State Bank Corp. Earnings Grow to $700,000, or $0.12 per Diluted Share, in First Quarter 2016

LAKE HAVASU CITY, Ariz., April 29, 2016 (GLOBE NEWSWIRE) -- State Bank Corp. (OTCQB: SBAZ) (“Company”), the holding company for Mohave State Bank (“Bank”), today announced net income increased 2.8% to $700,000, or $0.12 per diluted share, for the first quarter ended March 31, 2016, as compared to net income of $681,000, or $0.12 per diluted share, for the first quarter of 2015.  Excluding costs related to its pending merger, net income for the quarter would have been $816,000, a 19.8% increase compared to the first quarter one year ago. (See “Non-GAAP Financial Information” table)

“The highlight of the first quarter was the announcement of our definitive merger agreement with Country Bank,” stated Brian M. Riley, President and Chief Executive Officer. “We are excited about this opportunity to bring together two independent community banks with similar philosophies and cultures into a combined Arizona franchise exceeding $500 million in assets.  This merger reaffirms our position as the largest community bank headquartered in Arizona and expands our geographic footprint into Yavapai County with Country Bank’s branches in Prescott, Prescott Valley and Cottonwood.  With strong capital, improving asset quality and continued profitability, we are investing in our infrastructure to capitalize on opportunities in our market.”

In February, State Bank announced it had signed a definitive merger agreement whereby Country Bank will merge into Mohave State Bank in a transaction valued at approximately $29.6 million.  The transaction joins two of the leading community bank franchises headquartered in Arizona with approximately $530 million in combined assets.  “We expect the merger will be immediately accretive to earnings per share and significantly increase return on equity,” said Riley.

First Quarter 2016 Highlights:

• First quarter core operating (non-GAAP) net income increased 19.8% to $816,000, or $0.14 per diluted share, compared to $681,000, or $0.12 per diluted share, in the first quarter a year ago.
• Declared an annual cash dividend of $0.10 per share, which represented a dividend yield of 1.40%.
• The net interest margin remained healthy at 4.08%.
• Tangible book value increased 7.9% to $6.52 per share from $6.04 per share a year earlier.

There was no provision for loan losses in the first quarter reflecting a small net recovery of $9,000.  The allowance for loan losses totaled $3.1 million at March 31, 2016, or 1.40% of total loans.  “We continue to carefully monitor our level of loss reserves and as asset quality continues to improve our need to make additions to reserves has diminished in the past few quarters,” noted Riley.

Total assets were $338.2 million at March 31, 2016, an increase of $12.9 million, or 4.0% from $325.3 million at December 31, 2015 and an increase of $9.9 million, or 3.0%, compared to $328.3 million a year ago.  Total loans held for investment were $216.5 million as compared to $216.3 million at December 31, 2015 and $214.9 million at March 31, 2015.  Total deposits were $288.6 million, an increase of $5.8 million, or 2.1%, from $282.8 million at December 31, 2015 and an increase of $1.4 million, or 0.5%, compared to $287.2 million a year ago.  Core deposits, defined as noninterest bearing demand, money market, NOW and savings accounts, increased 2.9% compared to three months earlier and increased 1.9% compared to a year earlier to $230.2 million at March 31, 2016.  Core deposits now comprise 79.8% of total deposits.   

Nonperforming assets were $6.2 million at March 31, 2016, a 3.2% decrease compared to $6.4 million at December 31, 2015 and a 55.7% decrease compared to $14.0 million at March 31, 2015.  Nonperforming assets represented 1.84% of total assets at March 31, 2016, down from 1.97% at December 31, 2015 and 4.28% a year ago.

Shareholder equity increased to $38.1 million at March 31, 2015, from $37.8 million at December 31, 2015 and $35.5 million a year earlier.  At March 31, 2016 tangible book value per share improved to $6.52 per share compared to $6.47 per share three months earlier and $6.04 a year earlier.

