Press Release

Select Bancorp Reports Fourth Quarter and Year-End 2019 Earnings

Company Release - 1/24/2020 4:35 PM ET

DUNN, N.C., Jan. 24, 2020 (GLOBE NEWSWIRE) -- Select Bancorp, Inc. (NASDAQ: SLCT) (the “Company”), the holding company for Select Bank & Trust Company (the “Bank”), today reported net income for the year ended December 31, 2019 of $13.0 million, or $0.69 and $0.68 per basic and diluted share, respectively. This was a decrease of 5.4% in net income compared to the year ended December 31, 2018.  Net income per share declined approximately 20.7% for basic and 21.8% for diluted share from the $0.87 per basic and diluted share reported for the year ended December 31, 2018. The additional decline in per share results is primarily attributable to the increase in weighted average shares outstanding during 2019 as compared to 2018, as the Company issued 5,270,834 shares of common stock in the third quarter of 2018 in a public offering. The increase in weighted shares outstanding was partially offset by common stock share repurchases completed during 2019.

For the three-month period ended December 31, 2019, the Company reported net income of $3.0 million, or $0.17 and $0.16 per basic and diluted share, respectively, a decrease of 6.1% in net income compared to the three months ended September 30, 2019.  The per share results were relatively flat on a linked-quarter basis due to a reduction in weighted average shares outstanding in the 2019 fourth quarter as compared to the 2019 third quarter, as the Company made additional share repurchases during the last six months of 2019.

The decrease in net income in 2019 compared to 2018 was impacted by expenses associated with new branches in Holly Springs, North Carolina (the Raleigh area) and Virginia Beach, Virginia plus the sale of our Six Mile, South Carolina branch and the closing of the Washington, North Carolina branch.  Expenses were also incurred with newly opened loan production offices located in Winston-Salem and Durham, North Carolina in preparation for the anticipated February 2020 opening of a branch in Cornelius, North Carolina (Charlotte area).

Net Interest Income and Net Interest Margin

Net interest income was $11.9 million for the fourth quarter of 2019 and 2018. On a comparative quarter basis, the Company’s total interest income was positively affected by increased loan balances due to growth and increasing yield which was offset by an increase in securities at a lower yield and a reduction in other earning assets at a lower yield. Average total interest-earning assets were $1.2 billion in the fourth quarter of 2019 and 2018.  The yield on those assets increased 13 basis points, from 4.92% in the fourth quarter of 2018 to 5.05% for the same period in 2019.  This was primarily due to higher rates on recently originated loans which was offset with a reduction of accretion from acquired loans on a comparative quarter basis.

The Company’s average interest-bearing liabilities decreased by $17.2 million, to $801.4 million for the quarter ended December 31, 2019, from $818.6 million for the third quarter in 2019 to take advantage of the reduced rate environment, with the cost of those funds decreasing from 1.52% to 1.46%, or 6 basis points. During the fourth quarter of 2019, the Company’s net interest margin was 4.05% and net interest spread was 3.59%. In the third quarter of 2019, net interest margin was 3.94% and net interest spread was 3.46%.  

Net interest income was $46.9 million for the year ended December 31, 2019, a decrease of $495,000 from the $47.4 million in net interest income reported for the year ended December 31, 2018. While the Company’s total interest income increased by approximately $1.6 million in 2019 versus 2018, this increase was more than offset by an increase in interest in the cost of funds of approximately $2.1 million. The Company’s increase in total interest income was fueled by an increase in loans and purchases of securities with higher yields. Average total interest-earning assets were $1.2 billion for 2019 compared with $1.1 billion for 2018, while the yield on those assets increased 1 basis point from 5.02% to 5.03%, which was primarily due to the increase in rates on purchased investment securities and other earning assets.

The Company’s average interest-bearing liabilities decreased by $28.4 million, to $795.2 million for the year ended December 31, 2019, from $823.6 million for the year ended December 31, 2018, with the cost of those funds increasing from 1.15% to 1.45%, or 30 basis points. For the year ended December 31, 2019, the Company’s net interest margin was 4.04% and net interest spread was 3.58%.  For the year ended December 31, 2018, net interest margin was 4.19% and net interest spread was 3.88%. The increase in the interest rates on deposits was the primary driver of a lower net interest margin in 2019.

