The ICBK Story Q3 2017 Holding Company for: Q3 2017
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
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 September 30, 2017 the Bank has lending relationships within 60 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 $1.4 billion at September 30, 2017, loans and loans serviced over $1.7 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
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 $26.97 $30.05 $13.02 $14.28 $16.01 $19.50 $17.16 $18.72 $19.79 $11.55 $10.17 $8.69 $7.08 $8.18 $5.75 $1.60 $1.71 $1.96 $2.40 $2.77 $3.37 $4.01 $4.69 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Pre-IPO numbers reflect book value. Year End BV / per share (1) ICBK Closing Stock Price Balance Sheet Growth Operating Revenue and ROAA ($ in millions) Deposits Loans Loans Serviced Assets ($ in millions) Net Interest Income Non-interest Income ROAA $2,000 $1,750 $1,500 $1,250 $1,000 $750 $500 $250 $0 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Company financial statements and SNL Financial. (1) Split adjusted point to point. 2016 Q3 17 4 $60 $45 $30 $15 $0 1.23% $16.2 0.74% $16.2 0.98% $20.1 $25.4 0.24% 0.92% $27.1 1.09% 0.94% 1.10% $31.6 $32.3 $30.5 1.35% $33.9 $44.3 0.98% $34.4 0.87% 2007 2008 2009 2010 2011 2012 YTD 1.50% 1.20% 0.90% 0.60% 0.30% 0.00%
Satisfied ICB customers 5
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 6
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% 9.0 6.0 3.0 0.0 WI Rank Among Top Cheese Producing Countries Production (billion lbs.) 8.6 4.6 4.2 2.9 2.7 1.7 1.7 1.6 1.7 Dairy industry fundamentals (3) (1) Source: University of Wisconsin 2012, Florida Citrus Mutual 2015, University of Idaho, 2012. (2) Source: USDA/FAS, Production, Supply and Distribution Online Database; EuroStat Online Database; United Nations FAOStat Online Database; 2014. 630 620 610 600 590 580 570 560 Dairy Products: Per capita consumption, U.S. (4) (lbs. per person) 646 630 565 571 584 591 586 589 596 595 604 613 613 607 608 615 616 604 604 607 (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 7 Global demand for dairy is expected to increase 36% over the next 10 years
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 $0.0 Wisconsin Dairy Exports (1) ($ in millions) $924 $971 $634 $723 $751 $683 $488 $301 2009 2010 2011 2012 2013 2014 2015 2016 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 $- $- Total Ag Charge-Offs ($ in millions) $0.1 $1.1 $1.1 2012 5-year (2) Ag Net Charge-Offs as a % of: Avg. Ag Real Estate Loans 0.18% Avg. Ag Non-Real Estate Loans 0.25% $- 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 $6.0 Non-Interest Income ($ in millions) 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 $3.0 $4.6 $5.6 $5.5 $7.5 $8.9 $7.1 $7.7 $8.7 $5.7 2008 2009 2010 2011 2012 (1) USDA Economic Research Service, 2015 (2) As of December 31, 2016 Market expertise is valued Not dependent upon branch network 8 We have evolved as the dairy industry has evolved Trend from smaller family farms to larger operations
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 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 FSA Loan Benefits Leverage real estate beyond normal policy and protect the Bank from collateral risk Longer term committed financing (typically 15 20 year terms) 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 $139,900 at maximum 9
Lending and Loan Servicing Activities We are focused on continued growth and diversification of our lending business We originate more loans than we keep on our balance sheet to better serve our clients Loan sales and participations are a source of non-interest income, risk mitigation and servicing income Continue to add commercial talent to diversify our loan mix SBA preferred lender strategy We are asset sensitive and have been asset sensitive throughout the recent low interest rate cycle ($ in millions) $2,000 $1,800 $1,600 $1,400 Total Loans (On-Balance Sheet and Serviced) On-Balance Sheet Loans Loans Serviced $1,720 $1,605 $593 $1,240 $575 CRE 25.8% Loan Composition (1) Agricultural 60.0% Dairy 50.0% $1,200 $1,000 $800 $600 $400 $200 $570 $153 $417 $958 $969 $890 $895 $834 $751 $345 $296 $400 $320 $264 $212 $539 $570 $594 $575 $613 $569 $1,069 $420 $648 $492 $748 $1,030 $1,127 Residential RE 4.7% Commercial 9.5% (1) As of September 30, 2017 Agribusiness 10.0% $0 2007 2008 2009 2010 2011 2012 10
