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Carolina Financial Corporation Reports Results for Second Quarter of 2018

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CHARLESTON, S.C., July 23, 2018 (GLOBE NEWSWIRE) -- Carolina Financial Corporation (the "Company") (NASDAQ:CARO) today announced financial results for the second quarter of 2018. 

Financial highlights at and for the three months ended June 30, 2018, include:

  • Net income for the second quarter 2018 increased 60.2% to $15.0 million, or $0.70 per diluted share, from $9.3 million, or $0.58 per diluted share for the second quarter of 2017.  Included in net income are pretax merger-related expenses of $0.5 million and $0.3 million for the second quarter of 2018 and 2017, respectively.
  • Operating earnings for the second quarter of 2018, which exclude certain non-operating income and expenses, increased 70.9% to $15.6 million, or $0.73 or per diluted share, from $9.1 million, or $0.56 per diluted share, for the second quarter of 2017.
  • Operating earnings for Q2 2018 have been adjusted to eliminate the following significant items:
    • Pretax merger-related expenses of $506,000
    • The fair value gain on interest rate swaps of $451,000.
    • The loss on sale of securities of $746,000.
  • Performance ratios for Q2 2018 compared to Q2 2017:
    • Return on average assets was 1.65% compared to 1.72%.
    • Operating return on average assets was 1.72% compared to 1.69%.
    • Return on average tangible equity was 17.02% compared to 16.02%.
    • Operating return on average tangible equity was 17.74% compared to 15.65%.
  • Loans receivable, gross grew $107.7 million, or at an annualized rate of 9.3% since December 31, 2017.
  • Nonperforming assets to total assets were 0.28% at June 30, 2018 compared to 0.20% at December 31, 2017.
  • Total deposits increased $103.9 million since December 31, 2017. Core deposits increased $76.6 million since December 31, 2017.
  • On June 11, Carolina Financial Corporation completed the sale of 1.5 million shares of its common stock. The net proceeds of the offering to the Company, after estimated expenses, were approximately $63.1 million.

"We continue to see the impact of solid organic growth and prior acquisitions on earnings.  Overall, results for the second quarter of 2018 continued to improve with an increase in net income to $15.0 million compared to the second quarter of 2017." stated Jerry Rexroad, Chief Executive Officer.

Financial Results

Carolina Financial Corporation

  • The Company reported net income for the three months ended June 30, 2018 of $15.0 million, or $0.70 per diluted share, as compared to $9.3 million, or $0.58 per diluted share, for the three months ended June 30, 2017. Included in net income for the three months ended June 30, 2018 and 2017 were pretax merger-related expenses of $0.5 million and $0.3 million, respectively.  The Company reported net income for the six months ended June 30, 2018 of $19.0 million or $0.90 per diluted share, as compared to $14.2 million, or $0.94 per diluted share, for the six months ended June 30, 2017. Included in net income for the six months ended June 30, 2018 and 2017 were pretax merger-related expenses of $15.2 million and $1.6 million, respectively. 
  • Operating earnings for the second quarter of 2018, which excludes certain non-operating income and expenses, increased 70.9% to $15.6 million, or $0.73 per diluted share, from $9.1 million, or $0.56 per diluted share, for the second quarter of 2017. Operating earnings for the six months ended June 30, 2018, which excludes certain non-operating income and expenses, increased 106.4% to $30.8 million, or $1.45 per diluted share, from $14.9 million, or $0.99 per diluted share, for the same period of 2017.
  • The Company's net interest margin-tax equivalent increased to 4.11% for the second quarter of 2018 compared to 4.03% for the second quarter of 2017.
  • The Company reported common book value per share of $24.60 and $22.76 as of June 30, 2018 and December 31, 2017, respectively.  Tangible common book value per share was $18.11 and $15.71 as of June 30, 2018 and December 31, 2017, respectively.
  • At June 30, 2018, the Company's regulatory capital ratios exceeded the minimum levels currently required.  Stockholders' equity totaled $551.8 million as of June 30, 2018 compared to $475.4 million at December 31, 2017. Tangible equity to tangible assets at June 30, 2018 was 11.5% compared to 9.7% at December 31, 2017.

