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Select Bancorp Reports Fourth Quarter and Year-End 2018 Earnings

DUNN, N.C., Jan. 25, 2019 (GLOBE NEWSWIRE) -- Select Bancorp, Inc. (the “Company” NASDAQ: SLCT), the holding company for Select Bank & Trust Company (the “Bank”), today reported net income for the year ended December 31, 2018 of $13.8 million and basic and diluted earnings per share of $0.87, compared to net income of $3.2 million and basic and diluted earnings per share of $0.27 for the year ended December 31, 2017.

For the fourth quarter of 2018, the Company reported net income of $4.5 million, and basic and diluted earnings per share of $0.23, compared to a net loss of $2.0 million and basic and diluted loss per share of $0.17 for the fourth quarter of 2017.

Total assets, deposits, and gross loans for the Company as of December 31, 2018 were $1.3 billion, $980.4 million, and $986.0 million, respectively, compared to total assets of $1.2 billion, deposits of $995.0 million, and gross loans of $982.6 million as of the same date in 2017.  The year-over-year changes represented an increase of $64.4 million in total assets and $3.4 million in gross loans with a reduction of $14.6 million in deposits which was primarily related to a reduction in wholesale deposits.

President and Chief Executive Officer William L. Hedgepeth II stated, “The Company, for the third quarter in a row, had record earnings this quarter of $4.5 million, which was partly due to the December 2017 acquisition of Premara Financial, Inc. and its subsidiary, Carolina Premier Bank.  For the last half of the year, net loan growth in the North and South Carolina markets has been challenging for the industry and the Bank as a result of Hurricane Florence and the record flooding in our markets.  Loan production has been impacted from the effects of the hurricane, but our pipeline has remained active over the last few months.  In 2018, we also experienced an increased number of loan repayments as customers have been selling portions of their real estate holdings.” 

For the twelve months ended December 31, 2018, return on average assets was 1.12% and return on average equity was 8.51%, compared to 0.35% and 2.93%, respectively, for the twelve months ended December 31, 2017. Non-performing loans increased to $11.6 million at December 31, 2018 from $7.0 million at December 31, 2017. Non-performing loans equaled 1.18% of loans at December 31, 2018, increasing from 0.71% of loans at December 31, 2017. Foreclosed real estate equaled $1.1 million at December 31, 2018, compared to $1.3 million at December 31, 2017. For the year ended December 31, 2018, net charge-offs were $10,000, or 0.00% of average loans, compared to net charge offs of $944,000, or 0.13% of average loans in 2017. At December 31, 2018, the allowance for loan losses was $8.7 million, or 0.88% of total loans, as compared to $8.8 million, or 0.90% of total loans, at December 31, 2017.

Net interest margin was 4.19% and 4.03% for the year and quarter ending December 31, 2018, as compared to 4.09% and 4.14% for the year and quarter ending December 31, 2017.  For 2018, the Company reported an efficiency ratio of 62.83% compared to an efficiency ratio of 66.93% for 2017.

Hedgepeth continued, “We completed a number of initiatives during 2018.  We successfully integrated Carolina Premier Bank, realizing our projected cost saves, expanded our mortgage department, started our SBA department, had a successful capital raise of approximately $60 million in net proceeds, received regulatory approval and announced the soon-to-be-open Holly Springs branch in our Raleigh market.  During 2019, we plan to continue to pursue other expansion opportunities through acquisition in North Carolina, South Carolina and Virginia near our current market footprint and organic growth in the Charlotte and Raleigh markets.”

“Even with the completion of these important initiatives,” Hedgepeth stated, “we saw notable increases in our earnings, Earnings per Share, and Return on Assets, plus improvement in our efficiency ratio, and maintained a net interest margin over 4%, among other improvements.  Our mortgage and SBA departments are growing and are adding to our non-interest income. We are looking forward to continuing these trends in 2019. As you would expect, our team is very energized and we are working diligently to expand our relationships with our current customers and to establish new relationships with prospective customers.”

