Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YesxNo¨

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). YesxNo¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting ~~company"~~company," and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.¨

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes¨Nox

As of ~~November 3, 2017,~~October 30, 2019, the ~~Registrant~~registrant had outstanding ~~11,662,621~~18,513,078 shares of Common Stock, $1.00 par value per share.

SELECT BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

SELECT BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

(in thousands, except share data)

SELECT BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Continued)

Select Bancorp, Inc. ~~(“Company”~~(the “Company”) is a bank holding company whose principal business activity consists of ownership of Select Bank & Trust Company (referred to as the “Bank”). In 2004, the Company formed New Century Statutory Trust I, which issued trust preferred securities to provide additional capital for general corporate purposes, including the current and future expansion of the Company. New Century Statutory Trust I is not a consolidated subsidiary of the Company. On July 25, 2014 the Company changed its name from New Century Bancorp, Inc. to Select Bancorp, Inc. following its acquisition by merger of Select Bancorp, Inc., Greenville, NC (which we refer to herein as “Legacy Select”). The Company is subject to the rules and regulations of the Board of Governors of the Federal Reserve System and the North Carolina Commissioner of Banks.

~~Select~~The Bank ~~& Trust Company~~ was originally incorporated as New Century Bank on May 19, 2000 and began banking operations on May 24, 2000. On July 25, 2014, ~~in connection with~~ the ~~Company’s acquisition of Legacy~~Company acquired Select Bank & Trust Company, Greenville, North Carolina, and changed the ~~Bank changed its~~Bank’s legal name ~~from New Century Bank~~ to Select Bank & Trust Company. On December 15, 2017, the Company ~~following~~acquired Premara Financial, Inc. and its subsidiary Carolina Premier Bank through the merger of Premara with and into the ~~two banking corporations.~~Company, followed immediately by the merger of Carolina Premier with and into the Bank. The Bank iscontinues as the only banking subsidiary of the Company ~~and~~with its headquarters and operations center ~~are~~ located in Dunn, NC. The Bank is engaged in general commercial and retail banking in central and eastern North Carolina, ~~and operates under the banking laws of~~as well as in Charlotte, North Carolina, northwest South Carolina, and Virginia Beach, Virginia. The Bank is subject to the ~~rules~~supervision and ~~regulations~~regulation of the Federal Deposit Insurance Corporation and the North Carolina Commissioner of Banks. ~~The Bank undergoes periodic examinations by those regulatory authorities.~~

All significant inter-company transactions and balances have been eliminated in consolidation. In management’s opinion, the financial information, which is unaudited, reflects all adjustments (consisting solely of normal recurring adjustments) necessary for a fair presentation of the financial information as of and for the ~~three~~three- and ~~nine month~~nine-month periods ended September 30, ~~2017~~2019 and ~~2016,~~2018, in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

The preparation of consolidated financial statements requires management to make estimates and assumptions that affect reported amounts of assets and liabilities at the date of the financial statements, as well as the amounts of income and expense during the reporting period. Actual results could differ from those estimates. Operating results for the ~~three~~three- and ~~nine month~~nine-month periods ended September 30, ~~2017~~2019 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, ~~2017.~~2019.

The organization and business of the Company, accounting policies followed by the Company and other relevant information are contained in the notes to the financial statements filed as part of the Company’s ~~2016~~2018 Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on March ~~14, 2017.~~15, 2019. This quarterly report should be read in conjunction with the Annual Report.

Certain reclassifications of the information in prior periods were made to conform to the September 30, ~~2017~~2019 presentation. Such reclassifications had no effect on shareholders’ equity or net income as previously reported.

Basic net income per share is computed based upon the weighted average number of shares of common stock outstanding during the period. Diluted net income per share includes the dilutive effect of stock options outstanding during the period. At September 30, ~~2017~~2019 and ~~2016~~2018 there were ~~152,300~~172,120 and ~~123,800~~119,800 anti-dilutive stock options outstanding, respectively.

The following summarizes recent accounting pronouncements and their expected impact on the Company:

ASU 2014-09, Revenue from Contracts with Customers (Topic 606), ASU 2015-14 Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, ASU 2016-08 Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), ASU 2016-10 Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, ASU 2016-11 Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting, ASU 2016-12 Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, ASU 2016-20 Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, and ASU 2017-05 Other Income - Gains and losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20) - Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets — In May 2014, the FASB issued guidance to change the recognition of revenue from contracts with customers. The new guidance, which does not apply to financial instruments, provides that revenue should be recognized for the transfer of goods and services to customers in an amount equal to the consideration it receives or expects to receive. The guidance also includes expanded disclosure requirements that provide comprehensive information about the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The Company currently plans to adopt the guidance using the modified retrospective method and without electing any of the practical expedients available. The Company has performed an analysis of the guidance and it is not expected to have a significant impact on the Company's financial position or results of operations but will increase disclosures of revenue.

~~In March 2016, the FASB issued ASU 2016-09,~~~~Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-based Payment Accounting,~~to simplify several aspects of the accounting for share-based payment award transactions including the income tax consequences, the classification of awards as either equity or liabilities, including the tax effect of forfeitures and the classification on the statement of cash flows. Additionally, the guidance simplifies two areas specific to entities other than public business entities allowing them to apply a practical expedient to estimate the expected term for all awards with performance or service conditions that have certain characteristics and also allowing them to make a one-time election to switch from measuring all liability-classified awards at fair value to measuring them at intrinsic value. The amendments were effective for the Company for annual periods beginning after December 15, 2016 and interim periods within those annual periods. The Company adopted these amendments to its financial statements during the first quarter of 2017 with a positive impact to net earnings as an excess tax benefit of $4,000 was recorded through the income statement rather than additional paid in capital.

~~In January 2016, FASB issued ASU No. 2016-01,~~~~Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities~~. The amendments in this ASU (i) requires equity investments, with certain exceptions, to be measured at fair value with changes in fair value recognized in net income, (ii) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment, (iii) eliminates the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet, (iv) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, (v) requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments, (vi) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements and (vii) clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity's other deferred tax assets. The accounting guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is prohibited except for the presentation in other comprehensive income of the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk which may be early adopted. The guidance is not expected to have a significant impact on the Company's financial position, results of operations or disclosures.

In February 2016, the ~~FASB~~Financial Accounting Standards Board (the FASB) issued ~~ASU~~Accounting Standards Update (“ASU”) 2016-02,Leases (Topic 842). ASU 2016-02 applies a right-of-use ~~(ROU)~~(“ROU”) model that requires a lessee to record, for all leases with a lease term of more than 12 months, an asset representing its right to use the underlying asset and a liability to make lease payments. For leases with a term of 12 months or less, a practical expedient is available whereby a lessee may elect, by class of underlying asset, not to recognize an ROU asset or lease liability. At inception, lessees must classify all leases as either finance or operating based on five criteria. Balance sheet recognition of finance and operating leases is similar, but the pattern of expense recognition in the income statement, as well as the effect on the statement of cash flows, differs depending on the lease classification. For public business entities, the amendments in ASU 2016-02 are effective for interim and annual periods beginning after December 15, 2018. The Company adopted this standard during the first quarter of 2019. The impact was an increase to the Consolidated Balance Sheet for ROU assets and associated lease liabilities, as well as resulting depreciation expense of the ROU assets and expense of the lease liabilities in the Consolidated Statements of Income. Additionally, adding these assets to the balance sheet impacted total risk-weighted assets used to determine the regulatory capital levels.

In ~~transition, lessees~~July 2018, the FASB amended the Leases Topic of the Accounting Standards Codification to make narrow amendments to clarify how to apply certain aspects of the new standard. The amendments are effective for reporting periods beginning after December 15, 2018.

The Company elected to apply ASU 2016-02 as of the beginning of the period of adoption (January 1, 2019) and ~~lessors~~will not restate comparative periods. Adoption of ASU 2016-02 resulted in the recognition of lease liabilities totaling $9,013,900 and the recognition of ROU assets totaling $9,013,900 as of the date of adoption. The adoption of this standard did not impact beginning retained earnings. Total risk-based capital was adversely impacted by 13 basis points due to the increase in risk-weighted assets, see Note J. Lease liabilities and ROU assets are ~~required~~reflected in other liabilities and other assets, respectively. The initial balance sheet gross up upon adoption was primarily related to ~~recognize~~operating leases of certain real estate properties. The Company has a finance lease and ~~measure~~no material subleases or leasing arrangements for which it is the lessor of property or equipment. The Company has elected to apply the package of practical expedients allowed by the new standard under which the Company need not reassess whether any expired or existing contracts are leases or contain leases, the Company need not reassess the lease classification for any expired or existing lease, and the Company need not reassess initial direct costs for any existing leases.

at the beginning of the earliest period presented using a modified retrospective approach which includes a number of optional practical expedients that entities may elect to apply. The Company has reviewed its outstanding lease agreements and has centrally documented the terms of its leases. The Company is currently evaluating the provisions of ASU 2016-02 in relation to its outstanding leases to determine the potential impact the new standard will have to the Company’s financial statements.

In June 2016, the FASB issued ASU 2016-13,Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, guidance to change the accounting for credit losses and modify the impairment model for certain debt securities. ASU 2016-13 requires an entity to utilize a new impairment model known as the current expected credit loss ("CECL") model to estimate its lifetime "expected credit loss" and record an allowance that, when deducted from the amortized cost basis of the financial asset, presents the net amount expected to be collected on the financial asset. The CECL model is expected to result in earlier recognition of credit losses. ASU 2016-13 also requires new disclosures for financial assets measured at amortized cost, loans and available-for-sale debt securities. The updated guidance is effective for interim and annual reporting periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. Entities will apply the standard's provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. On October 16, 2019, the FASB voted to delay implementation of CECL until January 2023 for certain companies, including smaller reporting companies (as defined by the SEC). The Company ~~has dedicated staff~~currently qualifies as a smaller reporting company and ~~resources in place evaluating the Company’s options including evaluating the appropriate model options and collecting and reviewing loan data for use in these models. The Company~~ is still assessing the impact that this new guidance will have on its consolidated financial statements.

In August ~~2016,~~2018, the FASB amended ASU 2018-13- Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the ~~Statement of Cash Flows~~ Disclosure Requirements for Fair Value Measurementtopic of the Accounting Standards ~~Codification to clarify how~~Codification. The amendments remove, modify, and add certain ~~cash receipts and cash payments are presented and classified~~fair value disclosure requirements based on the concepts in the ~~statement of cash flows.~~FASB Concepts Statement,Conceptual Framework for Financial Reporting—Chapter 8: Notes to Financial Statements. The amendments ~~will be~~are effective for ~~the Company~~all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, ~~2017 including interim periods within those fiscal years.~~2019. Early adoption is permitted. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this ASU and delay adoption of the additional disclosures until their effective date. The Company does not expect these amendments to have a material effect on its ~~financial statements.~~

In January 2017, the FASB updated the Accounting Changes and Error Corrections and the Investments—Equity Method and Joint Ventures Topics of the Accounting Standards Codification. The ASU incorporates into the Accounting Standards Codification recent SEC guidance about disclosing, under SEC SAB Topic 11.M, the effect on financial statements of adopting the revenue, leases, and credit losses standards. The ASU was effective upon issuance. The Company is currently evaluating the impact on additional disclosure requirements as each of the standards is adopted; however, it does not expect these amendments to have a material effect on its financial position, results of operations or cash flows.

In January 2017, the FASB amended the Goodwill and Other Topic of the Accounting Standards Codification to simplify the accounting for goodwill impairment for public business entities and other entities that have goodwill reported in their financial statements and have not elected the private company alternative for the subsequent measurement of goodwill. The amendment removes Step 2 of the goodwill impairment test. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The effective date and transition requirements for the technical corrections will be effective for the Company for ~~reporting periods beginning after December 15, 2019.~~ ~~Early adoption is permitted for interim or annual goodwill~~

~~impairment tests performed on testing dates after January 1, 2017. The Company does not expect these amendments to have a material effect on its financial statements.~~

In February 2017, the FASB amended the Other Income Topic of the Accounting Standards Codification to clarify the scope of the guidance on nonfinancial asset derecognition as well as the accounting for partial sales of nonfinancial assets. The amendments conform the derecognition guidance on nonfinancial assets with the model for transactions in the new revenue standard. The amendments will be effective for the Company for ~~reporting periods beginning after December 15, 2017.~~ ~~The Company does not expect these amendments to have a material effect on its financial statements.~~

In May 2017, the FASB amended the requirements in the Compensation—Stock Compensation Topic of the Accounting Standards Codification related to changes to the terms or conditions of a share-based payment award. The amendments provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The amendments will be effective for the Company for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted. The Company does not expect these amendments to have a material effect on itsconsolidated financial statements.

From time to time, the FASB issues exposure drafts for proposed statements of financial accounting standards. Such exposure drafts are subject to comment from the public, to revisions by the FASB and to final issuance by the FASB as statements of financial accounting standards. Management considers the effect of the proposed statements on the consolidated financial statements of the Company and monitors the status of changes to and proposed effective dates of exposure drafts.

Accounting Standards Codification (“ASC”) 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 does not require any new fair value measurements, but clarifies and standardizes some divergent practices that have emerged since prior guidance was issued. ASC 820 creates a three-level hierarchy under which individual fair value estimates are to be ranked based on the relative reliability of the inputs used in the valuation.

Fair value estimates are made at a specific moment in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument.

Because no active market readily exists for a portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

The Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:

The following is a description of valuation methodologies used for assets and liabilities recorded at fair value on a recurring basis.

Investment securities available-for-sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level 2 securities include U.S. government agency securities, mortgage-backed securities issued by ~~government sponsored~~government-sponsored entities (“GSEs”), and municipal bonds. There have been no changes in valuation techniques for the three and nine months ended September 30, ~~2017.~~2019. Valuation techniques are consistent with techniques used in prior periods.

The following tables summarize quantitative disclosures about the fair value measurement for each category of assets carried at fair value on a recurring basis as of September 30, ~~2017~~2019 and December 31, ~~2016~~2018 (in thousands):

The following is a description of valuation methodologies used for assets recorded at fair value on a non-recurring basis.

The Company does not record loans at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance for loan losses is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures impairment in accordance with ASC 310 ~~“Receivables”.~~“Receivables.” The fair value of impaired loans is estimated using one of several methods, including collateral value, market value of similar debt, enterprise value, or liquidation value and discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. At September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, substantially all of the total impaired loans were evaluated based on the fair value of the collateral. Impaired loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the impaired loan as non-recurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the impaired loan as non-recurring Level 3. The significant unobservable input used in the fair value measurement of the Company’s impaired loans is the discount applied to appraised values to account for expected liquidation and selling costs. At September 30, ~~2017,~~2019, the discounts to appraised value used are weighted between 6%3% and ~~61%~~50%. There were no transfers between levels from the prior reporting periods, and there have been no changes in valuation techniques for the three months ended September 30, ~~2017.~~2019.

Foreclosed real estate are properties recorded at estimated fair value less estimated selling costs. Inputs include appraised values on the properties or recent sales activity for similar assets in the property’s market. Therefore, foreclosed real estate is classified within Level 3 of the hierarchy. The significant unobservable input used in the fair value measurement of the Company’s foreclosed real estate is the discount applied to appraised values to account for expected liquidation and selling costs. At September 30, ~~2017,~~2019, the discounts used ranged between 6% and 10%. There have been no changes in valuation techniques for the three months ended September 30, ~~2017.~~2019.

During 2015, a branch facility was taken out of service as part of the Company’s branch restructuring plan and reclassified as held for sale. The property is recorded at the remaining book balance of the asset or an estimated fair value less estimated selling costs, whichever is less. Inputs include appraised values on the properties or recent sales activity for similar assets in the property’s market. Therefore, assets held for sale is classified within Level 3 of the hierarchy.

The ~~significant unobservable input used is the discount applied to appraised values to account for expected liquidation~~Company originates fixed and ~~selling costs which ranged between 1% and 25% at September 30, 2017. There have been no changes~~variable rate residential mortgage loans on a servicing-released basis in the secondary market. Loans closed but not yet settled with an investor are carried in our loans held for sale portfolio. Virtually all of these loans have commitments to be purchased by investors and the majority of these loans were locked in by price with the investors on the same day or shortly thereafter that the loan was locked in with our customers. Therefore, these loans present very little market risk. The Company usually delivers to, and receives funding from, the investor within 30 to 60 days. Commitments to sell these loans to the investor are considered derivative contracts and are sold to investors on a “best efforts” basis. The Company is not obligated to deliver a loan or pay a penalty if a loan is not delivered to the investor. Because of the short-term nature of these derivative contracts, the fair value of the mortgage loans held for sale in most cases is materially the same as the value of the loan amount at its origination.

Mortgage loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated market value in the aggregate. Therefore, loans held for sale are classified within Level 2 of the hierarchy. Net unrealized losses are provided for in a valuation ~~techniques for~~allowance by charges to operations as a component of mortgage banking income. Gains or losses on sales of loans are recognized when control over these assets are surrendered and are included in fees on the ~~three months ended September 30, 2017.~~sale of mortgages in the consolidated statements of income.

The following tables summarize quantitative disclosures about the fair value measurement for each category of assets carried at fair value on a non-recurring basis as of September 30, ~~2017~~2019 and December 31, ~~2016~~2018 (in thousands):

Asset Category December 31, 2018	Fair value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans	$	7,257	$	-	$	-	$	7,257
Loans held for sale		580		-		580		-
Assets held for sale		668		-		-		668
Foreclosed real estate		1,088		-		-		1,088
Total	$	9,593	$	-	$	580	$	9,013

~~SELECT BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

~~NOTE D – FAIR VALUE MEASUREMENTS (continued)~~SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)

The following table presents the carrying values and estimated fair values of the Company's financial instruments at September 30, ~~2017~~2019 and December 31, ~~2016:~~2018:

	September 30, 2017										September 30, 2019
	Carrying		Estimated								Carrying		Estimated
	Amount		Fair Value		Level 1		Level 2		Level 3		Amount		Fair Value		Level 1		Level 2		Level 3
	(In thousands)										(In thousands)
Financial assets:
Cash and due from banks	$	15,518	$	15,518	$	15,518	$	-	$	-	$	20,052	$	20,052	$	20,052	$	-	$	-
Certificates of deposit		1,000		1,000		1,000		-		-		500		500		500		-		-
Interest-earning deposits in other banks		36,793		36,793		36,793		-		-		53,093		53,093		53,093		-		-
Federal funds sold												10,728		10,728		10,728		-		-
Investment securities available for sale		53,705		53,705		-		53,705		-		76,941		76,941		-		76,941		-
Loans held for sale												1,714		1,714				1,714		-
Loans, net		754,785		757,055		-		-		757,055		1,006,872		998,827		-		-		998,827
Accrued interest receivable		2,949		2,949		-		2,949		-		3,902		3,902		-		3,902		-
Stock in FHLB		1,712		1,712		-		-		1,712		3,045		3,045		-		-		3,045
Other non-marketable securities		630		630		-		-		630		719		719		-		-		719

Financial liabilities:
Deposits	$	775,022	$	773,189	$	-	$	773,189	$	-	$	987,673	$	989,577	$	-	$	989,577	$	-
Short-term debt		22,366		22,366		-		22,366		-
Long-term debt		12,372		6,982		-		6,982		-		57,372		55,941		-		55,941		-
Accrued interest payable		302		302		-		302		-		596		596		-		596		-

December 31, 2016
Carrying Estimated
Amount Fair Value Level 1 Level 2 Level 3
(in thousands)
Financial assets:
Cash and due from banks $ 14,372 $ 14,372 $ 14,372 $ - $ -
Certificates of deposits 1,000 1,000 1,000 - -
Interest-earning deposits in other banks 40,342 40,342 40,342 - -
Investment securities available for sale 62,257 62,257 - 62,257 -
Loans, net 668,784 671,208 - - 671,208
Accrued interest receivable 2,768 2,768 - 2,768 -
Stock in the FHLB 2,251 2,251 - - 2,251
Other non-marketable securities 703 703 - - 703

Financial liabilities:
Deposits $ 679,661 $ 678,328 $ - $ 678,328 $ -
Short-term debt 37,090 37,177 - 37,177 -
Long-term debt 23,039 17,649 - 17,649 -
Accrued interest payable 221 221 - 221 -

	December 31, 2018
	Carrying		Estimated
	Amount		Fair Value		Level 1		Level 2			Level 3
	(dollars in thousands)
Financial assets:
Cash and due from banks	$	17,059	$	17,059	$	17,059	$	-		$	-
Certificates of deposits		1,000		1,000		1,000		-			-
Interest-earning deposits in other banks		121,303		121,303		121,303		-			-
Investment securities available for sale		51,533		51,533		-		51,533			-
Loans held for sale		580		580		-		580			-
Loans, net		977,371		970,330		-		-			970,330
Accrued interest receivable		3,889		3,889		-		3,889			-
Stock in the FHLB		3,283		3,283		-		-			3,283
Other non-marketable securities		762		762		-		-			762
Assets held for sale		668		668		-		-			668

Financial liabilities:
Deposits	$	980,427	$	979,570	$	-	$	979,570	��	$	-
Short-term debt		7,000		7,000		-		7,000			-
Long-term debt		57,372		55,504		-		55,504			-
Accrued interest payable		667		667		-		667			-

~~SELECT BANCORP, INC.~~

SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)

~~NOTE D – FAIR VALUE MEASUREMENTS (continued)~~

~~Cash and Due from Banks, Certificates of Deposit, Interest-Earning Deposits in Other Banks and Federal Funds Sold~~

The carrying amounts for cash and due from banks, certificates of deposit, interest-earning deposits in other banks and federal funds sold approximate fair value because of the short maturities of those instruments.

~~Investment Securities Available for Sale~~

Fair value for investment securities available for sale equals quoted market price if such information is available. If a quoted market price is not available, fair value is estimated using prices quoted for similar investments or quoted market prices obtained from independent pricing services.

~~Loans~~

For certain homogenous categories of loans, such as residential mortgages, fair value is estimated using the quoted market prices for securities backed by similar loans, adjusted for differences in loan characteristics. The fair value of other types of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. However, the values likely do not represent exit prices due to distressed market conditions.

~~Stock in Federal Home Loan Bank of Atlanta~~

~~The fair value for FHLB stock approximates carrying value, based on the redemption provisions of the FHLB stock.~~

~~Other Non-Marketable Securities~~

~~The fair value of equity instruments in other non-marketable securities is assumed to approximate carrying value.~~

~~Deposits~~

The fair value of demand, savings, and money market and NOW deposits is the amount payable on demand at the reporting date. The fair values of time deposits are estimated using the rates currently offered for instruments of similar remaining maturities.

