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Section 1: 8-K (FORM 8-K)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

  FORM 8-K  

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): January 26, 2021

 

 

 

 

SELECT BANCORP, INC.

 
 

(Exact Name of Registrant as Specified in Charter) 

 

 

North Carolina 000-50400 20-0218264

(State or Other Jurisdiction

of Incorporation)

(Commission
File Number)

(IRS Employer

Identification No.)

 

700 W. Cumberland Street, Dunn, North Carolina 28334
(Address of Principal Executive Offices) (Zip Code)

 

Registrant’s Telephone Number, Including Area Code: (910) 892-7080

 

Not Applicable
(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of class Trading Symbol Name of exchange on which registered
Common Stock, par value $1.00 per share SLCT The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.

Emerging growth company ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

 

 

 

Item 2.02Results of Operations and Financial Condition.

 

On January 26, 2021, Select Bancorp, Inc. issued a press release announcing financial results for the three and twelve months ended December 31, 2020. A copy of the press release is furnished as Exhibit 99.1 hereto and incorporated by reference herein.

 

Pursuant to General Instruction B.2 of Current Report on Form 8-K, the information contained in, or incorporated into, Item 2.02, including the press release attached as Exhibit 99.1, is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any registration statement or other filing under the Securities Act of 1933 or the Exchange Act, except as shall be expressly set forth by specific reference to such filing.

 

Item 9.01.Financial Statements and Exhibits.

 

  (d) Exhibits

 

Exhibit No.   Description
99.1   Press release dated January 26, 2021, regarding financial results for the three and twelve months ended December 31, 2020.
     
104   Cover page interactive data file (embedded within the Inline XBRL document)

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  SELECT BANCORP, INC.
     
     
Date:   January 28, 2021 By: /s/ Mark A. Jeffries
    Mark A. Jeffries
    Executive Vice President and Chief Financial Officer

 

 

 

(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit 99.1

 

 

 

FOR RELEASE: January 26, 2021

Mark A. Jeffries

Executive Vice President

Chief Financial Officer

Office: 910-892-7080 and Direct: 910-897-3603

markj@SelectBank.com

SelectBank.com

 

SELECT BANCORP REPORTS

FOURTH QUARTER AND YEAR-END 2020 EARNINGS

 

DUNN, NC . . . Select Bancorp, Inc. (NASDAQ: SLCT) (the “Company”), the holding company for Select Bank & Trust Company (the “Bank”), today reported net income for the year ended December 31, 2020 of $8.2 million, or $0.46 and $0.45 per basic and diluted share, respectively, as compared to net income for the year ended December 31, 2019 of $13.0 million, or $0.69 and $0.68 per basic and diluted share, respectively. This was a decrease of 37.4% in net income compared to the year ended December 31, 2019. Net income per share declined approximately 33.3% for basic and 33.8% for diluted per share for the year ended December 31, 2019. The decline in net income is primarily attributable to an increase of $5.8 million in loan loss allowance provision during 2020 as compared to 2019, incurring debt extinguishment expenses of $1.6 million for the payoff of $45.0 million of FHLB advances with a composite rate of 2.76% during the 2020 4th quarter, recognized $755,000 in integration expenses during the year related to the acquisition of three branches in western North Carolina, and $2.3 million in deferred interest income related to COVID-19 loan modifications. These items were partially offset by $2.6 million in revenue from loan fees associated with loans originated by the Bank as part of the U.S. Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”), recognized under the effective interest rate method. The number of weighted shares outstanding decreased due to the repurchase by the Company of 834,608 shares of common stock completed during 2020. Management expects the repurchase of shares to continue in 2021 under the Company’s previously announced stock repurchase plan.

 

For the three-month period ended December 31, 2020, the Company reported net income of $3.9 million, or $0.22 per basic and diluted share, respectively, as compared to net income of $2.5 million, or $0.14 per basic and diluted share, respectively, for the three months ended September 30, 2020, representing an increase of 57.1% in net income for the 2020 fourth quarter.

 

Initiatives to expand the market footprint of the franchise reduced net income in 2020 compared to 2019 due to the increased expenses associated with the opening of a new branch in Cornelius, North Carolina (the Charlotte area) and the acquisition of three western North Carolina branches mentioned above.

