State Bank Corp. Earnings Double YOY to $1.43 million, or $0.18 per Diluted Share, in 1Q17; Non-performing Assets Decline to Lowest Levels Since 2007

by | Apr 28, 2017 | Globe Newswire

LAKE HAVASU CITY, Ariz., April 28, 2017 (GLOBE NEWSWIRE) — State Bank Corp. (OTCPink:SBAZ)(“Company”), the holding company for Mohave State Bank (“Bank”), today announced net income increased 104.3% to $1.43 million, or $0.18 per diluted share, for the first quarter ended March 31, 2017, as compared to net income of $700,000, or $0.12 per diluted share, for the first quarter of 2016.  Excluding costs related to its acquisition of Country Bank, net income for the quarter would have been $1.47 million, a 110.0% increase compared to the first quarter one year ago. (See “Non-GAAP Financial Information” table)

“Our first quarter’s strong operating performance, improved efficiencies, growing balance sheet and decline in non-performing assets contributed to the near record first quarter net income,” stated Brian M. Riley, President and Chief Executive Officer. “The profitability of our bank is growing as the markets we serve in Arizona continue to benefit from a strong economy and a population that is rising faster than the national average.”

First Quarter 2017 Financial Highlights:

  • Completion of the Bank’s core processing conversion.
  • Net income, excluding merger related expenses, was $1.47 million, or $0.18 per diluted share.
  • Non-performing assets fell below 1.0% of total assets for the first time since 2007.
  • Return on average assets, excluding merger related expenses, was 1.00%.
  • Return on average equity, excluding merger related expenses, was 10.73%.

“Our net interest margin increased four basis points compared to the preceding quarter and decreased 19 basis points compared to the first quarter a year ago. The slight increase from the prior quarter is primarily due to lower cost of funds,” said Riley.  Net interest margin was 3.89% in the first quarter 2017 compared to 3.85% in the preceding quarter and 4.08% in the first quarter a year ago. 

There was no provision for loan losses in the first quarter, with net charge-offs of $73,000.  The allowance for loan losses totaled $3.0 million at March 31, 2017, or 0.89% of total loans.  Excluding acquired loans, the reserve ratio was 1.17%, in line with industry peers.  On the acquired portfolio, the credit component of the loan purchase discount remains greater than an imputed reserve.

Total assets were $590.3 million at March 31, 2017, an increase of $7.1 million, or 1.22%, from $583.2 million at December 31, 2016, and an increase of $252.1 million, or 74.5%, compared to $338.2 million a year ago.  Total loans held for investment were $333.0 million as compared to $323.2 million at December 31, 2016, and $216.5 million at March 31, 2016.  Total loan comparisons were affected by the addition of $107.0 million in loans from the acquisition of Country Bank.

Total deposits were $522.5 million, an increase of $6.0 million, or 1.16%, from $516.5 million at December 31, 2016, and an increase of $233.9 million, or 81.1%, compared to $288.6 million a year ago.  Core deposits, defined as noninterest bearing demand, money market, NOW and savings accounts, increased 2.09% compared to three months earlier and increased 96.5% compared to a year earlier to $452.2 million at March 31, 2017.  Total deposits and core deposit comparisons were affected by the acquisition of Country Bank by $202.2 million and $186.6 million, respectively.  Core deposits now comprise 86.6% of total deposits. 

Non-performing assets were $5.1 million at March 31, 2017, a 16.4% decrease from $6.1 million at December 31, 2016.  Nonperforming assets represented 0.87% of total assets at March 31, 2017, which represents its lowest level since fourth quarter 2007. 

Shareholder equity increased to $55.1 million at March 31, 2017, from $53.8 million at December 31, 2016.  At March 31, 2017, tangible book value per share was $5.90 per share compared to $5.76 per share at December 31, 2016.

