CHARLESTON, S.C., Oct. 24, 2018 (GLOBE NEWSWIRE) -- Carolina Financial Corporation (the “Company”) (NASDAQ: CARO) today announced financial results for the third quarter of 2018. 

Financial highlights at and for the periods ended September 30, 2018, include:

• Net income for the third quarter 2018 increased 90.2% to $15.2 million, or $0.66 per diluted share, from $8.0 million, or $0.49 per diluted share for the third quarter of 2017.
• Operating earnings for the third quarter of 2018, which exclude certain non-operating income and expenses, increased 94.7% to $15.4 million, or $0.67 per diluted share, from $7.9 million, or $0.49 per diluted share, for the third quarter of 2017.
• Operating earnings for Q3 2018 have been adjusted to eliminate the following significant items:
  • The fair value gain on interest rate swaps of $628,000.
  • The loss on sale of securities of $849,000.
• Performance ratios for Q3 2018 compared to Q3 2017:
  • Return on average assets was 1.66% compared to 1.43%.
  • Operating return on average assets was 1.68% compared to 1.42%.
  • Return on average tangible equity was 14.68% compared to 13.24%.
  • Operating return on average tangible equity was 14.85% compared to 13.08%.
• Loans receivable, gross grew $137.9 million, or at an annualized rate of 7.9% since December 31, 2017.
• Nonperforming assets to total assets were 0.32% at September 30, 2018 compared to 0.20% at December 31, 2017.
• Total deposits increased $154.7 million since December 31, 2017. Core deposits increased $49.0 million since December 31, 2017.

“Despite the impacts of Hurricane Florence on our markets in the third quarter, we continued to see the impact of solid organic growth and prior acquisitions on earnings. Overall, results for the third quarter of 2018 continued to improve with an increase of 90.2% in net income to $15.2 million compared to the third quarter of 2017,” stated Jerry Rexroad, Chief Executive Officer.

Hurricane Florence Update

On September 14, 2018, Hurricane Florence made landfall near Wilmington, NC. As a result of Florence, our markets’ business activities were significantly impacted along the Eastern and Coastal regions of the Carolinas. The impact of Florence on our third quarter results is difficult to quantify. However, we believe the hurricane adversely impacted our operating earnings in the following areas:

• Limited mortgage banking activities in Eastern and Coastal markets during most of September 2018.
• Delayed closings on mortgage loans, in which we provided free extensions to customers, reducing margin.
• Costs related to relocating employees, repairs of facilities, compensation costs and contributions to relief efforts.
• Refunds of foreign ATM fees to customers affected by the storm.
• Delayed closings on commercial loans and limited business activity for most of September in the impacted areas.
• Increased provision for loan losses for unknown impacts of Florence.

The aggregate financial effects of these items was a reduction in income and an increase in expense of approximately $500,000 to $600,000 pretax for the quarter. We are continuing to assess the impact of Florence on the economic prospects of our markets affected by it in future periods.

Financial Results

Carolina Financial Corporation

• The Company reported net income for the three months ended September 30, 2018 of $15.2 million, or $0.66 per diluted share, as compared to $8.0 million, or $0.49 per diluted share, for the three months ended September 30, 2017. The Company reported net income for the nine months ended September 30, 2018 of $34.2 million or $1.57 per diluted share, as compared to $22.2 million, or $1.47 per diluted share, for the nine months ended September 30, 2017. Included in net income for the nine months ended September 30, 2018 and 2017 were pretax merger-related expenses of $15.2 million and $1.9 million, respectively. 
• Operating earnings for the third quarter of 2018, which excludes certain non-operating income and expenses, increased 94.7% to $15.4 million, or $0.67 per diluted share, from $7.9 million, or $0.49 per diluted share, for the third quarter of 2017. Operating earnings for the nine months ended September 30, 2018, which excludes certain non-operating income and expenses, increased 101.4% to $45.9 million, or $2.10 per diluted share, from $22.8 million, or $1.50 per diluted share, for the same period of 2017.
• The Company’s net interest margin-tax equivalent increased to 4.15% for the third quarter of 2018 compared to 3.94% for the third quarter of 2017.
• The Company reported common book value per share of $25.14 and $22.76 as of September 30, 2018 and December 31, 2017, respectively. Tangible common book value per share was $18.69 and $15.71 as of September 30, 2018 and December 31, 2017, respectively.
• At September 30, 2018, the Company’s regulatory capital ratios exceeded the minimum levels currently required. Stockholders’ equity totaled $564.0 million as of September 30, 2018 compared to $475.4 million at December 31, 2017. Tangible equity to tangible assets at September 30, 2018 was 11.7% compared to 9.7% at December 31, 2017.

