Suncrest Bank Reports First Quarter Net Income; Earnings Doubled Year Over Year

VISALIA, CA / ACCESSWIRE / April 27, 2018 / Suncrest Bank (OTCQX: SBKK) today reported unaudited financial results for the first quarter of 2018.

”This was a strong quarter for Suncrest with net income of $1.46 million and an increase in earnings per share of 110% over the prior year,” said Ciaran McMullan, President and CEO of Suncrest Bank. ”Revenues benefited from higher core net interest income which increased by 5% on a linked quarter basis and by 25% over the prior year while we have kept operating expenses relatively flat. Non-interest expense, excluding non-recurring costs, has decreased by just under 1% compared to the prior year.”

McMullan added, ”During the quarter the shareholders of Suncrest Bank and those of CBBC Bancorp approved our planned merger which we expect to close during the second quarter, following receipt of all regulatory approvals.”

First Quarter 2018 Highlights

Net income of $1.46 million, an increase of 110% compared to the first quarter 2017
Diluted EPS of $0.21 compared to $0.10 for the first quarter 2017
Return on average assets of 1.09% compared to 0.62% for the first quarter 2017
Return on average equity of 9.53% compared to 4.78% for the first quarter 2017
Total loans increased by $9.5 million, or 2.7% during the quarter
New loan originations1 were $47.5 million during the quarter – a single quarter record.
Total deposits increased by $16.5 million, or 3.5% during the quarter
Core net interest margin2 for the quarter was 4.38% compared to 4.28% for the first quarter 2017
Cost of funds for the quarter was 23 basis points compared to 26 basis points for the first quarter 2017
Total risk based capital ratio was 14.47% and Tier 1 leverage ratio was 11.01%
Named to the 2018 DepositAccounts.com Top 200 List of Healthiest Banks in the United States
Named to the 2018 OTCQX® Best 50 List for the second year running

Income Statement

The comparability of first quarter net income to the same quarter last year, and the linked quarter, is impacted by the one-time impact of tax expense associated with the ”Tax Act,” non-recurring costs associated with our upcoming merger and previous acquisition of Security First Bank, and non-recurring income due to the recognition of fair value discount accretion on acquired loans.

Period

Net Income

Non-recurring income

Non-recurring costs(3)

Core Net Interest Income(2)

Core Net Income(2)

Core NIM(2)

Core Diluted EPS(2)

Q1 2018

$
1,456,492

$
16,138

$
115,000

$
5,355,793

$
1,551,492

4.38
%

$
0.22

Q4 2017

$
111,999

$
434,412

$
1,430,000

$
5,096,185

$
1,285,999

4.10
%

$
0.18

Q1 2017

$
695,214

$
351,200

$
250,000

$
4,302,117

$
635,658

4.28
%

$
0.09

Core net income for the quarter, which excludes all non-recurring items, was a record $1.6 million or $0.22 per diluted share compared with core net income of $0.6 million or $0.09 per diluted share for the first quarter of 2017, and $1.3 million or $0.18 per diluted share for the linked quarter.

Core net interest income for the quarter was $5.4 million, an increase of $1.1 million or 24.5% over the same quarter last year.

Non-interest income for the quarter was $296,000 and has been slowly increasing when compared to both the prior year and the linked-quarter primarily driven by an increasing number of deposit accounts. The bank had no Gain on Sale income in the first quarter.

Non-interest expense excluding non-recurring costs was $3.3 million for the quarter, a decrease of approximately $27,000 or 0.8% compared to the first quarter of 2017, and an increase of approximately $65,000 or 2.0% compared to the linked quarter. Included in non-interest expense were salaries and employee benefits expense of $1.9 million for the quarter, a decrease of approximately $121,000 or 6.0% compared to the first quarter of 2017, and an increase of approximately $33,000 or 1.8% compared to the linked quarter. The improvement over the same period last year is a result of a decline in FTE as a result of a reduction in staff related to the merger with Security First Bank. In addition, the increase in compensation cost as compared to the linked quarter was lower than expected as increases in compensation cost due to annual salary increases and payroll taxes normally experienced in the first quarter were partially offset by an increase in deferred costs due to the significant increase in loan originations during the current quarter.

Core net interest margin (NIM), which removes accretion of loan fair value marks and non-recurring items such as recovery of interest, was 4.38% for the quarter, an increase of 10 basis points from the same quarter last year. This improvement was driven primarily by a lower cost of funds and improved return on our investment securities. Our Core NIM improved by 28 basis points when compared to the linked quarter driven by an increase in our core loan yield and improved return on our investment securities as well as securities being a higher percentage of average earnings assets in the current quarter.

Balance Sheet

Total assets at March 31, 2018 were $545.9 million, an increase of $17.0 million during the quarter and a year over year increase of $94.2 million, or 20.9%.