 

Net Interest Income and Net Interest Margin

 

Net interest income was $16.0 million for the fourth quarter of 2020 compared to $11.9 million for the same period in 2019. On a comparative quarter basis, the Company’s total interest income was positively affected by increased loan balances due to growth. Loan yields decreased but were partially offset by increased loan fee income primarily from PPP loan forgiveness. On a comparative quarter basis, the Company’s total interest income was positively affected by increased investment balances due to growth which was partially offset by decreasing investment yields. Average total interest-earning assets were $1.6 billion in the fourth quarter of 2020 compared to $1.2 billion for the same period in 2019. The yield on those assets decreased 27 basis points, from 5.05% in the fourth quarter of 2019 to 4.78% for the same period in 2020. This was primarily due to lower rates on recently purchased investments and cash in other banks on a comparative quarter basis.

 

 

 

 

The Company’s average interest-bearing liabilities increased by $333.4 million, to $1.1 billion for the quarter ended December 31, 2020, from $801.4 million for the fourth quarter of 2019. The cost of those funds decreased from 1.46% to 0.94%, or 52 basis points. During the fourth quarter of 2020, the Company’s net interest margin was 4.10% and net interest spread was 3.84%. In the fourth quarter of 2019, net interest margin was 4.05% and net interest spread was 3.59%.

 

Net interest income was $52.4 million for the year ended December 31, 2020, an increase of $5.6 million from the $46.9 million in net interest income reported for the year ended December 31, 2019. The Company’s total interest income increased by approximately $4.8 million in 2020 versus 2019, and the cost of funds decreased by approximately $797,000 from the prior period. The Company’s increase in total interest income was fueled by an increase in loans and purchases of securities. Average total interest-earning assets were $1.4 billion for 2020 compared with $1.2 billion for 2019, while the yield on those assets decreased 46 basis points from 5.03% to 4.57%, which was primarily due to the decrease in rates on purchased investment securities and other earning assets.

 

The Company’s average interest-bearing liabilities increased by $183.4 million, to $978.6 million for the year ended December 31, 2020, from $795.2 million for the year ended December 31, 2019, with the cost of those funds decreasing from 1.45% to 1.10%, or 35 basis points. For the year ended December 31, 2020, the Company’s net interest margin was 3.79% and net interest spread was 3.47%. For the year ended December 31, 2019, net interest margin was 4.04% and net interest spread was 3.58%.

 

Provision for Loan Losses and Asset Quality

 

During the fourth quarter of 2020, the Company recorded a provision for loan losses of $400,000, based primarily on loan growth and adjustments to qualitative loan factors related to trends in the loan portfolio. On a comparative quarter basis, the Company had a $302,000 provision for the fourth quarter of 2019. In the third quarter of 2020, the Company recorded a provision for loan losses of $1.6 million, based primarily on economic disruptions due to COVID-19, net charge-offs of $104,000 and changes in qualitative loan factors during the quarter. In the fourth quarter of 2020, the Company incurred net recoveries of $147,000, a net recovery rate of 0.05% of average loans, compared to a net charge-off rate of 0.04% in the third quarter of 2020.

 

For the year ended December 31, 2020, the Company recorded a provision for loan losses of $6.2 million, compared to a provision of $438,000 for 2019. This increase for 2020 was based primarily on the market disruption from COVID-19 and its effect on economic indicators, loan growth, net charge-offs incurred and the increase in qualitative loan factors. The net charge-off ratio for the year ended December 31, 2020 was 0.04%, compared to 0.08% for the year ended December 31, 2019.

 

The allowance for loan losses as a percentage of gross loans at December 31, 2020 was 1.08% compared to 0.81% at December 31, 2019. At December 31, 2020 the allowance for loan losses amounted to $14.1 million and the credit mark on acquired loans amounted to $6.4 million which could be used to absorb loan charge offs.

 

Non-interest Income

 

Non-interest income for the quarter ended December 31, 2020 was $1.5 million, an increase of $95,000 from $1.4 million in the fourth quarter of 2019. Service charges on deposit accounts decreased $12,000, to $291,000 for the quarter ended December 31, 2020, from $303,000 for the fourth quarter of 2019. Other non-deposit fees and income increased $7,000 from the fourth quarter of 2019 to the fourth quarter of 2020. Fees from presold mortgages increased by $100,000 in the fourth quarter of 2020 to $248,000, from $148,000 in the fourth quarter of 2019. The Company did not sell any investment securities in the fourth quarter of 2020 or fourth quarter of 2019.

