Stonegate Bank Announces Fourth Quarter 2016 Opera

POMPANO BEACH, FL--(Marketwired - Jan 27, 2017) - Stonegate Bank ( NASDAQ : SGBK ) ("Stonegate") reported net income of $9.0 million for the fourth quarter of 2016 or $0.62 per diluted common share ($0.62 per common share net operating income, a non-GAAP measurement described below), as compared to net income of $6.6 million for the third quarter of 2016 or $0.49 per diluted common share. 

Net operating income is a non-GAAP financial measurement used by management to evaluate and monitor financial results of operations and excludes certain activities or transactions, such as merger and acquisition related expenses. Information related to our use of non-GAAP financial measures and a table reconciling GAAP to non-GAAP measures used in this press release are presented below under the caption Non-GAAP Financial Measures - Reconciliation of GAAP to non-GAAP Measures .

Key highlights for the fourth quarter:

• Loans: Total loans, net of discounts and deferred fees, decreased $18.0 million during the fourth quarter of 2016 to $2.27 billion at December 31, 2016. The primary reason for the decrease in loans was payoffs. Approximately $12.0 million of paid off loans were in the loan portfolio acquired in Stonegate's acquisition of Regent Bancorp, Inc. and Regent Bank (collectively, "Regent"), some of which were classified loans that were sold. Additionally, approximately $23.1 million of the decrease were loans acquired in connection with Stonegate's acquisition of Community Bank of Broward. Lastly, management has made a concerted effort to reduce the Bank's Commercial Real Estate concentration and therefore has allowed certain of these loans to payoff rather than renew them. Based upon the outstanding balance as of December 31, 2016, during the fourth quarter of 2016, commercial real estate ("CRE") comprised 44% of new loan originations, residential loans accounted for 23% of the new originations and commercial and industrial ("C&I") accounted for 22% of the new loan originations, with the remaining balance primarily in construction loans. The loan production for the fourth quarter was comprised of 76% variable rate loans. Approximately 57% of the variable rate loans originated in the fourth quarter were tied to LIBOR and 13% were tied to the prime rate. Organic loan growth for 2016 was approximately 9.35%.
• Asset Quality: Total loans past due, excluding nonaccrual loans, were $327,000 at December 31, 2016, a decrease of $2.8 million from September 30, 2016. Nonaccrual loans were $8.6 million at December 31, 2016, or 0.38% of total loans, a decrease from $9.0 million at September 30, 2016, or 0.39% of total loans. Other real estate owned was $2.8 million at December 31, 2016, a decrease of $2.0 million from September 30, 2016. See Credit Quality and Allowance for Loan Losses for a detailed analysis of past due and nonaccrual loans.
• Net Interest Income and Margin: Net interest income, on a tax-equivalent basis, totaled $27.1 million for the three months ended December 31, 2016, and represented an increase of $4.6 million when compared to the three months ended September 30, 2016. The net interest margin, on a tax-equivalent basis, increased to 4.01% for the fourth quarter of 2016 as compared to 3.86% for the third quarter of 2016 and a decrease over the tax-equivalent net interest margin of 4.06% for the quarter ended December 31, 2015. The increase in the margin from the third quarter of 2016 to the fourth quarter of 2016 was primarily a result of greater nonaccretable discounts recognized during the fourth quarter.
• Noninterest Expense: Noninterest expense increased to $16.9 million for the three months ended December 31, 2016 from $13.8 million for the three months ended September 30, 2016. The increase in expenses was primarily a result of expenses associated with the Regent and Insignia Bank acquisitions.
• Capital: Stonegate remained well-capitalized as of December 31, 2016 with capital of $356.1 million as compared to $346.1 million at September 30, 2016. As of December 31, 2016, Stonegate's total risk-based capital ratio was 12.1%; Stonegate's Tier 1 and Common Equity Tier 1 capital ratios were each 11.1%; and Stonegate's leverage capital ratio was 10.0%. 