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 March 31, 2017.  The Bank reported the following capital ratios at March 31, 2017:

Common Equity Tier 1 Capital Ratio 13.24%
   
Tier 1 Leverage Ratio 9.63%
   
Tier 1 Capital Ratio 13.24%
   
Total Capital Ratio 13.95%
   

Use of Non-GAAP Financial Information

This press release contains both financial measures based on accounting principles generally accepted in the United States (“GAAP”) and non-GAAP based financial measures, which are used where management believes this disclosure can be helpful in understanding the Company’s results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in this press release. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

About the Company

State Bank Corp., headquartered in Lake Havasu City, Arizona, is the parent company of Mohave State Bank, the largest community bank headquartered in Arizona.  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 nine full-service branches: two in Lake Havasu City, two in Kingman, two in Prescott, one in Bullhead City, one in Prescott Valley, and one in Cottonwood, 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 Mohave State Bank.  These statements involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such risks and uncertainties include, but are not limited to, the following factors: the expected cost savings, synergies and other financial benefits from the merger might not be realized within the expected time frames or at all.; Annualized, pro forma, projected and estimated numbers in this press release are used for illustrative purposes only, are not forecasts and may not reflect actual results. All forward-looking statements included in this press release are based on information available at the time of the release, and State Bank Corp. and Mohave State Bank assume no obligation to update any forward-looking statements.

UNAUDITED FINANCIAL STATEMENTS FOLLOW

State Bank Corp.      
Statement of Operations      
         
     For the Quarter Ended 
Dollars in thousands – Unaudited 3/31/2017 12/31/2016 3/31/2016
Statements of Operations      
  Interest income      
  Loans, including fees $ 4,765 $ 4,816 $ 2,956
  Securities   582   501   215
  Fed funds and other     70     56     35
  Total interest income     5,417     5,373     3,206
         
  Interest expense      
  Deposits   184   206   153
  Borrowings     96     97     34
  Total interest expense     280     303     187
         
  Net interest income     5,137     5,070     3,019
         
  Provision for loan losses   –   –   –
  Net interest income after loan loss provision   5,137   5,070   3,019
         
  Noninterest income      
  Service charges on deposits   139   131   79
  Mortgage loan fees   343   351   174
  Gain on sale of loans   447   357   173
  (Loss)/Gain on securities   –   –   –
  Other income     283     394     167
  Total noninterest income     1,212     1,233     593
         
  Noninterest expense      
  Salaries and employee benefits   2,483   2,555   1,330
  Net occupancy expense   159   129   53
  Equipment expense   93   106   40
  Data processing   428   370   242
  Director fees & expenses   43   75   44
  Insurance   32   39   30
  Marketing & promotion   128   134   78
  Professional fees   99   108   159
  Office expense   65   57   50
  Regulatory assessments   79   13   60
  OREO and repossessed assets   25   299   53
  Other expenses     442     530     216
        4,076     4,415     2,355
         
  Acquisition related costs   52   496   178
         
  Total noninterest expense     4,128     4,911     2,533
         
  Income (loss) before provision (benefit) for income taxes     2,221     1,392     1,079
         
  Provision (benefit) for income taxes     788     481     379
  Net Income $   1,433 $   911 $   700
         
         
 Per Share Data       
  Basic EPS $ 0.18 $ 0.11 $ 0.12
  Diluted EPS $ 0.18 $ 0.11 $ 0.12
         
  Average shares outstanding      
  Basic   8,029,691   8,029,691   5,842,145
  Effect of dilutive shares     –     –     –
  Diluted     8,029,691     8,029,691     5,842,145
         

State Bank Corp.        
Balance Sheets        
           
Dollars in thousands – Unaudited 3/31/2017 12/31/2016 3/31/2016  
Consolidated Balance Sheets        
           
Assets        
  Cash and cash equivalents $ 3,130   $ 5,202   $ 2,949    
  Interest bearing deposits   17,495     24,524     2,832    
  Overnight Funds   33,425     33,680     37,795    
  Held for maturity securities   2     2     17    
  Available for sale securities     159,335       147,574       51,752    
  Total cash and securities   213,387     210,982     95,345    
           
  Loans held for sale, before reserves   2,524     5,870     4,499    
  Gross loans held for investment   333,039     323,210     216,547    
  Loan loss reserve     (2,986 )     (3,058 )     (3,098 )  
  Total net loans   332,577     326,022     217,948    
           
  Premises and equipment, net   14,965     15,071     8,134    
  Other real estate owned   3,261     3,955     3,995    
  Federal Home Loan Bank and other stock   3,307     3,308     2,126    
  Company owned life insurance   11,343     11,275     6,073    
  Other assets     11,436       12,554       4,584    
           
  Total Assets $   590,276   $   583,167   $   338,205    
           
           
Liabilities        
  Non interest bearing demand $ 120,191   $ 116,696   $ 71,361    
  Money market, NOW and savings   332,047     326,269     158,830    
  Time deposits <$250K   64,574     67,845     55,538    
  Time deposits >$250K     5,651       5,688       2,836    
  Total Deposits     522,463       516,498       288,565    
           
