{"id":521642,"date":"2021-08-02T16:33:44","date_gmt":"2021-08-02T20:33:44","guid":{"rendered":"https:\/\/www.marketnewsdesk.com\/index.php\/select-bancorp-reports-second-quarter-2021-earnings\/"},"modified":"2021-08-02T16:33:44","modified_gmt":"2021-08-02T20:33:44","slug":"select-bancorp-reports-second-quarter-2021-earnings","status":"publish","type":"post","link":"https:\/\/www.marketnewsdesk.com\/index.php\/select-bancorp-reports-second-quarter-2021-earnings\/","title":{"rendered":"Select Bancorp Reports Second Quarter 2021 Earnings"},"content":{"rendered":"
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DUNN, N.C., Aug. 02, 2021 (GLOBE NEWSWIRE) — Select Bancorp, Inc. (NASDAQ: SLCT<\/strong>) (the \u201cCompany\u201d), the holding company for Select Bank & Trust Company, today reported net income for the quarter ended June 30, 2021 of $5.6 million with basic and diluted earnings per share of $0.33 and $0.32, respectively, compared to net income of $681,000 with basic and diluted earnings per share of $0.04 for the comparative quarter ended June 30, 2020. The increase in net income in the second quarter of 2021 compared to 2020 was primarily attributable to loan growth and an increase in earnings from the three additional western North Carolina branches that were acquired in April of 2020, plus an increase in non-interest income and a recovery of provision for loan losses.<\/p>\n

Total assets, deposits, and gross loans for the Company as of June 30, 2021 were $1.9 billion, $1.6 billion, and $1.3 billion, respectively, compared to total assets of $1.6 billion, total deposits of $1.3 billion, and gross loans of $1.2 billion as of the same date in 2020.<\/p>\n

On June 1st<\/sup>, 2021, the Company announced it had entered into an agreement to be acquired by First Bancorp, headquartered in Southern Pines, North Carolina, which operates 102 branches in North Carolina and South Carolina and has approximately $8.2 billion in assets. This transaction, which is subject to regulatory and shareholder approvals and the satisfaction of other customary closing conditions, is expected to close during the fourth quarter of 2021.<\/p>\n

\n Comments of the Chief Executive Officer<\/u>\n <\/p>\n

William Hedgepeth, President and Chief Executive Officer of the Company, stated \u201cWe are pleased to announce our second quarter results are very strong, following closely with the results for the first quarter of this year. We had second quarter earnings of $5.6 million including a recovery of loan loss provision of $459,000. Total assets have grown $42.5 million this quarter and deposits grew $38.0 million during the second quarter. Gross loans declined by $9.9 million, which was primarily due to PPP loans that were forgiven. Fee income for the quarter from our mortgage and SBA departments have remained strong and increased by $77,000 over the second quarter of 2020. As always, we are focused on our net interest margin and are pleased to report it was 3.86% for the first half of 2021. Maintaining our margin at this level is challenging and was difficult to accomplish in the current interest rate environment, especially considering the effects of the COVID-19 pandemic on the economy. The strategic initiatives we have been implementing over the last several quarters are proving to be successful and are reflected in our ROAA of 1.33% and ROAE of 11.12% for the first half of 2021. We are reaping the benefits of those initiatives and the efficiencies we have gained from those efforts. Our efficiency ratio for the first half of 2021 was 59.72%.\u201d<\/p>\n

Hedgepeth continued, \u201cAs you can see, our asset quality numbers continue to reflect a very low level of net charge offs for our loan portfolio with past dues, nonaccruals and foreclosed real estate remaining at historically low levels for our institution as of June 30, 2021. We believe this is due to our ongoing interaction with our customers that has allowed us to work closely with them to ensure resources are available to those customers still navigating the effects of the COVID-19 pandemic. Our staff has dedicated a tremendous number of hours and has worked diligently with our customers to utilize the SBA\u2019s PPP loan program and loan modifications as the economy continues to confront challenges associated with the pandemic. For all phases of the SBA\u2019s PPP loan program, we originated 1,822 loans amounting to $137.1 million that assisted our communities as they dealt with this event. At the end of June 2021, we had approximately $41.5 million comprising 605 PPP loans outstanding that are in the process of being forgiven. At the height of the pandemic we granted 419 loan deferrals related to COVID-19 for $219.6 million. As of June 30, 2021, we had 8 loan deferrals related to COVID-19 totaling $2.2 million. Our allowance for loan losses was reduced slightly from year-end, but we believe it is sufficient to absorb any losses in the near future. With the rise of new variants, the country is not out of the pandemic, so we will continue to provide additional staff resources, together with an \u2018all hands-on deck\u2019 philosophy to facilitate superior customer service. We will continue to work with our customers by assisting them with any stimulus programs in the future.\u201d<\/p>\n

\u201cAll of our branch lobbies have remained open for business transactions while keeping the health and safety of our customers and employees as our primary objective. That will not change as we quickly address any changes related to the pandemic and remain watchful for adjustments in the economy that affect the operational activities of our customers and our branches. We will address and accommodate as needed the effects of social distancing measures, occupancy limitations and other challenges that influence how we interact with our customers. We continue to believe crafting financial solutions enables and enhances our employees\u2019 relationships with their customers to further strengthen business partnerships during these times.\u201d<\/p>\n

