SOURCE: Stonegate Bank

Stonegate Bank

October 22, 2010 17:21 ET

Stonegate Bank 2010 Third Quarter Earnings Release

FORT LAUDERDALE, FL--(Marketwire - October 22, 2010) - Stonegate Bank (OTCBB: SGBK)

Third Quarter 2010 highlights:

-- $596 million in assets
-- 19 straight quarters of profitability
-- Year to date loan growth of 10%
-- Year to date non- interest bearing deposit growth of 14%
-- Net income of $904,000 for the Third Quarter of 2010
-- Tier 1 capital ratio of 20.8% at September 30, 2010

Net Income:

Stonegate Bank (OTCBB: SGBK) reported net income of $904,693 or 11.7 cents per share for the third quarter of 2010 as compared to net income of $615,925 or 11 cents per share in the third quarter of 2009. This represents a 46% increase from the same period in 2009. The bank earned $2,594,222 or 33.6 cents a share in the first nine months of 2010 as compared to $982,933 or 17.9 cents a share in the first nine months of 2009.

Income and Expenses:

Total interest income increased from $5.1 million in the third quarter of 2009 to $8.1 million in the third quarter of 2010. This $3.0 million increase is largely due to an increase in total loans of $83 million and in U.S. Government agencies of $50 million. Total interest expense remained flat at $1.9 million in both the third quarter of 2009 and the third quarter of 2010. This was despite total deposits increasing $84 million period to period. Net interest income improved from $3.2 million in the third quarter of 2009 to $6.2 million in the third quarter of 2010. This increase was the direct result of the growth of the Bank as well as an improvement in the Bank's net interest margin. Total non-interest income decreased from $4.9 million in the third quarter of 2009 to $1.4 million in the third quarter of 2010. However, if the negative goodwill associated with the FDIC assisted Integrity transaction is removed, non-interest income would have increased from $110,000 in the third quarter of 2009 to $1.4 million in the third quarter of 2010.

Non-interest expense increased from $8.1 million for the nine months of 2009 to $12 million for the nine months of 2010. The largest increases are as follows:

                                     9 Months of    9 Months of
                                         2009          2010
                                    -------------  -------------
Salaries and Benefits               $   4,443,000  $   5,923,000
FDIC Assessments                    $     684,000  $     673,000
Data Processing                     $     253,000  $     575,000
Loan Expenses                       $     249,000  $     691,000
Legal                               $     303,000  $     742,000
Occupancy                           $   1,106,000  $   1,600,000
                                    -------------  -------------

These increases were the result of several factors. First, the general growth of the bank contributed to an increase in normal operating expenses. Second, the conversion costs of three FDIC assisted transactions are included in this period. Last, the addition of the Coral Gables and Naples offices added significantly to salaries and occupancy expense.

Margin and Cost of Funds:

Total cost of funds declined from a 1.72% June month to date average to 1.59% month to date average in September. Management believes that the cost of funds will continue to decline over the next few quarters. Stonegate Bank's net interest margin increased from a June month to date average of 3.90% to 4.27% September month to date average. This was the result of a decrease in the overall cost of funds as well as a minimal amount of interest reversals from loans moving to non-accrual during September.

Balance Sheet and Capital:

Total assets grew from $464 million on September 30, 2009 to $596 million on September 30, 2010, a $132 million increase. Total loans increased $83 million from $317 million on September 30, 2009 to $400 million on September 30, 2010. Total deposits increased $84 million from $361 million on September 30, 2009 to $445 million on September 30, 2010. Approximately 13.0% of total deposits are non-interest bearing. Traditional brokered deposits were $2.1 million on September 30, 2010. Total capital grew from $58.9 million on September 30, 2009 to $95.3 million on September 30, 2010. This resulted in an undiluted book value of $12.36 per share on September 30, 2010.

Asset Quality:

                                    March 31,     June 30,    September 30,
Past Dues and Non-Performing          2010          2010          2010
                                  ------------- ------------- -------------
Total loans                       $     360,727 $     368,705 $     400,238
30 days past due                          1,035             -           481
60 - 9089 days past due                     401         2,280           227
NPAs                                     10,974         9,760         8,553
REO                                       4,012         4,783         5,616
                                  ------------- ------------- -------------

The Bank's total non-performing assets decreased from $9.7 million on June 30, 2010 to $8.5 million at September 30, 2010. All of these loans are secured by real estate. This decrease is the direct result of reduced defaults as well as successful litigation as the Bank moved these loans to REO. These non-performing assets represent 2.1% of total loans and 1.4% of total assets.

