Exhibit 99.1

 

Carolina Financial Corporation Reports Results for Third Quarter of 2016

NEWS RELEASE – For Release October 19, 2016, 9:00AM

 

For More Information, Contact:

William A. Gehman III, EVP and CFO, 843.723.7700

 

Charleston, S.C., October 19, 2016 - Carolina Financial Corporation (NASDAQ: CARO) today announced financial results for the third quarter of 2016. Highlights at and for the three months ended September 30, 2016, include:

 

·

Net income for the third quarter 2016 increased 53.1% to $5.9 million, or $0.47 per diluted share from $3.9 million, or $0.40 per diluted share for the third quarter of 2015.

·

Operating earnings for the third quarter of 2016, which excludes certain non-operating income and expenses, increased 45.8% to $5.9 million, or $0.47 per diluted share, from $4.0 million, or $0.42 per diluted share, from the third quarter of 2015.

·

Loans receivable, excluding acquired loans, grew at an annualized rate of 19.3% or $133.7 million since December 31, 2015 and 24.7% or $66.0 million since June 30, 2016.

·

Nonperforming assets to total assets of 0.42% as of September 30, 2016.

·

Core deposits, excluding acquired deposits, increased $150.0 million since December 31, 2015 and $45.3 million since June 30, 2016.

 

“We are pleased to report an increase in operating earnings of 45.8% for the third quarter of 2016 over the comparable prior quarter. These strong operating earnings are the result of excellent earnings of CresCom Bank combined with improved results of Crescent Mortgage Company. The Company continued to experience exceptional growth in the third quarter with loans receivable growing at an annualized rate of 24.7% and core deposit growth of $45.3 million while maintaining superior asset quality. Finally, we are excited to announce plans to open a second branch in the Wilmington market by year end,” stated Jerry Rexroad, Chief Executive Officer.

 

Financial Results

 

Carolina Financial Corporation

 

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The Company reported net income for the three months ended September 30, 2016 of $5.9 million, or $0.47 per diluted share, as compared to $3.9 million, or $0.40 per diluted share, for the three months ended September 30, 2015. Net income for the nine months ended September 30, 2016 totaled $12.4 million, or $1.02 per diluted share, compared to net income of $10.8 million, or $1.13 per diluted share. Included in net income for the nine months ended September 30, 2016 were pretax merger related expenses of $3.0 million.

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Operating earnings for the third quarter of 2016 increased 45.8% to $5.9 million, or $0.47 per diluted share, from $4.0 million, or $0.42 per diluted share, from the third quarter of 2015. Operating earnings for the nine months ended September 30, 2016 increased 25.8% to $14.5 million, or $1.18 per diluted share, from $11.5 million, or $1.20 per diluted share, for the nine months ended September 30, 2015.

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The Company’s net interest margin-tax equivalent increased to 3.75% for the third quarter of 2016 compared to 3.66% for the third quarter of 2015.

 

 

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The Company reported book value per common share of $13.00 and $11.92 as of September 30, 2016 and December 31, 2015, respectively. Tangible book value per common share was $12.35 and $11.66 as of September 30, 2016 and December 31, 2015, respectively.

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At September 30, 2016, the Company’s regulatory capital ratios exceeded the minimum levels currently required. Stockholders’ equity totaled $160.3 million as of September 30, 2016 compared to $139.9 million at December 31, 2015.

 

CresCom Bank

 

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The Bank’s net income (excluding Crescent Mortgage Company) increased 65.9% to $4.7 million for the three months ended September 30, 2016 compared to $2.9 million for the three months ended September 30, 2015. Net income for the nine months ended September 30, 2016 totaled $10.3 million compared to net income of $8.1 million for the nine months ended September 30, 2015. Included in net income for the nine months ended September 30, 2016 were pretax merger related expense of $ $2.9 million.

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No provision for loan loss was recorded during the three and nine month periods ended September 30, 2016 or 2015. This was primarily due to continued excellent asset quality as well as net recoveries of $199,000 and $854,000 for the nine months ended September 30, 2016 and 2015, respectively.

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The Bank’s non-performing assets were 0.42% and 0.47% of total assets at September 30, 2016 and December 31, 2015, respectively. The Bank added $1.5 million in real estate acquired through foreclosure, net as a result of the merger with Congaree Bancshares, Inc.

