Stonegate Bank Announces Second Quarter 2017 Operating Results

7/28/17

POMPANO BEACH, Fla., July 28, 2017 (GLOBE NEWSWIRE) -- Stonegate Bank(NASDAQ:SGBK) (“Stonegate”) reported net income of $8.3 million for the second quarter of 2017 or $0.54 per diluted common share ($0.59 per common share net operating income, a non-GAAP measurement described below), as compared to net income of $8.0 million for the first quarter of 2017 or $0.53 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 under the caption Non-GAAP Financial Measures – Reconciliation of GAAP to non-GAAP Measures.

Key highlights for the second quarter:

  • Loans: Total loans, net of discounts and deferred fees, declined $20.6 million during the second quarter of 2017 to $2.46 billion at June 30, 2017, a result of net loan payoffs and principal reductions during the quarter. Commercial real estate (“CRE”) comprised 46% of new loan originations for the second quarter of 2017, based upon the outstanding balance as of June 30, 2017. Residential loans accounted for 33% of the new loan originations, commercial and industrial (“C&I”) were 11% of the new loan originations; 8% of the new originations were construction with the remaining balance in consumer and other loans. The loan production for the second quarter was comprised of 54% variable rate loans. Approximately 69% of the variable rate loans originated in the second quarter were tied to LIBOR.
  • Asset Quality: Total loans past due, excluding nonaccrual loans, were $1.4 million at June 30, 2017, a decrease of $3.0 million from March 31, 2017. Nonaccrual loans were $11.1 million at June 30, 2017, or 0.45% of total loans, an increase from $9.1 million at March 31, 2017, or 0.37% of total loans. Other real estate owned was $4.2 million at June 30, 2017, unchanged from March 31, 2017.
  • Net Interest Income and Margin: Net interest income, on a tax-equivalent basis, increased $864,000 for the three months ended June 30, 2017 as compared to the three months ended March 31, 2017. Net interest income totaled $27.1 million for the three months ended June 30, 2017. The net interest margin, on a tax-equivalent basis, decreased to 3.84% for the second quarter of 2017 as compared to 3.91% for the first quarter of 2017 and 3.97% for the quarter ended June 30, 2016. The decrease in the margin from the first quarter of 2017 to the second quarter of 2017 was primarily a result of a decrease in the amount of accretion that was recognized during the second quarter.
  • Noninterest Expense: Noninterest expense increased to $16.3 million for the three months ended June 30, 2017 from $15.1 million for the three months ended March 31, 2017. The increase was due to the added expenses of Insignia Bank for a full three months in the second quarter and $980,000 of costs associated with both the Insignia Bank conversion in early June 2017 and our pending acquisition by Home BancShares, Inc.
  • Capital: Stonegate remained well-capitalized as of June 30, 2017 with capital of $417.8 million as compared to $410.1 million at March 31, 2017. As of June 30, 2017, Stonegate’s total risk-based capital ratio was 12.5%; Stonegate’s Tier 1 and Common Equity Tier 1 capital ratios were each 11.5%; and Stonegate’s leverage capital ratio was 10.7%.


Loans and Deposits

Loans outstanding at June 30, 2017 were $2.46 billion as compared to $2.48 billion at March 31, 2017, a decrease of $20.6 million during the second quarter of 2017.

New loan originations were $160.1 million during the second quarter of 2017, with fundings of $111.1 million. As of June 30, 2017, outstanding commitments were approximately $504.6 million with approximately $75.9 million representing new approved loan originations and approximately $158.6 million in unfunded construction commitments and approximately $13.9 in unfunded credit card lines.

Total deposits decreased to $2.62 billion at June 30, 2017 from $2.72 billion at March 31, 2017. Noninterest-bearing deposits were $609.7 million at June 30, 2017, a decrease from $628.5 million at March 31, 2017, and represented approximately 23.2% of total deposits.