~~Short-term Debt~~

~~Short-term debt consists of repurchase agreements and FHLB advances with maturities of less than twelve months. The carrying values of these instruments is a reasonable estimate of fair value.~~

~~Long-term Debt~~

~~The fair values of long-term debt are based on discounted expected cash flows at the interest rate for debt with the same or similar remaining maturities and collateral requirements.~~

~~SELECT BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

~~NOTE D – FAIR VALUE MEASUREMENTS (continued)~~

~~Accrued Interest Receivable and Accrued Interest Payable~~

~~The carrying amounts of accrued interest receivable and payable approximate fair value because of the short maturities of these instruments.~~

~~Financial Instruments with Off-Balance Sheet Risk~~

~~With regard to financial instruments with off-balance sheet risk, it is not practicable to estimate the fair value of future financing commitments.~~

NOTE E - INVESTMENT SECURITIES

The amortized cost and fair value of available for sale investments (“AFS”), with gross unrealized gains and losses, follow:

	September 30, 2017									September 30, 2019
			Gross		Gross							Gross		Gross
	Amortized		unrealized		unrealized			Fair		Amortized		unrealized		unrealized			Fair
	cost		gains		losses			value		cost		gains		losses			value
	(dollars in thousands)									(dollars in thousands)
Securities available for sale:
U.S. government agencies – GSE’s	$	10,489	$	168	$	(13	)	$	10,644
Mortgage-backed securities – GSE’s		28,589		387		(37	)		28,939
U.S. government agencies – GSEs										$	10,181	$	202	$	(2	)	$	10,381
Mortgage-backed securities – GSEs											51,200		919		(15	)		52,104
Corporate bonds											1,532		21		-			1,553
Municipal bonds		13,842		280		-			14,122		12,698		205		-			12,903

	$	52,920	$	835	$	(50	)	$	53,705	$	75,611	$	1,347	$	(17	)	$	76,941

As of September 30, ~~2017,~~2019, accumulated other comprehensive income included net unrealized gains totaling ~~$785,000.~~$1.3 million. Deferred tax liabilities resulting from these net unrealized gains totaled ~~$285,000.~~$300,000.

The amortized cost and fair value of AFS investments, with gross unrealized gains and losses, follow:

	December 31, 2016									December 31, 2018
			Gross		Gross							Gross		Gross
	Amortized		unrealized		unrealized			Fair		Amortized		unrealized		unrealized			Fair
	cost		gains		losses			value		cost		gains		losses			value
	(in thousands)									(dollars in thousands)
Securities available for sale:
U.S. government agencies – GSE’s	$	14,086	$	98	$	(25	)	$	14,159
Mortgage-backed securities – GSE’s		32,082		382		(101	)		32,363
U.S. government agencies – GSEs										$	9,852	$	36	$	(51	)	$	9,837
Mortgage-backed securities – GSEs											23,150		62		(229	)		22,983
Corporate bonds											1,697		25		-			1,722
Municipal bonds		15,527		209		(1	)		15,735		16,910		105		(24	)		16,991

	$	61,695	$	689	$	(127	)	$	62,257	$	51,609	$	228	$	(304	)	$	51,533

As of December 31, ~~2016,~~2018, accumulated other comprehensive ~~income~~loss included net unrealized ~~gains~~losses totaling ~~$562,000.~~$76,000. Deferred tax ~~liabilities~~assets resulting from these net unrealized ~~gains~~losses totaled ~~$204,000.~~$17,000.

~~SELECT BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

~~NOTE E - INVESTMENT SECURITIES (continued)~~SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)

The scheduled maturities of securities available for sale, with gross unrealized gains and losses, were as follows:

	September 30, 2017									September 30, 2019
			Gross		Gross							Gross			Gross
	Amortized		unrealized		unrealized			Fair		Amortized		unrealized			unrealized			Fair
	cost		gains		losses			value		cost		gains			losses			value
	(In thousands)									(In thousands)
Securities available for sale:
Within 1 year	$	877	$	11	$	-		$	888	$	8,114	$	23		$	(7	)	$	8,130
After 1 year but within 5 years		41,013		575		(50	)		41,538		45,902		728			(10	)		46,620
After 5 years but within 10 years		5,774		145		-			5,919		14,083		423			-			14,506
After 10 years		5,256		104		-			5,360		7,512		173	��		-			7,685

	$	52,920	$	835	$	(50	)	$	53,705	$	75,611	$	1,347		$	(17	)	$	76,941

	December 31, 2016									December 31, 2018
			Gross		Gross							Gross		Gross
	Amortized		unrealized		unrealized			Fair		Amortized		unrealized		unrealized			Fair
	cost		gains		losses			value		cost		gains		losses			value
	(in thousands)									(dollars in thousands)
Securities available for sale:
Within 1 year	$	3,735	$	12	$	-		$	3,747	$	3,275	$	13	$	-		$	3,288
After 1 year but within 5 years		37,615		424		(110	)		37,929		32,862		96		(252	)		32,706
After 5 years but within 10 years		10,695		109		(12	)		10,792		6,551		48		(29	)		6,570
After 10 years		9,650		144		(5	)		9,789		8,921		71		(23	)		8,969

	$	61,695	$	689	$	(127	)	$	62,257	$	51,609	$	228	$	(304	)	$	51,533

Securities with a carrying value of ~~$1.9~~$21.8 million and ~~$34.3~~$6.4 million at September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, respectively, were pledged to secure public monies on deposit as required by law, customer repurchase agreements, and access to the Federal Reserve Discount Window.

None of the unrealized losses relate to the liquidity of the securities or the issuer’s ability to honor redemption ~~obligations and the~~obligations. The Company has the intent and ability to hold these securities to recovery. No other than temporary impairments were identified for these investments having unrealized losses for the periods ended September 30, ~~2017~~2019 and December 31, ~~2016. In 2016 the~~2018. The Company ~~realized a gain on the disposal of eleven securities and has~~did not ~~sold~~sell any securities in ~~2017.~~2018 and sold two securities for a gain of $48,000 in the first nine months of 2019.

~~SELECT BANCORP, INC.~~

SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)

~~NOTE E- INVESTMENT SECURITIES (continued)~~

The following tables show the gross unrealized losses and fair value of the Company’s investment securities, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, at September 30, ~~2017~~2019 and December 31, ~~2016.~~2018.

	September 30, 2017															September 30, 2019
	Less Than 12 Months					12 Months or More					Total					Less Than 12 Months					12 Months or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized			Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	value		losses			value		losses			value		losses			value		losses			value		losses			value		losses
	(dollars in thousands)															(dollars in thousands)
Securities available for sale:
U.S. government agencies – GSEs	$	1,420	$	(13	)	$	-	$	-		$	1,420	$	(13	)	$	-	$	-		$	627	$	(2	)	$	627	$	(2	)
Mortgage-backed securities- GSEs		6,660		(29	)		479		(8	)		7,139		(37	)
Municipal bonds		110		-			-		-			110		-
Mortgage-backed securities-GSEs																	3,150		(3	)		3,784		(12	)		6,934		(15	)
Total temporarily impaired securities	$	8,190	$	(42	)	$	479	$	(8	)	$	8,669	$	(50	)	$	3,150	$	(3	)	$	4,411	$	(14	)	$	7,561	$	(17	)

~~One mortgage-backed GSE~~At September 30, 2019, the Company had four securities in an unrealized ~~losses~~loss position for more than twelve months ~~totaling $8,000 at September 30, 2017. One U.S. government agency GSE, one municipal and six~~of $4.4 million. There were three mortgage-backed GSEs ~~had~~in an unrealized ~~losses~~loss position for less than twelve months totaling ~~$42,000~~$3.2 million at September 30, ~~2017.~~2019. All unrealized losses are attributable to the general trend of interest rates. ~~During~~There were two investment securities sold during the first nine months of ~~2017 there were no investment security sales. During the first quarter~~2019 at a gain of ~~2016 gross proceeds of investment sales amounted to $624,000 and gains of $22,000. There were no sales of investment securities in the second or third quarters of 2016.~~$48,000.

	December 31, 2016															December 31, 2018
	Less Than 12 Months					12 Months or More					Total					Less Than 12 Months					12 Months or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized			Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	value		losses			value		losses			value		losses			value		losses			value		losses			value		losses
	(in thousands)															(dollars in thousands)
Securities available for sale:
U.S. government agencies – GSEs	$	2,748	$	(13	)	$	1,651	$	(12	)	$	4,399	$	(25	)	$	1,224	$	(6	)	$	4,086	$	(45	)	$	5,310	$	(51	)
Mortgage-backed securities- GSEs		8,778		(101	)		-		-			8,778		(101	)
Mortgage-backed securities-GSEs																	200		-			16,932		(229	)		17,132		(229	)
Municipal bonds		110		(1	)		-		-			110		(1	)		1,007		(2	)		1,740		(22	)		2,747		(24	)
Total temporarily impaired securities	$	11,636	$	(115	)	$	1,651	$	(12	)	$	13,287	$	(127	)	$	2,431	$	(8	)	$	22,758	$	(296	)	$	25,189	$	(304	)

At December 31, ~~2016,~~2018, the Company had ~~two~~twenty-four AFS mortgage-backed GSEs, four municipals and six U.S Government agencies – GSEs with an unrealized loss for twelve or more consecutive months totaling $296,000. The Company had six AFS securities with a loss for twelve months or less. Three U.S. government agency GSEs, ~~with unrealized losses for more than twelve months totaling $12,000. Two U.S. government agency GSEs,~~two municipals and one ~~municipal and eight~~ mortgage-backed ~~GSEs~~GSE had unrealized losses for less than twelve months totaling ~~$115,000~~$8,000 at December 31, ~~2016.~~2018. All unrealized losses are attributable to the general trend of interest rates and the abnormal spreads of all debt instruments to U.S. Treasury securities. ~~The Company did not incur a loss on any~~There were no sales of investment securities ~~sold~~available for sale during ~~2016.~~2018.

SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)

~~SELECT BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

NOTE F - LOANS

Following is a summary of the composition of the Company’s loan portfolio at September 30, ~~2017~~2019 and December 31, ~~2016:~~2018:

	September 30,						December 31,						September 30,						December 31,
	2017						2016						2019						2018
				Percent						Percent						Percent						Percent
	Amount			of total			Amount			of total			Amount			of total			Amount			of total
	(dollars in thousands)
Total Loans:
													(dollars in thousands)
Real estate loans:
1-to-4 family residential	$	106,229			13.91	%	$	97,978			14.47	%	$	153,862			15.16	%	$	159,597			16.19	%
Commercial real estate		301,555			39.50	%		281,723			41.60	%		452,644			44.60	%		457,611			46.41	%
Multi-family residential		72,238			9.46	%		56,119			8.29	%		62,080			6.12	%		63,459			6.44	%
Construction		147,557			19.33	%		100,911			14.90	%		212,677			20.95	%		170,404			17.28	%
Home equity lines of credit (“HELOC”)		43,016			5.63	%		41,158			6.08	%		46,221			4.55	%		49,713			5.04	%

Total real estate loans		670,595			87.83	%		577,889			85.34	%		927,484			91.38	%		900,784			91.36	%

Other loans:
Commercial and industrial		84,563			11.08	%		90,678			13.39	%		79,686			7.85	%		74,181			7.52	%
Loans to individuals		9,518			1.25	%		9,756			1.44	%		9,539			0.94	%		12,597			1.28	%
Overdrafts		68			0.01	%		71			0.01	%		180			0.02	%		217			0.02	%
Total other loans		94,149			12.34	%		100,505			14.84	%		89,405			8.81	%		86,995			8.82	%

Gross loans		764,744						678,394						1,016,889						987,779
Less deferred loan origination fees, net		(1,312	)		(0.17	)%		(1,199	)		(0.18	)%		(1,961	)		(0.19	)%		(1,739	)		(0.18	)%
Total loans		763,432			100.00	%		677,195			100.00	%		1,014,928			100.00	%		986,040			100.00	%

Allowance for loan losses		(8,647	)					(8,411	)					(8,056	)					(8,669	)

Total loans, net	$	754,785					$	668,784					$	1,006,872					$	977,371

For Purchased Credit Impaired, or PCI, the contractually required payments including principal and interest, cash flows expected to be collected and fair values as of September 30, 2019 and December 31, 2018 were:

(dollars in thousands)	September 30, 2019		December 31, 2018
Contractually required payments	$	20,999	$	24,823
Nonaccretable difference		1,659		1,962
Cash flows expected to be collected		19,340		22,861
Accretable yield		3,305		3,593
Carrying value	$	16,035	$	19,268

Loans are primarily secured by real estate located in eastern and central North Carolina and northwestern South Carolina. Real estate loans can be affected by the condition of the local real estate market and by local economic conditions.

At September 30, ~~2017,~~2019, the Company had pre-approved but unused lines of credit for customers totaling ~~$153.0~~$178.2 million. In management’s opinion, these commitments, and undisbursed proceeds on loans, ~~reflected above,~~ represent no more than normal lending risk to the Company and will be funded from normal sources of liquidity.

A floating lien of ~~$109.3~~$112.6 million of loans was pledged to the FHLB to secure borrowings at September 30, ~~2017.~~

2019.

~~SELECT BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

~~NOTE F - LOANS (continued)~~

~~A description of the various loan products provided by the Bank is presented below.~~

~~1-to-4 Family Residential Loans~~SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)

Residential 1-to-4 family loans are mortgage loans secured by residential real estate within the Bank’s market areas. These loans may also include loans that convert from construction loans into permanent financing and are secured by properties within the Bank’s market areas.

~~Commercial Real Estate Loans~~

Commercial real estate loans are underwritten based on the borrower’s ability to generate adequate cash flow to repay the subject debt within reasonable terms. Commercial real estate loans typically include both owner and non-owner occupied properties with higher principal loan amounts. The repayment of these loans is generally dependent on the successful management of the property. Commercial real estate loans are sensitive to market and general economic conditions. Repayment analysis must be performed and consists of an identified primary/cash flow source of repayment and a secondary/liquidation source of repayment. The primary source of repayment is cash flow from income generated from rental or lease of the property. However, the cash flow can be supplemented with the borrower's and guarantor's global cash flow position. Other credit issues such as the business fundamentals and financial strength of the borrower/guarantor can be considered in determining adequacy of repayment ability. The secondary source of repayment is liquidation of the collateral, supplemented by a liquidation cushion provided by the financial assets of the borrower/guarantor. Management monitors and evaluates commercial real estate loans based on collateral, cash flow, market area, and risk grade.

~~Multi-family Residential Loans~~

Multi-family residential loans are typically non-farm properties with 5 or more dwelling units in structures which include apartment buildings used primarily to accommodate households on a more or less permanent basis. Successful performance of these types of loans is primarily dependent on occupancy rates, rental rates, and property management.

~~Construction Loans~~

~~Construction loans are non-revolving extensions of credit secured by real property of which the proceeds are used to acquire and develop land and to construct commercial or residential buildings.~~The primary source of repayment for these types of loans is the sale of the improved property or permanent financing in which case the property is expected to generate the cash flow necessary for repayment on a permanent loan basis. Property cash flow may be supplemented with financial support from the borrowers/guarantors.~~Proper underwriting of a construction loan consists of the initial process of obtaining, analyzing, and approving various aspects of information pertaining to: the~~ ~~analysis of the permanent financing source, creditworthiness of the borrower and guarantors, ability of the contractor to perform under the terms of the contract, and thefeasibility, marketability, and valuation of the project.~~

~~SELECT BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

~~NOTE F - LOANS (continued)~~

~~Also, consideration is given to thecost of the project and sources of funds needed to complete construction as well as identifying any sources of equity funding. Construction loans are~~traditionally considered to be higher risk loans involving technical and legal requirements inherently different from other types of loans; however with thorough credit underwriting, proper loan structure, and diligent loan servicing, these risks can often be mitigated. Some examples of risks inherent in this type of lending include: underestimated costs, inflation of material and labor costs, site difficulties (i.e. rock, soil), project not built to plans, weather delays and natural disasters, borrower/contractor/subcontractor disputes which prompt liens, and interest rates increasing beyond budget.

~~Home Equity Lines of Credit~~

Home equity lines of credit are consumer-purpose revolving extensions of credit which are secured by first or second liens on owner-occupied residential real estate. Appropriate risk management and compliance practices are exercised to ensure that loan-to-value, lien perfection, and compliance risks are addressed and managed within the Bank’s established guidelines. The degree of utilization of revolving commitments within this loan segment is reviewed periodically to identify changes in the behavior of this borrowing group.

~~Commercial and Industrial Loans~~

Commercial and industrial loans are underwritten after evaluating and understanding the borrower’s ability to generate positive cash flow, operate profitably and prudently expand its business. Underwriting standards are designed to promote relationships to include a full range of loan, deposit, and cash management services. Commercial and industrial loans are primarily made based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower and the guarantors. The cash flows of the borrower, however, may not be as expected and the collateral securing these loans may fluctuate in value. In the case of loans secured by accounts receivable, the availability of funds for repayment can be impacted by the borrower’s ability to collect amounts due from its customers.

~~Loans to Individuals & Overdrafts~~

Consumer loans are approved using Bank policies and procedures established to evaluate each credit request. All lending decisions and credit risks are required to be clearly documented. Several factors are considered in making these decisions such as credit score, adjusted net worth, liquidity, debt ratio, disposable income, credit history, and loan-to-value of the collateral. This process, combined with the relatively smaller loan amounts spreads the risk among many individual borrowers. Overdrafts on customer accounts are classified as loans for reporting purposes.

~~SELECT BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

~~NOTE F - LOANS (continued)~~

The following tables present an age analysis of past due loans, segregated by class of loans as of
September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, respectively:

	September 30, 2017											September 30, 2019
	30+		Non-		Total							30-59		60-89		90+		Non-		Total
	Days		Accrual		Past				Total			Days		Days		Days		Accrual		Past				Total
	Past Due		Loans		Due		Current		Loans			Past Due		Past Due		Accruing		Loans		Due		Current		Loans
	(dollars in thousands)

Total Loans:
													(dollars in thousands)
Commercial and industrial	$	131	$	82	$	213	$	84,350	$	84,563		$	80	$	-	$	1,362	$	3,664	$	5,106	$	74,580	$	79,686
Construction		809		184		993		146,564		147,557			166		-		-		2,272		2,438		210,239		212,677
Multi-family residential		238		-		238		72,000		72,238			-				-		-		-		62,080		62,080
Commercial real estate		827		551		1,378		300,177		301,555			6		88		-		2,020		2,114		450,530		452,644
Loans to individuals & overdrafts		13		6		19		9,567		9,586			31		-		-		-		31		9,688		9,719
1-to-4 family residential		630		856		1,486		104,743		106,229			51		474		934		382		1,841		152,021		153,862
HELOC		230		334		564		42,452		43,016			-		-		-		745		745		45,476		46,221
Deferred loan (fees) cost, net		-		-		-		-		(1,312	)		-		-		-		-		-		-		(1,961	)

	$	2,878	$	2,013	$	4,891	$	759,853	$	763,432		$	334	$	562	$	2,296	$	9,083	$	12,275	$	1,004,614	$	1,014,928

~~There were five loans that amounted to $663,000 that were more than 90 days past due and still accruing interest at September 30, 2017.~~

	December 31, 2018
	30-59		60-89		90+		Non-		Total
	Days		Days		Days		Accrual		Past				Total
	Past Due		Past Due		Accruing		Loans		Due		Current		Loans
	(dollars in thousands)
Commercial and industrial	$	27	$	203	$	1,665	$	4,170	$	6,065	$	68,116	$	74,181
Construction		-		-		69		587		656		169,748		170,404
Multi-family residential		-		-		-		-		-		63,459		63,459
Commercial real estate		103		483		-		1,074		1,660		455,951		457,611
Loans to individuals & overdrafts		1		24		-		-		25		12,789		12,814
1-to-4 family residential		502		505		1,433		386		2,826		156,771		159,597
HELOC		-		43		-		1,040		1,083		48,630		49,713
Deferred loan (fees) cost, net		-		-		-		-		-		-		(1,739	)
	$	633	$	1,258	$	3,167	$	7,257	$	12,315	$	975,464	$	986,040

December 31, 2016
30+ Non- Total
Days Accrual Past Total
Past Due Loans Due Current Loans
(in thousands)

Total Loans
Commercial and industrial $ 1,459 $ 73 $ 1,532 $ 89,146 $ 90,678
Construction 221 151 372 100,539 100,911
Multi-family residential 46 346 392 55,727 56,119
Commercial real estate 589 3,807 4,396 277,327 281,723
Loans to individuals & overdrafts 23 46 69 9,758 9,827
1-to-4 family residential 631 602 1,233 96,745 97,978
HELOC 24 780 804 40,354 41,158
Deferred loan (fees) cost, net - - - - (1,199 )
$ 2,993 $ 5,805 $ 8,798 $ 669,596 $ 677,195

~~There were three loans in the aggregate amount of $529,000 greater than 90 days past due and still accruing interest at December 31, 2016.~~

~~SELECT BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

~~NOTE F - LOANS (continued)~~SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)

Impaired Loans

The following tables present information on loans that were considered to be impaired as of
September 30, ~~2017~~2019 and December 31, ~~2016:~~2018:

Three months ended Nine months ended
As of September 30, 2017 September 30, 2017 September 30, 2017
Contractual Interest Income Interest Income
Unpaid Average Recognized on Average Recognized on
Recorded Principal Related Recorded Impaired Recorded Impaired
Investment Balance Allowance Investment Loans Investment Loans
(In thousands)
With no related allowance recorded:
Commercial and industrial $ 1,043 $ 1,053 $ - $ 1,048 $ 12 $ 1,114 $ 51
Construction 253 337 - 209 9 242 15
Commercial real estate 3,226 4,663 - 3,564 33 3,909 147
Loans to individuals & overdrafts - - - - - - -
Multi-family residential - - - 24 - 173 -
1-to-4 family residential 1,159 1,378 - 1,191 16 1,080 49
HELOC 746 934 - 697 10 893 32
Subtotal: 6,427 8,365 - 6,733 80 7,411 294
With an allowance recorded:
Commercial and industrial - - - - - 1 -
Construction - - - - - - -
Commercial real estate 766 822 6 698 18 1,631 38
Loans to individuals & overdrafts - - - - - - -
Multi-family residential - - - - - - -
1-to-4 family residential 283 282 14 291 2 289 12
HELOC 33 35 - 33 - 34 -
Subtotal: 1,082 1,139 20 1,022 20 1,955 50
Totals:
Commercial 5,288 6,875 6 5,543 72 7,070 251
Consumer - - - - - - -
Residential 2,221 2,629 14 2,212 28 2,296 93
Grand Total: $ 7,509 $ 9,504 $ 20 $ 7,755 $ 100 $ 9,366 $ 344

							Three months ended				Nine months ended
	As of September 30, 2019						September 30, 2019				September 30, 2019
			Contractual						Interest Income				Interest Income
			Unpaid				Average		Recognized on		Average		Recognized on
	Recorded		Principal		Related		Recorded		Impaired		Recorded		Impaired
	Investment		Balance		Allowance		Investment		Loans		Investment		Loans
	(In thousands)
With no related allowance recorded:
Commercial and industrial	$	3,142	$	4,530	$	-	$	4,010	$	32	$	4,397	$	100
Construction		2,531		2,635		-		2,413		12		1,546		20
Commercial real estate		6,366		7,601		-		7,167		70		6,022		218
Loans to individuals & overdrafts		85		89		-		84		6		93		6
Multi-family residential		202		202		-		205		3		209		10
1-to-4 family residential		658		1,843		-		1,205		21		1,202		61
HELOC		845		1,044		-		861		11		944		36
Subtotal:		13,829		17,944		-		15,945		155		14,413		451
With an allowance recorded:
Commercial and industrial		731		1,056		230		882		1		572		41
Construction		-		-		-		-		-		13		-
Commercial real estate		-		-		-		-		-		-		-
Loans to individuals & overdrafts		-		-		-		-		-		-		-
Multi-family residential		-		-		-		-		-		-		-
1-to-4 family residential		81		94		6		546		14		563		7
HELOC		160		222		48		162		4		212		10
Subtotal:		972		1,372		284		1,590		19		1,360		58
Totals:
Commercial		12,972		16,024		230		14,677		118		12,759		389
Consumer		85		89		-		84		6		93		6
Residential		1,744		3,203		54		2,774		50		2,921		114
Grand Total:	$	14,801	$	19,316	$	284	$	17,535	$	174	$	15,773	$	509

Impaired loans at September 30, ~~2017~~2019 were approximately ~~$7.5~~$14.8 million and were composed of ~~$2.0~~$9.1 million in nonaccrual loans and ~~$5.5~~$5.7 million in loans that were still accruing interest. Certain PCI loans are redirected and are not included in the table above. Recorded investment represents the current principal balance of the loan. Approximately ~~$1.0 million~~$972,000 in impaired loans had specific allowances provided for them while the remaining ~~$6.5~~$13.8 million had no specific allowances recorded at September 30, ~~2017.~~2019. Of the ~~$6.5~~$13.8 million with no allowance recorded, ~~$1.2 million of those loans have had~~ partial charge-offs ~~recorded.~~through September 30, 2019 amounted to $844,000.

