Stonegate Bank Announces Third Quarter 2016 Operating Results
(firmenpresse) - POMPANO BEACH, FL -- (Marketwired) -- 10/26/16 -- (NASDAQ: SGBK) ("Stonegate") reported net income of $6.6 million for the third quarter of 2016 or $0.49 per diluted common share ($0.55 per common share net operating income, a non-GAAP measurement described below), as compared to net income of $6.7 million for the second quarter of 2016 or $0.51 per diluted common share.
Net operating income is a non-GAAP financial measurement used by management to evaluate and monitor financial results of operations and excludes certain activities or transactions, such as merger and acquisition related expenses. Information related to our use of non-GAAP financial measures and a table reconciling GAAP to non-GAAP measures used in this press release are presented below under the caption Non-GAAP Financial Measures - Reconciliation of GAAP to non-GAAP Measures.
Announced the signing of a definitive agreement to acquire all the operations of Insignia Bank ("Insignia"), located in Sarasota, Florida. As of June 30, 2016, Insignia had total assets of $248 million, total loans of $188 million and total deposits of $210 million.
Total loans, net of discounts and deferred fees, grew $328.8 million during the third quarter of 2016 to $2.29 billion at September 30, 2016, a result of loans acquired through the Regent Bancorp, Inc. and Regent Bank ("Regent") acquisition and $72.9 million of net organic loan growth during the quarter. Commercial real estate ("CRE") comprised 54% of new loan originations for the third quarter of 2016, based upon the outstanding balance as of September 30, 2016. Commercial and industrial ("C&I") accounted for 25% of the new loan originations; 13% of the new originations were residential loans; construction loans were 7% of new originations with the remaining balance in consumer and other loans. The loan production for the third quarter was comprised of 68% variable rate loans. Approximately 60% of the variable rate loans originated in the third quarter were tied to LIBOR. On an annualized basis organic loan growth was approximately 12.5%.
Total loans past due, excluding nonaccrual loans, were $3.1 million at September 30, 2016, an increase of $284,000 from June 30, 2016. Nonaccrual loans were $9.0 million at September 30, 2016, or 0.39% of total loans, an increase from $4.1 million at June 30, 2016, or 0.21% of total loans. Other real estate owned was $4.8 million at September 30, 2016, an increase of $4.2 million from June 30, 2016. The increase in both nonaccrual loans and OREO was a result of the Regent acquisition. See Credit Quality and Allowance for Loan Losses for a detail analysis of past due and nonaccrual loans.
Net interest income, on a tax equivalent basis, totaled $22.4 million for the three months ended September 30, 2016, and represented an increase of $425,000 when compared to the three months ended June 30, 2016. The net interest margin, on a tax-equivalent basis, decreased to 3.86% for the third quarter of 2016 as compared to 3.97% for the second quarter of 2016 and a decrease over the net interest margin of 4.32% for the quarter ended September 30, 2015. The decrease in the margin from the second quarter of 2016 to the third quarter of 2016 was primarily a result of greater nonaccretable discounts recognized during the second quarter.
Noninterest expense increased to $13.8 million for the three months ended September 30, 2016 from $12.8 million for the three months ended June 30, 2016. The increase in expenses was a result of expenses associated with the Regent and Insignia Bank acquisitions.
Stonegate remained well-capitalized as of September 30, 2016 with capital of $346.1 million as compared to $297.0 million at June 30, 2016. As of September 30, 2016, Stonegate''s total risk-based capital ratio was 11.8%; Stonegate''s Tier 1 and Common Equity Tier 1 capital ratios were each 10.8%; and Stonegate''s leverage capital ratio was 10.1%.
Loans outstanding at September 30, 2016 were $2.29 billion as compared to $1.96 billion at June 30, 2016, an increase of $328.8 million during the third quarter of 2016. Loans outstanding that were acquired through Stonegate''s acquisition of Regent were $258.9 million at September 30, 2016.