Provision for Loan Losses and Asset Quality

During the fourth quarter of 2019, the Company recorded a provision for loan losses of $302,000, based primarily on loan growth and adjustments to qualitative loan factors related to trends in the loan portfolio. On a comparative quarter basis, the Company had a $395,000 reverse provision for the fourth quarter of 2018. In the third quarter of 2019, the Company recorded a provision of loan losses of $231,000, based primarily on net charge-offs of $478,000 and improved qualitative loan factors during the quarter.  In the fourth quarter of 2019, the Company incurred net charge-offs of $33,000, a net charge-off rate of 0.01% of average loans, compared to a net charge-off rate of 0.19% in the third quarter of 2019.

For the year ended December 31, 2019, the Company recorded a provision for loan losses of $438,000, compared to a recovery of $156,000 for 2018. This increase for 2019 was based primarily on loan growth and net charge-offs incurred that were partially offset by the reduction of qualitative loan factors.  In 2018, the reverse provision was driven primarily by a reduction in the concentration ratios in commercial real estate and construction loans exceeding regulatory concentration guidelines. This reduction was a result of the Company’s equity investment of $25.0 million in the Bank from the proceeds of the August 2018 common stock offering. The net charge-off ratio for the year ended December 31, 2019 was 0.08%, compared to 0.0% for the year ended December 31, 2018.

Non-interest Income

Non-interest income for the quarter ended December 31, 2019 was $1.4 million, a decrease of $2,000 from $1.4 million in the third quarter of 2019. Service charges on deposit accounts decreased $5,000, to $303,000 for the quarter ended December 31, 2019, from $308,000 for the third quarter in 2019. Other non-deposit fees and income increased $121,000 from the third quarter of 2019 to the fourth quarter of 2019. Fees from presold mortgages decreased by $70,000 in the fourth quarter of 2019 to $148,000, from $218,000 in the third quarter of 2019. The Company sold two investment securities in the third quarter of 2019 for a gain of $48,000. The Company did not sell any investment securities in the fourth quarter of 2019.

Non-interest income for the year ended December 31, 2019 was $5.4 million, an increase of $718,000, or 15.3%, from the year ended December 31, 2018. Service charges on deposit accounts increased $37,000, to $1.2 million, for the year ended December 31, 2019 from $1.1 million for the year ended December 31, 2018. Other non-deposit fees and income increased $377,000 from the year ended December 31, 2018 to the year ended December 31, 2019. Fees from presold mortgages increased non-interest income by $256,000 in 2019 to $753,000 from $497,000 for 2018. The Company sold two investment securities for a gain of $48,000 in 2019. The Company did not sell any investment securities during 2018.

Non-interest Expenses

Non-interest expenses increased by $1.2 million, or 15.6%, to $9.1 million for the quarter ended December 31, 2019, from $7.9 million for the same period in 2018. The following are highlights of the significant categories of non-interest expenses during the fourth quarter of 2019 compared to the same period in 2018:

  • Personnel expenses increased $709,000, to $5.2 million, due to increased staff for new branches, employment taxes and benefits costs.
  • Foreclosed real estate-related expense increased $75,000, primarily due to maintenance expenses and property taxes.
  • There was an increase of $375,000 in information system expenses in the fourth quarter of 2019, primarily due to additional software and cyber security costs.
  • Professional fees increased by $121,000, to $503,000, primarily due to expenses associated with branch purchases and divestitures.
  • Deposit insurance expense increased by $8,000, primarily due to growth, which was offset by a credit from the FDIC as a result of regulatory changes in the premium calculation.
  • Occupancy and equipment expense decreased by $95,000, to $973,000, due to a reduction in repairs and maintenance, as offset by branch additions and divestitures.
  • Merger-related expenses increased by $171,000 due to branch purchases and divestitures.
  • Other non-interest expenses decreased by $95,000, primarily due to decreases in various administrative related non-interest expenses.

Non-interest expenses increased by $590,000, or 1.7%, to $35.1 million for the twelve months ended December 31, 2019, from $34.6 million for the same period in 2018. The following are highlights of the significant categories of non-interest expenses during the twelve months ended December 31, 2019 versus 2018:

  • Personnel expenses increased $2.0 million, to $20.3 million, due to net additions in branch staff, employment taxes and benefit costs.
  • Occupancy and equipment expenses increased by $29,000 due to branch acquisition and start-up which was offset by a reduction of repairs and maintenance expenses.
  • Core deposit intangible amortization expense decreased by $191,000 in 2019 due to normal amortization.
  • Deposit insurance expense decreased $444,000 due to receiving a credit from the FDIC as a result of regulatory changes in the premium calculation.
  • Information systems expense increased $120,000 due primarily to additional software and security costs.
  • Merger/integration-related expenses decreased by $1.4 million compared to the non-recurring 2018 merger cost associated with the acquisition of Premara Financial, Inc. and its subsidiary, Carolina Premier Bank.
  • Foreclosed real estate expenses increased $25,000 due to increased property taxes and write downs in 2019.

