FOR IMMEDIATE RELEASE
| Contact: | Roger D. Plemens |
| | President and Chief Executive Officer |
| | (828) 524-7000 |
ENTEGRA FINANCIAL CORP. ANNOUNCES
SECOND QUARTER 2017 RESULTS
Franklin, North Carolina, July 20, 2017 — Entegra Financial Corp. (the “Company”) (NASDAQ: ENFC), the holding company for Entegra Bank (the “Bank”), today announced earnings and related data for the three and six months ended June 30, 2017.
Highlights
The following tables highlight the most important trends that the Company believes are relevant to understanding the performance of the Company. As further detailed in Appendix A, core results (a non-GAAP measure) reflect adjustments for material items including investment gains, investment impairment, and merger and acquisition expenses.
| | | For the Three Months Ended June 30, |
| | | (Dollars in thousands, except per share data) |
| | | 2017 | | 2016 | | Change (%) |
| | | GAAP | | Core | | GAAP | | Core | | GAAP | | Core |
| Net income | | $ | 2,102 | | | $ | 2,344 | | | $ | 858 | | | $ | 1,730 | | | | 145.0 | % | | | 35.5 | % |
| Net interest income | | $ | 10,222 | | | | N/A | | | $ | 8,748 | | | | N/A | | | | 16.8 | % | | | N/A | |
| Net interest margin | | | 3.36 | % | | | N/A | | | | 3.33 | % | | | N/A | | | | 0.9 | % | | | N/A | |
| Return on average assets | | | 0.61 | % | | | 0.68 | % | | | 0.29 | % | | | 0.59 | % | | | 110.3 | % | | | 15.3 | % |
| Return on average equity | | | 6.09 | % | | | 6.79 | % | | | 2.56 | % | | | 5.17 | % | | | 137.9 | % | | | 31.3 | % |
| Efficiency ratio | | | 72.96 | % | | | 69.81 | % | | | 85.85 | % | | | 72.39 | % | | | -15.0 | % | | | -3.6 | % |
| Diluted earnings per share | | $ | 0.32 | | | $ | 0.36 | | | $ | 0.13 | | | $ | 0.27 | | | | 146.2 | % | | | 33.3 | % |
| | | For the Six Months Ended June 30, |
| | | (Dollars in thousands, except per share data) |
| | | 2017 | | 2016 | | Change (%) |
| | | GAAP | | Core | | GAAP | | Core | | GAAP | | Core |
| Net income | | $ | 3,402 | | | $ | 4,385 | | | $ | 2,224 | | | $ | 3,015 | | | | 53.0 | % | | | 45.4 | % |
| Net interest income | | $ | 19,840 | | | | N/A | | | $ | 16,372 | | | | N/A | | | | 21.2 | % | | | N/A | |
| Net interest margin | | | 3.33 | % | | | N/A | | | | 3.28 | % | | | N/A | | | | 1.5 | % | | | N/A | |
| Return on average assets | | | 0.50 | % | | | 0.65 | % | | | 0.40 | % | | | 0.55 | % | | | 25.0 | % | | | 18.2 | % |
| Return on average equity | | | 4.99 | % | | | 6.44 | % | | | 3.32 | % | | | 4.51 | % | | | 50.3 | % | | | 42.8 | % |
| Efficiency ratio | | | 76.46 | % | | | 70.68 | % | | | 81.55 | % | | | 74.69 | % | | | -6.2 | % | | | -5.4 | % |
| Diluted earnings per share | | $ | 0.52 | | | $ | 0.67 | | | $ | 0.34 | | | $ | 0.46 | | | | 52.9 | % | | | 45.7 | % |
| | | As of June 30, | | As of December 31, |
| | | 2017 | | 2016 |
| | | (Dollars in thousands, except per share data) |
| Asset Quality: | | | | | | | | |
| Non-performing loans | | $ | 6,587 | | | $ | 6,041 | |
| Real estate owned | | $ | 2,487 | | | $ | 4,226 | |
| Non-performing assets | | $ | 9,074 | | | $ | 10,267 | |
| Non-performing loans to total loans | | | 0.83 | % | | | 0.81 | % |
| Non-performing assets to total assets | | | 0.64 | % | | | 0.79 | % |
| Net charge-offs (6 and 12 months ended) | | $ | 11 | | | $ | 430 | |
| Allowance for loan losses to non-performing loans | | | 150.81 | % | | | 154.03 | % |
| Allowance for loan losses to total loans | | | 1.25 | % | | | 1.25 | % |
| | | | | | | | | |
| Other Data: | | | | | | | | |
| Book value per share | | $ | 21.70 | | | $ | 20.57 | |
| Tangible book value per share | | $ | 20.21 | | | $ | 20.10 | |
| Closing market price per share | | $ | 22.75 | | | $ | 20.60 | |
Management Commentary
Roger D. Plemens, President and CEO of the Company reported, “The second quarter represents another successful quarter for the Company as we continue to improve our profitability while decreasing our efficiency ratio. We remain focused on improving our return on equity and assets, and will continue to make decisions that create a high performing bank. We are also pleased with the continued improvement in asset quality as we successfully liquidated several large properties. In June, we announced a definitive agreement to acquire Chattahoochee Bank of Georgia (“Chattahoochee”) which we expect will be more than 15% accretive to 2018 earnings and increase our return on equity above 8%.”
