LAKE HAVASU CITY, Ariz., July 30, 2010 (GLOBE NEWSWIRE) -- State Bank Corp. (OTCBB:SBAZ) ("Company"), the holding company for Mohave State Bank ("Bank"), today announced a net operating loss of $7.6 million, or $1.98 per diluted share, for the quarter ended June 30, 2010, as compared to a net operating loss of $950,000, or $0.25 per diluted share, for the same period of 2009. For the six months ended June 30, 2010, the Company reported a net operating loss of $7.5 million, or $1.95 per diluted share, as compared to a net operating loss of $2.0 million, or $0.51 per diluted share, for the same period of 2009.
The net operating loss recorded in the second quarter 2010 resulted from a $7.4 million provision to the allowance for loan and lease losses along with $3.5 million in OREO expenses. The Company is required to mark collateral dependent, impaired loans to the net realizable collateral liquidation value. As commercial real estate values, in particular land values, continue to decrease, the Company has experienced a tremendous increase in required loan impairments. The required loss reserve component for impairments alone increased to $9.3 million at June 30, 2010 from $3.7 million at March 31, 2010. The remaining increase in the loan loss reserve was to replenish $2.3 million in net credit losses during the quarter. In addition, the Company sold $6.6 million of Other Real Estate Owned resulting in a loss on sale of $3.3 million.
"Until real estate values stabilize, we will be forced to recognize collateral devaluation through increased loan impairments. Many impaired loans continue to perform as agreed so we are hopeful that these reserves will not be fully utilized," commented Brian M. Riley, President & CEO.
Excluding the provision for loan losses and other real estate owned expense, the Company would have reported net income of $750,000 for the second quarter and $1.7 million for the six months ended June 30, 2010.
The Company's net interest margin continues to show improvement after several quarters of nonaccrual activity. The net interest margin increased to 3.99 percent during the quarter ended June 30, 2010. The yield on loans increased to 6.10 percent while the cost of funds continued to decrease to 1.20 percent. Cost control remains a focus of the Company; however, the cost of loan collection, FDIC insurance and OREO disposition continue to increase.
As previously announced, the Company is pursuing a deleveraging strategy to enhance its capital position. As of June 30, 2010, total assets were $350.7 million, a decrease of $22.4 million from $373.1 million at December 31, 2009. Total loans were $236.5 million at June 30, 2010 as compared to $252.4 million at December 31, 2009. Total deposits were $298.4 million at June 30, 2010 as compared to $311.7 million at December 31, 2009.
Nonperforming assets were $23.7 million at June 30, 2010, a decrease of $2.5 million from $26.2 million at December 31, 2009. Nonperforming assets represented 6.7 percent of total assets at June 30, 2010 as compared to 7.0 percent at December 31, 2009. The allowance for loan and lease losses totaled $13.2 million, or 5.56 percent of total loans, at June 30, 2010. The Company continues to carefully monitor its level of loss reserves and will proactively make additions as necessary to protect against an uncertain economic environment.
Shareholder equity decreased to $26.7 million at June 30, 2010 from $34.3 million at December 31, 2009. The Bank must meet certain minimum capital requirements to satisfy federal and state laws. The following table provides the Bank's capital ratio at June 30, 2010:
| Actual Ratio | Ratio to be well capitalized | Consent Order Requirement | |
|
Leverage Ratio Tier 1 Capital to Risk-Weighted Assets Total Capital to Risk-Weighted Assets |
7.52% 9.81% 11.10% |
5.00% 6.00% 10.00% |
9.25% N/A 12.00% |
The reduction in capital was not due to operational losses, but rather attributable to the write down of loans and collateral values. Without these reductions, the Company would have posted an operating profit and attained the capital levels required by the Consent Order. Since the Bank failed to meet its Consent Order capital requirements at June 30, 2010, the Company is currently weighing options for a secondary stock offering, along with further active balance sheet management strategies, in order to bring capital ratios in compliance with all regulatory orders.
