land Development 13.2% C&I 22.1% Owner-Occupied CRE 27.5% Multifamily 4.2% Total: $427.4M Continued Focus on Diversifying the Loan Portfolio ($ in Millions) $150.0 $ % $ % $136.0 $ % $100.0 $71.7 $94.4 Q1 17 $50.0 Q1 18 $0.0 Owner-Occupied CRE Nonowner-Occupied CRE C&I Source : SNL Financial Note: Commercial loan portfolio buckets are as percentages of total commercial portfolio. Note: Q was the quarter prior to the closing of the Fox River Valley Bancorp acquisition. (1) Includes Home Equity. 9

10 Ag Lending Focus in America s Dairyland Dairy-related lending is the foundation of our business Dairy industry impact on the Wisconsin economy (1) $10.8 $43.4 billion Florida citrus billion of revenue compared to: $6.7 billion Idaho potatoes Wisconsin s impact on the dairy industry (2) U.S. Cheese Production by State IA 2.4% PA 3.8% MN 5.9% NM 6.7% All Other States 19.8% NY 7.2% ID 7.9% Wisconsin 25.6% CA 20.7% WI Rank Among Top Cheese Producing Countries Production (billion lbs.) Dairy industry fundamentals (3) (1) Source: University of Wisconsin 2012, Florida Citrus Mutual 2015, University of Idaho, (2) Source: USDA/FAS, Production, Supply and Distribution Online Database; EuroStat Online Database; United Nations FAOStat Online Database; Dairy Products: Per capita consumption, U.S. (4) (lbs. per person) (3) Sources: USDA National Agricultural Statistics Service, USDA Farm Service Agency, USDA Foreign Agricultural Service, USDA Agricultural Marketing Service, U.S. Department of Commerce Bureau of the Census, California Department of Food and Agriculture, USDA Economic Research Service calculations. (4) Represents milk, yogurt, cheese, evaporated and condensed milk, frozen dairy products and dry products 10 Global demand for dairy is expected to increase 36% over the next 10 years

11 Ag Lending Focus: Dairy Our expertise in dairy-related lending has been a driving force for our performance and growth $1,200.0 $1,000.0 $800.0 $600.0 $400.0 $200.0 $0.0 Wisconsin Dairy Exports (1) $924 $971 $634 $723 $751 $683 $488 $ Continued momentum and growth in the dairy industry represents a significant opportunity Source of credit risk mitigation and non-interest income Attractive Market Dynamics FSA Preferred Lender FSA Guaranteed Loan Programs Strong Credit History $1.5 $1.0 $0.5 $0.0 $- $0.1 Total Ag Charge-Offs $1.1 $1.1 $- $- 5-year (2) Ag Net Charge-Offs as a % of: Avg. Ag Real Estate Loans 0.20% Avg. Ag Non-Real Estate Loans 0.27% Loan sales and subsequent servicing income diversify our revenue mix Ability to sell-off portions of loans allows us to serve larger credit relationships $9.0 $6.0 Non-Interest Income Significant Non-interest Income Source Relationship Focused Distinct Competitive Advantages Homegrown lenders with farm background High personal touch / monitoring of credit Value add we bring to our customers makes us a trusted advisor/partner $3.0 $0.0 $4.6 $5.6 $5.5 $7.5 $8.9 $7.1 $7.7 $8.7 $7.7 $ (1) USDA Economic Research Service, 2017 (2) As of December 31, 2017 Market expertise is valued Not dependent upon branch network 11 We have evolved as the dairy industry has evolved Trend from smaller family farms to larger operations

