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State Bank Corp. Earns $911,000 in Fourth Quarter and $3.78 Million for the Year; Results Highlighted by Double Digit Year-over-Year Loan and Deposit Growth

LAKE HAVASU CITY, Ariz., Jan. 26, 2017 (GLOBE NEWSWIRE) -- State Bank Corp. (OTCQB:SBAZ) (“Company”), the holding company for Mohave State Bank (“Bank”), today reported net income of $911,000, or $0.11 per diluted share, for the fourth quarter ended December 31, 2016, as compared to $946,000, or $0.16 per diluted share, for the fourth quarter of 2015. On a linked quarter basis, net income in the fourth quarter 2016 dropped 23.4% from $1.19 million, or $0.16 per diluted share, in the third quarter of 2016. This decrease was due to higher merger related costs as well as a full quarter of combined operating expenses.

For the year ended December 31, 2016, net income grew to $3.78 million, or $0.56 per diluted share, as compared to net income of $3.47 million, or $0.59 per diluted share, for 2015.

“For the fourth quarter, we generated strong operating results driven by balance sheet expansion, core deposit growth and robust mortgage banking operations,” stated Brian M. Riley, President and Chief Executive Officer. “We are confident that our recently completed merger of Country Bank will provide opportunities for continued revenue growth going forward. The staff of the combined bank has done an amazing job integrating the two companies and with a majority of the transaction expenses behind us, we look forward to realizing the full value of our merger.”

Fourth Quarter & Full Year 2016 Financial Highlights:

  • Fourth Quarter net income, excluding merger related expenses, was $1.23 million, or $0.15 per diluted share.
  • Fourth quarter return on average assets, excluding merger related expenses, of 0.83%.
  • Fourth quarter return on average equity, excluding merger related expenses, of 9.15%.
  • Continued integration of the combined Banks following the acquisition of Country Bank. The lone outstanding item is the core processing conversion, scheduled for February 2017.
  • The Bank’s Mortgage Division originated a record $72.0 million in loan production and recorded net operating profit of $665,000 in 2016. For the first time, mortgage activities generated over $2 million in gross revenue.

Net interest margin was 3.85% in the fourth quarter 2016 compared to 4.14% in the preceding quarter and 4.29% in the fourth quarter a year ago. The decrease is the result of a nonrecurring accounting adjustment to loan interest and the normalization of discount amortization on Country Bank’s acquired portfolio.

There was no provision for loan losses in the fourth quarter, with net recoveries of $11,000. The allowance for loan losses totaled $3.1 million at December 31, 2016, or 0.93% of total loans. Excluding acquired loans, the reserve ratio was 1.28%, well in line with industry peers. On the acquired portfolio, the credit component of the loan purchase discount remains greater than the imputed reserve.

Total assets were $583.2 million at December 31, 2016, an increase of $257.9 million, or 79.3%, from $325.3 million at December 31, 2015. Total loans held for investment were $323.2 million as compared to $216.4 million at December 31, 2015. Total loan comparisons were affected by the addition of $107.0 million in loans from the acquisition of Country Bank.

Total deposits were $516.5 million, an increase of $233.7 million, or 82.6%, from $282.8 million at December 31, 2015. Core deposits, defined as noninterest bearing demand, money market, NOW and savings accounts, increased to $443.0 million at December 31, 2016, or 97.9%, from $223.8 million at December 31, 2015. 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 85.8% of total deposits.

Nonperforming assets were $6.1 million at December 31, 2016, a 4.7% decrease from $6.4 million at December 31, 2015. Nonperforming assets represented 1.05% of total assets at December 31, 2016.

Shareholder equity increased to $53.8 million at December 31, 2016, from $37.8 million at December 31, 2015. The significant increase is the result of issuing 2,187,546 shares of common stock at $6.50 per share to finance the acquisition of Country Bank. At December 31, 2016, tangible book value per share was $5.76 per share compared to $6.47 per share at December 31, 2015. The decrease was the result of the issuance of common stock and the formation of goodwill and intangible assets involved in the acquisition of Country Bank.

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

Common Equity Tier 1 Capital Ratio 13.17%
Tier 1 Leverage Ratio 9.40%
Tier 1 Capital Ratio 13.17%
Total Capital Ratio 13.90%