Community Banking

• Community banking segment net income increased 94.8% to $15.3 million for the three months ended September 30, 2018 compared to $7.8 million for the three months ended September 30, 2017. The community banking segment net income increased 64.4% to $34.2 million for the nine months ended September 30, 2018 compared to $20.8 million for the nine months ended September 30, 2017. Included in net income for the nine months ended September 30, 2018 and 2017 were pretax merger-related expenses of $15.2 million and $1.9 million, respectively. And, as noted above, community banking net income during the third quarter of 2018 was adversely affected by Hurricane Florence.
• Community banking segment operating earnings increased 99.4% to $15.4 million for the three months ended September 30, 2018 compared to $7.7 million for the three months ended September 30, 2017. The community banking segment operating earnings increased 115.3% to $45.9 million for the nine months ended September 30, 2018 compared to $21.3 million for the nine months ended September 30, 2017. Provision for loan loss during the three months ended September 30, 2018 was $750,000. There was no provision for loan loss during the three months ended September 30, 2017. Asset quality and historical loss experience continue to remain favorable. The provision for loan loss was primarily driven by organic loan growth and unknown potential storm related impacts.
• Non-performing assets were 0.32% and 0.20% of total assets at September 30, 2018 and December 31, 2017, respectively.
• Loans receivable, gross increased to $2.5 billion at September 30, 2018 compared to $2.3 billion at December 31, 2017. Loans increased $137.9 million for the nine months ended September 30, 2018, or at an annualized rate of 7.9% over December 31, 2017.
• Total deposits increased $154.7 million since December 31, 2017. As of September 30, 2018 and December 31, 2017, core deposits, defined as demand deposits, savings accounts and money market accounts, comprised approximately 64.9% and 66.9% respectively, of total deposits.

Wholesale Mortgage Banking

• Net income for the wholesale mortgage banking segment was $555,000 for the three months ended September 30, 2018 compared to $449,000 for the three months ended September 30, 2017. The increase in the three months ended September 30, 2018 was primarily due to higher mortgage servicing income on higher average servicing balances, partially offset by the impact of Hurricane Florence on origination activity and closings. Net income was $1.7 million for the nine months ended September 30, 2018 compared to $2.3 million for the nine months ended September 30, 2017. The decrease in the nine months ended September 30, 2018 was primarily due to a decrease in mortgage banking income, early lease termination costs, and loss on sale of other real estate expense incurred in second quarter 2018, and the impact of Hurricane Florence in the third quarter. Additionally, income taxes in 2017 were reduced due to tax benefits related to the vesting of employee stock-based compensation.
• Net margin was 1.65% for the three months ended September 30, 2018 compared to 1.44% for the three months ended September 30, 2017. Originations for the three months ended September 30, 2018 and 2017 were $190.1 million and $217.0 million, respectively. Originations during September 2018 were affected by storm related interruptions. Net margin was 1.71% for the nine months ended September 30, 2018 compared to 1.65% for the nine months ended September 30, 2017. Originations for the nine months ended September 30, 2018 and 2017 were $576.2 million and $611.6 million, respectively.

Dividend Declared

On October 17, 2018, the Company declared a $0.07 dividend per common share, payable on January 4, 2019, to stockholders of record on December 14, 2018.