12 Dairy-Related Lending We have developed an expertise and branded reputation in dairy-related lending and it has served as a source of stability and growth Dairy-Related Loan Portfolio Loans typically cross-collateralized with all farm assets pledged to the Bank as collateral securing all notes FSA Loan Benefits Leverage real estate beyond normal policy and protect the Bank from collateral risk Longer term committed financing (typically year terms) The customer grants a lien on milk produced and proceeds from its sale Operating lines of credit secured by inventory and growing crops Intermediate Term loans secured by equipment and livestock Long Term loans secured by farm real estate Longer term fixed rate with secondary market Illustrative Example Assumptions $4.0 million appraised property value $3.5 million loan request 90% FSA guarantee on 2 nd mortgage FSA Guaranteed Loan Example 1 st Mortgage (Bank) Loan 2 nd Mortgage (FSA) Loan Equity $2.1 million $1.4 million $0.5 million FSA guarantee up to $1,399,000 ICBK exposure up to $139,900 at maximum 12

13 Asset Quality: Proactive & Disciplined Risk Management We are proactive in our identification and mitigation of risk Asset quality has improved significantly coming out the credit cycle-slight movement up due to acquisition Patient approach to OREO has resulted in lower net chargeoffs Ag clients experiencing some stress due to lower commodity and milk prices. Extensive use of government lending programs mitigates risk profile Ag 59.8% NPA Composition (1) OREO 33.7% Commercial RE 2.2% Commercial 4.2% NCOs / Avg. Loans and NPAs / Assets ALLs / Total Loans and ALLs / NPLs 3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% -0.50% 1.05% 2.92% NCOs / Avg. Loans 3.10% 2.42% NPAs / Assets 1.84% 1.15% 1.83% 0.08% -0.12% 0.08% 0.16% -0.11% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% ALL / Total Loans ALLs / NPLs 173.3% 1.84% 114.6% 1.39% 1.64% 1.23% 1.25% 91.8% 1.15% 62.9% 42.3% 82.34% 200.0% 150.0% 100.0% 50.0% 0.0% (1) As of March 31,

14 Funding Strategy We focus on building a diversified and low all-in cost deposit base Leverage agriculture and business relationships to pursue core retail deposit growth Funding Growth Typically pay higher rates for retail certificates of deposit to avoid the expense burden of an extensive branch network Longer term direction to decrease dependency on wholesale funding Municipalities another source of funding being pursued $1,300.0 $1,200.0 $1,100.0 $1,000.0 Other Borrowings CDs Now and Savings Brokered/National Money Market Noninterest bearing demand $1,231.6 $1,085.4 $1,292.9 $900.0 Funding Composition (1) $800.0 $738.7 Now and Savings Noninterest 4.2% bearing demand 7.8% CDs 24.4% $700.0 $600.0 $500.0 $638.3 $633.4 Money Market 15.5% $400.0 $300.0 Other Borrowings 9.3% (1) As of March 31, 2018 Brokered/National 38.8% $200.0 $100.0 $0.0 14

15 Efficient Operating Model We believe operating efficiently has been key to our track record of consistent profitability Efficiency has always been core to our operating model Branch-lite strategy lowers brick-and-mortar related expenses to decrease all-in funding costs Off balance sheet revenue from core lending business boosts non-interest income and helps drive efficiency Approximately $2.6 MM of one time merger related costs in Assets Per Employee (1) Assets and Loans Serviced Per Employee Assets Per Employee Peer Assets Per Employee $15.0 $13.2 $13.5 $13.5 $13.9 $12.3 $13.6 $12.0 $9.0 $8.0 $8.5 $8.7 $9.2 $9.7 $9.6 $6.0 $4.4 $4.6 $4.6 $5.3 $5.5 $3.0 $0.0 Non-Interest Expense / Assets (1) Efficiency Ratio (1) County Peers County Peers 4.00% 76.00% 69.0% 3.00% 3.17% 3.08% 3.18% 3.13% 3.05% 64.00% 67.4% 70.7% 63.7% 62.5% 2.00% 2.24% 2.28% 2.15% 2.21% 2.01% 1.92% 52.00% 47.4% 51.0% 50.0% 53.7% 54.6% 55.1% 1.00% 40.00% (1) Source: SEC filings and FDIC.gov. Peer data represents weighted average statistics for U.S. based depositories with assets between $1B and $3B. 15