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Loans receivable increased to $1.1 billion at September 30, 2016 compared to $922.7 million at December 31, 2015. The increase in loans receivable primarily relates to the completed acquisition of Congaree as well as the Bank’s focus on commercial lending and residential mortgage lending.

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The number of checking accounts increased at an annualized rate of 10.6%, excluding Congaree checking accounts acquired, since December 31, 2015. As of September 30, 2016 and December 31, 2015, core deposits, defined as checking, savings and money market, comprised approximately 61.8% and 56.7%, respectively, of total deposits. Total deposits, excluding acquired deposits, increased $189.5 million since December 31, 2015.

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The Bank’s retail mortgage conforming loan originations increased to $25.6 million for the three months ended September 30, 2016 compared to $17.6 million for the three months ended September 30, 2015. For the nine months ended September 30, 2016, retail mortgage conforming loan originations increased to $68.3 million compared to $50.4 million for the nine months ended September 30, 2015. As a result of the increased originations, retail mortgage banking noninterest income increased to $680,000 and $1.6 million for the three and nine months ended September 30, 2016 compared to $431,000 and $1.2 million for the three and nine months ended September 30, 2015. Mortgage banking income consists primarily of gain on sale of loans and related fees as well as fair value changes in mortgage banking derivatives.

 

Crescent Mortgage Company

 

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Net income for Crescent Mortgage Company, a wholly-owned subsidiary of the Bank, was $1.4 million for the three months ended September 30, 2016 compared to $1.3 million for the three months ended September 30, 2015. Net income for the nine months ended September 30, 2016 was $2.7 million compared to $3.3 million for the nine months ended September 30, 2015.

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The increase in net income of Crescent Mortgage Company during third quarter of 2016 is primarily attributable to an increase in margin during the period. Originations for the three months ended September 30, 2016 and 2015 were $253.5 million and $261.9 million, respectively. Originations for the nine months ended September 30, 2016 and 2015 were $645.4 million and $769.7 million, respectively. The percentage of originations attributable to refinances were 35.9% for the third quarter of 2016 compared to 30.3% for the third quarter of 2015.

 

Conference Call

 

A conference call will be held at 10:00 a.m., Eastern Time on October 20, 2016. The conference call can be accessed by dialing (855) 218-6998 or (615) 247-5963 and requesting the Carolina Financial Corporation earnings call. The conference ID number is 93428847. Listeners should dial in 10 minutes prior to the start of the call. The live webcast and presentation slides will be available on www.haveanicebank.com under Investor Relations, “Investor Presentations.”

A replay of the webcast will be available on www.haveanicebank.com under Investor Relations, “Investor Presentations” shortly following the call. A replay of the conference call can be accessed approximately three hours after the call by dialing (855) 859-2056 or (404) 537-3406 and requesting conference number 93428847.

About Carolina Financial Corporation

Carolina Financial is the holding company of CresCom Bank, which also owns and operates Atlanta-based Crescent Mortgage Company. Carolina Financial trades on NASDAQ under the symbol CARO. As of September 30, 2016, Carolina Financial had approximately $1.7 billion in total assets and Crescent Mortgage Company originated loans in 45 states and partners with community banks, credit unions and mortgage brokers. In 2016, Carolina Financial was ranked #8 on American Banker’s 2015 list of “Top 200 Community Banks and Thrifts as Ranked by Three-Year Average ROE”, and was added to the Russell 2000 as part of the 2016 Russell indexes reconstitution. In June 2016, Carolina Financial Corporation completed its previously announced merger with Congaree Bancshares, Inc.

 

Addendum to News Release – Use of Certain Non-GAAP Financial Measures and Forward-Looking Statements

 

This news release contains financial information determined by methods other than in accordance with generally accepted accounting principles (“GAAP”). Such statements should be read along with the accompanying tables, which provide a reconciliation of non-GAAP measures to GAAP measures. This news release and the accompanying tables discuss financial measures, such as core deposits, tangible book value, operating earnings and net income related to segments of the Company, which are non-GAAP measures. We believe that such non-GAAP measures are useful because they enhance the ability of investors and management to evaluate and compare the Company’s operating results from period to period in a meaningful manner. Non-GAAP measures should not be considered as an alternative to any measure of performance as promulgated under GAAP. Investors should consider the Company’s performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the company. Non-GAAP measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the Company’s results or financial condition as reported under GAAP.

