State Bank Corp. Earnings Increase 39% to $974,000, or

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News Desk 2018

Jul 22, 2016 at 10:45 AM

State Bank Corp. Earnings Increase 39% to $974,000, or $0.17 per Share, in 2Q16 from 1Q16

LAKE HAVASU CITY, Ariz., July 22, 2016 (GLOBE NEWSWIRE) -- State Bank Corp. (OTCQB:SBAZ) (“Company”), the holding company for Mohave State Bank (“Bank”), today announced net income increased 39.1% to $974,000, or $0.17 per diluted share, for the second quarter ended June 30, 2016, compared to $700,000, or $0.12 per diluted share, in the first quarter of 2016, and increased 26.2% compared to $772,000, or $0.13 per diluted share, for the second quarter of 2015.

For the first six months of 2016, net income grew 15.2% to $1.67 million, or $0.29 per diluted share, compared to $1.45 million, or $0.25 per diluted share, for the same period of 2015.

“Our second quarter performance continued to reflect the success of our client relationship building. This process helped us realize strong operating results and improved key metrics,” stated Brian M. Riley, President and Chief Executive Officer. “Our return on average assets was well above average at 1.13% and return on average equity was 10.0% in the second quarter. We are continuing to generate strong loan and deposit growth in our primary markets and are focused on building the premier community banking franchise in Arizona.

“With the pending acquisition of Country Bank, expected to close at the end of the month, we will have assets in excess of $500 million. Following the acquisition, State Bank will become the largest of the 13 community banks headquartered in Arizona. We are positioning ourselves to expand our geographic footprint and build our earnings capacity,” Riley said.

Second Quarter 2016 Financial Highlights:

Net income increased 26.2% to $974,000 million in the second quarter, compared to $772,000 in the second quarter 2015.
Received regulatory and shareholder approval for the merger with Country Bank. The transaction is expected to close on July 31, 2016.
Return on average assets at 1.13%.
Return on average equity of 10.07%.
Tangible book value per share increased 9.5% to $6.71 per share, compared to $6.13 a year ago.

Net interest margin was 3.85% in the second quarter 2016 compared to 4.08% in the preceding quarter and 4.22% in the second quarter a year ago. The decrease is the result of a fully drawn $7.5 million loan that is being used to facilitate the merger with Country Bank and high levels of balance sheet liquidity

There was no provision for loan losses in the second quarter reflecting a small net recovery of $5,000. The allowance for loan losses totaled $3.1 million at June 30, 2016, or 1.40% of total loans. “We continue to carefully monitor our level of reserves, and as asset quality continues to improve, our need to make additions to reserves continues to diminish,” noted Riley.

Total assets were $346.4 million at June 30, 2016, an increase of $21.1 million, or 6.5%, from $325.3 million at December 31, 2015, and an increase of $7.3 million, or 2.2%, compared to $339.1 million a year ago. Total loans held for investment were $216.0 million as compared to $216.4 million at December 31, 2015, and $235.9 million at June 30, 2015. Total loan comparisons were affected by the sale of loans from the Yuma branch in the third quarter of 2015 of $11.1 million.

Total deposits were $295.0 million, an increase of $12.2 million, or 4.3%, from $282.8 million at December 31, 2015 and a decrease of $2.9 million compared to a year ago. Core deposits, defined as noninterest bearing demand, money market, NOW and savings accounts, increased 5.3% compared to six months earlier and increased slightly compared to a year earlier to $235.7 million at June 30, 2016. Total deposits and core deposit comparisons were affected by the sale of deposits from the Yuma branch of $16.5 million and $12.8 million, respectively. Core deposits now comprise 79.9% of total deposits.

Nonperforming assets were $6.7 million at June 30, 2016, a 4.7% increase compared to $6.4 million at December 31, 2015, and a 35.6% decrease compared to $10.4 million at June 30, 2016. Nonperforming assets represented 1.94% of total assets at June 30, 2016, down from 1.97% at December 31, 2015, and from 3.08% a year ago.

