SUNCREST FOR IMMEDIATE RELEASE | July 30, 2021 |
Contacts: Mr. Ciaran McMullan, President/CEO or Ms. Jean Carandang, CFO. 559-802-1000
Suncrest Bank Reports Second Quarter Earnings. Return on Average Tangible Equity of 14%. Annualized non-PPP loan growth of 20%.
SACRAMENTO, Calif. and VISALIA, Calif. Suncrest Bank (OTCQX: SBKK) today reported unaudited financial results for the second quarter of 2021.
"We have continued to see exceptionally strong organic balance sheet growth through the second quarter, with non-PPP loans increasing by 5% over the linked quarter and total deposits increasing by almost 4%," said Ciaran McMullan, President and CEO of Suncrest Bank. "This impressive performance is a reflection of the high quality of our relationship management teams and the outstanding support they receive from the entire organization."
"On July 27th we announced our intention to merge with Citizens Business Bank, one of the country's top performing banks, and we look forward to completing the merger later this year or early next year," McMullan added.
Second Quarter 2021 Highlights
- Announced agreement to merge with CVB Financial Corp. on July 27, 2021
- Net income of $4.5 million, an increase of $1.8 million over Q2 2020
- Diluted EPS of $0.36, an increase of 63.6% over Q2 2020
- Total loan growth (excluding PPP) of $35.2 million or 4.88% (19.5% annualized)
- New originations1 (excluding PPP) of $71.0 million
- Total deposits (excluding brokered) increased $40.5 million or 3.66% (14.62% annualized)
- Return on average tangible assets of 1.37%
- Return on average tangible equity of 14.10%
- Efficiency ratio of 50.83%
- Tier 1 leverage ratio of 9.45%
Income Statement
Net income for the quarter was $4.5 million compared to $4.0 million for the linked quarter and $2.69 million for the same quarter last year. The increase over the linked quarter is primarily due to an increase in fees and interest on loans and securities. The increase over the second quarter of 2020 is mostly driven by an increase in net interest income and the reduction in provision for loan losses, partially offset by an increase in noninterest expense.
Interest income increased to $12.5 million versus $11.5 million for the linked quarter and increased from $10.6 million compared to the second quarter of 2020. The increase over the linked quarter is primarily a result of an increase in the loan yield from 4.62% in the linked quarter to 4.80% for the quarter ended June 30, 2021. Interest expense declined to $490,000 as compared to $518,000 over the linked quarter due to a decline in our cost of funds to 17 basis points (bps) from 19 bps last quarter. In addition, the decrease in interest expense was $261,000 over the same quarter last year due to a decline in our cost of funds by 12 basis points.
Included in interest income are fees earned on Paycheck Protection Program ("PPP") Loans of approximately $764,000 in the second quarter versus $704,000 in the linked quarter and $399,000 in the second quarter of 2020.
1 Includes unfunded commitments
Net interest Margin (NIM) improved to 3.82% compared to 3.68% for the linked quarter. NIM improved over the same quarter last year primarily due to the decrease in the cost of funds by 12 basis points. Yield on loans improved to 4.80% in Q2 from 4.62% for the linked quarter. Excluding PPP loans, our NIM would have been 3.87% in Q2 compared to 3.81% for the linked quarter and loan yield would have been 5.07% in Q2 compared to 4.99% for the linked quarter.
Total noninterest expense increased over the linked quarter by 6.3% or $377,000, and increased over the same quarter last year by approximately $1.0 million. The increase over the linked quarter was a result of an increase in salaries and employee benefits expense by $169,000 or 5.0% and an increase in other noninterest expense of $201,000 or 9.9%. The increase over the same quarter last year is predominantly a result of the recruitment of new employees in primarily customer facing roles. However, despite this level of recruitment we continue to maintain our key expense ratios at consistently low levels with efficiency ratio being 50.83% in Q2 while our burden ratio and noninterest expense to average assets were 1.75% and 1.89% respectively.
Balance Sheet
Total assets at June 30, 2021 increased to $1.37 billion as compared to $1.34 billion for the linked quarter. The increase was $33.8 million or 2.5% as a result of an increase in total investment securities of $31.3 million and were funded by an increase in deposits. Total assets increased $85.5 million or 6.6% over the same quarter last year as a result of an increase in loans of $64.2 million. Investment Securities increased $123.4 million over the same quarter last year and were funded by an increase in deposits.
Total deposits (excluding brokered deposits) at June 30, 2021 were $1.147 billion, an increase of $40.5 million or 3.66% over the linked quarter. Total deposits (excluding brokered deposits) increased year over year by $97.9 million or 9.34%.
During the quarter ended March 31, 2021 the bank acquired $60.0 million in low cost brokered deposits to partially fund PPP loans and pay down advances from the Federal Home Loan Bank. Brokered deposits at June 30, 2021 were $45.0 million.
Total loans at June 30, 2021 were $868.8 million, an increase of $5.5 million over the linked quarter. Total loans (excluding PPP loans) increased by $35.2 million or 4.88% over the linked quarter. Total PPP loans were $111.3 million at June 30, 2021 compared to $141.0 million at March 31, 2021.
PPP Loan Forgiveness and PPP Round Two
To date, over 95% of our PPP Round One customers have started the forgiveness process and $69 million has been forgiven. We completed PPP Round Two with 244 loans totaling $48.6 million.
We have continued to track new business generated as a result of the approximately 190 new customers acquired through both PPP Round One and Round Two. To date, approximately 43% of these customers have established additional non-PPP related business with the bank, including approximately $30 million in new deposits (exclusive of PPP funds) and approximately $24.0 million in new loan commitments together with an additional $15.7 million in the pipeline.
