Carolina Financial (CARO) 8-K Carolina Financial Corporation Reports Results for First Quarter of 2017

Exhibit 99.1

Carolina Financial Corporation Reports Results for First Quarter of 2017

NEWS RELEASE – For Release April 24, 2017, 4:00PM

For More Information, Contact:

William A. Gehman III, EVP and CFO, 843.723.7700

Charleston, S.C., April 24, 2017 - Carolina Financial Corporation (NASDAQ: CARO) today announced financial results for the first quarter of 2017.

Operational highlights for the three months ended March 31, 2017 include:

· On January 25, 2017, the Company closed a public offering of 1.8 million shares of its common stock with net proceeds of approximately $47.7 million.

· On March 18, 2017, the Company closed its previously announced acquisition of Greer Bancshares Incorporated, the holding company for Greer State Bank, (“Greer”) with the operational conversion completed in April 2017. Excluding purchase accounting adjustments, total assets of Greer were $382.7 million, total loans receivable were $205.2 million and total deposits were $311.4 million as of the closing date.

Financial highlights at and for the three months ended March 31, 2017, include:

· Net income for the first quarter 2017 increased 34.6% to $4.9 million, or $0.35 per diluted share, from $3.6 million, or $0.30 per diluted share for the first quarter of 2016.

· Operating earnings for the first quarter of 2017, which excludes certain non-operating income and expenses, increased 56.1% to $5.7 million, or $0.41 per diluted share, from $3.7 million, or $0.31 per diluted share, from the first quarter of 2016.

· Performance ratios Q1 2017 compared to Q1 2016:

o Return on average assets improved to 1.11% compared to 1.03%.

o Operating return on average assets improved to 1.30% compared to 1.04%.

o Return on tangible equity was 9.98% compared to 10.53% for the first quarter.

o Operating return on tangible equity improved to 11.70% compared to 10.65%.

· Loans receivable, excluding Greer loans acquired, grew at an annualized rate of 15.7%, or $46.4, million since December 31, 2016.

· Nonperforming assets to total assets were 0.34% at March 31, 2017 compared to 0.40% at December 31, 2016.

· Total deposits, excluding Greer deposits acquired, increased $35.6 million since December 31, 2016. Core deposits, excluding Greer core deposits acquired, increased $26.6 million since December 31, 2016.

“We are very excited to add the Greer State Bank customers and employees to the CresCom Bank family. We were pleased with a smooth system conversion of Greer which was completed on April 10^th. Overall operating results for the first quarter of 2017 exceeded our expectations with the increase in operating earnings of 56.1% from the first quarter of 2016,” stated Jerry Rexroad, Chief Executive Officer.

Acquisition of Greer Bancshares Incorporated

Effective March 18, 2017, the Company completed its previously announced acquisition of Greer. At closing, the holding companies were merged with Carolina Financial as the surviving corporation, and Greer State Bank also merged with and into CresCom Bank, with CresCom Bank surviving the merger and continuing its corporate existence.

Under the terms of the merger, Greer shareholders had the right to receive either $18.00 in cash or 0.782 shares of Carolina Financial common stock, or a combination thereof, for each share of Greer common stock they owned immediately prior to the merger, subject to the limitation that 10% of the outstanding shares of Greer common stock will be exchanged for cash and 90% of the outstanding shares of Greer common stock will be exchanged for shares of Carolina Financial common stock. The mailing of materials regarding the election and exchange of Greer stock certificates commenced on March 27, 2017 and the election period expires on May 17, 2017.

The acquisition of Greer was accounted for under the acquisition method of accounting. The assets and liabilities of Greer have been recorded at their estimated fair values and added to those of Carolina Financial for periods following the merger date. Included in the March 31, 2017 consolidated balance sheet were approximately $192.4 million in acquired loans, net of related purchase accounting adjustments and $313.9 million in deposits. The Company may continue to refine its valuations of acquired assets and liabilities for up to one year following the merger date.

