SOURCE: Stonegate Bank

Stonegate Bank

July 28, 2011 18:04 ET

Stonegate Bank 2011 Second Quarter Earnings Release

FORT LAUDERDALE, FL--(Marketwire - Jul 28, 2011) - Stonegate Bank (OTCBB: SGBK)

Second Quarter 2011 highlights:

  • $839 million in assets
  • 22 straight quarters of profitability
  • Acquired First Commercial Bank of Tampa Bay via FDIC assistance
  • 4.02% net interest margin
  • Net income of $5,736,026 for the second quarter of 2011
  • Net income of $7,183,697 for the first six months of 2011
  • Tier 1 risk based capital ratio of 16.9% at June 30, 2011

Net Income:

Stonegate Bank (OTCBB: SGBK) reported net income of $5,736,026 or 69.6 cents per share for the second quarter of 2011 as compared to net income of $859,913 or 11.3 cents per share in the second quarter of 2010. The bank earned $7,183,697 or 87.1 cents per share in the first six months of 2011 as compared to $1,689,529 or 22 cents a share in the first six months of 2010.

Income and Expenses:

Total interest income increased from $7.3 million in the second quarter of 2010 to $9.3 million in the second quarter of 2011. This $2.0 million increase is largely due to an increase of $207 million in total loans. Total interest expense remained flat in the second quarter. This expense remained flat notwithstanding the addition of $240 million in deposits. This resulted in net interest income improvement from $5.2 million in the second quarter of 2010 to $7.3 million in the second quarter of 2011. Total non-interest income increased from $887,000 in the second quarter of 2010 to $15.3 million in the second quarter of 2011. Included in this number was a one-time bargain purchase gain of $14.9 million associated with the acquisition of First Commercial Bank of Tampa Bay. Non-interest expense increased from $2.5 million for the second quarter of 2010 to $7.1 million for the second quarter of 2011. The larger than normal number is directly related to the conversion of Southwest Capital Bank as well as the acquisition of First Commercial Bank of Tampa Bay.

Margin and Cost of Funds:

Total cost of funds declined from 1.72% for the June 2010 month to date average to 1.22% for the June 2011 month to date average. Stonegate Bank's net interest margin increased from a June 2010 month to date average of 3.9% to June 2011 month to date average of 4.02%. The Bank's liquidity was significantly increased due to the acquisition of First Commercial Bank of Tampa Bay resulting in the modest increase in the net interest margin.

Balance Sheet and Capital:

Total assets grew from $578 million on June 30, 2010 to $839 million on June 30, 2011, a $261 million increase. Total loans increased $207 million from $368 million on June 30, 2010 to $575 million on June 30, 2011. Total deposits increased $240 million from $430 million on June 30, 2010 to $670 million on June 30, 2011. Approximately 12.5% of total deposits are non-interest bearing. Traditional brokered deposits were $6.1 million on June 30, 2011. Total capital grew from $94.0 million on June 30, 2010 to $112 million on June 30, 2011. This resulted in an undiluted book value of $13.57 per share on June 30, 2011. Please note that certain fair market valuations were not complete on the First Commercial Bank of Tampa Bay transaction at the time of this release. Management has made certain estimates concerning values based on initial valuations.

Asset Quality:

Legacy

Past Dues and Non-Performing March 31, 2011 June 30, 2011
Total loans $ 512,689,000 $ 521,107,000
30 days past due 474,182 23,885
60 - 89 days past due 910,890 89,121
NPAs 8,455,370 6,793,813
REO 6,146,038 6,990,583

Past Dues and Non-Performing First Commercial Bank of Tampa Bay Total Stonegate Bank
Total loans $ 54,373,000 $ 575,480,000
30 days past due 349,773 373,658
60 - 89 days past due 646,668 735,789
NPAs 6,823,745 13,617,558
REO 1,217,624 8,208,207

The loan quality detail is presented by showing the legacy Stonegate portfolio as well as the Bank's recent FDIC acquisition. This was done in order to provide additional clarity on the legacy portfolio trends. The Bank's legacy non-performing assets decreased from $8.4 million on March 31, 2011 to $6.7 million on June 30, 2011. Approximately 12% of the NPAs are Southwest Capital Bank loans 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. Overall, legacy non-performing assets represent 1.28% of total legacy loans. The acquisition of First Commercial Bank of Tampa Bay on June 17th increased total non-performing loans to $13.6 million. This represents 1.6% of total assets and 2.3% of total loans on June 30, 2011.

