Smithtown Bancorp (NASDAQ: SMTB) today announced a loss of $13.8
million for the first quarter of 2010, or $0.93 per fully diluted
share. The loss includes a valuation allowance in the amount of
$4.1 million against the Company's deferred tax asset at 3/31/10.
For the first quarter, Bank of Smithtown made provisions for
loan losses of $25 million. This figure compares to fourth quarter
provisions of $38 million. Net charge offs for the first quarter
were $12.3 million, or 0.59% of average loans. Although these net
charge offs remain elevated, they were down from the level of net
charge offs for the fourth quarter, which was $22.6 million. The
allowance for loan losses was $51.2 million at March 31, 2010, or
2.53% of total loans.
The Bank resolved seven problem real estate loans with a total
principal amount of $45.1 million during the quarter. In the course
of these resolutions, the Bank recovered $39.1 million of principal
and charged off $6.0 million, representing a loss rate of
approximately 13.3%. These resolutions, however, were more than
offset by the movement of some loans previously identified at
12/31/09 as "impaired" into the "nonperforming" category, as well
as some new nonperforming loans. Impaired loans, which include all
nonperforming loans, were $218.8 million at March 31, 2010,
compared to $212.5 million at December 31, 2009. Nonperforming
loans ended the quarter at $203.6 million, or 10.05% of total loans
and loans 30-89 days past due totaled $52.9 million, or 2.61% of
total loans. At December 31, 2009, nonperforming loans were $130.2
million, or 6.23%, of total loans and loans 30-89 days past due
were $20.8 million, or .99% of total loans. Total loans (including
loans held for sale) at March 31st were $2.041 billion, a decrease
of $65.9 million from the previous year-end. More detailed
information about the Bank's asset quality and nonperforming loans
can be found on the investor page of the Bank's website at
www.bankofsmithtown.com.
One of the primary focuses for the Bank to date in 2010 has been
to meet the requirements of the Consent Agreement. The Bank
submitted to the FDIC and New York State Banking Department a
revised lending policy, a revised independent loan review policy
and program, a plan for systematically reducing and monitoring its
CRE loan concentration, a plan to reduce assets classified by the
regulators as "Doubtful" and "Substandard," and a comprehensive
budget.
Plans to meet the capital requirements of the Consent Agreement
so far this year have focused upon shrinking the balance sheet,
which the Bank has been able to do as assets at March 31 were $2.43
billion, down 7% from $2.63 billion at year-end 2009. As previously
stated, loans were decreased by $65.9 million during the first
quarter. On the liability side of the balance sheet, deposits were
decreased by $202.4 million, including $126.0 million of
certificates of deposit. Our efforts (through pricing and other
means) to retain multiple service customers and let go single
service CD customers have been successful. Sixty-six percent (66%)
of retained CDs belonged to multiple service customers. We have
maintained our usual high percentage of core deposits as a
percentage of total deposits, which increased slightly to 76.2%. In
the 10 new branches opened during 2009, 73% of the new money
brought in during the first quarter was from multiple service
customers, and 65% of those customers have a low cost checking
account. Furthermore, as a result of these strategies and shifts in
market interest rates, the weighted average rate on renewing
certificates of deposits was reduced by 160 basis points. Finally,
with respect to efforts to shrink the balance sheet, as deposit
reductions outpaced loan decreases, investment securities were
reduced by $176.9 million.
At March 31, 2010, the Company's Tier 1 Leverage capital ratio
was 6.00%, Tier 1 Capital to Total Assets was 6.19%, Tier 1
Risk-Based Capital ratio was 7.90% and the Total Risk-Based Capital
ratio was 10.06%. The Bank's Tier 1 Leverage ratio was 5.90%, Tier
1 Capital to Total Assets was 6.08%, Tier 1 Risk-Based Capital
ratio was 7.86% and the Total Risk-Based Capital ratio was 10.06%.
All of these capital ratios are below the targets set forth in the
Consent Agreement.
Commenting upon the first quarter results, the Company's
Chairman & Chief Executive Officer, Brad Rock, said: "While we
are pleased that we were able to resolve $45 million of problem
credits at a 13% loss rate and that provisions and charge offs were
reduced, we are disappointed that nonperformers nonetheless
increased and that we had a loss for the quarter.
"It appears that although a case by case resolution of problem
credits brings the best price for each loan, it is also a slow
process that, when combined with migration of new loans to the
nonperforming category, may not allow us to reach our capital
requirements as quickly as we had hoped.
"Should the Bank be unable to meet the required ratios by the
end of the second quarter of 2010, the consent agreement requires
immediate notification to the FDIC and Banking Department and
provides a 60-day cure period to either meet the ratios or to
submit a written plan describing the primary means and timing by
which the Bank shall meet or exceed the minimum requirements, as
well as a contingency plan for the sale or merger of the Bank in
the event the primary sources of capital are not available.
Accordingly, we have decided to expand the alternatives we are
exploring to include selling one or more packages of nonperforming
loans, selling one or more packages of performing loans, raising
capital if necessary, or some 'hybrid' combination of the foregoing
strategies."