The loan portfolio consists primarily of loans to individuals and small- and medium-sized businesses within Stonegate''s primary market areas of South and West Florida. The table below shows the loan portfolio composition:
New loan originations were $153.5 million during the third quarter of 2016, with fundings of $107.5 million. As of September 30, 2016, outstanding commitments were approximately $465.7 million with approximately $112.7 million representing new approved loan originations and approximately $112.0 million in unfunded construction commitments.
Deposits increased to $2.49 billion at September 30, 2016 from $2.03 billion at June 30, 2016, primarily as a result of the Regent acquisition. Deposits acquired in the Regent acquisition were $299.6 million as of September 30, 2016. Noninterest-bearing deposits were $550.0 million at September 30, 2016, an increase from $424.7 million at June 30, 2016, and represented approximately 22.1% of Stonegate''s total deposits.
The following table shows the composition of deposits as of September 30, 2016 and June 30, 2016:
Loans past due 30-89 days were $2.65 million at September 30, 2016, a slight increase from $2.62 million at June 30, 2016. Loans past due 90 days or more and still accruing were $471,000 at September 30, 2016, compared to $218,000 at June 30, 2016. Legacy loans (i.e., loans made by Stonegate and not acquired by acquisition) which were past due loans totaled $1.7 million at September 30, 2016 and June 30, 2016. Nonaccrual loans stood at $9.0 million at September 30, 2016, an increase from $4.1 million at June 30, 2016. This increase was due to nonaccrual loans acquired in the Regent acquisition. Legacy nonaccrual loans were approximately $1.0 million at September 30, 2016 versus $1.5 million as of June 30, 2016. Residential loans classified as nonaccrual were $2.8 million or 30.7% of the nonaccrual loans and commercial real estate loans classified as nonaccrual were $2.1 million or 22.9% of the nonaccrual as of September 30, 2016. At September 30, 2016, there remained approximately $18.2 million in nonaccretable discounts on loans previously acquired, of which $12.0 million are associated with the loans acquired in the Regent acquisition. None of the acquired loans are subject to a loss share arrangement with the Federal Deposit Insurance Corporation. The following table outlines Stonegate''s past due and nonaccrual loans at September 30, 2016:
Nonperforming assets (nonaccrual loans and other real estate owned) were $13.8 million as of September 30, 2016, an increase of $9.1 million from June 30, 2016. Other real estate owned increased to $4.8 million as of September 30, 2016 as compared to $613,000 as of June 30, 2016. The increase of $4.2 million in OREO from June 30, 2016 consisted of $3.8 million acquired in the Regent acquisition and a transfer of a legacy nonaccrual loan in the amount of $412,000.
The following table outlines nonperforming assets for the periods ended:
Loans modified as troubled debt restructuring were $9.0 million and $8.6 million at September 30, 2016 and June 30, 2016, respectively. There were two new loans modified as troubled debt restructuring during the third quarter of 2016, of which one loan for $424,000 was on nonaccrual status at September 30, 2016. There were no loans modified as trouble debt restructuring and on nonaccrual at June 30, 2016. Specific reserves allocated to loans modified as troubled debt restructuring decreased to $60,000 at September 30, 2016, from $67,000 at June 30, 2016.
At September 30, 2016, the allowance for loan losses was $18.7 million, an increase of $154,000 from June 30, 2016. During the third quarter of 2016 recoveries totaled $177,000 and charge-offs were $23,000. Specific reserves decreased to $517,000 at September 30, 2016 from $611,000 at June 30, 2016. The allowance for loan losses represented 0.82% of total loans as of September 30, 2016 and 0.95% as of June 30, 2016. The decrease in the allowance for loan losses as a percentage of total loans was due to the loans acquired in the Regent acquisition.