Community Banking

  • Community banking segment net income increased 76.8% to $14.9 million for the three months ended June 30, 2018 compared to $8.4 million for the three months ended June 30, 2017. Included in net income for the three months ended June 30, 2018 and 2017 were pretax merger-related expenses of $0.5 million and $0.3 million, respectively.  The community banking segment net income increased 46.0% to $18.9 million for the six months ended June 30, 2018 compared to $13.0 million for the six months ended June 30, 2017. Included in net income for the six months ended June 30, 2018 and 2017 were pretax merger-related expenses of $15.2 million and $1.6 million, respectively. 
  • Community banking segment operating earnings increased 89.0% to $15.6 million for the three months ended June 30, 2018 compared to $8.2 million for the three months ended June 30, 2017.  The community banking segment operating earnings increased 126.4% to $30.8 million for the six months ended June 30, 2018 compared to $13.6 million for the six months ended June 30, 2017.
  • Provision for loan loss during the three months ended June 30, 2018 was $534,000.  There was no provision for loan loss during the three months ended June 30, 2017.   Asset quality and historical loss experience continue to remain favorable.  The provision for loan loss was primarily driven by the organic loan growth.
  • Non-performing assets were 0.28% and 0.20% of total assets at June 30, 2018 and December 31, 2017, respectively.
  • Loans receivable, gross increased to $2.4 billion at June 30, 2018 compared to $2.3 billion at December 31, 2017.  Loans increased $107.7 million, or at an annualized rate of 9.3% over December 31, 2017.
  • Total deposits increased $103.9 million since December 31, 2017. As of June 30, 2018 and December 31, 2017, core deposits, defined as demand deposits, savings accounts and money market accounts, comprised approximately 67.2% and 66.9% respectively, of total deposits.

Wholesale Mortgage Banking

  • Net income for the wholesale mortgage banking segment was $598,000 for the three months ended June 30, 2018 compared to $1.2 million for the three months ended June 30, 2017. Net income was $1.2 million for the six months ended June 30, 2018 compared to $1.9 million for the six months ended June 30, 2017. The decrease in the three months ended June 30, 2018 was primarily due to a loss on sale of other real estate owned of approximately $92,000 and the cost to terminate an equipment lease in the amount of $206,000. Income taxes in 2017 were significantly lower due to tax benefits related to the vesting of employee stock-based compensation.
  • Net interest margin was 1.74% for the three months ended June 30, 2018 compared to 1.73% for the three months ended June 30, 2017. Originations for the three months ended June 30, 2018 and 2017 were $205.6 and $213.9 million, respectively. Net margin was 1.74% for the six months ended June 30, 2018 compared to 1.76% for the six months ended June 30, 2017. Originations for the six months ended June 30, 2018 and 2017 were $386.1 million and $394.7 million, respectively.

Conference Call

A conference call will be held at 10:00 a.m., Eastern Time on July 24, 2018. The conference call can be accessed by dialing (866) 464-9448 or (213) 660-0874 and requesting the Carolina Financial Corporation earnings call. The conference ID number is 1880558. Listeners should dial in 10 minutes prior to the start of the call.  The live webcast and presentation slides will be available on www.haveanicebank.com under Investor Relations, "Investor Presentations."

A replay of the webcast will be available on www.haveanicebank.com under Investor Relations, "Investor Presentations" approximately three hours after the call and can be accessed by dialing (855) 859-2056 or (404) 537-3406 and requesting conference number 1880558.

About Carolina Financial Corporation

Carolina Financial Corporation (NASDAQ:CARO) is the holding company of CresCom Bank, which also owns and operates Atlanta-based Crescent Mortgage Company.  As of June 30, 2018, Carolina Financial Corporation had approximately $3.7 billion in total assets and Crescent Mortgage Company was approved to originate loans in 48 states partnering with community banks, credit unions and mortgage brokers. 

Addendum to News Release – Use of Certain Non-GAAP Financial Measures and Forward-Looking Statements

This news release contains financial information determined by methods other than in accordance with generally accepted accounting principles ("GAAP").  Such statements should be read along with the accompanying tables, which provide a reconciliation of non-GAAP measures to GAAP measures.  This news release and the accompanying tables discuss financial measures, including but not limited to, core deposits, tangible book value, operating earnings and net income related to segments of the Company, which are non-GAAP measures.  We believe that such non-GAAP measures are useful because they enhance the ability of investors and management to evaluate and compare the Company's operating results from period to period in a meaningful manner.  Non-GAAP measures should not be considered as an alternative to any measure of performance as promulgated under GAAP.  Investors should consider the Company's performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the company.  Non-GAAP measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the Company's results or financial condition as reported under GAAP.

Please refer to the Non-GAAP reconciliation tables later in this release for additional information.