Conference Call

A conference call will be held at 10:00 a.m., Eastern Time on October 25, 2018. 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 7386054. 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 7386054.

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, 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; (9) disruption from acquisitions may make it more difficult to maintain relationships with clients, associates, or suppliers; and (10) the impact of recent and future hurricanes and other natural disasters on our loan portfolio and the economic prospects of our coastal markets. 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, 2018				December 31, 2017
									(Unaudited)				(Audited)
									(Dollars in thousands)
ASSETS
	Cash and due from banks								$	37,930			25,254
	Interest-bearing cash									38,017			55,998
		Cash and cash equivalents								75,947			81,252
	Securities available-for-sale									817,745			743,239
	Federal Home Loan Bank stock, at cost									17,446			19,065
	Other investments									3,428			3,446
	Derivative assets									6,151			2,803
	Loans held for sale									25,356			35,292
	Loans receivable, gross									2,457,464			2,319,528
	Allowance for loan losses									(13,615	)		(11,478	)
		Loans receivable, net								2,443,849			2,308,050
	Premises and equipment, net									61,702			61,407
	Accrued interest receivable									13,390			11,992
	Real estate acquired through foreclosure, net									1,601			3,106
	Deferred tax assets, net									6,746			2,436
	Mortgage servicing rights									32,995			21,003
	Cash value life insurance									58,354			57,195
	Core deposit intangible									17,225			19,601
	Goodwill									127,592			127,592
	Other assets									11,958			21,538
		Total assets							$	3,721,485			3,519,017
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
	Noninterest-bearing deposits								$	567,394			525,615
	Interest-bearing deposits									2,192,229			2,079,314
		Total deposits								2,759,623			2,604,929
	Short-term borrowed funds									320,500			340,500
	Long-term debt									44,391			72,259
	Derivative liabilities									-			156
	Drafts outstanding									8,593			7,324
	Advances from borrowers for insurance and taxes									5,435			3,005
	Accrued interest payable									1,793			1,126
	Reserve for mortgage repurchase losses									1,442			1,892
	Dividends payable to stockholders									1,580			1,051
	Accrued expenses and other liabilities									14,101			11,394
		Total liabilities								3,157,458			3,043,636
Stockholders' equity:
	Preferred stock									-			-
	Common stock									226			210
	Additional paid-in capital									412,990			348,037
	Retained earnings									153,371			123,537
	Accumulated other comprehensive (loss) income, net of tax									(2,560	)		3,597
		Total stockholders' equity								564,027			475,381
	Total liabilities and stockholders' equity								$	3,721,485			3,519,017

