Suncrest Bank Reports Record First Quarter Earnings; EPS Increase of 67%
VISALIA, Calif., April 27, 2017 /PRNewswire/ -- Suncrest Bank (OTCQX: SBKK) today reported unaudited financial results for the first quarter of 2017. The acquisition of Security First Bank, with total assets of $104 million, which closed on December 16, 2016, will affect the comparability of financial information for the quarter versus the first quarter of 2016 and financial results will also be affected by one-time merger expenses related to the acquisition.
"We are delighted to announce record results for the first quarter, and a 67% increase in diluted EPS over the prior year," said Ciaran McMullan, President and CEO of Suncrest Bank. "This improvement has been driven primarily by improved operating efficiencies, achieved through the successful integration of our two most recent acquisitions." McMullan continued, "We completed the systems integration and back office consolidation of Security First Bank during the quarter and do not anticipate further merger related expenses this year."
First Quarter 2017 Highlights
- Record first quarter net income of $0.7 million, up 158% compared to first quarter 2016.
- Diluted EPS of $0.10, up 67% compared to first quarter 2016.
- Efficiency ratio of 71.56% (66.51% excluding non-recurring costs) compared to 81.41% for the first quarter 2016.
- Net Interest Income increased by $1.57 million, up 51% compared to first quarter 2016.
- Non-interest Income increased by $0.14 million, up 90% compared to first quarter 2016.
- Return on average assets of 0.62% (0.75% excluding non-recurring costs) compared to 0.37% for the first quarter 2016.
- Return on average equity of 4.78% (5.8% excluding non-recurring costs) compared to 2.72% for the first quarter 2016.
- Total risk based capital ratio was 14.32% and Tier 1 leverage ratio was 11.92%.
- Net organic loan growth of $9.0 million, or 3%, during the quarter (12% on an annualized basis).
- New loan originations(1) were $25.4 million during the quarter.
(1) Includes unfunded commitments
Income Statement
Net income for the first quarter was a record $0.7 million, which is a 158% increase over the same quarter last year. The comparability of first quarter 2017 net income to fourth quarter 2016 net income is impacted by non-recurring costs in both those quarters, associated with our acquisition of Security First Bank. These non-recurring costs were approximately $250,000 pre-tax or $0.02 per diluted share for first quarter 2017, and approximately $725,000 pre-tax or $0.09 per diluted share for the fourth quarter of 2016.
Net Interest Income increased by $1.57 million, up 51% compared to first quarter 2016 and non-interest income increased by $0.14 million, up 90% compared to first quarter 2016. This compares favorably to an increase of $0.9 million, or 34%, in non-interest expenses over the same period, inclusive of the non-recurring costs mentioned above.
Net interest margin for the first quarter was 4.62% as compared to 4.48% for the same quarter last year. The Company's net interest income was positively impacted in the first quarter by the recognition of fair value discount accretion on acquired loans of approximately $151,000 (which is equivalent to approximately 14 basis points (bps) of net interest margin for the quarter), and a recovery of approximately $200,000 in interest on a non-accrual loan which paid off during the quarter (which is equivalent to approximately 20 bps of net interest margin for the quarter). The core net interest margin(2), which removes accretion of loan fair value marks and non-recurring items such as recovery of interest, was 4.28% for the first quarter. The core net interest margin for the linked quarter, and the same quarter last year, was 4.03% and 4.40% respectively. Core net interest margin declined slightly when compared to the same quarter last year. The decline was primarily due to average loans being a lower percentage of average earnings assets in the first quarter of 2017 compared to the first quarter of 2016, and an increase in cost of deposits of 7 bps (discussed below).
Core net interest margin has increased when compared to the linked quarter. The increase was due to average loans being a higher percentage of average earning assets in the first quarter of 2017 compared to the fourth quarter of 2016. Through the second half of 2016, we actively managed our loan to deposit position to ensure we were well positioned to take advantage of new loan growth opportunities resulting from the acquisition of Security First Bank. As a result, our average loan to deposit ratio was 72.5% during the fourth quarter and, following the completion of the acquisition, increased to 79.06% at December 31st 2016.
As mentioned above, our cost of funds increased by 7 bps when compared to first quarter of 2016 and has remained steady on a linked quarter basis. The increase was driven primarily by a one-year CD promotional rate of 1.15% offered through May and June of 2016, and increased balances in our higher rate business money market account. We expect a significant percentage of the promotional CDs to reprice to the non-promotional rate at maturity.