Shareholder equity increased to $39.2 million at June 30, 2016, from $37.8 million at December 31, 2015, and $36.0 million a year earlier. At June 30, 2016, tangible book value per share improved to $6.71 per share compared to $6.47 per share at December 31, 2015 and $6.13 a year earlier.

Recent Developments

The merger of Country Bank into Mohave State Bank received all regulatory and shareholder approval and is expected to close on July 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, 2016. The Bank reported the following capital ratios at June 30, 2016:

Common Equity Tier 1 Capital Ratio	14.62	%
Tier 1 Leverage Ratio	11.08	%
Tier 1 Capital Ratio	14.62	%
Total Capital Ratio	15.81	%

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						Year to Date
Dollars in thousands - Unaudited		6/30/2016		3/31/2016		6/30/2015		6/30/2016		6/30/2015
Statements of Operations
	Interest income
	Loans, including fees	$	2,980	$	2,956	$	3,031	$	5,936	$	5,813
	Securities		221		215		224		436		437
	Fed funds and other		59		35		17		94		33
	Total interest income		3,260		3,206		3,272		6,466		6,283

	Interest expense
	Deposits		162		153		143		315		276
	Borrowings		95		34		11		128		25
	Total interest expense		257		187		154		443		301

	Net interest income		3,003		3,019		3,118		6,023		5,982

	Provision for loan losses		-		-		350		-		460
	Net interest income after loan loss provision		3,003		3,019		2,768		6,023		5,522

	Noninterest income
	Service charges on deposits		78		79		88		157		184
	Mortgage loan fees		291		174		304		464		497
	Gain on sale of loans		357		173		405		530		1,059
	(Loss)/Gain on securities		-		-		-		-		(8	)
	Other income		196		167		208		364		374
	Total noninterest income		922		593		1,005		1,515		2,106

	Noninterest expense
	Salaries and employee benefits		1,430		1,330		1,457		2,760		2,985
	Net occupancy expense		56		53		96		109		175
	Equipment expense		39		40		43		79		84
	Data processing		241		242		292		483		580
	Director fees & expenses		33		44		63		77		111
	Insurance		30		30		26		61		52
	Marketing & promotion		54		78		81		132		207
	Professional fees		95		159		80		255		171
	Office expense		27		50		30		77		65
	Regulatory assessments		52		60		100		111		214
	OREO and repossessed assets		43		53		111		96		397
	Other expenses		152		216		209		368		368
			2,252		2,355		2,588		4,608		5,409

	Acquisition related costs		63		178		-		241		-

	Total noninterest expense		2,315		2,533		2,588		4,849		5,409

	Income (loss) before provision (benefit) for income taxes		1,610		1,079		1,185		2,689		2,219

	Provision (benefit) for income taxes		636		379		413		1,015		766
	Net Income (Loss)	$	974	$	700	$	772	$	1,674	$	1,453


Per Share Data
	Basic EPS	$	0.17	$	0.12	$	0.13	$	0.29	$	0.25
	Diluted EPS	$	0.17	$	0.12	$	0.13	$	0.29	$	0.25

	Average shares outstanding
	Basic		5,842,145		5,842,145		5,868,038		5,842,145		5,868,038
	Effect of dilutive shares		-		-		-		-		-
	Diluted		5,842,145		5,842,145		5,868,038		5,842,145		5,868,038

State Bank Corp.
Balance Sheets


Dollars in thousands - Unaudited		6/30/2016			12/31/2015			6/30/2015
Consolidated Balance Sheets

Assets
	Cash and cash equivalents	$	2,650		$	1,899		$	2,169
	Interest bearing deposits		2,047			4,167			3,710
	Overnight Funds		46,265			29,250			13,930
	Held for maturity securities		15			19			23
	Available for sale securities		52,366			46,881			50,809
	Total cash and securities		103,343			82,216			70,641

	Loans held for sale, before reserves		5,626			4,457			5,785
	Gross loans held for investment		216,002			216,357			235,881
	Loan loss reserve		(3,103	)		(3,089	)		(2,969	)
	Total net loans		218,525			217,725			238,697

	Premises and equipment, net		8,083			8,195			9,830
	Other real estate owned		4,039			4,247			6,696
	Federal Home Loan Bank and other stock		2,281			2,126			2,126
	Company owned life insurance		6,114			6,034			5,952
	Other assets		4,073			4,776			5,167

