LAKE HAVASU CITY, Ariz., Oct. 28, 2016 (GLOBE NEWSWIRE) -- State Bank Corp. (OTCQB:SBAZ) (“Company”), the holding company for Mohave State Bank (“Bank”), today announced net income increased 22.2% to $1.19 million, or $0.16 per diluted share, for the third quarter ended September 30, 2016, compared to $974,000, or $0.17 per diluted share, in the second quarter of 2016, and increased 11.5% compared to $1.07 million, or $0.18 per diluted share, for the third quarter of 2015.  Earnings represent two full months of the newly combined Bank. 

For the first nine months of 2016, net income grew 13.7% to $2.86 million, or $0.45 per diluted share, compared to $2.52 million, or $0.43 per diluted share, for the same period of 2015. 

“The highlight of the third quarter was completing the acquisition of Country Bank,” stated Brian M. Riley, President and Chief Executive Officer.  “The closed acquisition added approximately $107.0 million in loans and $202.2 million in deposits to the Bank and expands our geographic footprint within Prescott, Prescott Valley and Cottonwood.  We continue to focus on building the premier community bank franchise in Arizona, and we believe, with this combination, the Bank will be even better positioned to grow, serve our customers and create strong long-term return for our shareholders.”

Third quarter 2016 earnings were adversely affected by $378,000 in net acquisition costs compared to $63,000 in the preceding quarter and no acquisition costs in the third quarter a year ago.  Year-to-date, net acquisition costs totaled $619,000.  “While costs associated with the acquisition integration will be higher than normal over the remainder of the year, we expect expenses to return to more normalized levels in 2017 and expect the merger to be immediately accretive to earnings per share,” added Riley.

Third Quarter 2016 Financial Highlights:

• Completed the acquisition of Country Bank, which was merged with and into Mohave State Bank on July 31, 2016.  As of the closing date, the combined company has 9 branches and is the largest community bank headquartered in Arizona.
  
• Net income, excluding merger related expenses, increased 34.4% to $1.43 million, compared to $1.07 million in the third quarter 2015.
  
• Net interest margin of 4.14%.
  
• Total assets exceeded $600 million.
  
• Return on average assets of 0.91%.
  
• Return on average equity of 9.69%.

Net interest margin improved to 4.14% in the third quarter 2016 compared to 3.85% in the preceding quarter and was down from 4.31% in the third quarter a year ago.  The increase is the result of a combination of lower cost of funds and amortization of an implemented discount on Country Bank’s acquired loan portfolio, both benefactors of the merger.    

There was no provision for loan losses in the third quarter, with net charge-offs of $56,000.  The allowance for loan losses totaled $3.1 million at September 30, 2016, or 0.91% of total loans.  The overall percentage decreased due to the accounting treatment on acquired loan portfolios.  The acquired loan portfolio was valued and recorded at fair value at the time of transaction, with uncertainty of future cash flows due to the credit risk of borrowers imbedded within the analysis.

Total assets were $600.3 million at September 30, 2016, an increase of $275.0 million, or 84.5%, from $325.3 million at December 31, 2015, and an increase of $275.2 million, or 84.7%, compared to $325.1 million a year ago.  Total loans held for investment were $329.2 million as compared to $216.4 million at December 31, 2015, and $216.8 million at September 30, 2015.  Total loan comparisons were affected by addition of $107.0 million in loans from the acquisition of Country Bank.

Total deposits were $532.8 million, an increase of $250.0 million, or 88.4%, from $282.8 million at December 31, 2015 and an increase of $249.8 million compared to a year ago.  Core deposits, defined as noninterest bearing demand, money market, NOW and savings accounts, increased to $457.2 million at September 30, 2016, or 104.2%, compared to nine months earlier and increased compared to a year earlier from $223.9 million.  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 $6.7 million at September 30, 2016, a 4.7% increase compared to $6.4 million at December 31, 2015, and a 37.3% decrease compared to $10.7 million at September 30, 2015.  Nonperforming assets represented 1.12% of total assets at September 30, 2016. 

