Market Overview

State Bank Corp. Second Quarter Earnings Increase 16% From the First Quarter and 44% Year-Over-Year to $2.14 million, or $0.26 per Diluted Share, Highlighted by Net Interest Margin Expansion

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LAKE HAVASU CITY, Ariz., July 25, 2018 (GLOBE NEWSWIRE) -- State Bank Corp. (OTC:SBAZ) ("Company"), the holding company for Mohave State Bank ("Bank"), today announced net income increased 15.6% to $2.14 million, or $0.26 per diluted share, for the second quarter ended June 30, 2018, compared to $1.85 million, or $0.23 per diluted share, in the first quarter of 2018, and increased 44.4% compared to $1.48 million, or $0.18 per diluted share, for the second quarter of 2017. 

For the first six months of 2018, net income grew 36.8% to $3.99 million, or $0.49 per diluted share, compared to $2.91 million, or $0.36 per diluted share, for the same period of 2017. 

"Our second quarter financial metrics reflect continued growth of the balance sheet and expansion of our Arizona banking franchise, stated Brian M. Riley, President and Chief Executive Officer.  "Both net income and earnings per share were record operating results for the second quarter and provide a strong base for us to build upon during the remainder of the year.  We continue to see solid growth opportunities in the Arizona markets that we serve and are exploring ways to expand our business throughout the state."

Second Quarter 2018 Financial Highlights:

  • Net income increased 15.6% to $2.14 million, or $0.26 per diluted share, compared to $1.85 million, or $0.23 per diluted share, in 1Q18.
  • Net interest margin improved 15 basis points to 3.93% compared to the preceding quarter.
  • Return on average assets of 1.33%.
  • Return on average equity of 14.48%.
  • Efficiency ratio of 59.28%.
  • Non-performing asset ratio decreased to 0.43% with the resolution of one large credit relationship.
  • Core deposits comprised 90.2% of total deposits.
  • Opened Phoenix Loan Production Office.

Net interest margin improved to 3.93% in the second quarter 2018 compared to 3.78% in the preceding quarter and 3.84% in the second quarter a year ago.  Average cost of funds rose slightly to 26 basis points, as the Company increased overall deposit rates to remain competitive in the market place.

The provision for loan losses was $158,000 during the second quarter of 2018, with net recoveries of $133,000.  The allowance for loan losses totaled $3.6 million at June 30, 2018, or 0.99% of total loans.  Excluding acquired loans, the reserve ratio was 1.15%, which is in line with industry peers.  On the acquired portfolio, the credit component of the loan purchase discount remains greater than an imputed reserve.

"We have been successful with executing on our growth initiatives and hiring key personnel, while keeping operating expenses in check," said Riley.  Second quarter noninterest expense improved to $4.3 million, from $4.5 million in the preceding quarter and $4.8 million in the second quarter a year ago.  The efficiency ratio improved to 59.28% in the second quarter, compared to 64.51% in the preceding quarter and 72.09% in the second quarter of 2017.

Total assets were $641.7 million at June 30, 2018, an increase of $21.0 million, or 3.39%, from $620.6 million at December 31, 2017 and an increase of $38.3 million, or 6.35%, compared to $603.4 million a year ago.  Total loans held for investment were $362.3 million at June 30, 2018, an increase of $14.3 million, or 4.13%, from $347.9 million at December 31, 2017 and an increase of $26.9 million, or 8.00%, compared to $335.5 million a year ago.

Total deposits were $561.9 million, an increase of $12.5 million, or 2.28%, from $549.4 million at December 31, 2017, and an increase of $27.9 million, or 5.22%, compared to $534.0 million a year ago.  Core deposits, defined as noninterest bearing demand, money market, NOW and savings accounts, increased 4.15% compared to six months earlier and increased 9.00% compared to a year earlier to $506.9 million at June 30, 2018.  Core deposits now comprise 90.2% of total deposits. 

Nonperforming assets were $2.8 million at June 30, 2018, a 59.7% decrease from $6.9 million at December 31, 2017.  Nonperforming assets represented 0.43% of total assets at June 30, 2018. 

Shareholder equity increased to $59.7 million at June 30, 2018, from $58.7 million at December 31, 2017, and compared to $56.9 million a year ago.  At June 30, 2018, tangible book value per share was $6.50 per share compared to $6.37 per share at December 31, 2017 and $6.13 per share at June 30, 2017.