 

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Non-interest income for the year ended December 31, 2020 was $6.1 million, an increase of $701,000, or 12.9%, from the year ended December 31, 2019. Service charges on deposit accounts decreased $69,000, to $1.1 million, for the year ended December 31, 2020 from $1.2 million for the year ended December 31, 2019. Other non-deposit fees and income increased $158,000 from the year ended December 31, 2019 to the year ended December 31, 2020. Fees from presold mortgages increased non-interest income by $660,000 in 2020 to $1.4 million from $753,000 for 2019. The Company sold two investment securities for a gain of $48,000 in 2019. The Company did not sell any investment securities during 2020.

 

Non-interest Expenses

 

Non-interest expenses increased by $3.0 million, or 33.4%, to $12.1 million for the quarter ended December 31, 2020, from $9.1 million for the same period in 2019. The following are highlights of the significant categories of non-interest expenses during the fourth quarter of 2020 compared to the same period in 2019:

 

·Personnel expenses increased $825,000, to $6.0 million, primarily due to increased staff for new and acquired branches, employment taxes and benefits costs.
·Foreclosed real estate-related expense increased $233,000, primarily due to write-downs and maintenance expenses.
·Deposit insurance expense increased by $355,000.
·Debt extinguishment expenses of $1.6 million were incurred due to the payoff of FHLB advances.
·Merger/integration-related expenses associated with branch purchases and divestitures decreased by $171,000.
·Other non-interest expenses increased by $193,000, primarily due to additional branches and other various administrative related non-interest expenses.

 

Non-interest expenses increased by $5.2 million, or 14.8%, to $41.9 million for the twelve months ended December 31, 2020, from $35.1 million for the same period in 2019. The following are highlights of the significant categories of non-interest expenses during the twelve months ended December 31, 2020 versus 2019:

 

·Personnel expenses increased $2.9 million, to $23.1 million, primarily due to additions in branch staff plus cost of living increases and related employment taxes and benefit costs.
·Occupancy and equipment expenses increased by $216,000 primarily due to branch acquisitions and branch start-up.
·Deposit insurance expense increased $624,000.
·Professional fees decreased by $234,000.
·Information systems expense increased $609,000 due primarily to additional software and security costs plus additional accounts from branch acquisitions.
·Debt extinguishment expenses of $1.6 million were incurred due to the payoff of FHLB advances.
·Merger/integration-related expenses increased by $349,000 primarily due to the acquisition of three branches in western North Carolina during 2020.
·Foreclosed real estate expenses increased $623,000 due to write downs and disposal costs in 2020.

 

Income Taxes

 

The Company’s effective tax rate was 22.1% and 22.4% for the quarters ended December 31, 2020 and 2019, respectively. The Company’s effective tax rate was 21.3% and 22.1% for the years ended December 31, 2020 and 2019, respectively.

 

Balance Sheet and Capital

 

Total assets at December 31, 2020 were $1.7 billion, a 35.6% increase from a year earlier. Gross loans at December 31, 2020 were $1.3 billion, up $274.4 million, or 26.6%, from a year earlier; total deposits were $1.5 billion, an increase of $493.0 million, or 49.7%, from a year earlier.

 

Retail deposit growth (excludes brokered deposits and internet time deposits) grew at a rate of 49.65% for 2020. Wholesale deposits decreased from $45.0 million at December 31, 2019 to $4.6 million at December 31, 2020 as we continued to emphasize core deposit growth to replace wholesale deposits.

 

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Comments of the Chief Executive Officer

 

William L Hedgepeth, II, President and CEO of the Company, commented, “Our commitment to expand our market footprint and implement our initiatives continued in 2020 even as we addressed major disruptions in the economy caused by the COVID-19 pandemic. We opened the Cornelius branch in the Charlotte market in early February plus acquired three branches in western North Carolina in mid-April during the height of the pandemic. We were very involved in assisting businesses in the communities we serve with the Small Business Administration’s Paycheck Protection Program (PPP) and working hand in hand with customers who requested temporary loan modifications to provide time for those businesses to adopt changes to their operations as they adjusted to the new normal.”

 

“With the onset of the COVID-19 pandemic Select Bank & Trust stood ready to assist our customers. We granted 467 COVID-19 deferrals totaling $254.2 million at the beginning of the pandemic. As of December 31, 2020, we had 48 COVID-19 deferrals outstanding that totaled $32.7 million or 2.5% of total loans outstanding. We remain prepared to work with our customers that might need assistance in 2021.”