The following table shows the activity in the allowance for loan losses for the quarters ended:
The table below reflects the allowance allocation per loan category and percent of loans in each category to total loans for the periods indicated:
The following is a summary of information pertaining to impaired loans for the three months ended on the date indicated:
On a tax-equivalent basis, Stonegate''s net interest income for the three months ended September 30, 2016 was $22.4 million, an increase of approximately $425,000 from the second quarter of 2016 and a decrease of $210,000 from the third quarter 2015. Average earning assets grew $84.4 million from the second quarter of 2016 to the third quarter of 2016, primarily a result of net organic growth in loans, offset by the decrease in Stonegate''s interest-earning deposits with other banks. The acquisition of Regent occurred on September 15, 2016, and therefore increased the quarterly earning asset average by approximately $30.7 million. The yield on loans decreased from 5.00% for the second quarter of 2016 to 4.77% for the third quarter of 2016, and was lower than the 5.33% yield for the third quarter of 2015. The decrease in the loan yield from the second quarter of 2016 was due to the reduced level of accretable and nonaccretable discounts recognized in the third quarter of 2016 versus the second quarter of 2016. During the second quarter of 2016 discounts of approximately $708,000 were recognized on loans which were paid off during that quarter.
The net interest margin on a tax-equivalent basis decreased from 3.97% for the second quarter of 2016 to 3.86% for the third quarter of 2016. The net interest margin was 4.32% for the third quarter of 2015. The average yield on total earning assets was 4.32% for the third quarter of 2016 versus 4.42% for the second quarter of 2016. The average yield on paying liabilities increased two basis points from 0.59% from the second quarter of 2016 to 0.61% for the third quarter of 2016. Stonegate''s cost of funds has increased from 0.43% for the September 2015 month-to-date average to 0.50% for the September 2016 month-to-date average.
The following table recaps yields and costs by various interest-earning asset and interest-bearing liability account types for the current quarter, the previous quarter and the same quarter last year.
Noninterest income of $2.1 million for the third quarter of 2016 increased from $1.7 million for the quarter ended June 30, 2016. The increase in noninterest income was primarily driven by interest rate swap fees which increased approximately $130,000 from the second quarter of 2016 to the third quarter of 2016.
Noninterest expense for the three months ended September 30, 2016 increased to $13.8 million from $12.8 million at June 30, 2016, and was greater than the $12.4 million for the three months ended September 30, 2015. The increase in noninterest expense was primarily related to expenses incurred in connection with the Regent and Insignia Bank acquisitions.
Salaries and employee benefits increased to $7.2 million for the third quarter of 2016 versus $6.9 million for the second quarter of 2016. This compares with $6.8 million for the three months ended September 30, 2015. Approximately one-half of the increase in salaries and employee benefits in the third quarter of 2016 from the second quarter of 2016 was associated with the increase in staff from the Regent acquisition.
Occupancy and equipment expenses remained unchanged at $2.1 million for the three months ended September 30, 2016 and June 30, 2016. Occupancy and equipment expenses were $2.2 million for the three months ended September 30, 2015. Expenses for merger-related branch closures in the third quarter of 2016 were approximately $48,000.
Data processing expenses were $609,000 and $447,000 for the third and second quarters of 2016, respectively. Approximately $155,000 of data processing expenses in the third quarter were related to the Regent data conversion. Professional fees for the three months ended September 30, 2016 were $1.4 million. This compared to professional fees of $954,000 for the three months ended June 30, 2016 and $546,000 for the three months ended September 30, 2015. During the third quarter of 2016 there were $672,000 in legal and other professional fees for merger-related expenses as compared to $334,000 in the second quarter of 2016. There were no merger-related legal or professional fees during the third quarter of 2015.
The table below outlines the expenses for the quarters ended:
During the second quarter of 2016, Stonegate announced that it had become a credit card issuer. As of September 30, 2016, there were a total of 789 credit cards issued of which 573 were consumer credit cards and 216 were commercial cards. Expenses associated with rolling out this new product line were approximately $163,000 in the third quarter of 2016 and total approximately $323,000 for the year. Looking forward to the fourth quarter of 2016, Stonegate anticipates additional costs associated with the conversion of Regent and merger costs associated with the pending Insignia Bank acquisition. Additionally, due to the Regent acquisition late in the third quarter of 2016, expenses in the fourth quarter of 2016 are expected to be higher than in the third quarter of 2016.
Stonegate Bank is a full-service commercial bank, providing a wide range of business and consumer financial products and services through its 25 banking offices in its target marketplaces of South and West Florida, which are comprised primarily of Broward, Charlotte, Collier, Hillsborough, Lee, Miami-Dade, Palm Beach and Sarasota Counties in Florida. Stonegate''s principal executive office and mailing address is 400 North Federal Highway, Pompano Beach, Florida 33062 and its telephone number is (954) 315-5500.