Shareholder equity increased to $54.5 million at September 30, 2016, from $37.8 million at December 31, 2015, and $37.2 million a year earlier.  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 September 30, 2016, tangible book value per share was $5.83 per share compared to $6.47 per share at December 31, 2015 and $6.34 a year earlier.  The decrease was the result of the aforementioned issuance of common stock and the recording 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 September 30, 2016.  The Bank reported the following capital ratios at September 30, 2016:

Common Equity Tier 1 Capital Ratio			12.95	%
Tier 1 Leverage Ratio			10.55	%
Tier 1 Capital Ratio			12.95	%
Total Capital Ratio			13.67	%

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. 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 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 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 - Unaudited			9/30/2016			6/30/2016			9/30/2015				9/30/2016			9/30/2015
Statements of Operations
	Interest income
	Loans, including fees		$	4,594		$	2,980		$	3,186			$	10,530		$	9,000
	Securities			394			221			209				830			646
	Fed funds and other			71			59			14				165			47
	Total interest income			5,059			3,260			3,409				11,525			9,693
	Interest expense
	Deposits			198			162			153				512			429
	Borrowings			96			95			1				225			26
	Total interest expense			294			257			154				737			455
	Net interest income			4,765			3,003			3,255				10,788			9,238
	Provision for loan losses			-			-			425				-			885
	Net interest income after loan loss provision			4,765			3,003			2,830				10,788			8,353
	Noninterest income
	Service charges on deposits			116			78			89				273			273
	Mortgage loan fees			272			291			241				736			738
	Gain on sale of loans			306			357			180				836			1,239
	(Loss)/Gain on securities			-			-			-				(2	)		(8	)
	Other income			274			196			886				638			1,261
	Total noninterest income			968			922			1,396				2,481			3,503
	Noninterest expense
	Salaries and employee benefits			2,004			1,430			1,447				4,764			4,430
	Net occupancy expense			87			56			102				196			278
	Equipment expense			70			39			47				149			131
	Data processing			261			241			246				743			826
	Director fees & expenses			37			33			55				114			166
	Insurance			33			30			26				93			77
	Marketing & promotion			119			54			57				251			265
	Professional fees			103			95			82				308			254
	Office expense			25			27			28				102			93
	Regulatory assessments			58			52			106				169			321
	OREO and repossessed assets			109			43			214				204			611
	Other expenses			425			152			158				766			526
				3,331			2,252			2,568				7,859			7,978
	Acquisition related costs			378			63			-				697			-
	Total noninterest expense			3,709			2,315			2,568				8,556			7,978
	Income (loss) before provision (benefit) for income taxes			2,024			1,610			1,658				4,713			3,878
	Provision (benefit) for income taxes			834			636			591				1,849			1,358
	Net Income (Loss)		$	1,190		$	974		$	1,067			$	2,864		$	2,520
Per Share Data
	Basic EPS		$	0.16		$	0.17		$	0.18			$	0.45		$	0.43
	Diluted EPS		$	0.16		$	0.17		$	0.18			$	0.45		$	0.43
	Average shares outstanding
	Basic			7,292,583			5,842,145			5,868,038				6,329,153			5,867,364
	Effect of dilutive shares			-			-			-				-			-
	Diluted			7,292,583			5,842,145			5,868,038				6,329,153			5,867,364