 

“We also originated 1,242 SBA PPP loans totaling $95.2 million. As of December 31, 2020, we had 786 SBA PPP loans remaining with outstanding balances totaling $55.5 million or 4.3% of total loans outstanding. Many of those loans are in varying stages of forgiveness. In 2020 we recognized $2.6 million in SBA PPP fee income. We stand ready to assist our customers and prospective customers in 2021 should they decide to pursue SBA PPP loans for their businesses.”

 

Mr. Hedgepeth added, “We continue to review opportunities for expansion and analyze each with a discipline designed to properly deploy the capital entrusted to us. Our share repurchase program remains active, and we are able to return capital to shareholders by buying our shares when market conditions warrant. We intend to retain adequate capital for expansion which meet our criteria.”

 

About Select Bank & Trust Company

 

Select Bank & Trust has 22 full-service offices in these North Carolina communities: Dunn, Burlington, Charlotte, Clinton, Cornelius (Charlotte), Elizabeth City, Fayetteville, Franklin, Goldsboro, Greenville, Highlands, Holly Springs (Raleigh area), Leland, Lillington, Lumberton, Morehead City, Raleigh, Sylva and Wilmington, North Carolina; in the following South Carolina communities: Blacksburg and Rock Hill; and in Virginia Beach, Virginia. The Bank also has loan production offices in Wilson, Durham and Winston-Salem, North Carolina.

 

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, South Carolina, and Virginia. 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.

 

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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 share. A reconciliation of tangible book value per share to book value per share is included in the tables that accompany this release.

 

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 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, and 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: the ongoing COVID-19 pandemic and measures intended to prevent its spread, which include wide disruptions to business activity that may impact the financial strength of our borrowers; our ability to manage growth or achieve it at all; substantial changes in financial markets; our ability to obtain the synergies and expense efficiencies anticipated from our acquisition activity and branch divestures and consolidations; regulatory changes; impacts from the recent presidential election, change in congressional leadership, and change in executive branch leadership, including regulatory agendas that may impact the business climate in which we operate; changes in interest rates; loss of deposits and loan demand to other savings and financial institutions; adverse economic conditions that impact our borrowers’ ability to pay their debts when due; 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.

 

 

 

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SELECT BANCORP, INC.

CONSOLIDATED BALANCE SHEETS

 

    December 31, 2020     September 30, 2020     June 30, 2020     March 31, 2020     December 31, 2019  
    (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)     (Audited)  
          (Dollars in thousands)  
ASSETS                              
                               
Cash and due from banks   $ 23,324     $ 25,068     $ 24,037     $ 20,030     $ 19,110  
Interest-earning deposits in other banks     87,399       249,541       157,521       35,544       50,920  
Federal funds sold     5,364       8,046       9,726       11,673       9,047  
Investment securities available for sale, at fair value     194,492       87,434       62,958       64,738       72,367  
Loans held for sale     2,064       2,945       3,455       1,606       928  
Loans     1,304,384       1,283,457       1,249,999       1,039,514       1,029,975  
Allowance for loan losses     (14,108 )     (13,561 )     (12,054 )     (10,586 )     (8,324 )
NET LOANS     1,290,276       1,269,896       1,237,945       1,028,928       1,021,651  
                                         
Accrued interest receivable     5,110       4,486       4,400       3,839       4,189  
Stock in Federal Home Loan Bank of Atlanta, at cost     1,147       3,059       3,059       3,059       3,045  
Other non-marketable securities     709       718       718       718       719  
Foreclosed real estate     2,172       3,237       3,561       3,737       3,533  
Premises and equipment, net     20,587       20,883       20,893       17,868       17,791  
Right of use lease asset     8,558       8,756       8,953       8,414       8,596  
Bank owned life insurance     30,432       30,271       30,110       29,950       29,789  
Goodwill     42,907       41,914       41,914       24,579       24,579  
Core deposit intangible ("CDI")     1,513       1,677       1,856       1,431       1,610  
Other assets     13,991       14,015       7,854       7,380       7,202  
TOTAL ASSETS   $ 1,730,045     $ 1,771,946     $ 1,618,960     $ 1,263,494     $ 1,275,076  
                                         
LIABILITIES AND SHAREHOLDERS' EQUITY                                        
Deposits:                                        
Demand   $ 395,916     $ 408,209     $ 400,098     $ 250,031     $ 240,305  
Savings     51,843       51,629       52,597       41,815       43,128  
Money market and NOW     649,677       610,275       495,609       306,051       280,145  
Time     388,381       402,667       390,449       384,754       429,260  
TOTAL DEPOSITS     1,485,817       1,472,780       1,338,753       982,651       992,838  
                                         
