State Bank Corp. Third Quarter Earnings Increase 8% From the Second Quarter and 26% Year-Over-Year to $2.31 million, or $0.29 per Diluted Share, Highlighted by Strong Loan Growth

LAKE HAVASU CITY, Ariz., Oct. 26, 2018 (GLOBE NEWSWIRE) — State Bank Corp. (OTCPINK: SBAZ) (“Company”), the holding company for State Bank of Arizona (“Bank”), today announced net income increased 8.2% to $2.31 million, or $0.29 per diluted share, for the third quarter ended September 30, 2018, compared to $2.13 million, or $0.26 per diluted share, in the second quarter of 2018, and increased 25.5% compared to $1.84 million, or $0.23 per diluted share, for the third quarter of 2017. 

For the first nine months of 2018, net income grew 32.5% to $6.30 million, or $0.78 per diluted share, compared to $4.75 million, or $0.59 per diluted share, for the same period of 2017. 

“Solid revenue growth combined with improving operating efficiencies contributed to the most profitable periods since the company was founded for both the third quarter and first nine months of 2018,” stated Brian M. Riley, President and Chief Executive Officer.  “We generated double digit loan growth year-over-year, in part to the success of our Phoenix loan production office, which opened in the Camelback/Biltmore area earlier this year.  We see significant opportunities for expansion in the greater Phoenix market and other markets throughout the state, as the banking landscape is changing, with fewer community banks and larger banks closing offices.  Strong economic conditions persist in the Arizona markets we serve, and we see ample opportunity for the continued profitable growth of our franchise.”

Third Quarter 2018 Financial Highlights:

  • Announced plans to rename the Bank “State Bank of Arizona” to further the strategic objective of expanding state wide.
  • Net income increased 8.2% to $2.31 million, or $0.29 per diluted share, compared to $2.13 million, or $0.26 per diluted share, in 2Q18.
  • Return on average assets improved to 1.44%.
  • Return on average equity improved to 15.19%.
  • Efficiency ratio was 59.31%.
  • Non-performing asset ratio decreased to 0.14% with the resolution of one large credit relationship.
  • Core deposits comprised 90.1% of total deposits.

Net interest margin improved to 4.12% in the third quarter 2018 compared to 3.93% in the preceding quarter and 3.99% in the third quarter a year ago.  The increased margin was the result of the recognition of interest income from the resolution of a large nonaccrual loan relationship.

The provision for loan losses was $160,000 during the third quarter of 2018, with net charge-offs of $71,000.  The allowance for loan losses totaled $3.7 million at September 30, 2018, or 0.97% of total loans.  Excluding acquired loans, the reserve ratio was 1.08%, which is 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 $643.0 million at September 30, 2018, an increase of $22.4 million, or 3.60%, from $620.6 million at December 31, 2017, and an increase of $10.9 million, or 1.72%, compared to $632.1 million a year ago.  Total loans held for investment were $384.2 million at September 30, 2018, an increase of $36.3 million, or 10.4%, from $347.9 million at December 31, 2017, and an increase of $39.0 million, or 11.3%, compared to $345.2 million a year ago.

Total deposits were $560.9 million, an increase of $11.5 million, or 2.09%, from $549.4 million at December 31, 2017, and a decrease of $0.1 million, or 0.02%, compared to $561.1 million a year ago.  Core deposits, defined as noninterest bearing demand, money market, NOW and savings accounts, increased 3.83% compared to nine months earlier and increased 1.79% compared to a year earlier to $505.4 million at September 30, 2018.  Core deposits now comprise 90.1% of total deposits. 

Nonperforming assets were $923,000 at September 30, 2018, an 86.6% decrease from $6.9 million at December 31, 2017.  Nonperforming assets represented 0.14% of total assets at September 30, 2018. 

Shareholder equity increased to $61.0 million at September 30, 2018, from $58.7 million at December 31, 2017, and compared to $58.2 million a year ago.  At September 30, 2018, tangible book value per share was $6.67 per share compared to $6.37 per share at December 31, 2017, and $6.31 per share at September 30, 2017.

