Press Release

Select Bancorp Reports Fourth Quarter and Year-End 2020 Earnings

Company Release - 1/26/2021 5:00 PM ET

DUNN, N.C., Jan. 26, 2021 (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, 2020 of $8.2 million, or $0.46 and $0.45 per basic and diluted share, respectively, as compared to 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 37.4% in net income compared to the year ended December 31, 2019. Net income per share declined approximately 33.3% for basic and 33.8% for diluted per share for the year ended December 31, 2019. The decline in net income is primarily attributable to an increase of $5.8 million in loan loss allowance provision during 2020 as compared to 2019, incurring debt extinguishment expenses of $1.6 million for the payoff of $45.0 million of FHLB advances with a composite rate of 2.76% during the 2020 4th quarter, recognized $755,000 in integration expenses during the year related to the acquisition of three branches in western North Carolina, and $2.3 million in deferred interest income related to COVID-19 loan modifications. These items were partially offset by $2.6 million in revenue from loan fees associated with loans originated by the Bank as part of the U.S. Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”), recognized under the effective interest rate method. The number of weighted shares outstanding decreased due to the repurchase by the Company of 834,608 shares of common stock completed during 2020. Management expects the repurchase of shares to continue in 2021 under the Company’s previously announced stock repurchase plan.

For the three-month period ended December 31, 2020, the Company reported net income of $3.9 million, or $0.22 per basic and diluted share, respectively, as compared to net income of $2.5 million, or $0.14 per basic and diluted share, respectively, for the three months ended September 30, 2020, representing an increase of 57.1% in net income for the 2020 fourth quarter.

Initiatives to expand the market footprint of the franchise reduced net income in 2020 compared to 2019 due to the increased expenses associated with the opening of a new branch in Cornelius, North Carolina (the Charlotte area) and the acquisition of three western North Carolina branches mentioned above.

Net Interest Income and Net Interest Margin

Net interest income was $16.0 million for the fourth quarter of 2020 compared to $11.9 million for the same period in 2019. On a comparative quarter basis, the Company’s total interest income was positively affected by increased loan balances due to growth. Loan yields decreased but were partially offset by increased loan fee income primarily from PPP loan forgiveness. On a comparative quarter basis, the Company’s total interest income was positively affected by increased investment balances due to growth which was partially offset by decreasing investment yields. Average total interest-earning assets were $1.6 billion in the fourth quarter of 2020 compared to $1.2 billion for the same period in 2019. The yield on those assets decreased 27 basis points, from 5.05% in the fourth quarter of 2019 to 4.78% for the same period in 2020. This was primarily due to lower rates on recently purchased investments and cash in other banks on a comparative quarter basis.

The Company’s average interest-bearing liabilities increased by $333.4 million, to $1.1 billion for the quarter ended December 31, 2020, from $801.4 million for the fourth quarter of 2019. The cost of those funds decreased from 1.46% to 0.94%, or 52 basis points. During the fourth quarter of 2020, the Company’s net interest margin was 4.10% and net interest spread was 3.84%. In the fourth quarter of 2019, net interest margin was 4.05% and net interest spread was 3.59%.

Net interest income was $52.4 million for the year ended December 31, 2020, an increase of $5.6 million from the $46.9 million in net interest income reported for the year ended December 31, 2019. The Company’s total interest income increased by approximately $4.8 million in 2020 versus 2019, and the cost of funds decreased by approximately $797,000 from the prior period. The Company’s increase in total interest income was fueled by an increase in loans and purchases of securities. Average total interest-earning assets were $1.4 billion for 2020 compared with $1.2 billion for 2019, while the yield on those assets decreased 46 basis points from 5.03% to 4.57%, which was primarily due to the decrease in rates on purchased investment securities and other earning assets.

The Company’s average interest-bearing liabilities increased by $183.4 million, to $978.6 million for the year ended December 31, 2020, from $795.2 million for the year ended December 31, 2019, with the cost of those funds decreasing from 1.45% to 1.10%, or 35 basis points. For the year ended December 31, 2020, the Company’s net interest margin was 3.79% and net interest spread was 3.47%. For the year ended December 31, 2019, net interest margin was 4.04% and net interest spread was 3.58%.

