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Carolina Financial Corporation Reports Results for Third Quarter of 2017

CHARLESTON, S.C., Oct. 19, 2017 (GLOBE NEWSWIRE) -- Carolina Financial Corporation (the ”Company”) (NASDAQ:CARO) today announced financial results for the third quarter of 2017.

Financial highlights at and for the three months ended September 30, 2017, include:

  • Net income for the third quarter 2017 increased 34.5% to $8.0 million, or $0.49 per diluted share, from $5.9 million, or $0.47 per diluted share for the third quarter of 2016. Included in earnings are pretax merger-related expenses of $0.3 million for the third quarter of 2017. There were no merger-related expenses in the third quarter of 2016.
  • Operating earnings for the third quarter of 2017, which exclude certain non-operating income and expenses, increased 34.3% to $7.9 million, or $0.49 per diluted share, from $5.9 million, or $0.47 per diluted share, from the third quarter of 2016.
  • Performance ratios Q3 2017 compared to Q3 2016:
    - Return on average assets was 1.43% compared to 1.46%.
    - Operating return on average assets was 1.42% compared to 1.45%.
    - Return on average tangible equity was 13.24% compared to 15.93%.
    - Operating return on average tangible equity was 13.08% compared to 15.76%.
    - Average stockholders' equity to average assets increased to 12.85% compared to 9.67%.
  • Loans receivable, excluding Greer loans acquired in March 2017, grew $111.5 million, or at an annualized rate of 12.6%, since December 31, 2016.
  • Nonperforming assets to total assets were 0.29% at September 30, 2017 compared to 0.40% at December 31, 2016.
  • Total deposits, excluding Greer deposits acquired in March 2017, increased $138.3 million since December 31, 2016. Core deposits, excluding Greer core deposits acquired, increased $78.0 million since December 31, 2016.

“We continue to see the impact of solid organic growth and prior acquisitions on earnings. Overall operating results for the third quarter of 2017 continued to improve with an increase in net income of 34.5% compared to the third quarter of 2016. In addition, we look forward to completion of the First South Bancorp, Inc. by the end of the fourth quarter,” stated Jerry Rexroad, Chief Executive Officer.

Financial Results

Carolina Financial Corporation

  • The Company reported an increase in net income for the three months ended September 30, 2017 to $8.0 million, or $0.49 per diluted share, as compared to $5.9 million, or $0.47 per diluted share, for the three months ended September 30, 2016. Included in net income for the three months ended September 30, 2017 were pretax merger-related expenses of $0.3 million. The Company reported increased net income for the nine months ended September 30, 2017 to $22.2 million, or $1.47 per diluted share, as compared to $12.4 million, or $1.02 per diluted share, for the nine months ended September 30, 2016. Included in net income for the nine months ended September 30, 2017 and 2016 were pretax merger-related expenses of $1.9 million and $3.0 million, respectively.
  • Operating earnings for the third quarter of 2017, which excludes certain non-operating income and expenses, increased 34.3% to $7.9 million, or $0.49 per diluted share, from $5.9 million, or $0.47 per diluted share, from the third quarter of 2016. Operating earnings for the nine months ended September 30, 2017, which excludes certain non-operating income and expenses, increased 57.75% to $22.8 million, or $1.50 per diluted share, from $14.5 million, or $1.18 per diluted share, from the same period of 2016.
  • The Company’s net interest margin-tax equivalent increased to 3.94% for the third quarter of 2017 compared to 3.75% for the third quarter of 2016.
  • The Company reported book value per common share of $18.07 and $13.23 as of September 30, 2017 and December 31, 2016, respectively. Tangible book value per common share was $15.27 and $12.59 as of September 30, 2017 and December 31, 2016, respectively.
  • At September 30, 2017, the Company’s regulatory capital ratios exceeded the minimum levels currently required. Stockholders’ equity totaled $290.2 million as of September 30, 2017 compared to $163.2 million at December 31, 2016. Tangible equity to tangible assets at September 30, 2017 was 11.09% compared to 9.3% at December 31, 2016.