Forward-Looking Statements

Certain statements in this news release contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements relating to future plans and expectations, and are thus prospective.  Such forward-looking statements include but are not limited to statements with respect to our plans, objectives, expectations and intentions and other statements that are not historical facts, and other statements identified by words such as "believes," "expects," "anticipates," "estimates," "intends," "plans," "targets," and "projects," as well as similar expressions.  Such statements are subject to risks, uncertainties, and other factors which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements.  Although we believe that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove to be inaccurate.  Therefore, we can give no assurance that the results contemplated in the forward-looking statements will be realized.  The inclusion of this forward-looking information should not be construed as a representation by the Company or any person that the future events, plans, or expectations contemplated by the Company will be achieved.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: (1) competitive pressures among depository and other financial institutions may increase significantly and have an effect on pricing, spending, third-party relationships and revenues; (2) the strength of the United States economy in general and the strength of the local economies in which we conduct operations may be different than expected resulting in, among other things, a deterioration in the credit quality or a reduced demand for credit, including the resultant effect on the Company's loan portfolio and allowance for loan losses; (3) the rate of delinquencies and amounts of charge-offs, the level of allowance for loan loss, the rates of loan growth, or adverse changes in asset quality in our loan portfolio, which may result in increased credit risk-related losses and expenses; (4) the risk that the preliminary financial information reported herein and our current preliminary analysis will be different when our review is finalized; (5) changes in the U.S. legal and regulatory framework including, but not limited to, the Dodd-Frank Act and regulations adopted thereunder; (6) adverse conditions in the stock market, the public debt market and other capital markets (including changes in interest rate conditions) could have a negative impact on the Company; (7) the business related to acquisitions may not be integrated successfully or such integration may take longer to accomplish than expected; (8) the expected cost savings and any revenue synergies from acquisitions may not be fully realized within expected timeframes; and (9) disruption from acquisitions may make it more difficult to maintain relationships with clients, associates, or suppliers.  Additional factors that could cause our results to differ materially from those described in the forward-looking statements can be found in our reports (such as our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K) filed with the SEC and available at the SEC's Internet site (http://www.sec.gov).  All subsequent written and oral forward-looking statements concerning the Company or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above.  We do not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statements are made.

  CAROLINA FINANCIAL CORPORATION
  CONDENSED CONSOLIDATED BALANCE SHEETS
                         
                    June 30, 2018   December 31, 2017
                    (Unaudited)   (Audited)
                               
                    (Dollars in thousands)
  ASSETS                
    Cash and due from banks         $ 27,327     25,254  
    Interest-bearing cash           54,751     55,998  
      Cash and cash equivalents           82,078     81,252  
    Securities available-for-sale           804,968     743,239  
    Federal Home Loan Bank stock, at cost         19,019     19,065  
    Other investments           3,429     3,446  
    Derivative assets             6,001     2,803  
    Loans held for sale           39,473     35,292  
    Loans receivable, gross           2,427,221     2,319,528  
    Allowance for loan losses           (12,987 )   (11,478 )
      Loans receivable, net           2,414,234     2,308,050  
                         
    Premises and equipment, net           62,530     61,407  
    Accrued interest receivable           12,664     11,992  
    Real estate acquired through foreclosure, net       1,726     3,106  
    Deferred tax assets, net           6,073     2,436  
    Mortgage servicing rights           23,626     21,003  
    Cash value life insurance           57,982     57,195  
    Core deposit intangible           18,003     19,601  
    Goodwill             127,592     127,592  
    Other assets             13,693     21,538  
      Total assets           $ 3,693,091     3,519,017  
                         
  LIABILITIES AND STOCKHOLDERS' EQUITY          
  Liabilities:                
    Noninterest-bearing deposits         $ 577,568     525,615  
    Interest-bearing deposits           2,131,230     2,079,314  
      Total deposits             2,708,798     2,604,929  
    Short-term borrowed funds           354,500     340,500  
    Long-term debt             46,347     72,259  
    Derivative liabilities           129     156  
    Drafts outstanding           10,454     7,324  
    Advances from borrowers for insurance and taxes       4,558     3,005  
    Accrued interest payable           1,560     1,126  
    Reserve for mortgage repurchase losses         1,592     1,892  
    Dividends payable to stockholders         1,354     1,051  
    Accrued expenses and other liabilities         12,015     11,394  
      Total liabilities           3,141,307     3,043,636  
  Stockholders' equity:              
    Preferred stock             -     -  
    Common stock             226     210  
    Additional paid-in capital           412,300     348,037  
    Retained earnings           139,799     123,537  
    Accumulated other comprehensive (loss) income, net of tax       (541 )   3,597  
      Total stockholders' equity           551,784     475,381  
    Total liabilities and stockholders' equity       $ 3,693,091     3,519,017  
                         


    CAROLINA FINANCIAL CORPORATION
    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
    (Unaudited)
                             
                For the Three Months   For the Six Months
                Ended June 30,   Ended June 30,
                  2018     2017     2018     2017  
                                       