Short-term debt     -       20,000       20,000       20,000       -  
Long-term debt     12,372       37,372       37,372       37,372       57,372  
Lease Liability     8,930       9,089       9,243       8,669       8,813  
Accrued interest payable     246       449       457       536       578  
Accrued expenses and other liabilities     7,312       18,889       1,597       2,181       2,700  
TOTAL LIABILITIES     1,514,677       1,558,579       1,407,422       1,051,409       1,062,301  
                                         
Shareholders' Equity                                        
Common stock     17,507       17,787       17,863       18,056       18,330  
Additional paid-in-capital     135,058       137,130       137,559       138,788       140,870  
Retained earnings     60,838       56,917       54,460       53,779       52,675  
Common stock issued to deferred compensation trust     (2,416 )     (2,352 )     (2,553 )     (2,791 )     (2,815 )
Directors' Deferred Compensation Plan Rabbi Trust     2,416       2,352       2,553       2,791       2,815  
Accumulated other comprehesive income     1,965       1,533       1,656       1,462       900  
TOTAL SHAREHOLDERS' EQUITY     215,368       213,367       211,538       212,085       212,775  
                                         
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY   $ 1,730,045     $ 1,771,946     $ 1,618,960     $ 1,263,494     $ 1,275,076  

 

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SELECT BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

   For the Three Months Ended   For the Twelve Months Ended 
   December 31,
2020
   September 30,
2020
   June 30,
2020
   March 31,
2020
   December 31,
2019
   December 31,
2020
   December 31,
2019
 
           (Dollars in thousands, except for share amounts)         
INTEREST INCOME                                   
Loans  $17,901   $15,404   $14,086   $13,589   $14,124   $60,980   $54,605 
Federal funds sold and interest-earning                                   
      deposits in other banks   52    54    33    168    258    307    1,838 
Investments   752    367    381    421    434    1,921    2,003 
TOTAL INTEREST INCOME   18,705    15,825    14,500    14,178    14,816    63,208    58,446 
                                    
INTEREST EXPENSE                                   
Money market, NOW and savings deposits   1,041    891    648    348    420    2,928    1,616 
Time deposits   1,269    1,415    1,576    1,931    2,075    6,191    8,061 
Short-term debt   131    145    141    87    6    504    62 
Long-term debt   240    263    281    352    447    1,136    1,817 
TOTAL INTEREST EXPENSE   2,681    2,714    2,646    2,718    2,948    10,759    11,556 
                                    
NET INTEREST INCOME   16,024    13,111    11,854    11,460    11,868    52,449    46,890 
                                    
PROVISION FOR LOAN LOSSES   400    1,638    1,933    2,273    302    6,244    438 
                                    
NET INTEREST INCOME AFTER  PROVISION                                   
FOR LOAN LOSSES   15,624    11,473    9,921    9,187    11,566    46,205    46,452 
                                    
NON-INTEREST INCOME                                   
Fees on the sale of mortgages   248    517    355    293    148    1,413    753 
Gain on securities   -    -    -    -    -    -    48 
Service charges on deposit accounts   291    257    206    338    303    1,092    1,161 
Other fees and income   1,002    950    850    813    995    3,615    3,457 
TOTAL NON-INTEREST INCOME   1,541    1,724    1,411    1,444    1,446    6,120    5,419 
                                    
NON-INTEREST EXPENSE                                   
Personnel   5,977    5,742    5,786    5,632    5,152    23,137    20,278 
Occupancy and equipment   986    1,008    986    931    973    3,911    3,695 
Deposit insurance   374    370    76    (12)   19    808    184 
Professional Fees   430    399    451    372    503    1,652    1,886 
CDI amortization   164    179    195    179    193    717    825 
Merger/acquisition related expenses   -    7    709    39    171    755    406 
Information systems   1,049    1,043    972    1,038    974    4,102    3,492 
Foreclosed-related expenses   342    228    187    5    109    762    140 
Debt extinguishment   1,616    -    -    -    -    1,616    - 
Other   1,193    1,091    1,140    1,063    1,000    4,487    4,234 
TOTAL NON-INTEREST EXPENSE   12,131    10,067    10,502    9,247    9,094    41,947    35,140 
                                    
