SOURCE: Stonegate Bank

Stonegate Bank

April 29, 2011 15:53 ET

Stonegate Bank 2011 First Quarter Earnings Release

FT. LAUDERDALE, FL--(Marketwire - Apr 29, 2011) - Stonegate Bank (OTCBB: SGBK)

First Quarter 2011 highlights:

--  Net income of $1,447,670
--  21 straight quarters of profitability
--  $761 million in assets
--  Completed acquisition of Southwest Capital Bank
--  4.01% year to date net interest margin
--  Tier 1 risk based capital ratio of 18.5 %

Net Income:

Stonegate Bank (OTCBB: SGBK) reported net income of $1,447,670 or 17.5 cents per share for the first quarter of 2011 as compared to net income of $829,616 or 10.7 cents per share in the first quarter of 2010. This represents a 74.5% increase in net income from the first quarter of 2010.

Income and Expenses:

Total interest income increased from $7.3 million in the first quarter of 2010 to $7.9 million in the first quarter of 2011. This $580,000 increase is largely due to an increase in total loans of $151 million and an increase of the securities portfolio of $30 million. Total interest expense declined $187,000 from $2.09 million the first quarter of 2010 to $1.9 million in the first quarter of 2011. This was due to the overall cost of funds decreasing by 39 basis points despite increasing total deposits by $143 million period to period. This resulted in a net interest income improvement from $5.2 million in the first quarter of 2010 to $6.0 million in the first quarter of 2011. Total non-interest income increased from $206,000 in the first quarter of 2010 to $1.02 million in the first quarter of 2011. Included in this number was a one-time bargain purchase premium of $406,000 associated with the acquisition of Southwest Capital Bank. As the Bank continued to reposition its securities portfolio in anticipation of rising rates, realized gains of $340,000 were recognized in the first quarter of 2011 with only a modest decrease in yield.

Non-interest expense increased marginally from $4.1 million for the first quarter of 2010 to $4.4 million for the first quarter of 2011. The largest components of non-interest expense were as follows:


                          1st quarter
(In thousands)                2011
                          -------------
Salaries and Benefits     $       2,129
Occupancy                           568
Loan  & OREO Expenses               479
Legal                               324
Data Processing                     174
                          -------------

Legal and professional fees were at an elevated level due to one-time acquisition costs associated with the merger of Southwest Capital Bank.

Overall, Stonegate Bank's efficiency ratio improved from 75.6% in the first quarter of 2010 to 62.5% in the first quarter of 2011.

Margin and Cost of Funds:

Total cost of funds declined from 1.72% month to date average at March, 2010 to 1.33% month to date average for March, 2011. Management believes that the cost of funds will continue to decline as higher cost funding sources are eliminated or reduced. Stonegate Bank's net interest margin decreased from a December month to date average of 4.02% to 3.90% March month to date average.

Balance Sheet and Capital:

Total assets grew from $590 million on March 31, 2010 to $761 million on March 31, 2011, a $171 million increase. Total loans increased $152 million from $360 million on March 31, 2010 to $512 million on March 31, 2011. Total deposits increased $144 million from $447 million on March 31, 2010 to $591 million on March 31, 2011. Approximately 12.5% of total deposits are non-interest bearing. Traditional brokered deposits were $1.0 million on March 31, 2011. Total capital grew from $92.9 million on March 31, 2010 to $104.2 million on March 31, 2011. This resulted in an undiluted book value of $12.64 per share on March 31, 2011.

Asset Quality:


Past Dues and Non-Performing    March 31,
 Assets  (In thousands)           2011
                             -------------
Total loans                  $     512,689
30 days past due                       474
60 - 89 days past due                  911
NPAs                                 8,455
REO                                  6,146
                             -------------

Total past due loans over 30 days remained flat at $1.3 million quarter to quarter. The Bank's total non-performing loans increased from $5.6 million on December 31, 2010 to $8.4 million at March 31, 2011. The increase was largely the result of the addition of $2.6 million in NPAs from the Southwest Capital Bank merger completed in the first quarter of 2011. Currently $2.7 million of the $8.4 million are making payments timely and are expected to move to accrual status in the second quarter of 2011. Southwest Capital Bank's loans and REO were recorded at fair market value at closing of the transaction and are covered by a separate $2.8 million contingent payment account that will be reduced by any loan or REO losses incurred for the first 3 years. Further, any loan expenses incurred with these loans is also covered by the agreement. Overall, non-performing assets represent 1.6% of total loans and 1.1% of total assets.