Community Banking

  • Community banking segment net income increased 65.6% to $7.8 million for the three months ended September 30, 2017 compared to $4.7 million for the three months ended September 30, 2016. Included in net income for the three months ended September 30, 2017 were pretax merger-related expenses of $0.3 million. The community banking segment net income increased 101.7% to $20.8 million for the nine months ended September 30, 2017 compared to $10.3 million for the nine months ended September 30, 2016. Included in net income for the nine months ended September 30, 2017 and 2016 were pretax merger-related expenses of $1.9 million and $3.0 million, respectively.
  • Community banking segment operating earnings increased 65.7% to $7.7 million for the three months ended September 30, 2017 compared to $4.7 million for the three months ended September 30, 2016. Included in earnings for the three months ended September 30, 2017 were pretax merger-related expenses of $0.3 million. The community banking segment operating earnings increased 80.7% to $22.2 million for the nine months ended September 30, 2017 compared to $12.3 million for the nine months ended September 30, 2016. Included in earnings for the nine months ended September 30, 2017 and 2016 were pretax merger-related expenses of $1.9 million and $3.0 million, respectively.
  • No provision for loan loss was recorded during the three months ended September 30, 2017 or 2016. This was primarily due to continued excellent asset quality, historical loss experience, and the risk characteristics of our loan portfolio.
  • Non-performing assets were 0.29% and 0.40% of total assets at September 30, 2017 and December 31, 2016, respectively.
  • Loans receivable, gross increased to $1.5 billion at September 30, 2017 compared to $1.2 billion at December 31, 2016.
  • The number of checking accounts increased at an annualized rate of 8.9%, excluding Greer checking accounts acquired, since December 31, 2016. Total deposits, excluding acquired deposits from the Greer acquisition, increased $138.3 million since December 31, 2016. As of September 30, 2017 and December 31, 2016, core deposits, defined as checking, savings and money market, comprised approximately 63.8% and 60.6%, respectively, of total deposits.

Wholesale Mortgage Banking

  • Net income for the wholesale mortgage banking segment was $0.4 million for the three months ended September 30, 2017 compared to $1.4 million for the three months ended September 30, 2016. Net income was $2.3 million for the nine months ended September 30, 2017 compared to $2.7 million for the nine months ended September 30, 2016.
  • Net margin was 1.44% for the three months ended September 30, 2017 compared to 1.94% for the three months ended September 30, 2016. Originations for the three months ended September 30, 2017 and 2016 were $217.0 million and $253.5 million, respectively. Net margin was 1.65% for the nine months ended September 30, 2017 compared to 1.76% for the nine months ended September 30, 2016. Originations for the nine months ended September 30, 2017 and 2016 were $611.6 million and $645.4 million, respectively.
  • Net interest income for the wholesale mortgage banking segment was $0.4 million for the three months ended September 30, 2017 compared to $0.4 million for the three months ended September 30, 2016. Net interest income for the wholesale mortgage banking segment was $1.2 million for the nine months ended September 30, 2017 compared to $1.1 million for the nine months ended September 30, 2016.
  • Mortgage loan servicing income, net of amortization of mortgage servicing rights and subservicing expense, for the wholesale mortgage banking segment was $0.4 million and $0.4 million for the three months ended September 30, 2017 and September 30, 2016, respectively. Mortgage loan servicing income, net of amortization of mortgage servicing rights and subservicing expense, for the wholesale mortgage banking segment was $1.3 million and $1.2 million for the nine months ended September 30, 2017 and September 30, 2016, respectively. At September 30, 2017, loans serviced for third parties totaled $2.5 billion.

Dividend Declared

On October 18, 2017 the Company declared a $0.05 dividend per common share, payable on January 5, 2018, to stockholders of record on December 14, 2017.

Conference Call

A conference call will be held at 11:00 a.m., Eastern Time on October 20, 2017. The conference call can be accessed by dialing (866) 464-9448 or (213) 660-0874 and requesting the Carolina Financial Corporation earnings call. The conference ID number is 99743248. Listeners should dial in 10 minutes prior to the start of the call. The live webcast and presentation slides will be available on www.haveanicebank.com under Investor Relations, “Investor Presentations.”