Mr. Rock continued: "As I stated in our 2009 year-end earnings
release, 'it is always difficult to predict the future, especially
in these difficult and uncertain economic times.' Retail vacancies
and office vacancies remain high, and commercial and residential
rents and the number of home purchases remain low. As a result, our
efforts to reduce impaired loans could progress slowly, absent one
or more sales in bulk. Earnings will continue to be negatively
impacted by historically high loan loss provisions and charge offs,
and the valuation allowance for our deferred tax asset will
continue to be re-evaluated each quarter. Cash dividends will
remain suspended and the Company has decided to defer interest
payments on its trust preferred securities.
"On the branch side, however," Mr. Rock continued, "our
agreement with the FDIC and the Banking Department, and working
through our problem loans, has not impaired our ability to serve
our valued retail customers. Our branch network and core deposit
franchise remain strong and are positioned for future growth once
we meet the terms of the Consent Agreement. Our development of new
branches is progressing and our deposits continue to carry FDIC
insurance up to the maximum limits allowed. In addition to our
deposit base being covered by the traditional FDIC insurance, the
Bank also has insurance on the entire amount of all noninterest
bearing checking accounts through our participation in the FDIC's
Transaction Account Guarantee Program, which we have decided to
continue via the most recently available extension through December
31, 2010."
With approximately $2.4 billion in assets and 29 branches, Bank
of Smithtown is the largest independent commercial bank
headquartered on Long Island. Founded in 1910, Bank of Smithtown is
nearing its 100th anniversary as a community bank. The stock of its
parent holding company, Smithtown Bancorp, is traded on the NASDAQ
Global Select Market under the symbol "SMTB."
Forward-Looking Statements
Certain statements contained in this release that are not
statements of historical fact constitute forward-looking statements
within the meaning of the Private Securities Litigation Reform Act
of 1995 (the "Act"), notwithstanding that such statements are not
specifically identified as such. In addition, certain statements
may be contained in our future filings with the Securities and
Exchange Commission, in press releases, and in oral and written
statements made by us or with our approval that are not statements
of historical fact and constitute forward-looking statements within
the meaning of the Act. Examples of forward-looking statements
include, but are not limited to: (i) projections of revenues,
expenses, income or loss, earnings or loss per share, the payment
or nonpayment of dividends, capital structure and other financial
items; (ii) statements of our plans, objectives and expectations or
those of our management or Board of Directors, including those
relating to products or services; (iii) statements of future
economic performance; and (iv) statements of assumptions underlying
such statements. Words such as "believes," "anticipates,"
"expects," "intends," "targeted," "continue," "remain," "will,"
"should," "may" and other similar expressions are intended to
identify forward-looking statements but are not the exclusive means
of identifying such statements.
Forward-looking statements involve risks and uncertainties that
may cause actual results to differ materially from those in such
statements. Factors that could cause actual results to differ from
those discussed in the forward-looking statements include, but are
not limited to: local, regional, national and international
economic conditions and the impact they may have on us and our
customers and our assessment of that impact, changes in the level
of non-performing assets and charge-offs; changes in estimates of
future reserve requirements based upon the periodic review thereof
under relevant regulatory and accounting requirements; the effects
of and changes in trade and monetary and fiscal policies and laws,
including the interest rate policies of the Federal Reserve Board;
inflation, interest rate, securities market and monetary
fluctuations; political instability; acts of war or terrorism; the
timely development and acceptance of new products and services and
perceived overall value of these products and services by users;
changes in consumer spending, borrowings and savings habits;
changes in the financial performance and/or condition of our
borrowers; technological changes; acquisitions and integration of
acquired businesses; the ability to increase market share and
control expenses; changes in the competitive environment among
financial holding companies and other financial service providers;
the quality and composition of our loan or investment portfolio;
the effect of changes in laws and regulations (including laws and
regulations concerning taxes, banking, securities and insurance)
with which we and our subsidiaries must comply; the effect of
changes in accounting policies and practices, as may be adopted by
the regulatory agencies, as well as the Public Company Accounting
Oversight Board, the Financial Accounting Standards Board and other
accounting standard setters; changes in our organization,
compensation and benefit plans; the costs and effects of legal and
regulatory developments, including the resolution of legal
proceedings or regulatory or other governmental inquiries and the
results of regulatory examinations or reviews; greater than
expected costs or difficulties related to the opening of new branch
offices or the integration of new products and lines of business,
or both; and/or our success at managing the risk involved in the
foregoing items.
Forward-looking statements speak only as of the date on which
such statements are made. We undertake no obligation to update any
forward-looking statement to reflect events or circumstances after
the date on which such statement is made, or to reflect the
occurrence of unanticipated events.