CAROLINA FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
						For the Three Months							For the Nine Months
						Ended September 30,							Ended September 30,
							2018			2017			2018			2017
						(In thousands, except share data)
Interest income
	Loans					$	33,623			18,960			98,037			52,207
	Investment securities						6,912			3,761			18,979			9,975
	Dividends from Federal Home Loan Bank stock						313			135			751			351
	Other interest income						137			70			371			185
		Total interest income					40,985			22,926			118,138			62,718
Interest expense
	Deposits						5,029			2,422			12,919			6,212
	Short-term borrowed funds						1,529			441			4,488			1,225
	Long-term debt						544			514			1,813			1,364
		Total interest expense					7,102			3,377			19,220			8,801
Net interest income							33,883			19,549			98,918			53,917
Provision for loan losses							750			-			1,309			-
	Net interest income after provision for loan losses						33,133			19,549			97,609			53,917
Noninterest income
	Mortgage banking income						3,685			3,625			11,701			11,522
	Deposit service charges						2,084			1,072			6,096			2,928
	Net (loss) gain on sale of securities						(849	)		368			(2,292	)		1,174
	Fair value adjustments on interest rate swaps						628			90			1,883			(37	)
	Net increase in cash value life insurance						378			267			1,153			759
	Mortgage loan servicing income						2,313			1,652			6,428			4,822
	Other						2,061			801			6,408			2,742
		Total noninterest income					10,300			7,875			31,377			23,910
Noninterest expense
	Salaries and employee benefits						13,451			8,623			40,660			26,487
	Occupancy and equipment						4,113			2,508			11,860			7,129
	Marketing and public relations						312			385			1,011			1,182
	FDIC insurance						285			205			805			380
	Recovery of mortgage loan repurchase losses						(150	)		(225	)		(450	)		(675	)
	Legal expense						94			157			327			373
	Other real estate (income) expense, net						(13	)		(5	)		(2	)		40
	Mortgage subservicing expense						640			494			1,772			1,485
	Amortization of mortgage servicing rights						1,099			748			2,967			2,083
	Merger-related expenses						-			311			15,216			1,910
	Other						4,171			2,255			11,806			6,538
		Total noninterest expense					24,002			15,456			85,972			46,932
Income before income taxes							19,431			11,968			43,014			30,895
Income tax expense							4,227			3,975			8,788			8,659
	Net income					$	15,204			7,993			34,226			22,236
Earnings per common share:
	Basic					$	0.67			0.50			1.58			1.48
	Diluted					$	0.66			0.49			1.57			1.47
Dividends Per Common Share						$	0.07			0.04			0.18			0.12
Weighted average common shares outstanding:
	Basic						22,678,681			16,029,332			21,616,485			14,980,349
	Diluted						22,898,983			16,187,869			21,842,769			15,146,972

CAROLINA FINANCIAL CORPORATION
(Unaudited)
(Dollars in thousands)
						At or for the Three Months Ended
Selected Financial Data:						September 30,  2018				June 30, 2018			March 31, 2018			December 31, 2017			September 30, 2017
Selected Average Balances:
Total assets						$	3,663,915			3,627,402			3,522,407			3,048,214			2,230,586
Investment securities and FHLB stock							831,793			809,625			770,161			647,276			521,569
Loans receivable, net							2,402,075			2,401,075			2,322,203			2,003,429			1,463,771
Loans held for sale							23,692			23,137			21,645			25,001			27,282
Deposits							2,735,346			2,677,401			2,616,640			2,352,303			1,710,263
Stockholders' equity							559,401			497,694			477,830			380,529			286,524
Performance Ratios (annualized):
Return on average stockholders' equity							10.87	%		12.03	%		3.40	%		6.65	%		11.16	%
Retun on average tangible equity (Non-GAAP)							14.68	%		17.02	%		4.90	%		8.78	%		13.24	%
Return on average assets							1.66	%		1.65	%		0.46	%		0.83	%		1.43	%
Operating return on average stockholders' equity (Non-GAAP)							10.99	%		12.54	%		12.51	%		11.69	%		11.02	%
Operating return on average tangible equity (Non-GAAP)							14.85	%		17.74	%		18.06	%		15.44	%		13.08	%
Operating return on average assets (Non-GAAP)							1.68	%		1.72	%		1.70	%		1.46	%		1.42	%
Average earning assets to average total assets							89.59	%		89.82	%		89.28	%		89.25	%		91.09	%
Average loans receivable to average deposits							87.82	%		89.68	%		88.75	%		85.17	%		85.59	%
Average stockholders' equity to average assets							15.27	%		13.72	%		13.57	%		12.48	%		12.85	%
Net interest margin-tax equivalent (1)							4.15	%		4.11	%		4.20	%		4.19	%		3.94	%
Net charge-offs  (recoveries) to average loans
	receivable						0.02	%		0.04	%		(0.21	)%		0.02	%		0.02	%
Nonperforming assets to period end loans
	receivable						0.49	%		0.42	%		0.45	%		0.30	%		0.44	%
Nonperforming assets to total assets							0.32	%		0.28	%		0.30	%		0.20	%		0.29	%
Nonperforming loans to total loans							0.43	%		0.35	%		0.36	%		0.17	%		0.33	%
Allowance for loan losses as a percentage of
	gross loans receivable (end of period) (2)						0.55	%		0.54	%		0.53	%		0.49	%		0.72	%
Allowance for loan losses as a percentage of gross
	non-acquired loans receivable (Non-GAAP)						0.80	%		0.80	%		0.85	%		0.84	%		0.87	%
Allowance for loan losses as a percentage
	of nonperforming loans (2)						129.26	%		153.84	%		146.93	%		291.81	%		216.53	%
Nonperforming Assets:
Nonacquired loans 90 days or more past due
	and still accruing					$	32			19			-			-			-
Nonacquired nonaccrual loans							10,501			8,423			8,649			3,934			4,924
	Total nonperforming loans						10,533			8,442			8,649			3,934			4,924
Real estate acquired through foreclosure, net							1,601			1,726			1,963			3,106			1,640
	Total nonperforming assets					$	12,134			10,168			10,612			7,040			6,564
(1) Net interest margin-tax equivalent reflects tax-exempt income on a tax-equivalent basis.
(2) Acquired loans represent 30.5%, 33.5%, 36.8%, 41.1%, and 17.3%,  of gross loans receivable at September 30, 2018, June 30, 2018, March 31, 2018, December 31, 2017, and September 30, 2017, respectively.