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 six full-service branches: two in Lake Havasu City, two in Kingman, one in Bullhead City, and one in Yuma, 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 its subsidiary, Mohave State Bank, for which the Company claims the protection of safe harbor provisions contained in the Private Securities Litigation Reform Act of 1995. 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. | |||||
| Five-Quarter Performance Summary | |||||
| For the Quarter Ended | |||||
| Dollars in thousands - Unaudited | 6/30/2010 | 3/31/2010 | 12/31/2009 | 9/30/2009 | 6/30/2009 |
| Performance Highlights | |||||
| Earnings: | |||||
| Total revenue (Net int. income + nonint. income) | $ 3,660 | $ 3,767 | $ 3,749 | $ 3,659 | $ 3,859 |
| Net interest income | $ 3,185 | $ 2,979 | $ 3,290 | $ 3,165 | $ 3,267 |
| Provision for loan losses | $ 7,400 | $ 1,315 | $ 1,250 | $ 600 | $ 2,900 |
| Noninterest income | $ 475 | $ 788 | $ 459 | $ 494 | $ 592 |
| Noninterest expense | $ 5,954 | $ 2,357 | $ 3,744 | $ 2,690 | $ 2,421 |
| Net income (loss) | $ (7,647) | $ 129 | $ (356) | $ 236 | $ (950) |
| Per Share Data: | |||||
| Net income (loss), basic | $ (1.98) | $ 0.03 | $ (0.09) | $ 0.06 | $ (0.25) |
| Net income (loss), diluted | $ (1.98) | $ 0.03 | $ (0.09) | $ 0.06 | $ (0.25) |
| Cash dividends declared | $ -- | $ -- | $ -- | $ -- | $ -- |
| Book value | $ 6.92 | $ 8.91 | $ 8.91 | $ 9.07 | $ 8.86 |
| Tangible book value | $ 6.92 | $ 8.91 | $ 8.91 | $ 9.07 | $ 8.86 |
| Performance Ratios: | |||||
| Return on average assets | -8.39% | 0.14% | -0.38% | 0.25% | -1.04% |
| Return on average equity | -101.38% | 1.50% | -4.10% | 2.74% | -11.13% |
| Net interest margin, taxable equivalent | 3.99% | 3.67% | 4.01% | 3.87% | 4.01% |
| Average cost of funds | 1.20% | 1.46% | 1.54% | 1.70% | 1.76% |
| Average yield on loans | 6.10% | 5.92% | 6.41% | 6.26% | 6.07% |
| Efficiency ratio | 162.68% | 62.57% | 99.87% | 74.14% | 63.18% |
| Non-interest income to total revenue | 12.98% | 20.92% | 12.24% | 13.50% | 15.34% |
| Capital & Liquidity: | |||||
| Total equity to total assets (EOP) | 7.61% | 9.27% | 9.20% | 9.36% | 9.51% |
| Tangible equity to tangible assets | 7.61% | 9.27% | 9.20% | 9.36% | 9.51% |
| Total loans to total deposits | 79.63% | 80.42% | 81.55% | 83.87% | 93.14% |
| Mohave State Bank | |||||
| Tier 1 leverage ratio | 7.52% | 9.32% | 9.07% | 9.05% | 9.15% |
| Tier 1 risk based capital | 9.81% | 11.77% | 11.41% | 11.12% | 10.87% |
| Total risk based capital | 11.10% | 13.04% | 12.68% | 12.39% | 12.13% |
| Asset Quality: | |||||
| Gross charge-offs | $ 2,409 | $ 2,076 | $ 1,244 | $ 813 | $ 1,085 |
| Net charge-offs (NCOs) | $ 2,344 | $ 2,019 | $ 1,128 | $ 813 | $ 1,085 |
| NCO to average loans, annualized | 3.77% | 3.19% | 1.76% | 1.24% | 1.56% |
| Non-accrual loans | $ 8,759 | $ 9,215 | $ 6,698 | $ 9,846 | $ 12,913 |
| Other real estate owned | $ 14,893 | $ 19,328 | $ 19,501 | $ 21,465 | $ 16,936 |