Net Interest Income
Net interest income increased $1.5 million, or 16.8%, to $10.2 million for the three months ended June 30, 2017 compared to $8.7 million for the same period in 2016. Net interest income increased $3.4 million, or 21.2%, to $19.8 million for the six months ended June 30, 2017 compared to $16.4 million for the same period in 2016. The increase in net interest income was primarily due to higher volumes in the loan and investment portfolios as well as a decrease in the interest rate paid on deposits. Net interest margin for the three and six months ended June 30, 2017 improved to 3.36% and 3.33%, respectively, compared to 3.33% and 3.28% for the same periods in 2016.
Provision for Loan Losses
The provision for loan losses was $0.3 million and $0.6 million for the three and six months ended June 30, 2017, compared to no provision for loan losses for the same periods in 2016. The Company continues to experience a minimal level of net charge-offs and modest levels of non-performing loans.
Noninterest Income
Noninterest income decreased $0.2 million, or 8.1%, to $1.9 million for the three months ended June 30, 2017 compared to $2.1 million for the same period in 2016. The slight decline was primarily related to reduced gains on sales of investments and SBA loans partially offset by increases in mortgage banking income, interchange fees, and bank-owned life insurance (BOLI).
Noninterest income decreased $1.0 million, or 24.2%, to $3.0 million for the six months ended June 30, 2017 compared to $4.0 million for the same period in 2016. The decline was primarily related to other than temporary impairment of $0.7 million realized on one investment security as well as decreases in gains from the sale of SBA loans, partially offset by increases in mortgage banking income, interchange fees, and BOLI.
Noninterest Expense
Noninterest expense decreased $0.4 million, or 4.8%, to $8.9 million for the three months ended June 30, 2017 compared to $9.3 million for the same period in 2016. The decrease was primarily related to a decline of $1.4 million in merger-related expenses. The Company incurred $1.8 million of merger-related expenses during the three months ended June 30, 2016 primarily related to the Oldtown Bank acquisition. Noninterest expense increased $0.9 million, or 5.3%, to $17.5 million for the six months ended June 30, 2017 compared to $16.6 million for the same period in 2016. The increase was primarily related to increased compensation and employee benefits and net occupancy expenses as the 2017 period included the full impact of the Oldtown Bank acquisition and the partial impact of the branches acquired from Stearns Bank.
Income Taxes
Income tax expense for the three and six months ended June 30, 2017 was $0.9 million and $1.3 million, respectively, compared to $0.7 million and $1.5 million in the comparable periods in the prior year. The Company’s effective tax rates of 29.0% and 28.2% for the three and six months ended June 30, 2017, respectively, improved from 44.0% and 40.7% from the same respective periods in 2016 primarily as the result of increased tax-exempt income related to municipal bond investments and BOLI income.
Balance Sheet
Total assets increased $116.6 million, or an annualized rate of 18.0%, to $1.41 billion at June 30, 2017 from $1.29 billion at December 31, 2016 as the Company continued to leverage its capital with earning assets.
Loans receivable increased $50.3 million, or an annualized rate of 13.5%, to $794.7 million at June 30, 2017 from $744.4 million at December 31, 2016. Loan growth continues to be primarily concentrated in commercial real estate and commercial and industrial loans.
The Company also increased its investment portfolio by $29.5 million from December 31, 2016 to June 30, 2017 in order to better leverage its capital. The Company utilized excess cash received from the assumption of deposits in the February branch acquisition to fund additional purchases of investments available for sale.
Core deposits increased $109.6 million, or 20.3%, to $650.4 million at June 30, 2017 from $540.8 million at December 31, 2016, including $79.6 million of core deposits assumed in the Stearns Bank branch acquisition. Certificates of deposits increased $74.4 million to $363.6 million at June 30, 2017 from $289.2 million at December 31, 2016, primarily as the result of certificates of deposit assumed from Stearns Bank. Core deposits remained relatively unchanged at 64% of the Company’s deposit portfolio at June 30, 2017 compared to 65% at December 31, 2016.
Total equity increased $7.0 million to $140.1 million at June 30, 2017 compared to $133.1 million at December 31, 2016. This increase was primarily attributable to $3.4 million of net income, $0.5 million of stock-based compensation expense, and a $3.4 million improvement in the market value of investment securities partially offset by $0.3 million of share repurchases. Tangible book value per share increased $0.11 from $20.10 at December 31, 2016 to $20.21 at June 30, 2017 as a result of operating results for the period offset by $1.02 per share dilution from the Stearns Bank branch acquisition.