A replay of the webcast will be available on www.haveanicebank.com under Investor Relations, “Investor Presentations” approximately three hours after the call and can be accessed by dialing (855) 859-2056 or (404) 537-3406 and requesting conference number 99743248.

About Carolina Financial Corporation

Carolina Financial Corporation (NASDAQ:CARO) is the holding company of CresCom Bank, which also owns and operates Atlanta-based Crescent Mortgage Company. As of September 30, 2017, Carolina Financial Corporation had approximately $2.3 billion in total assets and Crescent Mortgage Company was licensed to originate loans in 48 states partnering with community banks, credit unions and mortgage brokers. On June 11, 2016, Carolina Financial completed its acquisition of Congaree Bancshares Inc. On January 5, 2017, the Company closed a public offering of approximately 1.8 million shares of its common stock with net proceeds of approximately $47.7 million, net of related expenses. On March 18, 2017, Carolina Financial completed its acquisition of Greer Bancshares Incorporated. On June 9, 2017, Carolina Financial Corporation announced the execution of an Agreement and Plan of Merger and Reorganization by and between the Company and First South Bancorp, Inc. (“First South”), pursuant to which, subject to the terms and conditions set forth therein, First South will merge with and into the Company, with the Company as the surviving corporation.

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

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

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

Forward-Looking Statements

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

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

CAROLINA FINANCIAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 2017 December 31, 2016
(Unaudited) (Audited)
(Dollars in thousands)
ASSETS
Cash and due from banks $ 14,046 9,761
Interest-bearing cash 31,198 14,591
Cash and cash equivalents 45,244 24,352
Securities available-for-sale 523,744 335,352
Federal Home Loan Bank stock, at cost 10,970 11,072
Other investments 2,139 1,768
Derivative assets 2,332 2,219
Loans held for sale 26,786 31,569
Loans receivable, gross 1,484,461 1,178,266
Allowance for loan losses (10,662) (10,688)
Loans receivable, net 1,473,799 1,167,578
Premises and equipment, net 46,430 37,054
Accrued interest receivable 7,320 5,373
Real estate acquired through foreclosure, net 1,640 1,179
Deferred tax assets, net 7,668 8,341
Mortgage servicing rights, net 17,444 15,032
Cash value life insurance 38,317 28,984
Core deposit intangible 7,666 3,658
Goodwill 37,287 4,266
Other assets 7,953 5,939
Total assets $ 2,256,739 1,683,736
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Noninterest-bearing deposits $ 333,267 229,905
Interest-bearing deposits 1,374,387 1,028,355
Total deposits 1,707,654 1,258,260
Short-term borrowed funds 180,000 203,000
Long-term debt 54,351 38,465
Derivative liabilities 201 342
Drafts outstanding 5,630 6,223
Advances from borrowers for insurance and taxes 3,163 1,058
Accrued interest payable 1,053 327
Reserve for mortgage repurchase losses 2,129 2,880
Dividends payable to stockholders 646 502
Accrued expenses and other liabilities 11,688 9,489
Total liabilities 1,966,515 1,520,546
Commitments and contingencies
Stockholders' equity:
Preferred stock - -
Common stock 162 125
Additional paid-in capital 168,919 66,156
Retained earnings 117,488 98,451
Accumulated other comprehensive income (loss), net of tax 3,655 (1,542)
Total stockholders' equity 290,224 163,190
Total liabilities and stockholders' equity $ 2,256,739 1,683,736


