County Bancorp Inc (NASDAQ:ICBK) Q4 2019 Earnings Conference Call - Final Transcript

Jan 24, 2020 • 09:30 am ET


County Bancorp Inc (NASDAQ:ICBK) Q4 2019 Earnings Conference Call - Final Transcript


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Good morning and welcome to the County Bancorp Incorporated Earnings Release for December 31st, 2019 Conference Call.

[Operator Instructions]

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

Tim Schneider

Good morning, everyone. Welcome to our earnings call for the fourth quarter of 2019. We will ask you to advance the slides through the presentation on your own manually, we had a little glitch in that and we'll announce which slides we'll be on as we move through the presentation.

As a reminder, we have our disclaimer on the use of forward-looking statements on Slide 2 of our presentation.

I'd like to start with the year-end review. Before we get into the quarterly results, I want to take a step back and reflect on the year we had in 2019 on Slide 3. There is a lot of uncertainty going into 2019 as we faced lower milk prices, increase in classified assets and a challenging interest rate environment. To navigate these headwinds, we set three strategic goals to guide our efforts throughout 2019.

They included maintain profitability, reduce classified assets and deleverage our balance sheet. Thanks to the hard work of our team, I'm proud to say we have accomplished all three of these in 2019. We had a record year profitability, driven partly by our ability to sell loans off-balance sheet with the servicing spread and associated loan servicing rights.

We reduced our classified asset ratio from 57% to 39%. Finally, we reduced our wholesale funding by $203 million year-over-year, almost doubling our goal of $120 million by year-end. The reduction in wholesale funding also shifted our mix from 38% of our funding to 27% year-over-year. We remain optimistic about the current ag environment, the Phase 1 China trade deal is signed and agreed to by both parties and in the process of being implemented.

The USMCA is all but done, we are just waiting for final ratification by Canada. Weather issues and wildfires in the Oceana region, which are very unfortunate should also create opportunity for Wisconsin dairy exports.

Lastly, feed costs remain low, which combined with improved milk prices should positively impact our dairy ag client performance. We have seen some pockets of stress from the trade wars on the commercial side, but we do not see that as a major issue at this time. We're going to move to asset quality now on Slide 4. We continue to be encouraged by the current level of milk prices. A year ago, forward 12-month CME Class III milk prices averaged $15.88, we are now averaging $17.88 a hundred. As we show in the chart, there has been clear correlation over the last few years between rising milk prices and a reduced coverage ratio. We hope this will continue to show improvement in overall classified assets in 2020 as we embark on the 2019 year-end ag credit review process.

We were disappointed that one of our classified ag customers who totaled