 

Please refer to the Non-GAAP reconciliation tables later in this release for additional information.

 

Forward-Looking Statements

 

Certain statements in this news release contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements relating to future plans and expectations, and are thus prospective.  Such forward-looking statements include but are not limited to statements with respect to our plans, objectives, expectations and intentions and other statements that are not historical facts, and other statements identified by words such as “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “targets,” and “projects,” as well as similar expressions.  Such statements are subject to risks, uncertainties, and other factors which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements.  Although we believe that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove to be inaccurate.  Therefore, we can give no assurance that the results contemplated in the forward-looking statements will be realized.  The inclusion of this forward-looking information should not be construed as a representation by the Company or any person that the future events, plans, or expectations contemplated by the Company will be achieved.

 

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: (1) competitive pressures among depository and other financial institutions may increase significantly and have an effect on pricing, spending, third-party relationships and revenues; (2) the strength of the United States economy in general and the strength of the local economies in which we conduct operations may be different than expected resulting in, among other things, a deterioration in the credit quality or a reduced demand for credit, including the resultant effect on the Company’s loan portfolio and allowance for loan losses; (3) the rate of delinquencies and amounts of charge-offs, the level of allowance for loan loss, the rates of loan growth, or adverse changes in asset quality in our loan portfolio, which may result in increased credit risk-related losses and expenses; (4) the risk that the preliminary financial information reported herein and our current preliminary analysis will be different when our review is finalized; (5) changes in the U.S. legal and regulatory framework including, but not limited to, the Dodd-Frank Act and regulations adopted thereunder; (6) adverse conditions in the stock market, the public debt market and other capital markets (including changes in interest rate conditions) could have a negative impact on the Company; (7) the business related to acquisitions may not be integrated successfully or such integration may take longer to accomplish than expected; (8) the expected cost savings and any revenue synergies from acquisitions may not be fully realized within expected timeframes; and (9) disruption from acquisitions may make it more difficult to maintain relationships with clients, associates, or suppliers.  Additional factors that could cause our results to differ materially from those described in the forward-looking statements can be found in our reports (such as our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K) filed with the SEC and available at the SEC’s Internet site (http://www.sec.gov).  All subsequent written and oral forward-looking statements concerning the Company or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above. We do not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statements are made.

 

###

 

CAROLINA FINANCIAL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

 

		September 30, 2016				December 31, 2015
		(Unaudited)				(Audited)
		(Dollars in thousands)
ASSETS
Cash and due from banks		$	9,110				10,206
Interest-bearing cash			29,211				16,421
Cash and cash equivalents			38,321				26,627
Securities available-for-sale			336,918				306,474
Securities held-to-maturity			—				17,053
Federal Home Loan Bank stock, at cost			7,438				9,919
Other investments			1,801				1,760
Derivative assets			3,168				1,945
Loans held for sale			36,686				41,774
Loans receivable, gross			1,133,229				922,723
Allowance for loan losses			(10,340	)			(10,141	)
Loans receivable, net			1,122,889				912,582
Premises and equipment, net			35,086				32,562
Accrued interest receivable			4,813				4,333
Real estate acquired through foreclosure, net			2,843				2,374
Deferred tax assets, net			8,285				5,273
Mortgage servicing rights			13,556				11,433
Cash value life insurance			28,772				28,082
Core deposit intangible			3,771				2,961
Goodwill			4,266				—
Other assets			5,236				4,517
Total assets		$	1,653,849				1,409,669
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Noninterest-bearing deposits		$	267,892				163,054
Interest-bearing deposits			1,044,384				868,474
Total deposits			1,312,276				1,031,528
Short-term borrowed funds			87,500				120,000
Long-term debt			68,465				103,465
Derivative liabilities			2,708				306
Drafts outstanding			3,965				2,154
Advances from borrowers for insurance and taxes			2,614				641
Accrued interest payable			346				333
Reserve for mortgage repurchase losses			3,130				3,876
Dividends payable to stockholders			376				361
Accrued expenses and other liabilities			12,138				7,146
Total liabilities			1,493,518				1,269,810
Commitments and contingencies
Stockholders’ equity:
Preferred stock			—				—
Common stock			125				120
Additional paid-in capital			65,862				56,418
Retained earnings			93,819				82,859
Accumulated other comprehensive income, net of tax			525				462
Total stockholders’ equity			160,331				139,859
Total liabilities and stockholders’ equity		$	1,653,849				1,409,669