| Repossessed assets | $ -- | $ 50 | $ 50 | $ 50 | $ 50 |
| Non-performing assets (NPAs) | $ 23,652 | $ 28,593 | $ 26,249 | $ 31,361 | $ 29,899 |
| NPAs to total assets | 6.74% | 7.72% | 7.03% | 8.40% | 8.33% |
| Loans >90 days past due | $ 379 | $ 27 | $ 523 | $ 3,221 | $ 5,195 |
| NPAs + 90 days past due | $ 24,031 | $ 28,620 | $ 26,772 | $ 34,582 | $ 35,094 |
| NPAs + loans 90 days past due to total assets | 6.85% | 7.72% | 7.17% | 9.26% | 9.78% |
| Allowance for loan losses to total loans | 5.56% | 3.26% | 3.50% | 3.42% | 3.33% |
| Allowance for loan losses to NPAs | 55.82% | 28.69% | 33.93% | 28.01% | 30.09% |
| Period End Balances: | |||||
| Assets | $ 350,723 | $ 370,592 | $ 373,143 | $ 373,290 | $ 358,916 |
| Total Loans (before reserves) | $ 237,629 | $ 251,786 | $ 254,188 | $ 257,059 | $ 269,611 |
| Deposits | $ 298,404 | $ 313,075 | $ 311,714 | $ 306,485 | $ 289,467 |
| Stockholders' equity | $ 26,675 | $ 34,346 | $ 34,312 | $ 34,924 | $ 34,134 |
| Common stock market capitalization | $ 15,342 | $ 13,491 | $ 13,483 | $ 12,520 | $ 24,076 |
| Full-time equivalent employees | 81 | 80 | 80 | 80 | 78 |
| Shares outstanding | 3,854,714 | 3,854,714 | 3,852,199 | 3,852,199 | 3,852,199 |
| Average Balances: | |||||
| Assets | $ 364,604 | $ 376,792 | $ 379,442 | $ 374,297 | $ 366,362 |
| Earning assets | $ 326,374 | $ 333,505 | $ 336,009 | $ 335,828 | $ 334,335 |
| Total Loans (before reserves) | $ 248,432 | $ 252,781 | $ 256,326 | $ 261,220 | $ 277,385 |
| Deposits | $ 308,763 | $ 315,849 | $ 314,279 | $ 302,011 | $ 287,523 |
| Other borrowings | $ 24,704 | $ 25,474 | $ 28,195 | $ 36,739 | $ 42,413 |
| Stockholders' equity | $ 30,173 | $ 34,448 | $ 34,760 | $ 34,488 | $ 34,134 |
| Shares outstanding, basic - wtd | 3,854,714 | 3,853,876 | 3,852,199 | 3,852,199 | 3,851,567 |
| Shares outstanding, diluted - wtd | 3,857,634 | 3,856,796 | 3,854,714 | 3,855,003 | 3,855,806 |
| State Bank Corp. | ||
| Balance Sheets | ||
| Dollars in thousands - Unaudited | 6/30/2010 | 12/31/2009 |
| Consolidated Balance Sheets | ||
| Assets | ||
| Cash and cash equivalents | $ 5,684 | $ 5,202 |
| Fed funds sold | 33,980 | 21,000 |
| Held for maturity securities | 1,027 | 1,086 |
| Available for sale securities | 43,460 | 54,740 |
| Total cash and securities | 84,151 | 82,028 |
| Loans held for sale, before reserves | 1,150 | 1,762 |
| Gross loans held for investment | 236,479 | 252,426 |
| Loan loss reserve | (13,202) | (8,907) |
| Total net loans | 224,427 | 245,281 |
| Premises and equipment, net | 11,070 | 11,218 |
| Other real estate owned | 14,893 | 19,501 |
| Federal Home Loan Bank and other stock | 3,048 | 3,158 |
| Company owned life insurance | 5,236 | 5,147 |
| Other assets | 7,898 | 6,810 |
| Total Assets | $ 350,723 | $ 373,143 |
| Liabilities | ||
| Non interest bearing demand | $ 43,833 | $ 38,409 |
| Money market, NOW and savings | 132,178 | 126,416 |
| Time deposits <$100K | 60,590 | 76,974 |
| Time deposits >$100K | 61,803 | 69,915 |