Capital Management

Community banking organizations, including State Bank Corp. and Mohave State Bank, became subject to increased 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, 2018.  The Bank reported the following capital ratios at June 30, 2018:

Common Equity Tier 1 Capital Ratio     13.83%  
Tier 1 Leverage Ratio     9.99%  
Tier 1 Capital Ratio     13.83%  
Total Capital Ratio     14.63%  

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.  Specializing in providing exceptional customer service and investing in its local communities, Mohave State Bank was named 2018 Bank of the Year by Western Independent Bankers.  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 Bank also operates loan production offices in Sedona and Phoenix, AZ.  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. Forward-looking statements are based on management's knowledge and belief as of today and include information concerning the Company's possible or assumed future financial condition, and its results of operations and business. Forward-looking statements are subject to risks and uncertainties. A number of important factors could cause actual results to differ materially from those in the forward-looking statements. Those factors include fluctuations in interest rates, government policies and regulations (including monetary and fiscal policies), legislation, economic conditions, borrower capacity to repay, operational factors and competition in the geographic and business areas in which the Company conducts its operations. All forward-looking statements included in this press release are based on information available at the time of the release, and the Company assumes no obligation to update any forward-looking statement.

UNAUDITED FINANCIAL STATEMENTS FOLLOW

State Bank Corp.            
Statement of Operations            
               
     For the Quarter Ended    Year to Date
Dollars in thousands - Unaudited 6/30/2018 3/31/2018 6/30/2017   6/30/2018 6/30/2017
Statements of Operations            
  Interest income            
  Loans, including fees $ 5,249   $ 4,842   $ 4,816     $ 10,091   $ 9,581  
  Securities   897     897     653       1,793     1,235  
  Fed funds and other   99     90     89       190     159  
  Total interest income   6,245     5,829     5,558       12,074     10,975  
                                   
  Interest expense                                
  Deposits   229     206     171       436     355  
  Borrowings   143     105     105       247     207  
  Total interest expense   372     311     276       683     562  
                                   
  Net interest income   5,873     5,518     5,282       11,391     10,413  
                                   
  Provision for loan losses   158     35     (440 )     193     (440 )
  Net interest income after loan loss provision   5,715     5,483     5,722       11,198     10,853  
                                   
  Noninterest income                                
  Service charges on deposits   140     148     138       288     277  
  Mortgage loan fees   296     247     380       544     723  
  Gain on sale of loans   576     442     400       1,019     847  
  Other income   374     548     457       921     740  
  Total noninterest income   1,386     1,385     1,375       2,772     2,587  
                                   
  Noninterest expense                                
  Salaries and employee benefits   2,677     2,695     2,626       5,372     5,069  
  Net occupancy expense   171     183     154       354     313  
  Equipment expense   83     92     100       175     193  
  Data processing   437     440     429       877     949  
  Director fees & expenses   77     80     78       158     121  
  Insurance   37     39     32       75     64  
  Marketing & promotion   124     129     139       253     267  
  Professional fees   239     149     129       388     222  
  Office expense   33     38     34       71     99  
  Regulatory assessments   57     64     47       121     126  
  OREO and repossessed assets   (29 )   42     594       13     619  
  Other expenses   397     502     437       900     879  
  Total noninterest expense   4,303     4,453     4,799       8,757     8,921  
                                   
                                   
  Income (loss) before provision (benefit) for income taxes   2,798     2,415     2,298       5,213     4,519  
                                   
  Provision (benefit) for income taxes   661     566     818       1,227     1,606  
  Net Income (Loss) $ 2,137   $ 1,849   $ 1,480     $ 3,986   $ 2,913  
                                   
                                   
 Per Share Data                                
  Basic EPS $ 0.27   $ 0.23   $ 0.18     $ 0.49   $ 0.36  
  Diluted EPS $ 0.26   $ 0.23   $ 0.18     $ 0.49   $ 0.36  
                                   
  Average shares outstanding                                
  Basic   8,062,225     8,049,845     8,039,567       8,056,069     8,034,656  
  Effect of dilutive shares   30,799     37,679     19,767       34,220     9,938  
  Diluted   8,093,024     8,087,524     8,059,334       8,090,289     8,044,594  
                                   


State Bank Corp.        
Balance Sheets        
         
           
Dollars in thousands - Unaudited 6/30/2018 3/31/2018 12/31/2017 6/30/2017
Consolidated Balance Sheets        
           