~~SELECT BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)

~~NOTE F - LOANS (continued)~~

~~Impaired Loans (continued)~~

																					Three months ended					Nine months ended
	As of December 31, 2016						Three months ended September 30, 2016				Nine months ended September 30, 2016				As of December 31, 2018						September 30, 2018				September 30, 2018
			Contractual						Interest Income				Interest Income				Contractual						Interest Income					Interest Income
			Unpaid				Average		Recognized on		Average		Recognized on				Unpaid				Average		Recognized on			Average		Recognized on
	Recorded		Principal		Related		Recorded		Impaired		Recorded		Impaired		Recorded		Principal		Related		Recorded		Impaired			Recorded		Impaired
	Investment		Balance		Allowance		Investment		Loans		Investment		Loans		Investment		Balance		Allowance		Investment		Loans			Investment		Loans
	(In thousands)														(In thousands)
With no related allowance recorded:
Commercial and industrial	$	46	$	46	$	-	$	307	$	4	$	175	$	12	$	4,210	$	4,495	$	-	$	3,789	$	-		$	2,178	$	108
Construction		231		318		-		505		1		557		7		561		647		-		481		8			486		10
Commercial real estate		4,364		5,983		-		3,685		34		4,313		107		4,744		6,903		-		5,361		84			4,789		238
Loans to individuals & overdrafts		1,139		1,144		-		-		-		-		-		215		215		-		66		1			66		1
Multi-family residential		346		365		-		363		7		394		14		101		109		-		223		5			227		11
1-to-4 family residential		1,000		1,278		-		1,129		15		1,534		67		1,040		1,204		-		782		10			829		35
HELOC		1,041		1,378		-		620		10		658		28		572		732		-		896		9			803		34
Subtotal:		8,167		10,512		-		6,609		71		7,631		235		11,443		14,305		-		11,598		117			9,378		437
With an allowance recorded:
Commercial and industrial		-		-		-		35		-		9		-		127		325		51		386		19			387		20
Construction		-		-		-		-		-		-		-		27		27		14		26		-			-		-
Commercial real estate		2,496		2,905		80		2,765		8		1,848		27		-		-		-		-		-			-		-
Loans to individuals & overdrafts		1		1		1		-		-		2		-		-		-		-		2		-			-		-
Multi-family residential		-		-		-		-		-		-		-		-		-		-		-		-			-		-
1-to-4 family residential		296		296		17		280		3		287		11		137		555		22		145		-			172		6
HELOC		34		35		19		33		-		16		-		-		-		-		142		3			-		-
Subtotal:		2,827		3,237		117		3,113		11		2,162		38		291		907		87		701		22			559		26
Totals:
Commercial		7,483		9,617		80		7,660		54		7,296		167		10,007		12,612		65		10,266		116			8,067		387
Consumer		1,140		1,145		1		-		-		2		-		101		109		-		68		1			66		1
Residential		2,371		2,987		36		2,062		28		2,495		106		1,626		2,491		22		1,965		22			1,804		75
Grand Total:	$	10,994	$	13,749	$	117	$	9,722	$	82	$	9,793	$	273	$	11,734	$	15,212	$	87	$	12,299	$	139		$	9,937	$	463

Impaired loans at December 31, ~~2016~~2018 were approximately ~~$11.0~~$11.7 million and ~~consisted~~were comprised of ~~$5.8~~$7.3 million in non-accrual loans and ~~$5.2~~$4.4 million in loans still in accruing status. Recorded investment represents the current principal balance for the loan. Approximately ~~$2.8 million~~$291,000 of the ~~$11.0~~$11.7 million in impaired loans at December 31, ~~2016~~2018 had specific allowances aggregating ~~$117,000~~$87,000 while the remaining ~~$8.2~~$11.4 million had no specific allowances recorded. Of the ~~$8.2~~$11.4 million with no allowance recorded, partial charge-offs ~~to date~~through December 31, 2018 amounted to ~~$2.3~~$3.5 million.

Loans are placed on non-accrual status when it has been determined that all contractual principal and interest will not be received. Any payments received on these loans are applied to principal first and then to interest only after all principal has been collected. In the case of an impaired loan that is still on accrual basis, payments are applied to both principal and interest.

~~SELECT BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)

~~NOTE F - LOANS (continued)~~

Troubled Debt Restructurings

The following table presents loans that were modified as troubled debt restructurings (“TDRs”) with a breakdown of the types of concessions made by loan class during the three and nine months ended September 30, ~~2017~~2019 and ~~2016:~~2018:

	Three months ended September 30, 2017						Nine months ended September 30, 2017						Three months ended September 30, 2019						Nine months ended September 30, 2019
			Pre-		Post-				Pre-		Post-				Pre-		Post-				Pre-		Post-
			Modification		Modification				Modification		Modification				Modification		Modification				Modification		Modification
			Outstanding		Outstanding				Outstanding		Outstanding				Outstanding		Outstanding				Outstanding		Outstanding
	Number		Recorded		Recorded		Number		Recorded		Recorded		Number		Recorded		Recorded		Number		Recorded		Recorded
	of loans		Investment		Investment		of loans		Investment		Investment		of loans		Investment		Investment		of loans		Investment		Investment
	(Dollars in thousands)													(Dollars in thousands)
Extended payment terms:
1-to-4 family residential		-	$	-	$	-		1	$	14	$	14		1	$	174	$	173		3	$	233	$	211
HELOCs		1		126		126		1		126		126
Commercial real estate														-		-		-		1		752		702
Construction														1		259		259		1		259		259
Commercial & industrial		-		-		-		1		41		41		1		103		71		4		931		899

Total		1	$	126	$	126		3	$	181	$	181		3	$	536	$	503		9	$	2,175	$	2,071

Three months ended September 30, 2016 Nine months ended September 30, 2016
Pre- Post- Pre- Post-
Modification Modification Modification Modification
Outstanding Outstanding Outstanding Outstanding
Number Recorded Recorded Number Recorded Recorded
of loans Investment Investment of loans Investment Investment
(Dollars in thousands)
Extended payment terms:
1-to-4 family residential - $ - $ - 2 $ 100 $ 48
Commercial & industrial - - - 3 296 188
Construction 1 139 68 1 139 68
Loans to individuals - - - 1 4 1

Total 1 $ 139 $ 68 7 $ 539 $ 305

	Three months ended September 30, 2018						Nine months ended September 30, 2018
			Pre-		Post-				Pre-		Post-
			Modification		Modification				Modification		Modification
			Outstanding		Outstanding				Outstanding		Outstanding
	Number		Recorded		Recorded		Number		Recorded		Recorded
	of loans		Investment		Investment		of loans		Investment		Investment
		(Dollars in thousands)
Extended payment terms:
1-to-4 family residential		1	$	17	$	16		2	$	426	$	413
Commercial real estate		1		392		350		3		1,283		1,123
Commercial & industrial		1		74		74		7		1,653		1,625

Total		3	$	483	$	440		12	$	3,362	$	3,161

Loans may be considered troubled debt restructurings for reasons ~~other than~~including, but not limited to, below market interest rates, extended payment terms or forgiveness of principal.

~~SELECT BANCORP, INC.~~

SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)

~~NOTE F - LOANS (continued)~~

Troubled Debt Restructurings (continued)

The following table presents loans that were modified as TDRs within the past twelve months with a breakdown of the types for which there was a payment default during that period together with concessions made by loan class during the ~~twelve month~~twelve-month periods ended September 30, ~~2017~~2019 and ~~2016:~~2018:

Twelve months ended Twelve months ended
September 30, 2017 September 30, 2016
Number Recorded Number Recorded
of loans investment of loans investment
(Dollars in thousands)
Extended payment terms:
Commercial real estate - $ - 3 $ 188
Loans to individuals & overdrafts - - 1 1
Construction - - 1 68
Commercial & Industrial 2 78 - -
Multi-family residential - - 1 364
1-to-4 family residential 1 14 1 48
Total 3 $ 92 7 $ 669

	Twelve months ended				Twelve months ended
	September 30, 2019				September 30, 2018
	Number		Recorded		Number		Recorded
	of loans		investment		of loans		investment
		(Dollars in thousands)
Extended payment terms:
Commercial & industrial		-	$	-		5	$	1,512
Commercial real estate		-		-		2		724
1-to-4 family residential		1		16		2		461

Total		1	$	16		9	$	2,697

At September 30, ~~2017,~~2019, the Bank had ~~thirty-one~~forty-one loans with an aggregate balance of ~~$4.7~~$8.2 million that were considered to be troubled debt restructurings. Of those TDRs, ~~nineteen~~twenty-eight loans with a balance totaling ~~$4.1~~$6.5 million were still accruing as of September 30, ~~2017.~~2019. The remaining TDRs with balances totaling ~~$539,000~~$1.7 million as of September 30, ~~2017~~2019 were in non-accrual status.

At September 30, ~~2016,~~2018, the Bank had ~~thirty-three~~forty-one loans with an aggregate balance of ~~$4.1~~$7.5 million that were considered to be troubled debt restructurings. Of those TDRs, ~~twenty-two~~twenty-three loans with a balance totaling ~~$2.7~~$4.5 million were still accruing as of September 30, ~~2016.~~2018. The remaining TDRs with balances totaling ~~$1.4~~$3.0 million as of September 30, ~~2016~~2018 were in non-accrual status.

~~Credit Quality Indicators~~

As part of the on-going monitoring of the credit quality of the loan portfolio, management utilizes a risk grading matrix to assign a risk grade to each of the Company’s loans. All non-consumer loans are graded on a scale of 1 to 9. A description of the general characteristics of these nine different risk grades is as follows:

Risk Grade 1 (Superior) - Credits in this category are virtually risk-free and are well-collateralized by cash-equivalent instruments. The repayment program is well-defined and achievable. Repayment sources are numerous. No material documentation deficiencies or exceptions exist.

Risk Grade 2 (Very Good) - This grade is reserved for loans secured by readily marketable collateral, or loans within guidelines to borrowers with liquid financial statements. A liquid financial statement is a financial statement with substantial liquid assets relative to debts. These loans have excellent sources of repayment, with no significant identifiable risk of collection, and conform in all respects to Bank policy, guidelines, underwriting standards, and Federal and State regulations (no exceptions of any kind).

~~SELECT BANCORP, INC.~~

SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)

~~NOTE F - LOANS (continued)~~

~~Credit Quality Indicators (continued)~~

Risk Grade 3 (Good) - These loans have excellent sources of repayment, with no significant identifiable risk of collection. Loans assigned this risk grade will demonstrate the following characteristics:

~~Documented historical cash flow that meets or exceeds required minimum Bank guidelines, or that can be supplemented with verifiable cash flow from other sources.~~

~~Conformity in all respects with Bank policy, guidelines, underwriting standards, and Federal and State regulations (no exceptions of any kind).~~

~~Adequate secondary sources to liquidate the debt, including combinations of liquidity, liquidation of collateral, or liquidation value to the net worth of the borrower or guarantor.~~

Risk Grade 4 (Acceptable) - This grade is given to acceptable loans. These loans have adequate sources of repayment, with little identifiable risk of collection. Loans assigned this risk grade will demonstrate the following characteristics:

General conformity to the Bank's policy requirements, product guidelines and underwriting standards, with limited exceptions. Any exceptions that are identified during the underwriting and approval process have been adequately mitigated by other factors.

~~Documented historical cash flow that meets or exceeds required minimum Bank guidelines, or that can be supplemented with verifiable cash flow from other sources.~~

~~Adequate secondary sources to liquidate the debt, including combinations of liquidity, liquidation of collateral, or liquidation value to the net worth of the borrower or guarantor.~~

Risk Grade 5 (Acceptable With Care) - This grade is given to acceptable loans that show signs of weakness in either adequate sources of repayment or collateral, but have demonstrated mitigating factors that minimize the risk of delinquency or loss. Loans assigned this grade may demonstrate some or all of the following characteristics:

Additional exceptions to the Bank's policy requirements, product guidelines or underwriting standards that present a higher degree of risk to the Bank. Although the combination and/or severity of identified exceptions is greater, all exceptions have been properly mitigated by other factors.

Unproven, insufficient or marginal primary sources of repayment that appears sufficient to service the debt at this time. Repayment weaknesses may be due to minor operational issues, financial trends, or reliance on projected (not historic) performance.

~~Marginal or unproven secondary sources to liquidate the debt, including combinations of liquidation of collateral and liquidation value to the net worth of the borrower or guarantor.~~

~~Risk Grade 6 (Watch List or Special Mention) – Loans in this category can have the following characteristics:~~

~~Loans with underwriting guideline tolerances and/or exceptions and with no mitigating factors.~~

Extending loans that are currently performing satisfactorily but with potential weaknesses that may, if not corrected, weaken the asset or inadequately protect the Bank's position at some future date. Potential weaknesses are the result of deviations from prudent lending practices.

~~SELECT BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

~~NOTE F - LOANS (continued)~~

~~Credit Quality Indicators (continued)~~

Loans where adverse economic conditions that develop subsequent to the loan origination that do not jeopardize liquidation of the debt but do substantially increase the level of risk may also warrant this rating.

~~Risk Grade 7 (Substandard) -~~A Substandard loan is inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as Substandard must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt; they are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Loans consistently not meeting the repayment schedule should be downgraded to substandard. Loans in this category are characterized by deterioration in quality exhibited by any number of well-defined weaknesses requiring corrective action.

Risk Grade 8 (Doubtful) - Loans classified Doubtful have all the weaknesses inherent in loans classified Substandard, plus the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions, and values highly questionable and improbable. However, these loans are not yet rated as loss because certain events may occur which would salvage the debt.

~~Risk Grade 9 (Loss) -~~Loans classified as Loss are considered uncollectable and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off the loan even though partial recovery may be affected in the future.

~~Consumer loans are graded on a scale of 1 to 9. A description of the general characteristics of the nine risk grades is as follows:~~

Risk Grades 1 – 5 (Pass) – The loans in this category range from loans secured by cash with no risk of principal deterioration (Risk Grade 1) to loans that show signs of weakness in either adequate sources of repayment or collateral but have demonstrated mitigating factors that minimize the risk of delinquency or loss (Risk Grade 5).

~~Risk Grade 6 (Watch List or Special Mention) -Watch List or Special Mention loans include the following characteristics:~~

~~Loans within guideline tolerances or with exceptions of any kind that have not been mitigated by other economic or credit factors.~~

Loans where adverse economic conditions that develop subsequent to the loan origination that don't jeopardize liquidation of the debt but do substantially increase the level of risk may also warrant this rating.

~~SELECT BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

~~NOTE F - LOANS (continued)~~

~~Credit Quality Indicators (continued)~~

~~Risk Grade 9 (Loss) -~~Loans classified Loss are considered uncollectable and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off this worthless loan even though partial recovery may be affected in the future.

~~SELECT BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

~~NOTE F - LOANS (continued)~~

The following tables present information on risk ratings of the commercial and consumer loan portfolios, segregated by loan class as of September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, respectively:

Total loans:

September 30, 2017
Commercial
Credit
Exposure By Commercial Commercial
Internally and real Multi-family
Assigned Grade industrial Construction estate residential
(In thousands)

Superior $ 570 $ - $ - $ -
Very good 1,132 145 431 -
Good 9,753 11,004 39,394 10,831
Acceptable 30,727 22,648 164,391 42,710
Acceptable with care 40,314 112,706 89,080 18,460
Special mention 1,780 736 4,717 -
Substandard 287 318 3,542 237
Doubtful - - - -
Loss - - - -
$ 84,563 $ 147,557 $ 301,555 $ 72,238

September 30, 2019
Commercial
Credit
Exposure By	Commercial				Commercial
Internally	and				real		Multi-family
Assigned Grade	industrial		Construction		estate		residential
		(In thousands)
Superior	$	1,602	$	-	$	232	$	-
Very good		670		153		1,121		-
Good		4,122		8,849		60,135		4,884
Acceptable		22,853		19,978		246,804		38,784
Acceptable with care		44,004		180,985		137,263		18,412
Special mention		1,499		441		1,885		-
Substandard		4,936		2,271		5,204		-
Doubtful		-		-		-		-
Loss		-		-		-		-
	$	79,686	$	212,677	$	452,644	$	62,080

Consumer Credit
Exposure By
Internally 1-to-4 family
Assigned Grade residential HELOC

Pass $ 100,543 $ 41,356
Special mention 2,932 581
Substandard 2,754 1,079
$ 106,229 $ 43,016

Consumer Credit
Exposure By
Internally	1-to-4 family
Assigned Grade	residential		HELOC
Pass	$	149,883	$	44,990
Special mention		1,550		76
Substandard		2,429		1,155
	$	153,862	$	46,221

Consumer Credit
Exposure Based Loans to
On Payment individuals &
Activity overdrafts

Pass $ 9,576
Non–pass 10
$ 9,586

Consumer Credit

Exposure Based

Loans to

On Payment

individuals &

Activity

overdrafts

��

Pass

9,593

Special mention

Substandard

116

9,719

~~SELECT BANCORP, INC.~~

SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)

Total Loans:

December 31, 2018
Commercial
Credit
Exposure By	Commercial				Commercial
Internally	and				real		Multi-family
Assigned Grade	industrial		Construction		estate		residential
		(dollars in thousands)
Superior	$	1,662	$	-	$	21	$	-
Very good		2,266		246		1,120		-
Good		5,773		12,106		47,959		5,116
Acceptable		22,332		30,897		263,017		37,832
Acceptable with care		34,626		125,788		139,484		20,296
Special mention		879		711		1,789		-
Substandard		6,643		656		4,221		215
Doubtful		-		-		-		-
Loss		-		-		-		-
	$	74,181	$	170,404	$	457,611	$	63,459

Consumer Credit
Exposure By
Internally	1-to-4 family
Assigned Grade	residential		HELOC
Pass	$	155,117	$	48,143
Special mention		900		88
Substandard		3,580		1,482
	$	159,597	$	49,713

Consumer Credit

Exposure Based

Loans to

On Payment

individuals &

Activity

overdrafts

Pass

10,891

Special mention

1,923

12,814

SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)

~~NOTE F - LOANS (continued)~~

Total Loans:
December 31, 2016
Commercial
Credit
Exposure By Commercial Commercial
Internally and real Multi-family
Assigned Grade industrial Construction estate residential
(dollars in thousands)

Superior $ 435 $ - $ - $ -
Very good 326 245 460 -
Good 13,632 4,506 36,501 12,139
Acceptable 35,720 12,922 152,608 29,873
Acceptable with care 37,351 82,771 81,231 13,467
Special mention 2,905 173 4,868 -
Substandard 309 294 6,055 640
Doubtful - - - -
Loss - - - -
$ 90,678 $ 100,911 $ 281,723 $ 56,119

Consumer Credit
Exposure By
Internally 1-to-4 family
Assigned Grade residential HELOC

Pass $ 92,115 $ 39,554
Special mention 3,015 439
Substandard 2,848 1,165
$ 97,978 $ 41,158

Consumer Credit
Exposure Based Loans to
On Payment individuals &
Activity overdrafts

Pass $ 9,820
Non-pass 7
$ 9,827

~~SELECT BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

~~NOTE F - LOANS (continued)~~

Determining the fair value of ~~Purchased Credit Impaired (PCI)~~PCI loans at acquisition required the Company to estimate cash flows expected to result from those loans and to discount those cash flows at appropriate rates of interest. For such loans, the excess of cash flows expected to be collected at acquisition over the estimated fair value is recognized as interest income over the remaining lives of the loans and is called the accretable yield. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition reflects the impact of estimated credit losses and is called the nonaccretable difference. In accordance with GAAP, there was no carry-over of previously established allowance for credit losses from the acquired ~~company.~~companies.

The following table documents changes to the amount of the accretable yield on PCI loans for the three and nine months ended September 30, ~~2017~~2019 and ~~2016 (dollars in thousands):~~2018:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
		(dollars in thousands)
Accretable yield, beginning of period	$	3,481		$	3,102		$	3,593		$	3,307
Accretion		(277	)		(540	)		(855	)		(1,242	)
Reclassification from (to) nonaccretable difference		45			15			293			78
Other changes, net		56			35			274			469

Accretable yield, end of period	$	3,305		$	2,612		$	3,305		$	2,612

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
(In thousands)

Accretable yield, beginning of period $ 2,280 $ 2,568 $ 2,626 $ 2,822
Accretion (262 ) (252 ) (782 ) (787 )
Reclassification from (to) nonaccretable difference (1 ) 248 78 250
Other changes, net 169 188 264 467

Accretable yield, end of period $ 2,186 $ 2,752 $ 2,186 $ 2,752

~~Allowance for Loan Losses~~

The allowance for loan losses is a reserve established through provisions for loan losses charged to income and represents management’s best estimate of probable loan losses that have been incurred within the existing portfolio of loans. The allowance, in the judgment of management, is necessary to reserve for estimated losses and risk inherent in the loan portfolio. The Company’s allowance for loan loss methodology is based on historical loss experience by type of credit and internal risk grade, specific homogeneous risk pools and specific loss allocations, with adjustments for current events and conditions. The Company’s process for determining the appropriate level of reserves is designed to account for changes in credit quality as they occur. The provision for loan losses reflects loan quality trends, including the levels of and trends related to past due loans and economic conditions at the local and national levels. It also considers the quality and risk characteristics of the Company’s loan origination and servicing policies and practices.

Individual reserves are calculated according to ASC Section 310-10-35 against loans evaluated individually and deemed to most likely be impaired. Impaired loans include all loans in non-accrual status, all troubled debt restructures, all substandard loans that are deemed to be collateral dependent, and other loans that management determines require reserves.