CAROLINA FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2017 2016 2017 2016
(In thousands, except share data)
Loans $ 18,960 13,826 52,207 36,791
Investment securities 3,761 2,264 9,975 6,835
Dividends from Federal Home Loan Bank stock 135 83 351 288
Federal funds sold - 3 7 5
Other interest income 70 32 178 92
Total interest income 22,926 16,208 62,718 44,011
Interest expense
Deposits 2,422 1,570 6,212 4,449
Short-term borrowed funds 441 124 1,225 320
Long-term debt 514 558 1,364 1,743
Total interest expense 3,377 2,252 8,801 6,512
Net interest income 19,549 13,956 53,917 37,499
Provision for loan losses - - - -
Net interest income after provision for loan losses 19,549 13,956 53,917 37,499
Noninterest income
Mortgage banking income 3,625 5,605 11,522 12,967
Deposit service charges 1,072 953 2,928 2,712
Net loss on extinguishment of debt - (118) - (174)
Net gain on sale of securities 368 111 1,174 641
Fair value adjustments on interest rate swaps 90 99 (37) (408)
Net increase in cash value life insurance 267 226 759 684
Mortgage loan servicing income 1,652 1,437 4,822 4,238
Other 801 560 2,742 1,728
Total noninterest income 7,875 8,873 23,910 22,388
Noninterest expense
Salaries and employee benefits 8,623 8,481 26,487 23,306
Occupancy and equipment 2,508 2,067 7,129 5,836
Marketing and public relations 385 374 1,182 1,144
FDIC insurance 205 180 380 527
Provision for (recovery of) mortgage loan repurchase losses (225) (250) (675) (750)
Legal expense 157 80 373 185
Other real estate (income) expense, net (5) (96) 40 (37)
Mortgage subservicing expense 494 462 1,485 1,353
Amortization of mortgage servicing rights 748 586 2,083 1,659
Merger related expenses 311 - 1,910 2,985
Other 2,255 2,006 6,538 5,759
Total noninterest expense 15,456 13,890 46,932 41,967
Income before income taxes 11,968 8,939 30,895 17,920
Income tax expense 3,975 2,998 8,659 5,500
Net income $ 7,993 5,941 22,236 12,420
Earnings per common share:
Basic $ 0.50 $ 0.48 $ 1.48 $ 1.04
Diluted $ 0.49 $ 0.47 $ 1.47 $ 1.02
Weighted average common shares outstanding:
Basic 16,029,332 12,327,921 14,980,349 11,995,477
Diluted 16,187,869 12,535,551 15,146,972 12,201,721


CAROLINA FINANCIAL CORPORATION
(Unaudited)
(Dollars in thousands)
At or for the Three Months Ended
Selected Financial Data: September 30,
2017
June 30,
2017
March 31,
2017
December 31,
2016
September 30,
2016
Selected Average Balances:
Total assets $ 2,230,586 $ 2,166,803 1,768,323 1,651,653 1,626,717
Investment securities and FHLB stock 521,569 510,706 373,551 326,485 345,385
Loans receivable, net 1,463,771 1,412,940 1,214,777 1,138,120 1,093,669
Loans held for sale 27,282 22,412 17,827 32,951 32,196
Deposits 1,710,263 1,633,285 1,330,805 1,288,665 1,291,567
Stockholders' equity 286,524 277,708 210,071 160,991 157,311
Performance Ratios (annualized):
Return on average equity 11.16% 13.45% 9.34% 12.80% 15.11%
Return on average tangible equity (Non-GAAP) 13.24% 16.02% 9.98% 13.46% 15.93%
Return on average assets 1.43% 1.72% 1.11% 1.25% 1.46%
Operating return on average equity (Non-GAAP) 11.02% 13.15% 10.95% 14.32% 14.95%
Operating return on average tangible equity (Non-GAAP) 13.08% 15.65% 11.70% 15.06% 15.76%
Operating return on average assets (Non-GAAP) 1.42% 1.69% 1.30% 1.40% 1.45%
Average earning assets to average total assets 91.09% 90.68% 91.99% 93.21% 92.94%
Average loans receivable to average deposits 85.59% 86.51% 91.28% 88.32% 84.68%
Average stockholders' equity to average assets 12.85% 12.82% 11.88% 9.75% 9.67%
Net interest margin-tax equivalent (1) 3.94% 4.03% 3.93% 3.87% 3.75%
Net charge-offs (recoveries) to average loans receivable 0.00% (0.01)% (0.01)% (0.12)% (0.02)%
Nonperforming assets to period end loans receivable 0.44% 0.48% 0.52% 0.58% 0.62%
Nonperforming assets to total assets 0.29% 0.31% 0.34% 0.40% 0.42%
Nonperforming loans to total loans 0.33% 0.38% 0.42% 0.48% 0.37%
Allowance for loan losses as a percentage of loans receivable (end
of period) 0.72% 0.75% 0.76% 0.91% 0.91%
Allowance for loan losses as a percentage of non-acquired loans
receivable (Non-GAAP) 0.87% 0.93% 0.96% 1.01% 1.03%
Allowance for loan losses as a percentage of nonperforming loans 216.53% 196.85% 180.66% 190.01% 247.72%
Nonperforming Assets:
Loans 90 days or more past due and still accruing $ - $- - - -
Nonaccrual loans 4,924 5,461 5,931 5,625 4,174
Total nonperforming loans 4,924 5,461 5,931 5,625 4,174
Real estate acquired through foreclosure, net 1,640 1,417 1,479 1,179 2,843
Total nonperforming assets $ 6,564 $6,878 7,410 6,804 7,017
(1) Net interest margin-tax equivalent reflects tax-exempt income on a tax-equivalent basis.