                (In thousands, except share data)
    Interest income                  
      Loans       $ 32,753     18,280     64,416     33,247  
      Investment securities     6,359     3,661     12,066     6,214  
      Dividends from Federal Home Loan Bank stock   263     115     438     216  
      Other interest income     102     67     234     115  
        Total interest income     39,477     22,123     77,154     39,792  
    Interest expense                  
      Deposits       4,248     2,098     7,891     3,790  
      Short-term borrowed funds     1,705     429     2,958     784  
      Long-term debt       619     498     1,269     850  
        Total interest expense     6,572     3,025     12,118     5,424  
    Net interest income       32,905     19,098     65,036     34,368  
    Provision for loan losses     559     -     559     -  
      Net interest income after provision for loan losses   32,346     19,098     64,477     34,368  
    Noninterest income                  
      Mortgage banking income     4,215     4,289     8,017     7,897  
      Deposit service charges     1,988     998     4,012     1,856  
      Net (loss) gain on sale of securities   (746 )   621     (1,443 )   806  
      Fair value adjustments on interest rate swaps   451     (69 )   1,255     (127 )
      Net increase in cash value life insurance   385     281     775     492  
      Mortgage loan servicing income     2,090     1,604     4,114     3,170  
      Other         2,644     1,081     4,346     1,941  
        Total noninterest income     11,027     8,805     21,076     16,035  
    Noninterest expense                  
      Salaries and employee benefits     13,541     9,255     27,210     17,864  
      Occupancy and equipment     4,094     2,439     7,747     4,621  
      Marketing and public relations     322     416     698     797  
      FDIC insurance       265     75     520     175  
      Recovery of mortgage loan repurchase losses   (150 )   (225 )   (300 )   (450 )
      Legal expense       157     151     233     216  
      Other real estate expense, net     105     26     11     45  
      Mortgage subservicing expense     568     505     1,132     991  
      Amortization of mortgage servicing rights   889     665     1,868     1,335  
      Merger-related expenses     506     279     15,216     1,599  
      Other         4,074     2,304     7,635     4,283  
        Total noninterest expense     24,371     15,890     61,970     31,476  
    Income before income taxes     19,002     12,013     23,583     18,927  
    Income tax expense       4,036     2,673     4,561     4,684  
      Net income     $ 14,966     9,340     19,022     14,243  
                             
    Earnings per common share:                
      Basic       $ 0.70     0.58     0.91     0.95  
      Diluted     $ 0.70     0.58     0.90     0.94  
    Dividends Per Common Share   $ 0.06     0.04     0.11     0.08  
    Weighted average common shares outstanding:              
      Basic         21,243,094     16,029,332     20,961,182     14,980,349  
      Diluted       21,495,014     16,180,171     21,216,872     15,144,796  
                             


CAROLINA FINANCIAL CORPORATION
(Unaudited)
(Dollars in thousands)
 
            At or for the Three Months Ended
Selected Financial Data:     June 30,
2018
  March 31,
2018
  December 31,
2017
  September 30,
2017
  June 30,
2017
                             
Selected Average Balances:                      
Total assets       $ 3,627,401     3,522,407     3,048,214     2,230,586     2,166,803  
Investment securities and FHLB stock     809,625     770,161     647,276     521,569     510,706  
Loans receivable, net         2,401,075     2,322,203     2,003,429     1,463,771     1,412,940  
Loans held for sale         23,137     21,645     25,001     27,282     22,412  
Deposits           2,677,401     2,616,640     2,352,303     1,710,263     1,633,285  
Stockholders' equity         497,694     477,830     380,529     286,524     277,708  
                             
Performance Ratios (annualized):                      
Return on average stockholders' equity     12.03 %   3.40 %   6.65 %   11.16 %   13.45 %
Return on average tangible equity (Non-GAAP)     17.02 %   4.90 %   8.78 %   13.24 %   16.02 %
Return on average assets       1.65 %   0.46 %   0.83 %   1.43 %   1.72 %
Operating return on average stockholders' equity (Non-GAAP)     12.54 %   12.51 %   11.69 %   11.02 %   13.15 %
Operating return on average tangible equity (Non-GAAP)     17.74 %   18.06 %   15.44 %   13.08 %   15.65 %
Operating return on average assets (Non-GAAP)     1.72 %   1.70 %   1.46 %   1.42 %   1.69 %
Average earning assets to average total assets     89.82 %   89.28 %   89.25 %   91.09 %   90.68 %
Average loans receivable to average deposits     89.68 %   88.75 %   85.17 %   85.59 %   86.51 %
Average stockholders' equity to average assets     13.72 %   13.57 %   12.48 %   12.85 %   12.82 %
Net interest margin-tax equivalent (1)     4.11 %   4.20 %   4.19 %   3.94 %   4.03 %
Net charge-offs  (recovery) to average loans                    
  receivable         0.04 %   (0.21 )%   0.02 %   0.02 %   (0.01 )%
Nonperforming assets to period end loans                    
  receivable         0.42 %   0.45 %   0.30 %   0.44 %   0.48 %
Nonperforming assets to total assets     0.28 %   0.30 %   0.20 %   0.29 %   0.31 %
Nonperforming loans to total loans       0.35 %   0.36 %   0.17 %   0.33 %   0.38 %
Allowance for loan losses as a percentage of                    
  gross loans receivable (end of period) (2)     0.54 %   0.53 %   0.49 %   0.72 %   0.75 %
Allowance for loan losses as a percentage of gross                    
  non-acquired loans receivable (Non-GAAP)     0.80 %   0.85 %   0.84 %   0.87 %   0.93 %
Allowance for loan losses as a percentage                    
  of nonperforming loans (2)       153.84 %   146.93 %   291.81 %   216.53 %   196.85 %
                             
