State Bank Corp. Earnings Increase 38% to $1.1 Million or $0.18 per Share, in 3Q15 from 2Q15; Highlighted by the Sale of the Bank's Yuma Branch at a 4.45% Deposit Premium

LAKE HAVASU CITY, Ariz., Oct. 26, 2015 (GLOBE NEWSWIRE) — State Bank Corp. (OTCQB:SBAZ) (“Company”), the holding company for Mohave State Bank (“Bank”), today announced net income increased 38.2% to $1,067,000, or $0.18 per diluted share, for the third quarter ended September 30, 2015, compared to $772,000, or $0.13 per diluted share, in the second quarter of 2015 and increased 74.3% compared to $612,000, or $0.10 per diluted share, for the third quarter of 2014. The current quarter results included a $735,000 pre-tax gross gain resulting from the sale of the Bank’s Yuma branch on September 4, 2015.

For the nine months ended September 30, 2015, net income totaled $2.52 million, or $0.43 per diluted share, compared to $4.88 million, or $0.83 per diluted share, for the same period of 2014. 2014 results included a $3.24 million tax benefit as a result of the reversal of its deferred tax asset valuation allowance. Pretax income increased 96.5% to $3.88 million in the first nine months of 2015 compared to $1.97 million in the first nine months of 2014.

“Our solid third quarter results reflect the progress we are making in building a strong franchise in the Western Arizona markets that we serve. Total loans grew by $14.4 million, or 7.1% year-over-year, and at the same time our net interest margin expanded 16 basis points from the third quarter a year ago to 4.31%,” stated Brian M. Riley, President and Chief Executive Officer. “The greater Arizona economy continues to show strong economic activity resulting in increased loan demand and solid core deposit growth. We are well positioned to take advantage of new growth opportunities in our markets which are benefitting from growing tourist volumes and the in-migration of retirees.”

Third Quarter 2015 Financial Highlights:

  • Net income increased 38.2% to $1.07 million in the third quarter, compared to $612,000 in the third quarter 2014.
  • Recognized a pre-tax gross gain of $735,000 on the sale of the Yuma branch, based on a deposit premium of 4.45%.
  • The net interest margin increased to 4.31% compared to 4.15% in the third quarter of 2014.
  • Non-performing assets decreased to $10.7 million at quarter-end and further improved to $8.0 million following the end of the third quarter, reflecting continued resolution of problem credits and the sale of three foreclosed assets. As of October 9, 2015, nonperforming assets to total assets was 2.5%.
  • Tangible book value per share increased 7.6% to $6.34 per share, compared to $5.89 a year ago.

“The net interest margin continued to expand this quarter, largely due to our reduced cost of funds,” added Riley. The net interest margin was 4.31% in the third quarter 2015 compared to 4.22% in the preceding quarter and 4.15% in the third quarter a year ago.

The provision for loan losses totaled $425,000 in the third quarter against net credit losses of $370,000. The allowance for loan losses totaled $3.0 million at September 30, 2015, or 1.39% of loans held for investment. The net credit loss resulted from a charge-off of a credit relationship that was previously provided for in the Bank’s impairment process.

Total assets increased 2.5% to $325.1 million at September 30, 2015, from $317.2 million at December 31, 2014 and 2.3% compared to $317.6 million a year ago. Total loans held for investment were $216.8 million as compared to $209.0 million at December 31, 2014 and $202.4 million at September 30, 2014. Total loan comparisons were affected by the sale of loans from the Yuma branch of $11.1 million. 

Total deposits were $283.0 million, an increase of $5.5 million, or 2.0%, from $277.5 million at December 31, 2014 and an increase of $6.3 million, or 2.3%, compared to $276.7 million a year ago. Core deposits, defined as noninterest bearing demand, money market, NOW and savings accounts, decreased 4.4% compared to three months earlier and increased 4.45% compared to a year earlier to $223.9 million at September 30, 2015. Total deposits and core deposit comparisons were affected by the sale of deposits from the Yuma branch of $16.5 million and $12.8 million, respectively. Core deposits now comprise 79.1% of total deposits.   

Nonperforming assets were $10.7 million at September 30, 2015, a 27.8% decrease compared to $14.8 million at December 31, 2014 and a 37.9% decrease compared to $17.2 million at September 30, 2014. Nonperforming assets represented 3.29% of total assets at September 30, 2015, down from 4.67% at December 31, 2014 and 5.43% a year ago.

