Carolina Financial 8K oration Reports Results for First Quarter of 2018 | CARO 30 Apr 18

Exhibit 99.1

Carolina Financial Corporation Reports Results for First Quarter of 2018

NEWS RELEASE – For Release April 30, 2018 4:00PM

For More Information, Contact:

William A. Gehman III, EVP and CFO, 843.723.7700

Charleston, S.C. April 30, 2018- Carolina Financial Corporation (the “Company”) (NASDAQ: CARO) today announced financial results for the first quarter of 2018.

Financial highlights at and for the three months ended March 31, 2018, include:

Net income for the first quarter 2018 was $4.1 million, or $0.19 per diluted share, down from $4.9 million, or $0.35 per diluted share for the first quarter of 2017. Included in net income are pretax merger-related expenses of $14.7 million for the first quarter of 2018 compared to $1.3 million for the first quarter of 2017.

Operating earnings for the first quarter of 2018, which exclude certain non-operating income and expenses, increased 160.0% to $14.9 million, or $0.71 per diluted share, from $5.8 million, or $0.41 per diluted share, from the first quarter of 2017.

Operating earnings for Q1 2018 have been adjusted to eliminate the following significant items:

Pretax merger-related expenses of $14.7 million.

The fair value gain on interest rate swaps of $803,000.

The loss on sale of securities of $697,000.

Performance ratios Q1 2018 compared to Q1 2017:

Return on average assets was 0.46% compared to 1.11%.

Operating return on average assets was 1.70% compared to 1.30%.

Return on average tangible equity was 4.90% compared to 9.98%.

Operating return on average tangible equity was 18.06% compared to 11.70%.

Loans receivable, gross grew $60.5 million, or at an annualized rate of 10.4%, since December 31, 2017.

Nonperforming assets to total assets were 0.30% at March 31, 2018 compared to 0.20% at December 31, 2017.

Total deposits increased $72.0 million since December 31, 2017. Core deposits increased $39.8 million since December 31, 2017.

The Company completed the operational integration of the First South acquisition during Q1 2018.

As a result of the Tax Cuts and Jobs Act of 2017, income taxes reflect the effects of the corporate Federal tax rate reduction to 21% in Q1 2018 compared to 35% in Q1 2017.

“We continue to see the impact of solid organic growth and strategic acquisitions on earnings. Overall operating results for the first quarter of 2018 continued to improve with an increase in operating earnings of 160.0% compared to the first quarter of 2017. We also completed the integration of the First South acquisition,” stated Jerry Rexroad, the Company’s Chief Executive Officer.

Financial Results

Carolina Financial Corporation

The Company reported net income for the three months ended March 31, 2018 of $4.1 million, or $0.19 per diluted share, as compared to $4.9 million, or $0.35 per diluted share, for the three months ended March 31, 2017. Included in net income for the three months ended March 31, 2018 were pretax merger-related expenses of $14.7 million, primarily related to vendor contract termination charges, compared to $1.3 million for the three months ended March 31, 2017.

Operating earnings for the first quarter of 2018, which exclude certain non-operating income and expenses, increased 160.0% to $14.9 million, or $0.71 per diluted share, from $5.7 million, or $0.41 per diluted share, from the first quarter of 2017.

The Company’s net interest margin-tax equivalent increased to 4.20% for the first quarter of 2018 compared to 3.93% for the first quarter of 2017 and 4.19% for the fourth quarter of 2017.

The Company reported book value per common share of $22.71 and $22.76 as of March 31, 2018 and December 31, 2017, respectively. Tangible book value per common share was $15.71 as of March 31, 2018 and December 31, 2017.

At March 31, 2018, the Company’s regulatory capital ratios exceeded the minimum levels currently required. Stockholders’ equity totaled $475.0 million as of March 31, 2018 compared to $475.4 million at December 31, 2017. Tangible equity to tangible assets at March 31, 2018 and December 31, 2017 was 9.7%.

Community Banking

Community banking segment net income was $4.0 million for the three months ended March 31, 2018 compared to $4.5 million for the three months ended March 31, 2017. Included in net income for the three months ended March 31, 2018 were pretax merger-related expenses of $14.7 million, compared to $1.3 million for the three months ended March 31, 2017.

Community banking segment operating earnings increased 178.8% to $14.9 million for the three months ended March 31, 2018 compared to $5.3 million for the three months ended March 31, 2017.