State Bank Corp.
Balance Sheets
Dollars in thousands - Unaudited			9/30/2016			12/31/2015			9/30/2015
Consolidated Balance Sheets
Assets
	Cash and cash equivalents		$	6,595		$	1,899		$	1,777
	Interest bearing deposits			30,151			4,167			4,033
	Overnight Funds			49,520			29,250			25,150
	Held for maturity securities			2			19			21
	Available for sale securities			135,773			46,881			49,323
	Total cash and securities			222,041			82,216			80,304
	Loans held for sale, before reserves			5,987			4,457			3,928
	Gross loans held for investment			329,208			216,357			216,840
	Loan loss reserve			(3,046	)		(3,089	)		(3,024	)
	Total net loans			332,149			217,725			217,744
	Premises and equipment, net			15,140			8,195			8,235
	Other real estate owned			4,398			4,247			6,141
	Federal Home Loan Bank and other stock			3,308			2,126			2,126
	Company owned life insurance			11,190			6,034			5,993
	Other assets			12,094			4,776			4,561
	Total Assets		$	600,320		$	325,319		$	325,104
Liabilities
	Non interest bearing demand		$	129,993		$	70,648		$	69,529
	Money market, NOW and savings			327,216			153,156			154,337
	Time deposits <$100K			30,037			25,703			26,018
	Time deposits >$100K			45,598			33,329			33,151
	Total Deposits			532,844			282,836			283,035
	Securities sold under repurchase agreements			3,752			3,653			3,657
	Federal Home Loan Bank advances			-			-			-
	Subordinated debt			7,500			-			-
	Total Debt			11,252			3,653			3,657
	Other Liabilities			1,736			1,047			1,246
	Total Liabilities			545,832			287,536			287,938
Shareholders' Equity
	Common stock			39,146			24,927			25,007
	Accumulated retained earnings			15,161			12,881			11,968
	Accumulated other comprehensive income			181			(25	)		191
	Total shareholders equity			54,488			37,783			37,166
	Total liabilities and shareholders' equity		$	600,320		$	325,319		$	325,104

State Bank Corp.
Five-Quarter Performance Summary
		For the Quarter Ended
Dollars in thousands - Unaudited		9/30/2016			6/30/2016			3/31/2016			12/31/2016			9/30/2015
Performance Highlights
Earnings:
	Total revenue (Net int. income + nonint. income)	$	5,733		$	3,925		$	3,612		$	3,800		$	4,651
	Net interest income	$	4,765		$	3,003		$	3,019		$	3,098		$	3,255
	Provision for loan losses	$	-		$	-		$	-		$	-		$	425
	Noninterest income	$	968		$	922		$	593		$	702		$	1,396
	Noninterest expense	$	3,709		$	2,315		$	2,533		$	2,500		$	2,568
	Net income (loss)	$	1,190		$	974		$	700		$	946		$	1,067
Per Share Data:
	Net income (loss), basic	$	0.16		$	0.17		$	0.12		$	0.16		$	0.18
	Net income (loss), diluted	$	0.16		$	0.17		$	0.12		$	0.16		$	0.18
	Cash dividends declared	$	-		$	-		$	0.10		$	-		$	-
	Book value	$	6.79		$	6.71		$	6.52		$	6.47		$	6.34
	Tangible book value	$	5.83		$	6.71		$	6.52		$	6.47		$	6.34
Performance Ratios:
	Return on average assets		0.91	%		1.13	%		0.86	%		1.17	%		1.26	%
	Return on average equity		9.69	%		10.05	%		7.40	%		10.04	%		11.63	%
	Net interest margin, taxable equivalent		4.14	%		3.85	%		4.08	%		4.29	%		4.31	%
	Average cost of funds		0.28	%		0.34	%		0.26	%		0.21	%		0.21	%
	Average yield on loans		6.37	%		5.38	%		5.34	%		5.45	%		5.42	%
	Efficiency ratio		64.70	%		58.98	%		70.13	%		65.79	%		55.21	%
	Non-interest income to total revenue		16.88	%		23.49	%		16.42	%		18.47	%		30.02	%
Capital & Liquidity:
	Total equity to total assets (EOP)		9.08	%		11.32	%		11.26	%		11.61	%		11.43	%
	Tangible equity to tangible assets		7.90	%		11.32	%		11.26	%		11.61	%		11.43	%
	Total loans to total deposits		62.91	%		75.13	%		76.60	%		78.07	%		78.00	%
	Mohave State Bank
	Common equity tier 1 ratio		12.95	%		14.62	%		14.62	%		14.70	%		14.10	%
	Tier 1 leverage ratio		10.55	%		11.08	%		11.51	%		11.61	%		10.83	%
	Tier 1 risk based capital		12.95	%		14.62	%		14.62	%		14.70	%		14.10	%
	Total risk based capital		13.67	%		15.81	%		15.82	%		15.91	%		15.27	%
Asset Quality:
	Gross charge-offs	$	67		$	4		$	-		$	4		$	373
	Net charge-offs (NCOs)	$	56		$	(5	)	$	(9	)	$	(65	)	$	370
	NCO to average loans, annualized		0.08	%		-0.01	%		-0.02	%		-0.12	%		0.63	%
	Non-accrual loans/securities	$	2,321		$	2,683		$	2,229		$	2,154		$	4,570
	Other real estate owned	$	4,398		$	4,039		$	3,995		$	4,246		$	6,141
	Repossessed assets	$	-		$	-		$	-		$	-		$	-
	Non-performing assets (NPAs)	$	6,719		$	6,722		$	6,224		$	6,400		$	10,711
	NPAs to total assets		1.12	%		1.94	%		1.84	%		1.97	%		3.29	%
	Loans >90 days past due	$	-		$	-		$	-		$	-		$	-
	NPAs + 90 days past due	$	6,719		$	6,722		$	6,224		$	6,400		$	10,711
	NPAs + loans 90 days past due to total assets		1.12	%		1.94	%		1.84	%		1.97	%		3.29	%
	Allowance for loan losses to total loans		0.91	%		1.40	%		1.40	%		1.40	%		1.37	%
	Allowance for loan losses to NPAs		45.33	%		46.16	%		49.78	%		48.27	%		28.23	%
Period End Balances:
	Assets	$	600,320		$	346,458		$	338,205		$	325,319		$	325,104
	Total Loans (before reserves)	$	335,195		$	221,628		$	221,046		$	220,814		$	220,768
	Deposits	$	532,844		$	295,010		$	288,565		$	282,836		$	283,035
	Stockholders' equity	$	54,488		$	39,229		$	38,088		$	37,783		$	37,166
	Common stock market capitalization	$	55,003		$	37,390		$	37,974		$	36,981		$	35,166
	Full-time equivalent employees		114			75			72			77			76
	Shares outstanding		8,029,691			5,842,145			5,842,145			5,842,145			5,861,000
Average Balances:
	Assets	$	523,785		$	345,348		$	327,228		$	323,157		$	337,463
	Earning assets	$	462,668		$	318,415		$	301,084		$	294,500		$	307,376
	Total Loans (before reserves)	$	288,558		$	221,608		$	221,499		$	221,705		$	235,051
	Deposits	$	411,676		$	294,645		$	282,123		$	280,558		$	295,327
	Other borrowings	$	11,628		$	10,933		$	6,105		$	3,846		$	4,327
	Stockholders' equity	$	49,134		$	38,753		$	37,855		$	37,686		$	36,689
	Shares outstanding, basic - wtd		7,292,583			5,842,145			5,842,145			5,849,444			5,866,038
	Shares outstanding, diluted - wtd		7,292,583			5,842,145			5,842,145			5,849,444			5,866,038