~~SELECT BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

~~NOTE F - LOANS (continued)~~

~~Allowance for Loan Losses (continued)~~

The Company’s allowance for loan losses model calculates historical loss rates by using a loss migration analysis associating losses to the risk-graded pool to which they relate for each of the previous twelve quarters. Then, using the twelve quarter look back period, loss factors are calculated for each risk-graded pool. The model incorporates various internal and external qualitative and environmental factors as described in the Interagency Policy Statement on the Allowance for Loan and Lease Losses, dated December 2006. Input for these factors is determined on the basis of management observation, judgment, and experience. The factors utilized by the Company in the model for all loan classes are as follows:

~~Internal Factors~~

~~Concentrations – Measures the increased risk derived from concentration of credit exposure in particular industry segments within the portfolio.~~

~~Policy exceptions – Measures the risk derived from granting terms outside of underwriting guidelines.~~

~~Compliance exceptions – Measures the risk derived from granting terms outside of regulatory guidelines.~~

~~Document exceptions – Measures the risk exposure resulting from the inability to collect due to improperly executed documents and collateral imperfections.~~

~~Financial information monitoring – Measures the risk associated with not having current borrower financial information.~~

~~Nonaccrual – Reflects increased risk of loans with characteristics that merit nonaccrual status.~~

~~Delinquency – Reflects the increased risk deriving from higher delinquency rates.~~

~~Personnel turnover – Reflects staff competence in various types of lending.~~

~~Portfolio growth – Measures the impact of growth and potential risk derived from new loan production.~~

~~External Factors~~

~~GDP growth rate – Impact of general economic factors that affect the portfolio.~~

~~North Carolina unemployment rate – Impact of local economic factors that affect the portfolio.~~

~~Peer group delinquency rate – Measures risk associated with the credit requirements of competitors.~~

~~Prime rate change – Measures the effect on the portfolio in the event of changes in the prime lending rate.~~

~~Each pool is assigned an adjustment to the potential loss percentage by assessing its characteristics against each of the factors listed above.~~

~~Reserves are generally divided into three allocation segments:~~

Individual reserves. These are calculated according to ASC Section 310-10-35 against loans evaluated individually and deemed to be most likely impaired. All loans in non-accrual status and all substandard loans that are deemed to be collateral dependent are assessed for impairment. Loans are deemed uncollectible based on a variety of credit, collateral, documentation and other issues. In the case of uncollectible receivables, the collateral is considered unsecured and therefore fully charged off.

~~SELECT BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

~~NOTE F – LOANS (continued)~~

~~Allowance for Loan Losses (continued)~~

Formula reserves. Formula reserves are held against loans evaluated collectively. Loans are grouped by type or by risk grade, or some combination of the two. Loss estimates are based on historical loss rates for each respective loan group. Formula reserves represent the Company’s best estimate of losses that may be inherent, or embedded, within the group of loans, even if it is not apparent at this time which loans within any group or pool represent those embedded losses.

Qualitative and external reserves. If individual reserves represent estimated losses tied to specific loans, and formula reserves represent estimated losses tied to a pool of loans but not yet to any specific loan, then these reserves represent an estimate of likely incurred losses, but are not yet tied to any loan or group of loans.

All information related to the calculation of the three segments, including data analysis, assumptions, and calculations are documented. Assigning specific individual reserve amounts, formula reserve factors, or unallocated amounts based on unsupported assumptions or conclusions is not permitted.

SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)

~~NOTE F - LOANS (continued)~~

~~Allowance for Loan Losses (Continued)~~

The following tables present a roll forward of the Company’s allowance for loan losses by loan class for the three and nine month periods ended September 30, ~~2017,~~2019, respectively:

Three months ended September 30, 2017
Commercial 1 to 4 Loans to Multi-
and Commercial family individuals & family
Allowance for loan losses industrial Construction real estate residential HELOC overdrafts residential Total
(Dollars in thousands)
Loans – excluding PCI
Balance, beginning of period $ 895 $ 1,292 $ 3,913 $ 923 $ 563 $ 142 $ 732 $ 8,460
Provision for loan losses 301 366 (840 ) 50 89 219 25 210
Loans charged-off - - - - (60 ) (45 ) - (105 )
Recoveries 18 10 4 18 1 11 - 62
Balance, end of period $ 1,214 $ 1,668 $ 3,077 $ 991 $ 593 $ 327 $ 757 $ 8,627

PCI Loans
Balance, beginning of period $ - $ - $ 12 $ 16 $ - $ - $ - $ 28
Provision for loan losses - - (6 ) (2 ) - - - (8 )
Loans charged-off - - - - - - - -
Recoveries - - - - - - - -
Balance, end of period $ - $ - $ 6 $ 14 $ - $ - $ - $ 20

Total Loans
Balance, beginning of period $ 895 $ 1,292 $ 3,925 $ 939 $ 563 $ 142 $ 732 $ 8,488
Provision for loan losses 301 366 (846 ) 48 89 219 25 202
Loans charged-off - - - - (60 ) (45 ) - (105 )
Recoveries 18 10 4 18 1 11 - 62
Balance, end of period $ 1,214 $ 1,668 $ 3,083 $ 1,005 $ 593 $ 327 $ 757 $ 8,647

Ending Balance: individually evaluated for impairment $ - $ - $ 6 $ 14 $ - $ - $ - $ 20
Ending Balance: collectively evaluated for impairment $ 1,214 $ 1,668 $ 3,077 $ 991 $ 593 $ 327 $ 757 $ 8,627

Loans:
Ending Balance: collectively evaluated for impairment $ 83,520 $ 147,304 $ 297,562 $ 104,788 $ 42,237 $ 9,586 $ 72,238 $ 757,235
Ending Balance: individually evaluated for impairment $ 1,043 $ 253 $ 3,993 $ 1,441 $ 779 $ - $ - $ 7,509
Ending Balance $ 84,563 $ 147,557 $ 301,555 $ 106,229 $ 43,016 $ 9,586 $ 72,238 $ 764,744

	Three months ended September 30, 2019
	Commercial								1 to 4						Loans to			Multi-
	and					Commercial			family						individuals &			family
Allowance for loan losses	industrial			Construction		real estate			residential			HELOC			overdrafts			residential		Total
	(Dollars in thousands)
Loans – excluding PCI
Balance, beginning of period	$	814		$	1,487	$	2,818		$	1,543		$	432		$	309		$	383	$	7,786
Provision for (recovery of) loan losses		123			212		(44	)		(111	)		18			9			11		218
Loans charged-off		(48	)		-		-			-			(50	)		(155	)		-		(253	)
Recoveries		2			-		1			8			21			5			-		37
Balance, end of period	$	891		$	1,699	$	2,775		$	1,440		$	421		$	168		$	394	$	7,788

PCI Loans
Balance, beginning of period	$	298		$	6	$	142		$	62		$	1		$	-		$	8	$	517
Provision for (recovery of) loan losses		10			-		-			(10	)		-			13			-		13
Loans charged-off		(249	)		-		-			-			-			(13	)		-		(262	)
Recoveries		-			-		-			-			-			-			-		-
Balance, end of period	$	59		$	6	$	142		$	52		$	1		$	-		$	8	$	268

Total Loans
Balance, beginning of period	$	1,112		$	1,493	$	2,960		$	1,605		$	433		$	309		$	391	$	8,303
Provision for (recovery of) loan losses		133			212		(44	)		(121	)		18			22			11		231
Loans charged-off		(297	)		-		-			-			(50	)		(168	)		-		(515	)
Recoveries		2			-		1			8			21			5			-		37
Balance, end of period	$	950		$	1,705	$	2,917		$	1,492		$	422		$	168		$	402	$	8,056

Ending Balance: individually evaluated for impairment	$	230		$	-	$	-		$	6		$	48		$	-		$	-	$	284
Ending Balance: collectively evaluated for impairment	$	720		$	1,705	$	2,917		$	1,486		$	374		$	168		$	402	$	7,772

Loans:
Ending Balance: collectively evaluated for impairment non PCI loans	$	74,658		$	209,464	$	440,244		$	145,645		$	45,170		$	9,634		$	60,970	$	985,785
Ending Balance: collectively evaluated for impairment PCI loans	$	1,154		$	682	$	6,033		$	7,479		$	47		$	-		$	908	$	16,303
Ending Balance: individually evaluated for impairment	$	3,874		$	2,531	$	6,367		$	738		$	1,004		$	85		$	202	$	14,801
Ending Balance	$	79,686		$	212,677	$	452,644		$	153,862		$	46,221		$	9,719		$	62,080	$	1,016,889

SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)

~~NOTE F - LOANS (continued)~~

	Nine months ended September 30, 2019
	Commercial								1 to 4						Loans to			Multi-
	and					Commercial			family						individuals &			family
Allowance for loan losses	industrial			Construction		real estate			residential			HELOC			overdrafts			residential			Total
	(Dollars in thousands)
Loans – excluding PCI
Balance, beginning of period	$	762		$	1,385	$	3,024		$	1,663		$	555		$	206		$	471		$	8,066
Provision for (recovery of) loan losses		422			296		(289	)		(248	)		(18	)		123			(77	)		209
Loans charged-off		(305	)		-		(10	)		-			(150	)		(179	)		-			(644	)
Recoveries		12			18		50			25			34			18			-			157
Balance, end of period	$	891		$	1,699	$	2,775		$	1,440		$	421		$	168		$	394		$	7,788

PCI Loans
Balance, beginning of period	$	214		$	-	$	385		$	4		$	-		$	-		$	-		$	603
Provision for (recovery of) loan losses		94			6		(243	)		48			1			13			8			(73	)
Loans charged-off		(249	)		-		-			-			-			(13	)		-			(262	)
Recoveries		-			-		-			-			-			-			-			-
Balance, end of period	$	59		$	6	$	142		$	52		$	1		$	-		$	8		$	268

Total Loans
Balance, beginning of period	$	976		$	1,385	$	3,409		$	1,667		$	555		$	206		$	471		$	8,669
Provision for (recovery of) loan losses		516			302		(532	)		(200	)		(17	)		136			(69	)		136
Loans charged-off		(554	)		-		(10	)		-			(150	)		(192	)		-			(906	)
Recoveries		12			18		50			25			34			18			-			157
Balance, end of period	$	950		$	1,705	$	2,917		$	1,492		$	422		$	168		$	402		$	8,056

~~Allowance for Loan Losses (Continued)~~

Nine months ended September 30, 2017
Commercial 1 to 4 Loans to Multi-
and Commercial family individuals & family
Allowance for loan losses industrial Construction real estate residential HELOC overdrafts residential Total
(Dollars in thousands)
Loans – excluding PCI
Balance, beginning of period $ 1,211 $ 1,301 $ 3,448 $ 846 $ 611 $ 317 $ 628 $ 8,362
Provision for loan losses (165 ) 348 241 108 87 80 127 826
Loans charged-off (37 ) - (623 ) - (129 ) (95 ) - (884 )
Recoveries 205 19 11 37 24 25 2 323
Balance, end of period $ 1,214 $ 1,668 $ 3,077 $ 991 $ 593 $ 327 $ 757 $ 8,627

PCI Loans
Balance, beginning of period $ 37 $ - $ - $ - $ 12 $ - $ - $ 49
Provision for loan losses (37 ) - 300 14 (12 ) - - 265
Loans charged-off - - (294 ) - - - - (294 )
Recoveries - - - - - - - -
Balance, end of period $ - $ - $ 6 $ 14 $ - $ - $ - $ 20

Total Loans
Balance, beginning of period $ 1,248 $ 1,301 $ 3,448 $ 846 $ 623 $ 317 $ 628 $ 8,411
Provision for loan losses (202 ) 348 541 122 75 80 127 1,091
Loans charged-off (37 ) - (917 ) - (129 ) (95 ) - (1,178 )
Recoveries 205 19 11 37 24 25 2 323
Balance, end of period $ 1,214 $ 1,668 $ 3,083 $ 1,005 $ 593 $ 327 $ 757 $ 8,647

The Company periodically reviews and updates its qualitative factors for changes in current conditions. During the three months ended September 30, 2019, the Company adjusted several factors, including reducing the factors relating to exceptions, accuracy, and delinquency for certain loan types resulting in a reduction of $270,000 of the allowance for loan losses.

SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)

~~NOTE F - LOANS (continued)~~

~~Allowance for Loan Losses (Continued)~~

The following tables present a roll forward of the Company’s allowance for loan losses by loan class for the three and nine month periods ended September 30, ~~2016,~~2018, respectively:

	Three months ended September 30, 2016																							Three months ended September 30, 2018
	Commercial									1 to 4					Loans to			Multi-						Commercial									1 to 4						Loans to			Multi-
	and						Commercial			family					individuals &			family						and						Commercial			family						individuals &			family
Allowance for loan losses	industrial			Construction			real estate			residential		HELOC			overdrafts			residential			Total			industrial			Construction			real estate			residential			HELOC			overdrafts			residential			Total
	(Dollars in thousands)																							(Dollars in thousands)
Loans – excluding PCI
Balance, beginning of period	$	1,086		$	1,511		$	3,113		$	772	$	493		$	169		$	523		$	7,667		$	781		$	1,768		$	3,926		$	1,421		$	618		$	320		$	588		$	9,422
Provision for loan losses		113			(13	)		102			7		60			78			(31	)		316
Provision for (recovery of) loan losses																									(178	)		(295	)		163			(36	)		(105	)		-			(41	)		(492	)
Loans charged-off		(136	)		-			(4	)		-		(25	)		(13	)		-			(178	)		-			-			(2	)		-			(20	)		(79	)		-			(101	)
Recoveries		8			6			2			9		9			4			-			38			26			-			6			7			14			68			-			121
Balance, end of period	$	1,071		$	1,504		$	3,213		$	788	$	537		$	238		$	492		$	7,843		$	629		$	1,473		$	4,093		$	1,392		$	507		$	309		$	547		$	8,950

PCI Loans
Balance, beginning of period	$	16		$	-		$	-		$	-	$	9		$	-		$	-		$	25		$	54		$	-		$	52		$	-		$	-		$	-		$	-		$	106
Provision for loan losses		21			-			-			-		-			-			-			21
Provision for (recovery of) loan losses																									61			-			(52	)		24			-			-			-			33
Loans charged-off		-			-			-			-		-			-			-			-			-			-			-			-			-			-			-			-
Recoveries		-			-			-			-		-			-			-			-			-			-			-			-			-			-			-			-
Balance, end of period	$	37		$	-		$	-		$	-	$	9		$	-		$	-		$	46		$	115		$	-		$	-		$	24		$	-		$	-		$	-		$	139

Total Loans
Balance, beginning of period	$	1,102		$	1,511		$	3,113		$	772	$	502		$	169		$	523		$	7,692		$	835		$	1,768		$	3,978		$	1,421		$	618		$	320		$	588		$	9,528
Provision for loan losses		134			(13	)		102			7		60			78			(31	)		337
Provision for (recovery of) loan losses																									(117	)		(295	)		111			(12	)		(105	)		-			(41	)		(459	)
Loans charged-off		(136	)		-			(4	)		-		(25	)		(13	)		-			(178	)		-			-			(2	)		-			(20	)		(79	)		-			(101	)
Recoveries		8			6			2			9		9			4			-			38			26			-			6			7			14			68			-			121
Balance, end of period	$	1,108		$	1,504		$	3,213		$	788	$	546		$	238		$	492		$	7,889		$	744		$	1,473		$	4,093		$	1,416		$	507		$	309		$	547		$	9,089

Ending Balance: individually evaluated for impairment	$	4		$	-		$	85		$	15	$	-		$	-		$	-		$	104		$	115		$	-		$	-		$	24		$	-		$	-		$	-		$	139
Ending Balance: collectively evaluated for impairment	$	1,104		$	1,505		$	3,128		$	773	$	545		$	238		$	492		$	7,785		$	629		$	1,473		$	4,093		$	1,392		$	507		$	309		$	547		$	8,950

Loans:
Ending Balance: collectively evaluated for impairment	$	82,352		$	115,788		$	255,732		$	92,534	$	40,727		$	9,073		$	47,526		$	643,732
Ending Balance: collectively evaluated for impairment non PCI loans																								$	76,355		$	161,323		$	447,676		$	155,648		$	49,409		$	12,124		$	64,062		$	966,597
Ending Balance: collectively evaluated for impairment PCI loans																								$	621		$	935		$	7,529		$	6,790		$	50		$	-		$	1,012		$	16,937
Ending Balance: individually evaluated for impairment	$	248		$	499		$	6,068		$	1,291	$	650		$	-		$	360		$	9,116		$	3,362		$	615		$	5,151		$	807		$	634		$	132	��	$	220		$	10,921
Ending Balance	$	82,600		$	116,287		$	261,800		$	93,825	$	41,377		$	9,073		$	47,886		$	652,848		$	80,338		$	162,873		$	460,356		$	163,245		$	50,093		$	12,256		$	65,294		$	994,455

SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)

	Nine months ended September 30, 2018
	Commercial									1 to 4					Loans to			Multi-
	and						Commercial			family					individuals &			family
Allowance for loan losses	industrial			Construction			real estate			residential		HELOC			overdrafts			residential			Total
	(Dollars in thousands)
Loans – excluding PCI
Balance, beginning of period	$	742		$	1,955		$	3,304		$	1,058	$	549		$	305		$	791		$	8,704
Provision for loan losses		(151	)		(488	)		775			309		4			26			(244	)		231
Loans charged-off		(9	)		-			(2	)		-		(68	)		(107	)		-			(186	)
Recoveries		47			6			16			25		22			85			-			201
Balance, end of period	$	629		$	1,473		$	4,093		$	1,392	$	507		$	309		$	547		$	8,950

PCI Loans
Balance, beginning of period	$	65		$	-		$	66		$	-	$	-		$	-		$	-		$	131
Provision for loan losses		50			-			(66	)		24		-			-			-			8
Loans charged-off		-			-			-			-		-			-			-			-
Recoveries		-			-			-			-		-			-			-			-
Balance, end of period	$	115		$	-		$	-		$	24	$	-		$	-		$	-		$	139

Total Loans
Balance, beginning of period	$	807		$	1,955		$	3,370		$	1,058	$	549		$	305		$	791		$	8,835
Provision for loan losses		(101	)		(488	)		709			333		4			26			(244	)		239
Loans charged-off		(9	)		-			(2	)		-		(68	)		(107	)		-			(186	)
Recoveries		47			6			16			25		22			85			-			201
Balance, end of period	$	744		$	1,473		$	4,093		$	1,416	$	507		$	309		$	547		$	9,089

~~NOTE F - LOANS (continued)~~

~~Allowance for Loan Losses (Continued)~~

Nine months ended September 30, 2016
Commercial 1 to 4 Loans to Multi-
and Commercial family individuals & family
Allowance for loan losses industrial Construction real estate residential HELOC overdrafts residential Total
(Dollars in thousands)
Loans – excluding PCI
Balance, beginning of period $ 922 $ 1,386 $ 3,005 $ 605 $ 564 $ 137 $ 393 $ 7,012
Provision for loan losses 310 103 321 (107 ) (36 ) 119 99 809
Loans charged-off (177 ) (2 ) (189 ) - (26 ) (31 ) - (425 )
Recoveries 15 17 76 290 35 13 - 446
Balance, end of period $ 1,070 $ 1,504 $ 3,213 $ 788 $ 537 $ 238 $ 492 $ 7,842

PCI Loans
Balance, beginning of period $ - $ - $ - $ - $ 9 $ - $ - $ 9
Provision for loan losses 38 - - - - - - 38
Loans charged-off - - - - - - - -
Recoveries - - - - - - - -
Balance, end of period $ 38 $ - $ - $ - $ 9 $ - $ - $ 47

Total Loans
Balance, beginning of period $ 922 $ 1,386 $ 3,005 $ 605 $ 573 $ 137 $ 393 $ 7,021
Provision for loan losses 348 103 321 (107 ) (36 ) 119 99 847
Loans charged-off (177 ) (2 ) (189 ) - (26 ) (31 ) - (425 )
Recoveries 15 17 76 290 35 13 - 446
Balance, end of period $ 1,108 $ 1,504 $ 3,213 $ 788 $ 546 $ 238 $ 492 $ 7,889

SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)

NOTE G – ~~ACCUMULATED OTHER COMPREHENSIVE INCOME~~LOANS HELD FOR SALE

We originate fixed and variable rate residential mortgage loans on a servicing-released basis in the secondary market. Loans closed but not yet settled with an investor are carried in our loans held for sale portfolio. Virtually all of these loans have commitments to be purchased by investors and the majority of these loans were locked in by price with the investors on the same day or shortly thereafter that the loan was locked in with our customers. Therefore, these loans present very little market risk. We usually deliver to, and receive funding from, the investor within 30 to 60 days. Commitments to sell these loans to the investor are considered derivative contracts and are sold to investors on a “best efforts” basis. We are not obligated to deliver a loan or pay a penalty if a loan is not delivered to the investor. Because of the short-term nature of these derivative contracts, the fair value of the mortgage loans held for sale in most cases is materially the same as the value of the loan amount at its origination.

Mortgage loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated market value in the aggregate. Net unrealized losses are provided for in a valuation allowance by charges to operations as a component of mortgage banking income. Gains or losses on sales of loans are recognized when control over these assets are surrendered and are included in mortgage banking income in the consolidated statements of operations.

NOTE H – REVENUE RECOGNITION

On January 1, 2018, the Company adopted ASU No. 2014-09Revenue from Contracts with Customers (Topic 606)and all subsequent ASUs that modified Topic 606. The implementation of the new standard did not have a material impact on the measurement or recognition of revenue; as such, a cumulative effect adjustment to opening retained earnings was not deemed necessary. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts were not adjusted and continue to be reported in accordance with our historic accounting under Topic 605.

Topic 606 does not apply to revenue associated with financial instruments, including revenue from loans and securities. In addition, certain noninterest income streams such as fees associated with mortgage servicing rights, financial guarantees, derivatives, and certain credit card fees are also not in scope of the new guidance. Topic 606 is applicable to noninterest revenue streams such as trust and asset management income, deposit related fees, interchange fees, merchant income, and annuity and insurance commissions. However, the recognition of these revenue streams did not change significantly upon adoption of Topic 606. Substantially all of the Company’s revenue is generated from contracts with customers. Noninterest revenue streams in-scope of Topic 606 are discussed below.

Service Charges on Deposit Accounts

Service charges on deposit accounts consist of insufficient funds fees, account analysis fees (i.e., net fees earned on analyzed business and public checking accounts), monthly service fees, check orders, and other deposit account related fees. The Company’s performance obligation for account analysis fees and monthly service fees is generally satisfied, and the related revenue recognized, over the period in which the service is provided. Check orders and other deposit account related fees are largely transactional based, and therefore, the Company’s performance obligation is satisfied, and related revenue recognized, at a point in time. Payment for service charges on deposit accounts is primarily received immediately or in the following month through a direct charge to customers’ accounts.

SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)

Other Fees and Income

Other fees and income primarily consist of debit and credit card income, ATM fees, merchant services income, and other service charges. Debit and credit card income primarily consists of interchange fees earned whenever the Company’s debit and credit cards are processed through card payment networks such as Visa. ATM fees are primarily generated when a Company cardholder uses a non-Company ATM or a non-Company cardholder uses a Company ATM. Merchant services income mainly represents fees charged to merchants to process their debit and credit card transactions, in addition to account management fees. Other service charges include revenue from processing wire transfers, bill pay service, cashier’s checks, and other services. The Company’s performance obligation for fees, exchange, and other service charges are largely satisfied, and related revenue recognized, when the services are rendered or upon completion. Payment is typically received immediately or in the following month. Other fees and income also includes other recurring revenue streams such as safe deposit box rental fees and other miscellaneous revenue streams. Safe deposit box rental fees are charged to the customer on an annual basis and recognized upon receipt of payment. The Company determined that since rentals and renewals occur fairly consistently over time, revenue is recognized on a basis consistent with the duration of the performance obligation.

The following ~~table~~ presents ~~changes in accumulated other comprehensive~~noninterest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the three and nine months ended September 30, ~~2017~~2019 and ~~2016.~~2018.

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
(In thousands)

Beginning balance $ 506 $ 1,178 $ 358 $ 490

Unrealized gain (loss) on investment securities available for sale (11 ) (259 ) 222 840
Tax effect 5 97 (80 ) (300 )
Other comprehensive gain (loss) before reclassification (6 ) (162 ) 142 540
Amounts reclassified from accumulated comprehensive income:
Realized gains on investment securities included in net income - - - (22 )
Tax effect - - - 8
Total reclassifications net of tax - - - (14 )

Net current period other comprehensive income (loss) (6 ) (162 ) 142 526

Ending balance $ 500 $ 1,016 $ 500 $ 1,016

	Three Months		Three Months		Nine Months		Nine Months
	Ended		Ended		Ended		Ended
	September 30,		September 30,		September 30,		September 30
	2019		2018		2019		2018
	(dollars in thousands)
Service Charges on Deposit Accounts	$	308	$	309	$	858	$	830
Other		584		349		1,618		1,119
Noninterest Income (in-scope of Topic 606)		892		658		2,476		1,949
Noninterest Income (out-of-scope of Topic 606)		556		408		1,497		1,508

Total Non-interest Income	$	1,448	$	1,066	$	3,973	$	3,457

The income statement line items impacted by the reclassifications of realized gains (losses) on investment securities are the gain on the sale of securities and income tax expense line items in the consolidated statement of operations.

~~NOTE H - REPURCHASE AGREEMENTS~~Contract Balances

~~We utilize securities sold under agreements~~A contract asset balance occurs when an entity performs a service for a customer before the customer pays consideration (resulting in a contract receivable) or before payment is due (resulting in a contract asset). A contract liability balance is an entity’s obligation to ~~repurchase~~transfer a service to ~~facilitate~~a customer for which the ~~needs of our~~entity has already received payment (or payment is due) from the customer. The Company’s noninterest revenue streams are largely based on transactional activity. Consideration is often received immediately or shortly after the Company satisfies its performance obligation and revenue is recognized. The Company does not typically enter into long-term revenue contracts with customers, and secure long-term funding needs. Repurchase agreements are transactions whereby we offer to sell to a counterparty an undivided interest in an eligible security at an agreed upon purchase price, and which obligates the Company to repurchase the security on an agreed upon date at an agreed upon repurchase price plus interest at an agreed upon rate. Securities sold under agreements to repurchase are recorded at the amounttherefore, does not experience significant contract balances. As of ~~cash received in connection with the transaction and are reflected as short-term borrowings.~~

We monitor collateral levels on a continuous basis and maintain records of each transaction specifically describing the applicable security and the counterparty’s fractional interest in that security, and we segregate the security from our general assets in accordance with regulations governing custodial holdings of securities. The primary risk with our repurchase agreements is market risk associated with the investments securing the transactions, as we may be required to provide additional collateral based on fair value changes of the underlying investments. Securities pledged as collateral under repurchase agreements are maintained with our safekeeping agents. During the third quarter of 2017 the Bank eliminated and no longer offered Repurchase Agreements to its customers. The carrying value of available for sale investment securities pledged as collateral under repurchase agreements totaled none and $12.0 million at September 30, ~~2017~~2019 and December 31, ~~2016, respectively.~~2018, the Company did not have any significant contract balances.

SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)

Contract Acquisition Costs

In connection with the adoption of Topic 606, an entity is required to capitalize, and subsequently amortize into expense, certain incremental costs of obtaining a contract with a customer if these costs are expected to be recovered. The incremental costs of obtaining a contract are those costs that an entity incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained (for example, sales commission). The Company utilizes the practical expedient which allows entities to immediately expense contract acquisition costs when the asset that would have resulted from capitalizing these costs would have been amortized in one year or less. Upon adoption of Topic 606, the Company did not capitalize any contract acquisition cost.

~~NOTE H - REPURCHASE AGREEMENTS (continued)~~

The remaining contractual maturity of the securities sold under agreements to repurchase by class of collateral pledged included in short-term borrowings as of December 31, 2016 is presented in the following tables.

December 31, 2016
Remaining Contractual Maturity of the Agreements
Overnight and Up to 30 30-90 Greater than
(in thousands) continuous Days Days 90 Days Total
Repurchase agreements
U.S. government agencies-GSE’s $ 5,568 $ - $ - $ - $ 5,568
Mortgage-backed Securities-GSEs 6,496 - - - 6,496
Total borrowings $ 12,064 $ - $ - $ - $ 12,064
Gross amount of recognized liabilities for repurchase agreements $ 12,003

NOTE I – OTHER REAL ESTATE OWNED

The following table explains changes in other real estate owned (“OREO”) during the nine months ended September 30, ~~2017~~2019 and ~~2016 (dollars in thousands):~~2018:

	Nine Months			Nine Months
	Ended			Ended			Nine Months			Nine Months
	September 30,			September 30,			Ended			Ended
	2017			2016			September 30,			September 30,
	(Dollars in thousands)						2019			2018
							(Dollars in thousands)
Beginning balance January 1	$	599		$	1,401		$	1,088		$	1,258
Sales		(787	)		(1,831	)		(103	)		(657	)
Write-downs		(214	)		(164	)		(12	)		(100	)
Transfers		2,495			1,142			469			519
Ending balance	$	2,093		$	548		$	1,442		$	1,020

At September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, the Company had ~~$2.1~~$1.4 million and ~~$599,000,~~$1.1 million, respectively, of foreclosed ~~residential~~ real estate property in OREO. The recorded investment in consumer mortgage loans collateralized by residential real estate property in the process of foreclosure totaled ~~$461,000 and none~~$233,000 at September 30, ~~2017 and~~2019. At December 31, ~~2016, respectively.~~2018, the Company had 3 loans with recorded investment in the amount of $376,000 in consumer mortgage loans collateralized by residential real estate property in the process of foreclosure.

Note J – LEASES

The Company has operating leases for branches and certain equipment. The Company’s leases have remaining lease terms of 1 year to 15 years which may include options to extend the leases for up to 5 years per option period. The Company has some leases that are month to month or expire within 1 year that are not included below.

At September 30, 2019, the Company did not have any leases that had not yet commenced for which we had created a ROU asset and a lease liability. For the operating leases the Company has elected the practical expedient of not separating lease components from non-lease components and instead to account for each separate lease component and the non-lease components associated with that lease as a single lease component. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. Most of the lease agreements include periodic rate adjustments for inflation.

SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)

~~NOTE J – MERGERS AND ACQUISITIONS~~

~~Proposed Merger~~Most leases include one or more options to renew, with ~~Premara Financial, Inc.~~renewal terms that can extend the lease term from 1 to 25 years. The exercise of lease renewal options is at our sole discretion. When it is reasonably certain that the Company will exercise the option to renew or extend the lease term, that option is included in determining the value of the ROU asset and lease liability.

The ~~Company~~components of lease expense were as follows:

	Three Months		Nine Months
	Ended		Ended
	September 30,		September 30,
	2019		2019
	(Dollars in thousands)
Operating lease cost	$	268	$	787

Supplemental cash flow information related to leases was as follows:

	Three Months		Nine Months
	Ended		Ended
	September 30,		September 30,
	2019		2019
	(Dollars in thousands)
Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases	$	268	$	787

Right-of-use assets obtained in exchange for lease obligations:
Operating leases		-		8,776

The following table presents the remaining weighted average lease terms and ~~Bank entered into an Agreement and Plan of Merger and Reorganization dated~~discount rates as of July 20, 2017, with Premara Financial, Inc. (“Premara”) and its subsidiary bank, Carolina Premier Bank, Charlotte, NC. Pursuant to the terms of the merger agreement, the Company would acquire Carolina Premier Bank through the merger of Premara with and into the Company, with the Company as the surviving corporation. Immediately following the parent company merger, Carolina Premier Bank would be merged with and into the Bank, with the Bank as the surviving banking corporation in the bank merger. The transaction is subject to various closing conditions, including the receipt of requisite shareholder approvals and required approvals of State and Federal banking regulators.September 30, 2019:

If the merger is completed, each share of Premara common stock issued and outstanding will be converted into the right to receive 1.0463 shares of Company common stock or $12.65 in cash, with 948,080 shares of Premara common stock (equivalent to 30% of Premara’s outstanding shares of common stock as of the date of the merger agreement) being converted to the per share cash consideration and the balance of the outstanding shares of Premara common stock being converted into Company common stock. Based on the Company’s closing price of $11.89 per share on July 20, 2017, the day before the proposed transaction was publicly announced, the estimated aggregate purchase price payable by the Company was approximately $40 million.

~~NOTE K – SUBSEQUENT EVENTS~~

~~Litigation related to the Proposed Merger~~

~~On October 12, 2017, a purported class action complaint captioned~~~~Sharpenter v. Premara Financial, Inc., et al., Case# 3:17-cv-00607-GCM~~, was filed by an alleged shareholder of Premara on behalf of himself and similarly situated shareholders against Premara and Carolina Premier Bank and each of the entities’ individual directors in the U.S. District Court for the Western District of North Carolina. The complaint also names the Company and the Bank as defendants in the action. The complaint alleges, among other things, that Premara and the individually named directors (by virtue of their positions as officers and/or directors of Premara) omitted material facts related to the proposed merger from the Form S-4 Registration Statement that was filed in connection with the merger on September 27, 2017, and that as a result of such omissions, certain statements in the Registration Statement were materially false or misleading. The complaint alleges that the Company and the Bank, by virtue of their position of control over the composition of the Registration Statement, are also liable for the omissions alleged in the complaint. Plaintiff seeks to enjoin closing of the merger and have the Court direct the defendants to disseminate a Registration Statement that does not contain any alleged untrue statements of material fact and that states all material facts necessary to make such statements not false or misleading. In the event that the proposed merger is consummated, the plaintiff seeks to rescind it or set it aside or receive an award of unspecified damages. Plaintiff seeks to recover all costs of the lawsuit, including attorneys’ fees and experts’ fees.

Weighted Average Remaining Lease Term
Operating leases		7.0 years
	45
Weighted Average Discount Rate
Operating leases		6.0	%

Maturities of lease liabilities were as follows:

(In thousands)

	Operating
	Leases
Year Ending December 31,

2019 (excluding the nine months ended September 30, 2019)	$	138
2020		586
2021		649
2022		722
2023		702
Thereafter		6,154
Lease payments		8,951
Amounts representing interest		(274	)
Present Value of Net Future Minimum Lease Payments		8,677

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s discussion and analysis is intended to assist readers in the understanding and evaluation of the financial condition and results of operations of Select Bancorp, Inc. (the “Company”). This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 relating to, without limitation, our future economic performance, plans and objectives for future operations, and projections of revenues and other financial items that are based on our beliefs and assumptions and information currently available to us. The words “may,” “will,” “anticipate,” “should,” “would,” “believe,” “contemplate,” “could,” “project,” “predict,” “expect,” “estimate,” “continue,” and “intend,” as well as other similar words and expressions of the future, are intended to identify forward-looking statements. Our actual results, performance or achievements may differ materially from the results expressed or implied by our forward-looking statements. Factors that could influence actual results, performance or achievements include, among other things: changes in national, regional and local market conditions; changes in legislative and regulatory conditions; changes in the interest rate environment; breaches of security or failures of our technology systems due to technological or other factors and cybersecurity threats; adverse change in credit quality trends; ~~the receipt of required shareholder and regulatory approvals for the announced merger with Premara Financial, Inc. may not be obtained or may be delayed or take longer than anticipated;~~ and diversion of management’s time and attention to our merger-related, ~~issues.~~acquisition, or divestiture activities.

Overview

The Company is a commercial bank holding company and has one banking subsidiary, Select Bank & Trust Company (referred to as the “Bank”), and one unconsolidated subsidiary, New Century Statutory Trust I, which issued trust preferred securities in 2004 to provide additional capital for general corporate purposes. The Company’s only business activity is the ownership of the Bank and New Century Statutory Trust I. This discussion focuses primarily on the financial condition and operating results of the Bank.

The Bank’s lending activities are oriented to the consumer/retail customer as well as to the small- to medium-sized businesses located in Harnett, Brunswick, New Hanover, Carteret, Cumberland, Johnston, Pitt, Robeson, Sampson, Wake, Pasquotank, Martin, Alamance, and Wayne counties in North ~~Carolina.~~Carolina and York, Pickens and Cherokee counties in South Carolina, and Virginia Beach, Virginia. The Bank offers the standard complement of commercial, consumer, and mortgage lending products, as well as the ability to structure products to fit specialized needs. The deposit services offered by the Bank include small business and personal checking accounts, savings accounts, and certificates of deposit. The Bank concentrates on customer relationships in building its customer deposit base and competes aggressively in the area of transaction accounts.

The Company was formerly known as New Century Bancorp, Inc. On July 25, 2014, New Century Bancorp, Inc. acquired Select Bancorp, Inc. (“Legacy Select”) by merger. ~~The~~In connection with that merger the combined company ~~is now known as~~changed its legal name to Select Bancorp, Inc., which we refer to in this report as the Company. Legacy Select was a bank holding company headquartered in Greenville, North Carolina, whose wholly owned subsidiary, Select Bank & Trust Company, was a state-chartered commercial bank with approximately $276.9 million in assets. The merger expanded the Company’s North Carolina presence with the addition of six branches located in Greenville (two), Elizabeth City, Washington, Gibsonville, and Burlington. During 2015, the Gibsonville and Burlington branches were combined into a new location in Burlington.

~~We closed our branch~~ On December 15, 2017, the Company acquired Premara Financial, Inc. (“Premara”) and its banking subsidiary Carolina Premier Bank (“Carolina Premier”), located ~~at 6390 Ramsey Street, Fayetteville,~~in Charlotte, North Carolina and ~~transferred accounts to our Fayetteville branch located at 2818 Raeford Road during September 2015. The property~~the cities of Rock Hill, Blacksburg and Six Mile, South Carolina. Under the terms of that ~~housed our former Ramsey Street branch is included~~acquisition, Premara was merged with and into the Company, Carolina Premier was merged with and into the Bank, and shareholders of Premara received 1.0463 shares of the Company’s common stock or $12.65 in ~~assets held~~cash for ~~sale on~~each outstanding share of Premara common stock, with approximately 70% of such shares being exchanged for shares of the ~~consolidated balance sheet as of September 30, 2017.~~Company’s common stock and 30% being exchanged for cash.

On ~~July 21, 2017,~~January 29, 2019, the ~~Company announced that it had~~Bank entered into a ~~definitive merger agreement~~Purchase and Assumption Agreement with ~~Premara Financial, Inc., Charlotte, North Carolina (“Premara”)~~City National Bank of West Virginia pursuant to which the ~~Company would~~Bank assumed the majority of deposits and acquired the equipment and other selected assets associated with City National Bank of West Virginia’s branch located at 621 Nevan Road, Virginia Beach, Virginia. The purchase and assumption transaction closed on June 28, 2019 resulting in the assumption of $25.7 million in deposits.

On June 4, 2019, the Bank entered into a Purchase and Assumption Agreement with Pickens Savings and Loan Association, FA (“Pickens”), pursuant to which Pickens will assume the majority of deposits and acquire ~~Premara and its subsidiary bank, Carolina Premier Bank. Please see Note J~~selected assets associated with the Bank’s branch located at 115 North Main Street, Six Mile, South Carolina. The transaction is expected to close in the ~~Company’s Notes to Consolidated Financial Statements above for additional discussion.~~fourth quarter of 2019 pending satisfaction of customary closing conditions.

Comparison of Financial Condition at

September 30, ~~2017~~2019 and December 31, ~~2016~~2018

During the first nine months of ~~2017,~~2019, total assets increased by ~~$76.1~~$11.1 million to ~~$922.7 million~~$1.3 billion as of September 30, ~~2017. The increase in assets was due primarily to loan growth funded by demand deposit accounts and time deposits.~~2019. Earning assets at September 30, ~~2017~~2019 totaled ~~$848.6 million~~$1.2 billion and consisted of ~~$754.8 million~~$1.0 billion in net loans, ~~$53.7~~$76.9 million in investment securities, ~~$37.8~~$64.3 million in overnight investments and interest-bearing deposits in other banks and ~~$2.3~~$3.8 million in non-marketable equity securities, of which ~~$1.7~~$3.0 million is FHLB stock. Total deposits and shareholders’ equity at the end of the third quarter of ~~2017~~2019 were ~~$775.0~~$987.7 million and ~~$109.8~~$212.0 million, respectively.

Since the end of ~~2016,~~2018, gross loans have increased by ~~$86.2~~$28.9 million to ~~$763.4 million~~$1.0 billion as of September 30, ~~2017.~~2019. At September 30, ~~2017,~~2019, gross loans consisted of ~~$84.6~~$79.7 million in commercial and industrial loans, ~~$301.6~~$452.6 million in commercial real estate loans, ~~$72.2~~$62.1 million in multi-family residential loans, ~~$9.6~~$9.7 million in loans to individuals, ~~$106.2~~$153.9 million in ~~1-to4~~1-to-4 family residential real estate loans, ~~$43.0~~$46.2 million in HELOCs, and ~~$147.6~~$212.7 million in construction loans. Deferred loan fees, net of costs, on these loans were ~~$1.3~~$2.0 million at September 30, ~~2017.~~2019.

At September 30, ~~2017 and December 31, 2016,~~2019, there were $10.7 million of federal funds sold compared to no federal funds sold, at December 31, 2018. At September 30, 2019 and December 31, 2018 there were no repurchase agreements. Interest-earning deposits in other banks were ~~$36.8~~$53.6 million at September 30, ~~2017,~~2019, a ~~$3.5~~$68.7 million decrease from December 31, ~~2016.~~2018 primarily due to investment purchases and loan growth. The Company’s investment securities at September 30, ~~2017~~2019 were ~~$53.7~~$76.9 million, ~~a decrease~~an increase of ~~$8.6~~$25.4 million from December 31, ~~2016 in order~~2018. These securities are used to provide funding for higher yielding ~~loans.~~loans and reduce wholesale funding reliance. The investment portfolio as of September 30, ~~2017~~2019 consisted of ~~$10.6~~$10.4 million in government agency debt securities, ~~$28.9~~$52.1 million in mortgage-backed securities, $1.6 million in corporate securities and ~~$14.1~~$12.9 million in municipal securities. The net unrealized gain on these securities as of September 30, ~~2017~~2019 was ~~$785,000.~~$1.3 million.

At September 30, ~~2017,~~2019, the Company had an investment of ~~$1.7~~$3.0 million in FHLB stock, which decreased by ~~$539,000~~$239,000 from December 31, ~~2016~~2018 due to ~~the effect of~~ the repayment of advances during ~~2017~~2019 on the stock calculation. Also, the Company had ~~$630,000~~$719,000 in other non-marketable securities at September 30, ~~2017,~~2019, which decreased by ~~$73,000~~$43,000 from December 31, ~~2016.~~2018.

At September 30, ~~2017,~~2019, non-earning assets were ~~$74.1~~$107.2 million, an increase of ~~$2.8 million~~$509,000 from ~~$71.3~~$106.7 million as of December 31, ~~2016.~~2018. Non-earning assets included ~~$15.5~~$20.1 million in cash and due from banks, bank premises and equipment of ~~$17.4~~$18.1 million, right of use asset of $8.8 million, goodwill of ~~$6.9~~$24.6 million, core deposit intangible of ~~$547,000,~~$1.8 million, accrued interest receivable of ~~$2.9~~$3.9 million, foreclosed real estate of ~~$2.1~~$1.4 million, ~~$22.6~~$29.6 million in ~~bank owned~~bank-owned life insurance (“BOLI”), ~~$846,000 of assets held for sale,~~ and other assets of ~~$5.3~~$7.7 million, which included ~~$2.7~~$3.3 million in deferred tax assets.Since the income on BOLI is included in non-interest income, this asset is not included in the Company’s calculation of earning assets. ~~The increase in non-earning assets was due primarily to the increase in deposits.~~

Total deposits at September 30, ~~2017~~2019 were ~~$775.0~~$987.7 million and consisted of ~~$173.2~~$243.9 million in non-interest-bearing demand deposits, ~~$192.7~~$283.4 million in money market and NOW accounts, ~~$34.2~~$43.4 million in savings accounts, and ~~$374.9~~$417.0 million in time deposits. Total deposits increased by ~~$95.4~~$7.2 million from ~~$679.7~~$980.4 million as of December 31, ~~2016,~~2018, due primarily to an increase in ~~DDA~~money market deposits which was offset by decreases in DDAs, savings and ~~a CD marketing program.~~wholesale CDs. The Bank had no brokered demand deposits and ~~$61.7~~$13.5 million in brokered time deposits as of September 30, ~~2017.~~2019.

As of September 30, ~~2017,~~2019, the Company had ~~$22.4~~no short-term debt and $57.4 million of ~~short-term~~long-term debt, ~~of which was~~including $45.0 million in FHLB ~~advances,~~borrowings and $12.4 million in ~~long-term debt which is~~ junior subordinated ~~debentures that are classified as long-term debt.~~debentures.

Total shareholders’ equity at September 30, ~~2017~~2019 was ~~$109.8~~$212.0 million, an increase of ~~$5.5~~$2.4 million from ~~$104.3~~$209.6 million as of December 31, ~~2016.~~2018. Accumulated other comprehensive income relating to available for sale securities increased ~~$142,000~~$1.1 million during the nine months ended September 30, ~~2017.~~2019. Other changes in shareholders’ equity included increases of ~~$70,000~~$178,000 in stock-based compensation, earnings of ~~$5.2~~$10.0 million, and ~~$104,000~~$114,000 from the exercise of stock options. These increases were offset by the repurchase of $8.9 million in common stock of the Company. The Company’s historical financial performance and well-capitalized status enable us to return value to our shareholders through the repurchase plan by focusing on creating shareholder value over the long term. We believe that the Company's share repurchases continue to be an effective part of the Company’s overall capital management strategies.

Past Due Loans, Non-performing Assets, and Asset Quality

At September 30, ~~2017,~~2019, the Company had ~~$2.9 million~~$334,000 in loans that were 30 to 59 days past due and $562,000 in loans that were 60 to 89 days past due. This represented ~~0.38%~~0.33% and 0.55%, respectively, of gross loans outstanding on that date. This is a decrease from December 31, ~~2016~~2018 when there were ~~$3.0~~$633,000 in loans that were 30-59 days past due or 0.64% of gross loans outstanding and $1.3 million in loans that were ~~30-89~~60-89 days past due or ~~0.44%~~0.13% of gross loans outstanding. Non-accrual loans ~~decreased~~increased from ~~$5.8~~$7.3 million at December 31, ~~2016~~2018 to ~~$2.0~~$9.1 million at September 30, ~~2017.~~2019.