  Securities sold under repurchase agreements   3,942     4,188     3,100    
  Federal Home Loan Bank advances   –     –     –    
  Subordinated debt     7,341       7,336       7,500    
  Total Debt   11,283     11,524     10,600    
           
  Other Liabilities     1,420       1,366       952    
  Total Liabilities   535,166     529,388     300,117    
           
           
Shareholders’ Equity        
  Common stock   39,146     39,146     24,927    
  Accumulated retained earnings   16,942     15,791     12,997    
  Accumulated other comprehensive income     (978 )     (1,158 )     164    
  Total shareholders equity   55,110     53,779     38,088    
           
  Total liabilities and shareholders’ equity $   590,276   $   583,167   $   338,205    

State Bank Corp.            
Five-Quarter Performance Summary            
             
     For the Quarter Ended   
Dollars in thousands – Unaudited 3/31/2017 12/31/2016 9/30/2016 6/30/2016 3/31/2016  
Performance Highlights            
               
Earnings:            
  Total revenue (Net int. income + nonint. income) $   6,349   $   6,303   $   5,733   $   3,925   $   3,612    
  Net interest income $   5,137   $   5,070   $   4,765   $   3,003   $   3,019    
  Provision for loan losses $   –   $   –   $   –   $   –   $   –    
  Noninterest income $   1,212   $   1,233   $   968   $   922   $   593    
  Noninterest expense $   4,128   $   4,911   $   3,709   $   2,315   $   2,533    
  Net income (loss) $   1,433   $   911   $   1,190   $   974   $   700    
               
Per Share Data:            
  Net income (loss), basic  $   0.18   $   0.11   $   0.16   $   0.17   $   0.12    
  Net income (loss), diluted  $   0.18   $   0.11   $   0.16   $   0.17   $   0.12    
  Cash dividends declared $   0.035   $   0.035   $   –   $   –   $   0.10    
  Book value $   6.86   $   6.70   $   6.79   $   6.71   $   6.52    
  Tangible book value $   5.90   $   5.76   $   5.83   $   6.71   $   6.52    
               
Performance Ratios:            
  Return on average assets    0.98 %   0.62 %   0.91 %   1.13 %   0.86 %  
  Return on average equity    10.48 %   6.77 %   9.69 %   10.05 %   7.40 %  
  Net interest margin, taxable equivalent   3.89 %   3.85 %   4.14 %   3.85 %   4.08 %  
  Average cost of funds   0.21 %   0.23 %   0.29 %   0.34 %   0.26 %  
  Average yield on loans   5.73 %   5.81 %   6.68 %   5.38 %   5.34 %  
  Efficiency ratio   65.02 %   77.92 %   64.70 %   58.98 %   70.13 %  
  Non-interest income to total revenue   19.09 %   19.56 %   16.88 %   23.49 %   16.42 %  
               
Capital & Liquidity:            
  Total equity to total assets (EOP)   9.34 %   9.22 %   9.08 %   11.32 %   11.26 %  
  Tangible equity to tangible assets   9.34 %   8.03 %   7.90 %   11.32 %   11.26 %  
  Total loans to total deposits   64.23 %   63.71 %   62.91 %   75.13 %   76.60 %  
  Mohave State Bank            
  Common equity tier 1 ratio   13.24 %   13.17 %   12.95 %   14.62 %   14.62 %  
  Tier 1 leverage ratio   9.63 %   9.40 %   10.55 %   11.08 %   11.51 %  
  Tier 1 risk based capital   13.24 %   13.17 %   12.95 %   14.62 %   14.62 %  
  Total risk based capital    13.95 %   13.90 %   13.67 %   15.81 %   15.82 %  
               