 

CAROLINA FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

		For the Three Months								For the Nine Months
		Ended September 30,								Ended September 30,
		2016				2015				2016				2015
		(In thousands, except share data)
Interest income
Loans		$	13,826				10,345				36,791				30,273
Investment securities			2,264				2,058				6,835				6,031
Dividends from Federal Home Loan Bank stock			83				93				288				238
Federal funds sold			3				—				5				—
Other interest income			32				16				92				60
Total interest income			16,208				12,512				44,011				36,602
Interest expense
Deposits			1,570				1,122				4,449				3,094
Short-term borrowed funds			124				75				320				217
Long-term debt			558				426				1,743				1,391
Total interest expense			2,252				1,623				6,512				4,702
Net interest income			13,956				10,889				37,499				31,900
Provision for loan losses			—				—				—				—
Net interest income after provision for loan losses			13,956				10,889				37,499				31,900
Noninterest income
Mortgage banking income			5,605				4,753				12,967				13,874
Deposit service charges			953				915				2,712				2,638
Net loss on extinguishment of debt			(118	)			—				(174	)			(1,215	)
Net gain on sale of securities			111				1,017				641				1,459
Fair value adjustments on interest rate swaps			99				(1,246	)			(408	)			(1,253	)
Net increase in cash value life insurance			226				172				684				530
Mortgage loan servicing income			1,437				1,330				4,238				3,956
Other			560				381				1,728				1,187
Total noninterest income			8,873				7,322				22,388				21,176
Noninterest expense
Salaries and employee benefits			8,481				7,204				23,306				21,453
Occupancy and equipment			2,067				1,821				5,836				5,332
Marketing and public relations			374				378				1,144				1,147
FDIC insurance			180				190				527				540
Provision for mortgage loan repurchase losses			(250	)			(250	)			(750	)			(750	)
Legal expense			80				97				185				347
Other real estate expense, net			(96	)			4				(37	)			114
Mortgage subservicing expense			462				418				1,353				1,236
Amortization of mortgage servicing rights			586				515				1,659				1,460
Merger related expenses			—				—				2,985				—
Other			2,006				2,004				5,759				6,084
Total noninterest expense			13,890				12,381				41,967				36,963
Income before income taxes			8,939				5,830				17,920				16,113
Income tax expense			2,998				1,949				5,500				5,302
Net income		$	5,941				3,881				12,420				10,811
Earnings per common share:
Basic		$	0.48				0.41				1.04				1.15
Diluted		$	0.47				0.40				1.02				1.13
Weighted average common shares outstanding:
Basic			12,327,921				9,463,722				11,995,477				9,421,042
Diluted			12,535,551				9,674,994				12,201,721				9,595,991

 

CAROLINA FINANCIAL CORPORATION

(Unaudited)

(Dollars in thousands)

 