Carolina Financial Corporation
Segment Information
(Unaudited)
(Dollars in thousands)
				For the Three Months							For the Nine Months						Increase (Decrease)
				September 30,							Ended September 30,						Three				Nine
					2018			2017			2018			2017			Months				Months
Segment net income:
Community banking				$	15,263			7,837			34,175			20,788			7,426				13,387
Wholesale mortgage banking					555			449			1,716			2,333			106				(617	)
Other					(606	)		(320	)		(1,672	)		(910	)		(286	)			(762	)
Eliminations					(8	)		27			7			25			(35	)			(18	)
Total net income				$	15,204			7,993			34,226			22,236			7,211				11,990
				For the Three Months Ended
				September 30,    2018				June 30,    2018			March 31,    2018			December 31,    2017			September 30,    2017
Segment net income:
Community banking				$	15,263			14,928			3,984			6,050			7,837
Wholesale mortgage banking					555			598			562			118			449
Other					(606	)		(568	)		(497	)		124			(320	)
Eliminations					(8	)		8			7			36			27
Total net income				$	15,204			14,966			4,056			6,328			7,993
				For the Three Months Ended September 30, 2018
				Community				Mortgage
				Banking				Banking			Other			Eliminations			Total
Interest income				$	40,588			472			14			(89	)		40,985
Interest expense					6,582			113			520			(113	)		7,102
Net interest income (expense)					34,006			359			(506	)		24			33,883
Provision for loan losses					750			-			-			-			750
Noninterest income from external customers					5,060			5,240			-			-			10,300
Intersegment noninterest income					242			36			-			(278	)		-
Noninterest expense					19,041			4,674			287						24,002
Intersegment noninterest expense					-			242			-			(242	)		-
Income (loss) before income taxes					19,517			719			(793	)		(12	)		19,431
Income tax expense (benefit)					4,254			164			(187	)		(4	)		4,227
Net income (loss)				$	15,263			555			(606	)		(8	)		15,204
				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 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
Carolina Financial Corporation
Segment Information, Continued
(Unaudited)
(Dollars in thousands)
				For the Nine Months Ended September 30, 2018
				Community				Mortgage
				Banking				Banking			Other			Eliminations			Total
Interest income				$	116,905			1,361			41			(169	)		118,138
Interest expense					17,732			244			1,488			(244	)		19,220
Net interest income (expense)					99,173			1,117			(1,447	)		75			98,918
Provision for loan losses					1,284			25			-			-			1,309
Noninterest income from external customers					15,690			15,599			88			-			31,377
Intersegment noninterest income					724			64			-			(788	)		-
Noninterest expense					71,318			13,809			845			-			85,972
Intersegment noninterest expense					-			725			-			(725	)		-
Income (loss) before income taxes					42,985			2,221			(2,204	)		12			43,014
Income tax expense (benefit)					8,810			505			(532	)		5			8,788
Net income (loss)				$	34,175			1,716			(1,672	)		7			34,226
				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 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 Three Months Ended September 30,
				Loan Originations							Mortgage Banking Income						Margin
					2018			2017			2018			2017			2018				2017
Additional segment information:
Community banking				$	27,563			20,342			541			500			1.96	%			2.46	%
Wholesale mortgage banking					190,142			217,014			3,144			3,125			1.65	%			1.44	%
Total				$	217,705			237,356			3,685			3,625			1.69	%			1.53	%
				For the Nine Months Ended September 30,
				Loan Originations							Mortgage Banking Income						Margin
					2018			2017			2018			2017			2018				2017
Additional segment information:
Community banking				$	91,786			59,511			1,843			1,441			2.01	%			2.42	%
Wholesale mortgage banking					576,205			611,597			9,858			10,081			1.71	%			1.65	%
Total				$	667,991			671,108			11,701			11,522			1.75	%			1.72	%