Carolina Financial Corporation
Segment Information
(Unaudited)
(Dollars in thousands)
For the Three Months For the Nine Months Increase (Decrease)
Ended September 30, Ended September 30, Three Nine
2017 2016 2017 2016 Months Months
Segment net income:
Community banking $ 7,837 4,734 20,788 10,309 3,103 10,479
Wholesale mortgage banking 449 1,402 2,333 2,722 (953) (389)
Other (320) (228) (910) (669) (92) (241)
Eliminations 27 33 25 58 (6) (33)
Total net income $ 7,993 5,941 22,236 12,420 2,052 9,816
For the Three Months Ended
September 30,
2017
June 30,
2017
March 31,
2017
December 31,
2016
September 30,
2016
Segment net income:
Community banking $ 7,837 8,443 4,509 4,565 4,734
Wholesale mortgage banking 449 1,238 645 806 1,402
Other (320) (346) (244) (232) (228)
Eliminations 27 5 (6) 11 33
Total net income $ 7,993 9,340 4,904 5,150 5,941
For the Three Months Ended September 30, 2017
Community Mortgage
Banking Banking Other Eliminations Total
Interest income $22,460 480 8 (22) 22,926
Interest expense 3,086 65 291 (65) 3,377
Net interest income (expense) 19,374 415 (283) 43 19,549
Provision for (recovery of) loan losses - - - - -
Noninterest income from external customers 3,097 4,778 - - 7,875
Intersegment noninterest income 242 - - (242) -
Noninterest expense 10,999 4,234 223 - 15,456
Intersegment noninterest expense - 240 2 (242) -
Income (loss) before income taxes 11,714 719 (508) 43 11,968
Income tax expense (benefit) 3,877 270 (188) 16 3,975
Net income (loss) $7,837 449 (320) 27 7,993
For the Three Months Ended September 30, 2016
Community Mortgage
Banking Banking Other Eliminations Total
Interest income $ 15,760 435 4 9 16,208
Interest expense 2,102 33 151 (34) 2,252
Net interest income (expense) 13,658 402 (147) 43 13,956
Provision for (recovery of) loan losses (12) 12 - - -
Noninterest income from external customers 2,512 6,361 - - 8,873
Intersegment noninterest income 242 (9) - (233) -
Noninterest expense 9,448 4,254 188 - 13,890
Intersegment noninterest expense - 240 2 (242) -
Income (loss) before income taxes 6,976 2,248 (337) 52 8,939
Income tax expense (benefit) 2,242 846 (109) 19 2,998
Net income (loss) $ 4,734 1,402 (228) 33 5,941
Carolina Financial Corporation
Segment Information, Continued
(Unaudited)
(Dollars in thousands)
For the Nine Months Ended September 30, 2017
Community Mortgage
Banking Banking Other Eliminations Total
Interest income $ 61,409 1,302 21 (14) 62,718
Interest expense 8,051 119 750 (119) 8,801
Net interest income (expense) 53,358 1,183 (729) 105 53,917
Provision for (recovery of) loan losses - - - - -
Noninterest income from external customers 9,011 14,899 - - 23,910
Intersegment noninterest income 725 64 - (789) -
Noninterest expense 33,773 12,448 711 - 46,932
Intersegment noninterest expense - 720 5 (725) -
Income (loss) before income taxes 29,321 2,978 (1,445) 41 30,895
Income tax expense (benefit) 8,533 645 (535) 16 8,659
Net income (loss) $ 20,788 2,333 (910) 25 22,236
For the Nine Months Ended September 30, 2016
Community Mortgage
Banking Banking Other Eliminations Total
Interest income $42,790 1,133 13 75 44,011
Interest expense 6,066 42 447 (43) 6,512
Net interest income (expense) 36,724 1,091 (434) 118 37,499
Provision for (recovery of) loan losses (12) 12 - - -
Noninterest income from external customers 6,773 15,615 - - 22,388
Intersegment noninterest income 727 25 - (752) -
Noninterest expense 29,523 11,825 619 - 41,967
Intersegment noninterest expense - 721 6 (727) -
Income (loss) before income taxes 14,713 4,173 (1,059) 93 17,920
Income tax expense (benefit) 4,404 1,451 (390) 35 5,500
Net income (loss) $10,309 2,722 (669) 58 12,420
For the Three Months Ended September 30,
Loan Originations Mortgage Banking
Income
Margin
2017 2016 2017 2016 2017 2016
Additional segment information:
Community banking $ 20,342 25,633 500 680 2.46% 2.65%
Wholesale mortgage banking 217,014 253,485 3,125 4,925 1.44% 1.94%
Total $ 237,356 279,118 3,625 5,605 1.53% 2.01%
For the Nine Months Ended September 30,
Loan Originations Mortgage Banking
Income
Margin
2017 2016 2017 2016 2017 2016
Additional segment information:
Community banking $ 59,511 68,263 1,441 1,586 2.42% 2.32%
Wholesale mortgage banking 611,597 645,412 10,081 11,381 1.65% 1.76%
Total $ 671,108 713,675 11,522 12,967 1.72% 1.82%