Balance Sheet
Total assets increased during the quarter by $4 million or approximately 1% as compared to December 31, 2016. Year over year growth was $155 million or approximately 52%. This growth includes the impact of the acquisition of Security First Bank. Excluding the acquired assets, which were approximately $104 million, organic year over year growth was $51 million or 17%.
Total loans increased by $9.0 million during the quarter or 3% (12% annualized) and we saw solid loan demand with new loan originations together with new unfunded commitments totaling $25.4 million.
Total deposits increased during the quarter by $3.5 million or approximately 1%. The bank typically sees a slight decline in total deposits during the first quarter due to the seasonal nature of a number of our agribusiness accounts, specifically packing houses who typically pay their growers after the financial year end. This year's seasonal outflow was offset by growth in new, non-seasonal, business and personal deposits.
(2) non-GAAP financial measure
Asset Quality
Non-performing assets were $2.6 million, or 0.58% of total assets at March 31st 2017 compared with $2.1 million or 0.47% of total assets at December 31st 2016. The increase was due to one loan, acquired via the Security First Bank acquisition being reclassified to non-accrual. Non-performing assets have declined significantly from March 31st 2016 and we expect to see further declines during the second quarter due to the expected disposition of an other real estate owned property at approximately net book value.
The allowance for loan losses as a percentage of loans, excluding acquired loans that have been marked to fair value, was 1.28% at March 31st 2017 compared to 1.31% at December 31st 2016.
Capital
Suncrest Bank remained well capitalized at March 31st 2017. All of the Bank's capital ratios are above minimum regulatory standards for "well capitalized" institutions.
At March 31st 2017 the tangible book value per common share was $7.63 with common shares issued of 7,000,094 as of the same date. This compares to a tangible book value per share of $7.51 at December 31st 2016. The bank has only common shares on issue.
About Suncrest Bank
Suncrest Bank, member FDIC, is locally owned and operated and offers a full range of commercial, small business and agribusiness loans, cash management services and personal deposit products throughout the Central Valley of California. It is regularly rated Five Stars by Bauer Financial as one of the nation's strongest financial institutions, and in 2017 was named to the 2017 OTCQX® Best 50, a ranking of top performing companies traded on the OTCQX Best Market. It is a Preferred Lender with the Small Business Administration and its stock can be purchased on the open market, trading on the OTCQX under the ticker symbol SBKK. For all other information, visit www.suncrestbank.com
Forward Looking Statements
Except for the historical information in this news release, the matters described herein contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties that could cause actual results to differ materially. Such risks and uncertainties include: the credit risks of lending activities, including changes in the level and trend of loan delinquencies and charge-offs, results of examinations by our banking regulators, our ability to maintain adequate levels of capital and liquidity, our ability to manage loan delinquency rates, our ability to price deposits to retain existing customers and achieve low-cost deposit growth, manage expenses and lower the efficiency ratio, expand or maintain the net interest margin, mitigate interest rate risk for changes in the interest rate environment, competitive pressures in the banking industry, access to available sources of credit to manage liquidity, the local and national economic environment, and other risks and uncertainties. Accordingly, undue reliance should not be placed on forward-looking statements. These forward-looking statements speak only as of the date of this release. Suncrest Bank undertakes no obligation to update publicly any forward-looking statements to reflect new information, events or circumstances after the date of this release or to reflect the occurrence of unanticipated events. Investors are encouraged to read the Suncrest Bank annual reports which are available on our website.
