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Stonegate Bank Reports Net Income of $2.0 Million for First Quarter 2014

POMPANO BEACH, FL -- (Marketwired) -- 04/22/14 -- Stonegate Bank (OTCBB: SGBK)

First Quarter 2014 Highlights:

  • $1.7 billion in total assets
  • Net income of $2,058,000 for the first quarter of 2014
  • 33 straight quarters of profitability
  • 2014 first quarter average net interest margin of 3.52%
  • Tier 1 risk based capital ratio of 13.50% at March 31, 2014
  • Form 10 Securities Registration Statement filed on March 28, 2014
  • NASDAQ application filed

Stonegate Bank (OTCBB: SGBK) reported net income of $2,058,000 in the first quarter of 2014 or 20.4 cents per share, as compared to net income of $2,293,000 or 27.8 cents per share in the first quarter of 2013. In the first quarter the Bank incurred approximately $775,000 in merger related expenses in connection with the January 15th acquisition of Florida Shores Bancorp and its subsidiaries. In addition, the Bank had $72,000 in fees related to the filing of the Registration Statement. The following chart outlines expenses incurred in the first quarter and anticipated expenses associated with the April 25th conversion of Florida Shores, and any fees associated with the Registration Statement:

                     1st Quarter   Anticipated 2nd Quarter
Data Processing         $123,000                  $520,000
Legal                    109,000                    30,000
Employee payments        432,000                   425,000
Consulting               153,000                         -
Contract buyouts               -                   105,000
Lease terminations             -                   785,000
NASDAQ fee                25,000                   100,000
Other                      5,000                    10,000
Total                   $847,000                $1,975,000

Management expects the majority of the cost saves related to the Florida Shores merger will be realized by June of this year.

Income and Expenses:
Total interest income increased from $10 million in the first quarter of 2013 to $14.5 million in the first quarter of 2014. Total interest expense remained essentially flat between the first quarter of 2013 when compared to the first quarter of 2014. This occurred even though total deposits increased $627 million period to period. Further, the Bank's cost of funds decreased 30 basis points from March 2013 through March 2014. This resulted in net interest income increasing from $8.3 million in the first quarter of 2013 to $12.7 million in the first quarter of 2014.

Total non-interest income increased to $1,435,000 in the first quarter of 2014 from $856,000 in the first quarter of 2013. The significant components of this increase were fees received on loans under certain legal arrangements of $210,000 and loan prepayment fees of $92,000.

Non-interest expense increased to $10.4 million for the first quarter of 2014 from $6.0 million for the first quarter of 2013. The majority of this increase is attributable to the addition of the Florida Shores franchise, plus merger and NASDAQ listing related expenses.

Margin and Cost of Funds:
Total cost of funds declined from 0.82% March 2013 month-to-date average to 0.52% March 2014 month-to-date average. Stonegate Bank's net interest margin declined from a first quarter 2013 average of 3.74% to 3.52% first quarter 2014 month to date average. The increase in Cash and Federal Funds Sold of nearly $204 million largely accounted for the decrease in the net interest margin. This increase is primarily due to the liquidation of the investment portfolios of the Florida Shores Banks.

Balance Sheet and Capital:
Total assets grew from $1.04 billion on March 31, 2013 to $1.71 billion on March 31, 2014, a $670 million increase. Total loans increased $456 million, from $724 million on March 31, 2013 to $1.18 billion on March 31, 2014. Total deposits increased $627 million, from $846 million on March 31, 2013 to $1.47 billion on March 31, 2014. Non-interest bearing deposits represent 17.6% of total deposits. Total capital grew to $187.9 million as of March 31, 2014. This includes $12.75 million of preferred stock issued to the Small Business Lending Fund. This $12.75 million was the amount held by Florida Shores at the time of acquisition. Management expects to redeem the preferred stock during the second quarter of 2014. Total common equity grew from $127.6 million on March 31, 2013 to $175.1 million on March 31, 2014. The tangible book value of common shares of Stonegate Bank was $15.48 per share on March 31, 2014.

Asset Quality:

Total Stonegate Bank

(dollars in thousands)   March 31,  December 31,
                           2014         2013
Total loans              $1,180,719     $812,009
30 days past due                917          202
60 - 89 days                    483            -
NPAs                          8,336        6,627
REO                           1,461        2,120

The chart above shows the various categories and ending balances of past due loans, nonaccrual loans as well as real estate owned. At March 31, 2014, non-performing loans represented 0.70% of total loans and 0.48% of total assets.