Loans and Deposits

Loans outstanding at December 31, 2016 were $2.27 billion as compared to $2.29 billion at September 30, 2016, a decrease of $18.0 million during the fourth quarter of 2016. Loans outstanding that were acquired through Stonegate's acquisition of Regent were $245.0 million at December 31, 2016, a decrease of $13.9 million since September 30, 2016.

The loan portfolio consists primarily of loans to individuals and small- and medium-sized businesses within Stonegate's primary market areas of South and West Florida. The table below shows the loan portfolio composition:

(in thousands of dollars)			December 31, 2016			September 30, 2016
Commercial			$	307,729		$	297,071
Commercial real estate - owner occupied				518,642			524,574
Commercial real estate - other				706,404			713,622
Construction and land development				261,006			274,611
Residential real estate				384,733			379,281
Consumer and other loans				107,089			114,958
Credit Cards				759			261
	Total loans			2,286,362			2,304,378
Less: discount on loans acquired				8,018			7,922
Less: net deferred fees				3,408			3,565
Recorded investment in loans				2,274,935			2,292,891
Less: Allowance for loan losses				18,888			18,749
	Net loans		$	2,256,048		$	2,274,142

New loan originations were $178.9 million during the fourth quarter of 2016, with fundings of $107.4 million. As of December 31, 2016, outstanding commitments were approximately $452.2 million with approximately $63.3 million representing new approved loan originations and approximately $118.0 million in unfunded construction commitments. 

Deposits decreased to $2.45 billion at December 31, 2016 from $2.49 billion at September 30, 2016. This decrease was primarily due to the investment of cash previously held as deposits by several of our larger relationships. Noninterest-bearing deposits were $506.8 million at December 31, 2016, a decrease from $550.0 million at September 30, 2016, and represented approximately 20.7% of Stonegate's total deposits. 

The following table shows the composition of deposits as of December 31, 2016 and September 30, 2016:

(in thousands of dollars)			December 31, 2016			September 30, 2016
Noninterest bearing			$	506,796		$	550,057
NOW				332,843			308,911
Money market				1,309,049			1,317,255
Savings				125,186			130,054
Certificates of deposit				173,952			184,788
	Total deposits		$	2,447,826		$	2,491,065

Credit Quality and Allowance for Loan Losses

Loans past due 30-89 days were $387,000 at December 31, 2016, a decrease from $2.65 million at September 30, 2016. Credit card balances past due and accruing totaled $78,000, with $18,000 in balances past due 90 days or more and still accruing at December 31, 2016. Loans past due 90 days or more and still accruing were $471,000 at September 30, 2016. Excluding credit cards, there were no legacy loans (i.e., loans made by Stonegate and not acquired by acquisition), which were past due at December 31, 2016 as compared to $1.7 million at September 30, 2016. Nonaccrual loans stood at $8.6 million at December 31, 2016, a decrease from $9.0 million at September 30, 2016. This decrease was due primarily to $1.65 million of nonaccrual loans which were paid off and three loans for a total of $356,000 which were removed from nonaccrual status, offset by $1.57 million in new loans that were changed to nonaccrual status during the fourth quarter. Legacy nonaccrual loans were approximately $2.6 million at December 31, 2016 versus $1.0 million as of September 30, 2016. Residential loans classified as nonaccrual were $3.5 million or 40.3% of the nonaccrual loans and commercial real estate loans classified as nonaccrual were $1.3 million or 14.9% of the nonaccrual loans as of December 31, 2016. At December 31, 2016, there remained approximately $15.2 million in nonaccretable discounts on loans previously acquired, of which $11.2 million are associated with the loans acquired in the Regent acquisition. None of the acquired loans are subject to a loss share arrangement with the Federal Deposit Insurance Corporation. The following table outlines Stonegate's past due and nonaccrual loans at December 31, 2016:

(dollars in thousands)								Other Acquired
		Legacy Bank			Regent Bank			Bank			Total
Past due 30-89 days		$	60		$	178		$	149		$	387
Past due 90 + days			18			-			-			18
Nonaccrual			2,615			3,684			2,257			8,556
Total		$	2,693		$	3,862		$	2,406		$	8,961

Nonperforming assets (nonaccrual loans and other real estate owned) were $11.3 million as of December 31, 2016, a decrease of $2.5 million from September 30, 2016. Other real estate owned ("OREO") decreased to $2.8 million as of December 31, 2016 as compared to $4.8 million as of September 30, 2016. The decrease of $2.0 million in OREO from September 30, 2016 was from sales of OREO properties obtained in the Regent acquisition. 