Asset Quality
Non-performing assets decreased $1.2 million to $9.1 million at June 30, 2017 from $10.3 million at December 31, 2016 primarily as a result of the liquidation of several large real estate owned balances during the period. Net loan charge-offs continue to remain low totaling $11 thousand for the six months ended June 30, 2017, compared to $0.4 million for the year ended December 31, 2016.
Non-GAAP Financial Measures
Statements included in this press release include non-GAAP financial measures and should be read along with the accompanying tables in Appendix A, which provide a reconciliation of non-GAAP financial measures to GAAP financial measures. This press release and the accompanying tables discuss financial measures, such as core noninterest expense, core net income, core diluted earnings per share, core return on average assets, core return on average equity, and core efficiency ratio, 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.
About Entegra Financial Corp. and Entegra Bank
Entegra Financial Corp. is the holding company of Entegra Bank. The Company’s shares began trading on the NASDAQ Global Market on October 1, 2014 under the symbol “ENFC”.
Entegra Bank operates a total of 17 branches located throughout the Western North Carolina counties of Cherokee, Haywood, Henderson, Jackson, Macon, Polk and Transylvania, the Upstate South Carolina counties of Anderson, Greenville, and Spartanburg and the northern Georgia county of Jasper. The Bank also operates loan production offices in Asheville, NC and Clemson, SC. For further information, visit the
Bank’s website www.entegrabank.com.
Disclosures About Forward-Looking Statements
The discussions included in this document and its exhibits may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially. For the purposes of these discussions, any statements that are not statements of historical fact may be deemed to be “forward-looking statements.” Such statements are often characterized by the use of qualifying words such as “expects,” “anticipates,” “believes,” “estimates,” “plans,” “projects,” or other statements concerning opinions or judgments of the Company and its management about future events. The accuracy of such forward looking statements could be affected by factors including, but not limited to: the financial success or changing conditions or strategies of the Company’s customers or vendors; fluctuations in interest rates; actions of government regulators; the availability of capital and personnel; or general economic conditions. In addition, in relation to the previously-announced definitive agreement to acquire Chattohoochee, the following factors among others, could cause actual results to differ materially from forward looking statements: ability to obtain regulatory approvals and meet other closing conditions to the acquisition, including approval by Chattahoochee’s shareholders, on the expected terms and schedule; delay in closing the acquisition; difficulties and delays in integrating Company’s and Chattahoochee’s businesses or fully realizing cost savings and other benefits; business disruption following the proposed transaction; changes in asset quality and credit risk; the inability to sustain revenue and earnings growth; changes in interest rates and capital markets; inflation; customer borrowing, repayment, investment and deposit practices; the introduction, withdrawal, success and timing of business initiatives; competitive conditions; the inability to realize cost savings or revenues or to implement integration plans and other consequences associated with mergers, acquisitions and divestitures; economic conditions; the reaction to the transaction of the banks’ customers, employees and counterparties; and the impact, extent and timing of technological changes, capital management activities, and other actions of the Board of Governors of the Federal Reserve and legislative and regulatory actions and reforms. These forward looking statements express management’s current expectations, plans or forecasts of future events, results and condition, including financial and other estimates. Additional factors that could cause actual results to differ materially from those anticipated by forward looking statements are discussed in the Company’s filings with the Securities and Exchange Commission (the “SEC”), including without limitation its annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. The Company undertakes no obligation to revise or update these statements following the date of this press release.
Additional Information About The Proposed Transaction And Where To Find It
This material is not a solicitation of any vote or approval of Chattahoochee’s shareholders and is not a substitute for the proxy statement/prospectus or any other documents which and Chattahoochee may send in connection with the proposed acquisition. This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities.
In connection with the proposed acquisition of Chattahoochee, the Company will file with the SEC a registration statement on Form S-4 to register the shares of the Company’s common stock to be issued to the shareholders of Chattahoochee. The registration statement will include a proxy statement/prospectus which will be sent to the shareholders of Chattahoochee seeking their approval of the acquisition and related matters. In addition, the Company may file other relevant documents concerning the proposed acquisition with the SEC.
INVESTORS AND SHAREHOLDERS OF CHATTAHOOCHEE ARE URGED TO READ THE REGISTRATION STATEMENT ON FORM S-4 AND THE PROXY STATEMENT/PROSPECTUS INCLUDED WITHIN THE REGISTRATION STATEMENT AND ANY OTHER RELEVANT DOCUMENTS TO BE FILED WITH THE SEC IN CONNECTION WITH THE PROPOSED ACQUISITION BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE COMPANY, CHATTAHOOCHEE AND THE PROPOSED TRANSACTION.