Asset Quality: Proactive & Disciplined Risk Management We are proactive in our identification and mitigation of risk Asset quality has improved significantly coming out the credit cycle-slight movement up due to acquisition NPA Composition (1) Patient approach to OREO has resulted in lower net chargeoffs Ag clients experiencing some stress due to lower commodity and milk prices. Extensive use of government lending programs mitigates risk profile Ag 40.9% Commercial 6.0% OREO 34.4% Commercial RE 18.7% NCOs / Avg. Loans and NPAs / Assets ALLs / Total Loans and ALLs / NPLs 3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% -0.50% 1.05% 2.92% NCOs / Avg. Loans 0.08% 2.42% 3.10% NPAs / Assets -0.12% 0.08% 1.84% 1.43% 0.12% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% ALL / Total Loans ALLs / NPLs 173.3% 1.84% 1.39% 105.9% 1.64% 1.23% 91.8% 1.21% 62.9% 42.3% 200.0% 150.0% 100.0% 50.0% 0.0% (1) As of September 30, 2017 11
Funding Strategy We focus on building a diversified and low all-in cost deposit base Leverage agriculture and business relationships to pursue core retail deposit growth ($ in millions) Average Deposit Balance Growth (1) 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 $1,000.0 $900.0 $800.0 Time deposits Money market accounts NOW and interest checking Brokered deposits Demand, noninterest-bearing Savings $832.3 $977.2 Demand, noninterestbearing 13.5% Money market accounts 15.9% Deposit Composition (1) NOW and interest checking 4.3% Savings 0.6% Time deposits 41.7% $700.0 $600.0 $500.0 $400.0 $300.0 $200.0 $598.9 $603.5 $622.7 (1) As of September 30, 2017 Brokered deposits 26.4% $100.0 $0.0 12
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 $2.6 MM of one time merger related costs in 2016. Assets Per Employee (1) ($ in millions) Assets and Loans Serviced Per Employee Assets Per Employee Peer Assets Per Employee $15.0 $12.3 $13.2 $13.5 $13.5 $13.1 $12.0 $8.0 $8.5 $8.7 $9.2 $9.1 $9.0 $6.0 $4.4 $4.6 $4.6 $5.3 $5.3 $3.0 $0.0 Non-Interest Expense / Assets (1) Efficiency Ratio (1) County Peers County Peers 4.00% 76.00% 69.0% 3.00% 2.00% 3.17% 3.08% 3.18% 3.13% 3.04% 2.24% 2.28% 2.15% 2.21% 1.98% 64.00% 52.00% 47.4% 67.4% 70.7% 51.0% 50.0% 63.7% 53.7% 61.9% 55.6% 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 $2B. 13
Sustainable Non-Interest Income Loan sales and subsequent servicing fee streams bolster revenue profile Extracting sustainable non-interest income from guaranteed and participated loans is core to our business ($ in millions) 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 Revenue ($ in millions) Net Interest Income Non-Interest Income Non-Interest Expense $50.0 $40.0 $8.7 $30.0 $7.7 5.7 $8.9 $7.1 $20.0 $35.6 $23.5 $23.4 $26.2 28.7 $10.0 $24.1 $17.0 $17.0 $17.5 18.8 $0.0 Loan Servicing Fees Loan Servicing Rights Gain on Sale of Loans Service Charges Other $10.0 $8.9 $8.7 $8.0 $7.1 $7.7 2.00% $5.7 $6.0 $4.0 1.00% $2.0 Non-Interest Income / Assets (1) County Peers 1.38% 1.35% 1.13% 1.06% 1.14% 1.19% 0.96% 0.95% 0.80% 0.60% $0.0 0.00% (1) Source: SEC filings and FDIC.gov. Peer data represents weighted average statistics for U.S. based depositories with assets between $1B and $2B. 14
Consistent Profitability We are focused on maintaining high levels of profitability We think like owners - 24% insider ownership Core drivers of future profitability Balance sheet growth Continued diversification Growing Ag lending business and related non-interest income Focus on sustained efficiency ($ in millions) $12.0 $9.0 $6.0 $3.0 $0.0 Net Income $11.0 $10.7 $7.0 $8.2 8.3 ROAA (1) ROAE / ROACE (1) 1.6% 1.2% 0.8% 0.4% ROAA Peer ROAA 1.35% 1.10% 1.07% 0.94% 0.98% 0.87% 0.79% 0.84% 0.75% 1.25% 14.0% 10.0% 6.0% ROACE ROAE Peer ROAE 11.37% 11.27% 10.47% 9.51% 9.02% 9.45% 9.52% 8.24% 8.99% 7.62% 7.99% 8.36% 11.70% 8.34% 8.10% 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 $2B. 15