There was no provision for loan loss during the three months ended March 31, 2018 and 2017. Asset quality and historical loss experience continue to remain favorable. In addition, the Company had net recoveries of loans previously charged off of $1.2 million and $27,000 during the three months ended March 31, 2018 and 2017, respectively.

Non-performing assets were 0.30% and 0.20% of total assets at March 31, 2018 and December 31, 2017, respectively.

Loans receivable, gross increased to $2.4 billion at March 31, 2018 compared to $2.3 billion at December 31, 2017. Loans increased $60.5 million, or 10.4% annualized over December 31, 2017.

Total deposits increased $72.0 million since December 31, 2017. As of March 31, 2018 and December 31, 2017, core deposits, defined as checking, savings and money market,comprised approximately 66.6% and 66.9%, respectively, of total deposits.

Wholesale Mortgage Banking

Net income for the wholesale mortgage banking segment was $562,000 for the three months ended March 31, 2018 compared to $645,000 for the three months ended March 31, 2017.

Net margin was 1.74% for the three months ended March 31, 2018 compared to 1.80% for the three months ended March 31, 2017. Originations for the three months ended March 31, 2018 and 2017 were $180.5 million and $180.8 million, respectively.

Dividend Declared

On April 25, 2018, the Company declared a $0.06 dividend per common share, payable on July 6, 2018, to stockholders of record on June 15, 2018.

Conference Call

A conference call will be held at 10:00 a.m., Eastern Time on May 1, 2018. The conference call can be accessed by dialing (866) 464-9448 or (213) 660-0874 and requesting the Carolina Financial Corporation first quarter earnings call. The conference ID number is 4788606. Listeners should dial in 10 minutes prior to the start of the call. The live webcast and presentation slides will be available on www.haveanicebank.com under Investor Relations, “Investor Presentations.”

A replay of the webcast will be available on www.haveanicebank.com under Investor Relations, “Investor Presentations” approximately three hours after the call and can be accessed by dialing (855) 859-2056 or (404) 537-3406 and requesting conference number 4788606.

About Carolina Financial Corporation

Carolina Financial Corporation (NASDAQ: CARO) is the holding company of CresCom Bank, which also owns and operates Atlanta-based Crescent Mortgage Company. As of March 31, 2018, Carolina Financial Corporation had approximately $3.6 billion in total assets and Crescent Mortgage Company was licensed to originate loans in 47 states, partnering with community banks, credit unions and mortgage brokers.

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

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

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

Forward-Looking Statements

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

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: (1) competitive pressures among depository and other financial institutions may increase significantly and have an effect on pricing, spending, fourth-party relationships and revenues; (2) the strength of the United States economy in general and the strength of the local economies in which we conduct operations may be different than expected resulting in, among other things, a deterioration in the credit quality or a reduced demand for credit, including the resultant effect on the Company’s loan portfolio and allowance for loan losses; (3) the rate of delinquencies and amounts of charge-offs, the level of allowance for loan loss, the rates of loan growth, or adverse changes in asset quality in our loan portfolio, which may result in increased credit risk-related losses and expenses; (4) the risk that the preliminary financial information reported herein and our current preliminary analysis will be different when our review is finalized; (5) changes in the U.S. legal and regulatory framework including, but not limited to, the Dodd-Frank Act, the Tax Cuts and Jobs Act of 2017 and regulations adopted thereunder; (6) adverse conditions in the stock market, the public debt market and other capital markets (including changes in interest rate conditions) could have a negative impact on the Company; (7)the business related to acquisitions may not be integrated successfully or such integration may take longer to accomplish than expected; (8) the expected cost savings and any revenue synergies from acquisitions may not be fully realized within expected timeframes; and (9) disruption from acquisitions may make it more difficult to maintain relationships with clients, associates, or suppliers. Additional factors that could cause our results to differ materially from those described in the forward-looking statements can be found in our reports (such as our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K) filed with the SEC and available at the SEC’s Internet site (http://www.sec.gov). All subsequent written and oral forward-looking statements concerning the Company or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above. We do not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statements are made.