Investors and shareholders may obtain free copies of these documents, when filed, through the website maintained by the SEC at www.sec.gov. Free copies of the proxy statement/prospectus also may be obtained, when available, by directing a request by telephone or mail to Entegra Financial Corp., 14 One Center Court, Franklin, North Carolina 28734, Attention: David Bright (telephone: (828) 524-7000), or Chattahoochee Bank of Georgia, 643 E E Butler Parkway, Gainesville, Georgia 30503, Attention: Investor Relations (telephone: (770) 536-0607), or by accessing the Company’s website at www.entegrabank.com under “Investor Relations.” The information on the Company’s and Chattahoochee’s websites is not, and shall not be deemed to be, a part of this Current Report or incorporated into other filings either company makes with the SEC.
Chattahoochee and its directors and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of Chattahoochee in connection with the acquisition. Information about the directors and executive officers of Chattahoochee is set forth in the proxy statement for Chattahoochee’s 2017 annual meeting of shareholders. Additional information regarding the interests of these participants and other persons who may be deemed participants in the proxy solicitation may be obtained by reading the proxy statement/prospectus when it becomes available.
ENTEGRA FINANCIAL CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands, except per share data)
| | | Three Months Ended June 30, |
| | | 2017 | | 2016 |
| Interest income | | $ | 12,024 | | | $ | 10,257 | |
| Interest expense | | | 1,802 | | | | 1,509 | |
| | | | | | | | | |
| Net interest income | | | 10,222 | | | | 8,748 | |
| | | | | | | | | |
| Provision for loan losses | | | 325 | | | | — | |
| | | | | | | | | |
| Net interest income after provision for loan losses | | | 9,897 | | | | 8,748 | |
| | | | | | | | | |
| Servicing income, net | | | 158 | | | | 75 | |
| Mortgage banking | | | 343 | | | | 220 | |
| Gain on sale of SBA loans | | | 4 | | | | 284 | |
| Gain on sale of investments | | | 36 | | | | 429 | |
| Trading securities gains | | | 100 | | | | 104 | |
| Other than temporary impairment on available-for-sale securities | | | — | | | | — | |
| Service charges on deposit accounts | | | 412 | | | | 387 | |
| Interchange fees | | | 480 | | | | 382 | |
| Bank owned life insurance | | | 214 | | | | 94 | |
| Other | | | 182 | | | | 124 | |
| Total noninterest income | | | 1,929 | | | | 2,099 | |
| | | | | | | | | |
| Compensation and employee benefits | | | 5,086 | | | | 4,257 | |
| Net occupancy | | | 926 | | | | 835 | |
| Federal deposit insurance | | | 135 | | | | 184 | |
| Professional and advisory | | | 363 | | | | 293 | |
| Data processing | | | 424 | | | | 400 | |
| Marketing and advertising | | | 226 | | | | 302 | |
| Net cost of operation of real estate owned | | | 81 | | | | 210 | |
| Merger-related expenses | | | 408 | | | | 1,771 | |
| Other | | | 1,217 | | | | 1,061 | |
| Total noninterest expense | | | 8,866 | | | | 9,313 | |
| | | | | | | | | |
| Income before taxes | | | 2,960 | | | | 1,534 | |
| | | | | | | | | |
| Income tax expense | | | 858 | | | | 676 | |
| | | | | | | | | |
| Net income | | $ | 2,102 | | | $ | 858 | |
| | | | | | | | | |
| Earnings per common share: | | | | | | | | |
| Basic | | $ | 0.33 | | | $ | 0.13 | |
| Diluted | | $ | 0.32 | | | $ | 0.13 | |
| | | | | | | | | |
| Weighted average common shares outstanding: | | | | | | | | |
| Basic | | | 6,456,572 | | | | 6,466,665 | |
| Diluted | | | 6,549,000 | | | | 6,482,079 | |
ENTEGRA FINANCIAL CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands, except per share data)
| | | Six Months Ended June 30, |
| | | 2017 | | 2016 |
| Interest income | | $ | 23,367 | | | $ | 19,250 | |
| Interest expense | | | 3,527 | | | | 2,878 | |
| | | | | | | | | |
| Net interest income | | | 19,840 | | | | 16,372 | |
| | | | | | | | | |
| Provision for loan losses | | | 640 | | | | — | |
| | | | | | | | | |