Provision for Loan Losses and Asset Quality

During the fourth quarter of 2020, the Company recorded a provision for loan losses of $400,000, 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 $302,000 provision for the fourth quarter of 2019. In the third quarter of 2020, the Company recorded a provision for loan losses of $1.6 million, based primarily on economic disruptions due to COVID-19, net charge-offs of $104,000 and changes in qualitative loan factors during the quarter. In the fourth quarter of 2020, the Company incurred net recoveries of $147,000, a net recovery rate of 0.05% of average loans, compared to a net charge-off rate of 0.04% in the third quarter of 2020.

For the year ended December 31, 2020, the Company recorded a provision for loan losses of $6.2 million, compared to a provision of $438,000 for 2019. This increase for 2020 was based primarily on the market disruption from COVID-19 and its effect on economic indicators, loan growth, net charge-offs incurred and the increase in qualitative loan factors. The net charge-off ratio for the year ended December 31, 2020 was 0.04%, compared to 0.08% for the year ended December 31, 2019.

The allowance for loan losses as a percentage of gross loans at December 31, 2020 was 1.08% compared to 0.81% at December 31, 2019. At December 31, 2020 the allowance for loan losses amounted to $14.1 million and the credit mark on acquired loans amounted to $6.4 million which could be used to absorb loan charge offs.

Non-interest Income

Non-interest income for the quarter ended December 31, 2020 was $1.5 million, an increase of $95,000 from $1.4 million in the fourth quarter of 2019. Service charges on deposit accounts decreased $12,000, to $291,000 for the quarter ended December 31, 2020, from $303,000 for the fourth quarter of 2019. Other non-deposit fees and income increased $7,000 from the fourth quarter of 2019 to the fourth quarter of 2020. Fees from presold mortgages increased by $100,000 in the fourth quarter of 2020 to $248,000, from $148,000 in the fourth quarter of 2019. The Company did not sell any investment securities in the fourth quarter of 2020 or fourth quarter of 2019.

Non-interest income for the year ended December 31, 2020 was $6.1 million, an increase of $701,000, or 12.9%, from the year ended December 31, 2019. Service charges on deposit accounts decreased $69,000, to $1.1 million, for the year ended December 31, 2020 from $1.2 million for the year ended December 31, 2019. Other non-deposit fees and income increased $158,000 from the year ended December 31, 2019 to the year ended December 31, 2020. Fees from presold mortgages increased non-interest income by $660,000 in 2020 to $1.4 million from $753,000 for 2019. The Company sold two investment securities for a gain of $48,000 in 2019. The Company did not sell any investment securities during 2020.

Non-interest Expenses

Non-interest expenses increased by $3.0 million, or 33.4%, to $12.1 million for the quarter ended December 31, 2020, from $9.1 million for the same period in 2019. The following are highlights of the significant categories of non-interest expenses during the fourth quarter of 2020 compared to the same period in 2019:

  • Personnel expenses increased $825,000, to $6.0 million, primarily due to increased staff for new and acquired branches, employment taxes and benefits costs.
  • Foreclosed real estate-related expense increased $233,000, primarily due to write-downs and maintenance expenses.
  • Deposit insurance expense increased by $355,000.
  • Debt extinguishment expenses of $1.6 million were incurred due to the payoff of FHLB advances.
  • Merger/integration-related expenses associated with branch purchases and divestitures decreased by $171,000.
  • Other non-interest expenses increased by $193,000, primarily due to additional branches and other various administrative related non-interest expenses.

Non-interest expenses increased by $5.2 million, or 14.8%, to $41.9 million for the twelve months ended December 31, 2020, from $35.1 million for the same period in 2019. The following are highlights of the significant categories of non-interest expenses during the twelve months ended December 31, 2020 versus 2019:

  • Personnel expenses increased $2.9 million, to $23.1 million, primarily due to additions in branch staff plus cost of living increases and related employment taxes and benefit costs.
  • Occupancy and equipment expenses increased by $216,000 primarily due to branch acquisitions and branch start-up.
  • Deposit insurance expense increased $624,000.
  • Professional fees decreased by $234,000.
  • Information systems expense increased $609,000 due primarily to additional software and security costs plus additional accounts from branch acquisitions.
  • Debt extinguishment expenses of $1.6 million were incurred due to the payoff of FHLB advances.
  • Merger/integration-related expenses increased by $349,000 primarily due to the acquisition of three branches in western North Carolina during 2020.
  • Foreclosed real estate expenses increased $623,000 due to write downs and disposal costs in 2020.