Total deposits increased during the quarter by approximately $16.5 million, or 3.5%. Non-maturity deposits increased by $18.0 million while time deposits declined by $1.5 million. Non-interest bearing deposits have increased by $58.1 million or 51.4% year over year and Savings, NOW and Money Market deposits have increased by $49.6 million or 25.4% year over year. This strong result reflects the banks ongoing efforts to grow less price sensitive non-maturity deposits.

Total loans increased by $9.5 million during the quarter, or 2.7%, and new loan originations together with new unfunded commitments during the quarter were a record $47.5 million. Total loans have grown by $46.4 million or 14.6% over the previous year.

Commercial and industrial loans declined by $7.0 million during the quarter which reflects the normal business cycle of certain clients, while loans to finance agricultural production increased by $4.1 million during the quarter, which is primarily driven by the initial draws of our 2018 crop lines.

Commercial real estate loans (both owner and non-owner occupied) increased by $18.6 million during the quarter or 11.5% including an increase in multifamily of $8.9 million which included a $6.3 million loan to purchase a large student housing complex associated with one of the Central Valley’s premier Universities. The additional growth was diversified across multiple real estate categories.

Asset Quality

Non-performing assets were $1.0 million or 0.19% of total assets at March 31, 2018 compared to $0.97 million or 0.18% of total assets at December 31, 2017. This slight increase was due to the reclassification of one small, matured loan to non-accrual.

During the first quarter, the company recorded an additional $210,000 provision for loan losses and the allowance for loan losses as a percentage of total loans, excluding acquired loans that have been marked to fair value, was 1.27% at March 31, 2018 compared to 1.27% at December 31, 2017.

Capital

Suncrest Bank remained well capitalized at March 31, 2018. All of the Bank’s capital ratios are above minimum regulatory standards for ”well capitalized” institutions.

At March 31, 2018, the tangible book value per common share was $8.11 with common shares issued of 7,041,577 as of the same date. This compares to a tangible book value per common share of $8.02 at December 31, 2017 and $7.63 at September 30, 2017.

Excluding the unrealized loss on securities, the tangible book value per common share at March 31, 2018 was $8.36

Footnotes:

1. Includes unfunded commitments
2. Non-GAAP financial measure, excludes non-recurring income and non-recurring costs
3. Includes $1.3 million related to the ”Tax Act” and $130,000 in non-recurring merger expenses for Q4 2017

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 and 2018 was named to the 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.

Contacts:

Mr. Ciaran McMullan,
President/CEO or
Ms. Jean Carandang, CFO
559-802-1000

Suncrest Bank
Statements of Financial Condition
(Unaudited)

March 31,

December 31,

March 31,

2018

2017

ASSETS

Cash and Due from Banks

$
24,572,282

$
29,728,313

$
22,783,570

Federal Funds Sold

34,042,000

33,006,000

42,553,000

TOTAL CASH AND CASH EQUIVALENTS

58,614,282

62,734,313

65,336,570

Investment Securities Available for Sale (AFS)

102,543,729

90,368,057

45,423,120

Loans:

Total Loans

362,834,193

353,368,194

316,481,527

Allowance for Loan Losses

(3,598,647)

(3,412,669)

(2,696,163)

NET LOANS

359,235,546

349,955,525

313,785,364

Federal Home Loan Bank and Other Bank Stock, at Cost

3,152,891

Premises and Equipment

5,855,755

5,904,262

5,710,907

Other Real Estate Owned

313,720

635,842

Bank Owned Life Insurance

5,268,420

5,238,821

5,146,284

Goodwill

3,325,220

Core Deposit Intangible

1,255,183

1,313,301

1,516,342

Accrued Interest and Other Assets

6,305,046

6,611,278

7,596,144

$
545,869,792

$
528,917,388

$
451,628,684

LIABILITIES AND SHAREHOLDERS’ EQUITY

Deposits:

Noninterest-bearing Demand

$
171,144,392

$
162,335,707

$
113,020,660

Savings, NOW and Money Market Accounts

244,517,041

235,311,974

194,953,732

Time Deposits

67,760,910

69,253,295

84,479,850

TOTAL DEPOSITS

483,422,343

466,900,976

392,454,242

Accrued Interest and Other Liabilities

763,424

1,199,304

928,694

TOTAL LIABILITIES

484,185,767

468,100,280

393,382,936

Shareholders’ Equity:

Common Stock – No par value

57,624,317

57,279,494

57,202,344

Additional Paid-in Capital

2,101,103

1,985,398

1,894,064

Retained Earnings (Deficit)

3,751,976

2,295,485

( 514,828)

