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Select Bancorp Reports First Quarter 2019 Earnings

DUNN, N.C., April 30, 2019 (GLOBE NEWSWIRE) -- Select Bancorp, Inc. (the “Company” NASDAQ: SLCT), the holding company for Select Bank & Trust Company, today reported net income for the quarter ended March 31, 2019 of $3.3 million with basic and diluted earnings per share of $0.17, compared to net income of $1.9 million and basic earnings per share of $0.14 and diluted earnings per share of $0.13 for the comparative quarter ended March 31, 2018.

Total assets, deposits, and total gross loans for the Company as of March 31, 2019 were $1.2 billion, $951.0 million, and $991.8 million, respectively, compared to total assets of $1.2 billion, total deposits of $1.0 billion, and total loans of $978.3 million as of the same date in 2018. The decrease in deposits was primarily due to the reduction in wholesale deposits.

Results for the three months ended March 31, 2019 continued to show the impact of the acquisition of Carolina Premier Bank and the expanded market opportunity in Charlotte and upstate South Carolina. The acquisition of Carolina Premier was completed on December 15, 2017. The results for the three months ended March 31, 2018, included $1.4 million in after-tax merger-related expenses. For the three months ended March 31, 2019, return on average assets was 1.08% and return on average equity was 6.32%, compared to 0.64% and 5.61%, respectively, for the three months ended March 31, 2018. Non-performing loans were $11.6 million at March 31, 2019 and December 31, 2018, respectively. Non-performing loans equaled 1.17% of total loans at March 31, 2019, decreasing from 1.18% of total loans at December 31, 2018. Foreclosed real estate equaled $1.0 million at March 31, 2019, compared to $1.1 million at December 31, 2018. For the first quarter of 2019, net charge-offs were $217,000, or 0.11% of average loans, compared to net charge offs of $25,000, or 0.01% of average loans for the quarter ended December 31, 2018. At March 31, 2019, the allowance for loan losses was $8.5 million, or 0.86% of total loans, as compared to $8.7 million, or 0.88% of total loans, at December 31, 2018.

Net interest margin was 4.09% for the quarter ended March 31, 2019, as compared to 4.03% for the quarter ended December 31, 2018.

Select Bank & Trust remains future-focused and continues to build its franchise based on common sense banking by opening a 19th branch office in Holly Springs, NC, to serve the greater Raleigh market and announcing the proposed acquisition of the Virginia Beach, VA location of City National Bank of West Virginia. The Holly Springs branch opened on February 19, 2019 and Virginia Beach is expected to begin operating as Select Bank & Trust Company in the second quarter of 2019. Management will continue its forward-thinking continuous review of locations and their performance with the goal of overall franchise profit potential.

“Our franchise is based on exciting market opportunities and continued expansion of our existing markets and customer relationships. Our solid market position in our North Carolina markets, our expansion in growth areas of the state, our South Carolina market extension and the anticipated move into Virginia Beach support our focus. We will continue to round out our nice footprint in the southeast,” stated William L. Hedgepeth, II, President and CEO of the Company. “Our new branch location in Holly Springs will support customers in the Raleigh area, where we intend to be very active. It is a good start to 2019 for Select Bank & Trust and we will work hard to achieve our goals.”

Select Bank & Trust has 19 branch 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, Washington and Wilmington; and in the following South Carolina communities: Blacksburg, Rock Hill and Six Mile.

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 and South Carolina. 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 common share. A reconciliation of tangible book value per share to book value per share is included following the “Selected Financial Information and Other Data” table below. 

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 common 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, 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; substantial changes in financial markets; our ability to obtain the synergies and expense efficiencies anticipated from mergers and acquisitions; regulatory changes; changes in interest rates; loss of deposits and loan demand to other savings and financial institutions; 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.
Selected Financial Information and Other Data
($ in thousands, except share and per share data)
 