In conjunction with this earnings report, the Company will offer a live participatory conference call to discuss the financial results for the third quarter of 2016. This telephone conference call will be held on Thursday, October 27, 2016, beginning at 2:00 p.m. Eastern Time. The call-in toll-free telephone number is 1-844-400-1536 and the Conference ID# is 98766200. Participants will be asked for their First Name, Last Name and Company Name. An audio replay of the conference call will be available until November 11, 2016, and may be accessed telephonically at 1-855-859-2056 using Conference ID# 98766200.
Any non-historical statements in this press release are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on current plans and expectations that are subject to uncertainties and risks, which could cause our future results to differ materially. The following factors, among others, could cause our actual results to differ: the strength of the United States economy in general and the strength of the local economies in which we conduct operations; our need and ability to incur additional debt or equity financing; our ability to execute our growth strategy through expansion; our ability to comply with the extensive laws and regulations to which we are subject; changes in the securities and capital markets; changes in general market interest rates; legislative and regulatory changes; monetary and fiscal policies of the U.S. Treasury and the Federal Reserve; changes in the quality or composition of our loan portfolios; demand for loan products; changes in deposit flows, real estate values, and competition and other economic, competitive, and technological factors affecting our operations, pricing, products and services; and our ability to manage the risks involved in the foregoing. Additional factors can be found in our filings with the FDIC, which are available at the FDIC''s internet site (). Forward-looking statements in this press release speak only as of the date of the press release and Stonegate Bank assumes no obligation to update any forward-looking statements or the reasons why actual results could differ.
This communication is not a solicitation of a proxy from any security holder of Stonegate Bank or Insignia Bank. However, Stonegate Bank, Insignia, their respective directors and executive officers and other persons may be deemed to be participants in the solicitation of proxies from Stonegate Bank''s and Insignia''s shareholders in respect of the anticipated merger. Information regarding the directors and executive officers of Stonegate Bank may be found in its Proxy Statement on Schedule 14A, which was filed with the FDIC on March 18, 2016, and can be obtained free of charge from Stonegate Bank''s website or from the FDIC''s website (). Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the joint proxy statement/offering circular and other relevant materials to be filed with the FDIC when they become available. Investors should read the joint proxy statement/offering circular carefully, when it becomes available, before making any voting decision because it will contain important information.
This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. In connection with the proposed merger, Stonegate intends to file a joint proxy statement of Stonegate and Insignia and an offering circular of Stonegate with the FDIC. Stonegate may file other documents with the FDIC regarding the proposed transaction with Insignia.Investors and security holders may obtain a free copy of the joint proxy statement/offering circular and other documents containing information about Stonegate at the FDIC''s website at www2.fdic.gov/efr. These documents may be accessed and downloaded for free at Stonegate''s website at or by directing a request to Sharon Jones, Senior Vice President and Chief Financial Officer, Stonegate Bank at 400 N. Federal Hwy., Pompano Beach, Florida 33462, telephone (954) 315-5500.
This press release contains financial information determined by methods other than in accordance with GAAP. Stonegate''s management uses these non-GAAP financial measures in their analysis of Stonegate''s performance. These measures typically adjust GAAP performance measures include the tax benefit associated with revenue items that are tax-exempt, as well as adjust income available to common shareholders for certain significant activities or transactions, such as merger-related expenses, that in management''s opinion can distort period-to-period comparisons of Stonegate''s performance. Since the presentation of these GAAP performance measures and their impact differ between companies, management believes presentations of these non-GAAP financial measures provide useful supplemental information that is essential to a proper understanding of the operating results of Stonegate''s core business. These non-GAAP disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Reconciliations of GAAP to non-GAAP disclosures in this press release are set forth below.
Reconciliation of GAAP to non-GAAP Measures
(in thousands of dollars, except per share data)
Dave Seleski
Stonegate Bank
(954) 315-5510
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Datum: 26.10.2016 - 15:00 Uhr
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