Income Taxes

The Company’s effective tax rate was 22.4% and 21.5% for the quarters ended December 31, 2019 and 2018, respectively.  The Company’s effective tax rate was 22.1% for the years ended December 31, 2019 and 2018, respectively.

Balance Sheet and Capital

Total assets at December 31, 2019 were $1.3 billion, a 1.3% increase from a year earlier.  Gross loans at December 31, 2019 were $1.0 billion, up $43.9 million or 4.5% from a year earlier; total deposits were $1.0 billion, an increase of $12.4 million or 1.3% from a year earlier.

Retail deposit growth (excludes brokered deposits and internet time deposits) grew at a rate of 2.60% for 2019. Wholesale deposits decreased from $56.5 million at December 31, 2018 to $45.0 million at December 31, 2019 as we emphasized core deposit growth to replace wholesale deposits.

Agreement to Acquire Three Branches in Western North Carolina

On December 23, 2019, the Bank announced it had entered into an agreement to acquire three Entegra Bank branches in western North Carolina. Entegra Bank was acquired by First-Citizens Bank & Trust Company effective December 31, 2019. The branches are being divested as required under agreements with the U.S. Department of Justice, Antitrust Division, and the Federal Reserve in connection with Entegra’s acquisition by First Citizens.

The branches are located at 473 Carolina Way, Highlands, NC; 498 East Main Street, Sylva, NC; and 30 Hyatt Road, Franklin, NC. As part of the agreement, the Bank will assume approximately $180 million in deposits and will purchase approximately $110 million in loans. The transaction is expected to close in April 2020, subject to regulatory approval. 

Comments of the Chief Executive Officer and Other Matters

William L Hedgepeth, II, President and CEO of Select Bancorp, commented, “Our fourth quarter results built upon the growth we experienced earlier in the year as we expanded into the Raleigh market with our Holly Springs branch and we opened in Virginia Beach with an acquired branch.  Our second Charlotte office is on the drawing board with an expected opening date in February.  We are building our capabilities with targeted hiring to support LPOs opened in the Durham and Winston-Salem markets.  As part of our continuing review of the Bank’s performance, we sold one branch and consolidated another in the fourth quarter. We also entered into an agreement to acquire three branches in western North Carolina, and are excited to expand our footprint into these new markets.”

“Our core profitability improved as a result of proactively addressing the pricing of our loans and deposits. We were able to reduce the cost of interest-bearing deposits from 1.40% in the third quarter of 2019 to 1.33% in the fourth quarter.  In this same time period, our yield on loans increased from 5.50% in the third quarter of 2019 to 5.51% in the fourth quarter of 2019.  As a result, our net interest margin increased from 3.94% in the third quarter of 2019 to 4.05% in the fourth quarter of 2019.   We are extremely proud of those performance improvements in this challenging rate environment.”

“We review opportunities for acquisitions and analyze each with a discipline designed to properly deploy the capital entrusted to us.  Our share repurchase program remains active, and we are able to return capital to shareholders by buying our shares when market conditions warrant.  We intend to retain adequate capital for any acquisitions which meet our criteria.”

Other matters of interest to shareholders are:

  • The Company purchased 581,518 shares of Company common stock during 2019, completing the repurchase plan authorized by the Board of Directors in 2016.
  • The Board of Directors approved a new stock repurchase plan for 937,248 shares in September 2019.
  • The Company purchased an additional 426,742 shares of the Company’s common stock under the new repurchase plan during 2019.
  • Loan growth was over $15 million in the fourth quarter of 2019.

About Select Bank & Trust Company

Select Bank & Trust has 18 full-service offices in these North Carolina communities: Dunn, Burlington, Charlotte, Clinton, Elizabeth City, Fayetteville, Goldsboro, Greenville, Holly Springs (Raleigh area), Leland, Lillington, Lumberton, Morehead City, Raleigh, and Wilmington, North Carolina; in the following South Carolina communities: Blacksburg and Rock Hill; and in Virginia Beach, Virginia.

About Select Bancorp, Inc.

Select Bancorp, Inc. is a bank holding company headquartered in Dunn, North Carolina. The Company primarily conducts operations through its wholly owned subsidiary, Select Bank & Trust Company, a North Carolina-chartered commercial bank that provides a full suite of banking services through its offices in North Carolina, South Carolina, and Virginia. The Company’s common stock is listed on the Nasdaq Global Market under the symbol “SLCT”.