Financial Results

Carolina Financial Corporation

n The Company reported an increase in net income for the three months ended March 31, 2017 of $4.9 million, or $0.35 per diluted share, as compared to $3.6 million, or $0.30 per diluted share, for the three months ended March 31, 2016. Included in net income for the three months ended March 31, 2017 and 2016 were pretax merger related expenses of $1.3 million and $186,000, respectively.

n Operating earnings for the first quarter of 2017, which excludes certain non-operating income and expenses, increased 56.1% to $5.7 million, or $0.41 per diluted share, from $3.7 million, or $0.31 per diluted share, from the first quarter of 2016.

n The Company’s net interest margin-tax equivalent increased to 3.93% for the first quarter of 2017 compared to 3.53% for the first quarter of 2016.

n The Company reported book value per common share of $17.01 and $13.23 as of March 31, 2017 and December 31, 2016, respectively. Tangible book value per common share was $14.17 and $12.59 as of March 31, 2017 and December 31, 2016, respectively.

n At March 31, 2017, the Company’s regulatory capital ratios exceeded the minimum levels currently required. Stockholders’ equity totaled $271.5 million as of March 31, 2017 compared to $163.2 million at December 31, 2016. Tangible equity to tangible assets at March 31, 2017 was 10.6% compared to 9.3% at December 31, 2016.

Community Banking

n The community banking segment net income increased 32.1% to $4.5 million for the three months ended March 31, 2017 compared to $3.4 million for the three months ended March 31, 2016. Included in net income for the three months ended March 31, 2017 and 2016 were pretax merger related expenses of $1.3 million and $186,000, respectively.

n No provision for loan loss was recorded during the three months ended March 31, 2017 or 2016. This was primarily due to continued excellent asset quality as well as net recoveries to average loans receivable of (0.01%) and (0.04%) for the three months ended March 31, 2017 and 2016, respectively.

n Non-performing assets were 0.34% and 0.40% of total assets at March 31, 2017 and December 31, 2016, respectively.

n Loans receivable increased to $1.4 billion at March 31, 2017 compared to $1.2 billion at December 31, 2016. Loans receivable, excluding Greer loans acquired, increased $46.4 million since year end. The increase in loans receivable primarily relates to the completed acquisition of Greer as well as the Bank’s continuing focus on commercial lending and residential mortgage lending.

n The number of checking accounts increased at an annualized rate of 11.7%, excluding Greer checking accounts acquired, since December 31, 2016.Total deposits, excluding acquired deposits from the Greer acquisition, increased $35.6 million since December 31, 2016. As of March 31, 2017 and December 31, 2016, core deposits, defined as checking, savings and money market,comprised approximately 64.6% and 60.6%, respectively, of total deposits.

Wholesale Mortgage Banking

n Net income for the wholesale mortgage banking segment was $645,000 for the three months ended March 31, 2017 compared to $401,000 for the three months ended March 31, 2016.

n The increase in net income of the wholesale mortgage banking segment during first quarter of 2017 is primarily attributable to an increase in margin during the period. Net margin was 1.80% for the three months ended March 31, 2017 compared to 1.47% for the three months ended March 31, 2016. Originations for the three months ended March 31, 2017 and 2016 were $180.8 million and $186.8 million, respectively.

Conference Call

A conference call will be held at 2:00 p.m., Eastern Time on April 25, 2017. 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 95417349. 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 95417349.

About Carolina Financial Corporation

Carolina Financial Corporation 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 March 31, 2017, Carolina Financial had approximately $2.2 billion in total assets and Crescent Mortgage Company originated loans in 48 states partnering with community banks, credit unions and mortgage brokers. In June 2016, Carolina Financial completed its acquisition ofCongaree Bancshares, Inc. and its wholly-owned subsidiary, Congaree State Bank. In March 2017, Carolina Financial completed its acquisition of Greer Bancshares Incorporated.