| Net interest income after provision for loan losses | | | 19,200 | | | | 16,372 | |
| | | | | | | | | |
| Servicing income, net | | | 253 | | | | 191 | |
| Mortgage banking | | | 563 | | | | 360 | |
| Gain on sale of SBA loans | | | 146 | | | | 618 | |
| Gain on sale of investments | | | 43 | | | | 698 | |
| Trading securities gains | | | 307 | | | | 178 | |
| Other than temporary impairment on available-for-sale securities | | | (700 | ) | | | — | |
| Service charges on deposit accounts | | | 803 | | | | 781 | |
| Interchange fees | | | 890 | | | | 724 | |
| Bank owned life insurance | | | 395 | | | | 201 | |
| Other | | | 312 | | | | 223 | |
| Total noninterest income | | | 3,012 | | | | 3,974 | |
| | | | | | | | | |
| Compensation and employee benefits | | | 9,922 | | | | 8,267 | |
| Net occupancy | | | 1,877 | | | | 1,651 | |
| Federal deposit insurance | | | 239 | | | | 360 | |
| Professional and advisory | | | 637 | | | | 505 | |
| Data processing | | | 825 | | | | 751 | |
| Marketing and advertising | | | 474 | | | | 502 | |
| Net cost of operation of real estate owned | | | 215 | | | | 496 | |
| Merger-related expenses | | | 856 | | | | 1,916 | |
| Other | | | 2,428 | | | | 2,144 | |
| Total noninterest expense | | | 17,473 | | | | 16,592 | |
| | | | | | | | | |
| Income before taxes | | | 4,739 | | | | 3,754 | |
| | | | | | | | | |
| Income tax expense | | | 1,337 | | | | 1,530 | |
| | | | | | | | | |
| Net income | | $ | 3,402 | | | $ | 2,224 | |
| | | | | | | | | |
| Earnings per common share: | | | | | | | | |
| Basic | | $ | 0.53 | | | $ | 0.34 | |
| Diluted | | $ | 0.52 | | | $ | 0.34 | |
| | | | | | | | | |
| Weighted average common shares outstanding: | | | | | | | | |
| Basic | | | 6,460,693 | | | | 6,492,209 | |
| Diluted | | | 6,540,524 | | | | 6,506,485 | |
ENTEGRA FINANCIAL CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
| | | June 30, 2017 | | December 31, 2016 |
| | | (Unaudited) | | (Audited) |
| Assets | | | | | | | | |
| | | | | | | | | |
| Cash and cash equivalents | | $ | 80,111 | | | $ | 43,294 | |
| Investments - trading | | | 5,636 | | | | 5,211 | |
| Investments - available for sale | | | 427,831 | | | | 398,291 | |
| Other investments | | | 12,208 | | | | 15,261 | |
| Loans held for sale | | | 3,668 | | | | 4,584 | |
| Loans receivable | | | 794,687 | | | | 744,361 | |
| Allowance for loan losses | | | (9,934 | ) | | | (9,305 | ) |
| Real estate owned | | | 2,487 | | | | 4,226 | |
| Fixed assets, net | | | 21,022 | | | | 20,209 | |
| Bank owned life insurance | | | 31,742 | | | | 31,347 | |
| Net deferred tax asset | | | 15,851 | | | | 18,985 | |
| Goodwill | | | 7,144 | | | | 2,065 | |
| Core deposit intangibles, net | | | 2,470 | | | | 979 | |
| Other assets | | | 14,553 | | | | 13,369 | |
| | | | | | | | | |
| Total assets | | $ | 1,409,476 | | | $ | 1,292,877 | |
| | | | | | | | | |
| Liabilities and Shareholders' Equity | | | | | | | | |
| | | | | | | | | |
| Liabilities | | | | | | | | |
| Deposits | | $ | 1,013,998 | | | $ | 830,013 | |
| Federal Home Loan Bank advances | | | 223,500 | | | | 298,500 | |
| Junior subordinated notes | | | 14,433 | | | | 14,433 | |
| Post employment benefits | | | 10,163 | | | | 10,211 | |
| Other liabilities | | | 7,249 | | | | 6,652 | |
| Total liabilities | | $ | 1,269,343 | | | $ | 1,159,809 | |
| | | | | | | | | |
| Total shareholders' equity | | | 140,133 | | | | 133,068 | |
| | | | | | | | | |
| Total liabilities and shareholders' equity | | $ | 1,409,476 | | | $ | 1,292,877 | |
APPENDIX A – RECONCILIATION OF NON-GAAP MEASURES (UNAUDITED)
| | | Three Months Ended June 30, | | Six Months Ended June 30. |
| | | 2017 | | 2016 | | 2017 | | 2016 |
| | | (Dollars in thousands) | | (Dollars in thousands) |
| | | | | | | | | |
| Core Noninterest Expense | | | | | | | | | | | | | | | | |
| Noninterest expense (GAAP) | | $ | 8,866 | | | $ | 9,313 | | | $ | 17,473 | | | $ | 16,592 | |
| Merger-related expenses | | | (408 | ) | | | (1,771 | ) | | | (856 | ) | | | (1,916 | ) |
