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Select Bancorp Reports Second Quarter 2018 Earnings

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DUNN, N.C., July 25, 2018 (GLOBE NEWSWIRE) -- Select Bancorp, Inc. (NASDAQ:SLCT), the holding company for Select Bank & Trust Company, today reported net income for the quarter ended June 30, 2018 of $3.1 million with basic and diluted earnings per share of $0.22, compared to net income of $1.3 million and basic and diluted earnings per share of $0.11 for the comparative quarter ended June 30, 2017. On a linked-quarter basis, the Company reported a $1.2 million increase in net income versus the $1.9 million in net income reported for the first quarter ended March 31, 2018, due primarily to the merger/acquisition related expenses that affected first quarter 2018 results.

The Company's total assets increased $22.6 million from $1.19 billion at December 31, 2017 to $1.22 billion at June 30, 2018. The majority of the increase in assets was in the Company's loan portfolio. Gross loans increased by $10.3 million from $982.6 million at December 31, 2017 to $992.9 million at June 30, 2018.

Deposits decreased $1.6 million from $995.0 million at December 31, 2017 to $993.5 million at June 30, 2018. The Company's time deposits decreased by $6.5 million and other deposit products increased by $5.0 million from December 31, 2017 to June 30, 2018.

"The Company saw strong post-merger net income in the second quarter. This is a significant increase in our net income over this year's first quarter numbers, which contained notable one-time merger/acquisition costs," President and Chief Executive Officer William L. Hedgepeth II stated. "The integration of Carolina Premier Bank has progressed as anticipated and provides us with a much larger population base to serve. The addition of Charlotte and our locations in South Carolina should allow us to expand further into those markets in the future."

Net income for the six months ended June 30, 2018 is $5.0 million and basic and diluted earnings per share were $0.36, compared to net income of $3.5 million, basic earnings per share of $0.30 and diluted earnings per share of $0.29 for the six months ended June 30, 2017.

For the three months ended June 30, 2018, return on average assets was 1.02% and return on average equity was 8.92%, compared to 0.64% and 5.61%, respectively, for the three months ended March 31, 2018.

Non-performing loans increased to $10.1 million at June 30, 2018 from $8.3 million at March 31, 2018. Non-performing loans equaled 1.02% of loans at June 30, 2018, increasing from 0.85% of loans at March 31, 2018. Foreclosed real estate equaled $1.5 million at June 30, 2018, compared to $1.5 million at March 31, 2018. For the quarter, net recoveries were $13,000, or (0.01)% of average loans, compared to net charge offs of $18,000, or 0.01% of average loans for the quarter ended March 31, 2018.

Net interest margin was 4.41% for the quarter ending June 30, 2018, as compared to 4.45% for the quarter ending March 31, 2018.

Hedgepeth went on to say, "Much of the early part of second quarter was focused on the conversion of the Carolina Premier Bank systems, deposit and loan accounts, and processes to our current core processor. The conversion was a success and we were able to shift our focus mid-quarter to growth within our newly expanded market. The mortgage group continues to expand, hiring a new senior loan consultant in April and increasing closings month over month. We brought on board a new director for our broadening SBA/Government Lending division, Scott Lewis. Scott comes to us with exceptional commercial and governmental lending experience and a desire to make a significant impact in the SBA lending area." 

"We are eager to continue our growth in the communities we serve," Hedgepeth noted. "Our newer Wilmington market continues to expand and we are placing an emphasis on growth in the Raleigh and Charlotte markets and their surrounding areas. This year has been and is shaping up to continue to be an exciting year for Select Bank & Trust. With our market expanded and the strong desire to grow, the team is very energized to continue serving our customers."

Select Bank & Trust has 18 branch offices in these North Carolina communities: Dunn, Burlington, Charlotte, Clinton, Elizabeth City, Fayetteville, Goldsboro, Greenville, Leland, Lillington, Lumberton, Morehead City, Raleigh, Washington, and Wilmington; and in the following South Carolina communities: Blacksburg, Rock Hill and Six Mile.