16 Sustainable Non-Interest Income Loan sales and subsequent servicing fee streams bolster revenue profile Extracting sustainable non-interest income from guaranteed and participated loans is core to our business Allows us to pursue larger relationships Efficiently leverages capital on balance sheet Decreases dependence on NIM Revenue stream is not dependent on branch network Non-Interest Income Detail $50.0 $40.0 $30.0 $20.0 $10.0 $0.0 Revenue Net Interest Income Non-Interest Income Non-Interest Expense $8.9 $7.1 $23.5 $17.0 $23.4 $17.0 $26.2 $ $7.7 $8.7 $35.6 $24.1 $7.7 $38.9 $ $2.0 $10.3 $6.8 Loan Servicing Fees Loan Servicing Rights Gain on Sale of Loans Service Charges Other $10.0 $8.9 $8.7 $8.0 $7.7 $7.7 $ % Non-Interest Income / Assets (1) County Peers $6.0 $4.0 $2.0 $ % 1.13% 1.06% 1.14% 1.19% 0.96% 0.95% 1.38% 0.80% 1.04% 0.59% 0.58% $ % (1) Source: SEC filings and FDIC.gov. Peer data represents weighted average statistics for U.S. based depositories with assets between $1B and $3B. 16

17 Consistent Profitability We are focused on maintaining high levels of profitability We think like owners - 26% insider ownership Core drivers of future profitability Balance sheet growth Continued diversification Growing Ag lending business and related non-interest income Focus on sustained efficiency Net Income $12.0 $9.0 $6.0 $11.0 $ $3.0 $7.0 $ $0.0 ROAA (1) ROAE / ROACE (1) 1.6% 1.2% 0.8% 0.4% 1.10% 0.94% 0.79% 0.75% ROAA Peer ROAA 1.35% 1.07% 1.11% 0.98% 0.84% 0.80% 1.15% 14.0% 10.0% 6.0% ROACE ROAE Peer ROAE 11.37% 11.27% 10.47% 9.51% 9.02% 9.99% 9.45% 9.52% 8.24% 8.99% 7.77% 7.62% 7.99% 8.36% 7.58% 12.04% 11.62% 0.0% 2.0% (1) Source: SEC filings and FDIC.gov. Peer data represents weighted average statistics for U.S. based depositories with assets between $1B and $3B. 17

18 Earnings Per Share Basic Earnings Per Share Analyst Estimate 2018 basic operating earnings per share (a non-gaap measure) is through the three months ended March 31, 2018 Source : SEC Filings and Analyst Report 18

19 Capitalization Our Company is in position to pursue higher levels of growth and profitability Increased financial flexibility to pursue growth strategies Capital Ratios Fund growth opportunities Public currency for acquisitions Increase liquidity profile Public currency for shareholders 20% 18% 16% 15.5% Q % 17.5% Access to capital markets 14% 12% 11.5% 11.0% 11.0% 12.4% 12.0% 12.0% 13.6% 13.1% 13.2% Core Strategy Will Remain Consistent Attract and retain talent be the employer of choice Continued growth and diversification of lending Focus on diversified low all-in cost funding sources Proactive and disciplined risk management Efficient operating model Pursue strategic mergers and acquisitions 10% Tier 1 Leverage Tier 1 Risk-Based Capital Total Risk-Based Capital Regular quarterly dividend of $0.06/ share (2017) and $0.07/ share (2018) Subject to board approval Dividend Policy Our Guiding Principles: Soundness, Profitability, then Growth Source : SEC Filings 19

20 Investment Highlights We believe County Bancorp is well-positioned for continued growth & profitability Track Record of Growth and Profitability Proven Management Team Efficient Operating Model Significant Insider Ownership High Touch Customer Relationship Emphasis Unique Focus On and Understanding of Ag Industry Attractive Valuation IPO Provided Strategic Capital for Organic Growth, M&A Our Guiding Principles: Soundness, Profitability, Growth 20

21 Q & A 21