SLCT Select Bancorp Inc

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.

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.

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.

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.

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 comprehensive 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

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

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 receivable	$	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.

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-accrual loans and accruing TDR loans.
(5) Delinquency Ratio includes loans 30-89 days past due and excludes non-accrual loans.

Mark A. JeffriesExecutive Vice PresidentChief Financial Officer Office: 910-892-7080 and Direct: 910-897-3603markj@SelectBank.comSelectBank.com