Management believes all non-performing assets and REO are written down to fair market value. Real estate owned in the legacy portfolio increased slightly from $6.1 million on March 31, 2011 to $6.9 million on June 30, 2011. Approximately 27% of the legacy REO is covered under the Southwest Capital Bank contingent payment account outlined above. Overall, $3.1 million is currently under contract and is expected to close in the 3rd and 4th quarter of 2011. Total REO increased to $8.2 million with the acquisition of First Commercial Bank of Tampa Bay.

The Bank's loan loss reserve was $11.2 million on June 30, 2011. This reserve represents 83% of all non-performing loans and 1.96% of total loans. Total loans past due more than 30 days decreased from $1.3 million on March 31, 2011 to $1.1 million on June 30, 2011. Total legacy loans past due more than 30 days were $113,000 on June 30, 2011.

Management Comments:

According to David Seleski, President and CEO of Stonegate, "Our second quarter performance was over-shadowed by the completion of the First Commercial Bank of Tampa Bay FDIC-assisted transaction. This was an excellent transaction for three reasons. First, Stonegate realized a large bargain purchase gain which significantly increased our earnings per share this quarter. Second, this acquisition allows Stonegate to enter one of the larger MSAs in Florida without the start-up costs of a de novo office. Third, the Bank has hired Wade Faircloth, a veteran Tampa banker, as the President of Hillsborough and Pinellas Counties to lead our business development efforts. I feel very strongly this is going to be a growth market for Stonegate in the coming years.

"On the other hand, there was an increase in non-performing loans and REO in the second quarter that was attributable to the acquisition of First Commercial Bank of Tampa Bay. We did not enter into a loss share agreement with the FDIC, however we did make a fair market value adjustment to the loan portfolio and REO of over $17 million. This is significant given the size of the portfolio. From a credit perspective Stonegate will have slightly higher NPAs and REOs over the next few quarters until there is resolution to these acquired assets. The situation is reminiscent of October 2009 when the Bank acquired Partners and Hillcrest Banks without loss share. Each succeeding quarter we were able to reduce these balances in an orderly fashion that maximized shareholder return. I anticipate the same resolution with the acquired problem assets of First Commercial Bank of Tampa Bay.

"We continue to experience organic growth both in terms of deposits and loans in all of our markets. Total organic loan growth for the first six months of the year was $28 million and total new loan production was about $90 million. I mentioned last quarter that we were seeing improvement in the overall economy and the latest housing numbers in most of our markets validate that there is a recovery in that sector. Our belief is that the worst is over for most of our markets and there will be significant opportunities to grow organically 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 June 30, 2011
(In Thousands)
Assets
Cash and Due From Banks $ 46,001
Federal Funds Sold 42,395
Investment Securities 135,255
Commercial Loans 64,536
Commercial Real Estate Loans - Owner Occupied 158,182
Commercial Real Estate Loans - Other 176,799
Construction Loans 61,959
Residential 1-4 Family Loans 89,133
HELOCs 19,973
Consumer Loans 4,898
Gross Loans 575,480
Allowance for Loan Losses (11,234 )
Net Loans 564,246
Fixed Assets 10,372
Other Assets 41,115
Total Assets $ 839,384
Liabilities
Non-Interest Bearing Deposits $ 84,148
NOW Accounts 52,834
Money Market Accounts 297,597
Savings Accounts 9,711
CDARS Reciprocal Deposits 82,429
Certificates of Deposits 143,343
Total Deposits 670,062
Repurchase Agreements 23,658
FHLB and Other Borrowings 20,240
Other Liabilities 13,560
Total Liabilities 727,520
Total Capital 111,864
Total Liabilities and Capital $ 839,384

STONEGATE BANK
Income Statement
For Period Ended June 30, 2011
(In Thousands)
Interest Income $ 17,274
Interest Expense 3,885
Net Interest Income 13,389
Less: Provision for Loan Losses 7,391
Net Interest Income after Provision for Loan Losses 5,998
Non-Interest Income 16,352
Realized Gains (Losses) on AFS Securities 360
Less: Salaries and Benefits Expense 5,242
Occupancy and Equipment Expense 1,339
Data Processing Expense 644
Legal and Professional Expense 1,224
FDIC Assessments 463
Loan and OREO Expenses 1,689
Other Expense 966
Total Non-Interest Expense 11,567
Net Income Before Income Taxes 11,143
Income Taxes 3,959
Net Income $ 7,184

Contact Information

  • Contact:
    David Seleski
    (954) 315-5510