Capital Management

Community banking organizations, including State Bank Corp. and State Bank of Arizona, became subject to increased 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, 2018.  The Bank reported the following capital ratios at September 30, 2018:

Common Equity Tier 1 Capital Ratio 13.49%                                                                                                                                                
Tier 1 Leverage Ratio 10.23%                                                                                                                                                
Tier 1 Capital Ratio 13.49%                                                                                                                                                
Total Capital Ratio 14.26%                                                                                                                                                


About the Company

State Bank Corp., headquartered in Lake Havasu City, Arizona, is the parent company of State Bank of Arizona, the largest locally-owned bank in Arizona.  State Bank of Arizona 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.  Specializing in providing exceptional customer service and investing in its local communities, State Bank of Arizona was named 2018 Bank of the Year by Western Independent Bankers.  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 Bank also operates loan production offices in Sedona and Phoenix, AZ.  The Company is traded over-the-counter as SBAZ. For further information, please visit the web site: www.statebankaz.com

Forward-looking Statements

This press release may include forward-looking statements about State Bank Corp. and State Bank of Arizona.  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 completed 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 State Bank of Arizona assume no obligation to update any forward-looking statements.

UNAUDITED FINANCIAL STATEMENTS FOLLOW

             
State Bank Corp.            
Statement of Operations            
               
     For the Quarter Ended     Year to Date 
Dollars in thousands – Unaudited 9/30/2018 6/30/2018 9/30/2017   9/30/2018 9/30/2017
Statements of Operations            
  Interest income            
  Loans, including fees $   5,548   $   5,249   $   5,033   $   15,639   $   14,614  
  Securities      904       897       753       2,697       1,988  
  Fed funds and other     156       99       124       346       283  
  Total interest income     6,608       6,245       5,910       18,682       16,885  
               
  Interest expense            
  Deposits     259       229       177       695       532  
  Borrowings     159       143       108       406       315  
  Total interest expense     418       372       285       1,101       847  
               
    Net interest income     6,190       5,873       5,625       17,581       16,038  
               
    Provision for loan losses     160       158       50       353       (390 )
    Net interest income after loan loss provision     6,030       5,715       5,575       17,228       16,428  
               
  Noninterest income            
    Service charges on deposits     170       140       151       457       428  
    Mortgage loan fees     287       296       461       831       1,184  
    Gain on sale of loans     366       576       449       1,384       1,296  
  Other income     529       374       336       1,451       1,076  
    Total noninterest income     1,352       1,386       1,397       4,123       3,984  
               
  Noninterest expense            
  Salaries and employee benefits     2,644       2,677       2,593       8,015       7,691  
  Net occupancy expense     234       171       197       588       510  
  Equipment expense     82       83       101       257       294  
  Data processing     470       437       419       1,346       1,339  
  Director fees & expenses     64       77       77       222       198  
  Insurance     25       37       32       100       96  
  Marketing & promotion     234       124       147       488       414  
  Professional fees     177       239       110       599       332  
  Office expense     70       33       33       107       132  
  Regulatory assessments     54       57       56       175       182  
  OREO and repossessed assets     29       (29 )     29       43       648  
  Other expenses     390       397       389       1,289       1,268  
      Total noninterest expense     4,473       4,303       4,183       13,229       13,104  
               
               
  Income (loss) before provision (benefit) for income taxes     2,909       2,798       2,789       8,122       7,308  
               
  Provision (benefit) for income taxes     597       661       947       1,824       2,554  
  Net Income (Loss) $   2,312   $   2,137   $   1,842   $   6,298   $   4,754  
               
               
 Per Share Data             
   Basic EPS  $   0.29   $   0.27   $   0.23   $   0.78   $   0.59  
   Diluted EPS  $   0.29   $   0.26   $   0.23   $   0.78   $   0.59  
               
   Average shares outstanding             
     Basic      8,065,709       8,062,225       8,043,938       8,059,318       8,037,784  
     Effect of dilutive shares      27,274       30,799       27,253       31,879       15,773  
     Diluted      8,092,983       8,093,024       8,071,191       8,091,197       8,053,557  
               

State Bank Corp.        
Balance Sheets        
         
           
Dollars in thousands – Unaudited 9/30/2018 6/30/2018 12/31/2017 9/30/2017
Consolidated Balance Sheets        
           