| Suncrest Bank |
|||||||||||||
| Statements of Financial Condition |
|||||||||||||
| March 31, |
December 31, |
March 31, |
|||||||||||
| 2017 |
2016 |
2016 |
|||||||||||
| ASSETS |
|||||||||||||
| Cash and Due from Banks |
$ 22,783,570 |
$ 25,567,875 |
$ 12,048,979 |
||||||||||
| Federal Funds Sold |
42,553,000 |
36,979,000 |
6,303,000 |
||||||||||
| TOTAL CASH AND CASH EQUIVALENTS |
65,336,570 |
62,546,875 |
18,351,979 |
||||||||||
| Investment Securities Available for Sale (AFS) |
45,423,120 |
53,567,064 |
49,320,236 |
||||||||||
| Loans: |
|||||||||||||
| Total Loans |
316,481,527 |
307,517,754 |
218,867,933 |
||||||||||
| Allowance for Loan Losses |
(2,696,163) |
(2,496,163) |
(2,364,566) |
||||||||||
| NET LOANS |
313,785,364 |
305,021,591 |
216,503,367 |
||||||||||
| Federal Home Loan Bank and Other Bank Stock, at Cost |
3,152,891 |
3,152,891 |
1,468,465 |
||||||||||
| Premises and Equipment |
5,710,907 |
4,218,360 |
2,429,149 |
||||||||||
| Other Real Estate Owned |
635,842 |
788,842 |
635,842 |
||||||||||
| Bank Owned Life Insurance |
5,146,284 |
5,114,446 |
2,095,456 |
||||||||||
| Goodwill |
3,325,220 |
3,325,220 |
- |
||||||||||
| Core Deposit Intangible |
1,516,342 |
1,576,611 |
411,653 |
||||||||||
| Accrued Interest and Other Assets |
7,596,144 |
8,340,728 |
5,216,772 |
||||||||||
| $ 451,628,684 |
$ 447,652,628 |
$ 296,432,919 |
|||||||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY |
|||||||||||||
| Deposits: |
|||||||||||||
| Noninterest-bearing Demand |
$ 113,020,660 |
$ 122,835,165 |
$ 83,384,111 |
||||||||||
| Savings, NOW and Money Market Accounts |
194,953,732 |
181,779,826 |
113,525,026 |
||||||||||
| Time Deposits |
84,479,850 |
84,371,288 |
58,790,408 |
||||||||||
| TOTAL DEPOSITS |
392,454,242 |
388,986,279 |
255,699,545 |
||||||||||
| Accrued Interest and Other Liabilities |
928,694 |
1,375,691 |
774,302 |
||||||||||
| TOTAL LIABILITIES |
393,382,936 |
390,361,970 |
256,473,847 |
||||||||||
| Shareholders' Equity: |
|||||||||||||
| Common Stock - No par value |
57,202,344 |
57,046,519 |
40,557,502 |
||||||||||
| Additional Paid-in Capital |
1,894,064 |
1,851,183 |
1,852,957 |
||||||||||
| Accumulated Deficit |
(514,828) |
(1,210,042) |
(2,673,075) |
||||||||||
| Accumulated Other Comprehensive Income (Loss) |
|||||||||||||
| Unrealized Gain (Loss) on Securities AFS |
(335,832) |
(397,002) |
221,688 |
||||||||||
| TOTAL SHAREHOLDERS' EQUITY |
58,245,748 |
57,290,658 |
39,959,072 |
||||||||||
| $ 451,628,684 |
$ 447,652,628 |
$ 296,432,919 |
|||||||||||
| Suncrest Bank |
|||||||||||||
| Statements of Income (Unaudited) |
|||||||||||||
| For the Three Months Ended |
|||||||||||||
| March 31, |
December 31, |
March 31, |
|||||||||||
| 2017 |
2016 |
2016 |
|||||||||||
| INTEREST INCOME |
|||||||||||||
| Interest and Fees on Loans |
$ 4,587,599 |
$ 3,347,320 |
$ 2,969,972 |
||||||||||
| Interest on Investment Securities |
196,733 |
217,389 |
227,334 |
||||||||||
| Interest on Federal Funds Sold and Other |
115,496 |
77,067 |
11,521 |
||||||||||
| TOTAL INTEREST INCOME |
4,899,828 |
3,641,776 |
3,208,827 |
||||||||||
| INTEREST EXPENSE |
|||||||||||||
| Interest on Savings Deposits, NOW and Money Market Accounts |
100,495 |
69,232 |
45,609 |
||||||||||
| Interest on Time Deposits |
146,016 |
138,756 |
74,724 |
||||||||||
| Interest on Other Borrowings |
- |
- |
2,709 |
||||||||||
| TOTAL INTEREST EXPENSE |
246,511 |
207,988 |
123,042 |
||||||||||
| NET INTEREST INCOME |
4,653,317 |
3,433,788 |
3,085,785 |
||||||||||
| Provision for Loan Losses |
200,000 |
- |
119,000 |
||||||||||
| NET INTEREST INCOME AFTER |
|||||||||||||