		At or for the Three Months Ended
Selected Financial Data:		September 30, 2016				June 30, 2016				March 31, 2016				December 31, 2015				September 30, 2015
Selected Average Balances:
Total assets		$	1,626,717				1,482,963				1,412,778				1,364,772				1,322,382
Investment securities			345,385				335,105				335,929				330,364				312,707
Loans receivable, net			1,093,669				978,337				935,438				876,445				840,414
Loans held for sale			32,196				24,467				25,454				31,212				43,193
Deposits			1,291,567				1,170,860				1,069,451				1,052,192				1,027,771
Stockholders’ equity			157,311				145,656				141,311				111,189				102,326
Performance Ratios (annualized):
Return on average stockholders’ equity (1)			15.11	%			7.79	%			10.31	%			12.98	%			15.17	%
Return on average assets (1)			1.46	%			0.76	%			1.03	%			1.06	%			1.18	%
Average earning assets to average total assets			92.94	%			93.44	%			93.08	%			92.23	%			91.82	%
Average loans receivable to average deposits			84.68	%			83.56	%			87.47	%			83.30	%			81.77	%
Average stockholders’ equity to average assets			9.67	%			9.82	%			10.00	%			8.15	%			7.75	%
Net interest margin-tax equivalent (2)			3.75	%			3.64	%			3.53	%			3.59	%			3.66	%
Net charge-offs  (recovery) to average loans receivable			(0.02	)%			(0.03	)%			(0.04	)%			(0.11	)%			0.06	%
Nonperforming assets to period end loans receivable			0.62	%			0.67	%			0.59	%			0.72	%			0.89	%
Nonperforming assets to total assets			0.42	%			0.45	%			0.39	%			0.47	%			0.57	%
Nonperforming loans to total loans			0.37	%			0.37	%			0.48	%			0.47	%			0.57	%
Allowance for loan losses as a percentage of gross loans receivable (end of period) (3)			0.91	%			0.96	%			1.06	%			1.10	%			1.15	%
Allowance for loan losses as a percentage of nonperforming loans			247.72	%			262.68	%			223.38	%			235.67	%			201.98	%
Nonperforming Assets:
Loans 90 days or more past due and still accruing		$	—				—				—				—				—
Nonaccrual loans			4,174				3,920				4,581				4,303				4,896
Total nonperforming loans			4,174				3,920				4,581				4,303				4,896
Real estate acquired through foreclosure, net (4)			2,843				3,272				1,091				2,374				2,744
Total nonperforming assets		$	7,017				7,192				5,672				6,677				7,640

 

(1) Included in net income are pretax merger related expenses of approximately $2.8 million for the three months ended June 30, 2016 and $186,000 for the three months ended March 31, 2016.

 

(2) Net interest margin-tax equivalent reflects tax-exempt income on a tax-equivalent basis.

 

(3) Acquired loans represent 11.4%, 12.2%, 6.4%, 7.0%, and 8.0%, of gross loans receivable at September 30, 2016, June 30, 2016, March 31, 2016, December 31, 2015, and September 30, 2015, respectively.

 

(4) Real estate acquired through foreclosure, net at September 30, 2016 includes $1.5 million related to the Congaree merger.

 

Segment Information

(Unaudited)

(Dollars in thousands)

 

		For the Three Months								For the Nine Months								Increase (Decrease)
		Ended September 30,								Ended September 30,								Three				Nine
		2016				2015				2016				2015				Months				Months
Segment net income:
Community banking (1)		$	4,734				2,854				10,309				8,144				1,880				2,165
Wholesale mortgage banking			1,402				1,273				2,722				3,307				129				(585	)
Other (2)			(228	)			(256	)			(669	)			(660	)			28				(9	)
Eliminations			33				10				58				20				23				38
Total net income		$	5,941				3,881				12,420				10,811				2,060				1,609

 

		For the Three Months Ended
		September 30,     2016				June 30,     2016				March 31,     2016				December 31,     2015				September 30,     2015
Segment net income:
Community banking (1)		$	4,734				2,162				3,413				3,258				2,854
Wholesale mortgage banking			1,402				919				401				525				1,273
Other (2)			(228	)			(253	)			(188	)			(207	)			(256	)
Eliminations			33				8				17				33				10
Total net income		$	5,941				2,836				3,643				3,609				3,881

 

		For the Three Months Ended September 30,
		Loan Originations								Mortgage Banking Income								Margin
		2016				2015				2016				2015				2016				2015
Additional segment information:
Community banking		$	25,633				17,642				680				431				2.65	%			2.44	%
Wholesale mortgage banking			253,485				261,948				4,925				4,322				1.94	%			1.65	%
Total mortgage banking income		$	279,118				279,590				5,605				4,753				2.01	%			1.70	%

 

 

		For the Nine Months Ended September 30,
		Loan Originations								Mortgage Banking Income								Margin
		2016				2015				2016				2015				2016				2015
Additional segment information:
Community banking		$	68,263				50,430				1,586				1,231				2.32	%			2.44	%
Wholesale mortgage banking			645,412				769,679				11,381				12,643				1.76	%			1.64	%
Total mortgage banking income		$	713,675				820,109				12,967				13,874				1.82	%			1.69	%

 

(1) Included in net income are pretax merger related expenses of approximately $2.7 million for the three months ending June 30, 2016 and $186,000 for the three months ending March 31, 2016, for a total of $2.9 million.