The percentage of non-performing loans (non-accrual loans and accruing troubled debt restructurings) to total loans ~~decreased~~increased from ~~1.39%~~1.50% at December 31, ~~2016~~2018 to ~~0.81%~~1.76% at September 30, ~~2017.~~2019. The Company has experienced ~~a decrease~~an increase in non-accruals from ~~$5.8~~$7.3 million at December 31, ~~2016~~2018 to ~~$2.0~~$9.1 million as of September 30, ~~2017~~2019 and an increase in accruing troubled debt restructurings from ~~$3.6~~$4.4 million at December 31, ~~2016~~2018 to ~~$4.1~~$6.5 million as of September 30, ~~2017.~~2019. Of the ~~$3.8 million decrease in~~ non-accrual loans inas of September 30, 2019, seven commercial real estate loans totaled $2.0 million, five construction loans totaled $2.3 million, eight commercial loans totaled $1.5 million, six HELOC loans totaled $745,000, eight agricultural loans totaled $500,000 and ten 1-to-4 family residential real estate loans made up the ~~first nine months of the year, the decrease is related to loans primarily in Multifamily Residential, HELOCS and Commercial Real Estate loan pool classifications.~~remaining balance.

At September 30, ~~2017,~~2019, the Company had ~~thirty-one~~forty-one loans totaling ~~$4.7~~$8.2 million that were considered to be troubled debt restructurings or TDRs. ~~Nineteen~~Twenty-eight of these loans totaling ~~$4.1~~$6.5 million were still in accruing status with the remaining TDRs included in non-accrual loans. All TDRs are considered impaired loans regardless of accrual status and have been included as non-performing assets in the table below.

The table below sets forth, ~~as of~~for the ~~dates~~periods indicated, information about the Company’s non-accrual loans, loans past due 90 days or more and still accruing interest, total non-performing loans (non-accrual loans plus accruing TDRs), and total non-performing assets.

As of
September 30, December 31,
2017 2016
(Dollars in thousands)

Non-accrual loans $ 2,013 $ 5,805
Accruing TDRs 4,140 3,625
Total non-performing loans 6,153 9,430
Foreclosed real estate 2,093 599
Total non-performing assets $ 8,246 $ 10,029

Accruing loans past due 90 days or more $ 663 $ 529
Allowance for loan losses $ 8,647 $ 8,411

Non-performing loans to period end loans 0.81 % 1.39 %
Non-performing loans and accruing loans past due 90 days or more to period end loans 0.89 % 1.47 %
Allowance for loans losses to period end loans 1.13 % 1.24 %
Allowance for loan losses to non-performing loans 141 % 89 %
Allowance for loan losses to non-performing assets 105 % 84 %
Allowance for loan losses to non-performing assets and accruing loans past due 90 days or more 97 % 80 %
Non-performing assets to total assets 0.89 % 1.18 %
Non-performing assets and accruing loans past due 90 days or more to total assets 0.97 % 1.25 %

	For Periods Ended
	September 30,			December 31,
	2019			2018
	(dollars in thousands)
Non-accrual loans	$	9,083		$	7,257
Accruing TDRs		6,477			4,378
Total non-performing loans		15,560			11,635
Foreclosed real estate		1,442			1,088
Total non-performing assets	$	17,002		$	12,723

Accruing loans past due 90 days or more	$	2,296		$	3,167
Allowance for loan losses	$	8,056		$	8,669

Non-performing loans to period end loans		1.53	%		1.18	%
Non-performing loans and accruing loans past due 90 days or more to period end loans		1.76	%		1.50	%
Allowance for loans losses to period end loans		0.79	%		0.88	%
Allowance for loan losses to non-performing loans		52	%		75	%
Allowance for loan losses to non-performing assets		47	%		68	%
Allowance for loan losses to non-performing assets and accruing loans past due 90 days or more		42	%		55	%
Non-performing assets to total assets		1.34	%		1.01	%
Non-performing assets and accruing loans past due 90 days or more to total assets		1.52	%		1.26	%

Total non-performing assets (non-accrual loans, accruing TDRs, and foreclosed real estate) at September 30, ~~2017~~2019 and December 31, ~~2016~~2018 were ~~$8.2~~$17.0 million and ~~$10.0~~$12.7 million, respectively. The allowance for loan losses at September 30, ~~2017~~2019 represented ~~105%~~47% of non-performing assets compared to ~~84%~~68% at December 31, ~~2016.~~2018.

Total impaired loans at September 30, ~~2017~~2019 were ~~$7.5~~$15.6 million. This includes ~~$2.0~~$9.1 million in loans that were classified as impaired because they were in non-accrual status and ~~$7.0~~$6.5 million in loans that were determined to be impaired for other reasons. Of these loans, ~~$1.0 million~~$972,000 required a specific reserve of ~~$20,000~~$284,000 at September 30, ~~2017.~~2019.

Total impaired loans at December 31, ~~2016~~2018 were ~~$11.0~~$11.7 million. This ~~includes $5.8~~included $7.3 million in loans that were ~~considered to be~~classified as impaired ~~due to being~~because they were in non-accrual status and ~~$5.2~~$4.4 million in ~~loans that were deemed to be impaired for other reasons.~~accruing TDRs. Of these loans, ~~$2.8 million~~$291,000 required a specific reserve of ~~$117,000~~$87,000 at December 31, ~~2016.~~2018.

The allowance for loan losses was ~~$8.6~~$8.1 million at September 30, ~~2017~~2019 or ~~1.13%~~0.79% of gross loans ~~outstanding. This is a decrease from the 1.24%~~outstanding as compared to 0.88% reported as a percentage of gross loans at December 31, ~~2016.~~2018. This decrease resulted primarily from reductions in qualitative factors related to interest rates, document exceptions and economic performance indicators. The Legacy Select loans and Carolina Premier loans were recorded at estimated fair value as of the acquisition date and the related credit risk is reflected as a fair value adjustment rather than separately in the allowance for losses as required in acquisition accounting. This required accounting under ~~generally accepted accounting principles~~GAAP has resulted in a lower percentage of the allowance for loan losses to gross loans. In the last few quarters past dues, nonaccruals and impaired loans ~~at September 30, 2017~~have increased and those loans have been assessed for ~~all periods post acquisition of Legacy Select.~~loss and charged offs have been incurred specifically on those loans for the respective expected loss. The allowance for loan losses at September 30, ~~2017 and~~2019 represented 52% of non-performing loans, as compared to 75% at December 31, ~~2016 represented 141% and 89%, respectively, of non-performing loans.~~2018. It is management’s assessment that the allowance for loan losses as of September 30, ~~2017~~2019 is appropriate in light of the risk inherent within the Company’s loan portfolio. No assurances, however, can be given that further adjustments to the allowance for loan losses may not be deemed necessary in the future.

Contractual Obligations

The following table presents the Company's significant fixed and determinable contractual obligations by payment date. The payment amounts represent those amounts contractually due to the recipient. The table excludes liabilities recorded where management cannot reasonably estimate the timing of any payments that may be required in connection with these liabilities.

	September 30, 2019
(dollars in thousands)	1 Year or Less		Over 1 to 3 Years		Over 3 to 5 Years		More Than 5 Years		Total
Time deposits	$	304,206	$	106,056	$	6,753	$	-	$	417,015
Long-term debt		-		20,000		25,000		12,372		57,372
Lease liability		573		1,334		1,389		5,655		8,951
Total contractual obligations	$	304,779	$	127,390	$	33,142	$	18,527	$	483,338

Other Lending Risk Factors

Besides monitoring non-performing loans and past due loans, management also monitors trends in the loan portfolio that may indicate more than normal risk. A discussion of certain other risk factors follows. Some loans or groups of loans may contain one or more of these individual loan risk factors. Therefore, an accumulation of the amounts or percentages of the individual loan risk factors may not necessarily be an indication of the cumulative risk in the total loan portfolio.

Regulatory Loan to Value

The Company monitors its exposure to loans that exceed the guidelines established by regulators for loan to value (“LTV”) ratios.

At September30, ~~2017~~2019 and December 31, ~~2016,~~2018, the Company had ~~$23.1~~$33.8 million and ~~$21.7~~$27.7 million in non 1-to-4 family residential loans that exceeded the regulatory LTV limits, respectively. At September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, the Company had ~~$11.3~~$10.9 million and ~~$4.8~~$10.0 million of 1-to-4 family residential loans that exceeded the regulatory LTV limits, respectively. The total amount of these loans represented ~~29.4%~~25.9% and ~~23.6%~~23.2% of total risk-based capital as of September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, which is less than the 100% maximum allowed. These loans may present more than ordinary risk to the Company if the real estate market weakens in terms of market activity or collateral valuations.

Business Sector Concentrations

Loan concentrations in certain business sectors can be impacted by lower than normal retail sales, higher unemployment, higher vacancy rates, and a weakening in real estate market conditions. The Company has established an internal commercial real estate guideline of 40% of risk-based capital for any single product line.

At September 30, ~~2017~~2019 the Company had ~~four~~two product type groups ~~that~~which exceeded this ~~guideline; Real Estate~~threshold; Office Building, which represented 46% of risk-based capital or $79.7 million and Commercial Construction, which represented ~~54%~~46% of risk-based capital or $63.8 million, Real Estate Construction – Speculative and Presold, which represented 42% of risk-based capital, or $49.5 million, 1-4 Family Rental, which represented 54% of risk-based capital, or $63.8 million, and Multifamily Residential, which represented 60% of risk-based capital, or $69.9$79.9 million. All other commercial real estate groups were at or below the 40% threshold. At December 31, ~~2016,~~2018, the Company ~~exceeded~~did not exceed the 40% guideline in ~~two~~any product types. ~~The 1-to-4 Family Residential Rental category represented 66% of risk-based capital or $74.2 million~~All commercial and ~~the Multi-family Residential category represented 49% of risk-based capital or $54.5 million at December 31, 2016. All other commercial~~residential real estate product types were under the 40% threshold.

Acquisition, Development, and Construction Loans (“ADC”)

The tables below provide information regarding loans the Company originates for the purpose of acquisition, development, and construction of both residential and commercial properties as of September 30, ~~2017~~2019 and December 31, ~~2016.~~2018.

Acquisition, Development and Construction Loans

(~~Dollars~~dollars in thousands)

September 30, 2017 December 31, 2016
Land and Land Land and Land
Construction Development Total Construction Development Total

Total ADC loans $ 120,245 $ 27,312 $ 147,557 $ 76,037 $ 24,874 $ 100,911

Average Loan Size $ 226 $ 294 $ 166 $ 350

Percentage of total loans 15.75 % 3.58 % 19.33 % 11.23 % 3.67 % 14.90 %

Non-accrual loans $ 248 $ - $ 248 $ 151 $ - $ 151

	September 30, 2019									December 31, 2018
				Land and Land									Land and Land
	Construction			Development			Total			Construction			Development			Total
Total ADC loans	$	178,499		$	34,178		$	212,677		$	145,736		$	24,668		$	170,404

Average Loan Size	$	301		$	510					$	267		$	308

Percentage of total loans		17.59	%		3.37	%		20.95	%		14.78	%		2.50	%		17.28	%

Non-accrual loans	$	2,272		$	-		$	2,272		$	587		$	-		$	587

Management closely monitors the ADC portfolio by reviewing funding based on project completeness, monthly and quarterly inspections as required by the project, collateral value, geographic concentrations, ~~spec-to-presold~~speculative-to-presold ratios and performance of similar loans in the Company’s market area.

Geographic Concentrations

Certain risks exist ~~arising~~arise from the geographic location of specific types of higher than normal risk real estate loans. Below is a table showing geographic concentrations for ADC and HELOC loans at September 30, ~~2017~~2019 and December 31, ~~2016.~~2018.

September 30, 2017 December 31, 2016
ADC Loans Percent HELOC Percent ADC Loans Percent HELOC Percent
(Dollars in thousands)

Harnett County $ 6,293 4.26 % $ 5,894 13.70 % $ 4,505 4.46 % $ 5,817 14.13 %
Alamance County 2,016 1.37 % 1,190 2.77 % 1,169 1.16 % 1,065 2.59 %
Beaufort County 156 0.11 % 1,502 3.49 % 182 0.18 % 1,026 2.49 %
Brunswick County 8,808 5.97 % 1,754 4.08 % 4,506 4.46 % 1,899 4.61 %
Carteret County 3,027 2.05 % 2,404 5.59 % 585 0.58 % 2,350 5.71 %
Craven County 930 0.63 % 442 1.03 % - - % - - %
Cumberland County 22,468 15.23 % 4,211 9.79 % 22,610 22.41 % 5,278 12.82 %
Pasquotank County 1,030 0.70 % 1,398 3.25 % 947 0.94 % 1,258 3.06 %
Pitt County 15,702 10.64 % 6,334 14.72 % 13,697 13.57 % 5,151 12.52 %
Robeson County 703 0.48 % 3,671 8.53 % 803 0.80 % 3,709 9.01 %
Sampson County 26 0.02 % 1,650 3.84 % 71 0.07 % 1,574 3.83 %
Wake County 22,363 15.15 % 1,367 3.18 % 15,689 15.55 % 1,536 3.73 %
Wayne County 9,996 6.77 % 4,384 10.19 % 9,734 9.65 % 4,281 10.40 %
All other locations 54,039 36.62 % 6,815 15.84 % 26,413 26.17 % 6,214 15.10 %

Total $ 147,557 100.00 % $ 43,016 100.00 % $ 100,911 100.00 % $ 41,158 100.00 %

	September 30, 2019										December 31, 2018
	ADC Loans		Percent			HELOC		Percent			ADC Loans		Percent			HELOC		Percent
	(dollars in thousands)
Harnett County	$	10,126		4.76	%	$	5,126		11.09	%	$	5,389		3.16	%	$	5,367		10.80	%
Alamance County		693		0.33	%		1,214		2.63	%		740		0.43	%		1,350		2.72	%
Beaufort County		3,287		1.54	%		975		2.11	%		908		0.53	%		1,113		2.24	%
Brunswick County		14,061		6.61	%		1,670		3.61	%		8,440		4.95	%		1,492		3.00	%
Carteret County		4,033		1.90	%		2,876		6.22	%		1,544		0.91	%		2,676		5.38	%
Cherokee County		-		-%			23		0.05	%		-		-%			52		0.11	%
Craven County		1,278		0.60	%		337		0.73	%		1,060		0.62	%		319		0.64	%
Cumberland County		26,236		12.34	%		2,503		5.42	%		21,019		12.34	%		3,116		6.27	%
Mecklenburg County		17,306		8.14	%		2,734		5.92	%		24,853		14.59	%		3,635		7.31	%
New Hanover County		37,300		17.54	%		3,070		6.64	%		23,396		13.73	%		2,721		5.47	%
Pasquotank County		1,533		0.72	%		1,754		3.79	%		1,145		0.67	%		1,915		3.85	%
Pickens County		-		-	%		96		0.21	%		-		-	%		99		0.20	%
Pitt County		16,724		7.86	%		5,515		11.93	%		10,574		6.21	%		6,334		12.74	%
Robeson County		850		0.40	%		2,835		6.13	%		1,076		0.63	%		3,505		7.05	%
Sampson County		176		0.08	%		1,699		3.68	%		149		0.09	%		1,835		3.69	%
Virginia Beach		142		0.07	%		103		0.22	%		-		-	%		-		-	%
Wake County		19,373		9.11	%		2,192		4.74	%		18,528		10.87	%		1,744		3.51	%
Wayne County		1,689		0.79	%		3,134		6.78	%		2,212		1.30	%		3,457		6.95	%
Wilson County		481		0.23	%		96		0.21	%		392		0.23	%		73		0.15	%
York County		1,881		0.88	%		788		1.70	%		124		0.07	%		1,053		2.12	%
All other locations		55,508		26.10	%		7,481		16.19	%		48,855		28.67	%		7,857		15.80	%

Total	$	212,677		100.00	%	$	46,221		100.00	%	$	170,404		100.00	%	$	49,713		100.00	%

~~Interest Only~~Interest-Only Payments

Another risk factor that exists in the total loan portfolio pertains to loans with ~~interest only~~interest-only payment terms. At September 30, ~~2017,~~2019, the Company had ~~$211.3~~$225.8 million in loans that had terms permitting ~~interest only~~interest-only payments. This represented ~~27.7%~~22.2% of the total loan portfolio. At December 31, ~~2016,~~2018, the Company had ~~$161.5~~$224.6 million in loans that had terms permitting ~~interest only~~interest-only payments. This represented ~~23.8%~~22.8% of the total loan ~~portfolio as of such date. Notwithstanding~~portfolio. Recognizing the risk inherent with ~~interest only~~interest-only loans, it is customary and general industry practice that loans in the ADC portfolio permit ~~interest only~~interest-only payments during the acquisition, development, and construction phases of such projects.

Large Dollar Concentrations

Concentrations of high dollar loans or large customer relationships may pose additional risk in the total loan portfolio. The Company’s ten largest loans or lines of credit totaled ~~$66.8~~$77.6 million, or ~~8.8%~~7.6% of total loans, at September 30, ~~2017~~2019 compared to ~~$62.9~~$70.6 million, or ~~9.3%~~7.2% of total loans, at December 31, ~~2016.~~2018. The Company’s ten largest customer relationships totaled ~~$89.9~~$125.8 million, or ~~11.8%~~12.4% of total loans, at September 30, ~~2017~~2019 compared to ~~$80.9~~$106.8 million, or ~~11.9%~~10.8% of total loans, at December 31, ~~2016.~~2018. Deterioration or loss in any one or more of these high dollar loan or customer concentrations could have an immediate, significant adverse impact on the Company’s capital position.

Comparison of Results of Operations for the

Three months ended September 30, ~~2017~~2019 and ~~2016~~2018

General. During the third quarter of ~~2017,~~2019, the Company had net income of ~~$1.8~~$3.2 million as compared with net income of ~~$1.7~~$4.3 million for the third quarter of ~~2016.~~2018. Net income per common share for the third quarter of ~~2017~~2019 was ~~$0.15,~~$0.17, basic and diluted, compared with net income per common share of ~~$0.15,~~$0.27, basic and diluted, for the third quarter of ~~2016.~~2018. Results of operations for the third quarter of ~~2017~~2019 were primarily impacted by an increase of ~~$839,000~~$16,000 in net interest income, and ~~a decrease~~an increase in non-interest income of ~~$7,000~~$382,000 and ~~a decrease~~an increase in the provision for loan losses of ~~$135,000~~$690,000 versus the comparative three-month period in ~~2016.~~2018. Noninterest expenses increased ~~$808,000~~$1.1 million which ~~were~~was primarily related to increased personnel expense of ~~$373,000, merger~~$660,000, occupancy expenses of $224,000, information system expenses of $126,000, integration related expenses of ~~$278,000,~~$128,000, foreclosure related expenses of ~~$160,000, information system expenses~~$13,000, professional fees of ~~$59,000~~$196,000, and other expenses of ~~$34,000~~$92,000 which was partially offset by a reduction in ~~professional fees~~deposit insurance expense of ~~$52,000,~~$269,000 and core deposit intangible amortization of ~~$23,000 and a $20,000 decrease in occupancy expenses.~~$39,000. The Company recorded a provision offor loan losses of ~~$202,000~~$231,000 for the third quarter of ~~2017~~2019 compared to a ~~provision~~recovery of ~~$337,000~~losses of $459,000 in the third quarter of ~~2016.~~2018. Net interest margin of ~~4.19%~~3.94% in the third quarter of ~~2017~~2019 decreased 826 basis points from the same period in ~~2016 resulting from the accretion of the credit mark associated with the acquired Legacy Select loan portfolio and increased deposit costs.~~2018.

Net Interest Income. Net interest income ~~increased to $8.7~~was $11.9 million for the third quarter of ~~2017~~2019, which was a $16,000 increase from ~~$7.8 million for~~ the comparative third quarter of ~~2016.~~2018. The Company’s total interest income was affected by the increase in interest rates and loan balances due to growth. Average total interest-earning assets were ~~$826.6 million~~$1.2 billion in the third quarter of ~~2017~~2019 compared with ~~$737.2 million~~$1.1 billion during the same period in ~~2016,~~2018, while the yield on those assets increased 841 basis points from ~~4.76%~~5.09% to ~~4.84%~~5.50%, which was primarily due to the increase in rates on recently originated loans on a comparative quarter basis and accretion from acquired loans.

The Company’s average interest-bearing liabilities ~~increased~~decreased by ~~$80.2~~$1.6 million to ~~$630.9~~$818.6 million for the quarter ended September 30, ~~2017~~2019 from ~~$550.7~~$820.2 million for the same period one year earlier, and the cost of those funds increased from ~~0.66%~~1.22% to ~~0.85%~~1.52%, or 1930 basis points. During the third quarter of ~~2017,~~2019, the Company’s net interest margin was ~~4.19%~~3.94% and net interest spread was ~~3.98%~~3.46%. In the same quarter ended one year earlier, net interest margin was ~~4.27%~~4.20% and net interest spread was ~~4.10%~~3.87%.

Provision for Loan Losses.Provisions for loan losses are charged to income to bring the allowance for loan losses to a level deemed appropriate by management. In evaluating the allowance for loan losses, management considers factors that include growth, composition, and industry diversification of the portfolio, historical loan loss experience, current delinquency levels, adverse situations that may affect a borrower’s ability to repay, estimated value of any underlying collateral, prevailing economic conditions, and other relevant factors. ~~The loss history to be applied to its ASC 450 loan pools within the allowance for loan losses is based on the risk-graded pool to which the loss was assigned.~~ Historical loss rates are ~~now~~ calculated by using a loss migration analysis associating losses to the risk-graded pool to which they relate for each of the previous twelve quarters. Then, using a twelve quarter look back period, loss factors are calculated for each risk-graded pool. During the third quarter of ~~2017,~~2019, the Company recorded a provision for loan losses of ~~$202,000~~$231,000, based primarily on adjustments to qualitative loan ~~growth and improving~~factors related to the underlying risk in loan portfolio. On a comparative quarter basis, the Company had a $459,000 recovery for the third quarter of 2018. The Company, has seen a slight deterioration of credit metrics asprimarily related to past dues, non-accruals of acquired loans, and TDRs during the third quarter of 2019, compared to the second quarter of 2019, where the Company recorded a ~~provision~~recovery of ~~$337,000~~loan losses of $207,000 based primarily on qualitative loan factors. As a result of the estimated deterioration the Company incurred charge-offs of $515,000 in the third quarter of ~~2016. This trend of improving credit metrics had been consistently maintained in 2017.~~2019.