Recent Developments

State Bank Corp. announced it signed a definitive merger agreement with Country Bank, whereby Country Bank will merge into Mohave State Bank in a stock and cash transaction valued at approximately $29.6 million.  Country Bank has four branches with $205.5 million in assets as of December 31, 2015, and following the combination of the two franchises, State Bank Corp. will have nine branches in attractive Arizona markets with assets of $530 million.  Additionally, on January 22nd the Company declared a $0.10 per share annual cash dividend, an increase of 43% from the previous year. 

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

Common Equity Tier 1 Capital Ratio		14.62	%
Tier 1 Leverage Ratio		11.51	%
Tier 1 Capital Ratio		14.62	%
Total Capital Ratio		15.82	%

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
Dollars in thousands - Unaudited			3/31/2016				12/31/2015				3/31/2015
Statements of Operations
	Interest income
	Loans, including fees		$	2,956			$	3,019			$	2,783
	Securities			215				212				213
	Fed funds and other			35				19				15
	Total interest income			3,206				3,250				3,011
	Interest expense
	Deposits			153				151				133
	Borrowings			34				1				14
	Total interest expense			187				152				147
	Net interest income			3,019				3,098				2,864
	Provision for loan losses			-				-				110
	Net interest income after loan loss provision			3,019				3,098				2,754
	Noninterest income
	Service charges on deposits			79				85				96
	Mortgage loan fees			174				190				193
	Gain on sale of loans			173				253				654
	(Loss)/Gain on securities			-				-				(8	)
	Other income			167				174				166
	Total noninterest income			593				702				1,101
	Noninterest expense
	Salaries and employee benefits			1,330				1,483				1,525
	Net occupancy expense			53				90				80
	Equipment expense			40				44				42
	Data processing			242				243				288
	Director fees & expenses			44				66				48
	Insurance			30				35				26
	Marketing & promotion			78				69				126
	Professional fees			159				180				91
	Office expense			50				70				35
	Regulatory assessments			60				32				114
	OREO and repossessed assets			53				39				286
	Other expenses			216				149				160
				2,355				2,500				2,821
	Acquisition related costs			178				-				-
	Total noninterest expense			2,533				2,500				2,821
	Income (loss) before provision (benefit) for income taxes			1,079				1,300				1,034
	Provision (benefit) for income taxes			379				354				353
	Net Income		$	700			$	946			$	681
Per Share Data
	Basic EPS		$	0.12			$	0.16			$	0.12
	Diluted EPS		$	0.12			$	0.16			$	0.12
	Average shares outstanding
	Basic			5,842,145				5,849,444				5,868,038
	Effect of dilutive shares			-				-				-
	Diluted			5,842,145				5,849,444				5,868,038

State Bank Corp.
Balance Sheets
Dollars in thousands - Unaudited			3/31/2016				12/31/2015				3/31/2015
Consolidated Balance Sheets
Assets
	Cash and cash equivalents		$	2,949			$	1,899			$	2,105
	Interest bearing deposits			2,832				4,167				3,908
	Overnight Funds			37,795				29,250				29,520
	Held for maturity securities			17				19				25
	Available for sale securities			51,752				46,881				48,039
	Total cash and securities			95,345				82,216				83,597
	Loans held for sale, before reserves			4,499				4,457				2,304
	Gross loans held for investment			216,547				216,357				214,941
	Loan loss reserve			(3,098	)			(3,089	)			(3,034	)
	Total net loans			217,948				217,725				214,211
	Premises and equipment, net			8,134				8,195				9,898
	Other real estate owned			3,995				4,247				7,594
	Federal Home Loan Bank and other stock			2,126				2,126				1,917
	Company owned life insurance			6,073				6,034				5,911
	Other assets			4,584				4,776				5,174
	Total Assets		$	338,205			$	325,319			$	328,302
Liabilities
	Non interest bearing demand		$	71,361			$	70,648			$	65,596
	Money market, NOW and savings			158,830				153,156				160,306
	Time deposits			25,015				25,703				27,304
	Time deposits >$100K			33,359				33,329				34,031
	Total Deposits			288,565				282,836				287,237
	Securities sold under repurchase agreements			3,100				3,653				3,581
	Federal Home Loan Bank advances			-				-				-
	Subordinated debt			7,500				-				675
	Total Debt			10,600				3,653				4,256
	Other Liabilities			952				1,047				1,339
	Total Liabilities			300,117				287,536				292,832
Shareholders' Equity
	Common stock			24,927				24,927				25,037
	Accumulated retained earnings			12,997				12,881				10,136
	Accumulated other comprehensive income			164				(25	)			297
	Total shareholders equity			38,088				37,783				35,470
	Total liabilities and shareholders' equity		$	338,205			$	325,319			$	328,302