Assets        
  Cash and cash equivalents $   4,185   $   4,251   $   3,558   $   3,195  
  Interest bearing deposits     5,027       4,966       6,835       8,254  
  Overnight Funds     21,320       31,950       15,110       28,865  
  Held for maturity securities     1       1       1       1  
  Available for sale securities     186,291       194,787       206,137       204,396  
  Total cash and securities     216,824       235,955       231,641       244,711  
           
  Loans held for sale, before reserves     1,256       4,817       3,400       4,289  
  Gross loans held for investment     384,233       362,308       347,951       345,202  
  Loan loss reserve     (3,736 )     (3,647 )     (3,306 )     (3,032 )
  Total net loans     381,753       363,478       348,045       346,459  
           
  Premises and equipment, net     14,284       14,180       14,561       14,732  
  Other real estate owned     266       398       691       577  
  Federal Home Loan Bank and other stock     6,512       4,518       3,867       3,867  
  Company owned life insurance     11,737       11,672       11,543       11,477  
  Other assets     11,587       11,481       10,289       10,255  
           
  Total Assets $   642,963   $   641,682   $   620,637   $   632,078  
           
           
Liabilities        
  Non interest bearing demand $   130,901   $   125,877   $   128,870   $   138,629  
  Money market, NOW and savings     374,492       381,090       357,880       357,867  
  Time deposits <$250K     48,014       49,154       58,214       59,804  
  Time deposits >$250K     7,545       5,781       4,431       4,777  
  Total Deposits     560,952       561,902       549,395       561,077  
           
  Securities sold under repurchase agreements     4,404       4,064       3,616       2,932  
  Federal Home Loan Bank advances     6,000       6,000       –       –  
  Subordinated debt, net of debt issuance costs     7,151       7,257       7,361       7,354  
  Total Debt     17,555       17,321       10,977       10,286  
           
  Other Liabilities     3,481       2,795       1,608       2,480  
  Total Liabilities     581,988       582,018       561,980       573,843  
           
           
Shareholders’ Equity        
    Common stock     39,556       39,513       39,333       39,260  
    Accumulated retained earnings     26,032       24,204       21,185       19,660  
    Accumulated other comprehensive income     (4,613 )     (4,053 )     (1,861 )     (685 )
  Total shareholders equity     60,975       59,664       58,657       58,235  
           
  Total liabilities and shareholders’ equity $   642,963   $   641,682   $   620,637   $   632,078  
                           

State Bank Corp.          
Five-Quarter Performance Summary          
           
     For the Quarter Ended 
Dollars in thousands – Unaudited 9/30/2018 6/30/2018 3/31/2018 12/31/2017 9/30/2017
Performance Highlights          
             
Earnings:          
  Total revenue (Net int. income + nonint. income) $   7,542   $   7,259   $   6,903   $   6,799   $   7,307  
  Net interest income $   6,190   $   5,873   $   5,518   $   5,579   $   5,625  
  Provision for loan losses $   160   $   158   $   35   $   100   $   50  
  Noninterest income $   1,352   $   1,386   $   1,385   $   1,220   $   1,397  
  Noninterest expense $   4,473   $   4,303   $   4,453   $   4,102   $   4,183  
  Net income (loss) $   2,312   $   2,137   $   1,849   $   1,541   $   1,842  
             
Per Share Data:          
  Net income (loss), basic  $   0.29   $   0.27   $   0.23   $   0.19   $   0.23  
  Net income (loss), diluted  $   0.29   $   0.26   $   0.23   $   0.19   $   0.23  
  Cash dividends declared $   0.06   $   0.06   $   0.06   $   0.04   $   0.04  
  Book value $   7.56   $   7.40   $   7.25   $   7.29   $   7.24  
  Tangible book value $   6.67   $   6.50   $   6.34   $   6.37   $   6.31  
             
