Treasure State Bank Reports Fourth Quarter 2015 Operating Results

MISSOULA, MT--(Marketwired - Jan 28, 2016) -  Treasure State Bank ("the Bank") (OTCBB: TRSU), a Montana chartered community bank, today announced:

• On December 2, 2015, the Bank paid to shareholders of record on November 18, 2015, a non-taxable distribution of $0.10 per share, totaling $174,095.
  
  
• The Annual Meeting of Shareholders of Treasure State Bank will be held at Treasure State Bank, located at 3660 Mullan Road, Missoula, Montana, on Monday, April 11, 2016, at 4:30 p.m., local time.
  
  
• The Bank had an unaudited net operating profit of $126,000 for the quarter ended December 31, 2015, as compared to $1.93MM for the quarter ended December 31, 2014. The quarter ended December 31, 2014 included a $1.88MM income tax benefit. Therefore, net operating profit for the quarter, excluding this item, was $50,000.
  
  
• On a pre-tax basis, the unaudited net operating profit for the quarter ended December 31, 2015 was $210,000, as compared to pre-tax earnings of $50,000 for the quarter ended December 31, 2014.
  
  
• Earnings, before non-cash expenses of depreciation and amortization, loan loss provisions, real estate owned write-downs, stock option expense and income tax benefit were $273,000 ($1.1MM annualized) for the quarter ended December 31, 2015, as compared to $112,000 ($448,000 annualized) for the quarter ended December 31, 2014.
  
  
• On a year-to-date basis for 2015, the Bank had unaudited net operating profit of $450,000, as compared to $2.26MM for the same period last year. The year-to-date earnings as of December 31, 2014 included a $1.88MM income tax benefit. Therefore, net operating profit on a year-to-date basis for December 31, 2014, excluding this item, was $380,000.
  
  
• On a pre-tax basis, the unaudited net operating profit for the year ended December 31, 2015 was $745,000, as compared to the $380,000 for the same period last year.
  
  
• Earnings before non-cash expenses of depreciation and amortization, loan loss provisions, real estate owned write-downs, stock option expense and income tax benefit were $996,000 for the year ended December 31, 2015, as compared to $661,000 for the same period last year.
  
  
• The annualized return on average assets for the quarter ended December 31, 2015 was 0.70% as compared to 0.29%, excluding the $1.88MM income tax benefit for the same period last year.
  
  
• The annualized return on average assets on a pre-tax basis for the quarter ended December 31, 2015 was 1.17%, as compared to 0.29% for the same period last year.
  
  
• The return on average assets for the twelve month period ended December 31, 2015 was 0.67% as compared to 0.56%, excluding the $1.88MM income tax benefit for the same period last year.
  
  
• The return on average assets on a pre-tax basis for the twelve month period ended December 31, 2015 was 1.10%, as compared to 0.56% for the same period last year.
  
  
• The annualized return on average equity for the quarter ended December 31, 2015 was 5.31% as compared to 2.14%, excluding the $1.88MM income tax benefit for the same period last year.
  
  
• The annualized return on average equity on a pre-tax basis for the quarter ended December 31, 2015 was 8.82%, as compared to 2.14% for the same period last year.
  
  
• The annualized return on average equity for the twelve month period ended December 31, 2015 was 4.79% as compared to 4.05%, excluding the $1.88MM income tax benefit for the same period last year.
  
  
• The return on average equity on a pre-tax basis for the twelve month period ended December 31, 2015 was 7.94%, as compared to 4.05% for the same period last year.
  
  
• Tier 1 leverage capital was 10.52% as of December 31, 2015, as compared to 10.42% as of December 31, 2014. Total Risk-Based Capital was 13.67% as of December 31, 2015, as compared to 14.14% at December 31, 2014.
  
  
• Stockholders' Equity to assets at December 31, 2015 was 13.24% as compared to 13.01% at December 31, 2014.
  
  
• Book value per share was $5.46 as of December 31, 2015, based on 1,740,451 shares outstanding.
  
  
• Total assets decreased $100,000 to $71.8MM at December 31, 2015, as compared to $71.9MM at December 31, 2014.
  
  
• Gross loans increased $1.8MM, or 3.52% (14.08% annualized) for the quarter ended December 31, 2015. Gross loans increased $4.9MM, or 10.14%, to $53.2MM at December 31, 2015 from $48.3MM at December 31, 2014.
  
  
• Core transaction, money market and savings accounts grew $4.0MM, or 9.87% for the year ended December 31, 2015. Certificates of deposit decreased $5.1MM, or 27.44%. Management allowed these higher cost deposits to roll off while replacing them with the core deposits, which have a lower cost of funds and generate service fee income.
  
  
• Cost of funds for the quarter ended December 31, 2015 was 0.49%, as compared to 0.59% (a decrease of 16.9%) for the same period last year.
  
  
• The net interest margin (interest income less interest expense divided by average earning assets) increased to 3.74% for the quarter ended December 31, 2015, as compared to 3.44% for the quarter ended December 31, 2014.
  
  
• Diluted earnings per share for the quarter were $0.07, and year-to-date were $0.26.
  
  
• Pre-tax diluted earnings per share for the year 2015 were $0.42 and for the quarter were $0.12.
  
  
• Loan loss reserves to total loans were 2.02% ($1.1MM) at December 31, 2015, as compared to 2.76% ($1.3MM) at December 31, 2014.
  