State Bank Corp.
Five-Quarter Performance Summary
		For the Quarter Ended
Dollars in thousands - Unaudited		3/31/2016			12/31/2015			9/30/2015			6/30/2015			3/31/2015
Performance Highlights
Earnings:
	Total revenue (Net int. income + nonint. income)	$	3,612		$	3,800		$	4,651		$	4,123		$	3,965
	Net interest income	$	3,019		$	3,098		$	3,255		$	3,118		$	2,864
	Provision for loan losses	$	-		$	-		$	425		$	350		$	110
	Noninterest income	$	593		$	702		$	1,396		$	1,005		$	1,101
	Noninterest expense	$	2,533		$	2,500		$	2,568		$	2,588		$	2,821
	Net income (loss)	$	700		$	946		$	1,067		$	772		$	681
Per Share Data:
	Net income (loss), basic	$	0.12		$	0.16		$	0.18		$	0.13		$	0.12
	Net income (loss), diluted	$	0.12		$	0.16		$	0.18		$	0.13		$	0.12
	Cash dividends declared	$	0.10		$	-		$	-		$	-		$	0.07
	Book value	$	6.52		$	6.47		$	6.34		$	6.13		$	6.04
	Tangible book value	$	6.52		$	6.47		$	6.34		$	6.13		$	6.04
Performance Ratios:
	Return on average assets		0.86	%		1.17	%		1.26	%		0.93	%		0.85	%
	Return on average equity		7.40	%		10.04	%		11.63	%		8.59	%		7.68	%
	Net interest margin, taxable equivalent		4.08	%		4.29	%		4.31	%		4.22	%		4.09	%
	Average cost of funds		0.26	%		0.21	%		0.21	%		0.21	%		0.21	%
	Average yield on loans		5.34	%		5.45	%		5.42	%		5.30	%		5.18	%
	Efficiency ratio		70.13	%		65.79	%		55.21	%		62.77	%		71.15	%
	Non-interest income to total revenue		16.42	%		18.47	%		30.02	%		24.38	%		27.77	%
Capital & Liquidity:
	Total equity to total assets (EOP)		11.26	%		11.61	%		11.43	%		10.60	%		10.80	%
	Tangible equity to tangible assets		11.26	%		11.61	%		11.43	%		10.60	%		10.80	%
	Total loans to total deposits		76.60	%		78.07	%		78.00	%		78.83	%		74.50	%
	Mohave State Bank
	Common equity tier 1 ratio		14.62	%		14.70	%		14.10	%		12.71	%		13.36	%
	Tier 1 leverage ratio		11.51	%		11.61	%		10.83	%		10.72	%		10.92	%
	Tier 1 risk based capital		14.62	%		14.70	%		14.10	%		12.71	%		13.36	%
	Total risk based capital		15.82	%		15.91	%		15.27	%		13.77	%		14.52	%
Asset Quality:
	Gross charge-offs	$	-		$	4		$	373		$	449		$	124
	Net charge-offs (NCOs)	$	(9	)	$	(65	)	$	370		$	415		$	30
	NCO to average loans, annualized		-0.02	%		-0.12	%		0.63	%		0.73	%		0.06	%
	Non-accrual assets	$	2,229		$	2,154		$	4,570		$	3,732		$	6,444
	Other real estate owned	$	3,995		$	4,246		$	6,141		$	6,696		$	7,595
	Repossessed assets	$	-		$	-		$	-		$	-		$	-
	Non-performing assets (NPAs)	$	6,224		$	6,400		$	10,711		$	10,428		$	14,039
	NPAs to total assets		1.84	%		1.97	%		3.29	%		3.08	%		4.28	%
	Loans >90 days past due	$	-		$	-		$	-		$	-		$	-
	NPAs + 90 days past due	$	6,224		$	6,400		$	10,711		$	10,428		$	14,039
	NPAs + loans 90 days past due to total assets		1.84	%		1.97	%		3.29	%		3.08	%		4.28	%
	Allowance for loan losses to total loans		1.40	%		1.40	%		1.37	%		1.26	%		1.42	%
	Allowance for loan losses to NPAs		49.78	%		48.27	%		28.23	%		28.47	%		21.61	%
Period End Balances:
	Assets	$	338,205		$	325,319		$	325,104		$	339,109		$	328,302
	Total Loans (before reserves)	$	221,046		$	220,814		$	220,768		$	241,666		$	217,245
	Deposits	$	288,565		$	282,836		$	283,035		$	297,928		$	287,237
	Stockholders' equity	$	38,088		$	37,783		$	37,166		$	35,951		$	35,470
	Common stock market capitalization	$	37,974		$	36,981		$	35,166		$	27,873		$	29,575
	Full-time equivalent employees		72			77			76			81			81
	Shares outstanding		5,842,145			5,842,145			5,861,000			5,868,038			5,868,038
Average Balances:
	Assets	$	327,228		$	323,157		$	337,463		$	333,387		$	319,817
	Earning assets	$	301,084		$	294,500		$	307,376		$	301,427		$	285,722
	Total Loans (before reserves)	$	221,499		$	221,705		$	235,051		$	228,847		$	214,992
	Deposits	$	282,123		$	280,558		$	295,327		$	291,980		$	279,305
	Other borrowings	$	6,105		$	3,846		$	4,327		$	4,817		$	4,481
	Stockholders' equity	$	37,855		$	37,686		$	36,689		$	35,947		$	35,454
	Shares outstanding, basic - wtd		5,842,145			5,849,444			5,866,038			5,868,038			5,868,038
	Shares outstanding, diluted - wtd		5,842,145			5,849,444			5,866,038			5,868,038			5,868,038