\n Net Interest Income and Net Interest Margin<\/u>\n <\/p>\n

Net interest income was $16.0 million and $11.9 million for the second quarter of 2021 and 2020, respectively. On a comparative quarter basis, the Company\u2019s total interest income was positively affected by increased loan balances due to branch acquisitions and organic growth. The increase in interest income was partially offset by a decreasing loan yield, an increase in securities balances at a lower yield, plus the reduction in other earning assets at a lower yield. Average total interest-earning assets were $1.7 billion and $1.4 billion in the second quarter of 2021 and 2020, respectively. The yield on those assets increased 3 basis points, from 4.22% in the second quarter of 2020 to 4.25% for the same period in 2021. This was primarily due to an increase of accretion from acquired loans which was slightly offset by lower rates on recently originated loans on a comparative quarter basis.<\/p>\n

The Company\u2019s average interest-bearing liabilities increased by $213.3 million, to $1.1 billion for the quarter ended June 30, 2021 from $936 million for the second quarter of 2020. Low-cost savings, NOW and money market deposits increased $292.4 million while the cost of transactional deposits decreased from 0.54% to 0.41%, or 13 basis points year over year. The cost of total deposits decreased from 0.72% in the second quarter of 2020 to 0.40% in the second quarter of 2021 primarily due to the decrease in the cost of time deposits. During the second quarter of 2021, the Company\u2019s net interest margin was 3.85% and net interest spread was 3.66%. In the second quarter of 2020, net interest margin was 3.45% and net interest spread was 3.08%. The Company\u2019s net interest margin year to date through June 30, 2021 was 3.86% and net interest spread was 3.65%. For the comparative six-month period ended June 30, 2020, net interest margin was 3.69% and net interest spread was 3.29%.<\/p>\n

\n Provision for Loan Losses and Asset Quality<\/u>\n <\/p>\n

During the second quarter of 2021, the Company recorded a recovery of provision for loan losses of $459,000, based primarily on adjustments to qualitative allowance factors and improved economic performance metrics related to the economic impact of the COVID-19 pandemic. The Company granted payment extensions on approximately 8 commercial and consumer loans totaling $2.2 million related to the impact of COVID-19 for the quarter, which mature in the next 90 days.\u00a0 On a comparative quarter basis, the Company recorded a provision for loan losses of $1.9 million for the second quarter of 2020, based primarily on adjustments to qualitative loan factors related to the pandemic trends in the loan portfolio presented during that quarter. In the second quarter of 2021, the Company recorded net charge-offs of $70,000 compared to net charge-offs of $492,000 in the second quarter of 2020.\u00a0 These charge-offs resulted in a net charge-off rate of 0.02% of average loans for the current quarter, compared to a net charge-off rate of 0.16% in the second quarter of 2020. On a comparative year-to-date basis, the Company recorded a provision for loan losses of $4.2 million during the first six months of 2020, based primarily on adjustments to qualitative loan factors related to the pandemic trends in the loan portfolio present during that period, as compared to a recovery of loan loss provision of $1.2 million for the six months ended June 30, 2021. In the first half of 2021, the Company recorded net charge-offs of $214,000 compared to net charge-offs of $503,000 in the first half of 2020.\u00a0 These charge-offs resulted in a net charge-off rate of 0.02% of average loans for year to date 2021, compared to a net charge-off rate of 0.05% for year to date 2020.<\/p>\n

\n Non-interest Income<\/u>\n <\/p>\n

Non-interest income for the quarter ended June 30, 2021 was $1.9 million, an increase of $484,000 from $1.4 million in the second quarter of 2020. Service charges on deposit accounts totaled $239,000 for the quarter ended June 30, 2021, compared to $206,000 for the second quarter in 2020, representing a $33,000 increase on a comparative quarter basis. Other non-deposit fees and income increased $375,000 from the second quarter of 2020 to the second quarter of 2021. Fees of $268,000 from presold mortgages and $163,000 from SBA loans totaled $431,000 in the second quarter of 2021, which represented an increase from the $234,000 in mortgage fees and $121,000 in SBA fees in the second quarter of 2020.<\/p>\n

Year to date fees of $556,000 from presold mortgages and $360,000 from SBA loans totaled $916,000 in the first half of 2021, compared to $419,000 in mortgage fees and $228,000 in SBA fees in the first half of 2020 totaling $647,000. The Company did not sell any investment securities in the second quarter of 2021 or 2020.<\/p>\n

\n Non-interest Expense<\/u>\n <\/p>\n

Non-interest expenses increased by $519,000 to $11.0 million for the quarter ended June 30, 2021, from $10.5 million for the same period in 2020. In general, most categories of non-interest expenses increased, primarily due to an increase in expenses related to our western North Carolina branches acquired in April 2020. The following are highlights of the significant categories of non-interest expenses during the second quarter of 2021 versus the same period in 2020:<\/p>\n