 

(2) Included in net income are pretax merger related expenses of approximately $102,000 for the three months ending June 30, 2016.

 

Reconciliation of Non-GAAP Financial Measures

(Unaudited)

(In thousands, except share data)

 

		At September 30,				At December 31,
		2016				2015
Core deposits:
Noninterest-bearing demand accounts		$	267,892				163,054
Interest-bearing demand accounts			195,792				158,581
Savings accounts			47,035				39,147
Money market accounts			299,960				223,906
Total core deposits (Non-GAAP)			810,679				584,688
Certificates of deposit:
Less than $250,000			476,744				428,067
$250,000 or more			24,853				18,773
Total certificates of deposit			501,597				446,840
Total deposits		$	1,312,276				1,031,528

 

		At September 30,				At December 31,
		2016				2015
Tangible book value per share:
Total stockholders’ equity		$	160,331				139,859
Less intangible assets			(8,037	)			(2,961	)
Tangible common equity (Non-GAAP)		$	152,294				136,898
Issued and outstanding shares			12,546,220				12,023,557
Less nonvested restricted stock awards			(216,828	)			(285,805	)
Period end dilutive shares			12,329,392				11,737,752
Total stockholders’ equity		$	160,331				139,859
Divided by period end dilutive shares			12,329,392				11,737,752
Common book value per share		$	13.00				11.92
Tangible common equity (Non-GAAP)		$	152,294				136,898
Divided by period end dilutive shares			12,329,392				11,737,752
Tangible common book value per share (Non-GAAP)		$	12.35				11.66

 

Reconciliation of Non-GAAP Financial Measures

(Unaudited)

(In thousands, except share data)

 

		For the Three Months Ended																				For the Nine Months Ended
Operating Earnings:		September 30, 2016				June 30, 2016				March 31, 2016				December 31, 2015				September 30, 2015				September 30, 2016				September 30, 2015
Income before income taxes		$	8,939				3,700				5,281				5,367				5,830				17,920				16,113
Gain on sale of securities			(111	)			(113	)			(417	)			(34	)			(1,017	)			(641	)			(1,459	)
Net loss on extinguishment of debt			118				47				9				36				—				174				1,215
Fair value adjustments on interest rate swaps			(99	)			226				281				(142	)			1,246				408				1,253
Merger related costs			—				2,799				186				—				—				2,985				—
Operating earnings before income taxes			8,847				6,659				5,340				5,227				6,059				20,846				17,122
Tax expense (1) (2)			2,967				1,555				1,656				1,712				2,026				6,398				5,634
Operating earnings (Non-GAAP)		$	5,880				5,104				3,684				3,515				4,033				14,448				11,488
Average equity			157,311				145,656				141,311				111,189				102,326				148,134				98,805
Average assets			1,626,717				1,482,963				1,412,778				1,364,772				1,322,382				1,500,819				1,283,183
Operating return on average assets (Non-GAAP)			1.45	%			1.38	%			1.04	%			1.03	%			1.22	%			1.28	%			1.19	%
Operating return on average equity (Non-GAAP)			14.95	%			14.02	%			10.43	%			12.64	%			15.77	%			13.00	%			15.50	%
Weighted average common shares outstanding:
Basic			12,327,921				11,908,282				11,746,574				9,888,030				9,463,772				11,995,477				9,421,042
Diluted			12,535,551				12,076,878				11,978,801				10,103,966				9,674,994				12,201,721				9,595,991
Operating earnings per common share:
Basic (Non-GAAP)		$	0.48				0.43				0.31				0.36				0.43				1.20				1.22
Diluted (Non-GAAP)		$	0.47				0.42				0.31				0.35				0.42				1.18				1.20
As Reported:
Income before income taxes		$	8,939				3,700				5,281				5,367				5,830				17,920				16,113
Tax expense			2,998				864				1,638				1,758				1,949				5,500				5,302
Net Income		$	5,941				2,836				3,643				3,609				3,881				12,420				10,811
Average equity			157,311				145,656				141,311				111,189				102,326				148,134				98,805
Average assets			1,626,717				1,482,963				1,412,778				1,364,772				1,322,382				1,500,819				1,283,183
Return on average assets			1.46	%			0.76	%			1.03	%			1.06	%			1.17	%			1.10	%			1.12	%
Return on average equity			15.11	%			7.79	%			10.31	%			12.98	%			15.17	%			11.18	%			14.59	%
Weighted average common shares outstanding:
Basic			12,327,921				11,908,282				11,746,574				9,888,030				9,463,772				11,995,477				9,421,042
Diluted			12,535,551				12,076,878				11,978,801				10,103,966				9,674,994				12,201,721				9,595,991
Earnings per common share:
Basic		$	0.48				0.24				0.31				0.37				0.41				1.04				1.15
Diluted		$	0.47				0.23				0.30				0.36				0.40				1.02				1.13