	Total Assets	$	346,458		$	325,319		$	339,109


Liabilities
	Non interest bearing demand	$	75,295		$	70,648		$	69,170
	Money market, NOW and savings		160,436			153,156			164,910
	Time deposits <$100K		26,067			25,703			27,691
	Time deposits >$100K		33,212			33,329			36,157
	Total Deposits		295,010			282,836			297,928

	Securities sold under repurchase agreements		3,767			3,653			4,169
	Federal Home Loan Bank advances		-			-			-
	Subordinated debt		7,500			-			-
	Total Debt		11,267			3,653			4,169

	Other Liabilities		952			1,047			1,061
	Total Liabilities		307,229			287,536			303,158


Shareholders' Equity
	Common stock		24,927			24,927			25,037
	Accumulated retained earnings		13,971			12,881			10,908
	Accumulated other comprehensive income		331			(25	)		6
	Total shareholders equity		39,229			37,783			35,951

	Total liabilities and shareholders' equity	$	346,458		$	325,319		$	339,109

State Bank Corp.
Five-Quarter Performance Summary

		For the Quarter Ended
Dollars in thousands - Unaudited		6/30/2016			3/31/2016			12/31/2015			9/30/2015			6/30/2015
Performance Highlights

Earnings:
	Total revenue (Net int. income + nonint. income)	$	3,925		$	3,612		$	3,800		$	4,651		$	4,123
	Net interest income	$	3,003		$	3,019		$	3,098		$	3,255		$	3,118
	Provision for loan losses	$	-		$	-		$	-		$	425		$	350
	Noninterest income	$	922		$	593		$	702		$	1,396		$	1,005
	Noninterest expense	$	2,315		$	2,533		$	2,500		$	2,568		$	2,588
	Net income (loss)	$	974		$	700		$	946		$	1,067		$	772

Per Share Data:
	Net income (loss), basic	$	0.17		$	0.12		$	0.16		$	0.18		$	0.13
	Net income (loss), diluted	$	0.17		$	0.12		$	0.16		$	0.18		$	0.13
	Cash dividends declared	$	-		$	0.10		$	-		$	-		$	-
	Book value	$	6.71		$	6.52		$	6.47		$	6.34		$	6.13
	Tangible book value	$	6.71		$	6.52		$	6.47		$	6.34		$	6.13

Performance Ratios:
	Return on average assets		1.13	%		0.86	%		1.17	%		1.26	%		0.93	%
	Return on average equity		10.05	%		7.40	%		10.04	%		11.63	%		8.59	%
	Net interest margin, taxable equivalent		3.85	%		4.08	%		4.29	%		4.31	%		4.22	%
	Average cost of funds		0.34	%		0.26	%		0.21	%		0.21	%		0.21	%
	Average yield on loans		5.38	%		5.34	%		5.45	%		5.42	%		5.30	%
	Efficiency ratio		58.98	%		70.13	%		65.79	%		55.21	%		62.77	%
	Non-interest income to total revenue		23.49	%		16.42	%		18.47	%		30.02	%		24.38	%

Capital & Liquidity:
	Total equity to total assets (EOP)		11.32	%		11.26	%		11.61	%		11.43	%		10.60	%
	Tangible equity to tangible assets		11.32	%		11.26	%		11.61	%		11.43	%		10.60	%
	Total loans to total deposits		75.13	%		76.60	%		78.07	%		78.00	%		78.83	%
	Mohave State Bank
	Common equity tier 1 ratio		14.62	%		14.62	%		14.70	%		14.10	%		12.71	%
	Tier 1 leverage ratio		11.08	%		11.51	%		11.61	%		10.83	%		10.72	%
	Tier 1 risk based capital		14.62	%		14.62	%		14.70	%		14.10	%		12.71	%
	Total risk based capital		15.81	%		15.82	%		15.91	%		15.27	%		13.77	%