| PROVISION FOR LOAN LOSSES |
4,453,317 |
3,433,788 |
2,966,785 |
||||||||||
| NONINTEREST INCOME |
|||||||||||||
| Service Charges, Fees, and Other Income |
282,883 |
231,512 |
124,558 |
||||||||||
| Gain on Sale of Loans |
12,789 |
- |
31,400 |
||||||||||
| 295,672 |
231,512 |
155,958 |
|||||||||||
| NONINTEREST EXPENSE |
|||||||||||||
| Salaries and Employee Benefits |
2,016,409 |
1,929,636 |
1,412,031 |
||||||||||
| Occupancy Expenses |
314,879 |
349,932 |
314,123 |
||||||||||
| Other Expenses |
1,210,187 |
1,094,794 |
912,876 |
||||||||||
| 3,541,475 |
3,374,362 |
2,639,030 |
|||||||||||
| INCOME BEFORE INCOME TAXES |
1,207,514 |
290,938 |
483,713 |
||||||||||
| Income Taxes |
512,300 |
180,500 |
213,800 |
||||||||||
| NET INCOME |
$ 695,214 |
$ 110,438 |
$ 269,913 |
||||||||||
| Suncrest Bank |
||||||
| Selected Financial Ratios (Unaudited) |
||||||
| March 31, |
December 31, |
March 31, |
||||
| 2017 |
2016 |
2016 |
||||
| For the three months ended: |
||||||
| Return on Average Assets(ROAA) |
0.62% |
0.12% |
0.37% |
|||
| ROAA excluding merger expenses (1) (2) |
0.75% |
0.64% |
0.37% |
|||
| Return on Average Equity(ROAE) |
4.78% |
1.01% |
2.72% |
|||
| ROAE excluding merger expenses(1) (2) |
5.80% |
5.29% |
2.72% |
|||
| Non-Interest Expense (NIE) To Average Assets |
3.16% |
3.70% |
3.58% |
|||
| NIE to Average Assets excluding merger expenses(1) (2) |
2.94% |
2.91% |
3.58% |
|||
| Efficiency Ratio |
71.56% |
92.06% |
81.41% |
|||
| Efficiency Ratio excluding merger expenses(1) (2) |
66.51% |
72.28% |
81.41% |
|||
| Net Interest Margin |
4.62% |
4.08% |
4.48% |
|||
| Cost of Funds |
0.26% |
0.26% |
0.19% |
|||
| Basic Earnings Per Share (EPS) |
$ 0.10 |
$ 0.02 |
$ 0.06 |
|||
| Diluted EPS |
$ 0.10 |
$ 0.02 |
$ 0.06 |
|||
| Diluted EPS excluding merger expenses(1) (2) |
$ 0.12 |
$ 0.11 |
$ 0.06 |
|||
| At Period End: |
||||||
| Loans to Deposits |
80.64% |
79.06% |
85.60% |
|||
| Non-Performing Assets to Assets |
0.58% |
0.47% |
1.18% |
|||
| Outstanding Shares |
7,000,094 |
6,979,497 |
5,002,225 |
|||
| Tangible Book Value Per Share(2) |
$ 7.63 |
$ 7.51 |
$ 7.91 |
|||
| Book Value Per Share |
$ 8.32 |
$ 8.21 |
$ 7.99 |
|||
| Regulatory Capital Ratios: |
||||||
| Tier 1 Leverage (to average assets) |
11.92% |
11.70% |
13.38% |
|||
| Common Equity Tier 1 Capital (to risk weighted assets) |
13.62% |
13.86% |
15.25% |
|||
| Tier 1 Capital (to risk weighted assets) |
13.62% |
13.86% |
15.25% |
|||
| Total Capital (to risk weighted assets) |
14.32% |
14.52% |
16.17% |
|||
| (1) |
Merger expenses were $250,000 and $725,000 for the quarters ended March 31, 2017 and December 31, 2016, respectively. Merger expenses, net of tax were $147,000 and $470,000 for the quarters ended March 31, 2017 and December 31, 2016, respectively |
| (2) |
These non-GAAP measures have inherent limitations, are not required to be uniformly applied and are not audited. They should not be considered in isolation or as a substitute for analyses of results reported under GAAP. These non-GAAP measures may not be comparable to similarly titled measures reported by other companies. |
| Suncrest Bank |
||||||||||||||
| Average Balance Sheet and |
||||||||||||||
| For the Three Months Ended |
||||||||||||||
| March 31, 2017 |
December 31, 2016 |
|||||||||||||
| Average |
Average |
Average |
Average |
|||||||||||
| Balance |
Interest |
Yield/Rate |
Balance |
Interest |
Yield/Rate |
|||||||||
| Interest Earning Assets: |
||||||||||||||
| Deposits in Other Financial Institutions |
$ 53,232,844 |
$ 115,496 |
0.88% |
$ 55,780,344 |
$ 77,067 |
0.55% |
||||||||
| Investment Securities |
47,037,935 |
196,733 |
