Select Bancorp Reports Fourth Quarter and Year-End 2018 Earnings

Dunn, North Carolina, UNITED STATES


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