Credit Quality and Allowance for Loan Losses

Loans past due 30-89 days were $1.3 million at June 30, 2017, a decrease from $4.4 million at March 31, 2017. The decrease in loans past due was primarily attributable to two loans, for a total of $2.6 million, acquired from Florida Shores Bank – Southwest, and two legacy loans for $587,000 which were transferred to nonaccrual status. Past dues acquired in the Insignia Bank acquisition totaled $337,000 at June 30, 2017. There was one loan from the Regent Bank portfolio which was past due 90 days or more and still accruing at June 30, 2017. There were no legacy loans (i.e., loans made by Stonegate and not acquired by acquisition or otherwise) which were past due at June 30, 2017. Nonaccrual loans stood at $11.1 million at June 30, 2017, an increase from $9.1 million at March 31, 2017. This increase was due primarily to $3.1 million of new loans that were changed to nonaccrual status during the second quarter, offset by two nonaccrual loans for $669,000 which were paid off and five loans for $365,000 which were charged-off. Legacy nonaccrual loans were approximately $2.9 million at June 30, 2017 versus $2.8 million as of March 31, 2017. Residential loans classified as nonaccrual were $2.6 million or 23.5% of the nonaccrual loans and commercial real estate loans classified as nonaccrual were $3.9 million or 34.8% of the nonaccrual loans as of June 30, 2017. At June 30, 2017, there remained approximately $13.8 million in nonaccretable discounts on loans previously acquired. None of the acquired loans are subject to a loss share arrangement with the Federal Deposit Insurance Corporation.

Net Interest Income and Margin
On a tax-equivalent basis, Stonegate’s net interest income for the three months ended June 30, 2017 was $27.1 million, an increase of approximately $864,000 from the first quarter of 2017 and an increase of $5.1 million from the second quarter 2016. Average earning assets grew $114.4 million from the first quarter of 2017 to the second quarter of 2017, primarily a result of the increase in the assets acquired from Insignia Bank, which occurred on March 7, 2017. The yield on loans decreased from 5.00% for the first quarter of 2017 to 4.85% for the second quarter of 2017, which was also a decrease from the 5.00% yield for the second quarter of 2016. The decrease in the loan yield in the second quarter was due to the decrease in nonaccretable discounts, associated with loan payoffs, recognized in the second quarter of 2017 over the first quarter of 2017.

The net interest margin on a tax-equivalent basis decreased from 3.91% for the first quarter of 2017 to 3.84% for the second quarter of 2017. The net interest margin was 3.97% for the second quarter of 2016. The average yield on total earning assets was 4.37% for the second quarter of 2017 versus 4.43% for the first quarter of 2017. The average yield on paying liabilities increased four basis points from 0.69% from the first quarter of 2017 to 0.73% for the second quarter of 2017. Stonegate’s cost of funds has increased from 0.48% for the June 2016 month-to-date average to 0.59% for the June 2017 month-to-date average. 

Noninterest Income

Noninterest income of $2.9 million for the second quarter of 2017 increased from $2.1 million for the quarter ended March 31, 2017. The increase in the second quarter was primarily due to $366,000 in loan prepayment fees that were collected, $196,000 in interest swap fees and approximately $170,000 net gain on the sale of a former Regent Bank banking office.

Noninterest Expense

Noninterest expense for the three months ended June 30, 2017 increased to $16.3 million from $15.1 million at March 31, 2017, and from $12.8 million for the three months ended June 30, 2016.

Salaries and employee benefits increased to $8.8 million for the second quarter of 2017 versus $8.4 million for the first quarter of 2017. This compares with $6.9 million for the three months ended June 30, 2016. The increase in salaries and employee benefits in the second quarter of 2017 from the first quarter of 2017 were from the staff added with the Insignia Bank acquisition in March 2017, both permanent and temporary, as well as payments made in the second quarter for the Insignia Bank conversion.

Occupancy and equipment expenses increased to $2.5 million for the three months ended June 30, 2017 from $2.3 million for the quarter ended March 31, 2017. Occupancy and equipment expenses were $2.1 million for the three months June 30, 2016. Expenses for merger-related branch closures were approximately $200,000 during the second quarter of 2017.

Data processing expenses increased $447,000 from $478,000 for the first quarter of 2017 to $925,000 for the quarter ended June 30, 2017. Approximately $356,000 million of data processing expenses in the second quarter were related to the Insignia Bank data conversion. Professional fees for the three months ended June 30, 2017 were $994,000. This compared to professional fees of $1.4 million for the three months ended March 31, 2017 and $954,000 for the three months ended June 30, 2016. During the second quarter of 2017, there was $203,000 in legal and other professional fees for merger-related expenses as compared to $583,000 in the first quarter of 2017 and $334,000 in the second quarter of 2016.

About Stonegate Bank

Stonegate Bank is a full-service commercial bank, providing a wide range of business and consumer financial products and services through its 24 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.

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