Shareholder equity increased to $37.2 million at September 30, 2015, from $35.1 million at December 31, 2014 and $34.5 million a year earlier. At September 30, 2015 tangible book value per share improved to $6.34 per share compared to $5.99 per share at December 31, 2014 and $5.89 a year earlier.

During the third quarter the company repurchased 7,038 shares of SBAZ stock at an average price of $5.29 per share.

Capital Management

Community banking organizations, including State Bank Corp. and Mohave State Bank, became subject to new capital requirements on January 1, 2015, and certain provisions of the new rules will be phased in from 2015 through 2019. The Company’s consolidated capital ratios and the Bank’s capital ratios exceeded the regulatory guidelines for a well-capitalized financial institution under the Basel III and Dodd Frank Wall Street Reform requirements at September 30, 2015.  The Bank reported the following capital ratios at September 30, 2015:

Common Equity Tier 1 Capital Ratio 14.10%
Tier 1 Leverage Ratio  10.83%
Tier 1 Capital Ratio 14.10%
Total Capital Ratio 15.27%

About the Company

State Bank Corp., headquartered in Lake Havasu City, Arizona, is the parent company of Mohave State Bank, the largest locally-owned bank in Mohave County. Mohave State Bank is a full-service bank providing deposit and loan products, and convenient on-line banking to individuals, businesses and professionals. The Bank was established in October 1991, and the holding company was formed in 2004. The Bank has five full-service branches: two in Lake Havasu City, two in Kingman, and one in Bullhead City, Arizona.  The Company is traded over-the-counter as SBAZ. For further information, please visit the web site: www.mohavestbank.com.

Forward-looking Statements

This press release may include forward-looking statements about State Bank Corp. and its subsidiary, Mohave State Bank, for which the Company claims the protection of safe harbor provisions contained in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on management’s knowledge and belief as of today and include information concerning the Company’s possible or assumed future financial condition, and its results of operations and business. Forward-looking statements are subject to risks and uncertainties. A number of important factors could cause actual results to differ materially from those in the forward-looking statements. Those factors include fluctuations in interest rates, government policies and regulations (including monetary and fiscal policies), legislation, economic conditions, borrower capacity to repay, operational factors and competition in the geographic and business areas in which the Company conducts its operations. All forward-looking statements included in this press release are based on information available at the time of the release, and the Company assumes no obligation to update any forward-looking statement.

UNAUDITED FINANCIAL STATEMENTS FOLLOW

State Bank Corp.          
Five-Quarter Performance Summary          
           
   For the Quarter Ended 
Dollars in thousands – Unaudited 9/30/2015 6/30/2015 3/31/2015 12/31/2014 9/30/2014
Performance Highlights          
           
Earnings:          
Total revenue (Net int. income + nonint. income)  $ 4,651  $ 4,123  $ 3,965  $ 3,740  $ 3,668
Net interest income  $ 3,255  $ 3,118  $ 2,864  $ 2,837  $ 2,793
Provision for loan losses  $ 425  $ 350  $ 110  $ 75  $ 250
Noninterest income  $ 1,396  $ 1,005  $ 1,101  $ 903  $ 875
Noninterest expense  $ 2,568  $ 2,588  $ 2,821  $ 3,068  $ 2,471
Net income (loss)  $ 1,067  $ 772  $ 681  $ 517  $ 612
           
Per Share Data:          
Net income (loss), basic   $ 0.18  $ 0.13  $ 0.12  $ 0.09  $ 0.10
Net income (loss), diluted   $ 0.18  $ 0.13  $ 0.12  $ 0.09  $ 0.10
Cash dividends declared  $ —  $ —  $ 0.07  $ —  $ —
Book value  $ 6.34  $ 6.13  $ 6.04  $ 5.99  $ 5.89
Tangible book value  $ 6.34  $ 6.13  $ 6.04  $ 5.99  $ 5.89
           
Performance Ratios:          
Return on average assets  1.26% 0.93% 0.85% 0.65% 0.79%
Return on average equity  11.63% 8.59% 7.68% 5.91% 7.12%
Net interest margin, taxable equivalent 4.31% 4.22% 4.09% 4.07% 4.15%
Average cost of funds 0.21% 0.21% 0.21% 0.22% 0.22%
Average yield on loans 5.42% 5.30% 5.18% 5.33% 5.31%
Efficiency ratio 55.21% 62.77% 71.15% 82.03% 67.37%
Non-interest income to total revenue 30.02% 24.38% 27.77% 24.14% 23.85%
           