Non-GAAP Financial Measures

Certain financial measures we use to evaluate our performance and discuss in this release and the accompanying tables are identified as being “non-GAAP financial measures.” In accordance with the rules of the Securities and Exchange Commission, or the SEC, we classify a financial measure as being a non-GAAP (generally accepted accounting principles) financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts, that are included or excluded, as the case may be, in the most directly comparable measure calculated and presented in accordance with GAAP as in effect from time to time in the United States in our statements of operations, balance sheet or statements of cash flows. Non-GAAP financial measures do not include operating and other statistical measures or ratios or statistical measures calculated using exclusively either financial measures calculated in accordance with GAAP, operating measures or other measures that are not non-GAAP financial measures or both.

The non-GAAP financial measures that we discuss in this release should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which we calculate the non-GAAP financial measures that we discuss in this release may differ from that of other companies reporting measures with similar names. You should understand how such other banking organizations calculate their financial measures similar, or with names similar, to the non-GAAP financial measures we have discussed in this release when comparing such non-GAAP financial measures.

Tangible book value per share is a non-GAAP measure generally used by financial analysts and investment bankers to evaluate financial institutions. We calculate: (a) tangible common equity as shareholders’ equity less goodwill and core deposit intangibles; and (b) tangible book value per share as tangible common equity (as described in clause (a)) divided by shares of common stock outstanding. For tangible book value per share, the most directly comparable financial measure calculated in accordance with GAAP is our book value per share. A reconciliation of tangible book value per share to book value per share is included in the tables that accompany this release. 

We believe that this measure is important to many investors in the marketplace who are interested in changes from period to period in book value per share exclusive of changes in intangible assets. Goodwill and other intangible assets have the effect of increasing total book value while not increasing our tangible book value.

Important Note Regarding Forward-Looking Statements

This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, (i) statements regarding certain of our goals and expectations with respect to earnings, revenue, and expenses and the growth rate in such items, as well as other measures of economic performance, including statements relating to anticipated market share growth, and (ii) statements preceded by, followed by or that include the words “may,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” “projects,” “outlook” or similar expressions. The actual results might differ materially from those projected in the forward-looking statements for various reasons, including, but not limited to: our ability to manage growth or achieve it at all; substantial changes in financial markets; our ability to obtain the synergies and expense efficiencies anticipated from our acquisition activity and branch divestitures and consolidations; regulatory changes; changes in interest rates; loss of deposits and loan demand to other savings and financial institutions; adverse economic conditions that impact our borrowers’ ability to pay their debts when due; and changes in real estate values and the real estate market. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in the Company’s SEC filings, including its periodic reports under the Securities Exchange Act of 1934, as amended, copies of which are available upon request from the Company. Except as required by law, the Company assumes no obligation to update the forward-looking statements publicly or to update the reasons actual results could differ materially from those anticipated in the forward-looking statements, even if new information becomes available in the future.

 
SELECT BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
           
  December 31, 2019
 September 30, 2019
 June 30, 2019
 March 31, 2019  December 31, 2018 
  (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited)
   
  (Dollars in thousands)
ASSETS          
           
Cash and due from banks 19,110  20,052  20,397  15,586  17,059 
Interest-earning deposits in other banks50,920  53,093  100,584  44,894  121,303 
Certificates of deposit -  500  500  1,000  1,000 
Federal funds sold 9,047  10,728  21,961  9,809  - 
Investment securities available for sale, at Fair Value 72,367  76,941  83,102  86,727  51,533 
Loans held for sale 928  1,714  826  354  580 
Loans 1,029,975  1,014,928  997,062  991,801  986,040 
Allowance for loan losses (8,324) (8,056) (8,303) (8,510) (8,669)
NET LOANS 1,021,651  1,006,872  988,759  983,291  977,371 
           
Accrued interest receivable 4,189  3,902  4,028  4,120  3,889 
Stock in Federal Home Loan Bank of Atlanta, at cost 3,045  3,045  3,045  3,342  3,283 
Other non-marketable securities 719  719  718  738  762 
Foreclosed real estate 3,533  1,442  1,468  1,046  1,088 
Premises and equipment, net 17,791  18,150  18,274  17,715  17,920 
Right of use lease asset 8,596  8,776  8,953  8,750  - 
Bank owned life insurance 29,789  29,621  29,451  29,282  29,117 
Goodwill 24,579  24,579  24,579  24,579  24,579 
Core deposit intangible ("CDI") 1,610  1,803  2,011  1,866  2,085 
Assets held for sale -  -  -  668  668 
Other assets 7,202  7,697  8,141  8,310  6,288 
TOTAL ASSETS 1,275,076  1,269,634  1,316,797  1,242,077  1,258,525 
           