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,
						2018				2018				2018				2017				2017
Core deposits:
Noninterest-bearing demand accounts					$	567,394				577,568				547,744				525,615				333,267
Interest-bearing demand accounts						579,522				584,719				558,942				551,308				309,241
Savings accounts						190,946				198,571				212,249				213,142				69,552
Money market accounts						453,957				458,558				463,676				452,734				377,754
	Total core deposits (Non-GAAP)					1,791,819				1,819,416				1,782,611				1,742,799				1,089,814
Certificates of deposit:
Less than $250,000						863,290				788,693				791,789				755,887				567,483
$250,000 or more						104,514				100,689				102,569				106,243				50,357
	Total certificates of deposit					967,804				889,382				894,358				862,130				617,840
Total deposits					$	2,759,623				2,708,798				2,676,969				2,604,929				1,707,654
					At the Month Ended
					September 30,				June 30,				March 31,				December 31,				September 30,
						2018				2018				2018				2017				2017
Tangible book value per share:
Total stockholders' equity					$	564,027				551,784				475,046				475,381				290,224
Less intangible assets						(144,817	)			(145,595	)			(146,387	)			(147,193	)			(44,953	)
Tangible common equity (Non-GAAP)					$	419,210				406,189				328,659				328,188				245,271
Issued and outstanding shares						22,570,445				22,570,182				21,057,539				21,022,202				16,159,309
Less nonvested restricted stock awards						(135,045	)			(137,345	)			(136,395	)			(134,302	)			(99,639	)
Period end dilutive shares						22,435,400				22,432,837				20,921,144				20,887,900				16,059,670
Total stockholders' equity					$	564,027			$	551,784			$	475,046			$	475,381			$	290,224
Divided by period end dilutive shares						22,435,400				22,432,837				20,921,144				20,887,900				16,059,670
Common book value per share					$	25.14			$	24.60			$	22.71			$	22.76			$	18.07
Tangible common equity (Non-GAAP)					$	419,210			$	406,189			$	328,659			$	328,188			$	245,271
Divided by period end dilutive shares						22,435,400				22,432,837				20,921,144				20,887,900				16,059,670
Tangible common book value per share (Non-GAAP)					$	18.69			$	18.11			$	15.71			$	15.71			$	15.27
					At the Month Ended
					September 30,				June 30,				March 31,				December 31,				September 30,
						2018				2018				2018				2017				2017
Acquired and non-acquired loans:
Acquired loans receivable					$	749,442				813,688				877,012				952,220				257,461
Non-acquired gross loans receivable						1,708,022				1,613,533				1,503,006				1,367,308				1,227,000
Total gross loans receivable					$	2,457,464				2,427,221				2,380,018				2,319,528				1,484,461
% Acquired						30.50	%			33.52	%			36.85	%			41.05	%			17.34	%
Non-acquired loans					$	1,708,022				1,613,533				1,503,006				1,367,308				1,227,000
Allowance for loan losses						13,615				12,987				12,708				11,478				10,662
Allowance for loan losses to non-acquired loans (Non-GAAP)						0.80	%			0.80	%			0.85	%			0.84	%			0.87	%
Total gross loans receivable					$	2,457,464				2,427,221				2,380,018				2,319,528				1,484,461
Allowance for loan losses						13,615				12,987				12,708				11,478				10,662
Allowance for loan losses to total gross loans receivable						0.55	%			0.54	%			0.53	%			0.49	%			0.72	%