  At or for the three months ended (unaudited)   At or for the twelve months ended
                               
  March 31,
2019
  December 31,
2018
  September 30,
2018
  June 30,
2018
  March 31,
2018
  December 31,
2018
  December 31,
2017
  December 31,
2016
Summary of Operations:                                                              
Total interest income $ 14,050     $ 14,544     $ 14,382     $ 14,187     $ 13,722     $ 56,835     $ 39,617     $ 34,709  
Total interest expense   2,593       2,644       2,530       2,258       2,018       9,450       5,106       3,733  
Net interest income   11,457       11,900       11,852       11,929       11,704       47,385       34,511       30,976  
Provision for loan losses   112       (395)       (459)       557       141       (156)       1,367       1,516  
Net interest income after provision   11,345       12,295       12,311       11,372       11,563       47,541       33,144       29,460  
Noninterest income   1,197       1,244       1,066       1,226       1,165       4,701       3,072       3,222  
Merger/acquisition related expenses   -       -       -       -       1,826       1,826       2,166       -  
Noninterest expense   8,304       7,864       7,800       8,602       8,458       32,724       25,153       22,281  
Income before income taxes   4,238       5,675       5,577       3,996       2,444       17,692       8,897       10,401  
Provision for income taxes   931       1,221       1,256       886       547       3,910       5,712       3,647  
Net Income   3,307       4,454       4,321       3,110       1,897       13,782       3,185       6,654  
Dividends on Preferred Stock   -       -       -       -       -       -       -       4  
Net income available to common shareholders $ 3,307     $ 4,454     $ 4,321     $ 3,110     $ 1,897     $ 13,782     $ 3,185     $ 6,750  
                                               
Share and Per Share Data:                                              
Earnings per share - basic $ 0.17     $ 0.23     $ 0.27     $ 0.22     $ 0.14     $ 0.87     $ 0.27     $ 0.58  
Earnings per share - diluted $ 0.17     $ 0.23     $ 0.27     $ 0.22     $ 0.13     $ 0.87     $ 0.27     $ 0.58  
Book value per share $ 11.04     $ 10.85     $ 10.61     $ 10.03     $ 9.82     $ 10.85     $ 9.72     $ 8.95  
Tangible book value per share(1) $ 9.68     $ 9.47     $ 9.21     $ 8.1     $ 7.87     $ 9.47     $ 7.72     $ 8.29  
Ending shares outstanding   19,326,485       19,311,505       19,296,121       14,024,887       14,013,917       19,311,505       14,009,137       11,645,413  
Weighted average shares outstanding:                                              
Basic   19,315,686       19,302,263       15,858,455       14,019,273       14,011,707       15,812,585       11,763,050       11,610,705  
Diluted   19,365,354       19,360,050       15,916,734       14,086,671       14,081,776       15,877,633       11,826,977       11,655,111  
                                               
Selected Performance Ratios:                                              
Return on average assets(2)   1.08 %     1.39 %     1.40 %     1.02 %     0.64 %     1.12 %     0.35 %     0.81 %
Return on average equity(2)   6.32 %     8.52 %     10.53 %     8.92 %     5.61 %     8.51 %     2.93 %     6.61 %
Net interest margin   4.09 %     4.03 %     4.20 %     4.41 %     4.45 %     4.19 %     4.09 %     4.06 %
Efficiency ratio (3)   65.62 %     59.83 %     60.38 %     65.39 %     65.72 %     62.83 %     66.93 %     65.15 %
                                               
Period End Balance Sheet Data:                                              
Gross loans $ 991,801     $ 986,040     $ 992,805     $ 992,885     $ 978,275     $ 986,040     $ 982,626     $ 677,195  
Total interest-earning assets   1,103,691       1,119,344       1,078,871       1,107,695       1,094,694       1,119,344       1,063,322       770,288  
Goodwill   24,579       24,579       24,579       24,579       24,579       24,579       24,904       6,931  
Core deposit intangible   1,866       2,085       2,318       2,564       2,826       2,085       3,101       810  
Total assets   1,241,048       1,258,525       1,252,156       1,216,731       1,222,551       1,258,525       1,194,135       846,640  
Deposits   950,966       980,427       974,161       993,484       1,009,481       980,427       995,044       679,661  
Short-term debt   7,000       7,000       11,002       21,071       32,173       7,000       28,279       37,090  
Long-term debt   57,372       57,372       57,372       57,372       39,372       57,372       19,372       23,039  
Shareholders' equity   213,451       209,611       204,705       140,702       137,673       209,611       136,115       104,273  
                                               