###

CAROLINA FINANCIAL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31, 2018			December 31, 2017
	(Unaudited)			(Audited)
	(Dollars in thousands)
ASSETS
Cash and due from banks	$	25,761			25,254
Interest-bearing cash		35,603			55,998
Cash and cash equivalents		61,364			81,252
Securities available-for-sale		753,363			743,239
Federal Home Loan Bank stock, at cost		17,913			19,065
Other investments		3,432			3,446
Derivative assets		4,913			2,803
Loans held for sale		24,618			35,292
Loans receivable, gross		2,380,018			2,319,528
Allowance for loan losses		(12,708	)		(11,478	)
Loans receivable, net		2,367,310			2,308,050

Premises and equipment, net		62,593			61,407
Accrued interest receivable		11,502			11,992
Real estate acquired through foreclosure, net		1,963			3,106
Deferred tax assets, net		4,952			2,436
Mortgage servicing rights		21,719			21,003
Cash value life insurance		57,604			57,195
Core deposit intangible		18,795			19,601
Goodwill		127,592			127,592
Other assets		13,443			21,538
Total assets	$	3,553,076			3,519,017

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Noninterest-bearing deposits	$	547,744			525,615
Interest-bearing deposits		2,129,225			2,079,314
Total deposits		2,676,969			2,604,929
Short-term borrowed funds		308,500			340,500
Long-term debt		67,303			72,259
Derivative liabilities		164			156
Drafts outstanding		10,133			7,324
Advances from borrowers for insurance and taxes		3,302			3,005
Accrued interest payable		1,288			1,126
Reserve for mortgage repurchase losses		1,742			1,892
Dividends payable to stockholders		1,053			1,051
Accrued expenses and other liabilities		7,576			11,394
Total liabilities		3,078,030			3,043,636
Commitments and contingencies
Stockholders’ equity:
Preferred stock		—			—
Common stock		210			210
Additional paid-in capital		348,622			348,037
Retained earnings		126,262			123,537
Accumulated other comprehensive (loss) income, net of tax		(48	)		3,597
Total stockholders’ equity		475,046			475,381
Total liabilities and stockholders’ equity	$	3,553,076			3,519,017

CAROLINA FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	For the Three Months
	Ended March 31,
	2018			2017
	(In thousands, except share data)
Interest income
Loans	$	31,663			14,968
Investment securities		5,707			2,553
Dividends from Federal Home Loan Bank stock		175			101
Other interest income		131			48
Total interest income		37,676			17,670
Interest expense
Deposits		3,642			1,692
Short-term borrowed funds		1,253			355
Long-term debt		650			353
Total interest expense		5,545			2,400
Net interest income		32,131			15,270
Provision for loan losses		—			—
Net interest income after provision for loan losses		32,131			15,270
Noninterest income
Mortgage banking income		3,801			3,608
Deposit service charges		2,024			858
Net gain (loss) on sale of securities		(697	)		185
Fair value adjustments on interest rate swaps		803			(58	)
Net increase in cash value life insurance		390			211
Mortgage loan servicing income		2,025			1,566
Other		1,702			861
Total noninterest income		10,048			7,231
Noninterest expense
Salaries and employee benefits		13,668			8,609
Occupancy and equipment		3,652			2,182
Marketing and public relations		376			381
FDIC insurance		255			100
Recovery of mortgage loan repurchase losses		(150	)		(225	)
Legal expense		76			65
Other real estate (income) expense, net		(94	)		20
Mortgage subservicing expense		565			486
Amortization of mortgage servicing rights		979			669
Merger related expenses		14,710			1,319
Other		3,561			1,980
Total noninterest expense		37,598			15,586
Income before income taxes		4,581			6,915
Income tax expense		525			2,011
Net income	$	4,056			4,904

Earnings per common share:
Basic	$	0.19			0.35
Diluted	$	0.19			0.35
Weighted average common shares outstanding:
Basic		20,908,225			13,919,711
Diluted		21,119,316			14,139,241

CAROLINA FINANCIAL CORPORATION

(Unaudited)

(Dollars in thousands)


	At or for the Three Months Ended
Selected Financial Data:	March 31, 2018			December 31, 2017			September 30, 2017			June 30, 2017			March 31, 2017

Selected Average Balances:
Total assets	$	3,522,407			3,048,214			2,230,586			2,166,803			1,768,323
Investment securities and FHLB stock		770,161			647,276			521,569			510,706			373,551
Loans receivable, net		2,322,203			2,003,429			1,463,771			1,412,940			1,214,777
Loans held for sale		21,645			25,001			27,282			22,412			17,827
Deposits		2,616,640			2,352,303			1,710,263			1,633,285			1,330,805
Stockholders’ equity		477,830			380,529			286,524			277,708			210,071