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
						September 30,    2018				June 30,    2018				March 31,    2018				December 31,    2017				September 30,    2017				September 30,    2018				September 30,    2017
As Reported:
Income before income taxes						$	19,431				19,002				4,581				10,630				11,968				43,014				30,895
Tax expense							4,227				4,036				525				4,302				3,975				8,788				8,659
Net Income						$	15,204				14,966				4,056				6,328				7,993				34,226				22,236
Average equity						$	559,401			$	497,694			$	477,830			$	380,529			$	286,524			$	512,268			$	258,101
Average tangible equity (Non-GAAP)						$	414,205			$	351,703			$	331,047			$	288,156			$	241,489			$	366,284			$	213,122
Average assets						$	3,663,915			$	3,627,401			$	3,522,407			$	3,048,214			$	2,230,586			$	3,605,432			$	2,055,237
Return on average assets							1.66	%			1.65	%			0.46	%			0.83	%			1.43	%			1.27	%			1.44	%
Return on average equity							10.87	%			12.03	%			3.40	%			6.65	%			11.16	%			8.91	%			11.49	%
Return on average tangible equity (Non-GAAP)							14.68	%			17.02	%			4.90	%			8.78	%			13.24	%			12.46	%			13.91	%
Tangible equity to tangible assets							11.72	%			11.45	%			9.65	%			9.73	%			11.09	%			11.72	%			11.09	%
Weighted average common shares outstanding:
	Basic						22,678,681				21,243,094				20,908,225				19,207,307				16,029,332				21,616,485				14,980,349
	Diluted						22,898,983				21,454,039				21,119,316				19,443,353				16,187,869				21,842,769				15,146,972
Earnings per common share:
	Basic					$	0.67			$	0.70			$	0.19			$	0.33			$	0.50			$	1.58			$	1.48
	Diluted					$	0.66			$	0.70			$	0.19			$	0.33			$	0.49			$	1.57			$	1.47
Operating Earnings and Performance Ratios:
Income before income taxes						$	19,431				19,002				4,581				10,630				11,968				43,014				30,895
(Gain)/loss on sale of securities							849				746				697				242				(368	)			2,292				(1,174	)
Fair value adjustments on interest rate swaps							(628	)			(451	)			(803	)			(419	)			(90	)			(1,883	)			37
Merger related expenses							-				506				14,710				6,391				311				15,216				1,910
Operating earnings before income taxes							19,652				19,803				19,185				16,844				11,821				58,639				31,668
Tax expense (1)							4,279				4,205				4,242				5,721				3,926				12,726				8,876
Operating earnings (Non-GAAP)						$	15,373				15,598				14,943				11,123				7,895				45,913				22,792
Average equity						$	559,401				497,694				477,830				380,529				286,524				512,268				258,101
Less average intangible assets							(145,196	)			(145,991	)			(146,783	)			(92,373	)			(45,035	)			(145,984	)			(44,979	)
Average tangible common equity (Non-GAAP)						$	414,205				351,703				331,047				288,156				241,489				366,284				213,122
Average assets						$	3,663,915				3,627,401				3,522,407				3,048,214				2,230,586				3,605,432				2,055,237
Less average intangible assets							(145,196	)			(145,991	)			(146,783	)			(92,373	)			(45,035	)			(145,984	)			(44,979	)
Average tangible assets (Non-GAAP)						$	3,518,719				3,481,410				3,375,624				2,955,841				2,185,551				3,459,448				2,010,258
Operating return on average assets (Non-GAAP)							1.68	%			1.72	%			1.70	%			1.46	%			1.42	%			1.70	%			1.48	%