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

	March 31, 2017			December 31, 2016
	(Unaudited)			(Audited)
	(Dollars in thousands)
ASSETS
Cash and due from banks	$	21,456			9,761
Interest-bearing cash		36,582			14,591
Cash and cash equivalents		58,038			24,352
Securities available-for-sale		494,130			335,352
Federal funds sold		10,560			—
Federal Home Loan Bank stock, at cost		12,478			11,072
Other investments		2,116			1,768
Derivative assets		3,226			2,219
Loans held for sale		21,399			31,569
Loans receivable, gross		1,417,010			1,178,266
Allowance for loan losses		(10,715	)		(10,688	)
Loans receivable, net		1,406,295			1,167,578
Premises and equipment, net		46,544			37,054
Accrued interest receivable		6,726			5,373
Real estate acquired through foreclosure, net		1,479			1,179
Deferred tax assets, net		10,210			8,341
Mortgage servicing rights, net		15,792			15,032
Cash value life insurance		37,938			28,984
Core deposit intangible		8,005			3,658
Goodwill		37,287			4,266
Other assets		9,886			5,939
Total assets	$	2,182,109			1,683,736
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Noninterest-bearing deposits	$	298,365			229,905
Interest-bearing deposits		1,309,355			1,028,355
Total deposits		1,607,720			1,258,260
Short-term borrowed funds		214,500			203,000
Long-term debt		55,304			38,465
Derivative liabilities		682			342
Drafts outstanding		7,129			6,223
Advances from borrowers for insurance and taxes		2,037			1,058
Accrued interest payable		690			327
Reserve for mortgage repurchase losses		2,583			2,880
Dividends payable to stockholders		576			502
Accrued expenses and other liabilities		19,434			9,489
Total liabilities		1,910,655			1,520,546
Commitments and contingencies
Stockholders’ equity:
Preferred stock		—			—
Common stock		162			125
Additional paid-in capital		168,113			66,156
Retained earnings		102,528			98,451
Accumulated other comprehensive income (loss), net of tax		651			(1,542	)
Total stockholders’ equity		271,454			163,190
Total liabilities and stockholders’ equity	$	2,182,109			1,683,736

CAROLINA FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	For the Three Months
	Ended March 31,
	2017			2016
	(In thousands, except share data)
Interest income
Loans	$	14,968			11,085
Investment securities		2,553			2,152
Dividends from Federal Home Loan Bank stock		101			97
Federal funds sold		3			—
Other interest income		45			26
Total interest income		17,670			13,360
Interest expense
Deposits		1,692			1,367
Short-term borrowed funds		355			105
Long-term debt		353			615
Total interest expense		2,400			2,087
Net interest income		15,270			11,273
Provision for loan losses		—			—
Net interest income after provision for loan losses		15,270			11,273
Noninterest income
Mortgage banking income		3,608			3,175
Deposit service charges		858			862
Net loss on extinguishment of debt		—			(9	)
Net gain on sale of securities		185			417
Fair value adjustments on interest rate swaps		(58	)		(281	)
Net increase in cash value life insurance		211			229
Mortgage loan servicing income		1,566			1,388
Other		861			495
Total noninterest income		7,231			6,276
Noninterest expense
Salaries and employee benefits		8,609			7,150
Occupancy and equipment		2,182			1,842
Marketing and public relations		381			385
FDIC insurance		100			168
Provision for mortgage loan repurchase losses		(225	)		(250	)
Legal expense		65			49
Other real estate expense, net		20			20
Mortgage subservicing expense		486			423
Amortization of mortgage servicing rights		669			532
Merger related expenses		1,319			186
Other		1,980			1,763
Total noninterest expense		15,586			12,268
Income before income taxes		6,915			5,281
Income tax expense		2,011			1,638
Net income	$	4,904			3,643
Earnings per common share:
Basic	$	0.35			0.31
Diluted	$	0.35			0.30
Weighted average common shares outstanding:
Basic		13,919,711			11,746,574
Diluted		14,139,241			11,978,801

CAROLINA FINANCIAL CORPORATION

(Unaudited)

(Dollars in thousands)