Income Taxes

The Company’s effective tax rate was 22.1% and 22.4% for the quarters ended December 31, 2020 and 2019, respectively. The Company’s effective tax rate was 21.3% and 22.1% for the years ended December 31, 2020 and 2019, respectively.

Balance Sheet and Capital

Total assets at December 31, 2020 were $1.7 billion, a 35.6% increase from a year earlier. Gross loans at December 31, 2020 were $1.3 billion, up $274.4 million, or 26.6%, from a year earlier; total deposits were $1.5 billion, an increase of $493.0 million, or 49.7%, from a year earlier.

Retail deposit growth (excludes brokered deposits and internet time deposits) grew at a rate of 49.65% for 2020. Wholesale deposits decreased from $45.0 million at December 31, 2019 to $4.6 million at December 31, 2020 as we continued to emphasize core deposit growth to replace wholesale deposits.

Comments of the Chief Executive Officer

William L Hedgepeth, II, President and CEO of the Company, commented, “Our commitment to expand our market footprint and implement our initiatives continued in 2020 even as we addressed major disruptions in the economy caused by the COVID-19 pandemic. We opened the Cornelius branch in the Charlotte market in early February plus acquired three branches in western North Carolina in mid-April during the height of the pandemic. We were very involved in assisting businesses in the communities we serve with the Small Business Administration’s Paycheck Protection Program (PPP) and working hand-in-hand with customers who requested temporary loan modifications to provide time for those businesses to adopt changes to their operations as they adjusted to the new normal.”

“With the onset of the COVID-19 pandemic, Select Bank & Trust stood ready to assist our customers. We granted 467 COVID-19 deferrals totaling $254.2 million at the beginning of the pandemic. As of December 31, 2020, we had 48 COVID-19 deferrals outstanding that totaled $32.7 million or 2.5% of total loans outstanding. We remain prepared to work with our customers that might need assistance in 2021.”

“We also originated 1,242 SBA PPP loans totaling $95.2 million. As of December 31, 2020, we had 786 SBA PPP loans remaining with outstanding balances totaling $55.5 million or 4.3% of total loans outstanding. Many of those loans are in varying stages of forgiveness. In 2020 we recognized $2.6 million in SBA PPP fee income. We stand ready to assist our customers and prospective customers in 2021 should they decide to pursue SBA PPP loans for their businesses.”

Mr. Hedgepeth added, “We continue to review opportunities for expansion 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 expansion which meet our criteria.”

About Select Bank & Trust Company

Select Bank & Trust has 22 full-service offices in these North Carolina communities: Dunn, Burlington, Charlotte, Clinton, Cornelius (Charlotte), Elizabeth City, Fayetteville, Franklin, Goldsboro, Greenville, Highlands, Holly Springs (Raleigh area), Leland, Lillington, Lumberton, Morehead City, Raleigh, Sylva and Wilmington, North Carolina; in the following South Carolina communities: Blacksburg and Rock Hill; and in Virginia Beach, Virginia. The Bank also has loan production offices in Wilson, Durham and Winston-Salem, North Carolina.

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: the ongoing COVID-19 pandemic and measures intended to prevent its spread, which include wide disruptions to business activity that may impact the financial strength of our borrowers; 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 divestures and consolidations; regulatory changes; impacts from the recent presidential election, change in congressional leadership, and change in executive branch leadership, including regulatory agendas that may impact the business climate in which we operate; 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, 2020 September 30, 2020June 30, 2020 March 31, 2020 December 31, 2019 
  (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited) 
      
    (Dollars in thousands)
 
ASSETS           
            
Cash and due from banks $23,324  $25,068  $24,037  $20,030  $19,110  
Interest-earning deposits in other banks 87,399   249,541   157,521   35,544   50,920  
Federal funds sold  5,364   8,046   9,726   11,673   9,047  
Investment securities available for sale, at fair value 194,492   87,434   62,958   64,738   72,367  
Loans held for sale  2,064   2,945   3,455   1,606   928  
Loans  1,304,384   1,283,457   1,249,999   1,039,514   1,029,975  
Allowance for loan losses  (14,108)  (13,561)  (12,054)  (10,586)  (8,324) 
 NET LOANS 1,290,276   1,269,896   1,237,945   1,028,928   1,021,651  
            