Performance Ratios (annualized):
Return on average stockholders’ equity		3.40	%		6.65	%		11.16	%		13.45	%		9.34	%
Return on average tangible equity (Non-GAAP)		4.90	%		8.78	%		13.24	%		16.02	%		9.98	%
Return on average assets		0.46	%		0.83	%		1.43	%		1.72	%		1.11	%
Operating return on average stockholders’ equity (Non-GAAP)		12.51	%		11.69	%		11.02	%		13.15	%		10.95	%
Operating return on average tangible equity (Non-GAAP)		18.06	%		15.44	%		13.08	%		15.65	%		11.70	%
Operating return on average assets (Non-GAAP)		1.70	%		1.46	%		1.42	%		1.69	%		1.30	%
Average earning assets to average total assets		89.28	%		89.25	%		91.09	%		90.68	%		91.99	%
Average loans receivable to average deposits		88.75	%		85.17	%		85.59	%		86.51	%		91.28	%
Average stockholders’ equity to average assets		13.57	%		12.48	%		12.85	%		12.82	%		11.88	%
Net interest margin-tax equivalent (1)		4.20	%		4.19	%		3.94	%		4.03	%		3.93	%
Net charge-offs (recovery) to average loans receivable		(0.21	)%		0.02	%		0.02	%		(0.01	)%		(0.01	)%
Nonperforming assets to period end loans receivable		0.45	%		0.30	%		0.44	%		0.48	%		0.52	%
Nonperforming assets to total assets		0.30	%		0.20	%		0.29	%		0.31	%		0.34	%
Nonperforming loans to total loans		0.36	%		0.17	%		0.33	%		0.38	%		0.42	%
Allowance for loan losses as a percentage of gross loans receivable (end of period) (2)		0.53	%		0.49	%		0.72	%		0.75	%		0.76	%
Allowance for loan losses as a percentage of non-acquired loans receivable (Non-GAAP)		0.85	%		0.80	%		0.87	%		0.93	%		0.96	%
Allowance for loan losses as a percentage of nonperforming loans (2)		146.93	%		291.81	%		216.53	%		196.85	%		180.66	%

Nonperforming Assets:
Nonacquired loans 90 days or more past due and still accruing	$	—			—			—			—			—
Nonacquired nonaccrual loans		8,649			3,934			4,924			5,461			5,931
Total nonperforming loans		8,649			3,934			4,924			5,461			5,931
Real estate acquired through foreclosure, net		1,963			3,106			1,640			1,417			1,479
Total nonperforming assets	$	10,612			7,040			6,564			6,878			7,410

(1) Net interest margin-tax equivalent reflects tax-exempt income on a tax-equivalent basis.

(2) Acquired loans represent 36.8%, 41.1%, 17.3%, 19.4%, and 21.4% of gross loans receivable at March 31, 2018, December 31, 2017, September 30, 2017, June 30, 2017, March 31, 2017, respectively.

Carolina Financial Corporation

Segment Information

(Unaudited)

(Dollars in thousands)

	For the Three Months Ended
	March 31, 2018			December 31, 2017		September 30, 2017			June 30, 2017			March 31, 2017
Segment net income:
Community banking	$	3,984			6,050		7,837			8,443			4,509
Wholesale mortgage banking		562			118		449			1,238			645
Other		(497	)		124		(320	)		(346	)		(244	)
Eliminations		7			36		27			5			(6	)
Total net income	$	4,056			6,328		7,993			9,340			4,904

	For the Three Months Ended March 31, 2018
	Community		Mortgage
	Banking		Banking		Other			Eliminations			Total
Interest income	$	37,257		431		13			(25	)		37,676
Interest expense		5,084		53		461			(53	)		5,545
Net interest income (expense)		32,173		378		(448	)		28			32,131
Provision for (recovery of) loan losses		—		—		—			—			—
Noninterest income from external customers		5,059		4,924		65			—			10,048
Intersegment noninterest income		242		17		—			(259	)		—
Noninterest expense		32,929		4,389		280			—			37,598
Intersegment noninterest expense		—		240		2			(242	)		—
Income (loss) before income taxes		4,545		690		(665	)		11			4,581
Income tax expense (benefit)		561		128		(168	)		4			525
Net income (loss)	$	3,984		562		(497	)		7			4,056