| Core noninterest expense (Non-GAAP) | | $ | 8,458 | | | $ | 7,542 | | | $ | 16,617 | | | $ | 14,676 | |
| | | | | | | | | | | | | | | | | |
| Core Net Income | | | | | | | | | | | | | | | | |
| Net income (GAAP) | | $ | 2,102 | | | $ | 858 | | | $ | 3,402 | | | $ | 2,224 | |
| Gain on sale of investments | | | (23 | ) | | | (279 | ) | | | (28 | ) | | | (454 | ) |
| Other than temporary impairment of investment securities available for sale | | | — | | | | — | | | | 455 | | | | — | |
| Merger-related expenses | | | 265 | | | | 1,151 | | | | 556 | | | | 1,245 | |
| Core net income (Non-GAAP) | | $ | 2,344 | | | $ | 1,730 | | | $ | 4,385 | | | $ | 3,015 | |
| | | | | | | | | | | | | | | | | |
| Core Diluted Earnings Per Share | | | | | | | | | | | | | | | | |
| Diluted earnings per share (GAAP) | | $ | 0.32 | | | $ | 0.13 | | | $ | 0.52 | | | $ | 0.34 | |
| Gain on sale of investments | | | — | | | | (0.04 | ) | | | — | | | | (0.07 | ) |
| Other than temporary impairment of investment securities available for sale | | | — | | | | — | | | | 0.06 | | | | — | |
| Merger-related expenses | | | 0.04 | | | | 0.18 | | | | 0.09 | | | | 0.19 | |
| Core diluted earnings per share (Non-GAAP) | | $ | 0.36 | | | $ | 0.27 | | | $ | 0.67 | | | $ | 0.46 | |
| | | | | | | | | | | | | | | | | |
| Core Return on Average Assets | | | | | | | | | | | | | | | | |
| Return on Average Assets (GAAP) | | | 0.61 | % | | | 0.29 | % | | | 0.50 | % | | | 0.40 | % |
| Gain on sale of investments | | | -0.01 | % | | | -0.09 | % | | | — | | | | -0.08 | % |
| Other than temporary impairment of investment securities available for sale | | | — | | | | — | | | | 0.07 | % | | | — | |
| Merger-related expenses | | | 0.08 | % | | | 0.39 | % | | | 0.08 | % | | | 0.23 | % |
| Core Return on Average Assets (Non-GAAP) | | | 0.68 | % | | | 0.59 | % | | | 0.65 | % | | | 0.55 | % |
| | | | | | | | | | | | | | | | | |
| Core Return on Average Equity | | | | | | | | | | | | | | | | |
| Return on Average Equity (GAAP) | | | 6.09 | % | | | 2.56 | % | | | 4.99 | % | | | 3.32 | % |
| Gain on sale of investments | | | -0.07 | % | | | -0.82 | % | | | -0.04 | % | | | -0.67 | % |
| Other than temporary impairment of investment securities available for sale | | | — | | | | — | | | | 0.67 | % | | | — | |
| Merger-related expenses | | | 0.77 | % | | | 3.43 | % | | | 0.82 | % | | | 1.86 | % |
| Core Return on Average Equity (Non-GAAP) | | | 6.79 | % | | | 5.17 | % | | | 6.44 | % | | | 4.51 | % |
| | | | | | | | | | | | | | | | | |
| Core Efficiency Ratio | | | | | | | | | | | | | | | | |
| Efficiency ratio (GAAP) | | | 72.96 | % | | | 85.85 | % | | | 76.46 | % | | | 81.55 | % |
| Gain on sale of investments | | | 0.30 | % | | | 2.87 | % | | | 0.19 | % | | | 2.56 | % |
| Other than temporary impairment of investment securities available for sale | | | — | | | | — | | | | -2.97 | % | | | — | |
| Merger-related expenses | | | -3.45 | % | | | -16.33 | % | | | -3.00 | % | | | -9.42 | % |
| Core Efficiency Ratio (Non-GAAP) | | | 69.81 | % | | | 72.39 | % | | | 70.68 | % | | | 74.69 | % |
| | | | | | | | | | | | | | | | | |
| | | | As Of | | | | | | | | | |
| | | June 30,
2017 | | | December 31,
2016 | | | | | | | | | |
| | | | (Dollars in thousands, except share data) | | | | | | | | | |
| Tangible Book Value Per Share | | | | | | | | | | | | | | | | |
| Book Value (GAAP) | | $ | 140,133 | | | $ | 133,068 | | | | | | | | | |
| Goodwill and intangibles | | | (9,614 | ) | | | (3,044 | ) | | | | | | | | |
| Book Value (Tangible) | | $ | 130,519 | | | $ | 130,024 | | | | | | | | | |
| Outstanding shares | | | 6,458,679 | | | | 6,467,550 | | | | | | | | | |
| Tangible Book Value Per Share | | $ | 20.21 | | | $ | 20.10 | | | | | | | | | |
APPENDIX B – TAX EQUIVALENT NET INTEREST MARGIN ANALYSIS (UNAUDITED)
| | | For the Three Months Ended June 30, |
| | | 2017 | | 2016 |
| | | Average Outstanding Balance | | Interest | | Yield/ Rate | | Average Outstanding Balance | | Interest | | Yield/ Rate |
| | | (Dollars in thousands) |
| Interest-earning assets: | | | | | | | | | | | | | | | | | | | | | | | | |