Real estate owned declined from $2.1 million on December 31, 2013 to $1.4 million on March 31, 2014. The Bank's loan loss reserve was $18.0 million on March 31, 2014. This reserve represents 215% of all non-performing loans and 1.52% of total loans. Total loans past due more than 30 days increased from $202,000 on December 31, 2013 to $1,400,000 on March 31, 2014.

Management Comments:

"Overall our performance was solid in the first quarter," said Dave Seleski, President and Chief Executive Officer. "While actual earnings were less than the prior year, earnings and earnings per share would have been higher in 2014 than 2013 if non-recurring items were eliminated from both years. Earnings per share would have been approximately 26 cents per share for the first quarter of 2014 if the one-time costs, tax-effected, of $534,000 for the merger and Registration Statement were not included as expense in 2014. For 2013, if the $477,000 gains on sales of securities were not included, tax effected, earnings per share would have been approximately 22 cents per share for the first quarter of 2013. This apples to apples comparison is remarkable given that the majority of cost saves associated with the Florida Shores transaction have not been fully realized and the Bank increased its overall share count by over 1.8 million shares. It is also important to point out that the actual dilution was 4.1% while the original tangible book dilution was projected to be 6.0%. Even though earnings will be less in the 2nd quarter due to Florida Shores and NASDAQ transactional costs, management is confident that overall cost saves and efficiencies will improve in the 3rd quarter and lead to an acceptable return to our investors.

"Many of you are aware that the Bank filed its Registration Statement on March 28th. We expect that the Bank will be listed on NASDAQ by the end of May. This should be a positive for our investors and provide additional liquidity and transparency.

"Going forward the Bank is going to continue to capitalize on the improving Florida economy. The focus ahead will be to expand in our existing markets in order to increase overall market share and improve efficiencies," said Dave Seleski, president and Chief Executive Officer of Stonegate Bank.

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, 2014

(In Thousands)

Cash and due from banks                                         $   312,368
Federal funds sold                                                   59,056
Investment securities                                                80,120

Commercial loans                                                    177,023
Commercial real estate loans - owner occupied                       280,400
Commercial real estate loans - other                                370,911
Construction loans                                                   82,836
Residential 1 - 4 family loans                                      196,484
HELOCs                                                               58,784
Consumer and other loans                                             14,281
  Gross loans                                                     1,180,719
Allowance for loan losses                                           (17,984)
  Net loans                                                       1,162,735

Fixed assets                                                         26,627
Intangible assets                                                    19,312
Other assets                                                         50,569
  Total assets                                                  $ 1,710,787

Non-interest bearing deposits                                   $   259,661
NOW accounts                                                        213,724
Money market accounts                                               649,784
Core reciprocal deposits                                            184,360
Savings accounts                                                     13,042
Certificates of deposit                                             153,181
  Total deposits                                                  1,473,752
Repurchase Agreements                                                17,894
FHLB and other borrowings                                            20,000
Other Liabilities                                                    11,240
  Total liabilities                                               1,522,886

Preferred stock                                                      12,750
Common stock                                                         50,342
Surplus                                                              85,575
Accumulated other comprehensive incom                                (2,039)
Retained earnings                                                    41,273
  Total capital                                                     187,901

  Total liabilities and capital                                 $ 1,710,787

                               STONEGATE BANK
                              Income Statement
                       For Period Ended March 31, 2014

(In Thousands)

Interest income                                                 $     14,504
Interest expense                                                       1,770
  Net interest income                                                 12,734
Less: Provision for loan losses                                          525
  Net interest income after provision for loan losses                 12,209
Non-interest income                                                    1,435
Realized gains (losses) on AFS securities                                  -

Less: Salaries and benefits expense                                    6,013
    Occupancy and equipment expense                                    1,570
    Data processing expense                                              503
    Legal and professional expenses                                      678
    Loan and OREO expenses                                               150
    Other expense                                                      1,458
   Total non-interest income                                          10,372

Net income before income taxes                                         3,272
Income taxes                                                           1,214
  Net income                                                    $      2,058

Sissy DeMaria
(Email Contact)
Suzanne Schmidt
(Email Contact)
Kreps DeMaria
(305) 663-3543

Dave Seleski
(Email Contact)
Stonegate Bank
(954) 315-5510

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