LIABILITIES AND SHAREHOLDERS' EQUITY        
Deposits:          
Demand 240,305  243,889  252,666  240,262  247,007 
Savings 43,128  43,355  46,037  48,080  51,811 
Money market and NOW 280,145  283,414  292,629  262,169  254,482 
Time 429,260  417,015  438,918  400,455  427,127 
TOTAL DEPOSITS 992,838  987,673  1,030,250  950,966  980,427 
           
Short-Term Debt -  -  -  7,000  7,000 
Long-Term Debt 57,372  57,372  57,372  57,372  57,372 
Lease Liability 8,813  8,951  9,086  8,842  - 
Accrued interest payable 578  596  637  519  667 
Accrued expenses and other liabilities2,700  2,993  2,607  3,927  3,448 
TOTAL LIABILITIES 1,062,301  1,057,585  1,099,952  1,028,626  1,048,914 
           
Shareholders' Equity          
Common stock 18,330  18,513  19,262  19,326  19,312 
Additional paid-in-capital 140,870  142,878  150,275  150,877  150,718 
Retained Earnings 52,675  49,634  46,395  42,947  39,640 
Common stock issued to deferred compensation trust (2,815) (2,730) (2,652) (2,652) (2,615)
Directors' Deferred Compensation Plan Rabbi Trust2,815  2,730  2,652  2,652  2,615 
Accumulated other comprehensive income (loss)900  1,024  913  301  (59)
TOTAL SHAREHOLDERS' EQUITY 212,775  212,049  216,845  213,451  209,611 
           
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY 1,275,076  1,269,634  1,316,797  1,242,077  1,258,525 
           



SELECT BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
 For the Three Months Ended  For the Twelve Months Ended
 December 31,
2019
 September 30,
2019
 June 30,
2019
 March 31,
2019
 December 31,
2018
 December 31,
2019
 December 31,
2018
INTEREST INCOME             
Loans14,124 13,924  13,515  13,042 13,503  54,605 53,796 
Federal funds sold and interest-earning deposits in other banks258 581  456  543 678  1,838 1,618 
Investments434 503  601  465 363  2,003 1,421 
TOTAL INTEREST INCOME14,816 15,008  14,572  14,050 14,544  58,446 56,835 
              
INTEREST EXPENSE             
Money market, NOW and savings deposits420 433  407  356 362  1,616 1,339 
Time deposits2,075 2,248  1,985  1,753 1,785  8,061 6,293 
Short-term debt6 4  26  26 43  62 328 
Long-term debt447 455  457  458 454  1,817 1,490 
TOTAL INTEREST EXPENSE2,948 3,140  2,875  2,593 2,644  11,556 9,450 
              
NET INTEREST INCOME11,868 11,868  11,697  11,457 11,900  46,890 47,385 
              
PROVISION FOR (RECOVERY OF) LOAN LOSSES302 231  (207) 112 (395) 438 (156)
              
NET INTEREST INCOME AFTER             
PROVISION FOR LOAN LOSSES11,566 11,637  11,904  11,345 12,295  46,452 47,541 
              
NON-INTEREST INCOME             
Fees on the sale of mortgages148 218  230  157 204  753 497 
Gain on securities0 48  0  0 0  48 0 
Service charges on deposit accounts303 308  284  266 294  1,161 1,124 
Other fees and income995 874  814  774 746  3,457 3,080 
TOTAL NON-INTEREST INCOME1,446 1,448  1,328  1,197 1,244  5,419 4,701 
              
NON-INTEREST EXPENSE             
Personnel5,152 5,124  5,031  4,971 4,443  20,278 18,304 
Occupancy and equipment973 1,073  922  727 1,068  3,695 3,666 
Deposit insurance19 (30) 90  105 11  184 628 
Professional Fees503 518  483  382 382  1,886 1,394 
CDI amortization193 208  205  219 232  825 1,016 
Merger/acquisition related expenses171 128  107  0 0  406 1,826 
Information systems974 852  877  789 599  3,492 3,372 
Foreclosed-related expenses109 (9) 10  30 34  140 115 
Other1,000 1,067  1,086  1,081 1,095  4,234 4,229 
TOTAL NON-INTEREST EXPENSE9,094 8,931  8,811  8,304 7,864  35,140 34,550 
              