Nonperforming Assets:                        
Nonacquired loans 90 days or more past due                    
  and still accruing       $ 19     -     -     -     -  
Nonacquired nonaccrual loans       8,423     8,649     3,934     4,924     5,461  
  Total nonperforming loans       8,442     8,649     3,934     4,924     5,461  
Real estate acquired through foreclosure, net     1,726     1,963     3,106     1,640     1,417  
  Total nonperforming assets     $ 10,168     10,612     7,040     6,564     6,878  
                             
(1) Net interest margin-tax equivalent reflects tax-exempt income on a tax-equivalent basis.
(2) Acquired loans represent 33.5%, 36.8%, 41.1%, 17.3%, and 19.4% of gross loans receivable at June 30, 2018, March 31, 2018, December 31, 2017, September 30, 2017, and June 30, 2017, respectively.
                             


Carolina Financial Corporation                            
Segment Information                              
(Unaudited)                              
(Dollars in thousands)          
                                   
            For the Three Months   For the Six Months   Increase (Decrease)
            June 30,   Ended June 30,   Three     Six
              2018     2017     2018     2017     Months     Months
Segment net income:                              
Community banking       $   14,928     8,443       18,912     12,951     6,485       5,961  
Wholesale mortgage banking         598     1,238       1,160     1,884     (640 )     (724 )
Other             (568 )   (346 )     (1,065 )   (591 )   (222 )     (474 )
Eliminations           8     5       15     (1 )   3       16  
Total net income       $   14,966     9,340       19,022     14,243     5,626       4,779  
                                   
            For the Three Months Ended      
            June 30, 
  2018
  March 31, 
  2018
  December 31, 
  2017
  September 30, 
  2017
  June 30, 
  2017
     
Segment net income:                              
Community banking       $   14,928     3,984     6,050     7,837     8,443        
Wholesale mortgage banking         598     562     118     449     1,238        
Other             (568 )   (497 )   124     (320 )   (346 )      
Eliminations           8     7     36     27     5        
Total net income       $   14,966     4,056     6,328     7,993     9,340        
                                   
            For the Three Months Ended June 30, 2018      
             Community    Mortgage                  
             Banking    Banking    Other    Eliminations   Total      
Interest income       $ 39,060     458     14     (55 )   39,477        
Interest expense         6,066     77     506     (77 )   6,572        
Net interest income (expense)       32,994     381     (492 )   22     32,905        
Provision for loan losses       534     25     -     -     559        
Noninterest income from external customers     5,570     5,434     23     -     11,027        
Intersegment noninterest income       242     9     -     (251 )   -        
Noninterest expense         19,348     4,748     275         24,371        
Intersegment noninterest expense       -     240     2     (242 )   -        
Income (loss) before income taxes       18,924     811     (746 )   13     19,002        
Income tax expense (benefit)       3,996     213     (178 )   5     4,036        
Net income (loss)       $ 14,928     598     (568 )   8     14,966        
                                   
            For the Three Months Ended June 30, 2017      
             Community    Mortgage                  
             Banking    Banking    Other    Eliminations   Total      
Interest income       $ 21,691     427     8     (3 )   22,123        
Interest expense         2,747     42     278     (42 )   3,025        
Net interest income (expense)       18,944     385     (270 )   39     19,098        
Provision for loan losses       -     -     -     -     -        
Noninterest income from external customers     3,494     5,311     -     -     8,805        
Intersegment noninterest income       242     31     -     (273 )   -        
Noninterest expense         11,448     4,164     278     -     15,890        
Intersegment noninterest expense       -     240     2     (242 )   -        
Income (loss) before income taxes       11,232     1,323     (550 )   8     12,013        
Income tax expense (benefit)       2,789     85     (204 )   3     2,673        
Net income (loss)       $ 8,443     1,238     (346 )   5     9,340        
                                   
                                   
                                   
Carolina Financial Corporation                            
Segment Information, Continued                            
(Unaudited)                              
(Dollars in thousands)          
                                   