NON-GAAP FINANCIAL INFORMATION
(Unaudited)
	Three Months Ended
NON-GAAP PERFORMANCE MEASURES	Mar. 31, 2016				Dec. 31, 2015				Mar. 31, 2015
Return on average common equity, excluding acquisition related costs, net (1)		8.62	%			10.04	%			7.68	%
Return on average assets, excluding acquisition related costs, net (1)		1.00	%			1.17	%			0.85	%
Efficiency ratio, excluding acquisition related costs, net (2)		65.20	%			65.79	%			71.15	%
NON-GAAP EARNINGS PER SHARE
Basic (3)	$	0.14			$	0.16			$	0.12
Diluted (3)	$	0.14			$	0.16			$	0.12
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Unaudited)
	Three Months Ended
	Mar. 31, 2016				Dec. 31, 2015				Mar. 31, 2015
	(in thousands)
Net income	$	700			$	946			$	681
Acquisition related costs, net		178				-				-
Tax effect on acquisition related costs, net		(62	)			-				-
Net income, excluding acquisition related costs, net (3)	$	816			$	946			$	681
	Three Months Ended
	Mar. 31, 2016				Dec.31, 2015				Mar. 31, 2015
	(in thousands)
Total non-interest expenses	$	2,533			$	2,500			$	2,821
Acquisition related costs, net		178				-				-
Total non-interest expenses, excluding acquisition related costs, net (3)	$	2,355			$	2,500			$	2,821
(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.

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