Consolidated Balance Sheets
As of
March 31, December 31,
2010 2009
----------- -----------
ASSETS
Cash and cash equivalents $ 18,539 $ 18,745
Interest-earning deposits with banks 51,483 3,409
----------- -----------
Total cash and cash equivalents 70,022 22,154
Term placements 507 507
Securities available for sale 220,412 397,274
Securities held to maturity (fair value of $67) 66 66
Loans held for sale 15,650 16,450
Loans 2,025,827 2,090,896
Less: allowance for loan losses 51,231 38,483
----------- -----------
Loans, net 1,974,596 2,052,413
Restricted stock, at cost 18,743 18,353
Real estate owned, net 1,130 2,013
Premises and equipment, net 50,629 47,708
Goodwill 3,923 3,923
Intangible assets 556 616
Cash value of company owned life insurance 24,999 24,874
Accrued interest receivable and other assets 48,304 48,579
----------- -----------
Total assets 2,429,537 $ 2,634,930
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Demand deposits 147,862 $ 152,306
Savings, NOW and money market deposits 927,103 999,066
Time deposits of $100,000 or more 425,110 508,632
Other time deposits 372,514 415,024
----------- -----------
Total deposits 1,872,589 2,075,028
Other borrowings 361,480 352,820
Subordinated debt 56,432 56,351
Accrued interest payable and other liabilities 16,219 14,976
----------- -----------
Total liabilities 2,306,720 2,499,175
Stockholders' equity
Preferred stock, par value $.01 per share :
Authorized: 1,000,000 shares at March 31,
2010 and December 31, 2009, respectively;
no shares issued or outstanding - -
Common stock, par value $.01 per share:
Authorized: 35,000,000 shares at March 31,
2010 and December 31, 2009, respectively;
17,019,372 and 16,907,346 shares
issued at March 31, 2010 and December 31, 2009,
respectively; 14,967,508 and 14,855,482 shares
outstanding at March 31, 2010 and December 31,
2009, respectively 170 169
Additional paid in capital 82,557 82,318
Retained earnings 51,051 64,820
Less: Treasury stock at cost, 2,051,864 shares (10,062) (10,062)
----------- -----------
123,716 137,245
Accumulated other comprehensive loss (899) (1,490)
----------- -----------
Total stockholders' equity 122,817 135,755
----------- -----------
Total liabilities and stockholders' equity 2,429,537 $ 2,634,930
=========== ===========
SMITHTOWN BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(Dollar amounts in thousands except share data)
For the Three Months
Ended
March 31,
2010 2009
----------- ------------
Interest income:
Loans $ 27,817 $ 25,499
Taxable securities 2,017 863
Tax exempt securities 502 48
Interest earning deposits with banks 18 17
Other 244 151
----------- ------------
Total interest income 30,598 26,578
Interest expense:
Savings, NOW and money market deposits 2,515 3,129
Time deposits of $100,000 or more 2,886 3,099
Other time deposits 2,713 4,147
Other borrowings 2,132 2,224
Subordinated debentures 1,008 516
----------- ------------
Total interest expense 11,254 13,115
----------- ------------
Net interest income 19,344 13,463
Provision for loan losses 25,000 1,200
----------- ------------
Net interest income after provision for loan
losses (5,656) 12,263
Noninterest income:
Revenues from insurance agency 840 922
Service charges on deposit accounts 622 567
Net gain on the sale of investment securities 518 522
Trust and investment services 197 133
Increase in cash value of company owned life
insurance 125 116
OTTI loss:
Total OTTI losses (495) -
Portion of loss recognized in other
comprehensive income -
----------- ------------
Net impairment losses recognized in earnings (495) -
Other 627 520
----------- ------------
Total noninterest income 2,434 2,780
Noninterest expense:
Salaries and employee benefits 5,241 4,806
Occupancy and equipment 4,001 2,578
Federal deposit insurance 1,658 550
Amortization of intangible assets 62 91
Valuation allowance for other real estate owned - -
Other 2,541 1,367
----------- ------------
Total noninterest expense 13,503 9,392
----------- ------------
Income (loss) before income taxes (16,725) 5,651
Provision (benefit) for income taxes (2,956) 2,035
----------- ------------
Net income (loss) $ (13,769) $ 3,616
=========== ============
Comprehensive income (loss) $ (13,178) $ 3,060
Basic earnings (loss) per share $ (0.93) $ 0.31
Diluted earnings (loss) per share $ (0.93) $ 0.31
Selected Financial Data
(in thousands, except per share data)
For the Three Months
Ended
March 31, March 31,
2010 2009
----------- ------------
Basic earnings per share $ (0.93) $ 0.31
----------- ------------
Diluted earnings per share (0.93) 0.31
----------- ------------
----------- ------------
Assets $ 2,429,537 $ 2,172,248
----------- ------------
Loans 2,025,827 1,823,185
----------- ------------
Deposits 1,872,589 1,670,007
----------- ------------
----------- ------------
Return on Average Equity (38.88) 11.95
----------- ------------
----------- ------------
Return on Average Assets (2.20) 0.71
----------- ------------
----------- ------------
Net Interest Margin 3.24 2.76
----------- ------------
----------- ------------
Efficiency 61.30 59.86
----------- ------------
Contact: Ms. Judith Barber Corporate Secretary Corporate
Headquarters 100 Motor Parkway, Suite 160 Hauppauge, NY 11788-5138
Direct Dial: 631-360-9304 Direct Fax: 631-360-9380
brock@bankofsmithtown.net
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