	At or for the Three Months Ended
Selected Financial Data:	March 31, 2017			December 31, 2016			September 30, 2016			June 30, 2016			March 31, 2016
Selected Average Balances:
Total assets	$	1,768,323			1,651,653			1,626,717			1,482,963			1,412,778
Investment securities		373,551			326,485			345,385			335,105			335,929
Loans receivable, net		1,214,777			1,138,120			1,093,669			978,337			935,438
Loans held for sale		17,827			32,951			32,196			24,467			25,454
Deposits		1,330,805			1,288,665			1,291,567			1,170,860			1,069,451
Stockholders’ equity		210,071			160,991			157,311			145,656			141,311
Performance Ratios (annualized):
Return on average equity		9.34	%		12.80	%		15.11	%		7.79	%		10.31	%
Return on average tangible equity (Non-GAAP)		9.98	%		13.46	%		15.93	%		7.96	%		10.53	%
Return on average assets		1.11	%		1.25	%		1.46	%		0.76	%		1.03	%
Operating return on average equity (Non-GAAP)		10.95	%		14.32	%		14.95	%		14.02	%		10.43	%
Operating return on average tangible equity (Non-GAAP)		11.70	%		15.06	%		15.76	%		14.32	%		10.65	%
Operating return on average assets (Non-GAAP)		1.30	%		1.40	%		1.45	%		1.38	%		1.04	%
Average earning assets to average total assets		91.99	%		93.21	%		92.94	%		93.44	%		93.08	%
Average loans receivable to average deposits		91.28	%		88.32	%		84.68	%		83.56	%		87.47	%
Average stockholders’ equity to average assets		11.88	%		9.75	%		9.67	%		9.82	%		10.00	%
Net interest margin-tax equivalent (1)		3.93	%		3.87	%		3.75	%		3.64	%		3.53	%
Net charge-offs  (recovery) to average loans receivable		(0.01	)%		(0.12	)%		(0.02	)%		(0.03	)%		(0.04	)%
Nonperforming assets to period end loans receivable		0.52	%		0.58	%		0.62	%		0.67	%		0.59	%
Nonperforming assets to total assets		0.34	%		0.40	%		0.42	%		0.45	%		0.39	%
Nonperforming loans to total loans		0.42	%		0.48	%		0.37	%		0.37	%		0.48	%
Allowance for loan losses as a percentage of loans receivable (end of period)		0.76	%		0.91	%		0.91	%		0.96	%		1.06	%
Allowance for loan losses as a percentage of non-acquired loans receivable (Non-GAAP)		0.96	%		1.01	%		1.03	%		1.10	%		1.13	%
Allowance for loan losses as a percentage of nonperforming loans		180.66	%		190.01	%		247.72	%		262.68	%		223.38	%
Nonperforming Assets:
Loans 90 days or more past due and still accruing	$	—			—			—			—			—
Nonaccrual loans		5,931			5,625			4,174			3,920			4,581
Total nonperforming loans		5,931			5,625			4,174			3,920			4,581
Real estate acquired through foreclosure, net		1,479			1,179			2,843			3,272			1,091
Total nonperforming assets	$	7,410			6,804			7,017			7,192			5,672

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

Segment Information

(Unaudited)

(Dollars in thousands)

	For the Three Months Ended
	March 31,  2017			December 31, 2016			September 30, 2016			June 30, 2016			March 31, 2016
Segment net income:
Community banking	$	4,509			4,565			4,734			2,162			3,413
Wholesale mortgage banking		645			806			1,402			919			401
Other		(244	)		(232	)		(228	)		(253	)		(188	)
Eliminations		(6	)		11			33			8			17
Total net income	$	4,904			5,150			5,941			2,836			3,643

	For the Three Months Ended March 31, 2017
	Community		Mortgage
	Banking		Banking		Other			Eliminations			Total
Interest income		17,257		395		6			12			17,670
Interest expense		2,218		12		182			(12	)		2,400
Net interest income (expense)		15,039		383		(176	)		24			15,270
Provision for loan losses		—		—		—			—			—
Noninterest income from external customers		2,384		4,846		—			—			7,230
Intersegment noninterest income		276		—		—			(276	)		—
Noninterest expense		11,324		4,052		209			—			15,585
Intersegment noninterest expense		—		241		1			(242	)		—
Income (loss) before income taxes		6,375		936		(386	)		(10	)		6,915
Income tax expense (benefit)		1,866		291		(142	)		(4	)		2,011
Net income (loss)		4,509		645		(244	)		(6	)		4,904

	For the Three Months Ended March 31, 2016
	Community		Mortgage
	Banking		Banking		Other			Eliminations			Total
Interest income		12,944		369		5			42			13,360
Interest expense		1,939		5		148			(5	)		2,087
Net interest income (expense)		11,005		364		(143	)		47			11,273
Provision for loan losses		—		—		—			—			—
Noninterest income from external customers		2,142		4,135		—			—			6,277
Intersegment noninterest income		262		—		—			(262	)		—
Noninterest expense		8,456		3,653		161			—			12,270
Intersegment noninterest expense		—		241		1			(242	)		—
Income (loss) before income taxes		4,953		605		(305	)		27			5,280
Income tax expense (benefit)		1,540		204		(117	)		10			1,637
Net income (loss)		3,413		401		(188	)		17			3,643

	For the Three Months Ended March 31,
	Loan Originations				Mortgage Banking Income				Margin
	2017		2016		2017		2016		2017			2016
Additional segment information:
Community banking	$	14,753		17,679		358		420		2.43	%		2.38	%
Wholesale mortgage banking		180,830		186,799		3,250		2,755		1.80	%		1.47	%
Total mortgage banking income	$	195,583		204,478		3,608		3,175		1.84	%		1.55	%

Reconciliation of Non-GAAP Financial Measures

(Unaudited)