| Loans, including loans held for sale | | $ | 765,764 | | | $ | 9,035 | | | | 4.73 | % | | $ | 703,576 | | | $ | 8,255 | | | | 4.71 | % |
| Loans, tax exempt (1) | | | 16,183 | | | | 151 | | | | 3.73 | % | | | 15,753 | | | | 151 | | | | 3.84 | % |
| Investments - taxable | | | 313,653 | | | | 1,822 | | | | 2.32 | % | | | 263,968 | | | | 1,422 | | | | 2.16 | % |
| Investment tax exempt (1) | | | 118,437 | | | | 1,227 | | | | 4.15 | % | | | 48,722 | | | | 471 | | | | 3.88 | % |
| Interest earning deposits | | | 52,993 | | | | 127 | | | | 0.96 | % | | | 38,086 | | | | 54 | | | | 0.57 | % |
| Other investments, at cost | | | 11,808 | | | | 144 | | | | 4.89 | % | | | 9,566 | | | | 122 | | | | 5.12 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total interest-earning assets | | | 1,278,838 | | | | 12,506 | | | | 3.92 | % | | | 1,079,671 | | | | 10,475 | | | | 3.89 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Noninterest-earning assets | | | 103,141 | | | | | | | | | | | | 87,193 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total assets | | $ | 1,381,979 | | | | | | | | | | | $ | 1,166,864 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest-bearing liabilities: | | | | | | | | | | | | | | | | | | | | | | | | |
| Savings accounts | | $ | 48,280 | | | $ | 13 | | | | 0.11 | % | | $ | 37,757 | | | $ | 16 | | | | 0.17 | % |
| Time deposits | | | 360,885 | | | | 783 | | | | 0.87 | % | | | 313,204 | | | | 769 | | | | 0.98 | % |
| Money market accounts | | | 257,457 | | | | 236 | | | | 0.37 | % | | | 237,424 | | | | 180 | | | | 0.30 | % |
| Interest bearing transaction accounts | | | 167,487 | | | | 53 | | | | 0.13 | % | | | 114,069 | | | | 67 | | | | 0.24 | % |
| Total interest bearing deposits | | | 834,109 | | | | 1,085 | | | | 0.52 | % | | | 702,454 | | | | 1,032 | | | | 0.59 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| FHLB advances | | | 223,500 | | | | 542 | | | | 0.97 | % | | | 173,885 | | | | 319 | | | | 0.74 | % |
| Junior subordinated debentures | | | 14,433 | | | | 141 | | | | 3.92 | % | | | 14,433 | | | | 128 | | | | 3.56 | % |
| Other borrowings | | | 3,044 | | | | 34 | | | | 4.48 | % | | | 2,569 | | | | 30 | | | | 4.68 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total interest-bearing liabilities | | | 1,075,086 | | | | 1,802 | | | | 0.67 | % | | | 893,341 | | | | 1,509 | | | | 0.68 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Noninterest-bearing deposits | | | 154,898 | | | | | | | | | | | | 121,001 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Other non interest bearing liabilities | | | 13,999 | | | | | | | | | | | | 18,725 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total liabilities | | | 1,243,983 | | | | | | | | | | | | 1,033,067 | | | | | | | | | |
| Total equity | | | 137,996 | | | | | | | | | | | | 133,797 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total liabilities and equity | | $ | 1,381,979 | | | | | | | | | | | $ | 1,166,864 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Tax-equivalent net interest income | | | | | | $ | 10,704 | | | | | | | | | | | $ | 8,966 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net interest-earning assets(2) | | $ | 203,752 | | | | | | | | | | | $ | 186,330 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Average interest-earning assets to interest-bearing liabilities | | | 1.19 | % | | | | | | | | | | | 1.21 | % | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Tax-equivalent net interest rate spread(3) | | | | | | | | | | | 3.25 | % | | | | | | | | | | | 3.21 | % |
| Tax-equivalent net interest margin(4) | | | | | | | | | | | 3.36 | % | | | | | | | | | | | 3.33 | % |
(1) Tax exempt loans and investments are calculated giving effect to a 35% federal tax rate.
(2) Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities.
(3) Tax-equivalent net interest rate spread represents the difference between the tax equivalent yield on average interest-earning assets and the cost of average interest-bearing liabilities.
