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State Bank Corp. Earnings Grow to $700,000, or $0.12 per Diluted Share, in First Quarter 2016

LAKE HAVASU CITY, Ariz., April 29, 2016 (GLOBE NEWSWIRE) -- State Bank Corp. (OTCQB:SBAZ) (“Company”), the holding company for Mohave State Bank (“Bank”), today announced net income increased 2.8% to $700,000, or $0.12 per diluted share, for the first quarter ended March 31, 2016, as compared to net income of $681,000, or $0.12 per diluted share, for the first quarter of 2015. Excluding costs related to its pending merger, net income for the quarter would have been $816,000, a 19.8% increase compared to the first quarter one year ago. (See “Non-GAAP Financial Information” table)

“The highlight of the first quarter was the announcement of our definitive merger agreement with Country Bank,” stated Brian M. Riley, President and Chief Executive Officer. “We are excited about this opportunity to bring together two independent community banks with similar philosophies and cultures into a combined Arizona franchise exceeding $500 million in assets. This merger reaffirms our position as the largest community bank headquartered in Arizona and expands our geographic footprint into Yavapai County with Country Bank’s branches in Prescott, Prescott Valley and Cottonwood. With strong capital, improving asset quality and continued profitability, we are investing in our infrastructure to capitalize on opportunities in our market.”

In February, State Bank announced it had signed a definitive merger agreement whereby Country Bank will merge into Mohave State Bank in a transaction valued at approximately $29.6 million. The transaction joins two of the leading community bank franchises headquartered in Arizona with approximately $530 million in combined assets. “We expect the merger will be immediately accretive to earnings per share and significantly increase return on equity,” said Riley.

First Quarter 2016 Highlights:

  • First quarter core operating (non-GAAP) net income increased 19.8% to $816,000, or $0.14 per diluted share, compared to $681,000, or $0.12 per diluted share, in the first quarter a year ago.
  • Declared an annual cash dividend of $0.10 per share, which represented a dividend yield of 1.40%.
  • The net interest margin remained healthy at 4.08%.
  • Tangible book value increased 7.9% to $6.52 per share from $6.04 per share a year earlier.

There was no provision for loan losses in the first quarter reflecting a small net recovery of $9,000. The allowance for loan losses totaled $3.1 million at March 31, 2016, or 1.40% of total loans. “We continue to carefully monitor our level of loss reserves and as asset quality continues to improve our need to make additions to reserves has diminished in the past few quarters,” noted Riley.

Total assets were $338.2 million at March 31, 2016, an increase of $12.9 million, or 4.0% from $325.3 million at December 31, 2015 and an increase of $9.9 million, or 3.0%, compared to $328.3 million a year ago. Total loans held for investment were $216.5 million as compared to $216.3 million at December 31, 2015 and $214.9 million at March 31, 2015. Total deposits were $288.6 million, an increase of $5.8 million, or 2.1%, from $282.8 million at December 31, 2015 and an increase of $1.4 million, or 0.5%, compared to $287.2 million a year ago. Core deposits, defined as noninterest bearing demand, money market, NOW and savings accounts, increased 2.9% compared to three months earlier and increased 1.9% compared to a year earlier to $230.2 million at March 31, 2016. Core deposits now comprise 79.8% of total deposits.

Nonperforming assets were $6.2 million at March 31, 2016, a 3.2% decrease compared to $6.4 million at December 31, 2015 and a 55.7% decrease compared to $14.0 million at March 31, 2015. Nonperforming assets represented 1.84% of total assets at March 31, 2016, down from 1.97% at December 31, 2015 and 4.28% a year ago.

Shareholder equity increased to $38.1 million at March 31, 2015, from $37.8 million at December 31, 2015 and $35.5 million a year earlier. At March 31, 2016 tangible book value per share improved to $6.52 per share compared to $6.47 per share three months earlier and $6.04 a year earlier.

Recent Developments

State Bank Corp. announced it signed a definitive merger agreement with Country Bank, whereby Country Bank will merge into Mohave State Bank in a stock and cash transaction valued at approximately $29.6 million. Country Bank has four branches with $205.5 million in assets as of December 31, 2015, and following the combination of the two franchises, State Bank Corp. will have nine branches in attractive Arizona markets with assets of $530 million. Additionally, on January 22nd the Company declared a $0.10 per share annual cash dividend, an increase of 43% from the previous year.