Accrued interest receivable  5,110   4,486   4,400   3,839   4,189  
Stock in Federal Home Loan Bank of Atlanta, at cost  1,147   3,059   3,059   3,059   3,045  
Other non-marketable securities  709   718   718   718   719  
Foreclosed real estate  2,172   3,237   3,561   3,737   3,533  
Premises and equipment, net  20,587   20,883   20,893   17,868   17,791  
Right of use lease asset  8,558   8,756   8,953   8,414   8,596  
Bank owned life insurance  30,432   30,271   30,110   29,950   29,789  
Goodwill  42,907   41,914   41,914   24,579   24,579  
Core deposit intangible ("CDI")  1,513   1,677   1,856   1,431   1,610  
Other assets  13,991   14,015   7,854   7,380   7,202  
 TOTAL ASSETS$1,730,045  $1,771,946  $1,618,960  $1,263,494  $1,275,076  
            
LIABILITIES AND SHAREHOLDERS' EQUITY         
Deposits:           
Demand $395,916  $408,209  $400,098  $250,031  $240,305  
Savings  51,843   51,629   52,597   41,815   43,128  
Money market and NOW  649,677   610,275   495,609   306,051   280,145  
Time  388,381   402,667   390,449   384,754   429,260  
 TOTAL DEPOSITS 1,485,817   1,472,780   1,338,753   982,651   992,838  
            
Short-term debt  -   20,000   20,000   20,000   -  
Long-term debt  12,372   37,372   37,372   37,372   57,372  
Lease Liability  8,930   9,089   9,243   8,669   8,813  
Accrued interest payable  246   449   457   536   578  
Accrued expenses and other liabilities 7,312   18,889   1,597   2,181   2,700  
 TOTAL LIABILITIES 1,514,677   1,558,579   1,407,422   1,051,409   1,062,301  
            
Shareholders' Equity           
Common stock  17,507   17,787   17,863   18,056   18,330  
Additional paid-in-capital  135,058   137,130   137,559   138,788   140,870  
Retained earnings  60,838   56,917   54,460   53,779   52,675  
Common stock issued to deferred compensation trust  (2,416)  (2,352)  (2,553)  (2,791)  (2,815) 
Directors' Deferred Compensation Plan Rabbi Trust 2,416   2,352   2,553   2,791   2,815  
Accumulated other comprehensive income 1,965   1,533   1,656   1,462   900  
 TOTAL SHAREHOLDERS' EQUITY 215,368   213,367   211,538   212,085   212,775  
            
 TOTAL LIABILITIES & SHAREHOLDERS' EQUITY$1,730,045  $1,771,946  $1,618,960  $1,263,494  $1,275,076  
            



  
SELECT BANCORP, INC. 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 
(Unaudited) 
               
 For the Three Months Ended For the Twelve Months Ended 
 December 31,
2020
 September
30, 2020
 June 30, 2020 March 31,
2020
 December 31,
2019
 December 31,
2020
 December 31,
2019
 
   
 (Dollars in thousands, except for share amounts)
 
INTEREST INCOME              
Loans$17,901 $15,404 $14,086 $13,589  $14,124 $60,980 $54,605 
Federal funds sold and interest-earning deposits in other banks 52  54  33  168   258  307  1,838 
Investments 752  367  381  421   434  1,921  2,003 
TOTAL INTEREST INCOME 18,705  15,825  14,500  14,178   14,816  63,208  58,446 
               
INTEREST EXPENSE              
Money market, NOW and savings deposits 1,041  891  648  348   420  2,928  1,616 
Time deposits 1,269  1,415  1,576  1,931   2,075  6,191  8,061 
Short-term debt 131  145  141  87   6  504  62 
Long-term debt 240  263  281  352   447  1,136  1,817 
TOTAL INTEREST EXPENSE 2,681  2,714  2,646  2,718   2,948  10,759  11,556 
               
NET INTEREST INCOME 16,024  13,111  11,854  11,460   11,868  52,449  46,890 
               
PROVISION FOR LOAN LOSSES 400  1,638  1,933  2,273   302  6,244  438 
               
NET INTEREST INCOME AFTER PROVISION              
FOR LOAN LOSSES 15,624  11,473  9,921  9,187   11,566  46,205  46,452 
               
NON-INTEREST INCOME              
Fees on the sale of mortgages 248  517  355  293   148  1,413  753 
Gain on securities -  -  -  -   -  -  48 
Service charges on deposit accounts 291  257  206  338   303  1,092  1,161 
Other fees and income 1,002  950  850  813   995  3,615  3,457 
TOTAL NON-INTEREST INCOME 1,541  1,724  1,411  1,444   1,446  6,120  5,419 
               