INCOME BEFORE INCOME TAXES   5,034    3,130    830    1,384    3,918    10,378    16,731 
                                    
INCOME TAXES   1,113    673    149    280    877    2,215    3,696 
NET INCOME  $3,921   $2,457   $681   $1,104   $3,041   $8,163   $13,035 
NET INCOME PER COMMON SHARE OUTSTANDING                                   
Basic  $0.22   $0.14   $0.04   $0.06   $0.17   $0.46   $0.69 
Diluted  $0.22   $0.14   $0.04   $0.06   $0.16   $0.45   $0.68 
                                    
WEIGHTED AVERAGE COMMON                                   
Basic Outstanding Shares   17,637,540    17,847,913    18,013,863    18,255,351    18,414,393    17,937,596    19,016,808 
Diluted Outstanding Shares   17,661,922    17,866,822    18,030,136    18,287,064    18,460,118    17,961,258    19,063,237 

 

7 

 

 

Select Bancorp, Inc.

Asset quality

 

   For Periods Ended 
   December 31,
2020
   September 30,
2020
   June 30,
2020
   March 31,
2020
   December 31,
2019
   December 31,
2020
   December 31,
2019
 
   (Dollars in thousands, except for share amounts, unaudited) 
Non-accrual loans  $6,790   $7,695   $7,979   $7,201   $5,941   $6,790   $5,941 
Accruing TDRs   7,506    6,044    6,420    5,619    6,207    7,506    6,207 
Total non-performing loans   14,296    13,739    14,399    12,820    12,148    14,296    12,148 
Foreclosed real estate   2,172    3,237    3,561    3,737    3,533    2,172    3,533 
Total non-performing assets  $16,468   $16,976   $17,960   $16,557   $15,681   $16,468   $15,681 
                                    
Accruing loans past due 90 days or more  $802   $1,548   $1,326   $1,182   $1,231   $802   $1,231 
Allowance for loan losses  $14,108   $13,561   $12,054   $10,586   $8,324   $14,108   $8,324 
                                    
Non-performing loans to period ending loans   1.10%   1.07%   1.15%   1.23%   1.18%   1.10%   1.18%
Non-performing loans & accruing loans past due 90 days or more to period ending loans   1.16%   1.19%   1.26%   1.35%   1.30%   1.16%   1.30%
Allowance for loans to period end loans   1.08%   1.06%   0.96%   1.02%   0.81%   1.08%   0.81%
Allowance for loans to non-performing loans   99%   99%   84%   83%   69%   99%   69%
Allowance for loans to non-performing Assets   86%   80%   67%   64%   53%   86%   53%
Allowance for loans to non-performing Assets and accruing loans past due 90 days or more   82%   73%   63%   60%   49%   82%   49%
Non-performing assets to total assets   0.95%   0.96%   1.11%   1.31%   1.23%   0.95%   1.23%
Non-performing assets to accruing loans past due 90 days or more to total assets   1.00%   1.05%   1.19%   1.40%   1.33%   1.00%   1.33%

 

 

SELECT BANCORP, INC.

Reconciliation of GAAP to Non-GAAP Measures

($ in thousands, except per share data, unaudited)

 

   For the Three Months Ended   For the Twelve Months Ended 
   December 31,
2020
   September 30,
2020
   June 30,
2020
   March 31,
2020
   December 31,
2019
   December 31,
2020
   December 31,
2019
 
Net interest margin:                                   
Net Interest Margin-tax equivalent (1)  $16,075   $13,141   $11,883   $11,489   $11,901   $52,588   $47,037 
Purchased loan accretion and early payoff charges   (506)   (455)   (620)   (105)   (226)   (1,581)   (904)
Net Interest Margin(2) (Non-GAAP)  $15,569   $12,686   $11,263   $11,384   $11,675   $51,007   $46,133 
                                    
Loans receivable interest income:                                   
Loans receivable interest income  $17,913   $15,415   $14,097   $13,600   $14,135   $61,025   $54,645 
Purchased loan accretion and early payoff charges   (506)   (455)   (620)   (105)   (226)   (1,581)   (904)
Loans receivable interest income (Non-GAAP)  $17,407   $14,960   $13,477   $13,495   $13,909   $59,444   $53,741 
                                    
Acquired and non-acquired loans:                                   
Acquired loans recievable  $180,152   $199,794   $213,466   $122,363   $129,595   $180,152   $129,595 
Non-acquired loans receivable   1,124,232    1,083,663    1,036,533    917,151    900,380    1,124,232    900,380 
Total gross loans receivable  $1,304,384   $1,283,457   $1,249,999   $1,039,514   $1,029,975   $1,304,384   $1,029,975 
% Acquired   13.8%   15.6%   17.1%   11.8%   12.6%   13.8%   12.6%
                                    
