Sat. Jan 18th, 2020

Stocks to Watch: Suncrest Bank (OTCQX: SBKK)

36 min read

Suncrest Bank (OTCQX: SBKK) recently stated unaudited fiscal results for the third quarter of 2k19.

“This quarter our total assets increased to $997.00M representing a year over year organic incline of $86.00M or 9.40 percent,” said Mr. Ciaran McMullan, President and CEO of Suncrest Bank. “We continue to deliver this growth profitably and efficiently with year-to-date return on average tangible assets of 1.320 percent and an efficiency ratio of 53.670 percent.”

McMullan added, “The award of an MLS franchise to Sacramento is an exciting and substantial economic opportunity for the bank and for a region that contributes over 40.00 percent of our asset base.”

Third Quarter 2k19 Highlights

  • Net income of $3.070M
  • Diluted EPS of $0.240 contrast to $0.220 for the linked quarter
  • Return on average tangible assets of 1.330 percent
  • Efficiency ratio of 52.60 percent
  • New loan originations1 of $36.90M
  • Total loans increased by $8.20M or 1.30 percent over the linked quarter
  • Total deposits increased by $49.90M or 6.30 percent over the linked quarter
  • Total assets increased to $997.40M, year over year organic growth of 9.40 percent
  • Return on average tangible equity of 11.930 percent
  • Total risk-based capital ratio increased to 14.320 percent and Tier 1 leverage ratio reduced to 10.90 percent

Income Statement

Net income increased by $246,000.00 or 8.70 percent over the linked quarter. This incline was mainly driven by a decline of $350,000.00 in our provision for loan losses and a reduction in the noninterest cost of $117,000.00 resulting in diluted earnings for each share (EPS) of $0.240, with $0.010 attributable to expected discount accretion on attained loans. Net income declined by $437,000.00 over the similar quarter last year mainly because of significantly lower non-recurring income and increased provision for loan losses and noninterest cost.

Core net income, which conservatively excludes recoveries and discount accretion on attained loans, declined over the similar quarter previous year by $284,000.00 or 8.90 percent. This was driven mainly by a boost in salaries and employee benefit costs, which are talked about below.

Core net interest income increased over the linked quarter and similar quarter last year by $280,000.00 or 3.10 percent and $142,000.00 or 1.50 percent respectively. These inclines are mainly explained by a boost in average earning assets partially offset by a decline in core net interest margin (NIM).

Core NIM was 4.220 percent for the quarter, a decline of 7.0 basis points (bps) from the linked quarter due mainly to a boost in overall cost of funds of 5.0 bps to 61.0 bps, and a decline in the fed funds rate of interest throughout the quarter. This was partially offset by a boost in core loan yield throughout the quarter of 8.0 bps to 5.570 percent. Core NIM declined over the similar quarter last year by 35.0 bps because of an overall incline in cost of funds of 24.0 bps and loans being a lower percentage of earning assets in the current quarter as contrast to the similar quarter last year.

Noninterest income for the quarter did not include any income on gain on sale of loans and was steady over the linked quarter and similar quarter last year.

Total noninterest cost declined over the linked quarter by $117,000.00 or 2.20 percent.  This was mainly driven by a decline in Other Cost of about $90,000.00 related to an FDIC small bank assessment credit received in the current quarter. Noninterest cost increased over the third quarter of 2k18 by $317,000.00 or 6.40 percent explained mainly by inclines in salaries and employee benefit cost. Salaries and employee benefits increased because of annual cost of living adjustments, increased healthcare cost and the hiring of senior market facing business development personnel since Q3 2k18.

Balance Sheet

Total assets at September 30, 2k19 were $997.40M representing a boost of $53.70M or 5.70 percent over the linked quarter, and a year over year incline of $85.90M or 9.40 percent. The incline over both the linked quarter and year over year, was mainly the result of a boost in deposits of $49.9M and $66.80M respectively.

Total deposits at September 30, 2k19 were $843.30M, a boost of $49.90M or 6.30 percent driven mainly by a noteworthy incline of $29.20M or 10.50 percent in noninterest-bearing accounts. This incline reflects normal seasonal inflows in our agricultural client base.

Total deposits have increased year over year by $66.80M or 8.60 percent with the growth being in non-maturity deposits5 reflecting the banks focus on growing relationship-based deposit balances, especially through our suite of cash administration services. Over the similar duration, we have allowed certificate of deposit (CD) balances, which are less relationship-based and more price sensitive, to decline by $36.30M or 30.80 percent. This strategy has been effective in assisting us manage the rate of incline in our cost of funds.

Total loans at September 30, 2k19 were $657.20M, a boost of $8.20M or 1.30 percent over the linked quarter. The leading inclines were in the Construction and Non-owner occupied commercial real estate (CRE) categories which increased by $6.40M or 17.90 percent, and $6.10M or 3.60 percent, respectively.

The leading year over year inclines have been in Farmland and Non-owner occupied CRE which have increased by $14.70M or 11.80 percent, and $28.50M or 19.20 percent, respectively.

The Commercial and Industrial (C&I) portfolio declined by $5.40M or 9.0 percent throughout the quarter and has declined year over year by $17.50M or 24.50 percent. As mentioned in previous earnings reports, this decline has been mostly driven by the bank’s desire to strengthen the underlying credit structures in its C&I portfolio. As a result, we chose not to renew of number of large operating lines while a number of others chose to pay off early.

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