NON-INTEREST EXPENSE              
Personnel 5,977  5,742  5,786  5,632   5,152  23,137  20,278 
Occupancy and equipment 986  1,008  986  931   973  3,911  3,695 
Deposit insurance 374  370  76  (12)  19  808  184 
Professional Fees 430  399  451  372   503  1,652  1,886 
CDI amortization 164  179  195  179   193  717  825 
Merger/acquisition related expenses -  7  709  39   171  755  406 
Information systems 1,049  1,043  972  1,038   974  4,102  3,492 
Foreclosed-related expenses 342  228  187  5   109  762  140 
Debt extinguishment 1,616  -  -  -   -  1,616  - 
Other 1,193  1,091  1,140  1,063   1,000  4,487  4,234 
TOTAL NON-INTEREST EXPENSE 12,131  10,067  10,502  9,247   9,094  41,947  35,140 
               
INCOME BEFORE INCOME TAXES 5,034  3,130  830  1,384   3,918  10,378  16,731 
               
INCOME TAXES 1,113  673  149  280   877  2,215  3,696 
NET INCOME$3,921 $2,457 $681 $1,104  $3,041 $8,163 $13,035 
NET INCOME PER COMMON SHARE OUTSTANDING             
Basic$0.22 $0.14 $0.04 $0.06  $0.17 $0.46 $0.69 
Diluted$0.22 $0.14 $0.04 $0.06  $0.16 $0.45 $0.68 
               
WEIGHTED AVERAGE COMMON              
Basic Outstanding Shares 17,637,540  17,847,913  18,013,863  18,255,351   18,414,393  17,937,596  19,016,808 
Diluted Outstanding Shares 17,661,922  17,866,822  18,030,136  18,287,064   18,460,118  17,961,258  19,063,237 
               



               
Select Bancorp, Inc.              
Asset quality              
               
 For Periods Ended 
 December 31,
2020
 September
30, 2020
 June 30, 2020 March 31,
2020
 December 31,
2019
 December 31,
2020
 December 31,
2019
 
   
 (Dollars in thousands, except for share amounts, unaudited) 
Non-accrual loans$6,790  $7,695  $7,979  $7,201  $5,941  $6,790  $5,941  
Accruing TDRs 7,506   6,044   6,420   5,619   6,207   7,506   6,207  
Total non-performing loans 14,296   13,739   14,399   12,820   12,148   14,296   12,148  
Foreclosed real estate 2,172   3,237   3,561   3,737   3,533   2,172   3,533  
Total non-performing assets$16,468  $16,976  $17,960  $16,557  $15,681  $16,468  $15,681  
               
Accruing loans past due 90 days or more$802  $1,548  $1,326  $1,182  $1,231  $802  $1,231  
Allowance for loan losses$14,108  $13,561  $12,054  $10,586  $8,324  $14,108  $8,324  
               
Non-performing loans to period ending loans 1.10%  1.07%  1.15%  1.23%  1.18%  1.10%  1.18% 
Non-performing loans & accruing loans past due 90 days or more to period ending loans 1.16%  1.19%  1.26%  1.35%  1.30%  1.16%  1.30% 
Allowance for loans to period end loans 1.08%  1.06%  0.96%  1.02%  0.81%  1.08%  0.81% 
Allowance for loans to non-performing loans 99%  99%  84%  83%  69%  99%  69% 
Allowance for loans to non-performing Assets 86%  80%  67%  64%  53%  86%  53% 
Allowance for loans to non-performing Assets and accruing loans past due 90 days or more 82%  73%  63%  60%  49%  82%  49% 
Non-performing assets to total assets 0.95%  0.96%  1.11%  1.31%  1.23%  0.95%  1.23% 
Non-performing assets to accruing loans past due 90 days or more to total assets 1.00%  1.05%  1.19%  1.40%  1.33%  1.00%  1.33% 
               
               
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,
2020
 September
30, 2020
 June 30, 2020 March 31,
2020
 December 31,
2019
 December 31,
2020
 December 31,
2019
 
Net interest margin:              
Net Interest Margin-tax equivalent (1)$16,075  $13,141  $11,883  $11,489  $11,901  $52,588  $47,037  
Purchased loan accretion and early payoff charges (506)  (455)  (620)  (105)  (226)  (1,581)  (904) 
Net Interest Margin(2) (Non-GAAP)$15,569  $12,686  $11,263  $11,384  $11,675  $51,007  $46,133  
               
