Carolina Financial : Reports Results for Fourth Quarter of 2016

Charleston, S.C., January 18, 2017 - Carolina Financial Corporation (NASDAQ: CARO) today announced financial results for the fourth quarter of 2016. Highlights at and for the three months ended December 31, 2016, include:

Net income for the fourth quarter 2016 increased 42.7% to $5.2 million, or $0.41 per diluted share from $3.6 million, or $0.36 per diluted share for the fourth quarter of 2015.
Operating earnings for the fourth quarter of 2016, which excludes certain non-operating income and expenses, increased 63.9% to $5.8 million, or $0.46 per diluted share, from $3.5 million, or $0.35 per diluted share, from the fourth quarter of 2015. Non-operating income and expenses for the quarter ended December 31, 2016 include:

$1.7 million loss on extinguishment of debt related to the prepayment of a $20.0 million advance with a 4% fixed interest rate and a remaining term of 4.1 years
$1.0 million fair value adjustment gain on interest rate swaps marked to market
$260,000 in merger related costs
$65,000 gain on sale of securities

Loans receivable, excluding acquired loans, grew at an annualized rate of 20.2% or $185.9 million since December 31, 2015 and 15.9% or $45.0 million since September 30, 2016.
Nonperforming assets to total assets of 0.40% as of December 31, 2016 compared to 0.47% at December 31, 2015.
Total deposits, excluding acquired deposits, increased $143.5 million since December 31, 2015. Core deposits, excluding acquired deposits, increased $114.0 million since December 31, 2015.

In November 2016, Carolina Financial Corporation announced the acquisition of Greer Bancshares Incorporated, a $381 million bank holding company that operates four banking locations in the Greenville-Anderson-Mauldin, South Carolina MSA.

In December 2016, the Company opened its second branch in the Wilmington Market.

'We are pleased to report increases in net income of 42.7% and operating earnings of 63.9% for the fourth quarter of 2016 over the comparable prior year quarter. These strong results are attributable to excellent earnings of CresCom Bank with improved performance of Crescent Mortgage Company. During 2016, we continued to experience exceptional organic loan and deposit growth, completed our Congaree Bancshares, Inc. merger, announced our Greer Bancshares, Inc. merger, and opened our second branch in Wilmington, NC.' stated Jerry Rexroad, Chief Executive Officer.

Financial Results

Carolina Financial Corporation

The Company reported net income for the three months ended December 31, 2016 of $5.2 million, or $0.41 per diluted share, as compared to $3.6 million, or $0.36 per diluted share, for the three months ended December 31, 2015. Net income for the year ended December 31, 2016 totaled $17.6 million, or $1.42 per diluted share, compared to net income of $14.4 million, or $1.48 per diluted share for year ended December 31, 2015. Included in net income for the year ended December 31, 2016 were pretax merger related expense of $3.2 million.
Operating earnings for the fourth quarter of 2016 increased 63.9% to $5.8 million, or $0.46 per diluted share, from $3.5 million, or $0.35 per diluted share, from the fourth quarter of 2015. Operating earnings for the year ended December 31, 2016 increased 34.7% to $20.2 million, or $1.64 per diluted share, from $15.0 million, or $1.54 per diluted share, for the year ended December 31, 2015.
During the fourth quarter of 2016, the Company paid off a $20.0 million borrowing with a 4.0% fixed interest rate and a remaining term of approximately 4.1 years, incurring a $1.7 million loss on extinguishment of debt. In addition, the Company recognized a $1.0 million gain on fair value adjustments related to interest rate swaps that are marked to market.
The Company's net interest margin-tax equivalent increased to 3.87% for the fourth quarter of 2016 compared to 3.59% for the fourth quarter of 2015.
The Company reported book value per common share of $13.23 and $11.92 as of December 31, 2016 and December 31, 2015, respectively. Tangible book value per common share was $12.59 and $11.66 as of December 31, 2016 and December 31, 2015, respectively.
At December 31, 2016, the Company's regulatory capital ratios exceeded the minimum levels currently required. Stockholders' equity totaled $163.2 million as of December 31, 2016 compared to $139.9 million at December 31, 2015.