 

NON-GAAP FINANCIAL INFORMATION
(Unaudited)
	Three Months Ended
NON-GAAP PERFORMANCE MEASURES	Sep. 30, 2016				June 30, 2016				Sep. 30, 2015
Return on average common equity, excluding acquisition related costs, net (1)		11.67	%			10.47	%			11.63	%
Return on average assets, excluding acquisition related costs, net (1)		1.10	%			1.18	%			1.26	%
Efficiency ratio, excluding acquisition related costs, net (2)		58.10	%			57.38	%			55.21	%
NON-GAAP EARNINGS PER SHARE
Basic (3)	$	0.20			$	0.17			$	0.18
Diluted (3)	$	0.20			$	0.17			$	0.18
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Unaudited)
	Three Months Ended
	Sep. 30, 2016				June 30, 2016				Sep. 30, 2015
	(in thousands)
Net income	$	1,190			$	974			$	1,067
Acquisition related costs, net		378				63				-
Tax effect on acquisition related costs, net		(134	)			(22	)			-
Net income, excluding acquisition related costs, net (3)	$	1,434			$	1,015			$	1,067
	Three Months Ended
	Sep. 30, 2016				June 30, 2016				Sep. 30, 2015
	(in thousands)
Total non-interest expenses	$	3,709			$	2,315			$	2,568
Acquisition related costs, net		378				63				-
Total non-interest expenses, excluding acquisition related costs, net (3)	$	3,331			$	2,252
(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

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