The information as of and for the quarter and year ended December 31, 2018, and other quarterly periods, as presented in this release is unaudited.

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  
                                 
  December 31,
2018
  September 30,
2018
  June 30,
2018
  March 31,
2018
  December 31,
2017
  December 31,
2018
(unaudited)
  December 31,
2017
  December 31,
2016
 
Summary of Operations:                            
Total interest income $ 14,544     $ 14,382     $ 14,187     $ 13,722     $ 10,981     $ 56,835     $ 39,617     $ 34,709    
Total interest expense   2,644       2,530       2,258       2,018       1,505       9,450       5,106       3,733    
Net interest income   11,900       11,852       11,929       11,704       9,476       47,385       34,511       30,976    
Provision for loan losses   (395 )     (459 )     557       141       276       (156 )     1,367       1,516    
Net interest income after provision   12,295       12,311       11,372       11,563       9,200       47,541       33,144       29,460    
Noninterest income   1,244       1,066       1,226       1,165       786       4,701       3,072       3,222    
Merger/acquisition related expenses   -       -       -       1,826       1,888       1,826       2,166       -    
Noninterest expense   7,864       7,800       8,602       8,458       7,207       32,724       25,153       22,281    
Income before income taxes   5,675       5,577       3,996       2,444       891       17,692       8,897       10,401    
Provision for income taxes   1,221       1,256       886       547       2,936       3,910       5,712       3,647    
Net Income (loss)   4,454       4,321       3,110       1,897       (2,045 )     13,782       3,185       6,654    
Dividends on Preferred Stock   -       -       -       -       -       -       -       4    
Net income available to common  shareholders (loss) $ 4,454     $ 4,321     $ 3,110     $ 1,897     $ (2,045 )   $ 13,782     $ 3,185     $ 6,750    
                                                 
Share and Per Share Data:                                                
Earnings (loss) per share - basic $ 0.23     $ 0.27     $ 0.22     $ 0.14     $ (0.17 )   $ 0.87     $ 0.27     $ 0.58    
Earnings (loss) per share - diluted $ 0.23     $ 0.27     $ 0.22     $ 0.13     $ (0.17 )   $ 0.87     $ 0.27     $ 0.58    
Book value per share $ 10.85     $ 10.61     $ 10.03     $ 9.82     $ 9.72     $ 10.85     $ 9.72     $ 8.95    
Tangible book value per share(1) $ 9.47     $ 9.21     $ 8.10     $ 7.87     $ 7.72     $ 9.47     $ 7.72     $ 8.29    
Ending shares outstanding   19,311,505       19,296,121       14,024,887       14,013,917       14,009,137       19,311,505       14,009,137       11,645,413    
Weighted average shares outstanding:                                                
Basic   19,302,263       15,858,455       14,019,273       14,011,707       12,071,392       15,812,585       11,763,050       11,610,705    
Diluted   19,360,050       15,916,734       14,086,671       14,081,776       12,071,392       15,877,633       11,826,977       11,655,111    
                                                 
Selected Performance Ratios:                                                
Return on average assets(2)   1.39 %     1.40 %     1.02 %     0.64 %     (0.81 )%     1.12 %     0.35 %     0.81 %  
Return on average equity(2)   8.52 %     10.53 %     8.92 %     5.61 %     (7.00 )%     8.51 %     2.93 %     6.61 %  
Net interest margin   4.03 %     4.20 %     4.41 %     4.45 %     4.14 %     4.19 %     4.09 %     4.06 %  
Efficiency ratio (3)   59.83 %     60.38 %     65.39 %     65.72 %     70.23 %     62.83 %     66.93 %     65.15 %  
                                                 