(In thousands, except share data)

	At the Month Ended
	March 31,		December 31,		September 30,		June 30,		March 31,
	2017		2016		2016		2016		2016
Core deposits:
Noninterest-bearing demand accounts	$	298,365		229,905		267,892		246,811		200,743
Interest-bearing demand accounts		309,961		191,851		195,792		166,843		147,393
Savings accounts		66,506		48,648		47,035		46,032		41,596
Money market accounts		363,600		292,639		299,960		296,968		257,808
Total core deposits (Non-GAAP)		1,038,432		763,043		810,679		756,654		647,540
Certificates of deposit:
Less than $250,000		524,836		467,937		476,744		480,002		459,789
$250,000 or more		44,452		27,280		24,853		26,532		20,443
Total certificates of deposit		569,288		495,217		501,597		506,534		480,232
Total deposits	$	1,607,720		1,258,260		1,312,276		1,263,188		1,127,772

	At the Month Ended
	March 31,			December 31,			September 30,			June 30,			March 31,
	2017			2016			2016			2016			2016
Tangible book value per share:
Total stockholders’ equity	$	271,454			163,190			160,331			155,017			142,390
Less intangible assets		(45,292	)		(7,924	)		(8,037	)		(8,150	)		(2,875	)
Tangible common equity (Non-GAAP)	$	226,162			155,266			152,294			146,867			139,515
Issued and outstanding shares		16,185,408			12,548,328			12,546,220			12,545,282			12,051,615
Less nonvested restricted stock awards		(227,439	)		(211,908	)		(216,828	)		(219,228	)		(302,028	)
Period end dilutive shares		15,957,969			12,336,420			12,329,392			12,326,054			11,749,587
Total stockholders equity	$	271,454			163,190			160,331			155,017			142,390
Divided by period end dilutive shares		15,957,969			12,336,420			12,329,392			12,326,054			11,749,587
Common book value per share	$	17.01			13.23			13.00			12.58			12.12
Tangible common equity (Non-GAAP)	$	226,162			155,266			152,294			146,867			139,515
Divided by period end dilutive shares		15,957,969			12,336,420			12,329,392			12,326,054			11,749,587
Tangible common book value per share (Non-GAAP)	$	14.17			12.59			12.35			11.92			11.87

	At the Month Ended
	March 31,			December 31,			September 30,			June 30,			March 31,
	2017			2016			2016			2016			2016
Acquired and non-acquired loans:
Acquired loans receivable	$	303,244			119,422			129,505			130,228			61,610
Non-acquired loans receivable		1,113,766			1,058,844			1,003,724			937,028			902,411
Total loans receivable	$	1,417,010			1,178,266			1,133,229			1,067,256			964,021
% Acquired		21.40	%		10.14	%		11.43	%		12.20	%		6.39	%
Non-acquired loans	$	1,113,766			1,058,844			1,003,724			937,028			902,411
Allowance for loan losses		10,715			10,688			10,340			10,297			10,233
Allowance for loan losses to non-acquired loans (Non-GAAP)		0.96	%		1.01	%		1.03	%		1.10	%		1.13	%
Total loans receivable	$	1,417,010			1,178,266			1,133,229			1,067,256			964,021
Allowance for loan losses		10,715			10,688			10,340			10,297			10,233
Allowance for loan losses to total loans receivable		0.76	%		0.91	%		0.91	%		0.96	%		1.06	%

Reconciliation of Non-GAAP Financial Measures

(Unaudited)

(In thousands, except share data)