	For the Three Months Ended March 31, 2017
	Community		Mortgage
	Banking		Banking		Other			Eliminations			Total
Interest income	$	17,257		395		6			12			17,670
Interest expense		2,218		12		182			(12	)		2,400
Net interest income (expense)		15,039		383		(176	)		24			15,270
Provision for (recovery of) loan losses		—		—		—			—			—
Noninterest income from external customers		2,419		4,812		—			—			7,231
Intersegment noninterest income		242		34		—			(276	)		—
Noninterest expense		11,324		4,053		209			—			15,586
Intersegment noninterest expense		—		240		2			(242	)		—
Income (loss) before income taxes		6,376		936		(387	)		(10	)		6,915
Income tax expense (benefit)		1,867		291		(143	)		(4	)		2,011
Net income (loss)	$	4,509		645		(244	)		(6	)		4,904

	For the Three Months Ended March 31,
	Loan Originations				Mortgage Banking Income				Margin
	2018		2017		2018		2017		2018			2017
Additional segment information:
Community banking	$	31,427		14,753		653		358		2.08	%		2.43	%
Wholesale mortgage banking		180,494		180,830		3,148		3,250		1.74	%		1.80	%
Total	$	211,921		195,583		3,801		3,608		1.79	%		1.84	%

Carolina Financial Corporation

Reconciliation of Non-GAAP Financial Measures - Consolidated

(Unaudited)

(In thousands, except share data)

	At the Month Ended
	March 31,		December 31,		September 30,		June 30,		March 31,
	2018		2017		2017		2017		2017

Core deposits:
Noninterest-bearing demand accounts	$	547,744		525,615		333,267		330,641		298,365
Interest-bearing demand accounts		558,942		551,308		309,241		298,123		309,961
Savings accounts		212,249		213,142		69,552		70,336		66,506
Money market accounts		463,676		452,734		377,754		380,108		363,600
Total core deposits (Non-GAAP)		1,782,611		1,742,799		1,089,814		1,079,208		1,038,432

Certificates of deposit:
Less than $250,000		791,789		755,887		567,483		539,177		524,836
$250,000 or more		102,569		106,243		50,357		45,344		44,452
Total certificates of deposit		894,358		862,130		617,840		584,521		569,288
Total deposits	$	2,676,969		2,604,929		1,707,654		1,663,729		1,607,720

	At the Month Ended
	March 31,			December 31,			September 30,			June 30,			March 31,
	2018			2017			2017			2017			2017

Tangible book value per share:
Total stockholders’ equity	$	475,046			475,381			290,224			281,818			271,454
Less intangible assets		(146,387	)		(147,193	)		(44,953	)		(45,123	)		(45,292	)
Tangible common equity (Non-GAAP)	$	328,659			328,188			245,271			236,695			226,162

Issued and outstanding shares		21,057,539			21,022,202			16,159,309			16,156,943			16,185,408
Less nonvested restricted stock awards		(136,395	)		(134,302	)		(99,639	)		(101,489	)		(227,439	)
Period end dilutive shares		20,921,144			20,887,900			16,059,670			16,055,454			15,957,969

Total stockholders’ equity	$	475,046			475,381			290,224			281,818			271,454
Divided by period end dilutive shares		20,921,144			20,887,900			16,059,670			16,055,454			15,957,969
Common book value per share	$	22.71			22.76			18.07			17.55			17.01

Tangible common equity (Non-GAAP)	$	328,659			328,188			245,271			236,695			226,162
Divided by period end dilutive shares		20,921,144			20,887,900			16,059,670			16,055,454			15,957,969
Tangible common book value per share (Non-GAAP)	$	15.71			15.71			15.27			14.74			14.17

	At the Month Ended
	March 31,			December 31,			September 30,			June 30,			March 31,
	2018			2017			2017			2017			2017
Acquired and non-acquired loans:
Acquired loans receivable	$	877,012			952,220			257,461			278,275			303,244
Non-acquired loans receivable		1,503,006			1,367,308			1,227,000			1,157,145			1,113,766
Total loans receivable	$	2,380,018			2,319,528			1,484,461			1,435,420			1,417,010
% Acquired		36.85	%		41.05	%		17.34	%		19.39	%		21.40	%