Carolina Financial Corporation
Reconciliation of Non-GAAP Financial Measures - Consolidated
(Unaudited)
(In thousands, except share data)
At the Month Ended
September 30, June 30, March 31, December 31, September 30,
2017 2017 2017 2016 2016
Core deposits:
Noninterest-bearing demand accounts $ 333,267 $ 330,641 298,365 229,905 267,892
Interest-bearing demand accounts 309,241 298,123 309,961 191,851 195,792
Savings accounts 69,552 70,336 66,506 48,648 47,035
Money market accounts 377,754 380,108 363,600 292,639 299,960
Total core deposits (Non-GAAP) 1,089,814 1,079,208 1,038,432 763,043 810,679
Certificates of deposit:
Less than $250,000 567,483 539,177 524,836 467,937 476,744
$250,000 or more 50,357 45,344 44,452 27,280 24,853
Total certificates of deposit 617,840 584,521 569,288 495,217 501,597
Total deposits $ 1,707,654 $ 1,663,729 1,607,720 1,258,260 1,312,276
At the Month Ended
September 30, June 30, March 31, December 31, September 30,
2017 2017 2017 2016 2016
Tangible book value per share:
Total stockholders' equity $ 290,224 281,818 271,454 163,190 160,331
Less intangible assets (44,953) (45,123) (45,292) (7,924) (8,037)
Tangible common equity (Non-GAAP) $ 245,271 236,695 226,162 155,266 152,294
Issued and outstanding shares 16,159,309 16,156,943 16,185,408 12,548,328 12,546,220
Less nonvested restricted stock awards (99,639) (101,489) (227,439) (211,908) (216,828)
Period end dilutive shares 16,059,670 16,055,454 15,957,969 12,336,420 12,329,392
Total stockholders equity $ 290,224 281,818 271,454 163,190 160,331
Divided by period end dilutive shares 16,059,670 16,055,454 15,957,969 12,336,420 12,329,392
Common book value per share $ 18.07 17.55 17.01 13.23 13.00
Tangible common equity (Non-GAAP) $ 245,271 236,695 226,162 155,266 152,294
Divided by period end dilutive shares 16,059,670 16,055,454 15,957,969 12,336,420 12,329,392
Tangible common book value per share (Non-GAAP)$ 15.27 14.74 14.17 12.59 12.35
At the Month Ended
September 30, June 30, March 31, December 31, September 30,
2017 2017 2017 2016 2016
Acquired and non-acquired loans:
Acquired loans receivable $ 257,461 $ 278,275 303,244 119,422 129,505
Non-acquired loans receivable 1,227,000 1,157,145 1,113,766 1,058,844 1,003,724
Total loans receivable $ 1,484,461 $ 1,435,420 1,417,010 1,178,266 1,133,229
% Acquired 17.34% 19.39% 21.40% 10.14% 11.43%
Non-acquired loans $ 1,227,000 $ 1,157,145 1,113,766 1,058,844 1,003,724
Allowance for loan losses 10,662 10,750 10,715 10,688 10,340
Allowance for loan losses to non-acquired loans (Non-GAAP) 0.87% 0.93% 0.96% 1.01% 1.03%
Total loans receivable $ 1,484,461 $ 1,435,420 1,417,010 1,178,266 1,133,229
Allowance for loan losses 10,662 10,750 10,715 10,688 10,340
Allowance for loan losses to total loans receivable 0.72% 0.75% 0.76% 0.91% 0.91%
Carolina Financial Corporation
Reconciliation of Non-GAAP Financial Measures - Consolidated
(Unaudited)
(In thousands, except share data)
