LAKE HAVASU CITY, Ariz., (CRWENEWSWIRE)(SBAZ.OB) — State Bank Corp. (”Company”), the holding company for Mohave State Bank (”Bank”), recently 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.

Contact:

State Bank Corp.
Brian M. Riley, President & CEO
(928) 855-0000

Disclaimer:
The Views and Opinions Expressed by the author are his or her opinions only and do not necessarily reflect those of Crown Equity Holdings or its agents, affiliates, officers, directors, staff, or contractors. The author at the time of this article did not own any shares or receive any consideration financial or otherwise from any company mentioned or referred to in the article.

Tags: 5 quarters, Brian M. Riley, financial statement, loans, Mohave State Bank, operating loss, real estate, SBAZ, State Bank Corp

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