Non-acquired loans	$	1,503,006			1,367,308			1,227,000			1,157,145			1,113,766
Allowance for loan losses		12,708			11,478			10,662			10,750			10,715
Allowance for loan losses to non-acquired loans (Non-GAAP)		0.85	%		0.84	%		0.87	%		0.93	%		0.96	%

Total loans receivable	$	2,380,018			2,319,528			1,484,461			1,435,420			1,417,010
Allowance for loan losses		12,708			11,478			10,662			10,750			10,715
Allowance for loan losses to total loans receivable		0.53	%		0.49	%		0.72	%		0.75	%		0.76	%

Carolina Financial Corporation

Reconciliation of Non-GAAP Financial Measures - Consolidated

(Unaudited)

(In thousands, except share data)


	For the Three Months Ended
	March 31, 2018			December 31, 2017			September 30, 2017			June 30, 2017			March 31, 2017
As Reported:
Income before income taxes	$	4,581			10,630			11,968			12,013			6,915
Tax expense		525			4,302			3,975			2,673			2,011
Net Income	$	4,056			6,328			7,993			9,340			4,904

Average equity	$	477,830			380,529			286,524			277,708			210,071
Average tangible equity (Non-GAAP)	$	331,047			288,156			241,489			233,256			196,561
Average assets	$	3,522,407			3,048,214			2,230,586			2,166,803			1,768,323

Return on average assets		0.46	%		0.83	%		1.43	%		1.72	%		1.11	%
Return on average equity		3.40	%		6.65	%		11.16	%		13.45	%		9.34	%
Return on average tangible equity (Non-GAAP)		4.90	%		8.78	%		13.24	%		16.02	%		9.98	%

Weighted average common shares outstanding:
Basic		20,908,225			19,207,307			16,029,332			16,029,332			13,919,711
Diluted		21,119,316			19,443,353			16,187,869			16,180,171			14,139,241
Earnings per common share:
Basic	$	0.19			0.33			0.50			0.58			0.35
Diluted	$	0.19			0.33			0.49			0.58			0.35


Operating Earnings and Performance Ratios:
Income before income taxes	$	4,581			10,630			11,968			12,013			6,915
Gain/(Loss) on sale of securities		697			242			(368	)		(621	)		(185	)
Fair value adjustments on interest rate swaps		(803	)		(419	)		(90	)		69			58
Merger related expenses		14,710			6,391			311			279			1,319
Operating earnings before income taxes		19,185			16,844			11,821			11,740			8,107
Tax expense (1)		4,242			5,721			3,926			2,612			2,358
Operating earnings (Non-GAAP)	$	14,943			11,123			7,895			9,128			5,749

Average equity	$	477,830			380,529			286,524			277,708			210,071
Less average intangible assets		(146,783	)		(92,373	)		(45,035	)		(44,452	)		(13,510	)
Average tangible common equity (Non-GAAP)	$	331,047			288,156			241,489			233,256			196,561

Average assets	$	3,522,407			3,048,214			2,230,586			2,166,803			1,768,323
Less average intangible assets		(146,783	)		(92,373	)		(45,035	)		(44,452	)		(13,510	)
Average tangible assets (Non-GAAP)	$	3,375,624			2,955,841			2,185,551			2,122,351			1,754,813

Operating return on average assets (Non-GAAP)		1.70	%		1.46	%		1.42	%		1.69	%		1.30	%
Operating return on average equity (Non-GAAP)		12.51	%		11.69	%		11.02	%		13.15	%		10.95	%
Operating return on average tangible assets (Non-GAAP)		1.77	%		1.51	%		1.44	%		1.72	%		1.31	%
Operating return on average tangible equity (Non-GAAP)		18.06	%		15.44	%		13.08	%		15.65	%		11.70	%

Weighted average common shares outstanding:
Basic		20,908,225			19,207,307			16,029,332			16,029,332			13,919,711
Diluted		21,119,316			19,443,353			16,187,869			16,180,171			14,139,241
Operating earnings per common share:
Basic (Non-GAAP)	$	0.71			0.58			0.49			0.57			0.41
Diluted (Non-GAAP)	$	0.71			0.57			0.49			0.56			0.41

(1) Tax expense is determined using the effective tax rate adjusted to eliminate the impact of the non-operating items.