            For the Six Months Ended June 30, 2018      
             Community    Mortgage                  
             Banking    Banking    Other    Eliminations   Total      
Interest income       $ 76,317     889     27     (79 )   77,154        
Interest expense         11,150     130     968     (130 )   12,118        
Net interest income (expense)       65,167     759     (941 )   51     65,036        
Provision for loan losses       534     25     -     -     559        
Noninterest income from external customers     10,630     10,358     88     -     21,076        
Intersegment noninterest income       483     26     -     (509 )   -        
Noninterest expense         52,278     9,137     554     1     61,970        
Intersegment noninterest expense       -     480     3     (483 )   -        
Income (loss) before income taxes       23,468     1,501     (1,410 )   24     23,583        
Income tax expense (benefit)       4,556     341     (345 )   9     4,561        
Net income (loss)       $ 18,912     1,160     (1,065 )   15     19,022        
                                   
            For the Six Months Ended June 30, 2017      
             Community    Mortgage                  
             Banking    Banking    Other    Eliminations   Total      
Interest income       $ 38,949     822     13     8     39,792        
Interest expense         4,965     54     459     (54 )   5,424        
Net interest income (expense)       33,984     768     (446 )   62     34,368        
Provision for loan losses       -     -     -     -     -        
Noninterest income from external customers     5,912     10,123     -     -     16,035        
Intersegment noninterest income       483     64     -     (547 )   -        
Noninterest expense         22,772     8,216     488     -     31,476        
Intersegment noninterest expense       -     480     3     (483 )   -        
Income (loss) before income taxes       17,607     2,259     (937 )   (2 )   18,927        
Income tax expense (benefit)       4,656     375     (346 )   (1 )   4,684        
Net income (loss)       $ 12,951     1,884     (591 )   (1 )   14,243        
                                   
                                   
                                   
                                   
                                   
            For the Three Months Ended June 30,
            Loan Originations   Mortgage Banking Income   Margin
              2018     2017     2018     2017     2018       2017  
Additional segment information:                            
Community banking       $   32,796     24,416       648     582     1.98 %     2.38 %
Wholesale mortgage banking         205,569     213,853       3,567     3,707     1.74 %     1.73 %
Total         $   238,365     238,269       4,215     4,289     1.77 %     1.80 %
                                   
                                   
            For the Six Months Ended June 30,
            Loan Originations   Mortgage Banking Income   Margin
              2018     2017     2018     2017     2018       2017  
Additional segment information:                            
Community banking       $   64,223     39,169       1,302     941     2.03 %     2.40 %
Wholesale mortgage banking         386,063     394,683       6,715     6,956     1.74 %     1.76 %
Total         $   450,286     433,852       8,017     7,897     1.78 %     1.82 %
                                   


                                     
Carolina Financial Corporation                              
Reconciliation of Non-GAAP Financial Measures - Consolidated                        
(Unaudited)                                
(In thousands, except share data)            
            At the Month Ended        
            June 30,   March 31,   December 31,   September 30,   June 30,        
              2018       2018     2017     2017     2017          
                                     
Core deposits:                                
Noninterest-bearing demand accounts   $   577,568       547,744     525,615     333,267     330,641          
Interest-bearing demand accounts         584,719       558,942     551,308     309,241     298,123          
Savings accounts           198,571       212,249     213,142     69,552     70,336          
Money market accounts         458,558       463,676     452,734     377,754     380,108          
  Total core deposits (Non-GAAP)       1,819,416       1,782,611     1,742,799     1,089,814     1,079,208          
                                     
Certificates of deposit:                                
Less than $250,000           788,693       791,789     755,887     567,483     539,177          
$250,000 or more           100,689       102,569     106,243     50,357     45,344          
  Total certificates of deposit         889,382       894,358     862,130     617,840     584,521          
Total deposits       $   2,708,798       2,676,969     2,604,929     1,707,654     1,663,729          
                                     
            At the Month Ended        
            June 30,   March 31,   December 31,   September 30,   June 30,        
              2018       2018     2017     2017     2017          
                                     
Tangible book value per share:                              
Total stockholders' equity     $   551,784       475,046     475,381     290,224     281,818          
Less intangible assets           (145,595 )     (146,387 )   (147,193 )   (44,953 )   (45,123 )        
Tangible common equity (Non-GAAP)   $   406,189     $ 328,659     328,188     245,271     236,695          
                                     
Issued and outstanding shares         22,570,182       21,057,539     21,022,202     16,159,309     16,156,943          
Less nonvested restricted stock awards       (137,345 )     (136,395 )   (134,302 )   (99,639 )   (101,489 )        
Period end dilutive shares         22,432,837       20,921,144     20,887,900     16,059,670     16,055,454          
                                     
Total stockholders' equity     $   551,784       475,046     475,381     290,224     281,818          
Divided by period end dilutive shares       22,432,837       20,921,144     20,887,900     16,059,670     16,055,454          
Common book value per share     $   24.60       22.71     22.76     18.07     17.55          
                                     
