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State Bank Corp. Reports Earnings of $1.48 Million, or $0.18 per Diluted Share, in 2Q17; Total Assets Exceed $600 Million

LAKE HAVASU CITY, Ariz., July 25, 2017 (GLOBE NEWSWIRE) -- State Bank Corp. (OTCPink:SBAZ) (“Company”), the holding company for Mohave State Bank (“Bank”), today announced net income increased 3.2% to $1.48 million, or $0.18 per diluted share, for the second quarter ended June 30, 2017, compared to $1.43 million, or $0.18 per diluted share, in the first quarter of 2017, and increased 51.9% compared to $974,000, or $0.17 per diluted share, for the second quarter of 2016.

For the first six months of 2017, net income grew 73.9% to $2.91 million, or $0.36 per diluted share, compared to $1.67 million, or $0.29 per diluted share, for the same period of 2016.

“We continue to focus on maximizing our post-merger performance,” stated Brian M. Riley, President and Chief Executive Officer. “Our basic business fundamentals are improving as loans and deposits have significantly increased. Our second quarter and year-to-date profits reflect solid loan production, along with our ability to attract and retain core deposits. The increase in loans and deposits, both from organic growth and the acquisition of Country Bank completed in 3Q16, has strengthened our net interest income and contributed to our healthy net interest margin. We are positioning ourselves to expand our geographic footprint and build additional earnings capacity. We are looking forward to delivering future results as economic conditions in our market areas remain strong.”

“A highlight of the quarter was the sale of our largest other real estate owned (OREO) property, which reduced OREO by 74% during the quarter,” added Riley.

Second Quarter 2017 Financial Highlights:

  • Net income, excluding merger related expenses, was $1.51 million, or $0.19 per diluted share.
  • Sale of the Bank’s largest OREO property, resulting in total OREO balances of less than $1 million.
  • Resolution of a large credit relationship resulting in a loan loss recovery of $492,000.
  • Non-performing assets fell to 0.62% of total assets, representing the lowest level since 2Q07.
  • Return on average assets, excluding merger related expenses, was 1.01%.
  • Return on average equity, excluding merger related expenses, was 10.70%.

Net interest margin was 3.84% in the second quarter 2017 compared to 3.89% in the preceding quarter and 3.85% in the second quarter a year ago.

There was a negative provision for loan losses in the second quarter of $440,000, with net recoveries of $456,000. The allowance for loan losses totaled $3.0 million at June 30, 2017, or 0.89% of total loans. Excluding acquired loans, the reserve ratio was 1.12%, 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 $603.4 million at June 30, 2017, an increase of $20.2 million, or 3.5%, from $583.2 million at December 31, 2016, and an increase of $256.9 million, or 74.1%, compared to $346.5 million a year ago. Total loans held for investment were $335.5 million as compared to $323.2 million at December 31, 2016, and $216.0 million at June 30, 2016. Total loan comparisons were affected by the addition of $107.0 million in loans from the acquisition of Country Bank, closed in August of 2016.

Total deposits were $534.0 million, an increase of $17.5 million, or 3.4%, from $516.5 million at December 31, 2016, and an increase of $239.0 million, or 81.0%, compared to $295.0 million a year ago. Core deposits, defined as noninterest bearing demand, money market, NOW and savings accounts, increased 5.00% compared to three months earlier and increased 97.3% compared to a year earlier to $465.1 million at June 30, 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 87.1% of total deposits.

Non-performing assets were $3.8 million at June 30, 2017, a 37.7% decrease from $6.1 million at December 31, 2016. Nonperforming assets represented 0.62% of total assets at June 30, 2017, which represents its lowest level since fourth quarter 2007.

Shareholder equity increased to $56.9 million at June 30, 2017, from $53.8 million at December 31, 2016. At June 30, 2017, tangible book value per share was $6.13 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 June 30, 2017. The Bank reported the following capital ratios at March 31, 2017:

Common Equity Tier 1 Capital Ratio 13.56%
Tier 1 Leverage Ratio 9.65%
Tier 1 Capital Ratio 13.56%
Total Capital Ratio 14.27%