Non-Interest Income. Non-interest income for the quarter ended September 30, ~~2017~~2019 was ~~$778,000, a slight decrease~~$1.4 million, an increase from ~~$785,000~~$382,000 in the third quarter of ~~2016.~~2018. Service charges on deposit accounts decreased ~~$12,000~~$1,000 to ~~$237,000~~$308,000 for the quarter ended September 30, ~~2017~~2019 from ~~$249,000~~$309,000 for the same period in ~~2016.~~2018. Other non-deposit fees and income increased ~~$5,000~~$226,000 from the third quarter of ~~2016~~2018 to the third quarter of ~~2017 due primarily~~2019. Fees from presold mortgages increased non-interest income by $109,000 in the third quarter of 2019 to ~~debit card fee transactions.~~$218,000 from $109,000 in the third quarter of 2018. The Company sold two investment securities in the third quarter of 2019 for a gain of $48,000. The Company did not sell any investment securities in the third quarter of ~~2017 or 2016.~~2018.

Non-Interest Expenses. Non-interest expenses increased by ~~$808,000~~$1.1 million to ~~$6.4~~$8.9 million for the quarter ended September 30, ~~2017,~~2019, from ~~$5.6~~$7.8 million for the same period in ~~2016.~~2018. The following are highlights of the significant categories of non-interest expenses during the third quarter of ~~2017~~2019 compared to the same period in ~~2016:~~2018:

Personnel expenses increased ~~$373,000~~$660,000 to ~~$3.5~~$5.1 million, due to increased ~~staff.~~staff for new branches, employment taxes and benefits costs.

Foreclosed real estate-related expense increased ~~$160,000,~~$13,000, primarily due to ~~write downs on a large real estate owned property.~~maintenance expenses and property taxes.

There was an increase of ~~$59,000 of~~$126,000 in information system expenses ~~incurred~~ in the third quarter of ~~2017~~2019 primarily due to ~~compliance~~additional software and ~~cyber~~ security ~~needs.~~costs.

Professional fees increased by $196,000 to $518,000, primarily due to expenses associated with branch purchases and divestures.

Deposit insurance expense decreased by ~~$52,000 to $211,000,~~$269,000, due to ~~internal audit procedures being performed by staff.~~receiving a credit from the FDIC as a result regulatory changes in the premium calculation.

Occupancy and equipment ~~decreased~~expense increased by ~~$20,000~~$224,000 to ~~$555,000,~~$1.1 million, due to repairs and maintenance and branch ~~restructuring.~~addition.

~~Merger~~Integration related expenses increased by ~~$278,000 due to announced acquisition.~~$128,000 for branch purchase and divestures.

Other non-interest expenses increased by ~~$34,000,~~$92,000, primarily due to an increase in various administrative related non-interest expenses.

Provision for Income Taxes. The Company’s effective tax rate was ~~37.0%~~22.0% and ~~34.7%~~22.5% for the quarters ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively. The effective tax rate for the third quarter of 2017 compared to the same quarter in 2016 was impacted by an adjustment to reduce the Company’s deferred tax asset resulting from enacted lower corporate tax rates for the State of North Carolina in 2016.

As of September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, the Company had a net deferred tax asset in the amount of ~~$2.7~~$3.3 million and ~~$3.1~~$3.7 million, respectively. In evaluating whether the Company will realize the full benefit of the net deferred tax asset, management considered both positive and negative evidence, including among other things, recent earnings trends, projected earnings, and asset quality. As of September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, management concluded that the net deferred tax assets were fully realizable. The Company will continue to monitor deferred tax assets closely to evaluate whether the full benefit of the net deferred tax asset will require a valuation allowance. Significant negative trends in credit quality or losses from operations, among other trends, could impact the realization of the deferred tax asset in the future.

NET INTEREST INCOME

The following table sets forth, for the periods indicated, information with regard to average balances of assets and liabilities, as well as the total dollar amounts of interest income from interest-earning assets and interest expense on interest-bearing liabilities, resultant yields or costs, net interest income, net interest spread, net interest margin and ratio of average interest-earning assets to average interest-bearing liabilities. Non-accrual loans have been included in determining average loans. The table is presented on a taxable equivalent basis where applicable.

	For the quarter ended									For the quarter ended
	September 30, 2019									September 30, 2018
	(dollars in thousands)
	Average						Average			Average						Average
	balance			Interest			rate			balance			Interest			rate
Interest-earning assets:
Loans, gross of allowance	$	1,005,170		$	13,935			5.50	%	$	978,928		$	13,615			5.52	%
Investment securities		80,503			527			2.60	%		55,318			382			2.74	%
Other interest-earning assets		111,593			581			2.07	%		89,092			442			1.88	%
Total interest-earning assets		1,197,266			15,043			4.98	%		1,123,338			14,419			5.09	%

Other assets		102,871									104,921

Total assets	$	1,300,137								$	1,228,259
Interest-bearing liabilities:
Deposits:
Savings, NOW and money market	$	327,737			433			0.52	%	$	310,697			338			0.43	%
Time deposits over $100,000		317,310			1,720			2.15	%		318,822			1,282			1.60	%
Other time deposits		116,191			528			1.80	%		115,796			383			1.31	%
Borrowings		57,372			459			3.17	%		74,916			527			2.79	%

Total interest-bearing liabilities		818,610			3,140			1.52	%		820,231			2,530			1.22	%

Non-interest-bearing deposits		252,266									240,859
Other liabilities		12,705									4,370
Shareholders' equity		216,556									162,799

Total liabilities and shareholders' equity	$	1,300,137								$	1,228,259


Net interest income/interest rate spread (taxable-equivalent basis)				$	11,903			3.46	%				$	11,889			3.87	%


Net interest margin (taxable-equivalent basis)								3.94	%								4.20	%

Ratio of interest-earning assets to interest-bearing liabilities		146.26	%								136.95	%

Reported net interest income
Net interest income/net interestmargin (taxable-equivalent basis)				$	11,903								$	11,889
Less:
taxable-equivalent adjustment					(39	)								(37	)

Net Interest Income				$	11,864			3.93	%				$	11,852			4.19	%

Comparison of Results of Operations for the

Nine months ended September 30, ~~2017~~2019 and ~~2016~~2018

General. During the first nine months of ~~2017,~~2019, the Company had net income of ~~$5.2~~$10.0 million as compared with net income of ~~$5.1~~$9.3 million for the first nine months of ~~2016.~~2018. Net income per share for the first nine months of ~~2017~~2019 was ~~$0.45,~~$0.52 for basic and diluted, compared with net income per share of ~~$0.44,~~$0.64 for basic and $0.63 diluted for the first nine months of ~~2016.~~2018. Results of operations for the first nine months of ~~2017~~2019 compared to ~~2016 was~~2018 were primarily impacted by ~~an increase~~a decrease of ~~$2.0 million~~$463,000 in net interest income, ~~an increase~~a decrease in provision for loan losses of ~~$244,000, a decrease~~$103,000, an increase of ~~$196,000~~$516,000 in non-interest income and ~~an increase~~a decrease in non-interest expenses of ~~$1.5 million.~~$640,000. Net interest margin of ~~4.20%~~4.03% in the first nine months of ~~2017~~2019 decreased 226 basis points from the same period in ~~2016.~~2018.

Net Interest Income. Net interest income ~~increased~~decreased to ~~$25.0~~$35.0 million for the first nine months of ~~2017~~2019 from ~~$23.1~~$35.5 million for the first nine months of ~~2016.~~2018. The Company’s total interest income was affected by the increase in ~~total~~ loan balances. Average total interest-earning assets were ~~$800.9 million in~~$1.2 billion for the first nine months of ~~2017~~2019 compared with ~~$737.1 million~~$1.1 billion during the same period in ~~2016,~~2018, while the yield on those assets ~~increased 8~~decreased 9 basis points from ~~4.72%~~5.11% to ~~4.80%.~~5.02%, which was primarily due to the decrease in rates on recently originated loans and accretion from acquired loans.

The Company’s average interest-bearing liabilities ~~increased~~decreased by ~~$46.3~~$37.0 million to ~~$607.2~~$793.1 million for the nine months ended September 30, ~~2017~~2019 from ~~$560.9~~$830.1 million for the same period one year earlier and the cost of those funds increased from ~~0.65%~~1.10% to ~~0.79%~~1.45%, or 1435 basis points. During the first nine months of ~~2017,~~2019, the Company’s net interest margin was ~~4.20%~~4.03% and net interest spread was ~~4.00%~~3.57%. In the same period ended one year earlier, net interest margin was ~~4.22%~~4.29% and net interest spread was ~~4.07%~~4.01%. The increase in the ~~cost~~interest rates of ~~funds~~deposits was the primary driver of a lower net interest margin in ~~2017.~~2019.

Provision for Loan Losses.Provisions for loan losses are charged to income to bring the allowance for loan losses to a level deemed appropriate by management. In evaluating the allowance for loan losses, management considers factors that include growth, composition and industry diversification of the portfolio, historical loan loss experience, current delinquency levels, adverse situations that may affect a borrower’s ability to repay, estimated value of any underlying collateral, prevailing economic conditions and other relevant factors. ~~The loss history to be applied to its ASC 450 loan pools within the allowance for loan losses is based on the risk-graded pool to which the loss was assigned.~~ Historical loss rates are ~~now~~ calculated by using a loss migration analysis associating losses to the risk-graded pool to which they relate for each of the previous twelve quarters. Then, using a twelve quarter look back period, loss factors are calculated for each risk-graded pool. ~~The Company recorded a provision of $1.1 million for~~During the first nine months of ~~2017~~2019, the Company recorded a provision for loan losses of $136,000 compared to ~~$847,000 for~~$239,000 in the first nine months of ~~2016. Loan growth~~2018. This reduction was based primarily on the ~~primary contributor~~reduction of qualitative loan factors associated with concentration ratios on CRE and Construction loans exceeding regulatory concentration guidelines. The reduction in these concentration ratios occurred as a result of downstreaming $25.0 million in capital to the ~~increased 2017~~Bank from the common stock offering completed in August of 2018. The provision ~~expense. Improving~~decreased approximately $103,000 compared to the provision for loan losses recorded in the first nine months of 2018. The Company periodically reviews and updates it qualitative factors for changes in current conditions. The Company has seen a slight deterioration of credit metrics ~~have been consistently maintained in 2016~~primarily related to past dues, non-accruals and ~~2017.~~TDRs during 2019 compared to the same period of 2018; however, management considers the allowance for loan losses to be appropriate.

Non-Interest Income. Non-interest income for the nine months ended September 30, ~~2016~~2019 was ~~$2.3~~$4.0 million, ~~a decrease~~an increase of ~~$196,000~~$516,000 from the first nine months of ~~2016.~~2018. Service charges on deposit accounts ~~decreased $74,000~~increased $28,000 to ~~$668,000~~$858,000 for the nine months ended September 30, ~~2017~~2019 from ~~$742,000~~$830,000 for the same period in ~~2016, primarily due to a decrease in overdraft charges.~~2018. Other non-deposit fees and income ~~decreased $100,000~~increased $128,000 from the first nine months of ~~2016~~2018 to the first nine months of ~~2017, primarily due~~2019. Fees from presold mortgages increased non-interest income $312,000 in the nine months of 2019 to ~~decreases~~$605,000 from $293,000 for the same period in ~~debit card activity.~~2018. The Company ~~recognized~~sold two investment securities for a gain ~~on sale~~ of ~~investment securities of $22,000 for~~$48,000 in the first nine months of ~~2016 compared to no gains for~~2019. The Company did not sell any investment securities during the first nine months of ~~2017.~~2018.

Non-Interest Expenses. Non-interest expenses ~~increased~~decreased by ~~$1.5 million~~$640,000 to ~~$18.2~~$26.0 million for the nine months ended September 30, ~~2017,~~2019, from ~~$16.8~~$26.7 million for the same period in ~~2016. Non-interest expenses were also impacted in 2017 by $278,000 in merger related expenses for our announced acquisition of Premara.~~2018. The following are highlights of the significant categories of non-interest expenses during the first nine months of ~~2017~~2019 versus the same period in ~~2016:~~2018:

Personnel expenses increased ~~$1.2~~$1.3 million to ~~$10.7~~$15.1 million, due to additions in ~~staff.~~branch staff, employment taxes and benefit costs.

Occupancy and equipment expenses ~~decreased~~increased by ~~$137,000~~$124,000 due to branch ~~repositioning.~~acquisition and repairs and maintenance expenses.

CDI amortization expense decreased by ~~$69,000~~$152,000 in the first nine months of ~~2017~~2019 due to ~~scheduled reductions.~~normal amortization.

Deposit insurance expense decreased ~~$115,000~~$452,000 due to ~~rate reductions.~~receiving a credit from the FDIC as a result regulatory changes in the premium calculation.

Information systems expense ~~increased $64,000~~decreased $255,000 due to ~~compliance and cybersecurity initiatives.~~expense elimination associated with assumed contracts from the Premara merger for similar services.

~~Merger~~Merger/integration related expenses ~~increased~~decreased by ~~$278,000 due~~$1.6 million compared to ~~an announced~~the non-recurring 2018 merger cost associated with the Premara acquisition.

Foreclosed real estate ~~increased $88,000~~expenses decreased $50,000 due to decreased HOA dues and write downs ~~on a large property.~~in 2019.

Other non-interest expenses increased by ~~$113,000,~~$100,000, due to small increases in several categories of other non-interest expenses.

Provision for Income Taxes. The Company’s effective tax rate was ~~34.7%~~22.0% and ~~35.2%~~22.4% for the nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively. ~~The effective tax rate for the first nine months of 2017 was impacted by North Carolina corporate income tax rate reductions compared to 2016 tax rates.~~

As of September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, the Company had a net deferred tax asset in the amount of ~~$2.7~~$3.3 million and ~~$3.1~~$3.7 million, respectively. In evaluating whether the Company will realize the full benefit of the net deferred tax asset, management considered both positive and negative evidence including, among other things, recent earnings trends, projected earnings, and asset quality. As of September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, management concluded that the net deferred tax ~~asset was~~assets were fully realizable. The Company will continue to monitor deferred tax assets closely to evaluate whether the full benefit of the net deferred tax asset will require a valuation allowance. Significant negative trends in credit quality or losses from operations, among other trends, could impact the realization of the deferred tax asset in the future.

NET INTEREST INCOME

	For the nine months ended									For the nine months ended
	September 30, 2019									September 30, 2018
	(dollars in thousands)
	Average						Average			Average						Average
	balance			Interest			rate			balance			Interest			rate
Interest-earning assets:
Loans, gross of allowance	$	988,268		$	40,510			5.48	%	$	976,862		$	40,315			5.52	%
Investment securities		77,674			1,653			2.85	%		59,139			1,153			2.61	%
Other interest-earning assets		99,966			1,580			2.11	%		73,821			940			1.70	%
Total interest-earning assets		1,165,908			43,743			5.02	%		1,109,822			42,408			5.11	%

Other assets		101,558									105,644

Total assets	$	1,267,466								$	1,215,466
Interest-bearing liabilities:
Deposits:
Savings, NOW and money market	$	315,349			1,196			0.51	%	$	317,303			977			0.41	%
Time deposits over $100,000		299,092			4,516			2.02	%		326,037			3,453			1.42	%
Other time deposits		116,710			1,470			1.68	%		115,028			1,055			1.23	%
Borrowings		61,954			1,426			3.08	%		71,771			1,321			2.46	%

Total interest-bearing liabilities		793,105			8,608			1.45	%		830,139			6,806			1.10	%

Non-interest-bearing deposits		247,087									232,366
Other liabilities		12,452									6,300
Shareholders' equity		214,822									146,661

Total liabilities and shareholders' equity	$	1,267,466								$	1,215,466
Net interest income/interest rate spread (taxable-equivalent basis)				$	35,135			3.57	%				$	35,602			4.01	%

Net interest margin
(taxable-equivalent basis)								4.03	%								4.29	%

Ratio of interest-earning assets to interest-bearing liabilities		147.01	%								133.69	%

Reported net interest income
Net interest income/net interestmargin (taxable-equivalent basis)				$	35,135								$	35,602
Less:
taxable-equivalent adjustment					(113	)								(117	)

Net Interest Income				$	35,022			4.02	%				$	34,485			4.27	%

Liquidity

The Company’s liquidity is a measure of its ability to fund loans, withdrawals and maturities of deposits, and other cash outflows in a ~~cost effective~~cost-effective manner. The principal sources of liquidity are deposits, scheduled payments and prepayments of loan principal, maturities of investment securities, access to liquid deposits, and funds provided by operations. While scheduled loan payments and maturing investments are relatively predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. Liquid assets (consisting of cash and due from banks, interest-earning deposits with other banks, federal funds sold and investment securities classified as available for sale) represented ~~11.6%~~12.7% of total assets at September 30, ~~2017 which was a decrease~~2019 and decreased as compared to ~~13.9%~~15.2% as of December 31, ~~2016. This reduction in liquid assets to total assets resulted primarily from loan growth and letting higher rate deposits roll off.~~2018.

The Company has been a net seller of federal funds ~~since its inception~~ and strives to maintain a position of liquidity sufficient to fund future loan demand and to satisfy fluctuations in deposit levels. Federal funds sold was $10.7 million at September 30, 2019. Should the need arise, the Company would have the capability to sell securities classified as available for sale or to borrow funds as necessary. As of September 30, ~~2017,~~2019, the Company had existing credit lines with other financial institutions to purchase up to ~~$153.0~~$243.2 million in federal funds. Also, as a member of the FHLB of Atlanta, the Company may obtain advances of up to ~~25%~~10% of total assets, subject to available collateral. A floating lien of ~~$109.3~~$112.6 million of qualifying loans is pledged to the FHLB to secure borrowings. At September 30, ~~2017,~~2019, the Company had ~~$22.4~~$45.0 million in FHLB advances outstanding. Another source of short-term borrowings is securities sold under agreements to repurchase. At September 30, ~~2017,~~2019, in addition to FHLB advances, total borrowings ~~also~~ consisted of junior subordinated debentures of $12.4 million.

Total deposits were ~~$775.0~~$987.7 million at September 30, ~~2017.~~2019. Time deposits, which are the only deposit accounts that have stated maturity dates, are generally considered to be rate sensitive. Time deposits represented ~~48.4%~~42.2% of total deposits at September 30, ~~2017.~~2019. Time deposits of $250,000 or more represented ~~11.8%~~16.0% of the Company’s total deposits at September 30, ~~2017.~~2019. At quarter-end, the Company had ~~$61.7~~$13.5 million in brokered time deposits and no brokered demand deposits. Management believes most other time deposits are relationship-oriented. While the Bank will need to pay competitive rates to retain these deposits at their maturities, there are other subjective factors that will determine their continued retention. Based upon prior experience, the Company anticipates that a substantial portion of outstanding certificates of deposit will renew upon maturity.

Management believes that current sources of funds provide adequate liquidity for the Bank’s current cash flow needs. The Company maintains minimal cash balances at the parent holding company level. Management believes that the current cash balances will provide adequate liquidity for the Company’s current cash flow needs.

Capital Resources

A significant measure of the strength of a financial institution is its capital base. Federal regulations have classified and defined capital into the following components: (1) Tier 1 capital, which includes common shareholders’ equity and qualifying preferred equity, and (2) Tier 2 capital, which includes a portion of the allowance for loan losses, certain qualifying long-term debt and preferred stock which does not qualify as Tier 1 capital. Commencing in the first quarter of 2015, financial institutions and their holding companies became subject to ~~the BASEL III~~a revised set of regulatory capital ~~requirements. A new~~requirements, due in part ~~of the capital ratios profile under~~to agreements reached by the Basel ~~III~~Committee on Banking Supervision. Under the revised capital rules, is the ~~common equity~~Common Equity Tier 1 risk-based ratio, which does not include limited life components such as trust preferred securities and SBLF preferred stock in ~~this calculation.~~the calculation, was added as part on an institution’s capital ratio profile. Minimum capital levels are regulated by risk-based capital adequacy guidelines, which require a financial institution to maintain capital as a percentage of its assets, and certain off-balance sheet items adjusted for predefined credit risk factors (risk-adjusted assets). ~~The Company’s equity to assets ratio was 11.9% at September 30, 2017.~~

As the following table indicates, at September 30, ~~2017,~~2019, the Company and the Bank both exceeded minimum regulatory capital requirements as specified in the tables below.

Actual Minimum
Select Bancorp, Inc. Ratio Requirement

Total risk-based capital ratio 14.18 % 8.00 %
Tier 1 risk-based capital ratio 13.18 % 6.00 %
Leverage ratio 12.57 % 4.00 %
Common equity Tier 1 risk-based capital ratio 11.79 % 4.50 %

	Actual			Minimum
Select Bancorp, Inc.	Ratio			Requirement
Total risk-based capital ratio		18.39	%		8.00	%
Tier 1 risk-based capital ratio		17.67	%		6.00	%
Leverage ratio		15.39	%		4.00	%
Common equity Tier 1 risk-based capital ratio		16.58	%		4.50	%

Regulatory
Actual Minimum Well-Capitalized
Select Bank & Trust Ratio Requirement Requirement

Total risk-based capital ratio 13.56 % 8.00 % 10.00 %
Tier 1 risk-based capital ratio 12.56 % 6.00 % 8.00 %
Leverage ratio 11.98 % 4.00 % 5.00 %
Common equity Tier 1 risk-based capital ratio 12.56 % 4.50 % 6.50 %

				Regulatory
	Actual			Minimum			Well-Capitalized
Select Bank & Trust	Ratio			Requirement			Requirement
Total risk-based capital ratio		15.62	%		8.00	%		10.00	%
Tier 1 risk-based capital ratio		14.89	%		6.00	%		8.00	%
Leverage ratio		12.97	%		4.00	%		5.00	%
Common equity Tier 1 risk-based capital ratio		14.89	%		4.50	%		6.50	%

During 2004, the Company issued $12.4 million of junior subordinated debentures to a newly formed subsidiary, New Century Statutory Trust I, which in turn issued $12.0 million of trust preferred securities. The proceeds from the sale of the trust preferred securities provided additional capital for the growth and expansion of the Bank. Under the current applicable regulatory guidelines, all of the proceeds from the issuance of these trust preferred securities qualify as Tier 1 capital as of September 30, ~~2017.~~2019. During the third quarter of 2018 the Company completed a common stock offering netting $59.8 million which resulted in an increase in capital ratios for the holding company. Shortly after the receipt of the common stock offering proceeds, $25.0 million was downstreamed to the Bank, increasing its capital ratios.

Management expects that the Bank will remain “well-capitalized” for regulatory purposes, although there can be no assurance that additional capital will not be required in the future.

The Company’s equity to assets ratio was 16.7% at September 30, 2019.

Item 3. Quantitative and Qualitative Disclosures about Market ~~Risk~~Risk.

The Company intends to reach its strategic financial objectives through the effective management of market risk. Like many financial institutions, the Company’s most significant market risk exposure is interest rate risk. The Company's primary goal in managing interest rate risk is to minimize the effect that changes in market interest rates have on earnings and capital. This goal is accomplished through the active management of the balance sheet. The goal of these activities is to structure the maturity and repricing ofassets and liabilities to produce stable net interest income despite changing interest rates. The Company's overall interest rate risk position is governed by policies approved by the Board of Directors and guidelines established and monitored by the Bank’s Asset/Liability Committee (“ALCO”).