For the Three Months Ended For the Nine Months Ended
Operating Earnings and Performance Ratios: September 30,
2017
June 30,
2017
March 31,
2017
December 31,
2016
September 30,
2016
September 30,
2017
September 30,
2016
Income before income taxes $ 11,968 12,013 6,915 7,498 8,939 30,895 17,920
Gain on sale of securities (368) (621) (185) (65) (111) (1,174) (641)
Net loss on extinguishment of debt - - - 1,694 118 - 174
Fair value adjustments on interest rate swaps (90) 69 58 (998) (99) 37 408
Merger related expenses 311 279 1,319 260 - 1,910 2,985
Operating earnings before income taxes 11,821 11,740 8,107 8,389 8,847 31,668 20,846
Tax expense (1) 3,926 2,612 2,358 2,627 2,967 8,876 6,398
Operating earnings (Non-GAAP) $ 7,895 9,128 5,749 5,762 5,880 22,792 14,448
Average equity $ 286,524 277,708 210,071 160,991 157,311 258,101 148,134
Average assets $ 2,230,586 2,166,803 1,768,323 1,651,653 1,626,717 2,055,237 1,500,819
Average Equity $ 286,524 277,708 210,071 160,991 157,311
Less average intangible assets (45,035) (44,452) (13,510) (7,979) (8,092)
Average tangible common equity (Non-GAAP) $ 241,489 233,256 196,561 153,012 149,219
Operating return on average assets (Non-GAAP) 1.42% 1.69% 1.30% 1.40% 1.45% 1.48% 1.28%
Operating return on average equity (Non-GAAP) 11.02% 13.15% 10.95% 14.32% 14.95% 11.77% 13.00%
Operating return on average tangible equity (Non-GAAP) 13.08% 15.65% 11.70% 15.06% 15.76%
Weighted average common shares outstanding:
Basic 16,029,332 16,029,332 13,919,711 12,336,420 12,327,921 14,980,349 11,995,477
Diluted 16,187,869 16,180,171 14,139,241 12,585,518 12,535,551 15,146,972 12,201,721
Operating earnings per common share:
Basic (Non-GAAP) $ 0.49 0.57 0.41 0.47 0.48 1.52 1.20
Diluted (Non-GAAP) $ 0.49 0.56 0.41 0.46 0.47 1.50 1.18
As Reported:
Income before income taxes $ 11,968 12,013 6,915 7,498 8,939 30,895 17,920
Tax expense 3,975 2,673 2,011 2,348 2,998 8,659 5,500
Net Income $ 7,993 9,340 4,904 5,150 5,941 22,236 12,420
Average equity $ 286,524 277,708 210,071 160,991 157,311 258,101 148,134
Average tangible equity (Non-GAAP) $ 241,489 233,256 196,561 153,012 149,219
Average assets $ 2,230,586 2,166,803 1,768,323 1,651,653 1,626,717 2,055,237 1,500,819
Return on average assets 1.43% 1.72% 1.11% 1.25% 1.46% 1.44% 1.10%
Return on average equity 11.16% 13.45% 9.34% 12.80% 15.11% 11.49% 11.18%
Return on average tangible equity (Non-GAAP) 13.24% 16.02% 9.98% 13.46% 15.93%
Weighted average common shares outstanding:
Basic 16,029,332 16,029,332 13,919,711 12,336,420 12,327,921 14,980,349 11,995,477
Diluted 16,187,869 16,180,171 14,139,241 12,585,518 12,535,551 15,146,972 12,201,721
Earnings per common share:
Basic $ 0.50 0.58 0.35 0.42 0.48 1.48 1.04
Diluted $ 0.49 0.58 0.35 0.41 0.47 1.47 1.02
(1) Tax expense is determined using the effective tax rate reflected in the accompanying income statement for the applicable reporting period.