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 Year to Date
Dollars in thousands - Unaudited6/30/2017
3/31/2017
6/30/2016
6/30/2017
6/30/2016
Statements of Operations
Interest income
Loans, including fees$4,816 $4,765 $2,980 $9,581 $5,936
Securities 653 582 221 1,235 436
Fed funds and other 89 70 59 159 94
Total interest income 5,558 5,417 3,260 10,975 6,466
Interest expense
Deposits 171 184 162 355 315
Borrowings 105 102 95 207 128
Total interest expense 276 286 257 562 443
Net interest income 5,282 5,131 3,003 10,413 6,023
Provision for loan losses (440) - - (440) -
Net interest income after loan loss provision 5,722 5,131 3,003 10,853 6,023
Noninterest income
Service charges on deposits 138 139 78 277 157
Mortgage loan fees 380 343 291 723 464
Gain on sale of loans 400 447 357 847 530
(Loss)/Gain on securities - - - - -
Other income 457 283 196 740 364
Total noninterest income 1,375 1,212 922 2,587 1,515
Noninterest expense
Salaries and employee benefits 2,586 2,483 1,430 5,069 2,760
Net occupancy expense 154 159 56 313 109
Equipment expense 100 93 39 193 79
Data processing 429 428 241 857 483
Director fees & expenses 78 43 33 121 77
Insurance 32 32 30 64 61
Marketing & promotion 139 128 54 267 132
Professional fees 129 93 95 222 255
Office expense 34 65 27 99 77
Regulatory assessments 47 79 52 126 111
OREO and repossessed assets 594 25 43 619 96
Other expenses 437 442 152 879 368
4,759 4,070 2,252 8,829 4,608
Acquisition related costs 40 52 63 92 241
Total noninterest expense 4,799 4,122 2,315 8,921 4,849
Income (loss) before provision (benefit) for income taxes 2,298 2,221 1,610 4,519 2,689
Provision (benefit) for income taxes 818 788 636 1,606 1,015
Net Income (Loss)$ 1,480 $ 1,433 $ 974 $ 2,913 $ 1,674
Per Share Data
Basic EPS$0.18 $0.18 $0.17 $0.36 $0.29
Diluted EPS$0.18 $0.18 $0.17 $0.36 $0.29
Average shares outstanding
Basic 8,039,567 8,029,691 5,842,145 8,034,656 5,842,145
Effect of dilutive shares 19,767 - - 9,938 -
Diluted 8,059,334 8,029,691 5,842,145 8,044,594 5,842,145

State Bank Corp.
Balance Sheets
Dollars in thousands - Unaudited6/30/2017
3/31/2017
12/31/2016
6/30/2016
Consolidated Balance Sheets
Assets
Cash and cash equivalents$3,023 $3,130 $5,202 $2,650
Interest bearing deposits 10,292 17,495 24,524 2,047
Overnight Funds 43,860 33,425 33,680 46,265
Held for maturity securities 1 2 2 15
Available for sale securities 169,125 159,335 147,574 52,366
Total cash and securities 226,301 213,387 210,982 103,343
Loans held for sale, before reserves 3,205 2,524 5,870 5,626
Gross loans held for investment 335,454 333,039 323,210 216,002
Loan loss reserve (3,001) (2,986) (3,058) (3,103)
Total net loans 335,658 332,577 326,022 218,525
Premises and equipment, net 14,828 14,965 15,071 8,083
Other real estate owned 836 3,261 3,955 4,039
Federal Home Loan Bank and other stock 3,867 3,307 3,308 2,281
Company owned life insurance 11,410 11,343 11,275 6,114
Other assets 10,451 11,436 12,554 4,073
Total Assets$ 603,351 $ 590,276 $ 583,167 $ 346,458
Liabilities
Non interest bearing demand$119,116 $120,191 $116,696 $75,295
Money market, NOW and savings 346,022 332,047 326,269 160,436
Time deposits <$250K 62,948 64,574 67,845 26,067
Time deposits >$250K 5,933 5,651 5,688 33,212
Total Deposits 534,019 522,463 516,498 295,010
Securities sold under repurchase agreements 3,263 3,942 4,188 3,767
Federal Home Loan Bank advances - - - -
Subordinated debt, net of debt issuance costs 7,348 7,341 7,336 7,500
Total Debt 10,611 11,283 11,524 11,267
Other Liabilities 1,826 1,420 1,366 952
Total Liabilities 546,456 535,166 529,388 307,229
Shareholders' Equity
Common stock 39,255 39,146 39,146 24,927
Accumulated retained earnings 18,140 16,942 15,791 13,971
Accumulated other comprehensive income (500) (978) (1,158) 331
Total shareholders equity 56,895 55,110 53,779 39,229
Total liabilities and shareholders' equity$ 603,351 $ 590,276 $ 583,167 $ 346,458