Assets        
  Cash and cash equivalents $ 4,251   $ 4,419   $ 3,558   $ 3,023  
  Interest bearing deposits   4,966     6,658     6,835     10,292  
  Overnight Funds   31,950     21,055     15,110     43,860  
  Available for sale securities   194,788     199,932     206,138     169,126  
  Total cash and securities   235,955     232,064     231,641     226,301  
                           
  Loans held for sale, before reserves   4,817     2,624     3,400     3,205  
  Gross loans held for investment   362,308     358,811     347,951     335,454  
  Loan loss reserve   (3,647 )   (3,356 )   (3,306 )   (3,001 )
  Total net loans   363,478     358,079     348,045     335,658  
                           
  Premises and equipment, net   14,180     14,152     14,561     14,828  
  Other real estate owned   398     528     691     836  
  Federal Home Loan Bank and other stock   4,518     3,867     3,867     3,867  
  Company owned life insurance   11,672     11,607     11,543     11,410  
  Other assets   11,481     10,063     10,289     10,451  
                           
  Total Assets $ 641,682   $ 630,360   $ 620,637   $ 603,351  
                           
                           
Liabilities                        
  Non interest bearing demand $ 125,877   $ 126,307   $ 128,870   $ 119,116  
  Money market, NOW and savings   381,090     372,706     357,880     346,022  
  Time deposits <$250K   49,154     54,811     58,214     62,948  
  Time deposits >$250K   5,781     4,590     4,431     5,933  
  Total Deposits   561,902     558,414     549,395     534,019  
                           
  Securities sold under repurchase agreements   4,064     4,339     3,616     3,263  
  Federal Home Loan Bank advances   6,000     -     -     -  
  Subordinated debt, net of debt issuance costs   7,257     7,367     7,361     7,348  
  Total Debt   17,321     11,706     10,977     10,611  
                           
  Other Liabilities   2,795     1,859     1,608     1,826  
  Total Liabilities   582,018     571,979     561,980     546,456  
                           
                           
Shareholders' Equity                        
  Common stock   39,513     39,466     39,333     39,255  
  Accumulated retained earnings   24,204     22,551     21,185     18,140  
  Accumulated other comprehensive income   (4,053 )   (3,636 )   (1,861 )   (500 )
  Total shareholders equity   59,664     58,381     58,657     56,895  
                           
  Total liabilities and shareholders' equity $ 641,682   $ 630,360   $ 620,637   $ 603,351  
                           


State Bank Corp.          
Five-Quarter Performance Summary          
           
     For the Quarter Ended
Dollars in thousands - Unaudited 6/30/2018 3/31/2018 12/31/2017 9/30/2017 6/30/2017
Performance Highlights          
             
Earnings:          
  Total revenue (Net int. income + nonint. income) $ 7,259   $ 6,903   $ 6,799   $ 7,307   $ 6,657  
  Net interest income $ 5,873   $ 5,518   $ 5,579   $ 5,625   $ 5,282  
  Provision for loan losses $ 158   $ 35   $ 100   $ 50   $ (440 )
  Noninterest income $ 1,386   $ 1,385   $ 1,220   $ 1,397   $ 1,375  
  Noninterest expense $ 4,303   $ 4,453   $ 4,102   $ 4,183   $ 4,799  
  Net income (loss) $ 2,137   $ 1,849   $ 1,541   $ 1,842   $ 1,480  
             
Per Share Data:          
  Net income (loss), basic $ 0.27   $ 0.23   $ 0.19   $ 0.23   $ 0.18  
  Net income (loss), diluted $ 0.26   $ 0.23   $ 0.19   $ 0.23   $ 0.18  
  Cash dividends declared $ 0.06   $ 0.06   $ 0.04   $ 0.04   $ 0.04  
  Book value $ 7.40   $ 7.25   $ 7.29   $ 7.24   $ 7.07  
  Tangible book value $ 6.50   $ 6.34   $ 6.37   $ 6.31   $ 6.13  
             
Performance Ratios:          
  Return on average assets   1.33 %   1.18 %   0.98 %   1.20 %   0.99 %
  Return on average equity   14.48 %   12.64 %   10.52 %   12.71 %   10.51 %
  Net interest margin, taxable equivalent   3.93 %   3.78 %   3.86 %   3.99 %   3.84 %
  Average cost of funds   0.26 %   0.22 %   0.20 %   0.20 %   0.21 %
  Average yield on loans   5.68 %   5.44 %   5.63 %   5.83 %   5.94 %
  Efficiency ratio   59.28 %   64.51 %   60.33 %   59.57 %   72.09 %
  Non-interest income to total revenue   19.09 %   20.06 %   17.94 %   19.89 %   20.65 %
             