Non-acquired loans  $1,124,232   $1,083,663   $1,036,533   $917,151   $900,380   $1,124,232   $900,380 
Allowance for loan losses   14,108    13,561    12,054    10,586    8,324    14,108    8,324 
Allowance for loan losses to non-acquired loans (Non-GAAP)   1.25%   1.25%   1.16%   1.15%   0.92%   1.25%   0.92%
                                    
Total gross loan receivable  $1,304,384   $1,283,457   $1,249,999   $1,039,514   $1,029,975   $1,304,384   $1,029,975 
Allowance for loan losses   14,108    13,561    12,054    10,586    8,324    14,108    8,324 
Allowance for loan losses to total gross loans receivable   1.08%   1.06%   0.96%   1.02%   0.81%   1.08%   0.81%

 

   For Periods Ended 
   December 31,
2020
   September 30,
2020
   June 30,
2020
   March 31,
2020
   December 31,
2019
   December 31,
2020
   December 31,
2019
 
Tangible common equity                                   
   Total shareholders' equity  $215,368   $213,367   $211,538   $212,085   $212,775   $215,368   $212,775 
   Adjustment:                                   
      Goodwill   42,907    41,914    41,914    24,579    24,579    42,907    24,579 
      Core deposit intangibles   1,513    1,677    1,856    1,431    1,610    1,513    1,610 
Tangible common equity  $170,948   $169,776   $167,768   $186,075   $186,586   $170,948   $186,586 
Common shares outstanding(3)   17,507,103    17,786,552    17,862,554    18,055,692    18,330,058    17,507,103    18,330,058 
Book value per common share(4)  $12.30   $12.00   $11.84   $11.75   $11.61   $12.30   $11.61 
Tangible book value per common share(5)  $9.76   $9.55   $9.39   $10.31   $10.18   $9.76   $10.18 

 

(1)Net interest margin-tax equivalent reflects tax-exempt income on a tax-equivalent basis.
(2)Net interest margin-core and yield on loans - core excludes the impact of purchase accounting accretion, loan payoff charges and related deferred fees recognized related to early loan repayments.
(3)Excludes the dilutive effect of common stock issuable upon exercise of stock options.
(4)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.
(5)We calculate the 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.

 

8 

 

 

Select Bancorp, Inc.

Selected Financial Information and Other Data

($ in thousands, except per share data)

 

   For the Quarter Ended   For the Year Ended 
    December 31,    September 30,    June 30,    March 31,    December 31,    December 31,    December 31,    December 31, 
    2020    2020    2020    2020    2019    2020    2019    2018 
Summary of Operations:                                        
Total interest income  $18,705   $15,825   $14,500   $14,178   $14,816   $63,208   $58,446   $56,835 
Total interest expense   2,681    2,714    2,646    2,718    2,948    10,759    11,556    9,450 
Net interest income   16,024    13,111    11,854    11,460    11,868    52,449    46,890    47,385 
Provision for loan losses   400    1,638    1,933    2,273    302    6,244    438    (156)
Net interest income after provision   15,624    11,473    9,921    9,187    11,566    46,205    46,452    47,541 
Noninterest income   1,541    1,724    1,411    1,444    1,446    6,120    5,419    4,701 
Merger/acquisition related expenses   -    7    709    39    171    762    406    1,826 
Noninterest expense   12,130    10,060    9,793    9,208    8,923    41,185    34,734    32,724 
Income before income taxes   5,035    3,130    830    1,384    3,918    10,378    16,731    17,692 
Provision for income taxes   1,113    673    149    280    877    2,215    3,696    3,910 
Net Income   3,922    2,457    681    1,104    3,041    8,163    13,035    13,782 
                                         
Share and Per Share Data:                                        
Earnings per share - basic  $0.22   $0.14   $0.04   $0.06   $0.17   $0.46   $0.69   $0.87 
Earnings per share - diluted  $0.22   $0.14   $0.04   $0.06   $0.16   $0.45   $0.68   $0.87 
Book value per share  $12.30   $12.00   $11.84   $11.75   $11.61   $12.30   $11.61   $10.85 
Tangible book value per share(1)  $9.76   $9.55   $9.39   $10.31   $10.18   $9.76   $10.18   $9.47 
Ending shares outstanding   17,507,103    17,786,552    17,862,554    18,055,692    18,330,058    17,507,103    18,330,058    19,311,505 
Weighted average shares outstanding:                                        
Basic   17,637,540    17,847,913    18,134,607    18,255,351    18,414,393    17,937,596    19,016,808    15,812,585 
Diluted   17,661,922    17,866,822    18,157,992    18,287,064    18,460,118    17,961,258    19,063,237    15,877,633 
                                         