The following table outlines nonperforming assets for the periods ended:

(in thousands of dollars)			December 31,  2016				September 30,  2016
Nonaccrual			$	8,556			$	9,024
Other real estate owned				2,792				4,817
	Total nonperforming assets		$	11,348			$	13,841
Nonperforming loans as a percentage of total loans				0.38	%			0.39	%
Nonperforming assets as a percentage of total assets				0.39	%			0.47	%

Loans modified as troubled debt restructuring were $9.5 million and $9.0 million at December 31, 2016 and September 30, 2016, respectively. There were two new loans modified as troubled debt restructuring during the fourth quarter of 2016 for $476,000. Specific reserves allocated to loans modified as troubled debt restructuring increased to $140,000 at December 31, 2016, from $60,000 at September 30, 2016.

At December 31, 2016, the allowance for loan losses was $18.9 million, an increase of $139,000 from September 30, 2016. During the fourth quarter of 2016 recoveries totaled $241,000 and charge-offs were $102,000. Specific reserves increased to $725,000 at December 31, 2016 from $517,000 at September 30, 2016. The allowance for loan losses represented 0.83% of total loans as of December 31, 2016 and 0.82% as of September 30, 2016. 

The following table shows the activity in the allowance for loan losses for the quarters ended:

(in thousands of dollars)		December 31, 2016				September 30, 2016
Balance at beginning of period		$	18,749			$	18,595
Charge-offs			(102	)			(23	)
Recoveries			241				177
Provision for loan losses			-				-
Balance at end of period		$	18,888			$	18,749

The table below reflects the allowance allocation per loan category and percent of loans in each category to total loans for the periods indicated:

			December 31, 2016					September 30, 2016
(in thousands of dollars)
			Amount			%		Amount			%
Commercial			$	2,757		14.6		$	2,600		13.9
Commercial real estate				11,382		60.3			11,484		61.2
Construction and land development				2,024		10.7			2,151		11.5
Residential real estate				2,273		12.0			2,076		11.1
Consumer and other loans				452		2.4			438		2.3
	Total		$	18,888		100.0		$	18,749		100.0

The following is a summary of information pertaining to impaired loans for the three months ended on the date indicated:

(in thousands of dollars)		December 31, 2016			September 30, 2016			December 31, 2015
Impaired loans without a valuation allowance		$	10,151		$	6,776		$	9,437
Impaired loans with a valuation allowance			5,496			5,521			6,571
Total impaired loans		$	15,647		$	12,297		$	16,008
Valuation allowance related to impaired loans		$	725		$	517		$	778

Net Interest Income and Margin

On a tax-equivalent basis Stonegate's net interest income for the three months ended December 31, 2016 was $27.1 million, an increase of approximately $4.6 million from the third quarter of 2016 and an increase of $5.3 million from the fourth quarter 2015. Average earning assets grew $372.6 million from the third quarter of 2016 to the fourth quarter of 2016, primarily a result of $258.8 million increase in loans and a $102.4 million increase in Stonegate's interest-earning deposits with other banks. The acquisition of Regent which closed on September 15, 2016, was the primary reason for the increase in the quarterly earning asset average. The yield on loans increased from 4.77% for the third quarter of 2016 to 5.10% for the fourth quarter of 2016, and was slightly higher than the 5.04% yield for the fourth quarter of 2015. The increase in the loan yield from the fourth quarter of 2016 was due to the increased level of accretable and nonaccretable discounts recognized in the fourth quarter of 2016 versus the third quarter of 2016. During the fourth quarter of 2016 discounts of approximately $1.4 million were recognized on loans which were paid off during the quarter.