Management believes that all non-performing assets and REO are written down to fair market value. Real estate owned increased from $4.7 million on June 30, 2010 to $5.6 million at September 30, 2010. The Bank is experiencing considerable market activity and expects this number to decline later in the year and early in 2011. The Bank's loan loss reserve increased from $8.75 million on June 30, 2010 to $9.56 million at September 30, 2010. This reserve represents 111% of all non-performing loans and 2.39% of total loans. Bank-wide total past due loans over 30 days decreased from $2.2 million on June 30, 2010 to $708,000 on September 30, 2010.

Management Comments:

According to David Seleski, President and CEO of Stonegate, "The Bank is continuing to see opportunities for organic growth as evidenced by our year to date loan and deposit growth. This is going to be major focus for Stonegate over the coming quarters. We believe that steady organic growth supplemented with potential small acquisitions is the most conservative and potentially rewarding strategy for our shareholders.

"In addition, the Southwest Capital Bank merger, which is pending regulatory approval, will strengthen our position in southwest Florida and allow us to offer more products and services efficiently due to economies of scale. We are excited to welcome these customers, employees and shareholders to the Stonegate family.

"The credit market remains challenging, however the Bank's overall credit quality as measured by non-performing assets continues to improve. Stonegate continues to increase reserves as evidenced by the increase to 111% of non-performing assets at quarter end. This is well above our peer group. A major focus in the 4th quarter is going to be the sale of REO. We believe we can reduce this number significantly in the coming quarters," said Seleski.

The Bank cautions that certain statements contained in this press release are "forward-looking statements" as defined under the Private Securities Litigation Reform Act of 1995, which statements are made pursuant to the "safe harbor" provisions of such Act. These forward-looking statements describe future plans or strategies and may include the Bank's expectations of future financial results. The words "believe," "expect," "anticipate," "estimate," "project," and similar expressions identify forward-looking statements. The Bank's ability to predict results or the effect of future plans or strategies or qualitative or quantitative changes is inherently uncertain. Actual results may differ materially from stated expectations. Specific factors include, but are not limited to, changes in general market interest rates, changes in general economic conditions and those specific to the Bank's market area, legislative/regulatory changes, monetary and fiscal policies of the U.S. Treasury and the Federal Reserve, changes in the quality or composition of the Bank's loan portfolios, demand for loan products, changes in deposit flows, real estate values, and competition and other economic, competitive, governmental, regulatory and technological factors affecting the Bank's operations, pricing, products and services. The Bank makes periodic filings to the Federal Deposit Insurance Corporation which contain various Bank financial information, copies of which are available from the Bank without charge. The Bank disclaims any obligation to update any such factors or to publicly announce the results of any revisions to any forward-looking statements contained in this release to reflect future events or developments.

                              STONEGATE BANK
                               Balance Sheet
                         As of September 30, 2010

(In Thousands)
Cash and Due From Banks                                  $ 28,321
Federal Funds Sold                                          7,225
Investment Securities                                     136,330

Commercial Loans                                           42,881
Commercial Real Estate Loans - Owner Occupied             117,044
Commercial Real Estate Loans - Other                      110,783
Construction Loans                                         50,190
Residential 1-4 Family Loans                               59,995
HELOCs                                                     15,292
Consumer Loans                                              4,053
Gross Loans                                               400,238
Allowance for Loan Losses                                  (9,560)
Net Loans                                                 390,678

Fixed Assets                                                2,260
Other Assets                                               32,101
Total Assets                                             $596,915

Non-Interest Bearing Deposits                            $ 57,724
NOW Accounts                                               35,512
Money Market Accounts                                     170,442
Savings Accounts                                            1,495
CDARS Reciprocal Deposits                                 128,530
Certificates of Deposits                                   51,827
Total Deposits                                            445,530
Repurchase Agreements                                      21,701
FHLB and Other Borrowings                                  24,000
Other Liabilities                                          10,340
Total Liabilities                                         501,571

Total Capital                                              95,344
Total Liabilities and Capital                            $596,915

                              STONEGATE BANK
                             Income Statement
                    For Period Ended September 30, 2010

(In Thousands)
Interest Income                                          $ 22,709
Interest Expense                                            6,178
Net Interest Income                                        16,531
Less:  Provision for Loan Losses                            3,115
Net Interest Income after Provision for Loan Losses        13,416
Non-Interest Income                                         2,553
Realized Gains (Losses) on AFS Securities                     114

Less:  Salaries and Benefits Expense                        5,923
          Occupancy and Equipment Expense                   1,985
          Data Processing Expense                             575
          Legal and Professional Expense                    1,003
          FDIC Assessments                                    673
          Loan  and OREO Expenses                             691
          Other Expense                                     1,193
Total Non-Interest Expense                                 12,043

Net Income Before Income Taxes                              4,040
Income Taxes                                                1,446
 Net Income                                              $  2,594

Contact Information

  • Contact:
    David Seleski
    (954) 315-5510