Operating return on average equity (Non-GAAP)							10.99	%			12.54	%			12.51	%			11.69	%			11.02	%			11.95	%			11.77	%
Operating return on average tangible assets (Non-GAAP)							1.75	%			1.79	%			1.77	%			1.51	%			1.44	%			1.77	%			1.51	%
Operating return on average tangible equity (Non-GAAP)							14.85	%			17.74	%			18.06	%			15.44	%			13.08	%			16.71	%			14.26	%
Weighted average common shares outstanding:
	Basic						22,678,681				21,243,094				20,908,225				19,207,307				16,029,332				21,616,485				14,980,349
	Diluted						22,898,983				21,454,039				21,119,316				19,443,353				16,187,869				21,842,769				15,146,972
Operating earnings per common share:
	Basic (Non-GAAP)					$	0.68			$	0.73			$	0.71			$	0.58			$	0.49			$	2.12			$	1.52
	Diluted (Non-GAAP)					$	0.67			$	0.73			$	0.71			$	0.57			$	0.49			$	2.10			$	1.50
(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 Nine Months Ended
					September 30,    2018				June 30,    2018				March 31,    2018				December 31,    2017				September 30,    2017				September 30,    2018				September 30,    2017
Segment net income:
Community banking					$	15,263				14,928				3,984				6,052				7,837				34,175				20,788
Wholesale mortgage banking						555				598				562				117				449				1,716				2,333
Other						(606	)			(568	)			(497	)			124				(320	)			(1,672	)			(910	)
Eliminations						(8	)			8				7				35				27				7				25
Total net income					$	15,204				14,966				4,056				6,328				7,993				34,226				22,236
Community banking segment operating earnings:
Income before income taxes					$	19,517				18,924				4,545				10,447				11,714				42,985				29,321
Tax expense (1)						4,254				3,996				561				4,397				3,877				8,810				8,533
Bank segment net income					$	15,263				14,928				3,984				6,050				7,837				34,175				20,788
Weighted average common shares outstanding:
	Basic					22,678,681				21,243,094				20,908,225				19,207,307				16,029,332				21,616,485				14,980,349
	Diluted					22,898,983				21,454,039				21,119,316				19,443,353				16,187,869				21,842,769				15,146,972
Bank segment earnings per common share:
	Basic				$	0.67			$	0.70			$	0.19			$	0.31			$	0.49			$	1.58			$	1.39
	Diluted				$	0.67			$	0.70			$	0.19			$	0.31			$	0.48			$	1.56			$	1.37
Bank segment income before taxes					$	19,517			$	18,924				4,545				10,447				11,714				42,985				29,321
(Gain) loss on sale of securities						849				746				692				242				(368	)			2,287				(1,174	)
Fair value adjustments on interest rate swaps						(628	)			(451	)			(755	)			(419	)			(90	)			(1,835	)			37
Merger related expenses						-				506				14,710				6,391				311				15,216				1,901
Operating earnings before income taxes						19,738				19,725				19,192				16,661				11,567				58,653				30,085
Tax expense (1)						4,306				4,152				4,288				5,778				3,828				12,746				8,762
Operating bank segment earnings (Non-GAAP)					$	15,432			$	15,573				14,904				10,883				7,739				45,907				21,323
Operating bank segment earnings per common share:
	Basic (Non-GAAP)				$	0.68			$	0.73			$	0.71			$	0.57			$	0.48			$	2.12			$	1.42
	Diluted (Non-GAAP)				$	0.67			$	0.73			$	0.71			$	0.56			$	0.48			$	2.10			$	1.41
(1)  Tax expense is determined using the effective tax rate adjusted to eliminate the impact of the non-operating items.

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