	For the Three Months Ended
Operating Earnings and Performance Ratios:	March 31, 2017			December 31, 2016			September 30, 2016			June 30, 2016			March 31, 2016
Income before income taxes	$	6,915			7,498			8,939			3,700			5,281
Gain on sale of securities		(185	)		(65	)		(111	)		(113	)		(417	)
Net loss on extinguishment of debt		—			1,694			118			47			9
Fair value adjustments on interest rate swaps		58			(998	)		(99	)		226			281
Merger related expenses		1,319			260			—			2,799			186
Operating earnings before income taxes		8,107			8,389			8,847			6,659			5,340
Tax expense (1)		2,358			2,627			2,967			1,555			1,656
Operating earnings (Non-GAAP)	$	5,749			5,762			5,880			5,104			3,684
Average equity		210,071			160,991			157,311			145,656			141,311
Average assets		1,768,323			1,651,653			1,626,717			1,482,963			1,412,778
Average Equity		210,071			160,991			157,311			145,656			141,311
Less average intangible assets		(13,510	)		(7,979	)		(8,092	)		(3,076	)		(2,917	)
Average tangible common equity (Non-GAAP)		196,561			153,012			149,219			142,580			138,394
Operating return on average assets (Non-GAAP)		1.30	%		1.40	%		1.45	%		1.38	%		1.04	%
Operating return on average equity (Non-GAAP)		10.95	%		14.32	%		14.95	%		14.02	%		10.43	%
Operating return on average tangible equity (Non-GAAP)		11.70	%		15.06	%		15.76	%		14.32	%		10.65	%
Weighted average common shares outstanding:
Basic		13,919,711			12,336,420			12,327,921			11,908,282			11,746,574
Diluted		14,139,241			12,585,518			12,535,551			12,076,878			11,978,801
Operating earnings per common share:
Basic (Non-GAAP)	$	0.41			0.47			0.48			0.43			0.31
Diluted (Non-GAAP)	$	0.41			0.46			0.47			0.42			0.31
As Reported:
Income before income taxes	$	6,915			7,498			8,939			3,700			5,281
Tax expense		2,011			2,348			2,998			864			1,638
Net Income	$	4,904			5,150			5,941			2,836			3,643
Average equity		210,071			160,991			157,311			145,656			141,311
Average tangible equity (Non-GAAP)		196,561			153,012			149,219			142,580			138,394
Average assets		1,768,323			1,651,653			1,626,717			1,482,963			1,412,778
Return on average assets		1.11	%		1.25	%		1.46	%		0.76	%		1.03	%
Return on average equity		9.34	%		12.80	%		15.11	%		7.79	%		10.31	%
Return on average tangible equity (Non-GAAP)		9.98	%		13.46	%		15.93	%		7.96	%		10.53	%
Weighted average common shares outstanding:
Basic		13,919,711			12,336,420			12,327,921			11,908,282			11,746,574
Diluted		14,139,241			12,585,518			12,535,551			12,076,878			11,978,801
Earnings per common share:
Basic	$	0.35			0.42			0.48			0.24			0.31
Diluted	$	0.35			0.41			0.47			0.23			0.30

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

Reconciliation of Non-GAAP Financial Measures

(Unaudited)

(In thousands, except share data)

	For the Three Months Ended
	March 31, 2017			December 31, 2016			September 30, 2016			June 30, 2016			March 31, 2016
Segment net income:
Community banking	$	4,509			4,565			4,734			2,162			3,413
Wholesale mortgage banking		645			806			1,402			919			401
Other		(244	)		(232	)		(228	)		(253	)		(188	)
Eliminations		(6	)		11			33			8			17
Total net income	$	4,904			5,150			5,941			2,836			3,643
Community banking segment operating earnings:
Income before income taxes	$	6,375			6,545			6,975			2,785			4,953
Tax expense (1)		1,866			1,980			2,241			623			1,540
Bank segment net income	$	4,509			4,565			4,734			2,162			3,413
Weighted average common shares outstanding:
Basic		13,919,711			12,336,420			12,327,921			11,908,282			11,746,574
Diluted		14,139,241			12,585,518			12,535,551			12,076,878			11,978,801
Earnings per common share:
Basic	$	0.32		$	0.37		$	0.38		$	0.18		$	0.29
Diluted	$	0.32		$	0.36		$	0.38		$	0.18		$	0.28
Bank segment income before taxes	$	6,375			6,545			6,975			2,785			4,953
Gain on sale of securities		(185	)		(65	)		(111	)		(113	)		(417	)
Net loss on extinguishment of debt		—			1,693			118			47			9
Fair value adjustments on interest rate swaps		58			(998	)		(99	)		226			281
Merger related expenses (2)		1,311			254			—			2,697			186
Operating earnings before income taxes		7,559			7,429			6,883			5,642			5,012
Tax expense (1)		2,213			2,247			2,211			1,262			1,558
��
Operating bank segment earnings (Non-GAAP)	$	5,346			5,182			4,672			4,380			3,454
Operating bank segment earnings per common share:
Basic (Non-GAAP)	$	0.38		$	0.42		$	0.38		$	0.37		$	0.29
Diluted (Non-GAAP)	$	0.38		$	0.41		$	0.37		$	0.36		$	0.29

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

(2) Remaining merger related costs were incurred within the category “Other” segment earnings.