Capital & Liquidity:          
Total equity to total assets (EOP) 11.43% 10.60% 10.80% 11.08% 10.88%
Tangible equity to tangible assets 11.43% 10.60% 10.80% 11.08% 10.88%
Total loans to total deposits 78.00% 78.83% 74.50% 75.01% 73.44%
Mohave State Bank          
Common equity tier 1 ratio 14.10% 12.71% 13.36%    
Tier 1 leverage ratio 10.83% 10.72% 10.92% 10.39% 10.34%
Tier 1 risk based capital 14.10% 12.71% 13.36% 13.70% 13.49%
Total risk based capital  15.27% 13.77% 14.52% 14.93% 14.75%
           
Asset Quality:          
Gross charge-offs  $ 373  $ 449  $ 124  $ 351  $ —
Net charge-offs (NCOs)  $ 370  $ 415  $ 30  $ 313  $ (19)
NCO to average loans, annualized 0.63% 0.73% 0.06% 0.60% -0.04%
Non-accrual loans/securities  $ 4,570  $ 3,732  $ 6,444  $ 5,522  $ 5,975
Other real estate owned  $ 6,141  $ 6,696  $ 7,595  $ 9,307  $ 11,268
Repossessed assets   $ —  $ —  $ —  $ —  $ —
Non-performing assets (NPAs)  $ 10,711  $ 10,428  $ 14,039  $ 14,829  $ 17,243
NPAs to total assets 3.29% 3.08% 4.28% 4.67% 5.43%
Loans >90 days past due  $ —  $ —  $ —  $ —  $ —
NPAs + 90 days past due  $ 10,711  $ 10,428  $ 14,039  $ 14,829  $ 17,243
NPAs + loans 90 days past due to total assets 3.29% 3.08% 4.28% 4.67% 5.43%
Allowance for loan losses to total loans 1.37% 1.26% 1.42% 1.42% 1.57%
Allowance for loan losses to NPAs 28.23% 28.47% 21.61% 19.92% 18.52%
           
Period End Balances:          
Assets  $ 325,104  $ 339,109  $ 328,302  $ 317,215  $ 317,648
Total Loans (before reserves)  $ 220,768  $ 241,666  $ 217,245  $ 210,312  $ 205,239
Deposits  $ 283,035  $ 297,928  $ 287,237  $ 277,493  $ 276,716
Stockholders’ equity  $ 37,166  $ 35,951  $ 35,470  $ 35,137  $ 34,575
Common stock market capitalization  $ 35,166  $ 27,873  $ 29,575  $ 29,340  $ 27,991
Full-time equivalent employees  76  81  81  80  80
Shares outstanding  5,861,000  5,868,038  5,868,038  5,868,038  5,868,038
           
Average Balances:          
Assets  $ 337,463  $ 333,387  $ 319,817  $ 318,835  $ 309,367
Earning assets  $ 307,376  $ 301,427  $ 285,722  $ 283,657  $ 273,449
Total Loans (before reserves)  $ 235,051  $ 228,847  $ 214,992  $ 207,130  $ 205,025
Deposits  $ 295,327  $ 291,980  $ 279,305  $ 277,947  $ 269,083
Other borrowings  $ 4,327  $ 4,817  $ 4,481  $ 4,481  $ 4,737
Stockholders’ equity  $ 36,689  $ 35,947  $ 35,454  $ 34,975  $ 34,365
Shares outstanding, basic – wtd  5,866,038  5,868,038  5,868,038  5,868,038  5,868,038
Shares outstanding, diluted – wtd  5,866,038  5,868,038  5,868,038  5,868,038  5,868,038
       
State Bank Corp.      
Balance Sheets      
       
       
Dollars in thousands – Unaudited 9/30/2015 12/31/2014 9/30/2014
Consolidated Balance Sheets      
       
Assets      
Cash and cash equivalents  $ 1,777  $ 1,679  $ 1,954
Interest bearing deposits  4,033  3,459  3,958
Overnight Funds  25,150  31,740  37,900
Held for maturity securities  21  27  30
Available for sale securities 49,323  39,814  36,541
Total cash and securities  80,304  76,719  80,383
       