The net interest margin on a tax-equivalent basis increased from 3.86% for the third quarter of 2016 to 4.01% for the fourth quarter of 2016. The net interest margin was 4.06% for the fourth quarter of 2015. The average yield on total earning assets was 4.49% for the fourth quarter of 2016 versus 4.32% for the third quarter of 2016. The average yield on interest-bearing liabilities increased three basis points from 0.61% from the third quarter of 2016 to 0.64% for the fourth quarter of 2016. Stonegate's cost of funds has increased from 0.44% for the December 2015 month-to-date average to 0.54% for the December 2016 month-to-date average. 

The following table recaps yields and costs by various interest-earning asset and interest-bearing liability account types for the current quarter, the previous quarter and the same quarter last year. 

Yield and cost table (unaudited)
(in thousands of dollars)
		4th Quarter 2016									3rd Quarter 2016									4th Quarter 2015
		Average Balance			Interest			Rate			Average Balance			Interest			Rate			Average Balance			Interest			Rate
ASSETS
Loans, Net (1)(2)(4)		$	2,298,487		$	29,493		5.10	%		$	2,039,667		$	24,431		4.77	%		$	1,842,950		$	23,412		5.04	%
Investment Securities			117,740			462		1.56				108,676			421		1.54				107,636			446		1.64
Federal Funds Sold			31,793			56		0.70				30,122			54		0.71				27,717			33		0.47
Other Investments (3)			3,831			41		4.26				3,142			34		4.30				2,895			33		4.52
Deposits with interest at banks			236,139			311		0.52				133,734			186		0.55				147,647			115		0.31
Total Earning Assets			2,687,990			30,363		4.49	%			2,315,341			25,126		4.32	%			2,128,845			24,039		4.48	%
LIABILITIES
Savings, NOW and Money Market		$	1,773,901		$	2,649		0.59	%		$	1,532,771		$	2,220		0.58	%		$	1,439,200		$	1,802		0.50	%
Time Deposits			179,820			232		0.51				147,826			218		0.59				173,311			239		0.50
Total Interest Bearing Deposits			1,953,721			2,881		0.59				1,680,597			2,438		0.58				1,612,511			2,041		0.50
Other Borrowings			70,192			392		2.22				58,787			235		1.59				63,371			223		1.40
Total Interest Bearing Liabilities			2,023,913			3,273		0.64	%			1,739,384			2,673		0.61	%			1,675,882			2,264		0.54	%
Net interest spread (tax equivalent basis) (4)								3.85	%								3.71	%								3.94	%
Net interest margin (tax equivalent basis) (5)								4.01	%								3.86	%								4.06	%

(1)		Average balances include nonaccrual loans, and are net of unearned loan fees of $3,408, $3,443 and $2,589 for 4 th quarter 2016, 3rd quarter 2016 and 4 th quarter 2015, respectively.
(2)		Interest income includes fees on loans of $79, $124 and $66 for 4th quarter 2016, 3 rd quarter 2016 and 4th quarter 2015, respectively.
(3)		"Other investments" consists of equity stock in the Federal Home Loan Bank of Atlanta ("FHLB") that Stonegate is required to own based on its transactions with the FHLB.
(4)		Interest income and rates include the effects of a tax equivalent adjustment using applicable statutory tax rates to adjust tax exempt interest income on tax exempt loans to a fully taxable basis.
(5)		Represents net interest income divided by total interest-earning assets.

Noninterest Income

Noninterest income of $2.5 million for the fourth quarter of 2016 increased from $2.1 million for the quarter ended September 30, 2016. The increase in noninterest income was primarily driven by gains on the sale of OREO of approximately $310,000.

Noninterest Expense

Noninterest expense for the three months ended December 31, 2016 increased to $16.9 million from $13.8 million at September 30, 2016, and was greater than the $12.3 million for the three months ended December 31, 2015. The increase in noninterest expense was primarily related to expenses incurred in connection with the Regent acquisition and conversion. 