Loans receivable interest income:              
Loans receivable interest income$17,913  $15,415  $14,097  $13,600  $14,135  $61,025  $54,645  
Purchased loan accretion and early payoff charges (506)  (455)  (620)  (105)  (226)  (1,581)  (904) 
Loans receivable interest income (Non-GAAP)$17,407  $14,960  $13,477  $13,495  $13,909  $59,444  $53,741  
               
Acquired and non-acquired loans:              
Acquired loans receivable$180,152  $199,794  $213,466  $122,363  $129,595  $180,152  $129,595  
Non-acquired loans receivable 1,124,232   1,083,663   1,036,533   917,151   900,380   1,124,232   900,380  
Total gross loans receivable$1,304,384  $1,283,457  $1,249,999  $1,039,514  $1,029,975  $1,304,384  $1,029,975  
% Acquired 13.8%  15.6%  17.1%  11.8%  12.6%  13.8%  12.6% 
               
Non-acquired loans$1,124,232  $1,083,663  $1,036,533  $917,151  $900,380  $1,124,232  $900,380  
Allowance for loan losses 14,108   13,561   12,054   10,586   8,324   14,108   8,324  
Allowance for loan losses to non-acquired loans (Non-GAAP) 1.25%  1.25%  1.16%  1.15%  0.92%  1.25%  0.92% 
               
Total gross loan receivable$1,304,384  $1,283,457  $1,249,999  $1,039,514  $1,029,975  $1,304,384  $1,029,975  
Allowance for loan losses 14,108   13,561   12,054   10,586   8,324   14,108   8,324  
Allowance for loan losses to total gross loans receivable 1.08%  1.06%  0.96%  1.02%  0.81%  1.08%  0.81% 
               
               
               
 For Periods Ended 
 December 31,
2020
 September 30,
2020
 June 30, 2020 March 31,
2020
 December 31,
2019
 December 31,
2020
 December 31,
2019
 
Tangible common equity              
Total shareholders' equity$215,368  $213,367  $211,538  $212,085  $212,775  $215,368  $212,775  
Adjustment:              
Goodwill 42,907   41,914   41,914   24,579   24,579   42,907   24,579  
Core deposit intangibles 1,513   1,677   1,856   1,431   1,610   1,513   1,610  
Tangible common equity$170,948  $169,776  $167,768  $186,075  $186,586  $170,948  $186,586  
Common shares outstanding(3) 17,507,103   17,786,552   17,862,554   18,055,692   18,330,058   17,507,103   18,330,058  
Book value per common share(4)$12.30  $12.00  $11.84  $11.75  $11.61  $12.30  $11.61  
Tangible book value per common share(5)$9.76  $9.55  $9.39  $10.31  $10.18  $9.76  $10.18  
               
(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 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, 
  2020  2020  2020   2020   2019  2020  2019  2018  
            
Summary of Operations:              
Total interest income$18,705  $15,825  $14,500  $14,178  $14,816  $63,208  $58,446  $56,835  
Total interest expense 2,681   2,714   2,646   2,718   2,948   10,759   11,556   9,450  
Net interest income 16,024   13,111   11,854   11,460   11,868   52,449   46,890   47,385  
Provision for loan losses 400   1,638   1,933   2,273   302   6,244   438   (156) 
Net interest income after provision 15,624   11,473   9,921   9,187   11,566   46,205   46,452   47,541  
Noninterest income 1,541   1,724   1,411   1,444   1,446   6,120   5,419   4,701  
Merger/acquisition related expenses -   7   709   39   171   762   406   1,826  
Noninterest expense 12,130   10,060   9,793   9,208   8,923   41,185   34,734   32,724  
Income before income taxes 5,035   3,130   830   1,384   3,918   10,378   16,731   17,692  
Provision for income taxes 1,113   673   149   280   877   2,215   3,696   3,910  
Net Income 3,922   2,457   681   1,104   3,041   8,163   13,035   13,782  
                 