Earnings Per Share 2.00 1.60 1.45 1.73 1.85 1.49 1.65 1.60 1.85 1.20 1.21 0.80 0.40 0.00 2013 2014 2015 2016 2017* Basic Earnings Per Share Analyst Estimate 2017 basic operating earnings per share (a non-gaap measure) is through the nine months ended September 30, 2017 Source : SEC Filings and Analyst Report 16
Capitalization Our Company is in position to pursue higher levels of growth and profitability Offering Rationale Increased financial flexibility to pursue growth strategies Capital Ratios Fund growth opportunities Public currency for acquisitions Increase liquidity profile Public currency for shareholders Access to capital markets 20% 18% 16% 14% 12% 14.3% 15.5% 11.5% 11.5% 2014 2015 2016 Q3 17 16.3% 15.9% 12.4% 12.0% 17.5% 17.2% 13.6% 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 $0.05 / share (2016) and $0.06 / share (2017) Subject to board approval Dividend Policy Our Guiding Principles: Soundness, Profitability, then Growth Source : SEC Filings 17
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 as of Q3 2017 Commercial Loan Portfolio Composition Ag Real Estate 33.7% Residential Mortgage 2.0% Ag Production 25.9% Commercial 36.7% Consumer & Other (1) 1.8% Total: $1,128.7M Nonowner- Occupied CRE 34.4% Construction & Land Development 9.8% C&I 21.4% Owner-Occupied CRE 29.6% Multifamily 4.8% Total: $413.8M Continued Focus on Diversifying the Loan Portfolio ($ in Millions) $150.0 $132.0-7.1% $122.7 12.9% $126.2 $142.5 21.3% $100.0 $72.9 $88.4 Q3 2016 $50.0 Q3 2017 $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: Q1 2016 was the quarter prior to the closing of the Fox River Valley Bancorp acquisition. (1) Includes Home Equity. 18
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 19
Balance Sheet September 30 December 31, 2017 2016 2015 2014 (dollars in thousands) Assets Cash and cash equivalents $ 71,795 $ 42,679 $ 14,907 $ 10,480 Investment securities 107,242 123,437 83,281 81,282 Loans and loans held for sale, net of allowance for loan losses 1,115,030 1,019,003 746,985 641,633 Cash surrender value of bank owned life insurance 17,274 11,448 11,155 10,863 Intangible assets 6,076 6,479 - - Accrued interest receivable and other assets 41,908 39,624 28,561 27,498 Total assets $ 1,359,325 $ 1,242,670 $ 884,889 $ 771,756 Liabilities & Shareholders' Equity Deposits $ 1,066,094 $ 977,518 $ 672,226 $ 605,469 Borrowings 129,652 110,047 70,390 51,857 Subordinated debentures 15,506 15,451 12,372 12,372 Accrued interest payable and other liabilities 8,344 8,366 7,877 7,015 Total liabilities 1,219,596 1,111,382 762,865 676,713 Small Business Lending Fund - - 15,000 15,000 Total shareholders' equity 139,729 131,288 107,024 80,043 Total liabilities and shareholders' equity $ 1,359,325 $ 1,242,670 $ 884,889 $ 771,756 Source : SEC Filings 20
Income Statement (1) Non-GAAP financial measure Source : SEC Filings For the nine months ended September 30, 2017 2016 For the year ended December 31, 2015 2014 Net interest income Total interest income $ 38,803 $ 45,581 $ 33,767 $ 30,897 Total interest expense 10,087 10,014 7,520 7,537 Net interest income 28,716 35,567 26,247 23,360 Provision for loan loss 2,318 2,959 (1,019) 589 Net interest income after provision 26,398 32,608 27,266 22,771 Non-Interest Income Service Charges 1,074 1,341 1,039 788 Gain on sale of loans, net 96 242 429 321 Loan servicing fees 4,038 6,571 5,323 4,938 Other 451 561 894 1,101 Total non-interest income 5,659 8,715 7,685 7,148 Non-Interest Expense Employee compensation and benefits 11,735 13,101 10,769 10,209 Occupancy 519 512 338 299 Other 6,573 10,533 6,351 6,517 Total non-interest expense 18,827 24,146 17,458 17,025 Income before income tax expense 13,230 17,177 17,493 12,894 Income tax expense 4,936 6,483 6,519 4,684 Net income $ 8,294 $ 10,694 $ 10,974 $ 8,210 Non-recurring merger related expenses $ - $ 2,601 $ - $ - Income before provision for loan losses, merger expenses, and income tax expense (1) $ 15,548 $ 22,736 $ 16,474 $ 13,483 21 (dollars in thousands)
Q & A 22