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 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., Mohave State Bank, Country Bank and the 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 Year to Date
Dollars in thousands - Unaudited12/31/20169/30/201612/31/2015 12/31/201612/31/2015
Statements of Operations
Interest income
Loans, including fees$ 4,816$ 4,594$ 3,019 $ 15,346$ 12,019
Securities 501 394 212 1,331 858
Fed funds and other 56 71 19 221 65
Total interest income 5,373 5,059 3,250 16,898 12,942
Interest expense
Deposits 206 198 151 718 581
Borrowings 97 96 1 322 26
Total interest expense 303 294 152 1,040 607
Net interest income 5,070 4,765 3,098 15,858 12,335
Provision for loan losses - - - - 885
Net interest income after loan loss provision 5,070 4,765 3,098 15,858 11,450
Noninterest income
Service charges on deposits 131 116 85 404 358
Mortgage loan fees 351 272 190 1,087 928
Gain on sale of loans 357 306 253 1,193 1,492
(Loss)/Gain on securities - - - (8)
Other income 394 274 174 1,032 1,435
Total noninterest income 1,233 968 702 3,716 4,205
Noninterest expense
Salaries and employee benefits 2,555 2,004 1,483 7,320 5,913
Net occupancy expense 129 87 90 325 367
Equipment expense 106 70 44 255 175
Data processing 370 261 243 1,113 1,069
Director fees & expenses 75 37 66 189 231
Insurance 39 33 35 132 112
Marketing & promotion 134 119 69 385 334
Professional fees 108 103 180 132 434
Office expense 57 25 70 160 163
Regulatory assessments 13 58 32 182 353
OREO and repossessed assets 299 109 39 504 650
Other expenses 530 425 149 1,579 676
4,415 3,331 2,500 12,276 10,477
Acquisition related costs 496 378 - 1,193 -
Total noninterest expense 4,911 3,709 2,500 13,469 10,477
Income (loss) before provision (benefit) for income taxes 1,392 2,024 1,300 6,105 5,178
Provision (benefit) for income taxes 481 834 354 2,330 1,712
Net Income (Loss)$ 911$ 1,190$ 946 $ 3,775$ 3,466
Per Share Data
Basic EPS $ 0.11$ 0.16$ 0.16 $ 0.56$ 0.59
Diluted EPS $ 0.11$ 0.16$ 0.16 $ 0.56$ 0.59
Average shares outstanding
Basic 8,029,691 7,292,583 5,849,444 6,756,611 5,862,847
Effect of dilutive shares - - - - -
Diluted 8,029,691 7,292,583 5,849,444 6,756,611 5,862,847


State Bank Corp.
Balance Sheets
Dollars in thousands - Unaudited12/31/201612/31/2015
Consolidated Balance Sheets
Assets
Cash and cash equivalents$ 5,202 $ 1,899
Interest bearing deposits 24,524 4,167
Overnight Funds 33,680 29,250
Held for maturity securities 2 19
Available for sale securities 147,574 46,881
Total cash and securities 210,982 82,216
Loans held for sale, before reserves 5,870 4,457
Gross loans held for investment 323,210 216,357
Loan loss reserve (3,058) (3,089)
Total net loans 326,022 217,725
Premises and equipment, net 15,071 8,195
Other real estate owned 3,955 4,247
Federal Home Loan Bank and other stock 3,308 2,126
Company owned life insurance 11,275 6,034
Other assets 12,554 4,776
Total Assets$ 583,167 $ 325,319
Liabilities
Non interest bearing demand$ 116,696 $ 70,648
Money market, NOW and savings 326,269 153,156
Time deposits <$100K 28,603 25,703
Time deposits >$100K 44,930 33,329
Total Deposits 516,498 282,836
Securities sold under repurchase agreements 4,188 3,653
Federal Home Loan Bank advances - -
Subordinated debt 7,336 -
Total Debt 11,524 3,653
Other Liabilities 1,366 1,047
Total Liabilities 529,388 287,536
Shareholders' Equity
Common stock 39,146 24,927
Accumulated retained earnings 15,791 12,881
Accumulated other comprehensive income (1,158) (25)
Total shareholders equity 53,779 37,783
Total liabilities and shareholders' equity$ 583,167 $ 325,319


