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
--------------- ---------------
First
Commercial Bank Total Stonegate
Past Dues and Non-Performing of Tampa Bay 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: David Seleski (954) 315-5510
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