Greer Bancshares, Inc. :GRBS-US: Earnings Analysis: 2016 By the Numbers : February 2, 2017

Greer Bancshares, Inc. reports financial results for the year ended December 31, 2016.

We analyze the earnings along side the following peers of Greer Bancshares, Inc. – DNB Financial Corporation, CenterState Banks, Inc. and Pacific Mercantile Bancorp (DNBF-US, CSFL-US and PMBC-US) that have also reported for this period.

Highlights

  • Net interest income margins widened from 72.81% to 74.20% compared to the same period last year.
  • Net loan assets changed 1.30% compared to same period last year and 1.30% from previous period, total deposits changed 7.06% compared to same period last year and 7.06% from previous period.
  • Earnings decline from worsening in operating margins as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2016 2015 2014 2013 2012
Relevant Numbers (Annual)
Revenues 14.14 14.04 14.04 12.94 15.85
Revenue Growth (YOY) N/A N/A N/A N/A N/A
Earnings 2.78 2.95 3.43 8.96 4.91
Earnings Growth (YOY) -5.6 -14.04 -61.77 82.54 329.18
Net Margin 19.66 20.98 24.39 69.25 30.97
EPS 1.12 1.18 1.22 3.3 1.68
Return on Equity 11.03 12.85 12.64 33.32 20.14
Return on Assets 0.74 0.81 0.96 2.49 1.32

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Earnings Growth Analysis

The company’s year-on-year earnings decline has not come as a result of decline in net interest income margins or because of any loan loss provisions. Both net interest income margins and net interest income after provisions margins have actually improved. In fact, net interest income margins went from 72.81% to 74.20% and net interest income after provisions margins improved from 72.81% to 74.20% over this period. In addition, loan loss provisions as a percentage of net interest income were 0% this period , and 0% a year ago.

Net Interest Income Margin Versus Loan Loss Provisions Margin

Quadrant label definitions. Hover to know more

High Risk; High Reward Loans, Risky Loan Portfolio, Conservative Loan Portfolio, Safer Loan Portfolio
Net Interest Income Margin History
Loan Loss Provisions Margin History

Net Loans and Total Deposits

A financial institution’s core operations represented by Net Interest Income and Net Interest Income after Provisions are dependent on both the growth and quality of its deposits as well as the growth and quality of its loans. A firm could boost its interest income in the short-term by just increasing its loan assets with less concern about their quality – but this would eventually lead to greater loan loss provisions. Similarly a drive to increase deposits could result in higher interest expenses and eventually effect the firm’s equity. It is thus important to understand net interest income performance in context to loan loss provisions, loan assets and deposits.

Loan Assets Growth Rate History (HY YOY)
Total Deposits Growth Rate History (HY YOY)

GRBS-US‘s improvement in net interest income margins came in spite of relative drops in the levels of net loan assets and total deposits. On an absolute basis, net loan assets changed 1.30% compared to the same period last year and 1.30% from the previous period. Total deposits changed 7.06% compared to the same period last year and 7.06% from the previous period.

Margins

The company’s decline in earnings has been influenced by the following factors: (1) Contraction of operating margins from 28.50% to 26.29% and (2) One-time items that contributed to a decrease in pretax margins from 28.50% to 26.29%

EBIT Margin History
PreTax Margin History
EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables

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Company Profile

Greer Bancshares, Inc. operates as a one-bank holding company. It offers following commercial banking services: deposits, lending, and other banking services. The deposits include services such as checking, savings, brokered deposits, and other time deposits of various types for businesses, real estate, personal use, home improvements, automobiles, and others. The lending activities include secured and unsecure loans among individuals, and businesses, commercial loans, commercial real estate loans, residential real estate loans, and loan risk management. Other banking services include travelers checks, safe deposit boxes, direct deposit of payroll and social security checks, as well as automatic drafts for various accounts. The company was founded in July 2001, and is headquartered in Greer, SC.

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