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, 2016. The Bank reported the following capital ratios at March 31, 2016:

Common Equity Tier 1 Capital Ratio 14.62%
Tier 1 Leverage Ratio 11.51%
Tier 1 Capital Ratio 14.62%
Total Capital Ratio 15.82%

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 it to 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 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., Mohave State Bank, Country Bank and the proposed merger. 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; regulatory approvals of the merger may not be obtained or adverse regulatory conditions may be imposed in connection with such regulatory approvals; and conditions to the closing of the merger may not be satisfied. 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., Mohave State Bank and Country 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 - Unaudited3/31/201612/31/20153/31/2015
Statements of Operations
Interest income
Loans, including fees $2,956 $3,019 $2,783
Securities 215 212 213
Fed funds and other 35 19 15
Total interest income 3,206 3,250 3,011
Interest expense
Deposits 153 151 133
Borrowings 34 1 14
Total interest expense 187 152 147
Net interest income 3,019 3,098 2,864
Provision for loan losses - - 110
Net interest income after loan loss provision 3,019 3,098 2,754
Noninterest income
Service charges on deposits 79 85 96
Mortgage loan fees 174 190 193
Gain on sale of loans 173 253 654
(Loss)/Gain on securities - - (8)
Other income 167 174 166
Total noninterest income 593 702 1,101
Noninterest expense
Salaries and employee benefits 1,330 1,483 1,525
Net occupancy expense 53 90 80
Equipment expense 40 44 42
Data processing 242 243 288
Director fees & expenses 44 66 48
Insurance 30 35 26
Marketing & promotion 78 69 126
Professional fees 159 180 91
Office expense 50 70 35
Regulatory assessments 60 32 114
OREO and repossessed assets 53 39 286
Other expenses 216 149 160
2,355 2,500 2,821
Acquisition related costs 178 - -
Total noninterest expense 2,533 2,500 2,821
Income (loss) before provision (benefit) for income taxes 1,079 1,300 1,034
Provision (benefit) for income taxes 379 354 353
Net Income $700 $946 $681
Per Share Data
Basic EPS $0.12 $0.16 $0.12
Diluted EPS $0.12 $0.16 $0.12
Average shares outstanding
Basic 5,842,145 5,849,444 5,868,038
Effect of dilutive shares - - -
Diluted 5,842,145 5,849,444 5,868,038


State Bank Corp.
Balance Sheets
Dollars in thousands - Unaudited3/31/201612/31/20153/31/2015
Consolidated Balance Sheets
Assets
Cash and cash equivalents $2,949 $1,899 $2,105
Interest bearing deposits 2,832 4,167 3,908
Overnight Funds 37,795 29,250 29,520
Held for maturity securities 17 19 25
Available for sale securities 51,752 46,881 48,039
Total cash and securities 95,345 82,216 83,597
Loans held for sale, before reserves 4,499 4,457 2,304
Gross loans held for investment 216,547 216,357 214,941
Loan loss reserve (3,098) (3,089) (3,034)
Total net loans 217,948 217,725 214,211
Premises and equipment, net 8,134 8,195 9,898
Other real estate owned 3,995 4,247 7,594
Federal Home Loan Bank and other stock 2,126 2,126 1,917
Company owned life insurance 6,073 6,034 5,911
Other assets 4,584 4,776 5,174
Total Assets $ 338,205 $ 325,319 $ 328,302
Liabilities
Non interest bearing demand $71,361 $70,648 $65,596
Money market, NOW and savings 158,830 153,156 160,306
Time deposits <$100K 25,015 25,703 27,304
Time deposits >$100K 33,359 33,329 34,031
Total Deposits 288,565 282,836 287,237
Securities sold under repurchase agreements 3,100 3,653 3,581
Federal Home Loan Bank advances - - -
Subordinated debt 7,500 - 675
Total Debt 10,600 3,653 4,256
Other Liabilities 952 1,047 1,339
Total Liabilities 300,117 287,536 292,832
Shareholders' Equity
Common stock 24,927 24,927 25,037
Accumulated retained earnings 12,997 12,881 10,136
Accumulated other comprehensive income 164 (25) 297
Total shareholders equity 38,088 37,783 35,470
Total liabilities and shareholders' equity $ 338,205 $ 325,319 $ 328,302