Management believes that all non-performing assets and REO are written down to fair market value. Real estate owned increased slightly from $5.4 million on December 31, 2010 to $6.1 million at March 31, 2011. The increase was a direct result of $778,000 in additional REO from the Southwest Capital Bank acquisition. Overall, $3.2 million of REO is currently under contract and is expected to close in the 2nd and 3rd quarters of 2011. Management expects a small gain on these sales. The Bank's loan loss reserve increased from $8.3 million at March 31, 2010 to $10.8 million at March 31, 2011. This reserve represents 128% of all non-performing loans and 2.11% of total loans.

Management Comments:

According to David Seleski, President and CEO of Stonegate, "The first quarter results were very good. We managed to continue to grow organically and increase overall profitability while closing the Southwest Capital Bank transaction in March. The Bank will continue to benefit from approximately $7.05 million in amortizing loan discounts that should continue to boost overall operating income in the foreseeable future. This will allow us to leverage our existing staff and offices, and increase core profitability.

"There was a marginal increase in non-performing loans and REO in the first quarter that was directly attributable to the acquisition of Southwest Capital Bank. This is not a concern because of the $2.8 million contingent payment account. In addition, we expect non-performing loans to decrease significantly in the 2nd quarter. There appears to be more stability in real estate prices and significantly more liquidity in these assets as the economy stabilizes. Overall our asset quality remains strong and I am cautiously optimistic that the worst is over for our industry.

"Most of the merger related expenses associated with Southwest Capital Bank were realized in the first quarter. In addition, Southwest Capital Bank will be converted to Stonegate's system on June 3rd. Long term, this acquisition gives Stonegate a presence that will enable us to grow in Southwest Florida.

"Going forward, the Bank is going to be opportunistic in terms of looking at acquisitions. I believe that we are in a position to be very selective. Any future acquisitions need to be highly accretive to our investors and not distract from our continued organic growth strategy", 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 March 31, 2011

(In Thousands)
Assets
Cash and Due From Banks                                          $  47,784
Federal Funds Sold                                                  22,625
Investment Securities                                              147,888

Commercial Loans                                                    51,050
Commercial Real Estate Loans - Owner Occupied                      137,800
Commercial Real Estate Loans - Other                               143,879
Construction Loans                                                  68,843
Residential 1-4 Family Loans                                        84,493
HELOCs                                                              21,952
Consumer Loans                                                       4,672
                                                                 ---------
Gross Loans                                                        512,689
Allowance for Loan Losses                                          (10,808)
                                                                 ---------
Net Loans                                                          501,881

Fixed Assets                                                        10,168
Other Assets                                                        31,495
                                                                 ---------
Total Assets                                                     $ 761,841
                                                                 =========

Liabilities
Non-Interest Bearing Deposits                                    $  74,819
NOW Accounts                                                        41,091
Money Market Accounts                                              258,860
Savings Accounts                                                     9,238
CDARS Reciprocal Deposits                                          103,282
Certificates of Deposits                                           103,794
                                                                 ---------
Total Deposits                                                     591,084
Repurchase Agreements                                               38,126
FHLB and Other Borrowings                                           20,000
Other Liabilities                                                    8,427
                                                                 ---------
Total Liabilities                                                  657,637

Total Capital                                                      104,204
                                                                 ---------
Total Liabilities and Capital                                    $ 761,841
                                                                 =========




                                       STONEGATE BANK
                                      Income Statement
                              For Period Ended March 31, 2011

(In Thousands)
Interest Income                                                  $   7,921
Interest Expense                                                     1,909
                                                                 ---------
Net Interest Income                                                  6,012
Less:  Provision for Loan Losses                                       711
                                                                 ---------
Net Interest Income after Provision for Loan Losses                  5,301
Non-Interest Income                                                  1,020
Realized Gains (Losses) on AFS Securities                              340

Less:  Salaries and Benefits Expense                                 2,129
       Occupancy and Equipment Expense                                 568
       Data Processing Expense                                         174
       Legal and Professional Expense                                  445
       FDIC Assessments                                                227
       Loan and OREO Expenses                                          479
       Other Expense                                                   375
                                                                 ---------
Total Non-Interest Expense                                           4,397

Net Income Before Income Taxes                                       2,264
Income Taxes                                                           816
                                                                 ---------
 Net Income                                                      $   1,448
                                                                 =========

Contact Information

  • Contact:
    David Seleski
    (954) 315-5510