Tangible common equity (Non-GAAP)   $   406,189       328,659     328,188     245,271     236,695          
Divided by period end dilutive shares       22,432,837       20,921,144     20,887,900     16,059,670     16,055,454          
Tangible common book value per share (Non-GAAP) $   18.11       15.71     15.71     15.27     14.74          
                                     
            At the Month Ended        
            June 30,   March 31,   December 31,   September 30,   June 30,        
              2018       2018     2017     2017     2017          
Acquired and non-acquired loans:                              
Acquired loans receivable     $   813,688         877,012       952,220       257,461       278,275          
Non-acquired loans receivable         1,613,533         1,503,006       1,367,308       1,227,000       1,157,145          
Total loans receivable       $   2,427,221         2,380,018       2,319,528       1,484,461       1,435,420          
% Acquired         33.52 %     36.85 %   41.05 %   17.34 %   19.39 %        
                                     
Non-acquired loans       $   1,613,533         1,503,006       1,367,308       1,227,000       1,157,145          
Allowance for loan losses         12,987         12,708       11,478       10,662       10,750          
Allowance for loan losses to non-acquired loans (Non-GAAP)   0.80 %     0.85 %   0.84 %   0.87 %   0.93 %        
                                     
Total loans receivable       $   2,427,221         2,380,018       2,319,528       1,484,461       1,435,420          
Allowance for loan losses         12,987         12,708       11,478       10,662       10,750          
Allowance for loan losses to total loans receivable     0.54 %     0.53 %   0.49 %   0.72 %   0.75 %        
                                     
                                     
Carolina Financial Corporation                              
Reconciliation of Non-GAAP Financial Measures  - Consolidated                        
(Unaudited)                                
(In thousands, except share data)            
                                     
            For the Three Months Ended   For the Six Months Ended
            June 30, 
  2018
  March 31, 
  2018
  December 31, 
  2017
  September 30, 
  2017
  June 30, 
  2017
  June 30, 
  2018
  June 30, 
  2017
As Reported:                                
Income before income taxes     $   19,002       4,581     10,630     11,968     12,013       23,583       18,927  
Tax expense       $   4,036       525     4,302     3,975     2,673       4,561       4,684  
Net Income       $   14,966       4,056     6,328     7,993     9,340       19,022       14,243  
                                     
Average equity       $   497,694       477,830     380,529     286,524     277,708       487,532       243,890  
Average tangible equity (Non-GAAP)   $   351,703       331,047     288,156     241,489     233,256       360,148       214,727  
Average assets       $   3,627,401       3,522,407     3,048,214     2,230,586     2,166,803       3,575,708       1,967,563  
                                     
Return on average assets       1.65 %     0.46 %   0.83 %   1.43 %   1.72 %   1.06 %     1.45 %
Return on average equity       12.03 %     3.40 %   6.65 %   11.16 %   13.45 %   7.80 %     11.68 %
Return on average tangible equity (Non-GAAP)     17.02 %     4.90 %   8.78 %   13.24 %   16.02 %   10.56 %     13.27 %
Tangible equity to tangible assets       11.45 %     9.65 %   9.73 %   11.09 %   11.03 %   11.45 %     11.03 %
                                     
Weighted average common shares outstanding:                            
  Basic             21,243,094       20,908,225     19,207,307     16,029,332     16,029,332       20,961,182       14,980,349  
  Diluted           21,495,014       21,119,316     19,443,353     16,187,869     16,180,171       21,216,872       15,144,796  
Earnings per common share:                              
  Basic         $   0.70       0.19     0.33     0.50     0.58       0.91       0.95  
  Diluted       $   0.70       0.19     0.33     0.49     0.58       0.90       0.94  
                                     
                                     
Operating Earnings and Performance Ratios:                            
Income before income taxes     $   19,002       4,581     10,630     11,968     12,013       23,583       18,927  
(Gain)/Loss on sale of securities         746       697     242     (368 )   (621 )     1,443       (806 )
Fair Value Adjustments on interest rate swaps       (451 )     (803 )   (419 )   (90 )   69       (1,255 )     127  
Merger related expenses         506       14,710     6,391     311     279       15,216       1,599  
Operating earnings before income taxes       19,803       19,185     16,844     11,821     11,740       38,987       19,847  
Tax expense (1)           4,205       4,242     5,721     3,926     2,612       8,168       4,912  
Operating earnings (Non-GAAP)     $   15,598       14,943     11,123     7,895     9,128       30,819       14,935  
                                     
Average equity       $   497,694       477,830     380,529     286,524     277,708       487,532       243,890  
Less average intangible assets         (145,991 )     (146,783 )   (92,373 )   (45,035 )   (44,452 )     (127,384 )     (29,163 )
Average tangible common equity (Non-GAAP)   $   351,703       331,047     288,156     241,489     233,256       360,148       214,727  
                                     