Performance Ratios:          
  Return on average assets    1.44 %   1.33 %   1.18 %   0.98 %   1.20 %
  Return on average equity    15.19 %   14.48 %   12.64 %   10.52 %   12.71 %
  Net interest margin, taxable equivalent   4.12 %   3.93 %   3.78 %   3.86 %   3.99 %
  Average cost of funds   0.29 %   0.29 %   0.22 %   0.20 %   0.20 %
  Average yield on loans   5.87 %   5.68 %   5.44 %   5.63 %   5.83 %
  Efficiency ratio   59.31 %   59.28 %   64.51 %   60.33 %   59.57 %
  Non-interest income to total revenue   17.93 %   19.09 %   20.06 %   17.94 %   19.89 %
             
Capital & Liquidity:          
  Total equity to total assets (EOP)   9.48 %   9.30 %   9.26 %   9.45 %   9.21 %
  Tangible equity to tangible assets   8.47 %   8.26 %   8.20 %   8.36 %   8.12 %
  Total loans to total deposits   68.72 %   65.34 %   64.73 %   63.95 %   62.29 %
  State Bank of Arizona          
  Common equity tier 1 ratio   13.49 %   13.83 %   13.98 %   14.03 %   13.91 %
  Tier 1 leverage ratio   10.23 %   9.99 %   9.91 %   9.73 %   9.64 %
  Tier 1 risk based capital   13.49 %   13.83 %   13.98 %   14.03 %   13.91 %
  Total risk based capital    14.26 %   14.63 %   14.75 %   14.80 %   14.63 %
             
Asset Quality:          
  Gross charge-offs $   77   $   –   $   –   $   26   $   27  
  Net charge-offs (NCOs) $   71   $   (133 ) $   (15 ) $   (173 ) $   19  
  NCO to average loans, annualized   0.08 %   -0.14 %   -0.02 %   -0.20 %   0.02 %
  Non-accrual loans/securities $   657   $   2,389   $   5,899   $   6,219   $   2,467  
  Other real estate owned $   266   $   399   $   529   $   691   $   577  
  Repossessed assets  $   –   $   –   $   –   $   –   $   –  
  Non-performing assets (NPAs) $   923   $   2,788   $   6,428   $   6,910   $   3,044  
  NPAs to total assets   0.14 %   0.43 %   1.02 %   1.11 %   0.48 %
  Loans >90 days past due $   –   $   –   $   –   $   –   $   3  
  NPAs + 90 days past due $   923   $   2,788   $   6,428   $   6,910   $   3,047  
  NPAs + loans 90 days past due to total assets   0.14 %   0.43 %   1.02 %   1.11 %   0.48 %
  Allowance for loan losses to total loans   0.97 %   0.99 %   0.93 %   0.94 %   0.87 %
  Allowance for loan losses to NPAs   404.77 %   134.00 %   52.21 %   47.84 %   99.61 %
             
Period End Balances:          
  Assets $   642,963   $   641,682   $   630,360   $   620,637   $   632,078  
  Total Loans (before reserves) $   385,489   $   367,125   $   361,435   $   351,351   $   349,491  
  Deposits $   560,952   $   561,902   $   558,414   $   549,395   $   561,077  
  Stockholders’ equity $   60,975   $   59,664   $   58,381   $   58,657   $   58,235  
  Common stock market capitalization $   117,759   $   126,632   $   97,023   $   88,084   $   66,284  
  Full-time equivalent employees     121       122       117       114       117  
  Shares outstanding     8,065,709       8,065,709       8,051,677       8,044,184       8,044,184  
             
Average Balances:          
  Assets $   644,250   $   640,327   $   627,504   $   626,759   $   616,175  
  Earning assets $   603,271   $   599,968   $   585,574   $   582,297   $   567,105  
  Total Loans (before reserves) $   377,752   $   369,705   $   355,848   $   349,866   $   345,042  
  Deposits $   562,683   $   562,942   $   556,608   $   556,169   $   545,944  
  Other borrowings $   17,596   $   16,622   $   11,028   $   10,226   $   10,622  
  Stockholders’ equity $   60,901   $   59,034   $   58,519   $   58,609   $   57,968  
  Shares outstanding, basic – wtd     8,065,709       8,062,225       8,049,845       8,044,184       8,043,938  
  Shares outstanding, diluted – wtd     8,092,983       8,093,024       8,087,524       8,070,524       8,071,191  

Contact:
Brian M. Riley, President & CEO
Craig Wenner, EVP & CFO
928 855 0000
www.mohavestbank.com

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