 

(1) Tax expense is determined using the effective tax rate reflected in the accompanying income statement for the applicable reporting period.

 

(2) In March 2016, the FASB issued guidance to simplify several aspects of the accounting for share-based payment award transactions, including income tax consequences. In addition to other changes, the guidance changes the accounting for excess tax benefits and tax deficiencies from generally being recognized in additional paid-in capital to recognition as income tax expense or benefit in the period they occur. The Company early adopted the new guidance in the second quarter of 2016. As a result, the Company’s income tax expense was reduced by approximately $399,000, or $0.03 per diluted share, in the second quarter of 2016.

 

Reconciliation of Non-GAAP Financial Measures

(Unaudited)

(In thousands, except share data)

 

		For the Three Months Ended
		September 30, 2016				June 30, 2016				March 31, 2016				December 31, 2015				September 30, 2015
Segment net income:
Community banking		$	4,734				2,162				3,413				3,258				2,854
Wholesale mortgage banking			1,402				919				401				525				1,273
Other			(228	)			(253	)			(188	)			(207	)			(256	)
Eliminations			33				8				17				33				10
Total net income		$	5,941				2,836				3,643				3,609				3,881
Community banking segment operating earnings:
Income before income taxes		$	6,975				2,785				4,953				4,842				4,199
Tax expense (1) (3)			2,241				623				1,540				1,584				1,345
Bank segment net income		$	4,734				2,162				3,413				3,258				2,854
Weighted average common shares outstanding:
Basic			12,327,921				11,908,282				11,746,574				9,888,030				9,463,772
Diluted			12,535,551				12,076,878				11,978,801				10,103,966				9,674,994
Earnings per common share:
Basic		$	0.38			$	0.18			$	0.28			$	0.32			$	0.29
Diluted		$	0.38			$	0.18			$	0.28			$	0.32			$	0.29
Bank segment income before taxes		$	6,975				2,785				4,953				4,842				4,199
Gain on sale of securities			(111	)			(113	)			(417	)			(34	)			(1,017	)
Net loss on extinguishment of debt			118				47				9				36				—
Fair value adjustments on interest rate swaps			(99	)			226				281				(142	)			1,246
Merger related costs (2)			—				2,697				186				—				—
Operating earnings before income taxes			6,883				5,642				5,012				4,702				4,428
Tax expense (1) (3)			2,211				1,262				1,558				1,538				1,418
Operating bank segment earnings (Non-GAAP)		$	4,672				4,380				3,454				3,164				3,010
Operating bank segment earnings per common share:
Basic (Non-GAAP)		$	0.38			$	0.37			$	0.29			$	0.32			$	0.32
Diluted (Non-GAAP)		$	0.37			$	0.36			$	0.29			$	0.31			$	0.31

 

(1) Tax expense is determined using the effective tax rate computed for the applicable business segment.

 

(2) Remaining merger related costs of $102,000 were incurred within the category “Other” segment earnings for three months ended June 30, 2016.

 

(3) In March 2016, the FASB issued guidance to simplify several aspects of the accounting for share-based payment award transactions, including income tax consequences. In addition to other changes, the guidance changes the accounting for excess tax benefits and tax deficiencies from generally being recognized in additional paid-in capital to recognition as income tax expense or benefit in the period they occur. The Company early adopted the new guidance in the second quarter of 2016. As a result, the Banking segment income tax expense was reduced by approximately $343,000, or $0.03 per diluted share, in the second quarter of 2016.