Non-GAAP Financial Measures

Certain financial measures we use to evaluate our performance and discuss in this release 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 stockholders' 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

The information as of and for the quarter ended June 30, 2018, as presented is unaudited. 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 our recent merger with Carolina Premier Bank; regulatory changes; the impact of the Tax Cuts and Jobs Act on our earnings, including any subsequent adjustments to the valuation of our deferred tax assets and liabilities; 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 per share data)  
   
  At or for the three months ended (unaudited)   At or for the twelve months ended  
  June 30,   March 31,   December 31,   September 30,   June 30,   December 31,   December 31,   December 31,  
  2018 2018 2017 2017 2017 2017 2016 2015
Summary of Operations:                                                                
Total interest income $ 14,187     $ 13,722     $ 10,981     $ 10,042     $ 9,469     $ 39,617     $ 34,709     $ 33,341    
Total interest expense   2,258       2,018       1,505       1,357       1,197       5,106       3,733       3,542    
Net interest income   11,929       11,704       9,476       8,685       8,272       34,511       30,976       29,799    
Provision for loan losses   557       141       276       202       1,083       1,367       1,516       890    
Net interest income after provision   11,372       11,563       9,200       8,483       7,189       33,144       29,460       28,909    
Noninterest income   1,226       1,165       786       778       778       3,072       3,222       3,292    
Merger/Acquisition related expenses   -       1,826       1,888       278       -       2,166       -       378    
Noninterest expense   8,602       8,458       7,207       6,161       5,980       25,153       22,281       21,852    
Income before income taxes   3,996       2,444       891       2,822       1,987       8,897       10,401       9,971    
Provision for income taxes   886       547       2,936       1,043       651       5,712       3,647       3,418    
Net Income (loss)   3,110       1,897       (2,045     1,779       1,336       3,185       6,654       6,553    
Dividends on Preferred Stock   -       -       -       -       -       -       4       77    
Net income available to common shareholders (loss) $ 3,110     $ 1,897     $ (2,045   $ 1,779     $ 1,336     $ 3,185     $ 6,750     $ 6,476    
                                                 
Share and Per Share Data:                                                
Earnings (loss) per share - basic $ 0.22     $ 0.14     $ (0.17   $ 0.15     $ 0.11     $ 0.27     $ 0.58     $ 0.56    
Earnings (loss) per share - diluted $ 0.22     $ 0.13     $ (0.17   $ 0.15     $ 0.11     $ 0.27     $ 0.58     $ 0.56    
Book value per share $ 10.03     $ 9.82     $ 9.72     $ 9.42     $ 9.26     $ 9.72     $ 8.95     $ 8.38    
Tangible book value per share(5) $ 8.10     $ 7.87     $ 7.72     $ 8.78     $ 8.61     $ 7.72     $ 8.29     $ 7.67    
Ending shares outstanding   14,024,887       14,013,917       14,009,137       11,662,621       11,662,471       14,009,137       11,645,413       11,583,011    
Weighted average shares outstanding:                                                
Basic   14,019,273       14,011,707       12,071,392       11,662,580       11,662,117       11,763,050       11,610,705       11,502,800    
Diluted   14,086,671       14,081,776       12,071,392       11,717,533       11,727,110       11,826,977       11,655,111       11,567,811    
                                                 
Selected Performance Ratios:                                                
Return on average assets(2)   1.02 %     0.64 %     (0.81 )%     0.77 %     0.60 %     0.35 %     0.81 %     0.86 %  
Return on average equity(2)   8.92 %     5.61 %     (7.00 )%     6.44 %     4.96 %     2.93 %     6.61 %     6.42 %  
Net interest margin   4.41 %     4.45 %     4.14 %     4.19 %     4.18 %     4.09 %     4.06 %     4.38 %  
Efficiency ratio (1)   65.39 %     65.72 %     70.23 %     65.11 %     66.08 %     66.93 %     65.15 %     66.04 %  
                                                 
Period End Balance Sheet Data:                                                
Gross Loans $ 992,885     $ 978,275     $ 982,626     $ 763,432     $ 738,021     $ 982,626     $ 677,195     $ 617,398    
Total interest earning assets   1,107,695       1,094,694       1,063,322       833,766       816,008       1,063,322       770,288       726,408    
Goodwill   24,579       24,579       24,904       6,931       6,931       24,904       6,931       6,931    
Core Deposit Intangible   2,564       2,826       3,101       547       629       3,101       810       1,241    
Total Assets   1,216,731       1,222,551       1,194,135       922,749       906,524       1,194,135       846,640       817,015    
Deposits   993,484       1,009,481       995,044       775,022       739,653       995,044       679,661       651,161    
Short-term debt   21,071       32,173       28,279       22,366       33,559       28,279       37,090       29,673    
Long-term debt   57,372       39,372       19,372       12,372       22,839       19,372       23,039       28,703    
Shareholders' equity   140,702       137,673       136,115       109,819       108,017       136,115       104,273       104,702    
                                                 