Share and Per Share Data:                
Earnings per share - basic$0.22  $0.14  $0.04  $0.06  $0.17  $0.46  $0.69  $0.87  
Earnings per share - diluted$0.22  $0.14  $0.04  $0.06  $0.16  $0.45  $0.68  $0.87  
Book value per share$12.30  $12.00  $11.84  $11.75  $11.61  $12.30  $11.61  $10.85  
Tangible book value per share(1)$9.76  $9.55  $9.39  $10.31  $10.18  $9.76  $10.18  $9.47  
Ending shares outstanding 17,507,103   17,786,552   17,862,554   18,055,692   18,330,058   17,507,103   18,330,058   19,311,505  
Weighted average shares outstanding:                
Basic 17,637,540   17,847,913   18,134,607   18,255,351   18,414,393   17,937,596   19,016,808   15,812,585  
Diluted 17,661,922   17,866,822   18,157,992   18,287,064   18,460,118   17,961,258   19,063,237   15,877,633  
                 
Selected Performance Ratios:                
Return on average assets(2) 0.87%  0.58%  0.18%  0.35%  0.95%  0.52%  1.03%  1.12% 
Return on average equity(2) 7.26%  4.56%  1.28%  2.07%  5.67%  3.81%  6.08%  8.51% 
Net interest margin 4.10%  3.73%  3.45%  4.03%  4.05%  3.79%  4.04%  4.19% 
Efficiency ratio (3) 69.06%  67.82%  73.83%  71.36%  67.02%  70.32%  66.40%  62.83% 
                 
Period End Balance Sheet Data:                
Gross loans$1,304,384  $1,283,457  $1,249,999  $1,039,514  $1,029,975  $1,304,384  $1,029,975  $986,040  
Total interest-earning assets 1,529,322   1,429,614   1,222,416   1,137,010   1,167,857   1,529,322   1,167,857   1,119,344  
Goodwill 42,907   41,914   41,914   24,579   24,579   42,907   24,579   24,579  
Core deposit intangible 1,513   1,677   1,856   1,431   1,610   1,513   1,610   2,085  
Total assets 1,730,045   1,771,946   1,618,960   1,263,494   1,275,076   1,729,426   1,275,076   1,258,525  
Deposits 1,485,817   1,472,780   1,338,753   982,651   992,838   1,485,817   992,838   980,427  
Short-term debt -   20,000   20,000   20,000   -   -   -   7,000  
Long-term debt 12,372   37,372   37,372   37,372   57,372   12,372   57,372   57,372  
Shareholders' equity 215,368   213,367   211,538   212,085   212,775   215,368   212,775   209,611  
                 
Selected Average Balances:                
Gross Loans$1,288,138  $1,255,027  $1,193,985  $1,020,630  $1,017,750  $1,189,894  $1,004,051  $987,634  
Total interest-earning assets 1,561,104   1,403,106   1,321,172   1,147,631   1,166,758   1,386,187   1,164,149   1,119,344  
Core Deposit Intangible 1,572   1,743   1,529   1,507   1,680   1,588   1,812   2,547  
Total Assets 1,784,289   1,683,174   1,520,278   1,255,943   1,272,475   1,561,865   1,268,728   1,228,576  
Deposits 1,499,162   1,399,840   1,237,343   972,162   989,721   1,278,068   981,132   989,838  
Short-term debt 17,609   20,000   20,000   12,747   -   17,596   3,414   21,393  
Long-term debt 34,383   37,438   37,438   44,625   57,372   38,440   57,372   49,357  
Shareholders' equity 214,861   214,277   213,796   214,502   212,849   214,360   214,324   161,953  
                 
Asset Quality Ratios:                
Nonperforming loans (4)$14,296  $13,739  $14,399  $12,820  $12,148  $14,296  $12,148  $11,635  
Other real estate owned 2,172   3,237   3,561   3,737   3,533   2,172   3,533   1,088  
Allowance for loan losses 14,108   13,561   12,054   10,586   8,324   14,108   8,324   8,669  
Nonperforming loans (4) to period-end loans 1.10%  1.07%  1.15%  1.23%  1.18%  1.10%  1.18%  1.18% 
Allowance for loan losses to period-end loans 1.08%  1.06%  0.96%  1.02%  0.81%  1.08%  0.81%  0.88% 
Delinquency ratio (5) 0.46%  0.17%  0.22%  0.43%  0.34%  0.46%  0.34%  0.19% 
Net loan charge-offs (recoveries) to average loans (2) -0.05%  0.04%  0.16%  0.00%  0.01%  0.04%  0.08%  0.00% 
                 
(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

 


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Source: Select Bancorp Inc.