Accumulated Other Comprehensive Income (Loss) – Net

Unrealized Gain (Loss) on Securities AFS

(1,793,371)

(743,269)

(335,832)

TOTAL SHAREHOLDERS’ EQUITY

61,684,025

60,817,108

58,245,748

$
545,869,792

$
528,917,388

$
451,628,684

Suncrest Bank
Statements of Income (Unaudited)
For the Three Months Ended

March 31,

December 31,

March 31,

2018

2017

INTEREST INCOME

Interest and Fees on Loans

$
4,899,624

$
5,170,322

$
4,587,599

Interest on Investment Securities

530,014

368,311

196,733

Interest on Federal Funds Sold and Other

208,834

269,180

115,496

TOTAL INTEREST INCOME

5,638,472

5,807,813

4,899,828

INTEREST EXPENSE

Interest on Savings Deposits, NOW and Money Market Accounts

147,041

159,900

100,495

Interest on Time Deposits

119,501

117,316

146,016

Interest on Other Borrowings

–

TOTAL INTEREST EXPENSE

266,542

277,216

246,511

NET INTEREST INCOME

5,371,930

5,530,597

4,653,317

Provision for Loan Losses

210,000

–

200,000

NET INTEREST INCOME AFTER

PROVISION FOR LOAN LOSSES

5,161,930

5,530,597

4,453,317

NONINTEREST INCOME

Service Charges, Fees, and Other Income

296,026

286,759

282,883

Gain on Sale of Loans

–

12,789

296,026

286,759

295,672

NONINTEREST EXPENSE

Salaries and Employee Benefits

1,895,202

1,862,316

2,016,409

Occupancy Expenses

353,032

344,874

314,879

Other Expenses

1,131,331

1,122,764

1,210,187

3,379,565

3,329,954

3,541,475

INCOME BEFORE INCOME TAXES

2,078,391

2,487,402

1,207,514

Income Taxes

621,900

2,375,403

512,300

NET INCOME

$
1,456,491

$
111,999

$
695,214

Suncrest Bank
Selected Financial Data & Ratios (Unaudited)

March 31,

December 31,

March 31,

2018

2017

For the three months ended:

Return on Average Assets(ROAA)

1.09
%

0.08
%

0.62
%

ROAA excluding non-recurring items (1) (2)

1.16
%

0.97
%

0.57
%

Return on Average Equity(ROAE)

9.53
%

0.73
%

4.78
%

ROAE excluding non-recurring items (1) (2)

10.15
%

8.35
%

4.37
%

Noninterest Expense (NIE) To Average Assets

2.53
%

2.50
%

3.16
%

NIE to Average Assets excluding non-recurring items (1) (2)

2.45
%

2.40
%

2.94
%

Efficiency Ratio

59.63
%

57.24
%

71.56
%

Efficiency Ratio excluding non-recurring items (1) (2)

57.76
%

59.44
%

71.59
%

Net Interest Margin

4.39
%

4.45
%

4.62
%

Core Net Interest Margin (1) (2)

4.38
%

4.10
%

4.28
%

Cost of Funds

0.23
%

0.26
%

Basic Earnings Per Share (EPS)

$
0.21

$
0.01

$
0.10

Diluted EPS

$
0.21

$
0.01

$
0.10

Diluted EPS excluding non-recurring items (1) (2)

$
0.22

$
0.18

$
0.09

(1) Non-recurring items include deferred tax asset write-down, merger expenses, discount accretion on acquired loans and recovery of interest on non-accrual loans.
(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
Selected Financial Data & Ratios Continued (Unaudited)

March 31,

December 31,

March 31,

2018

2017

At Period End:

Loans to Deposits

75.06
%

75.68
%

80.64
%

Average Loans to Average Deposits (QTD)

74.81
%

73.46
%

79.14
%

Non-Performing Assets to Assets

0.19
%

0.18
%

0.58
%

Outstanding Shares

7,041,577

7,007,594

7,000,094

Tangible Book Value Per Share (2)

$
8.11

$
8.02

$
7.63

Tangible Book Value Per Share excluding Unrealized Loss on Securities (2)

$
8.36

$
8.12

$
7.68

Book Value Per Share

$
8.76

$
8.68

$
8.32

Regulatory Capital Ratios

Tier 1 Leverage (to average assets)

11.01
%

10.58
%

11.92
%

Common Equity Tier 1 Capital (to risk weighted assets)

13.62
%

13.63
%

13.62
%

Tier 1 Capital (to risk weighted assets)

13.62
%

13.63
%

13.62
%

Total Capital (to risk weighted assets)

14.47
%

14.32
%

March 31,

December 31,

March 31,

2018

2017

Loan Composition

Commercial and Industrial:

$
32,155,128

$
39,160,437

$
38,317,607

Loans to Finance Agricultural Production and Other Loans to Farmers:

24,327,648

20,213,687

17,362,540

Loans Secured by Real Estate:

Secured by Farmland

71,477,138

74,503,408

57,394,590

Construction, Land Development and Other Land

10,413,014

12,383,517

13,556,031

1-4 Family Residential Properties

44,044,058

45,261,076

45,318,921

Multifamily Residential Properties

27,436,480

18,504,600

15,728,093

Owner Occupied Nonresidential Properties

55,107,107

50,715,973

45,183,519

Non-Owner Occupied Nonresidential Properties

97,670,570

92,378,429

83,286,478

Total Loans Secured by Real Estate

306,148,367

293,747,003

260,467,632

Other Loans:

203,050

247,067

333,748

Total Loans

$
362,834,193

$
353,368,194

$
316,481,527

(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 Yields (Unaudited)
For the Three Months Ended

March 31, 2018

December 31, 2017

Average

Balance

Interest

Yield/Rate

Balance

Interest

Yield/Rate

Interest Earning Assets:

Deposits in Other Financial Institutions

$
45,128,356

$
208,834

1.88
%

$
74,631,467

$
269,180

1.43
%

Investment Securities

98,506,314

530,014

2.15
%

73,019,626

368,311

2.02
%

Loans

352,726,445

4,899,624

5.63
%

345,324,119

5,170,322

5.94
%

Total Interest Earning Assets

496,361,115

5,638,472

4.61
%

492,975,212

5,807,813

4.67
%

Noninterest Earning Assets

37,353,245

39,859,575

Total Assets

$
533,714,360

$
532,834,787

Interest Bearing Liabilities

Interest Bearing Transaction Accounts

$
57,412,491

17,736

0.13
%

$
57,337,498

18,006

0.12
%

Savings and Money Market Accounts

178,140,536

129,305

0.29
%

178,504,255

141,894

0.32
%

Time Deposits

68,553,202

119,501

0.71
%

71,184,502

117,316

0.65
%

Total Interest Bearing Deposits

304,106,229

266,542

0.36
%

307,026,255

277,216

0.36
%

Other Borrowings

–

Total Interest Bearing Liabilities

304,106,229

266,542

0.36
%

307,026,255

277,216

0.36
%

Noninterest Bearing Transaction Accounts

167,393,658

163,029,890

Total Funding Sources

471,499,887

470,056,145

Noninterest Bearing Liabilities

1,068,364

1,188,217

Shareholders’ Equity

61,146,109

61,590,425

Total Liabilities and Shareholder’s Equity

$
533,714,360

$
532,834,787

Net Interest Income

$
5,371,930

$
5,530,597

Net Interest Margin

4.39
%

4.45
%

Suncrest Bank
Average Balance Sheet and Yields (Unaudited)
For the Three Months Ended

March 31, 2018

March 31, 2017

Average

Balance

Interest

Yield/Rate

Balance

Interest

Yield/Rate

Interest Earning Assets:

Deposits in Other Financial Institutions

$
45,128,356

$
208,834

1.88
%

$
53,232,844

$
115,496

0.88
%

Investment Securities

98,506,314

530,014

2.15
%

47,037,935

196,733

1.67
%

Loans

352,726,445

4,899,624

5.63
%

307,592,099

4,587,599

6.05
%

Total Interest Earning Assets

496,361,115

5,638,472

4.61
%

407,862,878

4,899,828

4.87
%

Noninterest Earning Assets

37,353,245

40,166,138

Total Assets

$
533,714,360

$
448,029,016

Interest Bearing Liabilities

Interest Bearing Transaction Accounts

$
57,412,491

17,736

0.13
%

$
52,151,487

14,870

0.12
%

Savings and Money Market Accounts

178,140,536

129,305

0.29
%

137,177,672

85,625

0.25
%

Time Deposits

68,553,202

119,501

0.71
%

84,096,285

146,016

0.70
%

Total Interest Bearing Deposits

304,106,229

266,542

0.36
%

273,425,444

246,511

0.37
%

Other Borrowings

–

Total Interest Bearing Liabilities

304,106,229

266,542

0.36
%

273,425,444

246,511

0.37
%

Noninterest Bearing Transaction Accounts

167,393,658

115,235,672

Total Funding Sources

471,499,887

388,661,116

Noninterest Bearing Liabilities

1,068,364

1,230,975

Shareholders’ Equity

61,146,109

58,136,925

Total Liabilities and Shareholder’s Equity

$
533,714,360

$
448,029,016

Net Interest Income

$
5,371,930

$
4,653,317

Net Interest Margin

4.39
%

4.62
%

SOURCE: Suncrest Bank

ReleaseID: 497745

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