Carolina Financial Corporation

Reconciliation of Non-GAAP Financial Measures - Community Banking Segment

(Unaudited)

(In thousands, except share data)


	For the Three Months Ended
	March 31, 2018			December 31, 2017			September 30, 2017			June 30, 2017			March 31, 2017
Segment net income:
Community banking	$	3,984			6,052			7,837			8,443			4,509
Wholesale mortgage banking		562			117			449			1,238			645
Other		(497	)		124			(320	)		(346	)		(244	)
Eliminations		7			35			27			5			(6	)
Total net income	$	4,056			6,328			7,993			9,340			4,904

Community banking segment operating earnings:
Income before income taxes	$	4,545			10,447			11,714			11,232			6,375
Tax expense (1)		561			4,397			3,877			2,789			1,866
Bank segment net income	$	3,984			6,050			7,837			8,443			4,509

Weighted average common shares outstanding:
Basic		20,908,225			19,207,307			16,029,332			16,029,332			13,919,711
Diluted		21,119,316			19,443,353			16,187,869			16,180,171			14,139,241

Bank segment earnings per common share:
Basic	$	0.19			0.31			0.49			0.53			0.32
Diluted	$	0.19			0.31			0.48			0.52			0.32

Bank segment income before taxes	$	4,545			10,447			11,714			11,232			6,375
Gain on sale of securities		692			541			(368	)		(621	)		(185	)
Fair value adjustments on interest rate swaps		(755	)		(419	)		(90	)		69			58
Merger related expenses		14,710			6,391			311			279			1,311
Operating earnings before income taxes		19,192			16,960			11,567			10,959			7,559
Tax expense (1)		4,288			5,778			3,828			2,721			2,213
Operating bank segment earnings (Non-GAAP)	$	14,904			11,182			7,739			8,238			5,346


Operating bank segment earnings per common share:
Basic (Non-GAAP)	$	0.71			0.58			0.48			0.51			0.38
Diluted (Non-GAAP)	$	0.71			0.58			0.48			0.51			0.38

(1) Tax expense is determined using the effective tax rate adjusted to eliminate the impact of the non-operating items.

INFORMATION IN THE INVESTOR DECK - THIS INFORMATION IS NOT IN THE EARNINGS RELEASE FINANCIALS

	For the Three Months Ended
	March 31, 2018			December 31, 2017			September 30, 2017			June 30, 2017			March 31, 2017
BANK SEGMENT OPERATING EFFICIENCY RATIO:
Nonintererst expense per Segment Info		32,929			22,125			10,999			11,448			11,324
Merger related expenses		(14,710	)		(4,091	)		(260	)		(279	)		(1,311	)

Noninterest expense-operating		18,219			18,034			10,739			11,169			10,013

Noninterest income per Segment Info:
Noninterest income from external customers		5,059			5,247			3,097			3,494			2,419
Intersegment noninterest income		242			244			242			242			242
		5,301			5,491			3,339			3,736			2,661
Gain on sale of securities		692			242			(65	)		(621	)		(185	)
Fair value adjustments on interest rate swaps		(755	)		(419	)		(998	)		69			58

Noninterest income-operating		5,238			5,314			2,276			3,184			2,534
Net interest income		32,173			27,861			19,374			18,944			15,039
Total revenues		37,411			33,175			21,650			22,128			17,573
Efficiency Ratio-operating		48.7	%		54.4	%		49.6	%		50.5	%		57.0	%

Banking Segment Diluted EPS:
GAAP	$	0.19		$	0.31		$	0.48		$	0.52		$	0.32
Operating	$	0.71		$	0.58		$	0.48		$	0.51		$	0.38

Diluted Shares Outstanding		21,119,316			19,443,353			16,187,869			16,180,171			14,139,241


Banking Segment Return on Average Assets:
GAAP earnings		0.45	%		0.79	%		1.41	%		1.56	%		1.02	%
Operating earnings		1.69	%		1.47	%		1.39	%		1.52	%		1.21	%

Average assets		3,522,407			3,048,214			2,230,586			2,166,803			1,768,323

Banking Operating Noninterest expense as a percent of Consolidated Average Assets		2.07	%		2.37	%		1.93	%		2.06	%		2.26	%

Carolina Financial (CARO) 8-KCarolina Financial Corporation Reports Results for First Quarter of 2018