Asset Quality:            
  Gross charge-offs $   84   $   –   $   67   $   4   $   –    
  Net charge-offs (NCOs) $   73   $   (11 ) $   56   $   (5 ) $   (9 )  
  NCO to average loans, annualized   0.09 %   -0.01 %   0.08 %   -0.01 %   -0.02 %  
  Non-accrual assets $   1,872   $   2,185   $   2,321   $   2,683   $   2,229    
  Other real estate owned $   3,261   $   3,955   $   4,398   $   4,039   $   3,995    
  Repossessed assets  $   –   $   –   $   –   $   –   $   –    
  Non-performing assets (NPAs) $   5,133   $   6,140   $   6,719   $   6,722   $   6,224    
  NPAs to total assets   0.87 %   1.05 %   1.12 %   1.94 %   1.84 %  
  Loans >90 days past due $   –   $   –   $   –   $   –   $   –    
  NPAs + 90 days past due $   5,133   $   6,140   $   6,719   $   6,722   $   6,224    
  NPAs + loans 90 days past due to total assets   0.87 %   1.05 %   1.12 %   1.94 %   1.84 %  
  Allowance for loan losses to total loans   0.89 %   0.93 %   0.91 %   1.40 %   1.40 %  
  Allowance for loan losses to NPAs   58.17 %   49.80 %   45.51 %   46.16 %   49.78 %  
               
Period End Balances:            
  Assets $   590,276   $   583,167   $   600,320   $   346,458   $   338,205    
  Total Loans (before reserves) $   335,563   $   329,080   $   335,195   $   221,628   $   221,046    
  Deposits $   522,463   $   516,498   $   532,844   $   295,010   $   288,565    
  Stockholders’ equity $   55,110   $   53,779   $   54,488   $   39,229   $   38,088    
  Common stock market capitalization $   63,033   $   61,427   $   55,003   $   37,390   $   37,974    
  Full-time equivalent employees     127       120       114       75       72    
  Shares outstanding     8,029,691       8,029,691       8,029,691       5,842,145       5,842,145    
               
Average Balances:            
  Assets $   583,909   $   589,896   $   523,785   $   345,348   $   327,228    
  Earning assets $   534,369   $   530,112   $   462,668   $   318,415   $   301,084    
  Total Loans (before reserves) $   332,487   $   331,806   $   288,558   $   221,608   $   221,499    
  Deposits $   516,107   $   514,366   $   411,676   $   294,645   $   282,123    
  Other borrowings $   11,198   $   11,446   $   11,628   $   10,933   $   6,105    
  Stockholders’ equity $   54,673   $   53,800   $   49,134   $   38,753   $   37,855    
  Shares outstanding, basic – wtd     8,029,691       8,029,691       7,292,583       5,842,145       5,842,145    
  Shares outstanding, diluted – wtd     8,029,691       8,029,691       7,292,583       5,842,145       5,842,145    

NON-GAAP FINANCIAL INFORMATION            
(Unaudited)            
  Three Months Ended  
NON-GAAP PERFORMANCE MEASURES Mar. 31, 2017   Dec. 31, 2016   Mar. 31, 2016  
Return on average common equity, excluding acquisition related costs, net (1)   10.73 %     9.15 %     8.62 %  
Return on average assets, excluding acquisition related costs, net (1)   1.00 %     0.83 %     1.00 %  
Efficiency ratio, excluding acquisition related costs, net (2)   64.20 %     70.05 %     65.20 %  
             
             
NON-GAAP EARNINGS PER SHARE            
Basic (3) $   0.18     $   0.15     $   0.14    
Diluted (3) $   0.18     $   0.15     $   0.14    
             
             
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES            
(Unaudited)            
  Three Months Ended  
  Mar. 31, 2017   Dec. 31, 2016   Mar. 31, 2016  
  (in thousands)  
Net income $   1,433     $   911     $   700    
Acquisition related costs, net     52         496         178    
Tax effect on acquisition related costs, net     (18 )       (176 )       (62 )  
Net income, excluding acquisition related costs, net (3) $   1,467     $   1,231     $   816    
             
             
  Three Months Ended  
  Mar. 31, 2017   Dec. 31, 2016   Mar. 31, 2016  
  (in thousands)  
Total non-interest expenses $   4,128     $   4,911     $   2,533    
Acquisition related costs, net     52         496         178    
Total non-interest expenses, excluding acquisition related costs, net (3) $   4,076     $   4,415     $   2,355    
             
             
(1) The Company believes these non-GAAP ratios provide a useful metric with which to analyze and evaluate the financial condition of the Company
(2) The Company believes this non-GAAP ratio provides a useful metric to measure the operating efficiency of the Company   
(3) The Company believes these non-GAAP measurements are a key indicator of the ongoing earnings power of the Company   
    
CONTACT: Contact:
Brian M. Riley, President & CEO
Craig Wenner, EVP & CFO 
928 855 0000
www.mohavestbank.com

The Cereghino Group
IR CONTACT: 206-388-5785