Selected Average Balances:                                              
Gross Loans $ 985,059     $ 990,504     $ 988,479     $ 990,036     $ 979,420     $ 987,634     $ 732,089     $ 639,412  
Total interest-earning assets   1,086,958       1,141,604       1,073,285       1,087,683       1,073,890       1,119,344       813,773       744,024  
Core Deposit Intangible   1,951       2,171       2,411       2,661       2,955       2,547       640       1,020  
Total Assets   1,238,847       1,267,479       1,228,259       1,219,225       1,198,588       1,228,576       898,943       829,315  
Deposits   949,771       987,180       986,174       1,004,571       981,403       989,838       738,310       665,764  
Short-term debt   7,000       10,348       17,542       21,289       36,726       21,393       34,523       32,111  
Long-term debt   57,372       57,372       57,372       37,520       19,880       49,357       14,239       25,739  
Shareholders' equity   212,130       207,331       162,799       139,810       137,092       161,953       108,709       102,110  
                                               
Asset Quality Ratios:                                              
Nonperforming loans (4) $ 11,583     $ 11,635     $ 11,162     $ 10,118     $ 8,338     $ 11,635     $ 6,978     $ 9,430  
Other real estate owned   1,046       1,088       1,020       1,497       1,525       1,088       1,258       599  
Allowance for loan losses   8,510       8,669       9,089       9,528       8,957       8,669       8,835       8,411  
Nonperforming loans (4) to period-end loans   1.17 %     1.18 %     1.12 %     1.02 %     0.85 %     1.18 %     0.71 %     1.02 %
Allowance for loan losses to period-end loans   0.86 %     0.88 %     0.92 %     0.96 %     0.92 %     0.88 %     0.90 %     1.24 %
Delinquency ratio (5)   0.73 %     0.51 %     0.53 %     0.51 %     0.25 %     0.51 %     0.63 %     0.44 %
Net loan charge-offs (recoveries) to average loans (2)   0.11 %     0.01 %     (0.01) %     (0.01) %     0.01 %     0.00 %     0.13 %     0.02 %
 
(1) Tangible book value per share (a non-GAAP measure) is equal to 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. Please refer to the table below for a reconciliation of this non-GAAP measure.
(2) Annualized.
(3) Efficiency ratio is calculated as non-interest expenses divided by the sum of net interest income and non-interest income.
(4) Nonperforming loans consist of non-accrual loans and restructured loans.
(5) Delinquency Ratio includes loans 30–89 days past due and excludes non-accrual loans.


Reconciliation of GAAP to Non-GAAP Measures
($ in thousands, except per share data)
(Unaudited)
 
  March 31,
2018
  December 31,
2018
  September 30,
2018
  June 30,
2018
  March 31,
2018
  December 31,
2018
  December 31,
2017
  December 31,
2016
Tangible common equity                              
Total shareholders’ equity $ 213,451     $ 209,611     $ 204,705     $ 140,702     $ 137,673     $ 209,611     $ 136,115     $ 104,273  
Adjustments:                              
Goodwill   24,579       24,579       24,579       24,579       24,579       24,579       24,904       6,931  
Core deposit intangibles   1,866       2,085       2,318       2,564       2,826       2,085       3,101       810  
Tangible common equity $ 187,006     $ 182,947     $ 177,808     $ 113,559     $ 110,268     $ 182,947     $ 108,110     $ 96,532  
Common shares outstanding(1)   19,326,485       19,311,505       19,296,121       14,024,887       14,013,917       19,311,505       14,009,137       11,645,413  
Book value per common share(2) $ 11.04     $ 10.85     $ 10.61     $ 10.03     $ 9.82     $ 10.85     $ 9.72     $ 8.95  
Tangible book value per common share(3) $ 9.68     $ 9.47     $ 9.21     $ 8.10     $ 7.87     $ 9.47     $ 7.72     $ 8.29  
 
(1) Excludes the dilutive effect of common stock issuable upon exercise of outstanding stock options. The number of exercisable options outstanding was 49,668 as of March 31, 2019; 57,787 as of December 31, 2018; 58,279 as of September 30, 2018; 67,398 as of June 30, 2018; 70,069 as of March 31, 2018; and 63,927 as of December 31, 2017.
(2) 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.
(3) We calculate 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.
 

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