State Bank Corp.
Five-Quarter Performance Summary
For the Quarter Ended
Dollars in thousands - Unaudited12/31/20169/30/20166/30/20163/31/201612/31/2015
Performance Highlights
Earnings:
Total revenue (Net int. income + nonint. income)$ 6,303 $ 5,733 $ 3,925 $ 3,612 $ 3,800
Net interest income$ 5,070 $ 4,765 $ 3,003 $ 3,019 $ 3,098
Provision for loan losses$ - $ - $ - $ - $ -
Noninterest income$ 1,233 $ 968 $ 922 $ 593 $ 702
Noninterest expense$ 4,911 $ 3,709 $ 2,315 $ 2,533 $ 2,500
Net income (loss)$ 911 $ 1,190 $ 974 $ 700 $ 946
Per Share Data:
Net income (loss), basic $ 0.11 $ 0.16 $ 0.17 $ 0.12 $ 0.16
Net income (loss), diluted $ 0.11 $ 0.16 $ 0.17 $ 0.12 $ 0.16
Cash dividends declared$ 0.04 $ - $ - $ 0.10 $ -
Book value$ 6.70 $ 6.79 $ 6.71 $ 6.52 $ 6.47
Tangible book value$ 5.76 $ 5.83 $ 6.71 $ 6.52 $ 6.47
Performance Ratios:
Return on average assets 0.62% 0.91% 1.13% 0.86% 1.17%
Return on average equity 6.77% 9.69% 10.05% 7.40% 10.04%
Net interest margin, taxable equivalent 3.85% 4.14% 3.85% 4.08% 4.29%
Average cost of funds 0.23% 0.29% 0.34% 0.26% 0.21%
Average yield on loans 5.81% 6.68% 5.38% 5.34% 5.45%
Efficiency ratio 77.92% 64.70% 58.98% 70.13% 65.79%
Non-interest income to total revenue 19.56% 16.88% 23.49% 16.42% 18.47%
Capital & Liquidity:
Total equity to total assets (EOP) 9.22% 9.08% 11.32% 11.26% 11.61%
Tangible equity to tangible assets 8.03% 7.90% 11.32% 11.26% 11.61%
Total loans to total deposits 63.71% 62.91% 75.13% 76.60% 78.07%
Mohave State Bank
Common equity tier 1 ratio 13.17% 12.95% 14.62% 14.62% 14.70%
Tier 1 leverage ratio 9.40% 10.55% 11.08% 11.51% 11.61%
Tier 1 risk based capital 13.17% 12.95% 14.62% 14.62% 14.70%
Total risk based capital 13.90% 13.67% 15.81% 15.82% 15.91%
Asset Quality:
Gross charge-offs$ - $ 67 $ 4 $ - $ 4
Net charge-offs (NCOs)$ (11)$ 56 $ (5)$ (9)$ (65)
NCO to average loans, annualized -0.01% 0.08% -0.01% -0.02% -0.12%
Non-accrual loans/securities$ 2,185 $ 2,321 $ 2,683 $ 2,229 $ 2,154
Other real estate owned$ 3,955 $ 4,398 $ 4,039 $ 3,995 $ 4,246
Repossessed assets $ - $ - $ - $ - $ -
Non-performing assets (NPAs)$ 6,140 $ 6,719 $ 6,722 $ 6,224 $ 6,400
NPAs to total assets 1.05% 1.12% 1.94% 1.84% 1.97%
Loans >90 days past due$ - $ - $ - $ - $ -
NPAs + 90 days past due$ 6,140 $ 6,719 $ 6,722 $ 6,224 $ 6,400
NPAs + loans 90 days past due to total assets 1.05% 1.12% 1.94% 1.84% 1.97%
Allowance for loan losses to total loans 0.93% 0.91% 1.40% 1.40% 1.40%
Allowance for loan losses to NPAs 49.80% 45.51% 46.16% 49.78% 48.27%
Period End Balances:
Assets$ 583,167 $ 600,320 $ 346,458 $ 338,205 $ 325,319
Total Loans (before reserves)$ 329,080 $ 335,195 $ 221,628 $ 221,046 $ 220,814
Deposits$ 516,498 $ 532,844 $ 295,010 $ 288,565 $ 282,836
Stockholders' equity$ 53,779 $ 54,488 $ 39,229 $ 38,088 $ 37,783
Common stock market capitalization$ 61,427 $ 55,003 $ 37,390 $ 37,974 $ 36,981
Full-time equivalent employees 120 114 75 72 77
Shares outstanding 8,029,691 8,029,691 5,842,145 5,842,145 5,842,145
Average Balances:
Assets$ 589,896 $ 523,785 $ 345,348 $ 327,228 $ 323,157
Earning assets$ 530,112 $ 462,668 $ 318,415 $ 301,084 $ 294,500
Total Loans (before reserves)$ 331,806 $ 288,558 $ 221,608 $ 221,499 $ 221,705
Deposits$ 514,366 $ 411,676 $ 294,645 $ 282,123 $ 280,558
Other borrowings$ 11,446 $ 11,628 $ 10,933 $ 6,105 $ 3,846
Stockholders' equity$ 53,800 $ 49,134 $ 38,753 $ 37,855 $ 37,686
Shares outstanding, basic - wtd 8,029,691 7,292,583 5,842,145 5,842,145 5,849,444
Shares outstanding, diluted - wtd 8,029,691 7,292,583 5,842,145 5,842,145 5,849,444


NON-GAAP FINANCIAL INFORMATION
(Unaudited)
Three Months Ended
NON-GAAP PERFORMANCE MEASURESDec. 31, 2016 Sep. 30, 2016 Dec. 31, 2015
Return on average common equity, excluding acquisition related costs, net (1) 9.15% 11.67% 10.04%
Return on average assets, excluding acquisition related costs, net (1) 0.83% 1.10% 1.17%
Efficiency ratio, excluding acquisition related costs, net (2) 70.05% 58.10% 65.79%
NON-GAAP EARNINGS PER SHARE
Basic (3)$ 0.15 $ 0.20 $ 0.16
Diluted (3)$ 0.15 $ 0.20 $ 0.16
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Unaudited)
Three Months Ended
Dec. 31, 2016 Sep. 30, 2016 Dec. 31, 2015
(in thousands)
Net income$ 911 $ 1,190 $ 946
Acquisition related costs, net 496 378 -
Tax effect on acquisition related costs, net (176) (134) -
Net income, excluding acquisition related costs, net (3)$ 1,231 $ 1,434 $ 946
Three Months Ended
Dec. 31, 2016 Sep. 30, 2016 Dec. 31, 2015
(in thousands)
Total non-interest expenses$ 4,911 $ 3,709 $ 2,500
Acquisition related costs, net 496 378 -
Total non-interest expenses, excluding acquisition related costs, net (3)$ 4,415 $ 3,331
(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.