Selected Performance Ratios:                                        
Return on average assets(2)   0.87%   0.58%   0.18%   0.35%   0.95%   0.52%   1.03%   1.12%
Return on average equity(2)   7.26%   4.56%   1.28%   2.07%   5.67%   3.81%   6.08%   8.51%
Net interest margin   4.10%   3.73%   3.45%   4.03%   4.05%   3.79%   4.04%   4.19%
Efficiency ratio (3)   69.06%   67.82%   73.83%   71.36%   67.02%   70.32%   66.40%   62.83%
                                         
Period End Balance Sheet Data:                                        
Gross loans  $1,304,384   $1,283,457   $1,249,999   $1,039,514   $1,029,975   $1,304,384   $1,029,975   $986,040 
Total interest-earning assets   1,529,322    1,429,614    1,222,416    1,137,010    1,167,857    1,529,322    1,167,857    1,119,344 
Goodwill   42,907    41,914    41,914    24,579    24,579    42,907    24,579    24,579 
Core deposit intangible   1,513    1,677    1,856    1,431    1,610    1,513    1,610    2,085 
Total assets   1,730,045    1,771,946    1,618,960    1,263,494    1,275,076    1,729,426    1,275,076    1,258,525 
Deposits   1,485,817    1,472,780    1,338,753    982,651    992,838    1,485,817    992,838    980,427 
Short-term debt   -    20,000    20,000    20,000    -    -    -    7,000 
Long-term debt   12,372    37,372    37,372    37,372    57,372    12,372    57,372    57,372 
Shareholders' equity   215,368    213,367    211,538    212,085    212,775    215,368    212,775    209,611 
                                         
Selected Average Balances:                                        
Gross Loans  $1,288,138   $1,255,027   $1,193,985   $1,020,630   $1,017,750   $1,189,894   $1,004,051   $987,634 
Total interest-earning assets   1,561,104    1,403,106    1,321,172    1,147,631    1,166,758    1,386,187    1,164,149    1,119,344 
Core Deposit Intangible   1,572    1,743    1,529    1,507    1,680    1,588    1,812    2,547 
Total Assets   1,784,289    1,683,174    1,520,278    1,255,943    1,272,475    1,561,865    1,268,728    1,228,576 
Deposits   1,499,162    1,399,840    1,237,343    972,162    989,721    1,278,068    981,132    989,838 
Short-term debt   17,609    20,000    20,000    12,747    -    17,596    3,414    21,393 
Long-term debt   34,383    37,438    37,438    44,625    57,372    38,440    57,372    49,357 
Shareholders' equity   214,861    214,277    213,796    214,502    212,849    214,360    214,324    161,953 
                                         
Asset Quality Ratios:                                        
Nonperforming loans (4)  $14,296   $13,739   $14,399   $12,820   $12,148   $14,296   $12,148   $11,635 
Other real estate owned   2,172    3,237    3,561    3,737    3,533    2,172    3,533    1,088 
Allowance for loan losses   14,108    13,561    12,054    10,586    8,324    14,108    8,324    8,669 
Nonperforming loans (4) to period-end loans    1.10%   1.07%   1.15%   1.23%   1.18%   1.10%   1.18%   1.18%
Allowance for loan losses to period-end loans   1.08%   1.06%   0.96%   1.02%   0.81%   1.08%   0.81%   0.88%
Delinquency ratio (5)   0.46%   0.17%   0.22%   0.43%   0.34%   0.46%   0.34%   0.19%
Net loan charge-offs (recoveries) to average loans (2)   -0.05%   0.04%   0.16%   0.00%   0.01%   0.04%   0.08%   0.00%

 

(1)Tangible book value per share (a non GAAP measure) is equal to total shareholders’ equity less goodwill 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 above for a reconciliation of this non-GAAP measure.
(2)Annualized.
(3)Efficiency ratio is calculated as a non-interest expenses divided by the sum of net interest income and non-interest income.
(4)Nonperforming loans consist of non-accrural loans and accruing TDR loans.
(5)Delinquency Ratio includes loans 30-89 days past due and excludes non-accrual loans.

 

9 

 

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