Salaries and employee benefits increased to $9.1 million for the fourth quarter of 2016 versus $7.2 million for the third quarter of 2016. This compares with $6.7 million for the three months ended December 31, 2015. The increase in salaries and employee benefits in the fourth quarter of 2016 from the third quarter of 2016 was associated with the increase in staff from the Regent acquisition and the payments associated with the conversion of Regent.

Occupancy and equipment expenses increased slightly to $2.5 million for the three months ended December 31, 2016 versus $2.1 million for the three months ended September 30, 2106. The increase was primarily due to the additional offices acquired from Regent. Occupancy and equipment expenses were $2.2 million for the three months ended December 31, 2015. Expenses for merger-related branch closures in the fourth quarter of 2016 were approximately $48,000.

Data processing expenses were $1.7 million and $609,000 for the fourth and third quarters of 2016, respectively. Approximately $1.02 million of data processing expenses in the fourth quarter were related to the Regent data conversion. Additionally during the fourth quarter, approximately $109,000 of the $1.7 million were expenses associated with Regent's data processing prior to conversion. Professional fees for the three months ended December 31, 2016 were $782,000. This compared to professional fees of $1.4 million for the three months ended September 30, 2016 and $431,000 for the three months ended December 31, 2015. During the fourth quarter of 2016 there were $43,000 in legal and other professional fees for merger-related expenses as compared to $672,000 in the third quarter of 2016. There were no merger-related legal or professional fees during the fourth quarter of 2015.

The table below outlines the expenses for the quarters ended:

(in thousands of dollars)		December 31, 2016			September 30, 2016			December 31, 2015
Salaries and employee benefits		$	9,135		$	7,160		$	6,695
Occupancy and equipment expense			2,498			2,134			2,184
FDIC insurance and state assessments			396			389			382
Data processing			1,669			609			431
Loan and other real estate expense			277			186			95
Professional fees			782			1,369			773
Core deposit intangible amortization			489			408			449
Other operating expenses			1,681			1,504			1,331
Totals		$	16,927		$	13,759		$	12,340

During the second quarter of 2016, Stonegate announced that it had become a credit card issuer. As of December 31, 2016, there were a total of 1,130 credit cards issued of which 809 were consumer credit cards and 321 were commercial cards. Expenses associated with rolling out this new product line were approximately $175,000 in the fourth quarter of 2016 and total approximately $498,000 for the year. Looking forward to 2017, Stonegate anticipates additional costs in the first quarter associated with the pending Insignia Bank acquisition and, in the second quarter, with the Insignia data conversion. 

About Stonegate Bank

Stonegate Bank is a full-service commercial bank, providing a wide range of business and consumer financial products and services through its 23 banking offices in its target marketplaces of South and West Florida, which are comprised primarily of Broward, Charlotte, Collier, Hillsborough, Lee, Miami-Dade, Palm Beach and Sarasota Counties in Florida. Stonegate's principal executive office and mailing address is 400 North Federal Highway, Pompano Beach, Florida 33062 and its telephone number is (954) 315-5500.

In conjunction with this earnings report the Company will offer a live participatory conference call to discuss the financial results for the fourth quarter of 2016. This telephone conference call will be held on Monday, January 30, 2017, beginning at 2:30 p.m. Eastern Time. The call-in toll-free telephone number is 1-844-400-1536 and the Conference ID# is 51765207. Participants will be asked for their First Name, Last Name and Company Name. An audio replay of the conference call will be available until February 14, 2017, and may be accessed telephonically at 1-855-859-2056 using Conference ID# 51765207. 