Loans held for sale, before reserves  3,928  1,300  2,825
Gross loans held for investment  216,840  209,012  202,414
Loan loss reserve  (3,024)  (2,954)  (3,193)
Total net loans  217,744  207,358  202,046
       
Premises and equipment, net  8,235  9,892  9,906
Other real estate owned  6,141  9,307  11,268
Federal Home Loan Bank and other stock  2,126  1,917  1,917
Company owned life insurance  5,993  5,871  5,830
Other assets  4,561  6,151  6,298
       
Total Assets  $ 325,104  $ 317,215  $ 317,648
       
       
Liabilities      
Non interest bearing demand  $ 69,529  $ 62,612  $ 63,772
Money market, NOW and savings  154,337  152,308  150,553
Time deposits <$100K  26,018  25,929  31,041
Time deposits >$100K  33,151  36,644  31,350
Total Deposits  283,035  277,493  276,716
       
Securities sold under repurchase agreements  3,657  2,734  4,240
Federal Home Loan Bank advances  —  —  —
Subordinated debt  —  675  675
Total Debt  3,657  3,409  4,915
       
Other Liabilities  1,246  1,176  1,442
Total Liabilities  287,938  282,078  283,073
       
       
Shareholders’ Equity      
 Common stock  25,007  25,037  25,037
 Accumulated retained earnings  11,968  9,866  9,349
 Accumulated other comprehensive income  191  234  189
Total shareholders equity  37,166  35,137  34,575
       
Total liabilities and shareholders’ equity  $ 325,104  $ 317,215  $ 317,648
           
State Bank Corp.          
Statement of Operations          
           
   For the Quarter Ended   Year to Date 
Dollars in thousands – Unaudited 9/30/2015 6/30/2015 9/30/2014 9/30/2015 9/30/2014
Statements of Operations          
Interest income          
Loans, including fees  $ 3,186  $ 3,031  $ 2,723  $ 9,000  $ 8,098
Securities   209  224  205  646  604
Fed funds and other  14  17  18  47  44
Total interest income  3,409  3,272  2,946  9,693  8,746
           
Interest expense          
Deposits  153  143  139  429  411
Borrowings  1  11  14  26  42
Total interest expense  154  154  153  455  453
           
Net interest income  3,255  3,118  2,793  9,238  8,293
           
Provision for loan losses  425  350  250  885  620
Net interest income after loan loss provision  2,830  2,768  2,543  8,353  7,673
           
Noninterest income          
 Service charges on deposits  89  88  104  273  312
 Mortgage loan fees  241  304  113  738  282
 Gain on sale of loans  180  405  510  1,239  833
 (Loss)/Gain on securities  —  —  —  (8)  (42)
Other income  886  208  148  1,261  553
Total noninterest income  1,396  1,005  875  3,503  1,938
           
Noninterest expense          
Salaries and employee benefits  1,447  1,457  1,315  4,430  3,923
Net occupancy expense  102  96  97  278  283
Equipment expense  47  43  39  131  115
Data processing  246  292  276  826  797
Director fees & expenses  55  63  41  166  140
Insurance  26  26  29  77  89
Marketing & promotion  57  81  82  265  250
Professional fees  82  80  97  254  399
Office expense  28  30  30  93  81
Regulatory assessments  106  100  69  321  330
OREO and repossessed assets  214  111  247  611  788
Other expenses  158  209  149  526  442
Total noninterest expense  2,568  2,588  2,471  7,978  7,637
           
Income (loss) before provision (benefit) for income taxes  1,658  1,185  947  3,878  1,974
           
Provision (benefit) for income taxes  591  413  335  1,358  (2,905)
Net Income (Loss)  $ 1,067  $ 772  $ 612  $ 2,520  $ 4,879
           
           
 Per Share Data           
 Basic EPS   $ 0.18  $ 0.13  $ 0.10  $ 0.43  $ 0.83
 Diluted EPS   $ 0.18  $ 0.13  $ 0.10  $ 0.43  $ 0.83
           
 Average shares outstanding           
 Basic   5,866,038  5,868,038  5,868,038  5,867,364  5,868,038
 Effect of dilutive shares   —  —  —  —  —
 Diluted   5,866,038  5,868,038  5,868,038  5,867,364  5,868,038
CONTACT: Brian M. Riley, President & CEO
         Craig Wenner, EVP & CFO
         928 855 0000
         www.mohavestbank.com

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