CresCom Bank

The Bank's net income (excluding Crescent Mortgage Company) increased 40.1% to $4.6 million for the three months ended December 31, 2016 compared to $3.3 million for the three months ended December 31, 2015. Net income for the year ended December 31, 2016 increased 30.5% to $14.9 million compared to net income of $11.4 million for the year ended December 31, 2015. Included in net income for the year ended December 31, 2016 were pretax merger related expense of $3.1 million.
No provision for loan loss was recorded during the three and twelve month periods ended December 31, 2016 or 2015. This was primarily due to continued excellent asset quality as well as net recoveries of $547,000 and $1.1 million for the year ended December 31, 2016 and 2015, respectively.
The Bank's non-performing assets were 0.40% and 0.47% of total assets at December 31, 2016 and December 31, 2015, respectively.
Loans receivable increased to $1.2 billion at December 31, 2016 compared to $922.7 million at December 31, 2015. The increase in loans receivable primarily relates to the completed acquisition of Congaree State Bank ('Congaree') as well as the Bank's continuing focus on commercial lending and residential mortgage lending.
The number of checking accounts increased at an annualized rate of 9.2%, excluding Congaree checking accounts acquired, since December 31, 2015. Total deposits, excluding acquired deposits from the Congaree acquisition, increased $143.5 million since December 31, 2015. As of December 31, 2016 and December 31, 2015, core deposits, defined as checking, savings and money market, comprised approximately 60.6% and 56.7%, respectively, of total deposits.
The Bank's retail mortgage conforming loan originations increased to $29.1 million for the three months ended December 31, 2016 compared to $23.2 million for the three months ended December 31, 2015. For the year ended December 31, 2016, retail mortgage conforming loan originations increased to $97.1 million compared to $73.6 million for the year ended December 31, 2015. As a result of the increased originations, retail mortgage banking noninterest income increased to $476,000 and $2.1 million for the three months and year ended December 31, 2016, respectively, compared to $424,000 and $1.7 million for the three months and year ended December 31, 2015, respectively. Mortgage banking income consists primarily of gain on sale of loans and related fees as well as fair value changes in mortgage banking derivatives.

Crescent Mortgage Company

Net income for Crescent Mortgage Company, a wholly-owned subsidiary of the Bank, was $806,000 for the three months ended December 31, 2016 compared to $525,000 for the three months ended December 31, 2015. Net income for the year ended December 31, 2016 was $3.5 million compared to $3.8 million for the year ended December 31, 2015.
The increase in net income of Crescent Mortgage Company during fourth quarter of 2016 is primarily attributable to an increase in margin during the period. Originations for the three months ended December 31, 2016 and 2015 were $234.9 million and $217.0 million, respectively. Originations for the year ended December 31, 2016 and 2015 were $875.4 million and $986.7 million, respectively. The percentage of originations attributable to refinances were 37.5% for 2016 compared to 34.3% for 2015.

Conference Call

A conference call will be held at 2:00 p.m., Eastern Time on January 19, 2017. The conference call can be accessed by dialing [phone] or [phone] and requesting the Carolina Financial Corporation earnings call. The conference ID number is 42947387. Listeners should dial in 10 minutes prior to the start of the call. The live webcast and presentation slides will be available on http://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' shortly following the call. A replay of the conference call can be accessed approximately three hours after the call by dialing [phone] or [phone] and requesting conference number 42947387.

About Carolina Financial Corporation

Carolina Financial Corporation ('Carolina Financial' or the 'Company') is the holding company of CresCom Bank, which also owns and operates Atlanta-based Crescent Mortgage Company. Carolina Financial trades on NASDAQ under the symbol CARO. As of December 31, 2016, Carolina Financial had approximately $1.7 billion in total assets and Crescent Mortgage Company originated loans in 45 states and partners with community banks, credit unions and mortgage brokers. In June 2016, Carolina Financial completed its previously announced acquisition of Congaree Bancshares, Inc. and its wholly-owned subsidiary, Congaree State Bank. In November 2016, Carolina Financial announced its entry into an agreement to acquire Greer Bancshares Incorporated, a $381 million bank holding company that operates four banking locations in the Greenville-Anderson-Mauldin, South Carolina MSA.

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, such as 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.

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More information of our locations

Cane Bay
Cayce
Chadbourn
Conway
Conway
Elizabethtown
Garden City
Greenville
Greenville Loan Production Office
Heath Springs
Holden Beach
James Island
Litchfield/Pawleys Island
Little River
Meeting Street
Mount Pleasant
Myrtle Beach
North Charleston
North Myrtle Beach
Shallotte
Socastee
Southport
St. George
Summerville
Sunset Beach
Tabor City
West Ashley
West Columbia
Whiteville
Wilmington
Wilmington Downtown