Forward-Looking Statements

Any non-historical statements in this press release are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on current plans and expectations that are subject to uncertainties and risks, which could cause our future results to differ materially. The following factors, among others, could cause our actual results to differ: the strength of the United States economy in general and the strength of the local economies in which we conduct operations; our need and ability to incur additional debt or equity financing; our ability to execute our growth strategy through expansion; our ability to comply with the extensive laws and regulations to which we are subject; changes in the securities and capital markets; changes in general market interest rates; legislative and regulatory changes; monetary and fiscal policies of the U.S. Treasury and the Federal Reserve; changes in the quality or composition of our loan portfolios; demand for loan products; changes in deposit flows, real estate values, and competition and other economic, competitive, and technological factors affecting our operations, pricing, products and services; and our ability to manage the risks involved in the foregoing. Additional factors can be found in our filings with the FDIC, which are available at the FDIC's internet site ( http://www2.fdic.gov/efr ). Forward-looking statements in this press release speak only s of the date of the press release and Stonegate Bank assumes no obligation to update any forward-looking statements or the reasons why actual results could differ.

Stonegate Bank and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands of dollars, except per share data)
				December 31, 2016				December 31, 2015
Assets
Cash and due from banks				$	305,803			$	257,934
Federal funds sold					30,000				30,000
Securities held to maturity (Fair value of $116,719 at December 31, 2016 and $107,659 at December 31, 2015)					116,529				106,619
Other investments					3,833				2,895
Loans, net of allowance for loan losses of $18,888 at December 31, 2016 and $18,149 at December 31, 2015					2,256,048				1,839,421
Premises and equipment, net					38,510				25,769
Bank-owned life insurance					44,011				29,776
Other real estate owned					2,792				1,390
Other assets					104,076				86,634
		Total assets		$	2,901,602			$	2,380,438
Liabilities and Stockholders' Equity
Liabilities
	Total deposits			$	2,447,826			$	2,024,367
	Other borrowings				71,448				58,638
	Subordinated debentures				8,175				-
	Other liabilities				19,040				14,869
		Total liabilities			2,546,489				2,097,874
Stockholders' Equity
	Senior non-cumulative preferred stock; no shares issued and outstanding as of December 31, 2016 and December 31, 2015				-				-
	Common stock, $5 par value, 20,000,000 shares authorized; 14,267,451 issued and 14,264,793 shares outstanding as of December 31, 2016 and 12,752,402 shares issued and 12,749,744 outstanding as of December 31, 2015				71,337				63,762
	Additional paid-in capital				186,948				146,994
	Retained earnings				97,814				73,205
	Treasury Stock				(13	)			(13	)
	Accumulated other comprehensive income (loss)				(973	)			(1,384	)
		Total stockholders' equity			355,113				282,564
		Total liabilities and stockholders' equity		$	2,901,602			$	2,380,438

Stonegate Bank and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (unaudited)
(in thousands of dollars, except per share data)
					For the three months ended
					December 31, 2016			September 30, 2016			December 31, 2015
Interest income:
	Interest and fees on loans				$	29,047		$	23,994		$	23,079
	Interest on securities					462			421			446
	Interest on federal funds sold and at other banks					367			240			148
	Other interest					41			34			33
		Total interest income				29,917			24,689			23,706
Interest expense:
	Interest on deposits					2,881			2,438			2,041
	Other interest					392			235			223
		Total interest expense				3,273			2,673			2,264
			Net interest income			26,644			22,016			21,442
	Provision for loan losses					-			-			300
			Net interest income after provision for loan losses			26,644			22,016			21,142
Noninterest income:
	Service charges and fees on deposit accounts					853			709			772
	Other noninterest income					1,633			1,366			1,740
		Total noninterest income				2,486			2,075			2,512
Noninterest expense:
	Salaries and employee benefits					9,135			7,160			6,695
	Occupancy and equipment expenses					2,498			2,134			2,184
	Data processing					1,669			609			431
	Professional fees					782			1,369			773
	Core deposit intangible amortization					489			408			449
	Other operating expenses					2,354			2,079			1,808
		Total noninterest expense				16,927			13,759			12,340
		Income before income taxes				12,203			10,332			11,314
		Income tax				3,207			3,776			4,050
			Net income applicable to common stock		$	8,996		$	6,556		$	7,264
Earnings per common share:
Basic					$	0.63		$	0.50		$	0.57
Diluted						0.62			0.49			0.56
Average common shares used in the calculation of earnings per share:
Basic						14,218,777			13,102,513			12,704,558
Diluted						14,542,388			13,403,307			13,037,123