Period End Balance Sheet Data:                                                
Gross loans $ 986,040     $ 992,805     $ 992,885     $ 978,275     $ 982,626     $ 986,040     $ 982,626     $ 677,195    
Total interest-earning assets   1,119,344       1,078,871       1,107,695       1,094,694       1,063,322       1,119,344       1,063,322       770,288    
Goodwill   24,579       24,579       24,579       24,579       24,904       24,579       24,904       6,931    
Core deposit intangible   2,085       2,318       2,564       2,826       3,101       2,085       3,101       810    
Total assets   1,258,525       1,252,156       1,216,731       1,222,551       1,194,135       1,258,525       1,194,135       846,640    
Deposits   980,427       974,161       993,484       1,009,481       995,044       980,427       995,044       679,661    
Short-term debt   7,000       11,002       21,071       32,173       28,279       7,000       28,279       37,090    
Long-term debt   57,372       57,372       57,372       39,372       19,372       57,372       19,372       23,039    
Shareholders' equity   209,611       204,705       140,702       137,673       136,115       209,611       136,115       104,273    
                                                 
Selected Average Balances:                                                
Gross Loans $ 990,504     $ 988,479     $ 990,036     $ 979,420     $ 809,608     $ 987,634     $ 732,089     $ 639,412    
Total interest-earning assets   1,141,604       1,073,285       1,087,683       1,073,890       901,324       1,119,344       813,773       744,024    
Core Deposit Intangible   2,171       2,411       2,661       2,955       1,007       2,547       640       1,020    
Total Assets   1,267,479       1,228,259       1,219,225       1,198,588       997,450       1,228,576       898,943       829,315    
Deposits   987,180       986,174       1,004,571       981,403       827,408       989,838       738,310       665,764    
Short-term debt   10,348       17,542       21,289       36,726       23,476       21,393       34,523       32,111    
Long-term debt   57,372       57,372       37,620       19,880       13,676       49,357       14,239       25,739    
Shareholders' equity   207,331       162,799       139,810       137,092       115,874       161,953       108,709       102,110    
                                                 
Asset Quality Ratios:                                                
Nonperforming loans (4) $ 11,635     $ 11,162     $ 10,118     $ 8,338     $ 6,978     $ 11,635     $ 6,978     $ 9,430    
Other real estate owned   1,088       1,020       1,497       1,525       1,258       1,088       1,258       599    
Allowance for loan losses   8,669       9,089       9,528       8,957       8,835       8,669       8,835       8,411    
Nonperforming loans (4) to period-end loans   1.18 %     1.12 %     1.02 %     0.85 %     0.71 %     1.18 %     0.71 %     1.02 %  
Allowance for loan losses to period-end loans   0.88 %     0.92 %     0.96 %     0.92 %     0.90 %     0.88 %     0.90 %     1.24 %  
Delinquency ratio (5)   0.51 %     0.53 %     0.51 %     0.25 %     0.63 %     0.51 %     0.63 %     0.44 %  
Net loan charge-offs (recoveries) to average loans (2)   0.00 %     (0.01 )%     (0.01 )%     0.01 %     0.05 %     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 share and per share data)
(Unaudited)

    December 31,
2018
  September 30,
2018
  June 30,
2018
  March  31,
2018
  December 31,
2017
  December 31,
2016
Tangible common equity                        
Total shareholders’ equity   $ 209,611   $ 204,705   $ 140,702   $ 137,673   $ 136,115   $ 104,273
Adjustments:                        
Goodwill       24,579       24,579       24,579       24,579       24,904       6,931
Core deposit intangibles       2,085       2,318       2,564       2,826       3,101       810
Tangible common equity   $ 182,947   $ 177,808   $ 113,559   $ 110,268   $ 108,110   $   96,532
Common shares outstanding(1)     19,311,505     19,296,121     14,024,887     14,013,917     14,009,137     11,645,413
Book value per common share(2)   $   10.85   $   10.61   $   10.03   $   9.82   $    9.72   $   8.95
Tangible book value per common share(3)   $   9.47   $   9.21   $   8.10   $   7.87   $   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 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; 63,927 as of December 31, 2017; and 44,406 as of December 31, 2016.

(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