Capital & Liquidity:          
  Total equity to total assets (EOP)   9.30 %   9.26 %   9.45 %   9.21 %   9.43 %
  Tangible equity to tangible assets   8.26 %   8.20 %   8.36 %   8.12 %   8.27 %
  Total loans to total deposits   65.34 %   64.73 %   63.95 %   62.29 %   63.41 %
  Mohave State Bank          
  Common equity tier 1 ratio   13.83 %   13.98 %   14.03 %   13.91 %   13.56 %
  Tier 1 leverage ratio   9.99 %   9.91 %   9.73 %   9.64 %   9.65 %
  Tier 1 risk based capital   13.83 %   13.98 %   14.03 %   13.91 %   13.56 %
  Total risk based capital   14.63 %   14.75 %   14.80 %   14.63 %   14.27 %
             
Asset Quality:          
  Gross charge-offs $ -   $ -   $ 26   $ 27   $ 59  
  Net charge-offs (NCOs) $ (133 ) $ (15 ) $ (173 ) $ 19   $ (456 )
  NCO to average loans, annualized   -0.14 %   -0.02 %   -0.20 %   0.02 %   -0.54 %
  Non-accrual loans/securities $ 2,389   $ 5,899   $ 6,219   $ 2,467   $ 2,923  
  Other real estate owned $ 399   $ 529   $ 691   $ 577   $ 836  
  Repossessed assets $ -   $ -   $ -   $ -   $ -  
  Non-performing assets (NPAs) $ 2,788   $ 6,428   $ 6,910   $ 3,044   $ 3,759  
  NPAs to total assets   0.43 %   1.02 %   1.11 %   0.48 %   0.62 %
  Loans >90 days past due $ -   $ -   $ -   $ 3   $ -  
  NPAs + 90 days past due $ 2,788   $ 6,428   $ 6,910   $ 3,047   $ 3,759  
  NPAs + loans 90 days past due to total assets   0.43 %   1.02 %   1.11 %   0.48 %   0.62 %
  Allowance for loan losses to total loans   0.99 %   0.93 %   0.94 %   0.87 %   0.90 %
  Allowance for loan losses to NPAs   130.81 %   52.21 %   47.84 %   99.61 %   80.66 %
             
Period End Balances:          
  Assets $ 641,682   $ 630,360   $ 620,637   $ 632,078   $ 603,351  
  Total Loans (before reserves) $ 367,125   $ 361,435   $ 351,351   $ 349,491   $ 338,635  
  Deposits $ 561,902   $ 558,414   $ 549,395   $ 561,077   $ 534,019  
  Stockholders' equity $ 59,664   $ 58,381   $ 58,657   $ 58,235   $ 56,895  
  Common stock market capitalization $ 126,632   $ 97,023   $ 88,084   $ 66,284   $ 65,957  
  Full-time equivalent employees   122     117     114     117     127  
  Shares outstanding   8,065,709     8,051,677     8,044,184     8,044,184     8,043,517  
             
Average Balances:          
  Assets $ 640,327   $ 627,504   $ 626,759   $ 616,175   $ 598,933  
  Earning assets $ 599,968   $ 585,574   $ 582,297   $ 567,105   $ 552,731  
  Total Loans (before reserves) $ 369,705   $ 355,848   $ 349,866   $ 345,042   $ 339,062  
  Deposits $ 562,942   $ 556,608   $ 556,169   $ 545,944   $ 522,443  
  Other borrowings $ 16,622   $ 11,028   $ 10,226   $ 10,622   $ 11,028  
  Stockholders' equity $ 59,034   $ 58,519   $ 58,609   $ 57,968   $ 56,305  
  Shares outstanding, basic - wtd   8,062,225     8,049,845     8,044,184     8,043,938     8,039,567  
  Shares outstanding, diluted - wtd   8,093,024     8,087,524     8,070,524     8,071,191     8,059,334  

Contact:
Brian M. Riley, President & CEO
Craig Wenner, EVP & CFO 
928 855 0000
www.mohavestbank.com  

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