Carolina Financial Corporation
Reconciliation of Non-GAAP Financial Measures - Community Banking Segment
(Unaudited)
(In thousands, except share data)
For the Three Months Ended For the Nine Months Ended
September 30,
2017
June 30,
2017
March 31,
2017
December 31,
2016
September 30,
2016
September 30,
2017
September 30,
2016
Segment net income:
Community banking $ 7,837 8,443 4,509 4,565 4,734 $ 20,788 10,309
Wholesale mortgage banking 449 1,238 645 806 1,402 2,333 2,722
Other (320) (346) (244) (232) (228) (910) (669)
Eliminations 27 5 (6) 11 33 25 58
Total net income $ 7,993 9,340 4,904 5,150 5,941 $ 22,236 12,420
Community banking segment operating earnings:
Income before income taxes $ 11,714 11,232 6,375 6,545 6,975 $ 29,321 14,713
Tax expense (1) 3,877 2,789 1,866 1,980 2,241 8,533 4,404
Bank segment net income $ 7,837 8,443 4,509 4,565 4,734 $ 20,788 10,309
Weighted average common shares outstanding:
Basic 16,029,332 16,029,332 13,919,711 12,336,420 12,327,921 14,980,349 11,995,477
Diluted 16,187,869 16,180,171 14,139,241 12,585,518 12,535,551 15,146,972 12,201,721
Earnings per common share:
Basic $ 0.50 0.53 0.32 0.37 0.38 $ 1.39 $ 0.86
Diluted $ 0.49 0.52 0.32 0.36 0.38 $ 1.37 $ 0.84
Bank segment income before taxes $ 11,714 11,232 6,375 6,545 6,975 $ 29,321 $ 14,713
Gain on sale of securities (368) (621) (185) (65) (111) (1,174) (641)
Net loss on extinguishment of debt - - - 1,693 118 - 174
Fair value adjustments on interest rate swaps (90) 69 58 (998) (99) 37 408
Merger related expenses (2) 311 279 1,311 254 - 3,137 2,883
Operating earnings before income taxes 11,567 10,959 7,559 7,429 6,883 31,321 17,537
Tax expense (1) 3,828 2,721 2,213 2,247 2,211 9,115 5,249
Operating bank segment earnings (Non-GAAP) $ 7,739 8,238 5,346 5,182 4,672 $ 22,206 $ 12,288
Operating bank segment earnings per common share:
Basic (Non-GAAP) $ 0.48 0.51 0.38 0.42 0.38 $ 1.48 $ 1.02
Diluted (Non-GAAP) $ 0.48 0.51 0.38 0.41 0.37 $ 1.47 $ 1.01
(1) Tax expense is determined using the effective tax rate computed for the applicable business segment.
(2) Remaining merger related costs were incurred within the category "Other" segment earnings.


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

Source:Carolina Financial Corporation