Stonegate Bank and Subsidiaries
CONDENSED FINANCIAL HIGHLIGHTS
(in thousands of dollars)
		As of
		December 31,  2016				September 30,  2016				December 31,  2015
BALANCE SHEET ITEMS:
Assets		$	2,901,602			$	2,936,298			$	2,380,438
Loans, net			2,256,048				2,274,142				1,839,422
Deposits			2,447,826				2,491,066				2,024,367
Stockholders' equity			355,113				346,110				282,564
CAPITAL RATIOS:
Total capital to risk weighted assets			12.1	%			11.8	%			11.9	%
Tier 1 capital to risk weighted assets			11.1				10.8				11.0
Common Equity Tier 1 to risk weighted assets			11.1				10.8				11.0
Tier 1 capital to average assets			10.0				10.1				10.0
BALANCE SHEET ITEMS QUARTERLY AVERAGE
Assets		$	2,948,409			$	2,508,264			$	2,375,948
Interest earning assets			2,687,990				2,315,341				2,128,845
Loans, net			2,279,629				2,020,950				1,825,012
Interest bearing liabilities			2,023,913				1,739,384				1,674,333
Deposits			2,499,516				2,119,465				2,015,859
Stockholders' equity			351,730				309,351				279,466

Stonegate Bank and Subsidiaries
CONDENSED FINANCIAL HIGHLIGHTS
(in thousands of dollars, except per share data)
		Three Months Ended
		December 31, 2016			September 30, 2016			December 31,  2015
FINANCIAL DATA:
Net interest income		$	26,644		$	22,016		$	21,442
Net interest income - tax equivalent			27,090			22,453			21,775
Noninterest income			2,486			2,075			2,512
Noninterest expense			16,927			13,759			12,340
Income tax			3,207			3,776			4,050
Net income attributed to common shares			8,996			6,556			7,264
Weighted average number of common shares outstanding:
Basic			14,218,777			13,102,513			12,704,558
Diluted			14,542,388			13,403,307			13,037,123
Per common share data:
Basic		$	0.63		$	0.50		$	0.57
Diluted			0.62			0.49			0.56
Cash dividend declared to common shares			1,141			1,134			1,020

Non-GAAP Financial Measures

This press release contains financial information determined by methods other than in accordance with GAAP. Stonegate's management uses these non-GAAP financial measures in their analysis of Stonegate's performance. These measures typically adjust GAAP performance measures include the tax benefit associated with revenue items that are tax-exempt, as well as adjust income available to common shareholders for certain significant activities or transactions, such as merger-related expenses, that in management's opinion can distort period-to-period comparisons of Stonegate's performance. Since the presentation of these GAAP performance measures and their impact differ between companies, management believes presentations of these non-GAAP financial measures provide useful supplemental information that is essential to a proper understanding of the operating results of Stonegate's core business. These non-GAAP disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Reconciliations of GAAP to non-GAAP disclosures in this press release are set forth below.

Reconciliation of GAAP to non-GAAP Measures
(in thousands of dollars, except per share data)
		December 31, 2016			September 30, 2016
Interest income, as reported (GAAP)		$	29,917		$	24,689
Tax equivalents adjustments			446			437
Interest income (tax equivalent)		$	30,363		$	25,126
Net interest income, as reported (GAAP)		$	26,644		$	22,016
Tax equivalent adjustments			446			437
Net interest income (tax equivalent)		$	27,090		$	22,453
Net income (GAAP)			8,996			6,556
Non-interest expense adjustments:
Merger and acquisition related expenses			1,719			181
Branch closure expenses			-			94
Professional expenses			45			672
Tax effect using the effective tax rate for the period presented			645			346
Cumulative effect of early adoption of ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting			1,252			-
Net operating income		$	8,860		$	7,157
Net operating income per common share		$	0.62		$	0.55