Carolina Financial Corporation Reports Results for Second Quarter of 2018

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

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

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

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

Financial Results

Carolina Financial Corporation

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

Community Banking

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

Wholesale Mortgage Banking

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

Conference Call

A conference call will be held at 10:00 a.m., Eastern Time on July 24, 2018. The conference call can be accessed by dialing [phone] or [phone] and requesting the Carolina Financial Corporation earnings call. The conference ID number is 1880558. Listeners should dial in 10 minutes prior to the start of the call.  The live webcast and presentation slides will be available on www.haveanicebank.com under Investor Relations, “Investor Presentations.”

A replay of the webcast will be available on www.haveanicebank.com under Investor Relations, “Investor Presentations” approximately three hours after the call and can be accessed by dialing [phone] or [phone] and requesting conference number 1880558.

About Carolina Financial Corporation

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

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

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

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

Forward-Looking Statements

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

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

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

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

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

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

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

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

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