Asset Quality
Non-performing assets decreased to $4.8 million or 0.35% of total assets at June 30, 2021 compared to 0.37% at March 31, 2021.
Based on our standard analysis of portfolio trends and considerations for improving economic conditions of our primary industries, we determined a provision for loan losses was not required for the quarter. As a result, our allowance as a percentage of total loans (excluding both PPP and acquired loans) declined to 1.36% at June 30, 2021 compared to 1.49% at March 31, 2021.
At the end of the second quarter, three loans in the amount of $2.7 million remain in our loan payment deferral program. Two of these loans, in the amount of $2.5 million, resumed payments in July 2021, with the remaining loan of approximately $200,000 scheduled to start payments by the end of the third quarter.
Per the table below, both classified accrual and classified nonaccrual loans declined through the quarter. As a result, total classified loans as a percentage of total loans declined to 1.44%, or 1.65% excluding PPP loans.
Q2 2021 | Q1 2021 | Q4 2020 | Q3 2020 | ||
Total Classified Loans (a) | $12,533,580 | $12,928,681 | $12,928,632 | $14,370,053 | |
Classified - Accrual Loans | $7,864,816 | $8,166,865 | $9,176,720 | $10,111,838 | |
Classified - Non-Accrual Loans | $4,668,764 | $4,761,816 | $3,751,912 | $4,258,215 | |
Total Classified / Total Loans | 1.44% | 1.50% | 1.58% | 1.78% | |
Total Classified / Total Loans | 1.65% | 1.79% | 1.84% | 2.12% | |
(excluding PPP) | |||||
(a) Includes classified accrual loans and non-accrual loans |
Capital
Suncrest Bank remained well capitalized at June 30, 2021. All of the bank's capital ratios are above minimum regulatory standards for "well capitalized" institutions.
At June 30, 2021 tangible book value per common share was $10.72 with common shares issued of 12,249,500 as of the same date.
About Suncrest Bank
Suncrest Bank, member FDIC, offers a full range of commercial, small business and agribusiness loans, cash management services and personal deposit products throughout the Central Valley of California and the Greater Sacramento Region. 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.
Suncrest Bank
Statements of Financial Condition (Unaudited)
June 30, | March 31, | June 30, | |||||||
2021 | 2021 | 2020 | |||||||
ASSETS | |||||||||
Cash and Due from Banks | $ | 15,578,565 | $ | 24,078,595 | $ | 13,228,364 | |||
Federal Funds Sold | 41,425,000 | 36,984,000 | 142,930,000 | ||||||
TOTAL CASH AND CASH EQUIVALENTS | 57,003,565 | 61,062,595 | 156,158,364 | ||||||
Investment Securities Available for Sale (AFS) | 379,724,228 | 348,379,719 | 256,315,062 | ||||||
Loans: | |||||||||
Total Loans | 868,818,328 | 863,343,343 | 804,668,120 | ||||||
Allowance for Loan Losses | ( | 8,502,239) | ( | 8,503,654) | ( | 7,261,565) | |||
NET LOANS | 860,316,089 | 854,839,689 | 797,406,555 | ||||||
Federal Home Loan Bank and Other Bank Stock, at Cost | 5,366,684 | 4,907,984 | 5,862,141 | ||||||
Premises and Equipment | 5,990,719 | 6,071,861 | 6,465,203 | ||||||
Other Real Estate Owned | - | 129,644 | 129,644 | ||||||
Bank Owned Life Insurance | 8,835,996 | 8,779,315 | 8,607,800 | ||||||
Goodwill | 38,989,566 | 38,989,566 | 38,989,566 | ||||||
Core Deposit Intangible | 2,232,796 | 2,378,513 | 2,844,243 | ||||||
Accrued Interest and Other Assets | 13,524,738 | 12,676,878 | 13,738,199 | ||||||
$ | 1,371,984,381 | $ | 1,338,215,764 | $ | 1,286,516,777 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||
Deposits: | |||||||||
Noninterest-bearing Demand | $ | 528,012,539 | $ | 490,584,958 | $ | 462,020,939 | |||
Savings, NOW and Money Market Accounts | 552,252,423 | 545,695,354 | 510,478,265 | ||||||
Time Deposits - Retail | 66,582,888 | 70,117,424 | 76,411,399 | ||||||
Time Deposits - Wholesale | 45,000,000 | 60,000,000 | - | ||||||
TOTAL DEPOSITS | 1,191,847,850 | 1,166,397,736 | 1,048,910,603 | ||||||
Accrued Interest and Other Liabilities | 7,621,556 | 7,762,743 | 7,503,426 | ||||||
Other Borrowings | - | - | 68,559,008 | ||||||
TOTAL LIABILITIES | 1,199,469,406 | 1,174,160,479 | 1,124,973,037 | ||||||
Shareholders' Equity: | |||||||||
Common Stock - No par value | 118,199,166 | 118,164,166 | 119,676,119 | ||||||
Additional Paid-in Capital | 3,741,305 | 3,584,198 | 3,201,835 | ||||||
Retained Earnings | 42,624,814 | 38,137,566 | 29,635,334 | ||||||
Accumulated Other Comprehensive Income - Net | |||||||||
Unrealized Gain on Securities AFS | 7,949,690 | 4,169,355 | 9,030,452 | ||||||
TOTAL SHAREHOLDERS' EQUITY | 172,514,975 | 164,055,285 | 161,543,740 | ||||||
$ | 1,371,984,381 | $ | 1,338,215,764 | $ | 1,286,516,777 | ||||
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Suncrest Bank published this content on 30 July 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 30 July 2021 18:38:04 UTC.