Asset Quality:
	Gross charge-offs	$	4		$	-		$	4		$	373		$	449
	Net charge-offs (NCOs)	$	(5	)	$	(9	)	$	(65	)	$	370		$	415
	NCO to average loans, annualized		-0.01	%		-0.02	%		-0.12	%		0.63	%		0.73	%
		$	2,683		$	2,229		$	2,154		$	4,570		$	3,732
	Other real estate owned	$	4,039		$	3,995		$	4,246		$	6,141		$	6,696
	Repossessed assets	$	-		$	-		$	-		$	-		$	-
	Non-performing assets (NPAs)	$	6,722		$	6,224		$	6,400		$	10,711		$	10,428
	NPAs to total assets		1.94	%		1.84	%		1.97	%		3.29	%		3.08	%
	Loans >90 days past due	$	-		$	-		$	-		$	-		$	-
	NPAs + 90 days past due	$	6,722		$	6,224		$	6,400		$	10,711		$	10,428
	NPAs + loans 90 days past due to total assets		1.94	%		1.84	%		1.97	%		3.29	%		3.08	%
	Allowance for loan losses to total loans		1.40	%		1.40	%		1.40	%		1.37	%		1.26	%
	Allowance for loan losses to NPAs		46.16	%		49.78	%		48.27	%		28.23	%		28.47	%

Period End Balances:
	Assets	$	346,458		$	338,205		$	325,319		$	325,104		$	339,109
	Total Loans (before reserves)	$	221,628		$	221,046		$	220,814		$	220,768		$	241,666
	Deposits	$	295,010		$	288,565		$	282,836		$	283,035		$	297,928
	Stockholders' equity	$	39,229		$	38,088		$	37,783		$	37,166		$	35,951
	Common stock market capitalization	$	37,390		$	37,974		$	36,981		$	35,166		$	27,873
	Full-time equivalent employees		75			72			77			76			81
	Shares outstanding		5,842,145			5,842,145			5,842,145			5,861,000			5,868,038

Average Balances:
	Assets	$	345,348		$	327,228		$	323,157		$	337,463		$	333,387
	Earning assets	$	318,415		$	301,084		$	294,500		$	307,376		$	301,427
	Total Loans (before reserves)	$	221,608		$	221,499		$	221,705		$	235,051		$	228,847
	Deposits	$	294,645		$	282,123		$	280,558		$	295,327		$	291,980
	Other borrowings	$	10,933		$	6,105		$	3,846		$	4,327		$	4,817
	Stockholders' equity	$	38,753		$	37,855		$	37,686		$	36,689		$	35,947
	Shares outstanding, basic - wtd		5,842,145			5,842,145			5,849,444			5,866,038			5,868,038
	Shares outstanding, diluted - wtd		5,842,145			5,842,145			5,849,444			5,866,038			5,868,038


NON-GAAP FINANCIAL INFORMATION
(Unaudited)
	Three Months Ended
NON-GAAP PERFORMANCE MEASURES	Jun. 30, 2016			March 31, 2016			Jun. 30, 2015
Return on average common equity, excluding acquisition related costs, net (1)		10.47	%		8.62	%		7.68	%
Return on average assets, excluding acquisition related costs, net (1)		1.18	%		1.00	%		0.85	%
Efficiency ratio, excluding acquisition related costs, net (2)		57.38	%		65.20	%		71.15	%


NON-GAAP EARNINGS PER SHARE
Basic (3)	$	0.17		$	0.14		$	0.13
Diluted (3)	$	0.17		$	0.14		$	0.13


RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Unaudited)
	Three Months Ended
	Jun. 30, 2016			March 31, 2016			Jun. 30, 2015
	(in thousands)
Net income	$	974		$	700		$	772
Acquisition related costs, net		63			178			-
Tax effect on acquisition related costs, net		(22	)		(62	)		-
Net income, excluding acquisition related costs, net (3)	$	1,015		$	878		$	772


	Three Months Ended
	Jun. 30, 2016			March 31, 2016			Jun. 30, 2015
	(in thousands)
Total non-interest expenses	$	2,315		$	2,533		$	2,588
Acquisition related costs, net		63			178			-
Total non-interest expenses, excluding acquisition related costs, net (3)	$	2,252		$	2,355		$	2,586



(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