State Bank Corp.
Five-Quarter Performance Summary
For the Quarter Ended
Dollars in thousands - Unaudited3/31/201612/31/20159/30/20156/30/20153/31/2015
Performance Highlights
Earnings:
Total revenue (Net int. income + nonint. income)$3,612 $3,800 $4,651 $4,123 $3,965
Net interest income$3,019 $3,098 $3,255 $3,118 $2,864
Provision for loan losses$- $- $425 $350 $110
Noninterest income$593 $702 $1,396 $1,005 $1,101
Noninterest expense$2,533 $2,500 $2,568 $2,588 $2,821
Net income (loss)$700 $946 $1,067 $772 $681
Per Share Data:
Net income (loss), basic$0.12 $0.16 $0.18 $0.13 $0.12
Net income (loss), diluted$0.12 $0.16 $0.18 $0.13 $0.12
Cash dividends declared$0.10 $- $- $- $0.07
Book value$6.52 $6.47 $6.34 $6.13 $6.04
Tangible book value$6.52 $6.47 $6.34 $6.13 $6.04
Performance Ratios:
Return on average assets 0.86% 1.17% 1.26% 0.93% 0.85%
Return on average equity 7.40% 10.04% 11.63% 8.59% 7.68%
Net interest margin, taxable equivalent 4.08% 4.29% 4.31% 4.22% 4.09%
Average cost of funds 0.26% 0.21% 0.21% 0.21% 0.21%
Average yield on loans 5.34% 5.45% 5.42% 5.30% 5.18%
Efficiency ratio 70.13% 65.79% 55.21% 62.77% 71.15%
Non-interest income to total revenue 16.42% 18.47% 30.02% 24.38% 27.77%
Capital & Liquidity:
Total equity to total assets (EOP) 11.26% 11.61% 11.43% 10.60% 10.80%
Tangible equity to tangible assets 11.26% 11.61% 11.43% 10.60% 10.80%
Total loans to total deposits 76.60% 78.07% 78.00% 78.83% 74.50%
Mohave State Bank
Common equity tier 1 ratio 14.62% 14.70% 14.10% 12.71% 13.36%
Tier 1 leverage ratio 11.51% 11.61% 10.83% 10.72% 10.92%
Tier 1 risk based capital 14.62% 14.70% 14.10% 12.71% 13.36%
Total risk based capital 15.82% 15.91% 15.27% 13.77% 14.52%
Asset Quality:
Gross charge-offs$- $4 $373 $449 $124
Net charge-offs (NCOs)$(9)$(65)$370 $415 $30
NCO to average loans, annualized -0.02% -0.12% 0.63% 0.73% 0.06%
Non-accrual assets$2,229 $2,154 $4,570 $3,732 $6,444
Other real estate owned$3,995 $4,246 $6,141 $6,696 $7,595
Repossessed assets$- $- $- $- $-
Non-performing assets (NPAs)$6,224 $6,400 $10,711 $10,428 $14,039
NPAs to total assets 1.84% 1.97% 3.29% 3.08% 4.28%
Loans >90 days past due$- $- $- $- $-
NPAs + 90 days past due$6,224 $6,400 $10,711 $10,428 $14,039
NPAs + loans 90 days past due to total assets 1.84% 1.97% 3.29% 3.08% 4.28%
Allowance for loan losses to total loans 1.40% 1.40% 1.37% 1.26% 1.42%
Allowance for loan losses to NPAs 49.78% 48.27% 28.23% 28.47% 21.61%
Period End Balances:
Assets$338,205 $325,319 $325,104 $339,109 $328,302
Total Loans (before reserves)$221,046 $220,814 $220,768 $241,666 $217,245
Deposits$288,565 $282,836 $283,035 $297,928 $287,237
Stockholders' equity$38,088 $37,783 $37,166 $35,951 $35,470
Common stock market capitalization$37,974 $36,981 $35,166 $27,873 $29,575
Full-time equivalent employees 72 77 76 81 81
Shares outstanding 5,842,145 5,842,145 5,861,000 5,868,038 5,868,038
Average Balances:
Assets$327,228 $323,157 $337,463 $333,387 $319,817
Earning assets$301,084 $294,500 $307,376 $301,427 $285,722
Total Loans (before reserves)$221,499 $221,705 $235,051 $228,847 $214,992
Deposits$282,123 $280,558 $295,327 $291,980 $279,305
Other borrowings$6,105 $3,846 $4,327 $4,817 $4,481
Stockholders' equity$37,855 $37,686 $36,689 $35,947 $35,454
Shares outstanding, basic - wtd 5,842,145 5,849,444 5,866,038 5,868,038 5,868,038
Shares outstanding, diluted - wtd 5,842,145 5,849,444 5,866,038 5,868,038 5,868,038


NON-GAAP FINANCIAL INFORMATION
(Unaudited)
Three Months Ended
NON-GAAP PERFORMANCE MEASURESMar. 31, 2016 Dec. 31, 2015 Mar. 31, 2015
Return on average common equity, excluding acquisition related costs, net (1) 8.62% 10.04% 7.68%
Return on average assets, excluding acquisition related costs, net (1) 1.00% 1.17% 0.85%
Efficiency ratio, excluding acquisition related costs, net (2) 65.20% 65.79% 71.15%
NON-GAAP EARNINGS PER SHARE
Basic (3)$0.14 $0.16 $0.12
Diluted (3)$0.14 $0.16 $0.12
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Unaudited)
Three Months Ended
Mar. 31, 2016 Dec. 31, 2015 Mar. 31, 2015
(in thousands)
Net income$700 $946 $681
Acquisition related costs, net 178 - -
Tax effect on acquisition related costs, net (62) - -
Net income, excluding acquisition related costs, net (3)$816 $946 $681
Three Months Ended
Mar. 31, 2016 Dec.31, 2015 Mar. 31, 2015
(in thousands)
Total non-interest expenses$2,533 $2,500 $2,821
Acquisition related costs, net 178 - -
Total non-interest expenses, excluding acquisition related costs, net (3)$2,355 $2,500 $2,821
(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: Brian M. Riley, President & CEO Craig Wenner, EVP & CFO 928 855 0000 www.mohavestbank.com

Source:State Bank Corp.