State Bank Financial Corporation announced unaudited financial results for the quarter ended September 30, 2016.  Net income for the third quarter of 2016 was $12.4 million, compared to $14.0 million in the second quarter of 2016 and $9.1 million in the third quarter of 2015.  Fully diluted earnings per share were $.34 in the third quarter of 2016 compared to $.38 in the second quarter of 2016 and $.25 in the third quarter of 2015.  Interest income on loans improved to $26.6 million in the third quarter, a $1.2 million increase from the second quarter of 2016 and a $2.4 million increase from the third quarter of 2015.  The increase in interest income on loans as well as lower noninterest expense helped offset a decline in accretion income in the third quarter of 2016.

Joe Evans, Chairman and CEO of State Bank Financial, commented, “This was another solid quarter.  I am very pleased with the way we continue to balance the delivery of current operating results with the build-out of markets and lines of business for the future.”

Operating Highlights

Net interest income of $38.1 million in the third quarter of 2016 decreased from $41.7 million in the second quarter of 2016 but increased from $37.4 million in the third quarter of 2015.  Accretion income on loans was $9.3 million in the third quarter of 2016, down from $14.0 million in the second quarter of 2016 and $11.2 million in the third quarter of 2015.  Accretion income in the second quarter of 2016 was positively impacted by a $4.1 million gain from one loan pool closing.  There were no loan pool closings during the third quarters of 2016 or 2015.  As of September 30, 2016, approximately $72 million of accretable discount remains to be recognized as loan accretion income.

Noninterest income was $9.8 million in the third quarter of 2016, compared to $10.2 million in the second quarter of 2016 and $8.9 million in the third quarter of 2015.  Excluding gain on sale of securities, noninterest income declined $103 thousand, or 1.0%, from the previous quarter and increased $854 thousand, or 9.6%, from the third quarter of 2015.  In the third quarter of 2016, income from mortgage banking and SBA lending totaled $3.2 million and $1.6 million, respectively.  Payroll fee income of $1.1 million increased versus the prior quarter and prior year periods.

Total noninterest expense for the third quarter of 2016 was $28.5 million, a $2.2 million decrease from the second quarter of 2016, and a $3.9 million decrease from the third quarter of 2015.  The decline was due primarily to lower salary and employee benefit costs, which were down $863 thousand from the previous quarter.  Merger-related expenses totaled $135 thousand in the third quarter of 2016 compared to $319 thousand in the second quarter of 2016.

Financial Condition

Total assets at September 30, 2016 were $3.62 billion, up from $3.59 billion at June 30, 2016.  Total loans were $2.3 billion at September 30, 2016, up $1.3 million from the second quarter of 2016.  Period-end organic and purchased non-credit impaired loans increased to $2.2 billion at September 30, 2016, a net increase of $8.9 million from the second quarter of 2016.  Purchased credit impaired loans decreased to $126.8 million at the end of the third quarter of 2016, a $7.7 million linked-quarter decline.

Tom Wiley, Vice Chairman and President, commented, “We originated over $390 million in new loans in the third quarter, but this was offset by a record level of paydowns as a number of our real estate clients profitably cashed out on their projects.  Our loan pipeline remains strong as does our expectation for continued strong longer-term growth without compromising our high credit standards.”

The organic loan portfolio continued to perform well in the third quarter of 2016 as past due organic loans represented .09% of total organic loans.  The allowance as a percent of loans declined three basis points to 1.07% at the end of the third quarter of 2016 and covers organic nonperforming assets by more than three times.

Total deposits at September 30, 2016 were $2.96 billion, up from $2.89 billion at the end of the second quarter of 2016.  Period-end transaction accounts, comprised of noninterest-bearing demand deposits and interest-bearing transaction accounts, increased $76.3 million from the second quarter of 2016.  Noninterest-bearing demand deposits represented 30.1% of total deposits as of September 30, 2016.  Average noninterest-bearing demand deposits decreased $25.3 million from the second quarter of 2016.

Tangible book value per share was $13.99 at the end of the third quarter of 2016.  State Bank Financial Corporation continues to be well capitalized, ending the quarter with a leverage ratio of 14.64% and a Tier I risk-based capital ratio of 16.68%.

Recent Events

On April 5, 2016, State Bank Financial announced the signing of a definitive agreement to acquire NBG Bancorp, Inc. and its wholly-owned subsidiary, The National Bank of Georgia, in a cash and stock transaction with a purchase price of approximately $68 million.  At September 30, 2016, The National Bank of Georgia had assets of approximately $415 million, loans of approximately $356 million, deposits of approximately $323 million, a branch and mortgage office in Athens, and a branch office in Gainesville, Georgia.  At a special meeting held on July 25, 2016, NBG Bancorp, Inc. received shareholder approval for the transaction.  The completion of the transaction is subject to receipt of regulatory approvals and satisfaction of other customary closing conditions.  On October 26, 2016, State Bank Financial and NBG Bancorp executed an amendment to the merger agreement extending the date that the merger may be terminated from December 31, 2016 to March 31, 2017.

On May 19, 2016, State Bank Financial announced the signing of a definitive agreement to acquire S Bankshares, Inc. and its wholly-owned subsidiary, S Bank, in a cash and stock transaction with a purchase price of approximately $11 million.  At September 30, 2016, S Bank had assets of approximately $110 million, loans of approximately $81 million, and deposits of approximately $92 million.  S Bank has banking operations in Savannah, Glennville, Reidsville, and Hinesville, Georgia.  The completion of the transaction is subject to receipt of regulatory approvals and satisfaction of other customary closing conditions, including approval of S Bankshares shareholders.  On October 26, 2016, State Bank Financial and S Bankshares executed an amendment to the merger agreement extending the date that the merger may be terminated from December 31, 2016 to February 28, 2017.

As noted in the previous paragraphs, State Bank Financial requested and was granted an extension of both merger agreements into the first quarter of 2017 as we determined additional time may be required to obtain regulatory approvals and to satisfy closing conditions necessary to complete the respective mergers.  No other changes to the merger agreements were made.  While we anticipate receiving regulatory approvals for both transactions by the end of 2016, these extensions will provide additional time for the parties to close the mergers if such regulatory approvals are not obtained until the first quarter of 2017.  However, no assurance can be given as to when or if the necessary regulatory approvals will be received.