| Total Deposits | 298,404 | 311,714 |
| Securities sold under repurchase agreements | 20,958 | 17,940 |
| Federal Home Loan Bank advances | 2,000 | 7,000 |
| Subordinated debt | 1,812 | 1,112 |
| Total Debt | 24,770 | 26,052 |
| Other Liabilities | 874 | 1,065 |
| Total Liabilities | 324,048 | 338,831 |
| Shareholders' Equity | ||
| Common stock | 21,655 | 21,644 |
| Accumulated retained earnings | 4,490 | 12,009 |
| Accumulated other comprehensive income | 530 | 659 |
| Total shareholders equity | 26,675 | 34,312 |
| Total liabilities and shareholders' equity | $ 350,723 | $ 373,143 |
| State Bank Corp. | ||||
| Statement of Operations | ||||
| For the Quarter Ended | Year to Date | |||
| Dollars in thousands - Unaudited | 6/30/2010 | 6/30/2009 | 6/30/2010 | 6/30/2009 |
| Statements of Operations | ||||
| Interest income | ||||
| Loans, including fees | $ 3,787 | $ 4,207 | $ 7,528 | $ 8,379 |
| Securities | 381 | 482 | 852 | 980 |
| Fed funds and other | 18 | 4 | 35 | 6 |
| Total interest income | 4,186 | 4,693 | 8,415 | 9,365 |
| Interest expense | ||||
| Deposits | 921 | 1,251 | 2,003 | 2,545 |
| Borrowings | 80 | 200 | 248 | 409 |
| Total interest expense | 1,001 | 1,451 | 2,251 | 2,954 |
| Net interest income | 3,185 | 3,242 | 6,164 | 6,411 |
| Provision for loan losses | 7,400 | 2,900 | 8,715 | 5,500 |
| Net interest income after loan loss provision | (4,215) | 342 | (2,551) | 911 |
| Noninterest income | ||||
| Service charges on deposits | 168 | 168 | 339 | 350 |
| Mortgage loan fees | 6 | 17 | 21 | 30 |
| Gain on sale of loans | 215 | 296 | 357 | 521 |
| Other income | 86 | 183 | 546 | 269 |
| Total noninterest income | 475 | 664 | 1,263 | 1,170 |
| Noninterest expense | ||||
| Salaries and employee benefits | 1,146 | 1,172 | 2,259 | 2,528 |
| Net occupancy expense | 85 | 72 | 175 | 156 |
| Equipment expense | 54 | 66 | 107 | 127 |
| Data processing | 275 | 310 | 549 | 629 |
| Director fees & expenses | 63 | 68 | 127 | 139 |
| Insurance | 19 | 22 | 36 | 44 |
| Marketing & promotion | 81 | 85 | 173 | 187 |
| Professional fees | 131 | 96 | 188 | 134 |
| Office expense | 58 | 58 | 115 | 118 |
| Regulatory assessments | 339 | 238 | 571 | 364 |
| OREO and repossessed assets | 3,544 | 176 | 3,786 | 500 |
| Other expenses | 159 | 105 | 225 | 214 |
| Total noninterest expense | 5,954 | 2,468 | 8,311 | 5,140 |
| Income (loss) before provision (benefit) for income taxes | (9,694) | (1,462) | (9,599) | (3,059) |
| Provision (benefit) for income taxes | (2,047) | (512) | (2,081) | (1,071) |
| Net Income (Loss) | $ (7,647) | $ (950) | $ (7,518) | $ (1,988) |
| Per Share Data | ||||
| Basic EPS | $ (1.98) | $ (0.25) | $ (1.95) | $ (0.52) |
| Diluted EPS | $ (1.98) | $ (0.25) | $ (1.95) | $ (0.51) |
| Average shares outstanding | ||||
| Basic | 3,854,714 | 3,851,567 | 3,848,703 | 3,848,703 |
| Effect of dilutive shares | 2,920 | 4,239 | 13,713 | 13,713 |
| Diluted | 3,857,634 | 3,855,806 | 3,862,416 | 3,862,416 |