INCOME BEFORE INCOME TAXES3,918 4,154  4,421  4,238 5,675  16,731 17,692 
              
INCOME TAXES877 915  973  931 1,221  3,696 3,910 
NET INCOME3,041 3,239  3,448  3,307 4,454  13,035 13,782 
NET INCOME PER COMMON SHARE OUTSTANDING            
Basic0.17 0.17  0.18  0.17 0.23  0.69 0.87 
Diluted0.16 0.17  0.18  0.17 0.23  0.68 0.87 
              
WEIGHTED AVERAGE COMMON             
Basic Outstanding Shares18,414,393 19,028,572  19,318,358  19,315,686 19,302,263  19,016,808 15,812,585 
Diluted Outstanding Shares18,460,118 19,073,235  19,359,492  19,365,354 19,360,050  19,063,237 15,877,633 
              


Select Bancorp, Inc.             
Asset quality             
              
 For Periods Ended
 December 31,
2019
 September 30,
2019
 June 30,
2019
 March 31,
2019
 December 31,
2018
 December 31,
2019
 December 31,
2018
              
Non-accrual loans 5,941   9,083   10,521   6,337   7,257   5,941   7,257 
Accruing TDRs 6,207   6,477   6,061   5,246   4,378   6,207   4,378 
Total non-performing loans 12,148   15,560   16,582   11,583   11,635   12,148   11,635 
Foreclosed real estate 3,533   1,442   1,468   1,046   1,088   3,533   1,088 
Total non-performing assets 15,681   17,002   18,050   12,629   12,723   15,681   12,723 
              
Accruing loans past due 90 days or more 1,231   2,296   2,447   3,146   3,167   1,231   3,167 
Allowance for loan losses 8,324   8,056   8,303   8,510   8,669   8,324   8,669 
              
Non-performing loans to period ending loans 1.18%  1.53%  1.66%  1.17%  1.18%  1.18%  1.18%
Non-performing loans & accruing loans past due 90 days or more to period ending loans 1.30%  1.76%  1.91%  1.49%  1.50%  1.30%  1.50%
Allowance for loans to period end loans 0.81%  0.79%  0.83%  0.86%  0.88%  0.81%  0.88%
Allowance for loans to non-performing loans 69%  52%  50%  73%  75%  69%  75%
Allowance for loans to non-performing Assets 53%  47%  46%  67%  68%  53%  68%
Allowance for loans to non-performing Assets and accruing loans past due 90 days or more 49%  42%  41%  54%  55%  49%  55%
Non-performing assets to total assets 1.23%  1.34%  1.37%  1.02%  1.01%  1.23%  1.01%
Non-performing assets to accruing loans  past due 90 days or more to total assets 1.33%  1.52%  1.56%  1.27%  1.26%  1.33%  1.26%
              
              
SELECT BANCORP, INC.             
Reconciliation of GAAP to Non-GAAP Measures             
($ in thousands, except per share data, unaudited)             
              
 For the Three Months Ended For the Twelve Months Ended
 December 31,
2019
 September 30,
2019
 June 30,
2019
 March 31,
2019
 December 31,
2018
 December 31,
2019
 December 31,
2018
Net interest margin - core:               
Net Interest Margin-tax equivalent (1) 11,901   11,903   11,740   11,496   11,937   47,037   47,535 
Purchased loan accretion and early payoff charges (226)  (210)  (268)  (200)  (404)  (904)  (3,051)
Net Interest Margin - core (2) (Non-GAAP) 11,675   11,693   11,472   11,296   11,533   46,133   44,484 
              
Loans receivable interest income - core:             
Loans receivable interest income 14,124   13,924   13,515   13,042   13,503   54,645   53,822 
Purchased loan accretion and early payoff charges (226)  (210)  (268)  (200)  (404)  (904)  (3,051)
Loans receivable interest income - core (Non-GAAP) 13,898   13,714   13,247   12,842   13,099   53,741   50,771 
              
Acquired and non-acquired loans:             
Acquired loans receivable 129,595   141,765   152,090   173,771   186,243   129,595   186,243 
Non-acquired loans receivable 900,380   873,163   844,972   818,030   799,797   900,380   799,797 
Total gross loans receivable 1,029,975   1,014,928   997,062   991,801   986,040   1,029,975   986,040 
% Acquired 12.6%  14.0%  15.3%  17.5%  18.9%  12.6%  18.9%
              
Non-acquired loans 900,380   873,163   844,972   818,030   799,797   900,380   799,797 
Allowance for loan losses 8,324   8,056   8,303   8,510   8,669   8,324   8,669 
Allowance for loan losses to non-acquired loans (Non-GAAP) 0.92%  0.92%  0.98%  1.04%  1.08%  0.92%  1.08%
              