Average assets       $   3,627,401       3,522,407     3,048,214     2,230,586     2,166,803       3,575,708       1,967,563  
Less average intangible assets         (145,991 )     (146,783 )   (92,373 )   (45,035 )   (44,452 )     (146,384 )     (29,163 )
Average tangible assets (Non-GAAP)   $   3,481,410       3,375,624     2,955,841     2,185,551     2,122,351       3,429,324       1,938,400  
                                     
Operating return on average assets (Non-GAAP)     1.72 %     1.70 %   1.46 %   1.42 %   1.69 %   1.72 %     1.52 %
Operating return on average equity (Non-GAAP)     12.54 %     12.51 %   11.69 %   11.02 %   13.15 %   12.64 %     12.25 %
Operating return on average tangible assets (Non-GAAP)   1.79 %     1.77 %   1.51 %   1.44 %   1.72 %   1.80 %     1.54 %
Operating return on average tangible equity (Non-GAAP)   17.74 %     18.06 %   15.44 %   13.08 %   15.65 %   17.11 %     13.91 %
                                     
Weighted average common shares outstanding:                            
  Basic             21,243,094       20,908,225     19,207,307     16,029,332     16,029,332       20,961,182       14,980,349  
  Diluted           21,495,014       21,119,316     19,443,353     16,187,869     16,180,171       21,216,872       15,144,796  
Operating earnings per common share:                            
  Basic (Non-GAAP)     $   0.73       0.71     0.58     0.49     0.57       1.47     $   1.00  
  Diluted (Non-GAAP)     $   0.73       0.71     0.57     0.49     0.56       1.45     $   0.99  
                                     
(1)  Tax expense is determined using the effective tax rate adjusted to eliminate the impact of the non-operating items.        
                                     


                                     
Carolina Financial Corporation                              
Reconciliation of Non-GAAP Financial Measures - Community Banking Segment                    
(Unaudited)                                
(In thousands, except share data)            
                                     
            For the Three Months Ended   For the Six Months Ended
            June 30, 
  2018
  March 31, 
  2018
  December 31, 
  2017
  September 30, 
  2017
  June 30, 
  2017
  June 30, 
  2018
  June 30, 
  2017
Segment net income:                                
Community banking       $ 14,928       3,984     6,052     7,837     8,443     18,912       12,951  
Wholesale mortgage banking       598       562     117     449     1,238     1,160       1,884  
Other           (568 )     (497 )   124     (320 )   (346 )   (1,065 )     (591 )
Eliminations         8       7     35     27     5     15       (1 )
Total net income       $ 14,966       4,056     6,328     7,993     9,340     19,022       14,243  
                                     
Community banking segment operating earnings:                            
Income before income taxes     $ 18,924       4,545     10,447     11,714     11,232     23,468       17,607  
Tax expense (1)         3,996       561     4,397     3,877     2,789     4,556       4,656  
Bank segment net income     $ 14,928       3,984     6,050     7,837     8,443     18,912       12,951  
                                     
Weighted average common shares outstanding:                            
  Basic           21,243,094       20,908,225     19,207,307     16,029,332     16,029,332     20,961,182       14,980,349  
  Diluted         21,495,014       21,119,316     19,443,353     16,187,869     16,180,171     21,216,872       15,144,796  
                                     
Bank segment earnings per common share:                            
  Basic         $ 0.70       0.19     0.31     0.49     0.53     0.90     $ 0.86  
  Diluted       $ 0.69       0.19     0.31     0.48     0.52     0.89     $  0.86  
                                     
Bank segment income before taxes     $ 18,924       4,545     10,447     11,714     11,232     23,468     $ 17,607  
(Gain) loss on sale of securities       746       692     242     (368 )   (621 )   1,438       (806 )
Fair value adjustments on interest rate swaps     (451 )     (755 )   (419 )   (90 )   69     (1,207 )     127  
Merger related expenses       506       14,710     6,391     311     279     15,216       1,590  
Operating earnings before income taxes     19,725       19,192     16,661     11,567     10,959     38,915       18,518  
Tax expense (1)         4,152       4,288     5,778     3,828     2,721     8,159       4,934  
Operating bank segment earnings (Non-GAAP)   $ 15,573     $ 14,904     10,883     7,739     8,238     30,756     $ 13,584  
                                     
                                     
Operating bank segment earnings per common share:                            
  Basic (Non-GAAP)     $ 0.73       0.71     0.57     0.48     0.51     1.47     $ 0.91  
  Diluted (Non-GAAP)     $ 0.72       0.71     0.56     0.48     0.51     1.45     $ 0.90  
                                     
(1)  Tax expense is determined using the effective tax rate adjusted to eliminate the impact of the non-operating items.        
                                     

For More Information, Contact: 
William A. Gehman III, EVP and CFO, 843.723.7700

 

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