(4) Tax-equivalent net interest margin represents tax equivalent net interest income divided by average total interest-earning assets.
| | | For the Six Months Ended June 30, |
| | | 2017 | | 2016 |
| | | Average Outstanding Balance | | Interest | | Yield/ Rate | | Average Outstanding Balance | | Interest | | Yield/ Rate |
| | | (Dollars in thousands) |
| Interest-earning assets: | | | | | | | | | | | | | | | | | | | | | | | | |
| Loans, including loans held for sale | | $ | 754,521 | | | $ | 17,511 | | | | 4.68 | % | | $ | 668,318 | | | $ | 15,461 | | | | 4.64 | % |
| Loans, tax exempt (1) | | | 15,549 | | | | 288 | | | | 3.73 | % | | | 11,147 | | | | 220 | | | | 3.96 | % |
| Investments - taxable | | | 305,029 | | | | 3,581 | | | | 2.35 | % | | | 263,925 | | | | 2,880 | | | | 2.19 | % |
| Investment tax exempt (1) | | | 114,954 | | | | 2,352 | | | | 4.09 | % | | | 31,586 | | | | 691 | | | | 4.39 | % |
| Interest earning deposits | | | 55,427 | | | | 243 | | | | 0.88 | % | | | 35,977 | | | | 90 | | | | 0.50 | % |
| Other investments, at cost | | | 12,831 | | | | 316 | | | | 4.97 | % | | | 9,058 | | | | 227 | | | | 5.03 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total interest-earning assets | | | 1,258,311 | | | | 24,291 | | | | 3.89 | % | | | 1,020,011 | | | | 19,569 | | | | 3.85 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Noninterest-earning assets | | | 100,113 | | | | | | | | | | | | 85,553 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total assets | | $ | 1,358,424 | | | | | | | | | | | $ | 1,105,564 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest-bearing liabilities: | | | | | | | | | | | | | | | | | | | | | | | | |
| Savings accounts | | $ | 45,661 | | | $ | 25 | | | | 0.11 | % | | $ | 36,688 | | | $ | 26 | | | | 0.14 | % |
| Time deposits | | | 344,834 | | | | 1,540 | | | | 0.90 | % | | | 292,979 | | | | 1,523 | | | | 1.04 | % |
| Money market accounts | | | 252,069 | | | | 455 | | | | 0.36 | % | | | 213,379 | | | | 331 | | | | 0.31 | % |
| Interest bearing transaction accounts | | | 151,464 | | | | 93 | | | | 0.12 | % | | | 108,387 | | | | 94 | | | | 0.17 | % |
| Total interest bearing deposits | | | 794,028 | | | | 2,113 | | | | 0.54 | % | | | 651,433 | | | | 1,974 | | | | 0.61 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| FHLB advances | | | 249,052 | | | | 1,072 | | | | 0.87 | % | | | 165,066 | | | | 594 | | | | 0.72 | % |
| Junior subordinated debentures | | | 14,433 | | | | 278 | | | | 3.88 | % | | | 14,433 | | | | 254 | | | | 3.53 | % |
| Other borrowings | | | 2,917 | | | | 64 | | | | 4.42 | % | | | 2,394 | | | | 56 | | | | 4.69 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total interest-bearing liabilities | | | 1,060,430 | | | | 3,527 | | | | 0.67 | % | | | 833,326 | | | | 2,878 | | | | 0.69 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Noninterest-bearing deposits | | | 147,770 | | | | | | | | | | | | 121,001 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Other non interest bearing liabilities | | | 13,968 | | | | | | | | | | | | 17,440 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total liabilities | | | 1,222,168 | | | | | | | | | | | | 971,767 | | | | | | | | | |
| Total equity | | | 136,256 | | | | | | | | | | | | 133,797 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total liabilities and equity | | $ | 1,358,424 | | | | | | | | | | | $ | 1,105,564 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Tax-equivalent net interest income | | | | | | $ | 20,764 | | | | | | | | | | | $ | 16,691 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net interest-earning assets(2) | | $ | 197,881 | | | | | | | | | | | $ | 186,685 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Average interest-earning assets to interest-bearing liabilities | | | 118.66 | % | | | | | | | | | | | 122.40 | % | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Tax-equivalent net interest rate spread(3) | | | | | | | | | | | 3.22 | % | | | | | | | | | | | 3.15 | % |
| Tax-equivalent net interest margin(4) | | | | | | | | | | | 3.33 | % | | | | | | | | | | | 3.28 | % |
(1) Tax exempt loans and investments are calculated giving effect to a 35% federal tax rate.
(2) Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities.
(3) Tax-equivalent net interest rate spread represents the difference between the tax equivalent yield on average interest-earning assets and the cost of average interest-bearing liabilities.
(4) Tax-equivalent net interest margin represents tax equivalent net interest income divided by average total interest-earning assets.