Total gross loan receivable 1,029,975   1,014,928   997,062   991,801   986,040   1,029,975   986,040 
Allowance for loan losses 8,324   8,056   8,303   8,510   8,669   8,324   8,669 
Allowance for loan losses to total gross loans receivable 0.81%  0.79%  0.83%  0.86%  0.88%  0.81%  0.88%
              
              
              
 For Periods Ended
 December 31,
2019
 September 30,
2019
 June 30,
2019
 March 31,
2019
 December 31,
2018
 December 31,
2017
 December 31,
2016
Tangible common equity               
Total shareholders' equity$212,775  $212,049  $216,845  $213,451  $209,611  $136,115  $104,273 
Adjustment:             
Goodwill 24,579   24,579   24,579   24,579   24,579   24,904   6,931 
Core deposit intangibles 1,610   1,803   2,011   1,866   2,085   3,101   810 
Tangible common equity$186,586  $185,667  $190,255  $187,006  $182,947  $108,110  $96,532 
Common shares outstanding(3) 18,330,058   18,513,078   19,261,989   19,326,485   19,311,505   14,009,137   11,645,413 
Book value per common share(4)$11.61  $11.45  $11.26  $11.04  $10.85  $9.72  $8.95 
Tangible book value per common share(5)$10.18  $10.03  $9.88  $9.68  $9.47  $7.72  $8.29 
              
(1) Net interest margin-tax equivalent reflects tax-exempt income on a tax-equivalent basis.
(2) Net interest margin-core and yield on loans - core excludes the impact of purchase accounting accretion, loan payoff charges and related deferred fees recognized related to early loan repayments.
(3) Excludes the dilutive effect of common stock issuable upon exercise of stock options.        
(4) We calculate book value per common share as shareholders' equity less preferred stock at the end of the relevant period divided by the outstanding number of shares of our common stock at the end of the relevant period.
(5) We calculate the tangible book value per common share as total shareholders' equity less goodwill, preferred stock and core deposit intangibles, divided by the number of outstanding shares of our common stock at the end of the relevant period.
         



Select Bancorp, Inc.               
Selected Financial Information and Other Data            
($ in thousands, except share and per share data)            
                
 For the Quarter Ended For the Year Ended
                
 December 31, September 30, June 30, March 31, December 31, December 31, December 31, December 31,
 201920192019 2019 2018201920182017
           
Summary of Operations:             
Total interest income$14,816  $15,008  $14,572  $14,050  $14,544  $58,446  $56,835  $39,617 
Total interest expense 2,948   3,140   2,875   2,593   2,644   11,556   9,450   5,106 
Net interest income 11,868   11,868   11,697   11,457   11,900   46,890   47,385   34,511 
Provision for loan losses 302   231   (207)  112   (395)  438   (156)  1,367 
Net interest income after provision 11,566   11,637   11,904   11,345   12,295   46,452   47,541   33,144 
Noninterest income 1,446   1,448   1,328   1,197   1,244   5,419   4,701   3,072 
Merger/acquisition related expenses 171   128   107   -   -   406   1,826   2,166 
Noninterest expense 8,923   8,803   8,704   8,304   7,864   34,734   32,724   25,153 
Income before income taxes 3,918   4,154   4,421   4,238   5,675   16,731   17,692   8,897 
Provision for income taxes 877   915   973   931   1,221   3,696   3,910   5,712 
Net Income 3,041   3,239   3,448   3,307   4,454   13,035   13,782   3,185 
Dividends on Preferred Stock -   -   -   -   -   -   -   - 
Net income available to common shareholders$3,041  $3,239  $3,448  $3,307  $4,454  $13,035  $13,782  $3,185 
                
Share and Per Share Data:               
Earnings per share - basic$0.17  $0.17  $0.18  $0.17  $0.23  $0.69  $0.87  $0.27 
Earnings per share - diluted$0.16  $0.17  $0.18  $0.17  $0.23  $0.68  $0.87  $0.27 
Book value per share$11.61  $11.45  $11.26  $11.04  $10.85  $11.61  $10.85  $9.72 
Tangible book value per share(1)$10.18  $10.03  $9.88  $9.68  $9.47  $10.18  $9.47  $7.72 
Ending shares outstanding 18,330,058   18,513,078   19,261,989   19,326,485   19,311,505   18,330,058   19,311,505   14,009,137 
Weighted average shares outstanding:               
Basic 18,414,393   19,028,572   19,318,358   19,315,686   19,302,263   19,016,808   15,812,585   11,763,050 
Diluted 18,460,118   19,073,235   19,359,492   19,365,354   19,360,050   19,063,237   15,877,633   11,826,977 
                