State Bank Corp.
Five-Quarter Performance Summary
For the Quarter Ended
Dollars in thousands - Unaudited6/30/20173/31/201712/31/20169/30/20166/30/2016
Performance Highlights
Earnings:
Total revenue (Net int. income + nonint. income)$6,657 $6,349 $6,303 $5,733 $3,925
Net interest income$5,282 $5,137 $5,070 $4,765 $3,003
Provision for loan losses$(440)$- $- $- $-
Noninterest income$1,375 $1,212 $1,233 $968 $922
Noninterest expense$4,799 $4,128 $4,911 $3,709 $2,315
Net income (loss)$1,480 $1,433 $911 $1,190 $974
Per Share Data:
Net income (loss), basic$0.18 $0.18 $0.11 $0.16 $0.17
Net income (loss), diluted$0.18 $0.18 $0.11 $0.16 $0.17
Cash dividends declared$0.035 $0.035 $0.035 $- $-
Book value$7.07 $6.86 $6.70 $6.79 $6.71
Tangible book value$6.13 $5.90 $5.76 $5.83 $6.71
Performance Ratios:
Return on average assets 0.99% 0.98% 0.62% 0.91% 1.13%
Return on average equity 10.51% 10.48% 6.77% 9.69% 10.05%
Net interest margin, taxable equivalent 3.84% 3.89% 3.85% 4.14% 3.85%
Average cost of funds 0.21% 0.21% 0.23% 0.29% 0.34%
Average yield on loans 5.68% 5.73% 5.81% 6.68% 5.38%
Efficiency ratio 72.09% 65.02% 77.92% 64.70% 58.98%
Non-interest income to total revenue 20.65% 19.09% 19.56% 16.88% 23.49%
Capital & Liquidity:
Total equity to total assets (EOP) 9.43% 9.34% 9.22% 9.08% 11.32%
Tangible equity to tangible assets 9.43% 9.34% 8.03% 7.90% 11.32%
Total loans to total deposits 63.41% 64.23% 63.71% 62.91% 75.13%
Mohave State Bank
Common equity tier 1 ratio 13.56% 13.24% 13.17% 12.95% 14.62%
Tier 1 leverage ratio 9.65% 9.63% 9.40% 10.55% 11.08%
Tier 1 risk based capital 13.56% 13.24% 13.17% 12.95% 14.62%
Total risk based capital 14.27% 13.95% 13.90% 13.67% 15.81%
Asset Quality:
Gross charge-offs$59 $84 $- $67 $4
Net charge-offs (NCOs)$(456)$73 $(11)$56 $(5)
NCO to average loans, annualized -0.54% 0.09% -0.01% 0.08% -0.01%
Non-accrual loans/securities$2,923 $1,872 $2,185 $2,321 $2,683
Other real estate owned$836 $3,261 $3,955 $4,398 $4,039
Repossessed assets$- $- $- $- $-
Non-performing assets (NPAs)$3,759 $5,133 $6,140 $6,719 $6,722
NPAs to total assets 0.62% 0.87% 1.05% 1.12% 1.94%
Loans >90 days past due$- $- $- $- $-
NPAs + 90 days past due$3,759 $5,133 $6,140 $6,719 $6,722
NPAs + loans 90 days past due to total assets 0.62% 0.87% 1.05% 1.12% 1.94%
Allowance for loan losses to total loans 0.89% 0.89% 0.93% 0.91% 1.40%
Allowance for loan losses to NPAs 79.84% 58.17% 49.80% 45.51% 46.16%
Period End Balances:
Assets$603,351 $590,276 $583,167 $600,320 $346,458
Total Loans (before reserves)$338,635 $335,563 $329,080 $335,195 $221,628
Deposits$534,019 $522,463 $516,498 $532,844 $295,010
Stockholders' equity$56,895 $55,110 $53,779 $54,488 $39,229
Common stock market capitalization$65,957 $63,033 $61,427 $55,003 $37,390
Full-time equivalent employees 127 127 120 114 75
Shares outstanding 8,043,517 8,029,691 8,029,691 8,029,691 5,842,145
Average Balances:
Assets$598,933 $583,909 $589,896 $523,785 $345,348
Earning assets$552,731 $534,369 $530,112 $462,668 $318,415
Total Loans (before reserves)$339,062 $332,487 $331,806 $288,558 $221,608
Deposits$522,443 $516,107 $514,366 $411,676 $294,645
Other borrowings$11,028 $11,198 $11,446 $11,628 $10,933
Stockholders' equity$56,305 $54,673 $53,800 $49,134 $38,753
Shares outstanding, basic - wtd 8,039,567 8,029,691 8,029,691 7,292,583 5,842,145
Shares outstanding, diluted - wtd 8,059,334 8,029,691 8,029,691 7,292,583 5,842,145

NON-GAAP FINANCIAL INFORMATION
(Unaudited)
Three Months Ended
NON-GAAP PERFORMANCE MEASURESJun. 30, 2017 Mar. 31, 2017 Dec. 31, 2016
Return on average common equity, excluding acquisition related costs, net (1) 10.70% 10.73% 9.15%
Return on average assets, excluding acquisition related costs, net (1) 1.01% 1.00% 0.83%
Efficiency ratio, excluding acquisition related costs, net (2) 71.49% 64.20% 70.05%
NON-GAAP EARNINGS PER SHARE
Basic (3)$0.19 $0.18 $0.15
Diluted (3)$0.19 $0.18 $0.15
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Unaudited)
Three Months Ended
Jun. 30, 2017 Mar. 31, 2017 Dec. 31, 2016
(in thousands)
Net income$1,480 $1,433 $911
Acquisition related costs, net 40 52 496
Tax effect on acquisition related costs, net (14) (18) (176)
Net income, excluding acquisition related costs, net (3)$1,506 $1,467 $1,231
Three Months Ended
Jun. 30, 2017 Mar. 31, 2017 Dec. 31, 2016
(in thousands)
Total non-interest expenses$4,799 $4,128 $4,911
Acquisition related costs, net 40 52 496
Total non-interest expenses, excluding acquisition related costs, net (3)$4,759 $4,076 $4,415
(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 The Cereghino Group IR CONTACT: 206-388-5785

Source:State Bank Corp.