1.67% |
47,420,583 |
217,389 |
1.83% |
||||||||
| Loans |
307,592,099 |
4,587,599 |
6.05% |
231,549,311 |
3,347,320 |
5.75% |
||||||||
| Total Interest Earning Assets |
407,862,878 |
4,899,828 |
4.87% |
339,789,236 |
3,641,776 |
4.33% |
||||||||
| Non-Interest Earning Assets |
40,166,138 |
29,760,696 |
||||||||||||
| Total Assets |
$ 448,029,016 |
$364,510,934 |
||||||||||||
| Interest Bearing Liabilities |
||||||||||||||
| Interest Bearing Transaction Accounts |
$ 52,151,487 |
14,870 |
0.12% |
$ 37,350,079 |
11,545 |
0.12% |
||||||||
| Savings and Money Market Accounts |
137,177,672 |
85,625 |
0.25% |
100,402,892 |
57,687 |
0.23% |
||||||||
| Time Deposits |
84,096,285 |
146,016 |
0.70% |
78,707,628 |
138,756 |
0.70% |
||||||||
| Total Interest Bearing Deposits |
273,425,444 |
246,511 |
0.37% |
216,460,599 |
207,988 |
0.38% |
||||||||
| Other Borrowings |
- |
- |
- |
- |
- |
- |
||||||||
| Total Interest Bearing Liabilities |
273,425,444 |
246,511 |
0.37% |
216,460,599 |
207,988 |
0.38% |
||||||||
| Non-Interest Bearing Transaction Accounts |
115,235,672 |
103,001,751 |
||||||||||||
| Total Funding Sources |
388,661,116 |
319,462,350 |
||||||||||||
| Non-Interest Bearing Liabilities |
1,230,975 |
1,180,237 |
||||||||||||
| Shareholders' Equity |
58,136,925 |
43,868,347 |
||||||||||||
| Total Liabilities and Shareholder's Equity |
$ 448,029,016 |
$364,510,934 |
||||||||||||
| Net Interest Income |
$ 4,653,317 |
$ 3,433,788 |
||||||||||||
| Net Interest Margin |
4.62% |
4.08% |
||||||||||||
| Suncrest Bank |
||||||||||||||
| Average Balance Sheet and |
||||||||||||||
| For the Three Months Ended |
||||||||||||||
| March 31, 2017 |
March 31, 2016 |
|||||||||||||
| Average |
Average |
Average |
Average |
|||||||||||
| Balance |
Interest |
Yield/Rate |
Balance |
Interest |
Yield/Rate |
|||||||||
| Interest Earning Assets: |
||||||||||||||
| Deposits in Other Financial Institutions |
$ 53,232,844 |
$ 115,496 |
0.88% |
$ 12,992,484 |
$ 11,521 |
0.36% |
||||||||
| Investment Securities |
47,037,935 |
196,733 |
1.67% |
51,608,669 |
227,334 |
1.76% |
||||||||
| Loans |
307,592,099 |
4,587,599 |
6.05% |
212,208,422 |
2,969,972 |
5.63% |
||||||||
| Total Interest Earning Assets |
407,862,878 |
4,899,828 |
4.87% |
276,809,575 |
3,208,827 |
4.66% |
||||||||
| Non-Interest Earning Assets |
40,166,138 |
18,409,228 |
||||||||||||
| Total Assets |
$ 448,029,016 |
$295,218,803 |
||||||||||||
| Interest Bearing Liabilities |
||||||||||||||
| Interest Bearing Transaction Accounts |
$ 52,151,487 |
14,870 |
0.12% |
$ 29,206,825 |
9,424 |
0.13% |
||||||||
| Savings and Money Market Accounts |
137,177,672 |
85,625 |
0.25% |
87,021,879 |
36,185 |
0.17% |
||||||||
| Time Deposits |
84,096,285 |
146,016 |
0.70% |
58,721,624 |
74,724 |
0.51% |
||||||||
| Total Interest Bearing Deposits |
273,425,444 |
246,511 |
0.37% |
174,950,328 |
120,333 |
0.28% |
||||||||
| Other Borrowings |
- |
- |
- |
718,692 |
2,709 |
- |
||||||||
| Total Interest Bearing Liabilities |
273,425,444 |
246,511 |
0.37% |
175,669,020 |
123,042 |
0.28% |
||||||||
| Non-Interest Bearing Transaction Accounts |
115,235,672 |
79,091,342 |
||||||||||||
| Total Funding Sources |
388,661,116 |
254,760,362 |
||||||||||||
| Non-Interest Bearing Liabilities |
1,230,975 |
711,794 |
||||||||||||
| Shareholders' Equity |
58,136,925 |
39,746,647 |
||||||||||||
| Total Liabilities and Shareholder's Equity |
$ 448,029,016 |
$295,218,803 |
||||||||||||
| Net Interest Income |
$ 4,653,317 |
$ 3,085,785 |
||||||||||||
| Net Interest Margin |
4.62% |
4.48% |
||||||||||||
SOURCE Suncrest Bank
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