Selected Performance Ratios:               
Return on average assets(2) 0.95%  0.99%  1.10%  1.08%  1.39%  1.03%  1.12%  0.35%
Return on average equity(2) 5.67%  5.93%  6.41%  6.32%  8.52%  6.08%  8.51%  2.93%
Net interest margin 4.05%  3.94%  4.06%  4.09%  4.03%  4.04%  4.19%  4.09%
Efficiency ratio (3) 67.02%  66.11%  66.83%  65.62%  59.83%  66.40%  62.83%  66.93%
                
Period End Balance Sheet Data:               
Gross loans$1,029,975  $1,014,928  $997,062  $991,801  $986,040  $1,029,975  $986,040  $982,626 
Total interest-earning assets 1,167,857   1,153,612   1,148,417   1,103,691   1,119,344   1,167,857   1,119,344   1,063,322 
Goodwill 24,579   24,579   24,579   24,579   24,579   24,579   24,579   24,904 
Core deposit intangible 1,610   1,803   2,011   1,866   2,085   1,610   2,085   3,101 
Total assets 1,275,076   1,269,634   1,316,797   1,242,077   1,258,525   1,275,076   1,258,525   1,194,135 
Deposits 992,838   987,673   1,030,250   950,966   980,427   992,838   980,427   995,044 
Short-term debt -   -   -   7,000   7,000   -   7,000   28,279 
Long-term debt 57,372   57,372   57,372   57,372   57,372   57,372   57,372   19,372 
Shareholders' equity 212,775   212,049   216,845   213,451   209,611   212,775   209,611   136,115 
                
Selected Average Balances:               
Gross Loans$1,017,750  $1,013,331  $982,876  $985,059  $990,504  $1,004,051  $987,634  $732,089 
Total interest-earning assets 1,166,758   1,197,266   1,160,387   1,086,958   1,141,604   1,164,149   1,119,344   813,773 
Core Deposit Intangible 1,680   1,878   1,741   1,951   2,171   1,812   2,547   640 
Total Assets 1,272,475   1,300,137   1,261,972   1,238,847   1,267,479   1,268,728   1,228,576   898,943 
Deposits 989,721   1,013,504   970,011   949,771   987,180   981,132   989,838   738,310 
Short-term debt -   -   6,824   7,000   10,348   3,414   21,393   34,523 
Long-term debt 57,372   57,372   57,372   57,372   57,372   57,372   49,357   14,239 
Shareholders' equity 212,849   216,556   215,722   212,130   207,331   214,324   161,953   108,709 
                
Asset Quality Ratios:               
Nonperforming loans (4)$12,148  $15,560  $16,582  $11,583  $11,635  $12,148  $11,635  $6,978 
Other real estate owned 3,533   1,442   1,468   1,046   1,088   3,533   1,088   1,258 
Allowance for loan losses 8,324   8,056   8,303   8,510   8,669   8,324   8,669   8,835 
Nonperforming loans (4) to period-end loans 1.18%  1.53%  1.66%  1.17%  1.18%  1.18%  1.18%  0.71%
Allowance for loan losses to period-end loans 0.81%  0.79%  0.83%  0.86%  0.88%  0.81%  0.88%  0.90%
Delinquency ratio (5) 0.34%  0.09%  0.12%  0.41%  0.19%  0.34%  0.19%  0.48%
Net loan charge-offs (recoveries) to average loans (2) 0.01%  0.19%  0.00%  0.11%  0.01%  0.08%  0.00%  0.13%
                
(1)  Tangible book value per share (a non GAAP measure) is equal to total shareholders’ equity less goodwill and core deposit intangibles, divided by the number of outstanding shares of our common stock at the end of the relevant period. Please refer to the table above for a reconciliation of this non-GAAP measure.
(2)  Annualized.               
(3)  Efficiency ratio is calculated as a non-interest expenses divided by the sum of net interest income and non-interest income.
(4)  Nonperforming loans consist of non-accrual loans and accruing TDR loans.       
(5)  Delinquency Ratio includes loans 30-89 days past due and excludes non-accrual loans.      
       

Mark A. Jeffries
Executive Vice President
Chief Financial Officer
Office: 910-892-7080 and Direct: 910-897-3603
markj@SelectBank.com
SelectBank.com

Select Bancorp.jpg

Source: Select Bancorp Inc.