  
• Total liquidity as of December 31, 2015 was 16.08%.
  
  
• Non-performing assets decreased $2.2MM, or 53.7%, to $1.9MM at December 31, 2015, as compared to $4.1MM at December 31, 2014. Non-performing assets decreased $1.4MM, or 42.4%, during the quarter ended December 31, 2015 to $1.9MM, down from $3.3MM at September 30, 2015.

President and Chief Executive Officer Jim Salisbury stated "I am pleased with the Bank's performance this quarter and for the year 2015. On December 2, 2015 the Bank paid its first ever distribution to shareholders in the amount of $0.10 per share, or $174,095. Because the payment is considered a distribution of capital rather than a dividend, it will also be considered non-taxable and will be reported as such on a 1099-DIV. This further enhances the return to our incredibly patient shareholders. The Bank's earnings, capital position, liquidity position and substantially reduced non-performing assets provide the Bank with the ability to pay a distribution as a return on investment for our shareholders. The Board, at this time, plans to pay an annual distribution based on the earnings of the prior four quarters beginning in December and ending in September. This policy may change as the financial condition of the Bank changes going forward.

In the press release reporting the fourth quarter 2014 earnings, I noted that going forward the Bank will make a provision for income taxes on earnings for financial statement purposes at approximately 39.0% and this will reduce earnings on a comparable basis. However, because the tax provision is offset by net operating loss carryforwards, there will not be a cash effect to the Bank until all of the net operating loss carryforwards are fully utilized. Management expects that it will be several years before the Bank will be required to actually pay income taxes. Therefore, some discussions focus on pre-tax earnings as a comparison to prior periods.

Our earnings continue to be strong. On a year over year basis, our pre-tax unaudited net operating profit for the year ended December 31, 2015 was $745,000, as compared to the $379,000 for the same period last year. This year's earnings were enhanced by a $36,000 reduction in provision for OREO expense, a $52,000 increase in net interest income, a $473,000 increase in non-interest income, due primarily to increased mortgage loan origination fees, and $141,000 in gains on sale of OREO. The income increases were offset by an increase in non-interest expense of $195,000. While we did see some very nice increases in non-interest income, we believe that much of the momentum built in 2015 can continue through 2016 with a continued improving economy that will allow the Bank to increase its loan portfolio and maintain its fee income related to mortgage loan originations.

The return on equity for the current quarter was 5.31% as compared to 2.14% for the same period last year. However, on a pre-tax basis, the return on equity for the current quarter was 8.82%, as compared to 2.14% for the same period last year. Stockholders' equity at December 31, 2015 was $9.5MM as compared to $9.4MM at December 31, 2014. Equity decreased in December 2015 due to the equity distribution of $174,095. Stockholders' Equity to assets at December 31, 2015 was 13.24% as compared to 13.01% at December 31, 2014. The return on average assets on a pre-tax basis for the twelve month period ended December 31, 2015 was 1.10%, as compared to 0.56% for the same period last year.

I continue to be very pleased with our reduction in non-performing assets. During the last quarter, and year over year, our non-performing assets, as noted above, decreased $2.2MM, or 53.7%, to $1.9MM at December 31, 2015, as compared to $4.1MM at December 31, 2014. Non-performing assets decreased $1.4MM, or 42.4%, during the quarter ended December 31, 2015 to $1.9MM, down from $3.3MM at September 30, 2015. The conversion of assets from a non-performing status to an earning asset status increases our interest income. In addition, the costs associated with these non-performing assets will decrease as well.

Our focus continues to be growing the Bank by increasing loan production, which will increase net interest income and loan related fee income. Loan growth during the quarter was $1.80MM, or an annualized increase of 14.08%. Gross loans increased $4.9MM, or 10.14%, on a year to date basis. Our net interest margin increased during the quarter and remains strong at 3.74% and the Bank's cost of funds decreased 16.9% year over year to 0.49% at December 31, 2015, as compared to 0.59% for the same period last year. The run off of higher rate certificates of deposit has helped reduce the Bank's overall cost of funds. 

The Bank believes at this time that its reserve for loan losses is sufficient and that no additional provision for loan loss reserves is necessary, especially given the reduction in non-performing loans. There were no loan loss provisions during the comparative quarters or year to date performance. OREO loss provisions for the year ended December 31, 2015 were $60,000, as compared to $96,000 for the same period last year. There could be additional charges related to foreclosed property if certain appraisals indicate the need for additional write downs of these assets, none of which the Bank is currently aware. In addition, the Bank had $141,000 in gains on the sale of OREO as compared to $3,000 for the same period last year.

With the Bank's stock trading at a significant discount to its $5.46 book value at December 31, 2015, the Board of Directors feels it is prudent to explore options to maximize shareholder value. This would include, but not be limited to, a potential stock repurchase program.

For more information regarding this release, or the Bank in general, you may contact James A. Salisbury, President and CEO, or Anne Robinson, Chief Financial Officer, at 406-543-8700. 

About Treasure State Bank:

Treasure State Bank, a Montana chartered community bank, is headquartered in Missoula, Montana. The Bank was founded in January 2007. Treasure State Bank currently trades on the OTCBB under the ticker symbol "TRSU". Treasure State Bank serves businesses, professionals, non-profit organizations and individuals through customized banking services and products. For more information, please visit www.treasurestatebank.com.