Selected Average Balances:                                                
Gross Loans $ 990,036     $ 979,420     $ 809,608     $ 748,699     $ 715,366     $ 732,089     $ 639,412     $ 578,759    
Total interest earning assets   1,087,683       1,073,890       901,324       826,595       799,240       813,773       744,024       686,663    
Core Deposit Intangible   2,661       2,955       1,007       589       673       640       1,020       1,330    
Total Assets   1,219,225       1,198,588       997,450       914,986       887,412       898,943       829,315       765,284    
Deposits   1,004,571       981,403       827,408       754,169       719,976       738,310       665,764       607,214    
Short-term debt   21,289       36,726       23,476       32,703       33,413       34,523       32,111       32,316    
Long-term debt   37,620       19,880       13,676       15,633       22,871       14,239       25,739       20,147    
Shareholders' equity   139,810       137,092       115,874       109,537       108,071       108,709       102,110       102,068    
                                                 
Asset Quality Ratios:                                                
Nonperforming loans $ 10,118     $ 8,338     $ 6,978     $ 6,153     $ 6,159     $ 6,978     $ 9,430     $ 8,712    
Other real estate owned   1,497       1,525       1,258       2,093       2,702       1,258       599       1,401    
Allowance for loan losses   9,528       8,957       8,835       8,647       8,488       8,835       8,411       7,021    
Nonperforming loans (3) to period-end loans   1.02 %     0.85 %     0.71 %     0.81 %     0.83 %     0.71 %     1.02 %     1.41 %  
Allowance for loan losses to period-end loans   0.96 %     0.92 %     0.90 %     1.13 %     1.15 %     0.90 %     1.24 %     1.14 %  
Delinquency Ratio (4)   0.51 %     0.25 %     0.63 %     0.38 %     0.07 %     0.63 %     0.44 %     0.40 %  
Net loan charge-offs (recoveries) to average loans (2)   (0.01 )%     0.01 %     0.05 %     0.02 %     0.35 %     0.13 %     0.02 %     0.12 %  
                                                                 


(1)   Efficiency ratio is calculated as non-interest expenses divided by the sum of net interest income and non-interest income.
(2)   Annualized.
(3)   Nonperforming loans consist of non-accrual loans and restructured loans.
(4)   Delinquency Ratio includes loans 30-89 days past due and excludes non-accrual loans.
(5)   Tangible book value per share (a non-GAAP measure) is equal to total stockholders' 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.
     


 
Reconciliation of GAAP to Non-GAAP Measures
($ in thousands, except per share data)
(Unaudited)
 
    June
30,
2018
  March
31,
2018
  December 
31,
2017
  September 
30,
2017
  June
30,
2017
  December 
31,
2017
  December 
31,
2016
  December 
31,
2015
Tangible common equity                                
Total shareholders' equity   $ 140,702   $ 137,673   $ 136,115   $ 109,819   $ 108,017   $ 136,115   $ 104,273   $ 104,702
Adjustments:                                
Goodwill     24,579     24,579     24,904     6,931     6,931     24,904     6,931     6,931
Core deposit intangibles     2,564     2,826     3,101     547     629     3,101     810     1,241
Tangible common equity   $ 113,559   $ 110,268   $ 108,110   $ 102,341   $ 100,457   $ 108,110   $ 96,532   $ 96,530
Common shares outstanding(1)     14,024,887     14,013,917     14,009,137     11,662,621     11,662,471     14,009,137     11,645,413     11,583,011
Book value per common share(2)   $ 10.03   $ 9.82   $ 9.72   $ 9.42   $ 9.26   $ 9.72   $ 8.95   $ 8.38
Tangible book value per common share(3)   $ 8.10   $ 7.87   $ 7.72   $ 8.78   $ 8.61   $ 7.72   $ 8.29   $ 7.67

_________________________

(1)   Excludes the dilutive effect of common stock issuable upon exercise of outstanding stock options. The number of exercisable options outstanding was 67,398 as of June 30, 2018; 70,069 as of March 31, 2018; 63,927 as of December 31, 2017; 54,953 as of September 30, 2017; 64,993 as of June 30, 2017; 63,927 as of December 31, 2017; 44,406 as of December 31, 2016; and 65,011 as of December 31, 2015.
(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 stockholders' 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

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