To measure, monitor, and report on interest rate risk, the Company begins with two models: (1) net interest income ("NII") at risk, which measures the impact on NII over the next twelve and twenty-four months to immediate changes in interest rates and (2) net economic value of equity ("EVE"), which measures the impact on the present value of net assets to immediate changes in interest rates. NII at risk is designed to measure the potential short-term impact of changes in interest rates on NII. EVE is a long-term measure of interest rate risk to the Company's balance sheet, or equity. Gap analysis, which is the difference between the amount of balance sheet assets and liabilities repricing within a specified time period, is used as a secondary measure of the Company's interest rate risk position. All of these models are subject to ALCO guidelines and are monitored regularly.

In calculating NII at risk, the Company begins with a base amount of NII that is projected over the next twelve and twenty-four months, assuming that the balance sheet is static and the yield curve remains unchanged over the period. The current yield curve is then “shocked,” or moved immediately, ±1.0 percent, ±2.0 percent, ±3.0 percent and ±4.0 percent in a parallel fashion, or at all points along the yield curve. New twelve-month and twenty four-month NII projections are then developed using the same balance sheet but with the new yield curves and these results are compared to the base scenario. The Company also models other scenarios to evaluate potential NII at risk such as a gradual ramp in interest rates, a flattening yield curve, a steepening yield curve, and others that management deems appropriate.

EVE at risk is based on the change in the present value of all assets and liabilities under different interest rate scenarios. The present value of existing cash flows with the current yield curve serves as the base case. The Company then applies an immediate parallel shock to that yield curve of ±1.0 percent, ±2.0 percent, ±3.0 percent and ±4.0 percent and recalculates the cash flows and related present values.

Key assumptions used in the models described above include the timing of cash flows, the maturity and repricing of assets and liabilities, changes in market conditions, and interest-rate sensitivities of the Company's non-maturity deposits with respect to interest rates paid and the level of balances. These assumptions are inherently uncertain and, as a result, the models cannot precisely calculate future NII or predict the impact of changes in interest rates on NII and EVE. Actual results could differ from simulated results due to the timing, magnitude and frequency of changes in interest rates and market conditions, changes in spreads and management strategies, among other factors. Projections of NII are assessed as part of the Company's forecasting process.

NII and EVE Analysis. The following table presents the estimated exposure to NII for the next twelve months due to immediate changes in interest rates and the estimated exposure to EVE due to immediate changes in interest rates. All information is presented as of June 30, ~~2017.~~2019.

	June 30, 2017						June 30, 2019
(Dollars in thousands)	Estimated Exposure to NII			Estimated Exposure to EVE				Estimated Exposure to NII		Estimated Exposure to EVE

Immediate change in interest rates:
+ 4.0%		14.4	%		6.0	%		12.4	%	13.3	%
+ 3.0%		11.6			5.4			9.7		10.8
+ 2.0%		8.3			4.2			6.7		8.0
+ 1.0%		4.1			2.3			3.4		4.3
No change		-			-			-		-
- 1.0%		(5.0	)		(4.8	)		(2.5	)	(5.3	)

While the measures presented in the table above are not a prediction of future NII or EVE valuations, they do suggest that if all other variables remained constant, immediate increases in interest rates at all points on the yield curve may produce higher NII in the short term. Other important factors that impact the levels of NII are balance sheet size and mix, interest rate spreads, the slope of the yield curve, the speed of interest rates changes, and management actions taken in response to the preceding conditions.

Item 4. Controls and ~~Procedures~~Procedures.

Disclosure Controls and Procedures.At the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Securities Exchange Act Rule 13a-14.

Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective (1) to provide reasonable assurance that information required to be disclosed by the Company in the reports filed or submitted by it under the Securities Exchange Act was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) to provide reasonable assurance that information required to be disclosed by the Company in such reports is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow for timely decisions regarding required disclosure.

Changes in internal control over financial reporting.Management of the Company has evaluated, with the participation of the Company's Chief Executive Officer and Chief Financial Officer, changes in the Company's internal controls over financial reporting (as defined in Rule 13a−15(f) and 15d−15(f) of the Exchange Act) during the third quarter of ~~2017.~~2019. In connection with such evaluation, the Company has determined that there have been no changes in internal control over financial reporting during the third quarter of ~~2017~~2019 that have materially affected or are reasonably likely to materially affect, the Company's internal control over financial reporting.

Part II. OTHER INFORMATION

Item 1. Legal Proceedings

The discussion under the subheading “Litigation Related to the Proposed Merger” under “Note K – Subsequent Events” in the accompanying Notes to Consolidated Financial Statements included in Part I of this Report is incorporated herein by reference.

~~Except as noted in the immediately prior paragraph, the~~ Company is not currently engaged in, nor are any of its properties subject to, any material legal proceedings. From time to time, the Bank is a party to legal proceedings in the ordinary course of business wherein it attempts to collect loans, enforce its security interest in loans, or other matters of similar nature.

Item 1A. Risk Factors

~~We face additional risk of litigation due to our acquisition strategy.~~

In addition to the ordinary risk of litigation that we face in connection with our day-to-day banking activities, we also face litigation risk in connection with our strategy to grow through acquisition of other financial institutions. The Company, as well as our directors and officers and the companies we seek to acquire, may face claims from shareholders related to transaction disclosures or alleged breaches of fiduciary duties in connection with entering into such acquisition transactions. The defense or settlement of any such lawsuit or claims, or the delay that any such lawsuit may cause on the strategic acquisitions that we pursue, may adversely affect the Company’s business, financial condition, results of operations and cash flows.

~~Except as noted in the immediately prior paragraph, there are~~There have been no material changes ~~from~~to the risk factors ~~set forth under Part II, Item 1A. “Risk Factors”~~that we have previously disclosed in ~~our Quarterly~~the Company’s Annual Report on Form ~~10-Q~~10-K for the ~~quarter~~year ended ~~March~~December 31, ~~2017.~~2018.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

The Company announced a repurchase ~~program~~plan on August 31, 2016 (the “2016 Repurchase Plan”), by which management was authorized to repurchase up to 581,518 shares of Company common stock in the open market and through privately negotiated transactions. ~~There were no share~~During the three months ended September 30, 2019, the Company exhausted its available repurchases under the 2016 Repurchase Plan. On September 17, 2019, the Company announced that its Board of Directors approved a new stock repurchase ~~transactions conducted~~plan (the “2019 Repurchase Plan”). Under the 2019 Repurchase Plan, the Company is authorized to repurchase up to 937,248 outstanding shares of its common stock in the open market or through privately negotiated transactions.

Share repurchase activity for the 2016 Repurchase Plan during the ~~three-month period covered by this Report.~~three months ended September 30, 2019 was as follows:

Issuer Purchases of Equity Securities

Period Total number of
Shares
Purchased
Average Price
Paid Per Share
Total Number of
Shares Purchased
as Part of Publicly
Announced Plan Maximum Number
of Shares that May
Yet Be Purchased
Under the Plan
July 1-31, 2019 - - - 517,022
August 1-31, 2019 428,492 10.78 428,492 88,530
September 1-30, 2019 (Plan 1) 88,530 10.90 517,022 -
September 17-30, 2019 (Plan 2) 231,889 11.30 231,889 705,359

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information
59

None.

Item 6. ~~Exhibits~~Exhibits.

Exhibit Index

Incorporated by Reference
(Unless Otherwise Indicated)

Incorporated by Reference
(Unless Otherwise Indicated)
Exhibit No. Description of Exhibit Form Exhibit Filing
Date
SEC
File No.
Description of Exhibit Form Exhibit Filing
Date
SEC
File No.

2.1 Agreement and Plan of Merger and Reorganization by and among Select Bancorp, Inc., Select Bank & Trust Company, Premara Financial, Inc., and Carolina Premier Bank dated as of July 20, 2017 8-K 2.1 07/26/17 000-50400
10.1 2019 Supplemental Executive Retirement Agreement dated September 23, 2019, with William L. Hedgepeth II 8-K 10.1 09/24/19 000-50400

10.2 2019 Supplemental Executive Retirement Agreement dated September 23, 2019, with Lynn L. Johnson 8-K 10.2 09/24/19 000-50400

31.1 Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act Filed herewith Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act Filed herewith

31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act Filed herewith Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act Filed herewith

32.1 Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act Furnished herewith Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act Furnished herewith

32.2 Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act Furnished herewith Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act Furnished herewith

101 Interactive data files providing financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2017, in XBRL (eXtensible Business Reporting Language) Filed herewith Interactive data files providing financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2019, in XBRL (eXtensible Business Reporting Language) Filed herewith

60
55

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

SELECT BANCORP, INC.

Date: November ~~9, 2017~~6, 2019 By: /s/ William L. Hedgepeth II
William L. Hedgepeth II
President and Chief Executive Officer

Date: November ~~9, 2017~~6, 2019 By: /s/ Mark A. Jeffries
Mark A. Jeffries
Executive Vice President and Chief Financial Officer

61

North Carolina		20-0218264
(State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)


700 W. Cumberland Street
Dunn, North Carolina		28334
(Address of principal executive offices)		(Zip Code)

		Page No.

Part I.	FINANCIAL INFORMATION

Item 1 -	Financial Statements(Unaudited)

	Consolidated Balance Sheets September 30, ~~2017~~2019 and December 31, ~~2016~~2018	3

	Consolidated Statements of Operations Three Months and Nine Months Ended September 30, ~~2017~~2019 and ~~2016~~2018	4

	Consolidated Statements of Comprehensive Income Three Months and Nine Months Ended September 30, ~~2017~~2019 and ~~2016~~2018	5

	Consolidated Statements of Changes in Shareholders’ Equity ~~Nine~~ Three Months Ended March 31, 2019 and 2018, Three Months Ended June 30, 2019 and 2018 and Three Months Ended September 30, ~~2017~~2019 and ~~2016~~2018	6

	Consolidated Statements of Cash Flows Nine Months Ended September 30, ~~2017~~2019 and ~~2016~~2018	78

	Notes to Consolidated Financial Statements	910

Item 2 -	Management’s Discussion and Analysis of Financial Condition andResults of Operations	4638

Item 3 -	Quantitative and Qualitative Disclosures about Market Risk	5753

Item 4 -	Controls and Procedures	5853

Part II.	OTHER INFORMATION

Item 1 -	Legal Proceedings	5954

Item 1A -	Risk Factors	5954

Item 2 -	Unregistered Sales of Equity Securities and Use of Proceeds	5954

Item 3 -	Defaults Upon Senior Securities	5954

Item 4 -	Mine Safety Disclosures	5954

Item 5-	Other Information	55

Item 6 -	Exhibits	6055

	Signatures	6156

	September 30, 2017			December 31,
	(Unaudited)			2016*
	(In thousands, except share
	and per share data)
ASSETS
Cash and due from banks	$	15,518		$	14,372
Interest-earning deposits in other banks		36,793			40,342
Certificates of deposit		1,000			1,000
Investment securities available for sale, at fair value		53,705			62,257
Loans		763,432			677,195
Allowance for loan losses		(8,647	)		(8,411	)
NET LOANS		754,785			668,784
Accrued interest receivable		2,949			2,768
Stock in Federal Home Loan Bank of Atlanta (“FHLB”), at cost		1,712			2,251
Other non-marketable securities		630			703
Foreclosed real estate		2,093			599
Premises and equipment, net		17,353			17,931
Bank owned life insurance		22,610			22,183
Goodwill		6,931			6,931
Core deposit intangible (“CDI”)		547			810
Assets held for sale		846			846
Other assets		5,277			4,863
TOTAL ASSETS	$	922,749		$	846,640
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Demand	$	173,231		$	163,569
Savings		34,214			38,394
Money market and NOW		192,685			174,205
Time		374,892			303,493
TOTAL DEPOSITS		775,022			679,661
Short-term debt		22,366			37,090
Long-term debt		12,372			23,039
Accrued interest payable		302			221
Accrued expenses and other liabilities		2,868			2,356
TOTAL LIABILITIES		812,930			742,367
Shareholders’ Equity:
Preferred stock, no par value, 5,000,000 shares authorized; 0 shares issued and outstanding at September 30, 2017 and December 31, 2016		-			-
Common stock, $1.00 par value, 25,000,000 shares authorized; 11,662,621 and 11,645,413 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively		11,663			11,645
Additional paid-in capital		69,753			69,597
Retained earnings		27,903			22,673
Common stock issued to deferred compensation trust, at cost; 286,432 and 280,432 shares at September 30, 2017 and December 31, 2016, respectively		(2,413	)		(2,340	)
Directors’ Deferred Compensation Plan Rabbi Trust		2,413			2,340
Accumulated other comprehensive income		500			358
TOTAL SHAREHOLDERS’ EQUITY		109,819			104,273
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	922,749		$	846,640

	September 30, 2019			December 31,
	(Unaudited)			2018*
	(In thousands, except share and per share data)
ASSETS
Cash and due from banks	$	20,052		$	17,059
Interest-earning deposits in other banks		53,093			121,303
Certificates of deposit		500			1,000
Federal funds sold		10,728			-
Investment securities available for sale, at fair value		76,941			51,533
Loans held for sale		1,714			580
Loans		1,014,928			986,040
Allowance for loan losses		(8,056	)		(8,669	)

NET LOANS		1,006,872			977,371

Accrued interest receivable		3,902			3,889
Stock in Federal Home Loan Bank of Atlanta (“FHLB”), at cost		3,045			3,283
Other non-marketable securities		719			762
Foreclosed real estate		1,442			1,088
Premises and equipment, net		18,150			17,920
Right of use lease asset		8,776			-
Bank owned life insurance		29,621			29,117
Goodwill		24,579			24,579
Core deposit intangible (“CDI”)		1,803			2,085
Assets held for sale		-			668
Other assets		7,697			6,288

TOTAL ASSETS	$	1,269,634		$	1,258,525

LIABILITIES AND SHAREHOLDERS’ EQUITY

Deposits:
Demand	$	243,889		$	247,007
Savings		43,355			51,811
Money market and NOW		283,414			254,482
Time		417,015			427,127

TOTAL DEPOSITS		987,673			980,427

Short-term debt		-			7,000
Long-term debt		57,372			57,372
Lease liability		8,951			-
Accrued interest payable		596			667
Accrued expenses and other liabilities		2,993			3,448

TOTAL LIABILITIES		1,057,585			1,048,914
Shareholders’ Equity:
Preferred stock, no par value, 5,000,000 shares authorized; 0 shares issued and outstanding at September 30, 2019 and December 31, 2018		-			-
Common stock, $1.00 par value, 50,000,000 shares authorized; 18,513,078 and 19,311,505 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively		18,513			19,312
Additional paid-in capital		142,878			150,718
Retained earnings		49,634			39,640
Common stock issued to deferred compensation trust, at cost; 312,956 and 303,239 shares outstanding at September 30, 2019 and December 31, 2018, respectively		(2,730	)		(2,615	)
Directors’ Deferred Compensation Plan Rabbi Trust		2,730			2,615
Accumulated other comprehensive income (loss)		1,024			(59	)

TOTAL SHAREHOLDERS’ EQUITY		212,049			209,611

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,269,634		$	1,258,525


Non-accelerated filer¨~~(Do not check if a smaller reporting company)~~	Smaller reporting companyx¨
	Emerging growth company¨

																Common
																Stock
																Issued					Accumulated
											Additional					to Deferred					Other		Total
	Preferred Stock						Common Stock				paid-in		Retained			Compensation			Deferred		Comprehensive		Shareholders’
	Shares			Amount			Shares		Amount		Capital		Earnings			Trust			Comp Plan		Income		Equity
Balance at December 31, 2015		7,645		$	7,645			11,583,011	$	11,583	$	69,061	$	15,923		$	(2,139	)	$	2,139	$	490	$	104,702
Net income		-			-			-		-		-		5,149			-			-		-		5,149
Other comprehensive income, net		-			-			-		-		-		-			-			-		526		526
Preferred stock dividends paid		-			-			-		-		-		(4	)		-			-		-		(4	)
Preferred stock redemption		(7,645	)		(7,645	)		-		-		-		-			-			-		-		(7,645	)
Stock option exercises		-			-			49,181		49		361		-			-			-		-		410
Stock based compensation		-			-			-		-		53		-			-			-		-		53
Director equity incentive plan, net		-			-			-		-		-		-			(122	)		122		-		-
Balance at September 30, 2016		-		$	-			11,632,192	$	11,632	$	69,475	$	21,068		$	(2,261	)	$	2,261	$	1,016	$	103,191


Balance at December 31, 2016		-		$	-			11,645,413	$	11,645	$	69,597	$	22,673		$	(2,340	)	$	2,340	$	358	$	104,273
Net income		-			-			-		-		-		5,230			-			-		-		5,230
Other comprehensive income, net		-			-			-		-		-		-			-			-		142		142
Stock option exercises		-			-			17,208		18		86		-			-			-		-		104
Stock based compensation		-			-			-		-		70		-			-			-		-		70
Director equity incentive plan, net		-			-			-		-		-		-			(73	)		73		-		-
Balance at September 30, 2017		-		$	-			11,662,621	$	11,663	$	69,753	$	27,903		$	(2,413	)	$	2,413	$	500	$	109,819

			Quoted Prices in		Significant
Investment securities			Active Markets		Other		Significant
available for sale			for Identical		Observable		Unobservable
September 30, 2017	Fair value		Assets (Level 1)		Inputs (Level 2)		Inputs (Level 3)

U.S. government agencies – GSE's	$	10,644	$	-	$	10,644	$	-
Mortgage-backed securities - GSE's		28,939		-		28,939		-
Municipal bonds		14,122		-		14,122		-

Total	$	53,705	$	-	$	53,705	$	-

Investment securities available for sale September 30, 2019	Fair value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
U.S. government agencies-GSEs	$	10,381	$	-	$	10,381	$	-
Mortgage-backed securities-GSEs		52,104		-		52,104		-
Corporate bonds		1,553		-		1,553		-
Municipal bonds		12,903		-		12,903		-
Total investment AFS	$	76,941	$	-	$	76,941	$	-

							Three months ended				Nine months ended
	As of September 30, 2017						September 30, 2017				September 30, 2017
			Contractual						Interest Income				Interest Income
			Unpaid				Average		Recognized on		Average		Recognized on
	Recorded		Principal		Related		Recorded		Impaired		Recorded		Impaired
	Investment		Balance		Allowance		Investment		Loans		Investment		Loans
	(In thousands)
With no related allowance recorded:
Commercial and industrial	$	1,043	$	1,053	$	-	$	1,048	$	12	$	1,114	$	51
Construction		253		337		-		209		9		242		15
Commercial real estate		3,226		4,663		-		3,564		33		3,909		147
Loans to individuals & overdrafts		-		-		-		-		-		-		-
Multi-family residential		-		-		-		24		-		173		-
1-to-4 family residential		1,159		1,378		-		1,191		16		1,080		49
HELOC		746		934		-		697		10		893		32
Subtotal:		6,427		8,365		-		6,733		80		7,411		294
With an allowance recorded:
Commercial and industrial		-		-		-		-		-		1		-
Construction		-		-		-		-		-		-		-
Commercial real estate		766		822		6		698		18		1,631		38
Loans to individuals & overdrafts		-		-		-		-		-		-		-
Multi-family residential		-		-		-		-		-		-		-
1-to-4 family residential		283		282		14		291		2		289		12
HELOC		33		35		-		33		-		34		-
Subtotal:		1,082		1,139		20		1,022		20		1,955		50
Totals:
Commercial		5,288		6,875		6		5,543		72		7,070		251
Consumer		-		-		-		-		-		-		-
Residential		2,221		2,629		14		2,212		28		2,296		93
Grand Total:	$	7,509	$	9,504	$	20	$	7,755	$	100	$	9,366	$	344

	Three months ended September 30, 2016						Nine months ended September 30, 2016
			Pre-		Post-				Pre-		Post-
			Modification		Modification				Modification		Modification
			Outstanding		Outstanding				Outstanding		Outstanding
	Number		Recorded		Recorded		Number		Recorded		Recorded
	of loans		Investment		Investment		of loans		Investment		Investment
	(Dollars in thousands)
Extended payment terms:
1-to-4 family residential		-	$	-	$	-		2	$	100	$	48
Commercial & industrial		-		-		-		3		296		188
Construction		1		139		68		1		139		68
Loans to individuals		-		-		-		1		4		1

Total		1	$	139	$	68		7	$	539	$	305

September 30, 2017
Commercial
Credit
Exposure By	Commercial				Commercial
Internally	and				real		Multi-family
Assigned Grade	industrial		Construction		estate		residential
(In thousands)

Superior	$	570	$	-	$	-	$	-
Very good		1,132		145		431		-
Good		9,753		11,004		39,394		10,831
Acceptable		30,727		22,648		164,391		42,710
Acceptable with care		40,314		112,706		89,080		18,460
Special mention		1,780		736		4,717		-
Substandard		287		318		3,542		237
Doubtful		-		-		-		-
Loss		-		-		-		-
	$	84,563	$	147,557	$	301,555	$	72,238

	December 31, 2016
	Remaining Contractual Maturity of the Agreements
	Overnight and		Up to 30		30-90		Greater than
(in thousands)	continuous		Days		Days		90 Days		Total
Repurchase agreements
U.S. government agencies-GSE’s	$	5,568	$	-	$	-	$	-	$	5,568
Mortgage-backed Securities-GSEs		6,496		-		-		-		6,496
Total borrowings	$	12,064	$	-	$	-	$	-	$	12,064
Gross amount of recognized liabilities for repurchase agreements									$	12,003

	As of
	September 30,			December 31,
	2017			2016
	(Dollars in thousands)

Non-accrual loans	$	2,013		$	5,805
Accruing TDRs		4,140			3,625
Total non-performing loans		6,153			9,430
Foreclosed real estate		2,093			599
Total non-performing assets	$	8,246		$	10,029

Accruing loans past due 90 days or more	$	663		$	529
Allowance for loan losses	$	8,647		$	8,411

Non-performing loans to period end loans		0.81	%		1.39	%
Non-performing loans and accruing loans past due 90 days or more to period end loans		0.89	%		1.47	%
Allowance for loans losses to period end loans		1.13	%		1.24	%
Allowance for loan losses to non-performing loans		141	%		89	%
Allowance for loan losses to non-performing assets		105	%		84	%
Allowance for loan losses to non-performing assets and accruing loans past due 90 days or more		97	%		80	%
Non-performing assets to total assets		0.89	%		1.18	%
Non-performing assets and accruing loans past due 90 days or more to total assets		0.97	%		1.25	%

Period	Total number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan		Maximum Number of Shares that May Yet Be Purchased Under the Plan
July 1-31, 2019		-		-		-		517,022
August 1-31, 2019		428,492		10.78		428,492		88,530
September 1-30, 2019 (Plan 1)		88,530		10.90		517,022		-
September 17-30, 2019 (Plan 2)		231,889		11.30		231,889		705,359

	SELECT BANCORP, INC.


Date: November ~~9, 2017~~6, 2019	By:	/s/ William L. Hedgepeth II
		William L. Hedgepeth II
		President and Chief Executive Officer


Date: November ~~9, 2017~~6, 2019	By:	/s/ Mark A. Jeffries
		Mark A. Jeffries
		Executive Vice President and Chief Financial Officer